TaxTMI 
TaxTMI 
2026 (3) TMI 606
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....executed between the assessee and the Merchandiser where the assessee was entitled only for fixed amount of Rs. 50,000/- per month and Merchandiser as liable to file the IT Return in respect of amount drawn by him being the profit. Rs. 4,94,641/- 3. The Ld. CIT(A) NFAC has erred in holding that the Assessee was responsible for the liability of Tax despite the Merchandiser agreement without appreciating the fact that he Assessee was bound by Merchandiser agreement for a fixed amount of Rs. 50,000/- per month. 4. The Ld. CIT(A) has erred in confirming the addition of Rs. 18,05,258/- estimated on purchases of Rs. 3,61,05,162/- and not on sales without appreciating the fact that the purchase of goods was an expenditure without any profit element. 5. The Ld. CIT(A) has erred in confirming the addition of Rs. 18,05,258/- estimated on purchases but mentioned as Sales and the same was accepted in the Appellate Order as an inadvertent mistake which does not vitiate the validity of the Assessment Order. 6. Without prejudice to the Ground No. 2 to 5 it is urged that the CIT(A) ought to have deleted the returned income of Rs. 11,03,886/- which is subsumed in....
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....nder section 133(6) of the Act seeking various details and information. 7.2 In response to the notice issued under section 133(6) of the Act, Sri B.S. Anil Kumar confirmed about existence of merchandise agreement during year for the period from 1st April 2017 to 31st October 2017. However, regarding the income/profit on the sale liquor purchased from the assessee, he stated that the profit on such sales has been booked and offered to tax by the assessee i.e. Sri Anup Devdas and not by him. 7.3 Accordingly, the AO concluded that the profit on purchase of liquor of Rs. 3,61,05,162/- from Karnataka State Beverage Corporation Limited- KSBCL which was shown by the assessee as sold to Sri B.S. Anil Kumar is neither offered by the merchandiser nor by the assessee. The AO held that the assessee is license holder and purchases from KSBCL were made in his name therefore it was the responsibility of the assessee to disclose the profit or loss on such purchases. Therefore, AO, because of merchandiser's confirmation that the assessee is liable to offer profit on impugned purchases, proceeded to estimate 5% of the purchases and accordingly made addition of Rs. 18,05,258/- (5% of Rs. 3,61,0....
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....taka High Court in the case of CIT v. A.S. Krishnaswamy Mudaliar [(1964) 53 ITR 122 (SC)] has held that private arrangements cannot defeat the charging provisions of the Income-tax Act. The income is to be taxed in the hands of the person on whom the right, title, and licence is conferred. Similarly, in McDowell & Co. Ltd. v. CTO [(1985) 154 ITR 148 (SC)], it has been held that tax planning arrangements that are colorable devices must be disregarded in determining the real nature of transactions. 7.3 It is undisputed that liquor worth Rs. 3,61,05,162/- was purchased from KSBCL in the name of the appellant. The lessee, Shri B.S. Anil Kumar, categorically admitted during proceedings u/s 133(6) that he neither accounted for the purchases nor offered any profit from such sales in his return of income. Thus, there is no evidence on record to suggest that the income from these sales was assessed in the hands of any other person. The plea that profit belonged to the merchandiser is therefore not acceptable, as it would otherwise result in complete escapement of income from taxation. The Hon'ble Supreme Court in the case of Kedarnath Jute Mfg. Co. Ltd. v. CIT [(1971) 82 ITR 36....
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....chandise agreements with two parties, namely Shri B.S. Anil Kumar and Shri B. Lokesh, under which the assessee was entitled only to a fixed monthly amount for permitting the use of the license. It is also a matter of record that for the year under consideration, the assessee disclosed such fixed receipts in the return of income and that identical arrangement with the second merchandiser, Shri B. Lokesh, has been accepted by the Assessing Officer without any estimation of profit on purchases routed through him. This differential treatment, on identical facts and under similar agreements, has not been properly explained by the Revenue. 14.1 We further note that the assessee has consistently maintained that the liquor purchased in his name from KSBCL was transferred to the merchandisers on cost-to-cost basis and that the responsibility of effecting sales, maintaining stock, recording transactions and earning profits or losses rested with them as per the contractual terms. The mere fact that purchases had to be made in the name of the license holder, owing to statutory requirements under excise law, cannot by itself lead to the automatic conclusion that the assessee carried on the t....