BALRAJ GOUD BALAGOUNI ,HYDERABAD vs. ASST. COMMISSIONER OF INCOME TAX, CIRCLE-4(1), HYDERABAD

The assessee has raised eight grounds in his appeal however, the cruxes of the issues are as follows:-

The brief facts of the case are that the assessee is an individual engaged in the business of retail liquor trade, filed his return of income on 5/4/2014 for the A.Y. 2013-14 declaring total income of Rs. 2,69,26,280/-. Subsequently, the case of the assessee was taken up for scrutiny and assessment was completed U/s. 143(3) of the Act vide order dated 31/3/2016 wherein the Ld. A.O. assessed the income of his benami firms in his hands by estimating 5% of their aggregate turnover which works out to Rs. 2,52,98,399/-. The Ld. A.O. also made addition of Rs. 17,41,978/- and Rs. 84,66,183/- invoking the provisions of section 40(a)(ia) of the Act. On appeal, the Ld. CIT(A) confirmed the order of the Ld. A.O. by agreeing with his view aggrieved by which the assessee is in appeal before us.

Ground No.1 and 2:- Addition of Rs. 2,52,98,399/-:

During the course of assessment proceedings, it was observed by the Ld. A.O. that the assessee had obtained Excise License in respect of 10 wine shops in benami names and immediately after obtaining the Excise Licenses he had created partnership firms wherein the assessee was holding 95% share and balance 5% share was in the name of his benami. During the course of enquiry all the partners in the assessee’s benami firms deposed that they were actually employees of the assessee and not his partners. It was also submitted by those employees that the entire license fees were paid by the assessee and they had not invested any capital in the firm as investment. These facts could not be successfully controverted by the assessee. Moreover, all the benami partnership firms of the assessee had not maintained proper books of accounts. Therefore, the Ld. A.O. estimated the income of all the benami firms @ 5% of their aggregate turnover which worked out to Rs. 2,52,98,399/- and added to the income of the assessee. Even before the Ld. CIT(A), the assessee could not establish that the firms in which the assessee was a partner is not his benami firms and also failed to furnish proper books of accounts. Hence, the Ld. CIT(A) confirmed the order of the Ld. A.O. on the issue.

Before us, the Ld. AR vehemently argued stating that all the assessee’s firms are independent firms, hence those firms cannot be treated as assessee’s benami firms. It was therefore argued that the income of the other firms cannot be added in the hands of the assessee. The Ld. AR further submitted that in case if the income of the firms which are held to be benami firms are added in the hands of the assessee, then the same may not be assessed in the hands of those firms separately. The Ld. DR on the other hand argued in support of the orders of the Ld. Revenue Authorities.

We have heard the rival submissions and carefully perused the material available on record. It is evident that the assessee is holding 95% share in all the 10 firms. The so-called partners of those firms have also conceded that they are only employees of the assessee and not the partner of the assessee. The assessee has also not brought out any materials on record to establish that the profits of the firms were distributed to the partners of the firm according to their profit-sharing ratio ie., in the ratio of the capital held by the assessee and the other partners. Considering these facts and circumstances of the case it is apparent that all the ten partnership firms are the assessee’s benami firms. Therefore, We are of the view that the Learned Revenue Authorities had rightly treated all the relevant firms as the assessee’s benami firms. Further, these firms have also not maintained their books of accounts properly and produced cogent evidence for the expense incurred before the Ld. Revenue Authorities. Under these circumstances, the Learned Revenue Authorities has estimated 5% of the aggregate turnover of all the relevant firms as the income of the assessee which We are of the view is quite reasonable and fair. Therefore, we do not find it necessary to interfere with the order of the Learned Revenue Authorities on this issue. Accordingly, Grounds No. 1 and 2 raised by the assessee is decided against the assessee. However, We also make it clear that since the income of all these firms are assessed in the hands of the assessee the same income cannot be once again assessed separately in the hands of those firms. It is ordered accordingly.

Ground No.3 and 4: Disallowance U/s. 40(a)(ia) of the Act:

The Ld. A.O. has disallowed the amount of Rs. 17,41,978/- and Rs. 84,66,183/- being the interest paid by the assessee to various entities without deducting TDS invoked the provisions of section 40(a)(ia) of the Act. Even at this stage, the Ld. AR could not controvert to the findings of the Learned Revenue Authorities on this issue. In this situation, We are of the view that the Learned Revenue Authorities had rightly invoked the provisions of section 40(a)(ia) of the Act which is in accordance with the provisions of the Act. Hence, we do not find it necessary to interfere with the orders of the Learned Revenue Authorities on this issue also. Therefore, Ground No. 3 and 4 raised by the assessee are also devoid of merits.

In the result, the appeal filed by the assessee is dismissed.