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2017 Supreme(P&H) 487
IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH
AJAY KUMAR MITTAL, RAMENDRA JAIN, JJ.
M/s Fusion Coaching Redefined - Appellant
Vs.
Income Tax Officer, Ward No. 6(3), SAS Nagar, Mohali - Respondent
ITA No. 171 of 2017(O&M)
Decided On : 27-04-2017
For the Appellant : Mr. Maninder Arora
The central legal point established in the judgment is the application of Section 16 of the Partnership Act, 1932, and the test of human probabilities in assessing the nature of receipts and profits in a partnership firm.
Headnote:
Income Tax Act - Assessment of Tuition Fee Receipts - Section 260A
Fact of the Case:
The appellant-assessee, a partnership firm, challenged the addition of tuition fee receipts in its hands, claiming that the receipts pertained to individual partners. The lower authorities confirmed the additions, concluding that the receipts pertained to the firm only.
Finding of the Court:
The court upheld the findings of the authorities below, stating that the additions were rightly made in the hands of the assessee firm as the receipts pertained to the firm only.
Issues: The issues revolved around the assessment of tuition fee receipts and whether they pertained to the individual partners or the firm.
Ratio Decidendi: The court relied on Section 16 of the Partnership Act, 1932, which provides that personal profits earned by a partner are subject to the contract between the partners. The court also applied the test of human probabilities and considered surrounding circumstances, as established in the cases of CIT Vs. Durga Prashad More and Sumati Dayal Vs. CIT.
Final Decision: The appeal was dismissed as no substantial question of law arose.
Ajay Kumar Mittal, J.
1. The appellant-assessee has filed the present appeal under Section 260A of the Income Tax Act, 1961 (in short, “the Act”) against the order dated 01.03.2016, Annexure A.3, passed by the Income Tax Appellate Tribunal, Chandigarh Bench “SMC”, Chandigarh (in short, “the Tribunal”) in ITA No. 59/CHD/2016, for the assessment year 2008-09, claiming following substantial questions of law:-
“(i) Whether under the facts and in the circumstances of the case, the lower authorities & ITAT have not committed illegality by passing the impugned orders?
(ii) Whether under the facts and in the circumstances of the case, the impugned orders are not liable to be set aside?
(iii) Whether under the facts and in the circumstances of the case, the Tribunal has not committed an illegality by wrongly appreciating the facts and legal aspects of present case?
(iv) Whether under the facts and in the circumstances of the case, the authorities below and ITAT have not committed error in taxing the amount thrice in the case of receipts relating to Rajeev Khurana?
(v) Whether under the facts and in the circumstances of the case, the authorities below have not committed an illegality in taxing twice in case of receipts relating to Sarabjit Kaur & Ms. Sukhdeep Kaur?
2. A few facts relevant for the decision of the controversy involved as narrated in the appeal may be noticed. The appellant-assessee M/s Fusion Coaching Redefined is a partnership firm constituted w.e.f. 01.09.2007 to carry on the activities of coaching consisting of three partners, namely Mr. Rajeev Khurana, Ms. Sarabjit Kaur and Ms. Sukhdeep Kaur. All the individual partners were also providing coaching classes in their individual proprietorship concerns, i.e. Mr. Rajeev Khurana, Prop. M/s Khurana Institute, Ms. Sarabjit Kaur, Prop. M/s Physics Planet and Ms. Sukhdeep Kaur, Prop. M/s Academic 71. Mr. Rajeev Khurana, Prop. M/s Khurana Institute had taken the premises SCF 23, Top Floor, Cabin No.1 on rent through lease deed executed on 10.01.2007 in his individual capacity. The receipt books were also got printed from the said address in bulk and were used even after the constitution of the partnership firm. In the receipt books of the individual, the word “Fusion” was also mentioned which was brand name of the individual coaching classes even prior to the constitution of the firm. During the course of survey, the department impounded the receipt books marked as Annexure A.2, with regard to Mr. Rajeev Khurana, Prop. M/s Khurana Institute for whole of the period including 01.04.2007 to 31.03.2008 and in all the receipts of the said receipt books, the word “Fusion” had been mentioned. The Assessing Officer confronted the assessee during the course of assessment proceedings that the receipts totalling Rs. 1,41,150/- had not been accounted for in the books of account of the assessee firm. The assessee submitted that these were the receipts in the hands of the partner Mr. Rajeev Khurana but could not explain that these were accounted for in the hands of the partner. Therefore, additions of these tuition fee receipts were made in the hands of the assessee firm. The assessee challenged the additions before the Commissioner of Income Tax (Appeals) [CIT(A)]. It was pleaded that Mr. Rajeev Khurana was partner of Fusion Coaching Institute providing coaching separately in his individual capacity to the students. Mr. Rajeev Khurana had accounted for all these additions and thus it could not be added in the hands of the firm. The CIT(A) found that the assessee could not establish before the Assessing Officer that these “Fusion” fee receipts had been accounted for in the books of Mr. Rajeev Khurana in his individual capacity. Since no evidence had been filed in support of the same, the addition was confirmed. Similarly, during the course of survey, a document Annexure A.7 was impounded giving details of fees received from students. The assessee pleaded that these receipts were of the in
