PCIT Vs Ramswaroop Shivhare (Supreme Court of India)
The Supreme Court of India, affirming the judgment of the Madhya Pradesh High Court, held that the income of an Association of Persons (AOP), described in the case as syndicates, cannot be clubbed with the income of individual assessees who are members of such syndicates. The Supreme Court dismissed the Revenue’s petitions, observing that the High Court had committed no error in upholding the orders of the appellate authorities.
Read HC Judgment: Share of Profit from AOPs Not Taxable Again in Member’s Hands: MP HC deletes ₹65 crore addition
Before the High Court, the Revenue had filed multiple appeals under Section 260A of the Income Tax Act, 1961, challenging a common order of the Income Tax Appellate Tribunal (ITAT). The dispute arose from search and seizure proceedings, followed by assessments in which the Assessing Officer made substantial additions to the individual assessee’s income for several assessment years. These additions were on account of the assessee’s alleged share in undisclosed profits of various liquor business syndicates, inadmissible expenses incurred by such syndicates, and certain undisclosed investments.
The assessee carried on liquor business activities through syndicates formed with other persons, apart from having income from hotel business, partnerships, salary, and rent. The Assessing Officer treated the assessee’s share of syndicate income as taxable in his individual hands. On appeal, the Commissioner of Income Tax (Appeals) granted substantial relief, holding that the syndicates constituted AOPs or Bodies of Individuals (BOIs), which are separate taxable persons under Section 2(31) of the Act and are liable to tax at the maximum marginal rate. Relying on Sections 67A and 86, and the principle that the right income must be taxed in the hands of the right person, the Commissioner deleted the additions relating to syndicate income and inadmissible expenses, while sustaining certain unrelated enhancements.
