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Transactions between related Proprietorship Firms

19 July 2020

I am having two proprietorship firms - one is under my name and another one under my HUF name in which I am karta. Both are of course under different PAN Nos and GST nos. One of the firms is under Audit in the current Assessment year, the other one is not.

Are transactions allowed between these two firms and if we do sale purchase between these two firms will there be any issue in Income tax audits and GST Audit?

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5 Replies

RAJA P M ("Do the Right Thing...!!!") (127921 Points)
Replied 19 July 2020

Transactions (sale & purchase) will treat as sale & purchase with tax then no more issues...

2 Like

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CA Raj Doshi (Practising CA) (8898 Points)
Replied 19 July 2020

If the entity under audit is purchasing goods from the non audit entity, Transaction will be required to reported under tax audit report. Also, the products should be sold at a price which is sold to other unrelated customers also OR there should be some reasonable profit margin.

2 Like

annu Goyal (1102 Points)
Replied 19 July 2020

In case of GST if proper sale and purchase are made with tax then there is no issue as both are shown in there respective returns.
In case of tax audit purchase will report.

1 Like