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Transactions between related Proprietorship Firms

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Rajesh Nahar

79 Points Posted on 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?

Replies (5)

Quick Summary

This discussion addresses the permissibility of transactions, specifically sales and purchases, between two proprietorship firms owned by the same individual (one under personal name, the other under HUF). The key concern is potential issues during income tax and GST audits. Advice suggests that as long as transactions are properly documented with tax applied, and goods are sold at market rates or with a reasonable profit margin, there should be no significant problems. Transactions may need to be reported in the tax audit report if one entity is under audit.

RAJA P M

"Do the Right Thing...!!!"

128157 Points Posted on 19 July 2020

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

CA Raj Doshi

Practising CA

8954 Points Posted on 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.

annu Goyal

1102 Points Posted on 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.