SOVEREIGN GLOBAL FINANCE P.LTD, MUMBAI V. DCIT IT 4(2), MUMBAI

ITA 2349/MUM/2012

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 92754 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 2 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-06-2015
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: E
• Next Hearing Date: 09-06-2015
• Assessment Year: 2000-2001
• Appeal Filed On: 10-04-2012
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: NEIL PHILIP
• Assessee Lawyers: NISHIT GANDHI
• Keywords: Business expenditure; Speculation loss; Corroborative evidences; Revenue expenditure
• Section: 143(3); 133(6)

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES E, MUMBAI . . , , , ' # BEFORE SHRI R.C.SHARMA, AM AND MS.SUSHMA CHOWLA, JM ITA NO.2349/MUM/2012: A.Y 2000-01 SOVEREIGN GLOBAL FINANCE P LTD. SONAWAL BLDG., BANK STREET, FORT, MUMBAI- 400 001 . APPELLANT PAN AACCS2152C VS. THE DCIT 4(2), MUMBAI. . RESPONDENT $ /APPELLANT BY : SHRI NISHIT GANDHI $ /RESPONDENT BY : SHRI NEIL PHILIP / DATE OF HEARING : 09.06.2015 / DATE OF PRONOUNCEMENT : 11.06.2015. / O R D E R PER SUSHMA CHOWLA, JUDICIAL MEMBER : THE PRESENT APPEAL FILED BY THE ASSESSEE IS AGAINST THE ORDER OF COMMISSIONER OF INCOME-TAX (APPEALS), DATED 26.02.2 012, RELATING TO ASSESSMENT YEAR 2000-01, AGAINST ORDER PASSED U/S 143(3) R.W.S 147 OF THE INCOME-TAX ACT, 1961. 2. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: THE LEARNED COMMISSIONER OF INCOME TAX (APPEAL) ER RED IN DISALLOWING COMMISSION/BROKERAGE PAID TO SONAL MANI SH SARDA (PROP. ITA NO.2349/MUM/2012 M/S.SOVEREIGN GLOBAL FINANCE P LTD. 2 SONAL MANAGEMENT SERVICES) AMOUNTING TO RS.25,70,08 4/- ON THE GROUND THAT MERE FILING OF AFFIDAVIT CANNOT BE CONS IDERED A SUPPORT EVIDENCE TO ESTABLISH THE GENUINENESS OF THE TRANSA CTIONS. 3. THE ONLY ISSUE RAISED IN THE PRESENT APPEAL IS A GAINST THE DISALLOWANCE OF COMMISSION/BROKERAGE PAID TO SONAL MANISH SARDA AMO UNTING TO RS.25,70,084/-. 4. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E WAS ENGAGED IN THE BUSINESS OF DEALING IN SHARES AND SECURITIES IN ITS OWN NAME AS WELL AS THE CLIENTS ON BROKERAGE. FOR THE YEAR UNDER CONSIDERATION, THE A SSESSEE HAD FILED THE RETURN OF INCOME DECLARING LOSS OF RS.14,27,430/-. THE ASSES SEE WAS A SUB-BROKER OF SOVEREIGN SECURITIES PVT. LTD. FOR THE YEAR UNDER CONSIDERATION, THE ASSESSEE HAD EARNED NET BROKERAGE INCOME OF RS.85,80,842/- AND H AD DECLARED OTHER INCOME OF RS.3,29,100/-. IN THE SHARE TRADING BUSINESS THE A SSESSEE HAD DECLARED LOSS OF RS.45,49,532/-. THE SHARE TRADING WAS DETERMINED B Y THE AO AT RS.55,49,532/- AND WAS HELD TO BE SPECULATIVE LOSS AGAINST WHICH THE A SSESSEE IS NOT IN APPEAL. FURTHER, THE AO DURING THE COURSE OF ASSESSMENT PRO CEEDINGS NOTED THAT THE ASSESSEE HAD PAID SUB BROKERAGE TO VARIOUS PERSONS AS ENLISTED IN THE ASSESSMENT ORDER. THE AO ISSUED NOTICE U/S. 133(6) OF THE ACT TO THE SIX PARTIES TO WHOM SUB BROKERAGE WAS CLAIMED TO HAVE BEEN PAID BY THE ASSE SSEE. HOWEVER, OUT OF SIX PARTIES, REPLY WAS RECEIVED FROM THREE PARTIES ONLY . THE NON-RECEIPT OF REPLY AND NOTICE RETURNED BACK AS UN-SERVED WAS BROUGHT TO TH E NOTICE OF THE ASSESSEE COMPANY. IN RESPECT OF MANISH B SARDA, THE ASSESSE E POINTED OUT THAT THE SAID PERSON HAD SETTLED IN AUSTRALIA AND, THEREFORE, THE NOTICE COULD NOT BE SERVED. IN RESPECT OF THE OTHER TWO PARTIES I.E. ETP CORPORATI ON LTD. AND RAJESH TUSCANO, IT WAS SUBMITTED BY THE ASSESSEE THAT THEY HAD SHIFTED BASE OUT OF MUMBAI. ITA NO.2349/MUM/2012 M/S.SOVEREIGN GLOBAL FINANCE P LTD. 3 CONSEQUENTLY, THE AO DISALLOWED THE CLAIM OF SUB-BR OKERAGE AMOUNTING TO RS.54,37,023/-. 5. THE CIT(A) AFTER TAKING NOTE OF THE CONFIRMATION OF THE PARTIES ALONG WITH THE LIST OF CLIENTS INTRODUCED BY THE SAID PARTIES AND OTHER DETAILS, WHICH WERE ACCEPTED BY THE AO IN THE REMAND REPORT, DELETED THE ADDITIO N ON ACCOUNT OF SUB BROKERAGE PAID TO ETP CORPORATION LTD. AND RAJESH TUSCANO. T HE REVENUE HAS FAILED TO BRING TO OUR NOTICE AS TO WHETHER ANY APPEAL HAS BEEN FIL ED AGAINST THE SAME. IN RESPECT OF THE THIRD PARTY I.E. MANISH SARDA, THE PLEA OF T HE ASSESSEE BEFORE THE CIT(A) WAS THAT THE PAYMENTS WERE ACTUALLY MADE TO SONAL MANIS H SARDA, AND THERE WAS A TYPOGRAPHICAL ERROR IN THE BOOKS OF THE ASSESSEE. THE AO IN THE REMAND REPORT, WHICH IS REPRODUCED IN PARA 5.1 OF THE APPELLATE OR DER NOTES THAT THE ASSESSEE HAD FAILED TO FILE ANY CONFIRMATION FROM SONAL MANISH S ARDA, WHO WAS APPOINTED AS SUB- BROKER BY THE ASSESSEE. FURTHER, DETAILS OF CLIENT S DEALT BY SUB-BROKERS WERE ALSO NOT FILED BY THE ASSESSEE. IN THE REJOINDER, THE A SSESSEE CLARIFIED THAT ALL THE RELEVANT DOCUMENTS WERE FILED BEFORE THE AO ALONG W ITH SUBMISSIONS DATED 13.12.2004 INCLUDING THE COPY OF BANK STATEMENTS, C OPY OF INCOME TAX RETURN AND COPY OF LEDGER ACCOUNTS. ALL THESE DOCUMENTS WERE RE-SUBMITTED BEFORE THE CIT(A), WHO IN TURN NOTED THAT THE AO HAD OBJECTED TO THE A MOUNT PAID TO SONAL SARDA AMOUNTING TO RS. 25,70,084/- ON THE GROUND THAT NO DETAILS OF THE CLIENTS INTRODUCED BY THE ASSESSEE WERE SUBMITTED. THE AFFIDAVIT OF T HE LADY FILED BY THE ASSESSEE WAS NOT ACCEPTED AND IT WAS ALSO HELD THAT THE SAME COU LD NOT BE CONSIDERED AS SUPPORTING EVIDENCE TO ESTABLISH THE GENUINENESS OF THE TRANSACTIONS. THE COMMISSION PAID @12.5% OF THE GROSS INCOME FOR THE SERVICES RENDERED AT RS.25,70,084/- WAS DISALLOWED BY THE CIT(A). THE A SSESSEE IS IN APPEAL AGAINST THE SAID ORDER OF THE CIT(A). ITA NO.2349/MUM/2012 M/S.SOVEREIGN GLOBAL FINANCE P LTD. 4 6. THE LEARNED AR FOR THE ASSESSEE POINTED OUT THAT IN THE FIRST ROUND OF APPEAL, THE TRIBUNAL HAD REMANDED THE ISSUE TO THE FILE OF THE CIT(A) SINCE THE COMPLETE EVIDENCE AVAILABLE ON RECORD WAS NOT CONSIDERED BY THE CIT(A). ANOTHER CONTENTION WAS THAT THE COMPLETE EVIDENCE IN RESPECT OF PAYMEN T MADE TO THE SAID PERSON HAS BEEN FURNISHED ON RECORD. THE LEARNED AR FOR THE A SSESSEE FURTHER POINTED OUT THAT EVEN THE AFFIDAVIT OF THE PAYEE WAS FILED, IN WHICH SHE HAD ADMITTED TO HAVE RECEIVED THE CONSIDERATION. RELIANCE WAS PLACED ON THE DECISION OF THE HONBLE SUPREME COURT IN 30 ITR 181 (SC) TO SUPPORT THE CON TENTION THAT AFFIDAVIT FILED BY THE ASSESSEE COULD NOT BE IGNORED. 7. THE LEARNED DR, ON THE OTHER HAND, POINTED OUT T HAT IN THE AUDITED ACCOUNTS, IMPUGNED PAYMENT OF RS.25,70,084/- WAS ACCOUNTED F OR AS BROKERAGE PAID AND THE NET BROKERAGE WAS CREDITED TO THE PROFIT & LOSS ACC OUNT. THE LEARNED DR FURTHER POINTED OUT THAT DURING THE ASSESSMENT PROCEEDINGS, THE ASSESSEE VIDE LETTER DATED 26.11.2002 SUBMITTED LIST OF SUNDRY CREDITORS, WHIC H INCLUDED THE NAME OF SHRI MANISH B SARDA. THE LEARNED DR FURTHER REFERRED TO THE LETTER OF THE ASSESSEE FILED BEFORE THE AO IN WHICH IT WAS POINTED OUT THAT SHRI MANISH B SARDA HAD SETTLED IN AUSTRALIA AND HIS EXACT ADDRESS WAS BEING LOCATED. THE PLEA OF THE ASSESSEE THUS THROUGHOUT THE ASSESSMENT PROCEEDINGS WAS THAT THE PAYMENT OF RS.25,70,084/- REPRESENTED SUB-BROKERAGE PAID TO SHRI MANISH SARDA . EVEN IN THE STATEMENT OF FACTS FILED WITH THE ORIGINAL APPEAL BEFORE THE CIT (A), THE ASSESSEE NARRATED THE SAID DETAILS OF PAYMENT BEING MADE TO SHRI MANISH SARDA. HOWEVER, IN THE PROCEEDINGS BEFORE THE CIT(A), IN THE FIRST ROUND OF APPEAL, AD DITIONAL EVIDENCE WAS FILED I.E. LEDGER ACCOUNT OF SHRI MANISH SARDA IN THE BOOKS OF THE ASSESSEE, WHICH WAS SIGNED BY SONAL SARDA. IN THE REMAND PROCEEDINGS THE ASSES SEE CLAIMED THAT THE LADY WAS SETTLED IN USA. AFTER THE MATTER WAS REMANDED BACK BY THE TRIBUNAL IN THE SECOND ITA NO.2349/MUM/2012 M/S.SOVEREIGN GLOBAL FINANCE P LTD. 5 ROUND OF PROCEEDINGS BEFORE THE CIT(A), THE ASSESSE E ENCLOSED DOCUMENTS I.E. BANK STATEMENTS OF SONAL MANAGEMENT SERVICES, A COPY OF LEDGER ACCOUNT AND INCOME TAX RETURNS OF THE SAID PARTY. HOWEVER, THE ASSESSEE F AILED TO PROVIDE ANY DETAILS OF SERVICES PROVIDED BY SAID LADY, IN THE ABSENCE OF W HICH THE ADDITION WAS UPHELD IN THE CASE OF THE ASSESSEE. THE LEARNED DR FOR THE REVENUE IN THIS REGARD PLACED ON RECORD WRITTEN STATEMENT IN WHICH IT WAS POINTED OU T THAT THE ASSESSEE IS CHANGING ITS STANDS REGARDING THE NATURE OF PAYMENT OF RS.25 ,70,084/- WHICH IN TURN CONFIRM THE FALSITY OF THE CLAIM. 8. THE LEARNED AR FOR THE ASSESSEE IN THE REJOINDER STRESSED THAT NO SUB- BROKERAGE WAS PAID TO THE SAID PARTY BUT SHE WAS PA ID REMUNERATION @12.5% OF THE INCOME GENERATED FOR SETTING UP OF BUSINESS. ANOTH ER CONTENTION RAISED BY THE LEARNED AR FOR THE ASSESSEE WAS THAT SONAL SARDA HA D HELPED THE ASSESSEE IN ESTABLISHING THE BUSINESS. 9. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORD. THE ISSUE ARISING IN THE PRESENT APPEAL IS WITH REGARD TO THE CLAIM OF EXPENDITURE OF RS.25,70,084/-. DURING THE COURSE OF ASSESSMENT PR OCEEDINGS THE ASSESSEE CLAIMED THAT IT HAD PAID SUB-BROKERAGE TO VARIOUS PERSONS T OTALING TO SIX PERSONS, WHOSE NAMES ARE ENLISTED IN THE ASSESSMENT ORDER. THE SA ID SUB-BROKERAGE WAS DEBITED TO THE SUB-BROKERAGE RECEIVED BY THE ASSESSEE AND THE NET SUB-BROKERAGE WAS DECLARED IN THE PROFIT AND LOSS ACCOUNT. ONE SUCH PAYMENT WAS CLAIMED TO HAVE BEEN MADE TO MANISH B SARDA. IN THE ASSESSMENT PRO CEEDINGS, THE AO IN ORDER TO VERIFY THE SAID EXPENDITURE HAD ISSUED NOTICE U/S. 133(6) OF THE ACT, WHICH WAS RETURNED UN-SERVED ON THE SAID MANISH B SARDA. WHEN CONFRONTED, THE REPLY OF THE ASSESSEE WAS THAT THE SAID PERSON HAD SHIFTED BASE TO AUSTRALIA AND HE WAS TRYING TO LOCATE THE ADDRESS FOR COMMUNICATION. SINCE NO DET AILS WERE FILED IN RESPECT ITA NO.2349/MUM/2012 M/S.SOVEREIGN GLOBAL FINANCE P LTD. 6 THEREOF, THE AO DISALLOWED THE EXPENDITURE OF RS.54 ,37,022/- IN RESPECT OF THREE PARTIES. THE CIT(A) HOWEVER, DELETED THE ADDITION IN RESPECT OF TWO PARTIES AS THE ASSESSEE FURNISHED COMPLETE DETAILS INCLUDING THE L IST OF CLIENTS AGAINST WHOSE BUSINESS SUB-BROKERAGE WAS PAID BY THE ASSESSEE. HO WEVER, NO SUCH DETAILS WERE FURNISHED IN RESPECT OF MANISH B SARDA. FURTHER, T HE ASSESSEE CHANGED ITS STAND BEFORE THE CIT(A) AND CLAIMED THAT THE SAID AMOUNT OF RS.25,70,084/- WAS PAID TO SONAL M SARDA AND NOT MANISH B SARDA AND BY AN ERRO R, THE ENTRY WAS MADE IN THE NAME OF MANISH B SARDA. THE ASSESSEE ALSO CHANGED ITS STAND VIZ-A-VIZ THE NATURE OF PAYMENT AND CLAIMED THAT THE SAID AMOUNT WAS PAI D NOT ON ACCOUNT OF SUB- BROKERAGE BUT WAS MADE ON ACCOUNT OF INTRODUCTION O F BUSINESS TO THE ASSESSEE AND PROVIDING VARIOUS OTHER SERVICES TO THE ASSESSEE. IN THE REMAND PROCEEDINGS, VIDE LETTER FILED ON 13.07.2007, THE ASSESSEE CLARIFIED THAT SONAL MANAGEMENT SEVICES WAS NEVER THE SUB BROKER OF THE ASSESSEE AND SHE WA S PAID REMUNERATION @12.5% OF INCOME GENERATED FOR SETTING UP OF BUSINESS AND NOT SUB-BROKERAGE. AN AFFIDAVIT FROM SONAL SARDA WAS FILED IN WHICH SHE ADMITTED TO HAVE RECEIVED RS.25,70,084/- AS COMMISSION/BROKERAGE FROM THE ASSESSEE. ADMITTE DLY, THE SAID AMOUNT WAS PAID BY THE ASSESSEE THROUGH BANKING CHANNELS, BUT THE M ERE PAYMENT THROUGH BANKING CHANNELS AND ITS TAXABILITY IN THE HANDS OF THE REC IPIENT DOES NOT ESTABLISH THE CLAIM OF EXPENDITURE MADE BY THE ASSESSEE. ANY EXPENDITU RE INCURRED BY A PERSON IS ALLOWABLE IN THE HANDS OF SUCH PERSON IF THE SAME I S IN RELATION TO THE CARRYING ON OF ITS BUSINESS AND IS THUS BUSINESS EXPENDITURE. FUR THER, THE ONUS IS UPON THE ASSESSEE TO ESTABLISH THAT THE SAME WAS BUSINESS EX PENDITURE. IN THE FACTS OF THE PRESENT CASE BEFORE US, THE ASSESSEE HAS REPEATEDLY CHANGED ITS STAND IN RESPECT OF THE SAID EXPENDITURE AND AT NO POINT OF TIME HAS FU RNISHED COMPLETE EVIDENCE VIZ-A- VIZ, THE SERVICES RENDERED BY THE SAID PARTY. THE ASSESSEE HAD CLAIMED SUB-BROKER ITA NO.2349/MUM/2012 M/S.SOVEREIGN GLOBAL FINANCE P LTD. 7 FEES BEING PAID TO DIFFERENT SUB-BROKERS, WHICH WAS ALLOWED IN THE HANDS OF THE ASSESSEE BY THE AO OR THE CIT(A) ON FURNISHING OF N ECESSARY EVIDENCES OF INTRODUCTION OF CLIENTS ETC. HOWEVER, IN THE CASE OF SONAL M SARDA/MANISH SARDA, THE ASSESSEE HAS FAILED TO FURNISH ANY EVIDENCE. W E FIND NO MERIT IN THE CLAIM OF THE ASSESSEE IN THIS REGARD AS REMUNERATION @12.5% WAS TO BE PAID OF INCOME GENERATED AND THE REASON FOR THE SAID PAYMENT WAS S ETTING UP OF BUSINESS. ON THE ONE HAND THE ASSESSEE WAS PAYING SUB-BROKERAGE TO T HE PERSON, WHO WERE INTRODUCING CLIENTS TO IT AND, ON THE OTHER HAND, E XPENDITURE WAS INCURRED AGAINST THE SETTING UP OF BUSINESS. IN THE ABSENCE OF REQU ISITE DETAILS HAVING BEEN FILED BY THE ASSESSEE AND THE ASSESSEE HAVING FAILED TO ESTA BLISH THE NATURE OF EXPENDITURE BEING RELATABLE TO CARRYING ON ITS BUSINESS, THE SA ME IS NOT ALLOWABLE IN THE HANDS OF THE ASSESSEE AS REVENUE EXPENDITURE. WE UPHOLD THE ORDER OF THE CIT(A) AND DISMISS THE APPEAL OF THE ASSESSEE. 10. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS DISMISSED . ORDER PRONOUNCED ON THIS 11 TH DAY OF JUNE, 2015. SD/- SD/- ( R.C.SHARMA ) ( SUSHMA CHOWLA ) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI; DATED : 11 TH JUNE, 2015. SA $ &''() *)' / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ! ( ) / THE CIT, MUMBAI. 4. ! / CIT(A) ITA NO.2349/MUM/2012 M/S.SOVEREIGN GLOBAL FINANCE P LTD. 8 / BY ORDER, ' # //TRUE COPY// / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI 5. '$% ##&' , &' , / DR, ITAT, MUMBAI 6. %() / GUARD FILE.