S.K. SECURITIES & INVESTMENTS, NAVI MUMBAI V. ASST CIT 4(2), MUMBAI

ITA 3125/MUM/2015

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 0258 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 2 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-08-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: Not Allotted
• Assessment Year: 2007-2008
• Appeal Filed On: 25-05-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: DR A K NAYAK
• Assessee Lawyers: PRADEEP KAPASI
• Keywords: Revised return
• Section: 143(3)

Judgement Text

ITA 3125/M/2015 S.K. SECURI TIES & INVESTMENTS 1 IN THE INCOME TAX APPELLATE TRIBUNAL, BENCH E, MU MBAI BEFORE SHRI G.S. PANNU, ACCOUNTANT MEMBER AND SHRI PAWAN SINGH, JUDICIAL MEMBER ITA NO.3125/MUM/2015 (ASSESSMENT YEAR- 2007-08) M/S S.K. SECURITIES & INVESTMENT PLOT NO. 8&9, OFFICE NO. 116, SHIVJI MARKET, SECTOR 19/D, VASHI, NAVIMUMBAI, MAHARASHTRA-4 00705 PAN: AAMS1741E VS. ACIT- 4(2), AAYAKAR BHAVAN, M.K. MARG, MUMBAI-400020 (APPELLANT) (RESPONDENT) ASSESSEE BY : SH. PRADEEP KAPASI -AR REVENUE BY : DR. A.K. NAYAK -DR DATE OF HEARING : 19.06.2017 DATE OF PRONOUNCEMENT : 09.08.2017 ORDER UNDER SECTION 254(1) OF INCOME TAX ACT PER PAWAN SINGH, JUDICIAL MEMBER: 1. THIS APPEAL BY ASSESSEE UNDER SECTION 253 OF THE IN COME-TAX ACT (ACT) IS DIRECTED AGAINST THE ORDER OF LD. COMMISSIONER OF I NCOME TAX (APPEALS)-9 [CIT(A)], MUMBAI DATED 13.02.2015 FOR THE ASSESSMEN T YEAR (AY) 2007- 08. THOUGH THE ASSESSEE HAS RAISED AS MANY AS SIX G ROUNDS OF APPEAL. HOWEVER, AS PER OUR CONSIDERED VIEW THE SOLE GROUND OF APPEAL IS WHETHER THE LEARNED COMMISSIONER (APPEALS) ERRED IN LAW AND ON FACTS IN CONFIRMING THE DISALLOWANCE OF BROKERAGE EXPENSES O F RS.73,64,427/- . REST OF THE GROUNDS OF APPEAL ARE NARRATION OF FACT S OR ARGUMENTATIVE IN NATURE. ITA 3125/M/2015 S.K. SECURI TIES & INVESTMENTS 2 2. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE I S A PARTNERSHIP FIRM AND IS IN THE BUSINESS OF SUB-BROKER WITH BOMBAY STOCK EXC HANGE, NATIONAL STOCK EXCHANGE AND MAIN BROKER OF SEVERAL MUTUAL FU NDS. THE ASSESSEE FILED ITS RETURN OF INCOME FOR RELEVANT ASSESSMENT YEAR ON 29 OCTOBER 2007 DECLARING TOTAL INCOME AT RS.95,29,102/-. SUBSEQUEN TLY, ASSESSEE FILED A REVISED RETURN ON 2 ND NOVEMBER, 2007. THE ASSESSMENT UNDER SECTION 143(3) OF THE ACT WAS COMPLETED ON 12 DECEMBER, 200 9, DETERMINING THE TOTAL INCOME OF RS.1,66,66,320/-. THE ASSESSING OFF ICER MADE THE DISALLOWANCE OF BROKERAGE EXPENSES. AGGRIEVED, BY T HE ORDER OF ASSESSMENT, ASSESSEE CARRIED THE MATTER IN APPEAL B EFORE COMMISSIONER (APPEALS) WHEREIN THE ASSESSEE WAS GRANTED PARTIAL RELIEF. FURTHER AGGRIEVED BY THE ORDER OF COMMISSIONER (APPEALS) TH E ASSESSEE FILED 2 ND APPEAL BEFORE THE TRIBUNAL; VIDE ITA NO. 2612/M/ 20 11. THE APPEAL OF THE ASSESSEE WAS REMANDED VIDE ORDER DATED 22 JULY, 201 1 TO THE FILE OF ASSESSING OFFICER WITH A DIRECTION TO EXAMINE THE A DDITIONAL EVIDENCES FURNISHED BY THE ASSESSEE. THE ASSESSING OFFICER IN COMPLIANCE OF DIRECTION OF TRIBUNAL PASSED THE ORDER UNDER SECTION 143(3) R EAD WITH SECTION 254 OF THE ACT ON 20 MARCH, 2013. THE ASSESSING OFFICER CO MPUTED THE TOTAL INCOME OF THE ASSESSEE BY AGAIN MAKING AN ADDITION OF RS.73,64,427/- TO THE RETURN INCOME OF ASSESSEE. THE ASSESSEE FURTHER UNSUCCESSFULLY FILED APPEAL BEFORE COMMISSIONER (APPEALS). AND AGAIN BEI NG AGGRIEVED BY THE ORDER OF COMMISSIONER (APPEALS) THE ASSESSEE FILED THIS APPEAL BEFORE US. ITA 3125/M/2015 S.K. SECURI TIES & INVESTMENTS 3 3. WE HAVE HEARD THE LEARNED AR OF THE ASSESSEE AND TH E LEARNED DR FOR THE REVENUE AND PERUSED THE MATERIAL AVAILABLE ON RECOR D. THE LEARNED AR OF THE ASSESSEE ARGUED THAT DURING THE YEAR UNDER CONS IDERATION THE ASSESSEE PAID THE BROKERAGE OF RS.54,61,809/- TO SH. RATIL AL V SHAH, PROPRIETOR OF M/S R.V. ENTERPRISES AND RS.19,02,618/- TO SH. KISH ORE V SHAH, PROPRIETOR OF M/S KISHORE SHAH & CO. THE BROKERAGE EXPENSES WA S PAID WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS. BOTH THE B ROKERS HAD INTRODUCED VARIOUS CLIENTS FOR GENERATING THE BUSINESS TO THE ASSESSEE. BOTH THE BROKERS WERE ADVISING CLIENTS FOR BUY SALE-DECISION, GUARAN TEED THE PAYMENT AND PROVIDED SUPPORT SERVICES SUCH AS COLLECTION OF PAY MENTS, DELIVERY OF THE SLIPS ETC. THE ASSESSEE HAS PLACED SUFFICIENT EVIDE NCE BEFORE THE ASSESSING OFFICER AND THE COMMISSIONER (APPEALS) TO SUBSTANTI ATE ITS CLAIM. THE ENTIRE DETAILS OF BROKERAGE AND THE BUSINESS GENERA TED FROM THE CLIENT INTRODUCED BY BOTH THE BROKERS SHOWING THE TRANSACT ION DATE, BROKERAGE GENERATED AND BROKERAGE PASSED TO EACH BROKER AND C LIENT REGISTRATION FORM AS A PROOF OF INTRODUCTION WAS FURNISHED BEFORE THE LOWER AUTHORITIES. THE BROKERAGE CHARGES WERE PAID THROUGH ACCOUNT PAYEE C HEQUES; ADVANCE TAX HAS BEEN DEDUCTED AT SOURCE WHILE MAKING THE PAYMEN T OF SUCH BROKERAGE CHARGES AND WAS DEPOSITED BY THE ASSESSEE. THE SERV ICE TAX WAS DULY PAID ON THE SAID AMOUNT. THE BROKERS FILED THEIR CONFORM ATION IN THE FORM OF AFFIDAVIT AND THE DETAILS OF CLIENTS INTRODUCED BY THEM TO THE ASSESSEE. THE PARTIES WHICH WERE INTRODUCED BY THOSE BROKERS HAVE ALSO FILED THEIR ITA 3125/M/2015 S.K. SECURI TIES & INVESTMENTS 4 CONFORMATION, CONFIRMING THE RELATIONSHIP WITH THE BROKERS. IN THE FIRST ROUND OF APPEAL BEFORE THE TRIBUNAL THE MATTER WAS REMANDED TO THE FILE OF ASSESSING OFFICER TO VERIFY THE VARIOUS EVIDENCES F URNISHED BY ASSESSEE AND TO PASS THE ORDER ACCORDINGLY. HOWEVER, THE ASSESSI NG OFFICER INSTEAD OF CONSIDERING THOSE EVIDENCES CONFIRMED THE DISALLOWA NCE, WITHOUT BRINGING ANY CONTRARY MATERIAL ON RECORD. IT WAS FURTHER ARG UED BY LEARNED AR OF THE ASSESSEE THAT THE ASSESSEE HAS PLACED ON RECORD THE DETAILS OF WRITTEN SUBMISSION FILED BEFORE COMMISSIONER (APPEALS), THE COPIES OF THE REPLIES FILED IN RESPONSE TO THE NOTICES UNDER SECTION 143 AND 42, FILED BEFORE ASSESSING OFFICER. THE COPY OF AFFIDAVITS OF SUB-BR OKER SH. RATILAL V SHAH AND SHRI KISHORE V SHAH IS ALSO FILED. THE ASSESSEE HAS ALSO PLACED ON RECORD THE CONFORMATION OF SEVEN CLIENTS INTRODUCED BY SH. RATILAL V SHAH, CONFIRMING THE RELATIONSHIP WITH THIS BROKER. THE A SSESSEE HAS ALSO PLACED ON RECORD THE CERTIFICATE UNDER SECTION 197 BY THE DEPARTMENT ISSUED IN FAVOUR OF SH. KISHORE L SHAH FOR ZERO TAX DEDUCTION . THE ASSESSEE HAS ALSO FILED A DETAILS SHOWING IN THE FORM OF CHART A BOUT THE PAYMENT OF BROKERAGE FOR LAST 3 ASSESSMENT YEAR. COPY OF INCOM E TAX RETURN OF BOTH THE SUB-BROKER IS ALSO PLACED BEFORE THE TRIBUNAL. THE ASSESSEE HAS FURTHER PLACED ON RECORD THE COPY OF TDS CERTIFICATE AND TH E RETURNS FURNISHED BY THE ASSESSEE FOR THE ASSESSMENT YEAR UNDER CONSIDER ATION. IT WAS ARGUED THAT DESPITE FURNISHING SUFFICIENT EVIDENCE BEFORE THE L OWER AUTHORITIES THE DISALLOWANCE WAS SUSTAINED. IT WAS ARGUED THAT THE ASSESSING OFFICER AS WELL ITA 3125/M/2015 S.K. SECURI TIES & INVESTMENTS 5 AS THE LEARNED COMMISSIONER (APPEALS) PASSED THE OR DER WITHOUT CONSIDERING THE PRIMARY DOCUMENTARY EVIDENCE. NO CO NTRARY MATERIAL WAS BROUGHT ON RECORD BY THE REVENUE AUTHORITY IT WAS A RGUED THAT THE DISALLOWANCE ARE LIABLE TO BE DELETED. ON THE OTHER HAND, THE LEARNED DR FOR THE REVENUE SUPPORTED THE ORDER OF THE AUTHORIT IES BELOW. IT WAS ARGUED BY LEARNED AR FOR THE REVENUE THAT MOST OF THE ALLE GED BROKERAGE CHARGES WERE PAID BY THE ASSESSEE AT THE FEG END OF ASSESSM ENT YEAR. 4. WE HAVE CONSIDERED THE RIVAL SUBMISSION OF THE PART IES AND HAVE GONE THROUGH THE ORDERS OF AUTHORITIES BELOW AND THE MAT ERIAL PLACED BEFORE US BY THE ASSESSEE. DURING THE COURSE OF ASSESSMENT PR OCEEDINGS, THE A.O. OBSERVED THAT THE ASSESSEE HAS DEBITED COMMISSION P AYMENT OF RS.73,64,427/- FROM THE PROFIT AND LOSS ACCOUNT. TH E A.O. ASKED THE ASSESSEE TO SUBSTANTIATE AND JUSTIFY THE DEDUCTION OF PAYMENT OF BROKERAGE. THE ASSESSEE FILED ITS REPLY DATED 13.03.2013. IN T HE REPLY, THE ASSESSEE CONTENDED THAT THE ASSESSEE PAID THE SUB BROKERAGE CHARGES TO 13 SUB BROKERS AGGREGATING TO RS.1,35,62,989/-. OUT OF THE SUB BROKERAGE, THE SUM OF RS.54,61,809/- WAS PAID TO M/S. R. V. ENTERPRISE S AND RS.19,02,618/- TO M/S. KISHORE SHAH & CO. BOTH THE SUB-BROKER HAD INT RODUCED VARIOUS CLIENTS FOR GENERATING SUBSTANTIAL BUSINESSES TO TH E ASSESSEE. BOTH THE BROKERS WERE ADVISING ON BUY SALE, GUARANTEE THE PA YMENT AND PROVIDED THE SUPPORT SERVICES FOR COLLECTION OF PAYMENT, DELIVER Y OF SLIPS AND COMPLETING OTHER FORMALITIES. THE ASSESSEE ALSO FIL ED THE COPY OF AFFIDAVIT ITA 3125/M/2015 S.K. SECURI TIES & INVESTMENTS 6 OF SUB BROKER SHRI KISHORE L. SHAH, PROPRIETOR OF M /S. KISHORE SHAH & CO. ALONG WITH THE AFFIDAVIT THE CONFIRMATION OF SEVEN CLIENTS INTRODUCED TO ASSESSEE BY M/S. S. K. ENTERPRISES AND THE DETAILS OF INVESTMENTS. THE ASSESSEE ALSO PLACED ON RECORD THE DETAILS OF PAYME NTS MADE TO SUB BROKERS. THE ASSESSING OFFICER NOT ACCEPTED THE CON TENTION OF THE ASSESSEE HOLDING THAT MOST OF THE SUB BROKERAGE PAID TO M/S. R. V. ENTERPRISES BY THE ASSESSEE IS IN THE MONTH OF MARCH, 2006. IT WAS FURTHER CONCLUDED THAT NORMALLY BROKERAGE IS PAID ON MONTHLY BASIS AND, TH EREFORE, THE BROKERAGE PAID IN A SPECIFIC MONTH IS NOT ACCEPTABLE AND ACCO RDINGLY DISALLOW THE BROKERAGE PAYMENT. THE LD. CIT(A) CONFIRMED THE ORD ER OF THE A.O. IN HIS SIMILAR LINE ORDER HOLDING THAT THE A.O. WAS JUSTIF IED IN DISALLOWING THE SUB BROKERAGE, WE HAVE SEEN THAT THE ASSESSEE HAS PLACE D ON RECORD SUFFICIENT DOCUMENTARY EVIDENCE. THE ASSESSEE HAS PAID THE BRO KERAGE CHARGES THROUGH BANKING CHANNEL. THE ASSESSEE DEDUCTED THE TDS ON ALL THE BROKERAGE PAID TO M/S. R. V. ENTERPRISES AND M/S. K ISHORE SHAH & CO. THE ASSESSEE HAS PLACED ON RECORD THE COPY OF TDS RETUR N FOR A.Y. 2007-08 (PGS. 167 TO 172 OF PB). THE PROOF OF STT OF ALL TH E SEVEN CLIENTS INTRODUCED BY SHRI RATILAL V. SHAH, PROPRIETOR OF M /S. R. V. ENTERPRISES IS ALSO PLACED ON RECORD (PGS. 194 TO 206 OF PB). THE ASSESSEE HAS ALSO PLACED ON RECORD THE AFFIDAVIT OF SHRI RATILAL V. SHAH, PR OPRIETOR OF M/S. R. V. ENTERPRISES AND SHRI KISHORE L. SHAH, PROPRIETOR OF M/S. KISHORE SHAH & CO. (PGS. 50 TO 54 OF PB). THE PERUSAL OF THE AFFI DAVIT OF SH RATILAL V ITA 3125/M/2015 S.K. SECURI TIES & INVESTMENTS 7 SHAH SHOWS THAT M/S. R. V. ENTERPRISES INTRODUCES C LIENT NAMES, ADDRESS, PAN NUMBER, TURNOVER, BROKERAGE AND SUB BROKERAGE, DETAILS WERE PROVIDED IN HIS AFFIDAVIT. FURTHER, THE AFFIDAVIT O F SHRI KISHORE L. SHAH DISCLOSED ABOUT THE INTRODUCTION OF ONE CLIENT, SHR I RAJESH N. CHADDHA. THE AFFIDAVIT OF SH KISHORE L SHAH FURTHER DISCLOSE THE NAME, ADDRESS, DETAILS OF TRANSACTION (TURNOVER) BROKERAGE PAID AN D SUB BROKERAGE. WE HAVE ALSO PERUSED THE CONFIRMATION OF THE CLIENTS I NTRODUCED BY BOTH THE SUB BROKER (PGS. 55-61 OF PB). WE HAVE ALSO PERUSED THE COPY OF INCOME TAX RETURN ALONG WITH THE COMPUTATION OF INCOME, BA LANCE-SHEET AND PROFIT AND LOSS ACCOUNT OF M/S. R. V. ENTERPRISES AND M/S. KISHORE SHAH & CO. (PGS. 72-85 OF PB). BOTH THE SUB BROKER SHOWN THE I NCOME EARNED FROM THE ASSESSEE ON ACCOUNT OF COMMISSION PAYMENT. IN OUR V IEW, THE ASSESSEE HAS PROVED THE PAYMENT OF COMMISSION PAID TO THE SUB BR OKER. THE A.O. IGNORED THE DOCUMENTARY EVIDENCE FURNISHED BY THE A SSESSEE. THE A.O. HAS NOT BROUGHT ON RECORD ANY CONTRARY MATERIAL WHILE M AKING THE DISALLOWANCE OF SUB BROKERAGE PAID BY THE ASSESSEE. CONSIDERING THE ABOVE MATRIX, WE DIRECT THE A.O. TO DELETE THE DISALLOWANCE MADE ON ACCOUNT OF BROKERAGE PAID CHARGES BY ACCEPTING THE GROUNDS OF APPEAL RAI SED BY THE ASSESSEE. 5. IN THE RESULT, THE ASSESSEES APPEAL IS ALLOWED ORDER PRONOUNCED IN THE OPEN COURT ON 9 TH DAY OF AUGUST 2017. SD/- SD/- (G. S. PANNU) (PAWAN SINGH) / ACCOUNTANT MEMBER / JUDICIAL MEMBER MUMBAI; DATED : 09.8.2017 ITA 3125/M/2015 S.K. SECURI TIES & INVESTMENTS 8 SHRAWAN, SR. PS & ROSHANI, SR. PS / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3. ( ) / THE CIT(A) 4. / CIT - CONCERNED 5. ! 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