Mahawar Iron Stores (P) Ltd., New Delhi V. ITO, Ward-16(1), New Delhi

ITA 4101/DEL/2018

• Counselvise Citation: [2019] 118 COUNSELVISE.COM (IT) 4485 (ITAT-DELHI)
• Duration Of Justice: 8 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-02-2019
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: SMC
• Assessment Year: 2010-2011
• Appeal Filed On: 30-05-2018
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: S L ANURAGI
• Keywords: TDS
• Section: 143(3); 142(1); 133(6); 263

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH: SMC, NEW DELHI BEFORE SH. H.S. SIDHU, JUDICIAL MEMBER ITA NO. 4101/DEL/2018 ASSESSMENT YEAR: 2010-11 MAHAWAR IRON STORES (P) LTD. VS. ITO, WARD 16(1) A-11, NIZAMUDIN (WEST), NEW DELHI NEW DELHI (PAN: AACCM5576G) (APPELLANT) (RESPONDENT) ASSESSEE BY : SH.ASHWANI KUMAR, CA REVENUE BY : SH. SL ANURAGI, SR. DR. ORDER THE ASSESSEE HAS FILED THE APPEAL AGAINST THE ORDE R DATED 27.4.2018 OF THE LD. CIT(A)-22, NEW DELHI PERTAININ G TO ASSESSMENT YEAR 2010-11 ON THE FOLLOWING GROUNDS:- 1. THAT THE ORDER DATED 27.4.2018 PASSED U/S. 250(6) OF THE ACT BY THE CIT(A), NEW DELHI IS AGAINST LAW AND FACTS ON THE FILE IN AS MUCH AS HE WAS NOT JUSTIFIED TO UPHOLD THE ACTION OF THE AO IN SUSTAINING THE ADDITION ON ACCOUNT OF BROKERAGE OF RS. 8,26,778/- (COMPRISING OF RS. 6,89,395/) ON ACCOUNT OF BROKERAGE PAID TO VARIOUS PERSONS ON THE GROUND THAT NOTICES 2 SENT TO THEM U/S. 133(6) OF THE ACT FOR VERIFICATION AND JUSTIFICATION OF PAYMENT HAS BEEN RECEIVED BACK UNSERVED AND THE PAYMENTS MADE TO THEM ARE ALLEGEDLY UNVERIFIED AND RS. 1,37,383/- ON ACCOUNT OF BROKERAGE PAID ON PURCHASES TO VARIOUS PARTIES ON THE GROUND THAT THERE IS, ALLEGEDLY, NO JUSTIFICATION FOR PAYMENT OF BROKERAGE ON PURCHASES. 2. THAT THE ORDER DATED 27.4.2018 PASSED U/S. 250(6) OF THE ACT BY THE LD. CIT(A), NEW DELHI IS AGAINST LAW AND FACTS ON THE FILE IN AS MUCH AS HE WAS NOT JUSTIFIED IN RESTRICTING THE ADDITION U/S. 40A(2)(B) OF THE ACT IN RESPECT OF PURCHASES MADE FROM M/S STAR WIRE INDIA LTD., A RELATED PARTY, TO RS. 10,290/- BEING THE DIFFERENCE IN THE PRICE AT WHICH PURCHASES HAVE BEEN MADE FROM M/S STAR WIRE INDIA LTD., A RELATED PARTY AND FROM M/S NARAYAN & CO. AN UNRELATED PARTY. 2. THE BRIEF FACTS OF THE CASE ARE THAT REGULAR ASS ESSMENT WAS MADE VIDE ORDER DATED 31.12.2012 U/S. 143(3) OF THE INCO ME TAX ACT, 1961 (IN 3 SHORT ACT) AT TOTAL INCOME OF RS. 22,59,020/- AGA INST RETURNED INCOME OF RS. 17,50,420/-. THE DIFFERENCE BETWEEN THE RETURN ED INCOME AND ASSESSED INCOME WAS DUE TO DISALLOWANCE OF RS. 5085 99/- OUT OF BROKERAGE EXPENSE. THE LD. CIT (CENTRAL), GURGAON VIDE HIS ORDER PASSED U/S. 263 OF THE ACT DATED 18.3.2015, SET ASI DE THE ASSESSMENT TO THE FILE OF THE AO WITH THE DIRECTION TO EXAMINE DE NOVO VARIOUS ISSUES. ACCORDINGLY, NOTICE U/S. 142(1) AND 143(2) OF THE A CT DATED 18.1.2016 FOR FIXING THE HEARING FOR 28.01.2016, WHEN THE ASSESSE E WAS REQUIRED TO PRODUCE COMPLETE DETAILS WITH DOCUMENTARY EVIDENCE. IN RESPONSE TO THE SAME, THE AR OF THE ASSESSEE ATTENDED THE ASSES SMENT PROCEEDINGS FROM TIME TO TIME AND FURNISHED THE VARIOUS DETAILS . AFTER CONSIDERING THE REPLY OF THE ASSESSEE, THE AO MADE THE ADDITIONS ON ACCOUNT OF BROKERAGE AND DISALLOWANCE U/S. 40A(2)(B) OF THE AC T AND ASSESSED THE INCOME OF THE ASSESSEE AT RS. 27,86,230/- VIDE HIS ORDER DATED 31.3.2016 PASSED U/S. 143(3)/263 OF THE ACT. AGAIN ST THE SAID ASSESSMENT ORDER, ASSESSEE APPEALED BEFORE THE LD. CIT(A), WHO VIDE HIS IMPUGNED ORDER DATED 27.4.2018 HAS PARTLY ALLOWED THE APPEAL OF THE ASSESSEE. AGGRIEVED WITH THE IMPUGNED ORDER, ASSESS EE IS IN APPEAL BEFORE THE TRIBUNAL. 3. DURING THE HEARING, LD. COUNSEL FOR THE ASSESSEE HAS STATED THAT LD. CIT(A) IS NOT JUSTIFIED IN UPHOLDING THE ACTION OF THE AO IN SUSTAINING THE ADDITION ON ACCOUNT OF BROKERAGE OF RS. 8,26,778/- (COMPRISING OF RS. 6,89,395/) ON ACCOUNT OF BROKERAGE PAID TO VARIOUS PERSONS ON THE GROUND THAT NOTICES SENT TO THEM U/S. 133(6) OF THE ACT FOR VERIFICATION 4 AND JUSTIFICATION OF PAYMENT HAS BEEN RECEIVED BACK UNSERVED AND THE PAYMENTS MADE TO THEM ARE ALLEGEDLY UNVERIFIED AND RS. 1,37,383/- ON ACCOUNT OF BROKERAGE PAID ON PURCHASES TO VARIOUS P ARTIES ON THE GROUND THAT THERE IS, ALLEGEDLY, NO JUSTIFICATION FOR PAYM ENT OF BROKERAGE ON PURCHASES. IT WAS FURTHER SUBMITTED THAT LD. CIT(A ) ERRED IN RESTRICTING THE ADDITION U/S. 40A(2)(B) OF THE ACT IN RESPECT O F PURCHASES MADE FROM M/S STAR WIRE INDIA LTD., A RELATED PARTY, TO RS. 10,290/- BEING THE DIFFERENCE IN THE PRICE AT WHICH PURCHASES HAVE BEE N MADE FROM M/S STAR WIRE INDIA LTD., A RELATED PARTY AND FROM M/S NARAY AN & CO. AN UNRELATED PARTY. HENCE, HE REQUESTED TO DELETE THE ADDITION C ONFIRMED BY THE LD. CIT(A) AND ALLOW THE APPEAL OF THE ASSESSEE. 4. ON THE OTHER HAND, LD. DR RELIED UPON THE ORDER OF THE LD. CIT(A) AND STATED THAT HE HAS PASSED A WELL REASONED ORDER , WHICH DOES NOT NEED ANY INTERFERENCE. 5. I HAVE HEARD BOTH THE PARTIES AND PERUSED THE RE CORDS ESPECIALLY THE IMPUGNED ORDER. I FIND THAT ASSESSEE HAS SUBMITTED THE DOCUMENTS RELATING TO BROKERAGE SUCH AS PAN AND TDS BEFORE T HE AO. IT IS NOTED THAT THE TURNOVER OVER OF ASSESSEE IS RS. 45.70 CRO RE AND THE AMOUNT OF BROKERAGE WAS DEBITED IN P&L ACCOUNT OF RS. 50,85,9 88/- AND IN THE PRECEDING YEAR THE TURNOVER OF THE ASSESSEE WAS RS. 69.94 CRORE AND THE BROKERAGE WAS PAID OF RS. 29,72,014/-, WHICH SHOWS THAT THERE IS QUANTUM JUMP IN THE PAYMENT OF BROKERAGE DESPITE TH E FACT THAT THE TURNOVER OF THE ASSESSEE HAS GONE DOWN SUBSTANTIALL Y. NOTICES U/S. 133(6) 5 OF THE INCOME TAX ACT, 1961 HAS NOT BEEN SERVED AT THE GIVEN ADDRESS. NO EFFORT IS MADE BY THE LD. AR TO PROVIDE NEW ADDR ESSES OF THE BROKERS. NO BASIS FOR PAYMENT OF BROKERAGE IS EITHER SUBMIT TED BEFORE THE AO OR IN THE APPELLATE PROCEEDINGS. THE LD. AR HAS SIMPL Y RELIED UPON THE DOCUMENTS OF BROKERAGE PAYMENT SUBMITTED. IN BUSINE SS PARLANCE ROLE OF BROKERS AND PAYMENT OF BROKERAGE CANNOT BE DENIED. HOWEVER, THERE MUST BE SOME BASIS FOR THE PAYMENT AND GENERALLY FI XED BROKERS ARE USED FOR MANY YEARS. IT IS NOTED THAT LD. CIT(A) IN APPE AL HAS ASKED THE LD. AR THAT PRESENTLY WHETHER THE ASSESSEE IS ENGAGING TH ESE BROKERS, THE LD. AR HAS NO CLUE. IN VIEW OF THIS THE ADDITION MADE B Y THE AO WAS RIGHTLY CONFIRMED BY THE LD. CIT(A), WHICH DOES NOT NEED A NY INTERFERENCE ON MY PART, THEREFORE, I UPHOLD THE ORDER OF THE LD. CIT(A) ON THIS ISSUE AND REJECT THE GROUND RAISED BY THE ASSESSEE. 5.2 AS REGARDS DISALLOWANCE U/S. 40A(2)(B) IS CONC ERNED, I FIND THAT ASSESSEE HAS PURCHASED FROM M/S STAR WIRE INDIA LT D. @ OF RS. 33,000/- PER METRIC TON AND ON THE SAME DATE PURCHASED SAME ITEM FROM M/S NARAYNA & CO. @ OF RS. 32,330/- PER METRIC TON. TH EREFORE, THE AO FOUND THE DIFFERENCE OF RS. 670 PER METRIC TON AND COMPUT ED THE DISALLOWANCE ACCORDINGLY. IN APPEAL THE ASSESSEE HAS SUBMITTED THAT THE RATE OF PURCHASE FROM M/S NARAYAN & CO. TAKEN BY THE AO IS INCORRECT AND SUBMITTED THE COPY OF THE PURCHASE BILL WHICH SHOWS THAT THE RATE OF PURCHASE IS RS. 32,930/-. THEREFORE, THE DIFFERENC E IS ONLY OF RS. 70/- INSTEAD OF RS. 670/- TAKEN BY THE AO. SINCE THERE IS DIFFERENCE IN PURCHASE RATE OF SAME ITEM FROM TWO PARTIES OUT OF WHICH RATE IS HIGHER IN 6 THE CASE OF RELATED PARTLY, LD. CIT(A) HAS CORREC TLY OBSERVED THAT SECTION 40A(2)(B) OF THE ACT IS ATTRACTED IN THE CASE OF T HE ASSESSEE. HOWEVER, HE OBSERVED THAT THE DISALLOWANCE NEEDS TO BE RECOM PUTED CONSIDERING THE RATE FROM M/S NARAYAN & CO. @ RS. 32,930/-. IN VIEW OF DISALLOWANCE OF RS. 10,290 WAS RIGHTLY CONFIRMED BY THE LD. CIT (A), WHICH DOES NOT NEED ANY INTERFERENCE ON MY PART, THEREFORE, I UP HOLD THE ORDER OF THE LD. CIT(A) ON THIS ISSUE AND REJECT THE GROUND RAIS ED BY THE ASSESSEE. 6. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS DISMISSED. ORDER PRONOUNCED ON 14-02-2019. SD/- [H.S. SIDHU] JUDICIAL MEMBER DATE:14/02/2019 SRBHATNAGAR COPY FORWARDED TO: - 1. APPELLANT 2. RESPONDENT 3. CIT 4.CIT (A) 5. D R, ITAT BY ORDER, ASSISTANT REGISTRAR, ITAT, DELHI BENCHES 7