ITO 13(2)(4), MUMBAI V. PARAS STEEL CORPORATION, MUMBAI

ITA 4671/MUM/2014

• Counselvise Citation: [2017] 126 COUNSELVISE.COM (IT) 9788 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 1 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-08-2017
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: C
• Next Hearing Date: 11-07-2017
• Assessment Year: 2009-2010
• Appeal Filed On: 08-07-2014
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: RAJAT MITTAL
• Keywords: Gross profit estimation; Business income; Opportunity of being heard; Principle of natural justice; Period of limitation; Additional evidence; Time period of passing order
• Section: 143(3); 133(6); 37(1); 131; 37

Judgement Text

C IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, MUMBAI BEFORE SHRI SAKTIJIT DEY, JUDICIAL MEMBER AND SHRI RAMIT KOCHAR, ACCOUNTANT MEMBER ./ I.T.A. NO. 4671/ MUM/2014 ( / ASSESSMENT YEAR : 2009-10) INCOME TAX OFFICER 13(2)(4), R NO. 412, 4 TH FLOOR, AAYAKAR BHAVAN, M.K. ROAD, MUMBAI 400 020. / V. M/S PARAS STEEL CORPORATION, 505, GUPTA BHAVAN, M-2, STEEL CENTRE, IRON MARKET, MUMBAI 400 009. ./ PAN : AAAFP 1172 A ( / APPELLANT ) .. ( / RESPONDENT ) REVENUE BY : SHRI RAJAT MITTAL ,DR ASSESSEE BY : NONE / DATE OF HEARING : 31.7.2017 / DATE OF PRONOUNCEMENT : 23.08.2017 / O R D E R PER RAMIT KOCHAR, ACCOUNTANT MEMBER THIS APPEAL, FILED BY THE REVENUE BEING ITA NO. 46 71/MUM/2014, IS DIRECTED AGAINST THE APPELLATE ORDER DATED 18 TH MARCH, 2014 PASSED BY LEARNED COMMISSIONER OF INCOME TAX (APPEALS)-24, MU MBAI (HEREINAFTER CALLED THE CIT(A)), FOR ASSESSMENT YEAR 2009-10, THE APP ELLATE PROCEEDINGS BEFORE THE LEARNED CIT(A) HAS ARISEN FROM THE ASSESSMENT O RDER DATED 02-12-2011 PASSED BY THE LEARNED ASSESSING OFFICER, MUMBAI (HE REINAFTER CALLED THE AO) U/S 143(3) OF THE INCOME-TAX ACT,1961 (HEREINAFTER CALLED THE ACT). ITA 4671/MUM/2014 2 2. THE GROUNDS OF APPEAL RAISED BY THE REVENUE IN T HE MEMO OF APPEAL FILED WITH THE INCOME-TAX APPELLATE TRIBUNAL, MUMBA I (HEREINAFTER CALLED THE TRIBUNAL) READ AS UNDER:- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LD. CIT(A), HAS ERRED IN DELETING THE ADDI TION OF RS. 2,50,000/- MADE BY THE AO. ON ACCOUNT OF LOW GROSS PROFIT. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LD. CIT(A), HAS ERRED IN DELETING THE ADDI TION OF RS. 34,00,000/- MADE BY THE A.O. ON ACCOUNT OF BROKERAG E/ COMMISSION. 3. THE APPELLANT PRAYS THAT THE ORDER OF CIT(A) ON THE ABOVE GROUNDS BE SET ASIDE AND THAT OF THE ASSESSING OFFI CER BE RESTORED. 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E IS IN THE BUSINESS OF TRADING IN IRON AND STEEL. THE AO OBSERVED THAT THE ASSESSEE HAD DECLARED TOTA L TURNOVER OF RS. 9,92,48,746/- WITH GROSS PROFIT OF RS. 88,12,531/- AND NET PROFIT OF RS. 10,52,658/- FROM THE BUSINESS OF TRADING IN IRON AN D STEEL. DURING THE COURSE OF ASSESSMENT PROCEEDINGS U/S 143(3) R.W.S. 143(2) OF THE 1961 ACT, THE ASSESSEE WAS ASKED TO FURNISH MONTH WISE DETAILS OF PURCHASES AND SALES FOR THE FINANCIAL YEAR 2008-09. THE ASSESSEE DID NOT FU RNISH MONTH WISE DETAILS OF PURCHASE AND SALES AND ALSO THE ASSESSEE DID NOT FU RNISH THE JUSTIFICATION , EXPLANATION AND GENUINENESS OF BROKERAGE EXPENSES C LAIMED W.R.T. CERTAIN PARTIES. THE AO OBSERVED THAT SOME PART DETAILS WE RE GIVEN BY THE ASSESSEE AT THE FAG END WHEN THE ASSESSMENT WAS GETTING TIME BA RRED PREVENTING CLOSE EXAMINATION AND VERIFICATION AND HENCE IS TO BE DEC IDED BASED ON MATERIAL ON RECORD KEEPING IN VIEW TIME LIMITATION PERIOD FOR F RAMING ASSESSMENT AS PRESCRIBED UNDER THE PROVISIONS OF THE 1961 ACT. ITA 4671/MUM/2014 3 THE A.O. OBSERVED THAT THE ASSESSEE HAD DECLARE D GROSS PROFIT DURING THE CURRENT YEAR AND PRECEDING YEARS , AS MENTIONED BEL OW:- ASST. YEAR TOTAL TURNOVER GROSS PROFIT RATE OF GP 2007-08 RS. 1,71,60,423/- RS. 16,84,935/- 9.82% 2008-09 RS. 4,94,11,686/- RS. 52,51,573 10.62% 2009-10 RS. 9,92,48,745/- RS. 88,12,530/- 8.88% IT WAS OBSERVED BY THE AO THAT THERE WAS A FALL IN THE GP RATE FOR A.Y. 2009- 10 AS COMPARED TO THE GP RATE FOR THE PRECEDING TWO YEARS AND ASSESSEE WAS ASKED TO EXPLAIN THE SAME. THE ASSESSEE VIDE ITS L ETTER DATED 18.10.2011 SUBMITTED AS UNDER:- IN SO FAR AS FALL IN GP FROM 10.62% TO 8.8% IS CON CERNED, IT IS SUBMITTED THAT THE SALES OF ASSESSEE HAVE INCREASED FROM RS. 4,94,11,685/- TO RS. 9,92,48,746 AND THUS IN ORDER TO INCREASE THE SALES, MARGIN OF GP HAS SLIGHTLY DECREASED IN A S MUCH AS THE TURNOVER IS ROUGHLY DOUBLED. THUS, THERE IS FULL JU STIFICATION FOR A SLIGHT FALL IN GP. THE A.O. REJECTED THE EXPLANATION OF THE ASSESSEE A ND OBSERVED THAT THE TURNOVER FOR A.Y. 2008-09 HAS GONE UP TWICE(NEARLY THRICE) AS COMPARED TO PRECEDING YEAR TURNOVER I.E. FOR A.Y. 2007-08, TH E GP RATE HAD ALSO GONE UP FROM 9.82% TO 10.62%. THE A.O. ANALYSED THE PURCHA SES AS COMPARED WITH THE SALES IN THE FOLLOWING WAY:- FOR EXAMPLE, FROM APRIL, 2008 UPTO THE MONTH OF NO VEMBER, 2008, THE TOTAL SALES ARE SHOWN TO BE RS.9,57,32,95 3/- AND AFTER REDUCING THE GP COMPONENT (8.88%) THE COST OF SALES COMES TO RS.8,72,31,866/-. BUT, FROM APRIL, 2008 UPTO NOVEMB ER, 2008 THE PURCHASES AND THE OPENING STOCK TOTALLY COME TO RS.8,42,15,936/- ONLY. BESIDES THIS, UPTO THE MONTH OF FEBRUARY 2009, THE TOTAL SALES ARE SHOWN TO BE RS.10,59,10,5 50/- AND THE COST OF THE SALES (BY REDUCING GP) COMES TO RS.9,65 ,05,693/- ITA 4671/MUM/2014 4 WHEREAS THE PURCHASES UPTO FEBRUARY, 2009 TOGETHER WITH OPENING STOCK TOTALLY COMES TO RS.8,96,91,449/- ONL Y. THUS, THE A.O. CAME TO THE CONCLUSION THAT THE BOOK S RESULTS WERE NOT RELIABLE FOR THE REASON THAT THE DAY TO TODAY STOCK REGISTER HAD NOT BEEN MAINTAINED. THE AO OBSERVED THAT THE TAX AUDIT REPORT ONLY SHOW S THE QUANTITY OF PURCHASES, SALES AND BALANCE IN THE CLOSING STOCK. AGAINST THESE OBSERVATIONS OF THE A.O., THE ASSESSEE EXPLAINED AS UNDER:- LOW G.P.:- YOUR HONOUR HAS OBSERVED THAT THE COST OF THE TOTAL SALES UPTO NOVEMBER' 2008/FEBRUARY' 2009 AS REDUCED BY G.P DO NOT MATCH WITH THE PURCHASES TILL THOSE MONTHS INCL USIVE OF OPENING STOCK. IN THIS CONNECTION, YOUR KIND ATTENT ION IS INVITED TO THE TRADING, PROFIT & LOSS A/C WHEREIN WHILE DET ERMINING THE GP, TRANSPORT CHARGES AND RATE DIFFERENCES ARE ALSO CONSIDERED WHEREAS IT APPEARS YOUR HONOUR HAS PROCEEDED WITHOU T CONSIDERING THE TRANSPORT CHARGES AND RATE DIFFEREN CE WHILE ARRIVING AT THE INFERENCE STATED IN THE IMPUGNED LE TTER. THUS THE VERY BASIS RELIED UPON BY YOUR HONOUR TO A RRIVE AT THE INFERENCE STATED IN THE SAID LETTER IS FALLACIOUS. INCIDENTALLY IT MAY PLEASE BE NOTED THAT THE COMPLETE DETAILS WITH REGA RD TO THE PURCHASES AND SALES IN TERMS OF THE QTY./MTS/NOS IS FILED ALONG WITH THE AUDIT REPORT FILED AT YOUR END VIDE LETTER DATED 28/9/2011 FILED ON 29/9/2011 AT PG. 59. IN VIEW OF THIS YOUR HONOUR IS REQUESTED TO CONSIDER THE ABOVE EXPLANATI ON. THE EXPLANATION OFFERED BY THE ASSESSEE WERE REJECT ED BY A.O. THE A.O. OBSERVED THAT THE GP RATE WAS 9.94% FOR TRADING AC COUNT UPTO 30 TH NOVEMBER 2008 WHILE THE SAME WAS 12.57% FOR THE PERIOD UPTO FEBRUARY 2009, WHICH WERE TOTALLY DIFFERENT THAN GP RATIO OF 8.88% DECLA RED FOR PREVIOUS YEAR RELEVANT TO THE IMPUGNED ASSESSMENT YEAR 2009-10 .I T WAS ALSO OBSERVED THAT FIGURE OF SALES AND PURCHASES EXTRACTED FROM THE CO NCERNED REGISTERS BY THE ASSESSEE ITSELF ARE DIFFERENT FROM THOSE IN PROFIT AND LOSS ACCOUNT ENCLOSED WITH TAX AUDIT REPORT U/S 44AB. THE AO OBSERVED THA T AS PER MONTH WISE ITA 4671/MUM/2014 5 DETAILS (REGISTER) THE TOTAL SALES ARE RS. 10,71,38 ,782/- WHEREAS THE PROFIT AND LOSS ACCOUNT SHOWS SALES OF RS. 9,92,48,746/- . IT WAS ALSO OBSERVED THAT THE TOTAL PURCHASES AS PER MONTH WISE DETAILS , THE TOT AL PURCHASES ARE RS. 8,60,11,897/- WHEREAS THE PROFIT AND LOSS ACCOUNT S HOWS PURCHASES TO THE TUNE OF RS. 8,34,28,183/- . THUS, THE AO OBSERVED T HAT THE ASSESSEES BOOK RESULTS WERE NOT GENUINE AND BY INVOKING PROVISIONS OF SECTION 145(3) OF THE 1961 ACT , THE AO MADE AN ADDITION OF RS. 2,50,000/ - ON ESTIMATE BASIS TO THE TOTAL INCOME OF THE ASSESSEE ON ACCOUNT OF LOW GP. THE A.O. FURTHER OBSERVED THAT THE ASSESSEE HAD PAI D BROKERAGE OR COMMISSION OF RS. 36,29,799/- TO VARIOUS PARTIES , OUT OF WHICH THE FOLLOWING PARTIES BELONGS TO NEW DELHI:- I) SANJEEV DATTA II) VARUN DATTA III) DIPIKA GROVER IV) GEETANJALI THAKUR V) NEELAM BHATIA THE ASSESSEE WAS ASKED BY THE AO TO PROVE CLAIM OF THE BROKERAGE PAID TO DELHI BASED PARTIES. HOWEVER, PHOTOCOPIES OF CREDI T NOTES ISSUED BY THE ASSESSEE AND CONFIRMATIONS OF SOME OF THE RECIPIENT S OF BROKERAGE WERE SUBMITTED BY THE ASSESSEE. THE DETAILS OF SOME BRO KERS OF NEW DELHI WHO WERE PAID BROKERAGE BY THE ASSESSEE ARE AS UNDER:- SR NO. NAME & ADDRESS OF RECIPIENT OF BROKERAGE NAME AND ADDRESS OF THE SUPPLIER OF GOODS VALUE OF GOODS INVOLVED BROKERAGE 1 N.K. JAIN & SONS HUF, 199/2B STREET NO. 10, TANSINGH NAGAR, ANAND M/S KOTHARI STEEL SYNDICATE, 202 GUPTA BHAVAN, AHMEDABAD STREET, RS. 96,49,834 RS. 1,20,000 ITA 4671/MUM/2014 6 PRABAT, NEW DELHI MUMBAI 400009 2 GEETANJALI THAKUR, 4C/20 RAJENDRA NAGAR, NEW DELHI A) UTTAM GALVA STEELS LKTD.,69, P.D. MELLOW ROAD, CARNAC BUNDER, MUMBAI 400009 RS. 21,62,284 (1.29%) RS. 1,50,000 B) BHARATKUMAR INDRASEN TRADING PVT. LTD., DEVJI RATANSHI MARG, CARNAC BUNDER, MUMBAI 400009 RS. 92,54,239 (1.44%) 3 MARENDRA THAKUR, 4C/20 RAJENDRA NAGAR, NEW DELHI A) JASMINE INDUSTRIAL CORPN., 505 GIRIRAJ, S.T. ROAD, MUMBAI 400009 RS.59,98,516 RS. 1,50,000 B) STEEL ROLLING MILL OF MAHARASHTRA, KHOLSA BUNDER, DARUKHANA, MUMBAI 400010 RS. 20,33,936 4 RAJENDRA KUMAR HUF, A-4/442, PASCHIM VIHAR, NEW DELHI EXECUTIVE TRADING CO. PVT. LTD., 59E, BARODA STREET, CARNAC BUNDER, MUMBAI 400009 RS.1,23,71,585 RS.150,000 BROKERAGE CLAIM IN RESPECT OF SALES 5 NEELAM BHATIA, C- 716, NFS, NEW DELHI A)UTKARSH STEEL CORPORATION, 40 CARNAC SIDING ROAD, CARNAC BUNDER, MUMBAI 400009 RS. 58,50,717 RS.5,00,000 (8.55%) 6 PUNIT GUPTA, A-4, 442, PACHIM VIHAR, NEW DELHI A)GANON DUNKERLY CO, MUMBAI B)REMI METALS, GUJARAT RS.12,39,152 RS.18,73,030 RS.160,000 (5.15%) 7 DEEPIKA GROVER, H- 11, WEST PATEL NAGAR, NEW DELHI KAMAL TRADING CORPN. HUBLI RS.44,18,981 RS.150,000 (3.39%) 8 DILIP GROVER, H-11, WEST PATEL NAGAR, NEW DELHI -DO- -DO- RS.150,000 (3.39%) 9 SANJEEV DATTA, A- GOA SHIPYARD, VASCO RS.3,00,65,158 RS.5,00,000 ITA 4671/MUM/2014 7 269, SARITA VIHAR, NEW DELHI DE GAMA, GOA (3.33%) 10 VARUN DATTA, A-269, SARITA VIHAR, NEW DELHI GOA SHIPYARD, VASCO DE GAMA, GOA RS.3,00,65,158 RS.4,00,000 (3.33%) 11 GHANSHYAMDAS CHEMICAL GOYAL, HUF, GIRIRAJ, JAINA, MAHARASHTRA WESTERN INDIA SHIPYARD, GOA RS.5,99,34,476 RS.8,70,000 (1.45%) TOTAL RS.34,00,000 THE ASSESSEE CLAIMED THAT ALL THE DETAILS WITH RESP ECT TO THESE BROKERS WERE SUBMITTED LIKE ADDRESSES, PAN ETC. IT WAS SUBMITTE D THAT MERELY BECAUSE THE PARTIES WERE BASED IN NEW DELHI , CANNOT BE A GROUN D FOR DISALLOWING THE SAME. IT WAS SUBMITTED THAT PERUSAL OF DETAILS WILL CLEARLY REVEAL THE NATURE OF SERVICES RENDERED WHICH WERE BOTH FOR PURCHASES/SAL ES EFFECTED, SPECIFYING THE QUANTUM OF THE GOODS AND THE PERSONS FROM WHOM SAID PURCHASES AND TO WHOM SALES WERE MADE. THE ASSESSEE SUBMITTED THAT I T HAS NO POWER TO ENFORCE ATTENDANCE OF THESE PARTIES BEFORE THE REVE NUE AND IT WAS SUBMITTED THAT THE AO HAS ALL THE POWERS TO ENFORCE THE ATTEN DANCE OF THESE PARTIES BEFORE REVENUE. THE A.O. AFTER CONSIDERING THE EXPLANATIONS OF THE ASSESSEE OBSERVED THAT THE ASSESSEE CARRIED ITS BUSINESS FROM THE PREMISES 505 , GUPTA SHAWAN, AHMEDABAD STREET, CARNAC BUNDER, MUMBAI, AND THE PU RCHASES MENTIONED IN THE ABOVE CASES WERE BY AND LARGE FROM THE SAME LOCALITY WHERE OFFICE OF THE ASSESSEE IS SITUATED . THE AO OBSERVED THAT PURCHAS ES MENTIONED AGAINST SR. NO. (1) ABOVE IS FROM A CONCERN LOCATED IN THE SAME BUILDING (VIZ.GUPTA BHAVAN) WHERE THE ASSESSEE IS LOCATED. IT WAS OBSER VED BY THE AO THAT THE TRANSACTION OF PURCHASE FROM THAT CONCERN WAS ALSO STATED TO BE DONE THROUGH A BROKER OF NEW DELHI. THE OTHER PURCHASES FROM CA RNAC BUNDER LOCALITY NEAR TO THE ASSESEES BUSINESS PREMISES WERE ALL CLAIMED TO BE DONE THROUGH NEW DELHI BROKERS AND ALSO THE ADDRESS OF MOST OF THE B ROKER PARTIES ARE ONE AND ITA 4671/MUM/2014 8 SAME. THE AO OBSERVED THAT THE ASSESSEE WAS ASKED T O PRODUCE THE BROKERS BUT THE SAID BROKERS WERE NOT PRODUCED BY THE ASSE SSEE. THE ASSESSEE WAS ALSO ASKED TO PRODUCE THE SERVICE RENDERED BY THE D ELHI PARTIES BUT NOTHING WAS BROUGHT ON RECORD TO PROVE THIS FACTUAL ASPECT. IT WAS OBSERVED BY THE AO THAT DETAILS OF OCCUPATION/ANTECEDENT , PAN, AGE, D ETAILS OF OTHER BROKERAGE ACTIVITIES ETC WERE NOT BROUGHT ON RECORD BY THE AS SESSEE. IT WAS ALSO OBSERVED THAT IN SOME CASE VERY HIGH RATE OF BROKERAGE IS PA ID IN SOME CASES WHICH IS ABNORMALLY HIGH. THE AO OBSERVED THAT THERE IS NO E VIDENCE OF ACTUAL RENDERING OF SERVICES BY THESE BROKERS. THUS, THE A.O. DISALLOWED THE CLAIM OF BROKERAGE EXPENSES OF RS. 34,00,000/- AS THE SAME W ERE NOT CONSIDERED TO BE WHOLLY AND EXCLUSIVELY FOR THE PURPOSES OF BUSINESS AND IT WAS HELD THAT IT DID NOT FULFILL THE PARAMETERS OF SECTION 37 OF THE AC T, VIDE ASSESSMENT ORDER DATED 02-12-2011 PASSED BY THE AO U/S 143(3) OF THE 1961 ACT. 4. AGGRIEVED BY THE ASSESSMENT ORDER DATED 02-12-20 11 PASSED BY THE AO U/S 143(3) OF THE 1961 ACT, THE ASSESSEE CARRIED THE MA TTER IN APPEAL BEFORE THE LD. CIT(A) , WHO ALLOWED THE APPEAL OF THE ASSESSEE BY HOLDING AS UNDER:- 4.3 DECISION :- I HAVE CONSIDERED THE FACTS OF THE CASE AND THE SUB MISSIONS MADE BY THE ASSESSEE. IT BECOMES CLEAR FROM THE PERUSAL OF PURCHASE AND SALES RECONCILIATION STATEMENTS THAT ASSESSEE H AS EXCLUDED THE VAT FROM THE PURCHASES AND HAS BUNCHED LABOR CH ARGES IN THE PURCHASE VALUE HAS SHOWN THE NET AMOUNT AS PURC HASES IN THE P & L ACCOUNT AND HAS SHOWN TRANSPORT CHARGES S EPARATELY ON THE DEBIT SIDE OF THE P & L ACCOUNT. SIMILARLY A SSESSEE HAS BUNCHED NET SALES VALUE OF RS. 9,77,13,831/- WITH T HE FORWARDING CHARGES OF RS. 15,34,914/- AND SHOWN SALES AT RS. 9 ,92,48,745/- AND HAS TAKEN THE VAT BILLED TO PARTIES OF RS. 24,2 8,727/- SEPARATELY TO THE VAT ACCOUNT. THUS, BASICALLY, THE DIFFERENCE IN PURCHASES AND SALES AMOUNT IN THE REGISTERS OF THE ASSESSEE AND THE P& L ACCOUNT IS BECAUSE THE VAT IN THE PURCHASE S BILLS AND VAT IN THE SALES BILLS HAVE BEEN TAKEN TO A SEPARAT E ACCOUNT IN THE BALANCE SHEET FOR EFFECTING ITS VAT PAYMENTS. T HUS, THE ITA 4671/MUM/2014 9 DIFFERENCE IN THE PURCHASE AND SALES FIGURES ARE BA SICALLY DUE TO ACCOUNTING OF VAT AND NOTHING ELSE AND THAT WAS NOT UNDERSTOOD BY THE ASSESSING OFFICER WHILE EXAMINING THE BOOKS OF ACCOUNT VIS-A-VIS THE P& L ACCOUNT. MOREOVER, THIS DID NOT CALL FOR REJECTION OF BOOKS OF ACCOUNT UNDER SECTION 145(3) OF IT. ACT, 1961 TO JUSTIFY THE ADDITION OF RS. 2,50,000/- ON ACCOUN T OF LOWER GROSS PROFITS. IN NUTSHELL, THE REJECTION OF BOOKS UNDER SECTION 145(3) OF IT. ACT, 1961 AND THE ADDITION OF RS. 2,50,000/- BY THE ASSESSING OFFICER ARE NOT JUSTIFIED AT ALL IN THE FACTS OF TH E CASE AND IN LAW AND THE SAME IS DELETED. ASSESSEE'S GROUNDS OF APPE AL NO. 1 & 2 ARE ALLOWED. WITH RESPECT TO SECOND ISSUE OF DISALLOWANCE OF BRO KERAGE AND COMMISSION EXPENDITURE BY THE AO , THE LEARNED CIT(A) HELD AS UNDER: 5.3 DECISION:- I HAVE CONSIDERED THE FACTS OF THE CASE AND THE SUB MISSIONS MADE BY THE ASSESSEE. IT APPEARS FROM ASSESSEES CAS SU BMISSIONS THAT ALL THE PURCHASE BROKERAGE AND SALES BROKERAGE PARTIES HAVE CONFIRMED THE TRANSACTIONS OF BROKERAGE AND ARE ASS ESSED TO TAX. TAX DEDUCTION AT SOURCE WAS ALSO DONE IN THEIR CASE S AND TDS WAS P[AID BY THE ASSESSEE IN TIME. ASSESSEES CA H AS SUBMITTED CONFIRMATION LETTERS FROM THE RESPECTIVE PARTIES IN DELHI ABOUT THE RECEIPT OF BROKERAGE ON DEALS BROKERED BY THEM REGA RDING PURCHASES MADE BY THE ASSESSEE AND THE SALES EFFECT ED BY THE ASSESSE AS FOLLOWS:- SR NO. NAME & ADDRESS OF RECIPIENT OF BROKERAGE NAME AND ADDRESS OF THE SUPPLIER OF GOODS VALUE OF GOODS INVOLVED BROKERAGE 1 N.K. JAIN & SONS HUF, 199/2B STREET NO. 10, TANSINGH NAGAR, ANAND PRABAT, NEW DELHI M/S KOTHARI STEEL SYNDICATE, 202 GUPTA BHAVAN, AHMEDABAD STREET, MUMBAI 400009 RS. 96,49,834 RS. 1,20,000 2 GEETANJALI THAKUR, 4C/20 RAJENDRA NAGAR, NEW DELHI C) UTTAM GALVA STEELS LKTD.,69, P.D. MELLOW ROAD, CARNAC BUNDER, MUMBAI 400009 RS. 21,62,284 (1.29%) RS. 1,50,000 ITA 4671/MUM/2014 10 D) BHARATKUMAR INDRASEN TRADING PVT. LTD., DEVJI RATANSHI MARG, CARNAC BUNDER, MUMBAI 400009 RS. 92,54,239 (1.44%) 3 NARENDRA THAKUR, 4C/20 RAJENDRA NAGAR, NEW DELHI C) JASMINE INDUSTRIAL CORPN., 505 GIRIRAJ, S.T. ROAD, MUMBAI 400009 RS.59,98,516 RS. 1,50,000 D) STEEL ROLLING MILL OF MAHARASHTRA, KHOLSA BUNDER, DARUKHANA, MUMBAI 400010 RS. 20,33,936 4 RAJENDRA KUMAR HUF, A-4/442, PASCHIM VIHAR, NEW DELHI EXECUTIVE TRADING CO. PVT. LTD., 59E, BARODA STREET, CARNAC BUNDER, MUMBAI 400009 RS.1,23,71,585 RS.150,000 BROKERAGE CLAIM IN RESPECT OF SALES 5 NEELAM BHATIA, C- 716, NFS, NEW DELHI A)UTKARSH STEEL CORPORATION, 40 CARNAC SIDING ROAD, CARNAC BUNDER, MUMBAI 400009 RS. 58,50,717 RS.5,00,000 (8.55%) 6 PUNIT GUPTA, A-4, 442, PACHIM VIHAR, NEW DELHI A)GANON DUNKERLY CO, MUMBAI B)REMI METALS, GUJARAT RS.12,39,152 RS.18,73,030 RS.160,000 (5.15%) 7 DEEPAK GROVER, H- 11, WEST PATEL NAGAR, NEW DELHI KAMAL TRADING CORPN. HUBLI RS.44,18,981 RS.150,000 (3.39%) 8 DEEPAK GROVER, H- 11, WEST PATEL NAGAR, NEW DELHI -DO- -DO- RS.150,000 (3.39%) 9 SANJEEV DATTA, A- 269, SARITA VIHAR, NEW DELHI GOA SHIPYARD, VASCO DE GAMA, GOA RS.3,00,65,158 RS.5,00,000 (3.33%) 10 VARUN DATTA, A-269, SARITA VIHAR, NEW DELHI GOA SHIPYARD, VASCO DE GAMA, GOA RS.3,00,65,158 RS.4,00,000 (3.33%) 11 GHANSHYAMDAS CHEMICAL GOYAL, WESTERN INDIA SHIPYARD, GOA RS.5,99,34,476 RS.8,70,000 (1.45%) ITA 4671/MUM/2014 11 HUF, GIRIRAJ, JAINA, MAHARASHTRA TOTAL RS.34,00,000 5.3.2 THE ASSESSING OFFICER ANALYSED THE ABOVE, DAT A AND AS PER THE ASSESSING OFFICER'S ANALYSIS, THE INFERENCES DR AWN ARE THAT SOME OF THE PARTIES TO WHOM COMMISSION/BROKERAGE PA ID ARE LOCATED AT DELHI AND SOME OF THEM ARE STAYING IN TH E SAME ADDRESS. FURTHER, THE ASSESSING OFFICER HAS ALSO CO MMENTED ON THE ISSUE REGARDING THE SERVICES RENDERED BY THESE PARTIES TO THE ASSESSEE IN PROCURING PART OF THE PURCHASES AND ENT IRE SALES ARE NOT FURNISHED AND ASSESSEE HAS NOT BEEN ABLE TO PRO DUCE A SINGLE PARTY FOR EXAMINATION BEFORE THE ASSESSING OFFICER. THE ASSESSING OFFICER ALSO OBSERVED THAT, WHEN THE ASSESSEE WAS E FFECTING PURCHASES FROM BOMBAY PARTIES WHOSE OFFICES WERE LO CATED IN THESE SAME BUILDING AND OR NEARBY BUILDINGS, THE AS SESSEE PAID BROKERAGE TO FOUR PARTIES LOCATED IN DELHI AT RATES RANGING FROM 1.25% TO 1.4% AND WHEN THE SAME GOODS WERE SUPPLIED TO PARTIES LOCATED IN MUMBAI/GOA, THE BROKERAGE AT RATES RANGI NG FROM 3.33% TO 8.55% WERE PAID TO PARTIES LOCATED AGAIN I N DELHI/NEW DELHI/JALNA. THUS, AS PER THE CIRCUMSTANTIAL EVIDEN CE, THE ASSESSING OFFICER CAME TO A CONCLUSION THAT THE ENT IRE PAYMENT TOTALING RS. 34,00,000/- WAS EFFECTED BY THE ASSESS EE WAS BOGUS AND UNJUSTIFIED VLS-A-VLS THE BUSINESS NEEDS OF THE ASSESSEE. IT IS OBSERVED FROM THE ABOVE ANALYSIS AND INFORMATION TH AT THE ASSESSING OFFICER HAS PRESUMED THAT THE BROKERAGE/C OMMISSION PAID WAS NOT FOR THE BUSINESS NEEDS. HE DID NOT MAK E ANY ENQUIRIES BY ISSUING NOTICES U/S 133(6) OR SUMMONIN G THE PARTIES U/S 131 OF IT. ACT. WHEN A CLAIM MADE BY THE ASSESS EE IS DOUBTED, IT IS THE DUTY OF AN INVESTIGATING OFFICER TO BRING IN EVIDENCE WHICH DISPROVES THE ASSESSEE'S CLAIM. NO C LAIM CAN BE DISREGARDED BASED ON ANALYSIS AND INFERENCES, BUT O NLY BASED ON SUBSTANTIAL EVIDENCE. MOREOVER, THE ASSESSING OFFIC ER MISSED THE BASIC ISSUE OF COMPARISON OF COMMISSION/BROKERAGE I N THE EARLIER AND SUBSEQUENT YEARS VIS-A-VIS TURNOVER OF THE ASSE SSEE. THE ASSESSEE DURING THE APPELLATE PROCEEDINGS SUBMITTED THIS DATA WHICH IS AS UNDER:- A.Y. TURNOVER COMMISSION/BROKERAGE 2007-08 1,71,60,423 10,48,623 2008-09 4,94,11,685 27,89, 709 2009-10 9,92,48,745 36,29, 799 ITA 4671/MUM/2014 12 2010-11 1,82,35,031 41,744 2011-12 2,30,08,541 2,99,2 72 5.3.3 THE ABOVE DETAILS INDICATE THAT THE ASSESSEE HAD MAXIMUM TURNOVER DURING THE PREVIOUS YEAR RELEVANT TO THE A Y 2009-10 AND ALSO MAXIMUM PAYMENT COMMISSION/BROKERAGE DURING TH IS YEAR ONLY. THE ASSESSEE HAD PAID RS. 27.89 LACS WHEN THE TURNOVER WAS ONLY RS. 4.94 CRORE IN THE A.Y. 2008-09. SIMILA RLY, FOR THE AY 2010-11 & 2011-12 ALSO THE COMMISSION/BROKERAGE PAY MENTS ARE CORRESPONDING TO TURNOVER ONLY. THUS, FROM THE COMPARISON, I DO NOT FIND ANY UNREASONABLENESS IN THE PAYMENT MAD E TOWARDS COMMISSION/BROKERAGE AND IT IS AS PER THE BUSINESS NEEDS. APART FROM THE ABOVE THE ASSESSEE HAS DULY MADE TDS, FILE D CONFIRMATIONS AND RECIPIENTS ARE ASSESSED TO TAX. I N THE LIGHT OF THE ABOVE, THE DISALLOWANCE MADE BY THE ASSESSING O FFICER IS NOT JUSTIFIED AND THEREFORE THE SAME IS DELETED. THUS, THE GROUNDS OF APPEAL ARE ALLOWED. THE LEARNED CIT(A), THUS ALLOWED THE CLAIM OF THE A SSESSEE VIDE APPELLATE ORDER DATED 18-03-2014 . 5. AGGRIEVED BY THE APPELLATE ORDER DATED 18-03-210 4 PASSED BY THE LD. CIT(A), THE REVENUE IS IN APPEAL BEFORE THE TRIBUNAL. 6. AT THE TIME WHEN THE APPEAL WAS CALLED FOR HEARI NG BEFORE THE BENCH IN OPEN COURT, NONE APPEARED ON BEHALF OF THE ASSESSEE , THEREFORE, WE PROCEED TO DISPOSE OF THIS APPEAL AFTER HEARING LD. D.R. . FROM THE ORDER SHEET ENTRIES, IT IS OBSERVED THAT ON THE LAST DAY OF HEARING I.E. 12 TH JULY, 2017 HEARING WAS ADJOURNED TO 31 ST JULY, 2017 AT THE REQUEST OF THE ASSESSEES COUNSE L MS. NIDHI PATEL, CHARTERED ACCOUNTANT SUBJECT TO PAYMEN T OF COST OF RS. 5000/- IMPOSED BY THE BENCH , TO BE DEPOSITED WITH THE PRI ME MINISTERS RELIEF FUND WITHIN A PERIOD OF ONE WEEK. WHEN THE APPEAL WAS CA LLED FOR HEARING ON 31- 07-2017 IN OPEN COURT, NONE APPEARED ON BEHALF OF T HE ASSESSEE NOR ANY COMPLIANCE TO ORDER OF THE BENCH PASSED ON 12-07-20 17 FOR DEPOSITING COST OF ITA 4671/MUM/2014 13 RS 5000/- WAS ON RECORD , NOR ANY ADJOURNMENT APPLI CATION WAS MOVED BY THE ASSESSEE. THUS, UNDER THESE CIRCUMSTANCES WE PR OCEEDED WITH THE APPEAL BY HEARING LEARNED DR. IT IS ALSO ON RECORD VIDE OR DER SHEET ENTRIES THAT THE ASSESSEE HAS IN PAST SOUGHT LARGE NUMBER OF ADJOURN MENTS I.E. AS MANY AS EIGHT TIMES FROM TIME TO TIME WHEN THE APPEAL WAS C ALLED FOR HEARING IN OPEN COURT, WHILE ON ONE OCCASION ON 29-05-2017 , THE AS SESSEE DID NOT ENTERED APPEARANCE BEFORE THE BENCH WHEN THE APPEAL WAS CAL LED FOR HEARING IN OPEN COURT AS IS EMERGING FROM ORDER SHEET ENTRIES. 7. THE LD. D.R. SUBMITTED THAT THE GP RATE DECLINED IN THE YEAR UNDER CONSIDERATION FROM 10.62% IN PRECEDING YEAR TO 8.88 % IN THE YEAR UNDER CONSIDERATION. THE LD. D.R. DREW OUR ATTENTION TO THE ORDERS OF THE AUTHORITIES BELOW. IT IS SUBMITTED THAT ADDITION OF RS. 2,50,0 00/- WAS MADE BY THE A.O. WHICH WAS DELETED BY THE LD. CIT(A), BUT NO EXPLANA TIONS WERE GIVEN REGARDING VAT DIFFERENTIAL BEFORE THE AO AND IT IS FOR THE FI RST TIME BEFORE LEARNED CIT(A) SUCH A PLEA IS TAKEN. IT IS SUBMITTED THAT ADDITIO NAL EVIDENCES WERE SUBMITTED BEFORE LEARNED CIT (A), WHILE ADDITIONAL EVIDENCES WERE ADMITTED BY LEARNED CIT(A) WITHOUT FORWARDING THE SAME TO THE A O FOR EXAMINATION/VERIFICATION AND NO REMAND REPORT WAS C ALLED BY LD. CIT(A) FROM THE AO , WHICH IS IN VIOLATION OF RULE 46A OF THE I NCOME-TAX RULES, 1962. IT WAS SUBMITTED THAT THEIR WAS A DISALLOWANCE OF RS. 34 LACS ON ACCOUNT OF BROKERAGE AND COMMISSION WHICH WAS ALLOWED BY THE L D. CIT(A) BY ACCEPTING THE CONTENTIONS OF THE ASSESSEE WITHOUT ANY EVIDENC E. IT WAS SUBMITTED THAT SOME CONFIRMATIONS WERE PRODUCED BY THE ASSESSEE . IT WAS SUBMITTED THAT NO PARTY WAS PRODUCED BY THE ASSESSEE BEFORE THE AO. I T IS SUBMITTED THAT THE LEARNED CIT(A) GRANTED RELIEF TO THE ASSESSEE BY HO LDING THAT THE AO DID NOT MADE ANY ENQUIRY WITH THE SAID BROKERS AS NO NOTICE S U/S 133(6) NOR ANY SUMMONS U/S 131 OF THE 1961 ACT WERE ISSUED BY THE AO, BUT IT IS CONTENDED THAT LEARNED CIT(A) COULD HAVE ISSUED THE NOTICES U /S 133(6) OR SUMMONS U/S 131 OF THE 1961 ACT AS THE POWER OF LEARNED CIT(A) IS CO-TERMINUS WITH POWERS ITA 4671/MUM/2014 14 OF THE AO. IT IS SUBMITTED THAT BROKERS ARE DIFFERE NT IN EACH YEAR ALTHOUGH THE PARTIES FROM WHOM PURCHASES WERE MADE ARE SAME EVER Y YEAR, WHICH CLEARLY SHOWS THAT BROKERAGE EXPENSES CLAIMED BY THE ASSESS EE WERE NOT GENUINE. 8. WE HAVE HEARD LD. D.R. AND ALSO PERUSED THE MATE RIAL AVAILABLE ON RECORD. WE HAVE OBSERVED THAT THE ASSESSEE IS IN TH E BUSINESS OF TRADING IN IRON AND STEEL. IT IS OBSERVED THAT THE ASSESSEE HA D DECLARED TOTAL TURNOVER OF RS. 9.92 CRORES WITH GROSS PROFIT OF RS. 88.12 LAC S AND NET PROFIT OF RS. 10.53 LACS DURING THE PREVIOUS YEAR RELEVANT TO THE IMPUG NED ASSESSMENT YEAR. THE GP RATIO WAS SHOWN AT 8.88% IN A.Y.2009-10 , WHICH IS LOWER THAN THE GP RATIO SHOWN IN ASSESSMENT YEAR 2007-08 AT 9.82% AND 10.62% IN A.Y. 2008- 09. THE GP RATIO SHOWN BY THE ASSESSEE DURING THE PRECEDING YEARS AND CURRENT YEAR IS AS FOLLOWS:- ASST. YEAR TOTAL TURNOVER GROSS PROFIT RATE OF GP 2007-08 RS. 1,71,60,423/- RS. 16,84,935/- 9.82% 2008-09 RS. 4,94,11,686/- RS. 52,51,573 10.62% 2009-10 RS. 9,92,48,745/- RS. 88,12,530/- 8.88% THE ASSESSEE HAS SUBMITTED BEFORE THE AO THAT THE R EASON FOR FALL IN GP RATIO WAS THAT THE SALES OF ASSESSEE HAVE INCREASED FROM RS. 4,94,11,685/- IN AY 2008-09 TO RS. 9,92,48,746 IN AY 2009-10 AND THUS I N ORDER TO INCREASE THE SALES, MARGIN OF GP HAS SLIGHTLY DECREASED IN AS MU CH AS THE TURNOVER IS ROUGHLY DOUBLED . THE ASSESSEE DID NOT SUBMITTED DE TAILS OF MONTHLY PURCHASE AND SALE BEFORE THE AO AND ALSO SUBMITTING PART INF ORMATION CALLED FOR BY AO AND THAT TOO ONLY AT THE FAG END WHEN THE ASSESSMEN T WAS GETTING TIME BARRED, THEREBY PREVENTING PROPER ENQUIRY AND EXAMI NATION BY THE AO. UNDER THESE AFORE-STATED CIRCUMSTANCES, THE AO MADE AN AD HOC ADDITION OF RS. 2,50,000/- ON ESTIMATE BASIS ON ACCOUNT OF LOW GP R ATIO TO THE INCOME OF THE ASSESSEE. WHILE BEFORE THE LD. CIT(A) DURING APPELL ATE PROCEEDINGS AN ALTOGETHER DIFFERENT STAND WAS TAKEN BY THE ASSESSE E, IT IS CONTENDED BY THE ITA 4671/MUM/2014 15 ASSESSEE THAT THE DIFFERENCE IS DUE TO EXCLUSION OF VAT DIFFERENTIAL FROM THE PURCHASES AND SALES WHICH IS TAKEN TO SEPARATE VAT ACCOUNT . THE LD. CIT(A) GRANTED RELIEF TO THE ASSESSEE BY DELETING ADDITION S MADE BY THE AO BY ACCEPTING CONTENTION OF THE ASSESSEE THAT THE DIFFE RENCE IN THE AMOUNT OF PURCHASE AND SALES WERE BASICALLY DUE TO ACCOUNTING IN THE VAT WHICH IS TAKEN TO SEPARATE ACCOUNT. THUS ALTOGETHER DIFFEREN T PLEA IS TAKEN BY THE ASSESSEE BEFORE LEARNED CIT(A) AND ADDITIONAL EVIDE NCES WERE FILED BEFORE LEARNED CIT(A) AS IS EMERGING FROM RECORDS AS WELL ARGUMENTS OF LEARNED DR, WHICH ADDITIONAL EVIDENCES WERE ADMITTED BY LEARNED CIT(A) WITHOUT FORWARDING THE SAME TO THE AO FOR EXAMINATION/VERIF ICATION BY THE AO AND NO REMAND REPORT WAS CALLED BY LEARNED CIT(A) FROM THE A.O. WHICH IS IN CLEAR BREACH OF RULE 46A OF THE INCOME-TAX RULES,1962. TH E RULE 46A OF THE 1962 RULES IS NOT AN EMPTY FORMALITY AND CANNOT BE GIVEN A COMPLETE GO BYE BY LEARNED CIT(A) IN A LIGHTER MANNER AS FRESH MATERIA L BEFORE LEARNED CIT(A) HAS TO STOOD THE TEST OF EXAMINATION AND VERIFICATION B Y THE AO WHO IS BOTH AN INVESTIGATOR AND ADJUDICATOR . IN OUR CONSIDERED VI EW KEEPING IN VIEW FACTUAL MATRIX OF THE CASE, THIS MATTER NEED TO BE SET ASID E TO THE FILE OF THE AO FOR DE- NOVO DETERMINATION OF THE ISSUE ON MERITS AFRESH IN ACCORDANCE WITH LAW. SINCE, IT IS ON RECORD THAT THE ASSESSEE FILED PART DETAILS AS SOUGHT BY THE AO ONLY AT THE FAG END WHEN THE ASSESSMENT WAS GETTING TIME BARRED THEREBY PREVENTING ANY MEANINGFUL ENQUIRY AND EXAMINATION B Y THE AO AND THE AO MADE ADHOC ESTIMATION OF THE ADDITION TO THE TUNE O F RS. 2,50,000/- TO THE TOTAL INCOME OF THE ASSESSEE ON ACCOUNT OF LOW GP, THIS IS AN OPEN REMAND SO FAR AS THIS ISSUE IS CONCERNED AND THE AO SHALL BE ENTITLED TO MAKE ADDITIONS, IF SO WARRANTED AFTER CONSIDERING THE EVIDENCES AND EXPLANATIONS FILED BY THE ASSESSEE UNINHIBITED BY THE EARLIER ADHOC ADDITION OF RS. 2.50 LACS ON ACCOUNT OF LOW GP MADE IN ORIGINAL ASSESSMENT PROCEEDINGS U /S 143(3) R.W.S. 143(2) OF THE 1961 ACT. THE ASSESSEE SHALL BE ENTITLED TO FIL E EVIDENCES AND EXPLANATION IN ITS DEFENSE WHICH SHALL BE ADMITTED BY THE AO IN THE INTEREST OF JUSTICE AND SHALL BE EVALUATED ON MERITS IN ACCORDANCE WITH LAW . NEEDLESS TO SAY THAT THE ITA 4671/MUM/2014 16 AO SHALL GIVE PROPER AND ADEQUATE OPPORTUNITY OF BE ING HEARD TO THE ASSESSEE IN ACCORDANCE WITH PRINCIPLES OF NATURAL JUSTICE IN ACCORDANCE WITH LAW. WE ORDER ACCORDINGLY. WITH RESPECT TO THE SECOND ADDITION MADE BY THE AO W.R.T. COMMISSIONS AND BROKERAGE PAID TO DELHI BASED BROKERS FOR ORGANIZIN G SALES/PURCHASES OF THE GOODS DEALT WITH BY THE ASSESSEE , THE A.O. HAD O BSERVED THAT THE ASSESSEE HAD PAID BROKERAGE OR COMMISSION OF RS. 36,29,799/- TO VARIOUS PARTIES , OUT OF WHICH THE FOLLOWING PARTIES BELONGS TO NEW DELHI :- VI) SANJEEV DATTA VII) VARUN DATTA VIII) DIPIKA GROVER IX) GEETANJALI THAKUR X) NEELAM BHATIA THE ASSESSEE WAS ASKED BY THE AO TO PROVE CLAIM OF THE BROKERAGE PAID TO DELHI BASED PARTIES. HOWEVER, PHOTOCOPIES OF CREDI T NOTES ISSUED BY THE ASSESSEE AND CONFIRMATIONS OF SOME OF THE RECIPIENT S OF BROKERAGE WERE SUBMITTED BY THE ASSESSEE BEFORE THE AO. THE DETAI LS OF SOME BROKERS OF NEW DELHI WHO WERE PAID BROKERAGE BY THE ASSESSEE ARE A S UNDER:- SR NO. NAME & ADDRESS OF RECIPIENT OF BROKERAGE NAME AND ADDRESS OF THE SUPPLIER OF GOODS VALUE OF GOODS INVOLVED BROKERAGE 1 N.K. JAIN & SONS HUF, 199/2B STREET NO. 10, TANSINGH NAGAR, ANAND PRABAT, NEW DELHI M/S KOTHARI STEEL SYNDICATE, 202 GUPTA BHAVAN, AHMEDABAD STREET, MUMBAI 400009 RS. 96,49,834 RS. 1,20,000 2 GEETANJALI THAKUR, 4C/20 RAJENDRA NAGAR, NEW DELHI E) UTTAM GALVA STEELS LKTD.,69, P.D. MELLOW ROAD, CARNAC RS. 21,62,284 (1.29%) RS. 1,50,000 ITA 4671/MUM/2014 17 BUNDER, MUMBAI 400009 F) BHARATKUMAR INDRASEN TRADING PVT. LTD., DEVJI RATANSHI MARG, CARNAC BUNDER, MUMBAI 400009 RS. 92,54,239 (1.44%) 3 MARENDRA THAKUR, 4C/20 RAJENDRA NAGAR, NEW DELHI E) JASMINE INDUSTRIAL CORPN., 505 GIRIRAJ, S.T. ROAD, MUMBAI 400009 RS.59,98,516 RS. 1,50,000 F) STEEL ROLLING MILL OF MAHARASHTRA, KHOLSA BUNDER, DARUKHANA, MUMBAI 400010 RS. 20,33,936 4 RAJENDRA KUMAR HUF, A-4/442, PASCHIM VIHAR, NEW DELHI EXECUTIVE TRADING CO. PVT. LTD., 59E, BARODA STREET, CARNAC BUNDER, MUMBAI 400009 RS.1,23,71,585 RS.150,000 BROKERAGE CLAIM IN RESPECT OF SALES 5 NEELAM BHATIA, C- 716, NFS, NEW DELHI A)UTKARSH STEEL CORPORATION, 40 CARNAC SIDING ROAD, CARNAC BUNDER, MUMBAI 400009 RS. 58,50,717 RS.5,00,000 (8.55%) 6 PUNIT GUPTA, A-4, 442, PACHIM VIHAR, NEW DELHI A)GANON DUNKERLY CO, MUMBAI B)REMI METALS, GUJARAT RS.12,39,152 RS.18,73,030 RS.160,000 (5.15%) 7 DEEPIKA GROVER, H- 11, WEST PATEL NAGAR, NEW DELHI KAMAL TRADING CORPN. HUBLI RS.44,18,981 RS.150,000 (3.39%) 8 DILIP GROVER, H-11, WEST PATEL NAGAR, NEW DELHI -DO- -DO- RS.150,000 (3.39%) 9 SANJEEV DATTA, A- 269, SARITA VIHAR, NEW DELHI GOA SHIPYARD, VASCO DE GAMA, GOA RS.3,00,65,158 RS.5,00,000 (3.33%) 10 VARUN DATTA, A-269, SARITA VIHAR, NEW DELHI GOA SHIPYARD, VASCO DE GAMA, GOA RS.3,00,65,158 RS.4,00,000 (3.33%) ITA 4671/MUM/2014 18 11 GHANSHYAMDAS CHEMICAL GOYAL, HUF, GIRIRAJ, JAINA, MAHARASHTRA WESTERN INDIA SHIPYARD, GOA RS.5,99,34,476 RS.8,70,000 (1.45%) TOTAL RS.34,00,000 THE ASSESSEE CLAIMED BEFORE THE AO THAT ALL THE DET AILS WITH RESPECT TO THESE BROKERS WERE SUBMITTED LIKE ADDRESSES, PAN ETC. IT WAS SUBMITTED THAT MERELY BECAUSE THE PARTIES WERE BASED IN NEW DELHI , CANNO T BE A GROUND FOR DISALLOWING THE SAME. IT WAS SUBMITTED THAT PERUSAL OF DETAILS WILL CLEARLY REVEAL THE NATURE OF SERVICES RENDERED WHICH WERE B OTH FOR PURCHASES/SALES EFFECTED, SPECIFYING THE QUANTUM OF THE GOODS AND T HE PERSONS FROM WHOM SAID PURCHASES AND TO WHOM SALES WERE MADE. THE ASS ESSEE SUBMITTED THAT IT HAS NO POWER TO ENFORCE ATTENDANCE OF THESE PARTIES BEFORE THE REVENUE AND IT WAS SUBMITTED THAT THE AO HAS ALL THE POWERS TO ENF ORCE THE ATTENDANCE OF THESE PARTIES BEFORE REVENUE. THE A.O. AFTER CONSIDERING THE EXPLANATIONS OF THE ASSESSEE OBSERVED THAT THE ASSESSEE CARRIED ITS BUSINESS FROM THE PREMISES 505 , GUPTA SHAWAN, AHMEDABAD STREET, CARNAC BUNDER, MUMBAI, AND THE PU RCHASES MENTIONED IN THE ABOVE CASES WERE BY AND LARGE FROM THE SAME LOCALITY WHERE OFFICE OF THE ASSESSEE IS SITUATED . THE AO OBSERVED THAT PURCHAS ES MENTIONED AGAINST SR. NO. (1) ABOVE IS FROM A CONCERN LOCATED IN THE SAME BUILDING (VIZ.GUPTA BHAVAN) WHERE THE ASSESSEE IS LOCATED. IT WAS OBSER VED BY THE AO THAT THE TRANSACTION OF PURCHASE FROM THAT CONCERN WAS ALSO STATED TO BE DONE THROUGH A BROKER OF NEW DELHI. THE OTHER PURCHASES FROM CA RNAC BUNDER LOCALITY NEAR TO THE ASSESEES BUSINESS PREMISES WERE ALL CLAIMED TO BE DONE THROUGH NEW DELHI BROKERS AND ALSO THE ADDRESS OF MOST OF THE B ROKER PARTIES ARE ONE AND SAME. THE AO OBSERVED THAT THE ASSESSEE WAS ASKED T O PRODUCE THE BROKERS BUT THE SAID BROKERS WERE NOT PRODUCED BY THE ASSE SSEE. THE ASSESSEE WAS ALSO ASKED TO PRODUCE THE DETAIL AND NATURE OF SERV ICE RENDERED BY THE DELHI PARTIES BUT NOTHING WAS BROUGHT ON RECORD TO PROVE THIS FACTUAL ASPECT. IT WAS ITA 4671/MUM/2014 19 OBSERVED BY THE AO THAT DETAILS OF OCCUPATION/ANTEC EDENT , PAN, AGE, DETAILS OF OTHER BROKERAGE ACTIVITIES ETC WERE NOT BROUGHT ON RECORD BY THE ASSESSEE. IT WAS ALSO OBSERVED BY THE AO THAT IN SOME CASE VERY HIGH RATE OF BROKERAGE IS PAID IN SOME CASES WHICH IS ABNORMALLY HIGH. THE AO OBSERVED THAT THERE IS NO EVIDENCE OF ACTUAL RENDERING OF SERVICES BY THES E BROKERS. THUS, THE A.O. DISALLOWED THE CLAIM OF BROKERAGE EXPENSES OF RS. 3 4,00,000/- AS THE SAME WERE NOT CONSIDERED TO BE WHOLLY AND EXCLUSIVELY FO R THE PURPOSES OF BUSINESS AND IT WAS HELD THAT IT DID NOT FULFILL THE PARAMET ERS OF SECTION 37 OF THE ACT. IT IS ON RECORD THAT THE ASSESSEE FILED PART DETAIL S AS SOUGHT BY THE AO ONLY AT THE FAG END WHEN THE ASSESSMENT WAS GETTING TIME BA RRED THEREBY PREVENTING ANY MEANINGFUL ENQUIRY AND EXAMINATION BY THE AO . THE LEARNED CIT(A) DELETED THE AFORESAID ADDITIONS. WE HAVE OBSERVED THAT THE LD. CIT(A) GRANTED RELIEF TO THE ASSESSEE ON THE GR OUND THAT THE A.O. HAS NOT ISSUED NOTICE U/S 133(6) OR SUMMONS U/S 131 OF THE ACT TO THESE DELHI BASED BROKERS WHO HAVE ALLEGEDLY PROVIDED SERVICES TO THE ASSESSEE FOR ORGANIZING SALE/PURCHASE OF GOODS DEALT WITHIN BY THE ASSESSEE . WE HAVE OBSERVED THAT THE POWER OF LD. CIT(A) IS CO-TERMINUS WITH THE POW ER OF A.O. INCLUDING POWER OF ENHANCEMENT AS ENSHRINED IN SECTION 251(1)(A) OF THE 1961 ACT. IT IS ON RECORD THAT THE ASSESSEE FILED PART DETAILS AS SOUG HT BY THE AO ONLY AT THE FAG END WHEN THE ASSESSMENT WAS GETTING TIME BARRED THE REBY PREVENTING ANY MEANINGFUL ENQUIRY AND EXAMINATION BY THE AO . UNDE R SUCH PECULIAR FACTUAL CIRCUMSTANCES OF THE CASE, IT WAS INCUMBENT ON THE LEARNED CIT(A) TO HAVE CONDUCTED ENQUIRY HIMSELF BY ISSUING NOTICES U/S 13 3(6) OR SUMMONS U/S 131 OF THE 1961 ACT TO THESE BROKERS BASED AT NEW D ELHI TO MAKE ENQUIRIES ABOUT GENUINENESS OF BROKERAGE AND COMMISSION PAID BY THE ASSESSEE TO THESE DELHI BASED BROKERS, AS THE POWERS OF LEARNED CIT(A) IS CO-TERMINUS WITH POWERS OF THE AO , MORE-SO IT WAS WITHIN KNOWL EDGE OF THE LEARNED CIT(A) THAT THE ASSESSEE FILED PART DETAILS AS SOUGHT BY T HE AO ONLY AT THE FAG END WHEN THE ASSESSMENT WAS GETTING TIME BARRED THEREBY PREVENTING ANY ITA 4671/MUM/2014 20 MEANINGFUL ENQUIRY AND EXAMINATION BY THE AO. THE A SSESSEE HAS CLAIMED THESE BROKERAGE AND COMMISSION EXPENSES BY DEBITING IN PROFIT AND LOSS ACCOUNT AND DEDUCTING AS AN EXPENDITURE WHILE COMPU TING INCOME CHARGEABLE TO TAX AND HENCE ONUS AND BURDEN IS ON THE ASSESSEE TO PROVE THAT THESE EXPENSES WERE INCURRED WHOLLY AND EXCLUSIVELY FOR T HE PURPOSES OF BUSINESS OF THE ASSESSEE AND MANDATE OF SECTION 37(1) OF THE 19 61 ACT IS FULFILLED/COMPLIED WITH . IN OUR CONSIDERED VIEW, T HIS MATTER ALSO NEEDS TO BE SET ASIDE AND RESTORED TO THE FILE OF THE A.O. FOR DE NOVO DETERMINATION OF THE ISSUE ON MERITS AFTER CONDUCTING SUCH ENQUIRY AND VERIFICATIONS AS MAY DEEM FIT BY THE AO IN ACCORDANCE WITH LAW. THE ASSE SSEE SHALL BE ENTITLED TO FILE EVIDENCES AND EXPLANATION IN ITS DEFENSE WHIC H SHALL BE ADMITTED BY THE AO IN THE INTEREST OF JUSTICE AND SHALL BE EVALUATE D BY AO ON MERITS IN ACCORDANCE WITH LAW. NEEDLESS TO SAY THAT THE AO SH ALL GIVE PROPER AND ADEQUATE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE IN ACCORDANCE WITH PRINCIPLES OF NATURAL JUSTICE IN ACCORDANCE WITH LA W. WE ORDER ACCORDINGLY. 9. IN THE RESULT, APPEAL OF THE REVENUE IN ITA NO. 4671/MUM/2014 FOR ASSESSMENT YEAR 2009-10 IS ALLOWED FOR STATISTICAL PURPOSE. ORDER PRONOUNCED IN THE OPEN COURT ON 23 RD AUGUST, 2017. # $% &' 23-08-2017 ( ) SD/- SD/- (SAKTIJIT DEY) (RAMIT KOCHAR) JUDICIAL MEMBER ACCOUNTANT MEMBER $ MUMBAI ; & DATED 23.08.2017 [ ITA 4671/MUM/2014 21 .9../ R.K. R.K. R.K. R.K. , EX. SR. PS !'#$%&%# / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. : ( ) / THE CIT(A)- CONCERNED, MUMBAI 4. : / CIT- CONCERNED, MUMBAI 5. =>( 99?@ , ?@ , $ / DR, ITAT, MUMBAI C BENCH 6. (BC D / GUARD FILE. / BY ORDER, = 9 //TRUE COPY// / ( DY./ASSTT. REGISTRAR) , $ / ITAT, MUMBAI