ACIT, CIR-5, Pune V. SHRI SATISH SABNIS, Pune

ITA 48/PUN/2010

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 49856 (ITAT-PUNE)
• Duration Of Justice: 1 year(s) 5 month(s) 30 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-07-2011
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 12-07-2011
• Assessment Year: 2001-2002
• Appeal Filed On: 07-01-2010
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Assessee Lawyers: S K AMBASTHA
• Keywords: Bad and doubtful debts

Judgement Text

1 ITA 48/PN/2010 SHRI SATISH SABNIS IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH A, PUNE BEFORE SHRI SHAILENDRA KUMAR YADAV, JM AND SHRI D. KARUNAKARA RAO, AM ITA NO.48/PN/2010 ASST.YEAR: 2001-02 ASST.COMMR. OF INCOME TAX, CIRCLE 5, PUNE . APPELLANT VS. SHRI SATISH SABNIS, 1040, ALOKMALA, TILAK ROAD,SHUKRAWARPETH, PUNE . RESPONDENT PAN ADWPS9376G APPLICANT BY : SHRI SUNIL GANOO, AR RESPONDENT BY : SHRI S.K.AMBASTHA, SR DR ORDER PER D. KARUNAKARA RAO, AM THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) III, PUNE DT. 30-10-2009 FOR THE AY 2001-02. REFERRING TO GROUND 5 BELOW, LD DR MENT IONED THAT THE SAME IS MISPLACED AND THEREFORE, WE FIND THAT THE SHOULD BE DISMISSED AS NOT RELEVANT TO THE FACTS OF THIS CASE. OTHERWISE, THE GROUNDS OF THE APPEAL ARE REPRODUCED S UNDER. 2. THE REVENUE RAISED THE FOLLOWING GROUNDS IN ITS APPEAL. 1. THE ORDER OF THE LEARNED CIT(A) IS CONTRARY TO LAW AND TO THE FACTS AND CIRCUMSTANCES OF THE CASE. 2. THE LEARNED CIT(A) HAS ERRED ON FACTS AND IN LAW IN DELETING THE ADDITION OF RS.78,50,000 WITHOUT APPRECIATING THE F ACTUAL AND LEGAL POSITION AS IS CLEARLY DELINEATED BY THE ASSESSING OFFICER IN THE ASSESSMENT ORDER. 2 ITA 48/PN/2010 SHRI SATISH SABNIS 3. THE LEARNED CIT(A) HAS ERRED ON FACTS AND IN LAW IN DELETING THE ADDITION OF RS.78,50,000 ON THE BASIS THAT THE ASSE SSING OFFICER HAS NOT EXCLUDED THE AMOUNT OF SUB-BROKERAGE FROM THE I NCOME OF SHRI ASHOK SABNIS AND SMT.SUJATA SABNIS, NOT APPRECIATIN G THE FACTUAL AND LEGAL POSITION THAT THERE IS NO SUCH REQUIREMEN T OF LAW TO EXCLUDE SUCH INCOME BY THE ASSESSING OFFICER. 4. THE LEARNED CIT(A) HAS ERRED ON FACTS AND IN LAW IN DELETING THE ADDITION OF RS.78,50,000 THOUGH THE ASSESSEE FAILED TO PROVE ANY RENDERING OF SERVICE BY SHRI ASHOK SABNIS WHO IS FA THER OF THE ASSESSEE AND SMT.SUJATA WHO IS WIFE OF THE ASSESSEE . 5. THE LEARNED CIT(A) HAS ERRED ON FACTS AND IN LAW IN NOT APPRECIATING THAT THE ASSESSEE ENTIRELY FAILED TO DISCHARGE THE ONUS CAST ON IT IN RESPECT OF SUCH PAYMENT TO PROVE THE BUSINESS NECES SITATED OF SUCH PAYMENT IN CASE OF A PERSON SPECIFIED U/S 40A(2)(A) (B) OF THE INCOME TAX ACT, 1961. 3. BRIEFLY STATED, THE FACTS OF THE CASE ARE THAT T HE ASSESSEE, WITH REGARD TO THE ADDITION OF RS.78,50,000, ARE THAT THE ASSESSEE IS A SHARE BROKE AND A MEMBER OF NATIONAL STOCK EXCHANGE - NSE. ASSESSEE CREDITED CO MMISSION OF RS.1,25,30,459 IN THE PROFIT AND LOSS ACCOUNT. THE ASSESSEE DEBITED RS.58,50,000 TO HIS FATHER MR.ASHOK SABNIS AND RS.20,00,000 TO HIS WIFE MRS.S UJATA SABNIS. ON PERUSAL OF THE AUDIT REPORT U/S 44AB OF THE ACT, AO FOUND THAT THE RE WAS NO MENTION OF THESE PAY OUTS TO THE SPECIFIED PERSONS U/S 40A(2)(B) OF THE ACT. ON ENQUIRY, AO FOUND THAT THE EXPLANATIONS OF THE ASSESSEE WERE NOT CONVINCIN G. FURTHER, THE ASSESSEE FAILED FILE DETAILS AS WANTED BY HIM IE TRANSACTION WISE D ETAILS. HOWEVER, THE ASSESSEE SUBMITTED THAT THE ABOVE PAYMENTS WERE MADE TOWARDS BROKERAGE CALCULATED @ OF THE 50% OF THE COMMISSION EARNED RELATABLE TO THE VOLUME HANDLED BY HIS FATHER MR.ASHOK SABNIS AND HIS WIFE MRS.SUJATA SABNIS. TH E CLIENT WISE AMOUNTS OF SUB BROKERAGE PAID TO MR.ASHOK SABNIS AND MRS.SUJATA SA BNIS WERE SUBMITTED ON 26-3- 2004. THE ASSESSING OFFICER FOUND THAT SUB BROKERA GE WAS UNIFORMLY PAID @ 50%. THE ASSESSEE ALSO FILED CLIENT WISE DETAILS OF SUB BROKERAGE PAID TO MR.ASHOK SABNIS IN ASSESSMENT YEAR 2002-03 AS AGAINST THE DETAILS C ALLED FOR OF ASSESSMENT YEARS 1999-2000 AND 2000-01 AND IN RESPECT OF MRS.SUJATA SABNIS, SUCH DETAILS WERE FILED FOR THE ASSESSMENT YEARS 2000-01 AND 2002-03. AO FO UND THAT SOME INFORMATION WAS NOT FILED WHICH RELATED TO CLIENT WISE DETAILS OF BROKERAGE RECEIVED BY THE 3 ITA 48/PN/2010 SHRI SATISH SABNIS ASSESSEE IN THE ASSESSMENT YEARS 1999-2000 AND 2000 -01. FURTHER, THE ASSESSING OFFICER NOTED THAT NO EVIDENCE WAS FILED TO PROVE T HAT THE CLIENTS, IN RESPECT OF WHOM THE SUB BROKERAGE PAID, BELONGED TO MRS.SUJATA SABN IS AND MR ASHOK SABNIS. THUS, RENDERING OF THE SERVICES IS CORE ISSUE FOR MAKING DISALLOWANCE OF THE CLAIM OF RS 78.50 LAKHS. 4. THE MATTER TRAVELLED TO THE CIT(A), THE FIRST AP PELLATE AUTHORITY. ASSESSEE FILED VARIOUS SUBMISSIONS AND THE RELEVANT DETAILS BEFORE HIM. CIT(A) CALLED FOR REMAND REPORT OF THE AO ON THESE SUBMISSIONS AND THE DATA FILED BEFORE HIM. ON CONSIDERING THE SAID REPO RT AND THE WRITTEN SUBMISSIONS OF THE ASSESSEE AND ALSO FROM COPIES OF VARIOUS DETAILS AND DOCUMENTS FILED BY THE ASSESSEE DURING THE COURSE O F APPELLATE PROCEEDINGS, THE CIT(A) DELETED THE ADDITION RELATI NG TO THE DISALLOWANCE OF THE SUB-BROKERAGE OF RS.78,50,000 PAID TO HIS WI FE AND FATHER. AGGRIEVED WITH THE SAID DECISION OF THE CIT(A), THE REVENUE IS IN APPEAL BEFORE US. 5. DURING THE SECOND APPELLATE PROCEEDINGS BEFORE U S, LD DR FOR THE REVENUE PUT FORWARDED VARIOUS ARGUMENTS AND MAIN ON ES OF THE SAME ARE: (I) THE ASSESSEE FAILED TO PROVE THAT HE RECEI VED THE SERVICES; (II) ALSO FAILED TO PROVE THE SERVICES RENDERED ARE NOT COMME NSURATE WITH THE PAY OUTS; (III) FAILED TO REVEAL ALL THE FACTS IN THE A UDIT REPORT, WHICH IS THE REPORT OF THE SPECIALIZED PERSONS; (IV) FAILED TO F ILE THE EVIDENCES TO PROVE THAT THE ASHOK SABNIS AND SUJATHA SUBNIS BROUGHT TH E CUSTOMER/CLIENTS TO THE ASSESSEE; (V) FAILED TO DEMONSTRATE THAT THE SO CALLED CLIENTS OF THE FATHER AND THE SPOUSE ARE THE DEDICATED ONES THESE PERSONS ETC. ON THE OTHER HAND, THE ARGUMENTS OF THE LD COUNSEL INCLUDE (I) ASSESSEE DEMONSTRATED THAT THE BOTH ASHOK SABNIS AND SUJATHA SABNIS ARE ASSESSEE TO TAX; (II) THEY WERE IN THE BUSINESS OF THE SUB BROKERAGE; (III) THEY HAVE DEDICATED CLIENTS OF THEIR OWN; (IV) THEY HAVE BEEN CONSISTENTLY RECEIVING/EARNING THE IDENTICAL COMMISSION/ SUB-BRO KERAGE IN THE PAST 4 ITA 48/PN/2010 SHRI SATISH SABNIS YEARS AND THE SAME IS SUBJECTED TO TAX IN THE RELEV ANT YEARS; (V)IT IS NOT THE CASE OF THE REVENUE THAT THEY HAVE EVIDENCE TO REBUT THE STAND OF THE ASSESSEE REGARDING THE CLIENTELE OR EARNING OF THE INCOME; (VI) IN FACT, THEY ARE MEMBERS OF THE PUNE STOCK EXCHANGE TOO; (V II) THERE IS NO TAX LOSSES TO THE REVENUE AS THE ASSESSEE-PAYER AS WELL AS THE PAYEES IE ASHOK SABNIS AND THE SUJATHA SABNIS ARE SUBJECTED T AX; (VIII) REGARDING PAYABLE NATURE OF THE IMPUGNED SUMS, WHICH WERE NOT YET PAID, THE ASSESSEE COULD NOT PAY THE SAME DUE TO CASH FLOW RE LATED PROBLEMS AND IN ANY CASE THE METHOD OF ACCOUNTING CONSISTENTLY FOLL OWED BY THE ASSESSEE PERMITS THE CLAIM OF THE SAME ETC. 6. WE HAVE HEARD THE PARTIES AND PERUSED THE ORDER OF THE REVENUE AND THE PAPERS AVAILABLE BEFORE US. FOR ADJUDICATI NG THE ISSUE UNDER CONSIDERATION IF THE SAID CLAIM OF DEDUCTION IS ALL OWABLE OR NOT, WE NEED TO EXAMINE THE STAND OF THE CIT(A) ON SIDE AND THE DEP ARTMENTAL VIEWS ON THE OTHER. TO START WITH, WE HAVE PERUSED THE IMPUG NED ORDER OF THE CIT(A) TO ASSIMILATE THE LOGIC OF THE CIT(A) IN GRA NTING RELIEF TO THE ASSESSEE. FOR THE SAKE OF THE COMPLETENESS, WE HAVE DECIDED TO REPRODUCE RELEVANT PARAGRAPHS FROM HIS ORDER AND TH E SAME IS AS UNDER: I FIND THAT THE APPELLANT HAS SATISFACTORILY REPL IED TO THE QUESTIONS ARISING IN THE MIND OF THE ASSESSING OFFICER ON THE BASIS OF WHICH THE ADDITION OF RS.78.50 LACS WAS MADE BY THE ASSESSING OFFICER TO THE TOTAL INCOME OF THE APPELLANT. BOTH, APPELLANTS W IFE SMT.SUJATA SABNIS AS WELL AS APPELLANTS FATHER SHRI ASHOK SAB NIS ARE QUALIFIED AND REGISTERED BROKERS OF PUNE STOCK EXCHANGE AND T HEIR MEMBERSHIP DATES BACK TO THE YEAR 1988 AND EVEN PRI OR TO THAT. MOREOVER, THEY HAVE ALSO OBTAINED REGISTRATION FROM SEBI AS SUB- BROKERAGE. THEY PERFORMED VARIOUS ACTIVITIES AS BR OKERS AND SUB- BROKERS AND IN ORDER TO PROVIDE VARIOUS SERVICES TO THEIR CLIENTS, THEY HAVE MAINTAINED THEIR OWN STAFF AND HAVE PAID SALARIES TO THE STAFF FROM THEIR ACCOUNTS. THE YEAR UNDER CONSIDER ATION IS NOT THE ONLY YEAR WHEN SHRI ASHOK SABNIS AND SMT.SUJATA SAB NIS HAVE EARNED INCOME BY WAY OF COMMISSION/BROKERAGE, AS TH EY HAVE EARNED HANDSOME AMOUNT AS COMMISSION/BROKERAGE IN P RECEDING YEARS, AS WELL AS IN SUCCEEDING YEARS. THESE FACTS ARE SUFFICIENT TO KEEP THE CAPABILITY OF SHRI ASHOK SABNIS AND SMT.SU JATA SABNIS OF 5 ITA 48/PN/2010 SHRI SATISH SABNIS EARNING COMMISSION/BROKERAGE AWAY FROM THE ARENA OF ANY DISPUTE. FURTHER, IN MY OPINION, THERE IS NOTHING WRONG IF T HE PAYMENT OF BROKERAGE IS MADE BY THE APPELLANT TO SHRI ASHOK SA BNIS AND SMT.SUJATA SABNIS BY WAY OF JOURNAL ENTRIES. FIRST LY, THE APPELLANT HAS EXPLAINED THAT ON ACCOUNT OF SHORTAGE OF FUNDS, THE MONEY COULD NOT BE PAID TO SHRI ASHOK SABNIS AND SMT.SUJA TA SABNIS. CONSIDERING THE FACT THAT HUGE BAD DEBTS HAVE BEEN INCURRED BY THE APPELLANT DURING THIS YEAR, THE EXPLANATION OF THE APPELLANT CANNOT BE SAID TO BE UNACCEPTABLE. SECONDLY, SHRI ASHOK S ABNIS AND SMT.SUJATA SABNIS BEING FAMILY MEMBERS, THERE WAS N O PRESSURE ON THE APPELLANT TO MAKE THE PAYMENT IN CASH FROM TIME TO TIME. THIRDLY, IT IS IMPORTANT TO CONSIDER THAT THOUGH BR OKERAGE WAS CREDITED TO THEIR RESPECTIVE ACCOUNTS BY WAY OF JOU RNAL ENTRIES, BOTH SHRI ASHOK SABNIS AND SMT.SUJATA SABNIS HAD PAID TH EIR RESPECTIVE ADVANCE TAX ON THE INCOME RECEIVABLE FROM THE APPEL LANT. I AM ALSO INCLINED TO AGREE WITH THE CONTENTION OF THE APPELL ANT THAT NON- REPORTING OF THE PAYMENT OF BROKERAGE IN THE TAX AU DIT REPORT BY THE TAX AUDITORS CANNOT BE MADE A GROUND FOR DISALLOWIN G THE BROKERAGE PAID. IT CANNOT BE THE CASE OF THE ASSESSING OFFIC ER THAT NON REPORTING OF PAYMENTS IN THE TAX AUDIT REPORT CONCL USIVELY MEANS THAT CORRESPONDING ENTRIES HAVE NOT BEEN MADE IN TH E BOOKS OF ACCOUNT AND THEREFORE, THE PAYMENT OF SOME BROKERAG E TO SHRI ASHOK SABNIS AND SMT.SUJATA SABNIS IS NOT SUPPORTED BY THE BOOKS OF ACCOUNT. WHAT IS MOST SURPRISING ON THE PART OF THE ASSESSING OFFICER IS THE FACT THAT ALTHOUGH HE HAS DISALLOWED THE PAYMENTS OF SUB-BROKERAGE MADE TO SHRI ASHOK SABNIS AND SMT.SUJ ATA SABNIS TREATING THE SAME AS NOT JUSTIFIED, HE HAS NOT EXCLUDED THESE AMOUNTS FROM THEIR INCOME WHILE COMPLETING THEIR ASSESSMENT. IF THE ASSESSING OFFICER WAS SURE AND CONVINCED WIT H THE AMOUNTS SHOWN AS SUB-BROKERAGE PAID BY THE APPELLANT TO SHR I ASHOK SABNIS AND SMT.SUJATA SABNIS WERE NOT ACTUALLY PAID/PAYABL E, HE SHOULD NOT HAVE ACCEPTED THEIR CLAIM OF HAVING EARNED INCO ME BY WAY OF COMMISSION/BROKERAGE AS SHOWN IN THEIR RESPECTIVE R ETURNS. ACCEPTING THE INCOME SHOWN IN THE RETURNS OF SHRI A SHOK SABNIS AND SMT.SUJATA SABNIS AND AT THE SAME TIME REJECTING AP PELLANTS CLAIM REGARDING PAYMENT OF SUB-BROKERAGE TO SHRI ASHOK SA BNIS AND SMT.SUJATA SABNIS REFLECTS AN IN-BUILT CONTRADICTIO N IN THE ACTION OF THE ASSESSING OFFICER WHICH IS DIFFICULT TO BE APPR ECIATED. IT IS ALSO IMPORTANT TO CONSIDER THAT UNDER IDENTICAL FACTS, N O DISALLOWANCE HAS BEEN MADE BY THE ASSESSING OFFICER IN THE CASE OF T HE APPELLANT IN OTHER ASSESSMENT YEARS SO FAR AS THE PAYMENT OF SUB -BROKERAGE TO SHRI ASHOK SABNIS AND SMT.SUJATA SABNIS IS CONCERNE D. 6 ITA 48/PN/2010 SHRI SATISH SABNIS 7. NOW, WE PROCEED TO EXAMINE THE DEPARTMENTAL VIEW WHICH IS MADE EXPRESSIVE IN THE WRITTEN SUBMISSION BY THE SR AR OF THE REVENUE. IMPORTANT PORTIONS OF THE WRITTEN SUBMISSION IS REPRODUCED AS UNDER: .. 2. MOST RESPECTFULLY, IT IS SUBMITTED THAT CLAIM OF THE LD AR IS FACTUALLY INCORRECT AND MISLEADING. .. NO DETAILS OF CLIENTS OR SERVICES RENDERED FOR THE INCOME OF RS.19.97 LAKHS FROM THE RESPONDEN T WAS SUBMITTED BY SMT, SABNIS, TILL COMPLETION OF ASSESSMENT. 3. . AR OF SMT. SABNIS GAVE A CRYPTIC AND VAGUE E XPLANATION REGARDING THE SUB-BROKERAGE STATING, SUB-BROKERAGE RECEIVED FROM M/S SATISH SABNIS FOR THE BUSINESS TRANSACTED OF CLIENTS OF THE ASSESSEE . SMT. SABNIS CLAIMED THAT THE SUB-BROKERAGE RECEIVED FROM THE RESPONDENT WAS FOR BUSINESS HANDLED BY HER JOINTLY WITH THE RESPONDENTS SHARE-BROKING FIR M, ON THE BASIS OF THE VOLUME HANDLED BY HER , WHICH WAS DECIDED AT THE END OF THE YEAR. IT WAS CLAIMED THAT SMT. SABNIS DID THE FOLLOWING FOR THE RESPONDENT:- (I) HANDLED THE BUSINESS OF RESPONDENT BY CONSTANT MONITORING THE CLIENTS ACCOUNTS. (II) DEBIT BALANCES WERE CONTINUOUSLY MONITORED TO ENSURE THAT IT REMAINS WITHIN MEANS OF THE CLIENTS. (III) CLOSE MONITORING OF TERMINAL OPERATOR (IV) PROCEDURAL MATTERS OF STOCK EXCHANGE & ITS COM PLIANCE. (V) CONTINUOUS MONITORING OF BANK ACCOUNT POSITION IN CONSIDERATION OF ALL THE ABOVE WORK, HANDLED BY SMT. SABNIS, SHE RECEIVED SUB-BROKERAGE. 3.2 THIS CLAIM IS GENERAL, UNSUBSTANTIATED, UNFOUND ED AND AN AFTERTHOUGHT, SUBMITTED SIX MONTHS AFTER THE QUERY WAS RAISED IN THE QUESTIONNAIRE DATED 11.09.2003, EVASIVE REPLY DATED 13.11.2003 & 27.1.2004. .. AS ADMITTED BY SMT. SABNIS IN HER STATEMENT DATED 3.3.2004 (ANS 2) THAT AS AUTHORISED SIGNATORY OF SHRI SATISH SABNIS, SHE TOOK CARE OF BANKING OPE RATIONS, CHEQUE PAYMENTS, RECONCILIATION OF BANK AND BUSINESS ACCOUNTS, AND O FFICE ADMINISTRATION E.G. DECIDING SALARIES, OFFICE SUPPLIES, GENERAL OFFICE MAINTENANCE; AND SUPERVISING PUNE OFFICE OPERATIONS WHEN SHRI SATISH SABNIS WENT OUT OF PUNE. THUS THE PAYMENT OF SUB-BROKERAGE WAS NOT RELATED TO THE CLIENTS, OR TH E TRANSACTIONS OR THE BROKERAGE INCOME OF THE RESPONDENT. 3.3 IN CASE OF SHRI ASHOK SABNIS ALSO THE REPLY DAT ED 13.11.2003 TO AOS SPECIFIC QUERY DATED 11.09.2003 REGARDING SUB-BROKE RAGE RECEIPT OF RS. 58.50 LAKHS FROM THE RESPONDENT, WAS CRYPTIC AND VAGUE. 4. VIDE LETTER DATED 24.3.2004, THE RESPONDENTS AR SUBMITTED TO THE AO, DETAILS OF SUB-BROKERAGE PAID TO SHRI ASHOK SABNIS AND SMT. SUAJATA SABNIS, WITH 7 ITA 48/PN/2010 SHRI SATISH SABNIS RESPECTIVE LIST OF CLIENTS, CLAIMING THAT IT WAS PA ID ON THE VOLUME OF TRANSACTIONS OF CLIENTS HANDLED BY EACH OF THEM. THE SUB-BROKERAGE IS SHOWN TO BE 50% OF THE BROKERAGE EARNED BY THE RESPONDENT IN RESPECT OF SUCH RESPECTIVE CL IENTS. THE AR ALSO SUBMITTED ON 29.3.2004 , SUCH LIST OF CLIENTS HANDLED BY SMT. SUJATA SABNIS IN FY 1999-00 (BEFORE AY 2001-02) AND FY 200 1-02 (AFTER RELEVANT AY), WHICH SHOWS THAT THE NUMBER AND NAMES CLIENTS WERE DIFFERENT IN EACH OF THE THREE FYRS., CLEARLY INDICATING THAT SUCH CLIENTS H AVE BEEN PICKED UP, MERELY TO JUSTIFY THE AMOUNT OF SUB-BROKERAGE SHOWN TO HAVE B EEN PAID BY THE RESPONDENT, IN RELATION TO THE CLIENTS AND THE BROKERAGE INCOME OF THE RESPONDENT. DETAILS OF SUB-BROKERAGE PAID TO SHRI ASHOK SUBNIS DURING FY 2 001-02 (AY 2002-03) WERE ALSO SUBMITTED, BUT NO SUCH DETAILS FOR IMMEDIATELY PREVIOUS YEARS WERE SUBMITTED TO THE AO. 5. DURING THE APPELLATE PROCEEDINGS BEFORE THE CIT( A), THE ARGUMENT IN RESPECT OF SMT SUJATA SABNIS CHANGED TOTALLY, AND I T WAS CLAIMED THAT PAYMENT OF SUB-BROKERAGE BY THE RESPONDENT TO HER AND TO SHRI ASHOK SABNIS WERE IN RESPECT OF THE CLIENTS WHO WERE PREVIOUSLY CLIENTS OF SHRI ASHOK SABNIS AND SMT. SUJATA SABNIS. THE RESPONDENTS AR SUBMITTED DETAILS OF CLIENTS O F SHRI ASHOK SABNIS BEFORE THE CIT(A) ON 24.2.2005 (REMANDED TO AO ON 25.2.2005) SHOWING PAST TRANSACTIONS WITH SUCH CLIENTS BY SHRI ASHOK A . SABNIS; AND BROKERAGE INCOME BY THE RESPONDENT, DURING FY 1996-97 TO 2000-01 , FROM SUCH 117 SUCH CLIENTS TRANSACTIONS, TOTALLING DURING FY 2000-01 TO RS.117 ,19,915/- (50% BEING RS. 58,59,957/- ). LIST OF DEBTORS AND CREDITORS AS ON 31.3.1991, A ND IN 1994-95 OF SHRI ASHOK A SABNIS HAS BEEN ENCLOSED, WHEREIN NAME S OF CLIENTS OF THE RESPONDENT APPEAR, TO BUTTRESS THE CLAIM THAT THERE WAS SHIFT OF BUSINESS/CLIENTELE OF SHRI ASHOK SABNIS TO THE RESPONDENT. 5.2 MERE FACT THAT THE CLIENTS WERE SIMULTANEOUSLY DEALING WITH THE RESPONDENT AS WELL AS SHRI ASHOK SABNIS (IN CASE OF ADHATRAO V IDYA BHAURAO, FY 1998-99) FOR THE SHARE TRANSACTIONS WOULD SHOW THAT THE LOGIC GI VEN REGARDING TRANSFER OF BUSINESS OF SHRI ASHOK SABNIS AND SMT SUJATA SABNIS , TO THE RESPONDENT, IS WITHOUT ANY BASIS. .. 5.3 ADMITTEDLY THERE WAS NO PAYMENT OF SUB-BROKERAGE BY THE RESPONDENT TO SHRI ASHOK SABNIS, DURING TWO PREVIOUS YEARS I.E . FY 1998-99 AND 1999-2000, ALTHOUGH THE RESPONDENT DID EARN BROKERAGE INCOM E FROM SUCH CLIENTS IN THESE YEARS 6. LD. CIT(A) HAS ALLOWED PAYMENT OF SUB-BROKERAGE TO THE TWO RELATED PERSONS ON THE FOLLOWING GROUNDS:-.. 6.2 IT IS HUMBLY SUBMITTED THAT EVEN THE RESPONDENT BEING A SHARE BROKER HIMSELF WITH A HANDSOME STRENGTH OF SALARIED STAFF AND WAS EQUALLY IF NOT MORE COMPETENT AND CAPABLE. HE WAS ALSO WAS ACTING AS AU THORISED REPRESENTATIVE AND SIGNATORY OF SHRI ASHOK SABNIS FOR BUSINESS TRANSAC TION, AND PERHAPS FOR SMT. 8 ITA 48/PN/2010 SHRI SATISH SABNIS SUJATA SABNIS ALSO. IT IS COMMON IN A FAMILY BUSINE SS TO AUTHORISE EACH OTHER FOR BUSINESS/BANK TRANSACTIONS. THESE DO NOT JUSTIFY TH E CLAIM OF EXPENSES. 6.3 THE RESPONDENT WAS NEVER SHORT OF FUNDS, AS BEL IEVED BY LD. CIT(A),.. 7. IT IS PRAYED THAT IN VIEW OF ABSENCE OF ANY INDE PENDENT EVIDENCE (DOCUMENTARY OR OTHER-WISE) TO SUGGEST THAT SERVICE S WERE ACTUALLY RENDERED BY THE TWO PERSONS TO THE RESPONDENT, AND ALSO THE FAC T THAT ALL THE EVIDENCES ARE CREATED BY RESPONDENT ALONE, WHICH ARE SELF-SERVING , WAVERING AND HENCE UNRELIABLE, THE IMPUGNED EXPENSES ARE NOT ALLOWABLE . 8. WE HAVE HEARD THE PARTIES AND PERUSED THE ORDER OF THE REVENUE AND THE PAPERS AVAILABLE BEFORE US. THE PERTINENT I SSUES FOR FACILITATING THE ADJUDICATION OF THE GROUND RAISED INCLUDE THE FOLLO WING AND THEY ARE: (I) IF THE ASSESSEE PAID THE SAID COMMISSION/SUB-BROKERAGE GENUINELY OR NOT (II) IF THE RECIPIENTS HAVE RENDERED SERVICES FOR B ECOME ENTITLED FOR THE SAID RECEIPTS; (III) IF THE RECIPIENTS HAVE THEIR O WN CLIENTELE AND IF THEY ARE CAPABLE OF DIVERTING THEM TO THE ASSESSEE; AND (IV) IF THE AMOUNT IN QUESTION IS COMMENSURATE WITH THE SERVICES RENDERED . ON PERUSAL OF THE RECORDS, WE FIND THAT THE ISSUE AT (I) IS NOT CONTE STED BY THE REVENUE AND THEREFORE, WE RESIST FROM ENTERING INTO THIS ISSUE. FURTHER, WE FIND ISSUE AT (IV) RELATES TO THE PROVISIONS OF SECTION 40A(2) OF THE ACT. AGAIN, IT IS NOT RAISED BY THE AO DURING THE ASSESSMENT OR FIRST APP ELLATE PROCEEDINGS AND THEREFORE, THIS ISSUE DOES NOT EMANATE FROM THE ORD ERS OF THE LOWER AUTHORITIES. THAT LEAVES ONLY ISSUES (II) AND (III) ABOVE FOR OUR ATTENTION. 9. REGARDING THESE TWO ISSUES AT (II) AND (III) ABO VE, FROM THE EXTRACTED PORTION OF THE CIT(A), IT IS EVIDENT THAT THE SUJATHA SABNIS AND THE ASHOK SABNIS ARE THE EXPERIENCED BROKERS OF PUNE STOCK EXCHANGRE PSE FOR THE PAST 12 YEARS OR MORE. CIT(A) HIGHLIG HTED THE FACT THAT THEY ARE DULY REGISTERED WITH THE SEBI TOO FOR DOING SUB-BROKERAGE ACTIVITY . AS PER THE ORDER OF THE CIT(A) THE ASSESSEE HAS THE IR CLIENTELE WHEN THEY WERE THE MEMBERS OF PSE, PUNE AND CONSEQUENTLY, THE Y ARE CAPABLE OF EARNING COMM ISSION OR SUB-BROKERAGE . CIT(A) ALSO RAISED VARIOUS 9 ITA 48/PN/2010 SHRI SATISH SABNIS OTHER LOGICAL ISSUES WHICH ARE UNANSWERED BY THE REVENUE SATISFACTORILY EVEN BEFORE US. FURTHER, FROM THE ABOVE WRITTEN SUB MISSION OF SRI AMBASTHA, THE SR AR, WE FIND THAT THE REVENUES SUB MISSIONS ARE BASICALLY ARGUMENTATIVE RATHER THAN THE FACT ORIENTED. IN OUR OPINION, THESE SUBMISSIONS CONSTITUTES MERELY ONE OF THE AVAILABLE INTERPRETATION OF THE DATA MADE AVAILABLE BY THE ASSESSEE. IT IS AMPLY VI VID THAT THE AO HAS NOT GARNERED ANY INCRIMINATING INFORMATION TO DEMONSTRA TE THAT THE ASSESSEE DOES NOT HAVE ANY CLIENTELE, WHO ARE DIVERTED TO TH E PRESENT ASSESSEE TO BECOME ELIGIBLE FOR THE IMPUGNED BROKERAGE OR NOT D ONE ANYTHING TO GARNER ANY DIRECT EVIDENCE TO DEMONSTRATE THAT THE RECIPIENTS OF THE SUB- BROKERAGE ARE INCAPABLE OF HAVING THEIR CLIENTELE O R THAT THE CLIENTELE LIST SUFFERS FROM CREDIBILITY OR THEIR CLIENTS ARE BOGUS OR NON-EXISTENT. REVENUE HAS NOT DONE ANYTHING TO DEMONSTRATE THE SUB-BROKER S FAILED TO BRING ANY CLIENTS TO THE ASSESSEE. FURTHER, WE FIND THAT IT I S A FACT THE IMPUGNED SUB-BROKERAGE RECIPIENTS ARE RELATED PARTIES (IE FA THER AND SPOUSE) AND ALL THEM ARE STOCK BROKERS/SUB-BROKERS AND THEY FURNISH ED A LIST OF THEIR CLIENTELE AND THE REVENUE HAS NOT REBUTTED THE SAM E. FURTHER IT IS NOT CASE OF THE REVENUE THAT ANY OF THE SAID CLIENTS FR OM THE SAID LIST HAVE GIVEN ANY INCRIMINATING STATEMENT THAT THEY ARE NOT INTRODUCED BY THE ASHOK SABNIS OR SUJATHA SUBNIS TO THE ASSESSEE. FUR THER, ALSO, IT IS A FACT THEY ARE IN THIS LINE OF BUSINESS ACTIVITY OVER THE YEARS. IT IS EVIDENT FROM THE WAY THEY EARNED INCOME AND TAXING OF THE SAME B Y THE REVENUE. THE SAME ACCEPTED BY THE REVENUE. THERE ARE NO COUNTER EVIDENCES IN THE POSSESSION OF THE REVENUE THAT THE SUB BROKERS ARE NOT CAPABLE OF HAVING THEIR OWN CLIENTELE, WHO WERE SAID TO HAVE BEEN DIV ERTED TO THE ASSESSEE AND EARNED THE IMPUGNED SUB-BROKERAGE. BOTH SUJATHA SABNIS AND ASHOK SABNIS ARE ASSOCIATED WITH THIS ACTIVITY OF EARNING BROKERAGE FOR MANY YEARS, THE FACT WHICH IS UNDISTURBED BY THE REVENUE . IT IS ALSO NOT THE CASE OF THE REVENUE THAT THERE EXISTS ANY TAX AVOID ANCE. FURTHER, WE FIND THE SAID SUB-BROKERAGE IS NOT EXCLUDED FROM THE CHA RGE OF TAX IN THE 10 ITA 48/PN/2010 SHRI SATISH SABNIS HANDS OF THE RECIPIENTS IE SUJATHA SABNIS AND ASHOK SABNIS, WHO ARE THE REGISTERED BROKERS OF PUNE STOCK EXCHANGE (PSE) SIN CE 1988 IE NEARLY 12 YEARS. IN SUMMARY, WE FIND THAT IT CANNOT BE SAID THAT THE Y INCAPABLE OF HAVING THEIR CLIENTELE AND INCAPABLE OF INTRODUCING THEM T O THE ASSESSEE FOR BECOMING ENTITLED FOR COMMISSION/BROKERAGE. THUS, IT IS A PO SSIBLE VIEW THAT THE ASHOK SABNIS AND SUJATHA SABNIS ARE CAPABLE OF EARNING SUB BROKE RAGE. WE DO NOT WANT TO DISTURB THE SAME IN THE ABSENCE ANY DIRECT EVIDENCE AGAINST THE ASSESSEE. IN OUR OPINION, THE ASSESSEE SUCCESSFULLY DISCHARGED REQUISITE INIT IAL ONUS AND THE REVENUE HAS NOT DONE ANYTHING TO REBUT THE SAME. THEY MERELY INTERP RETED THE AVAILABLE DATA PASSIVELY. FURTHER, IT IS NOT CASE OF THE AO THAT T HE AMOUNTS IN QUESTION ARE EXCESSIVE AND UNREASONABLE WITHIN THE MEANING OF SE CTION 40A(2) OF THE ACT, ALTHOUGH GROUND 5 RELATES TO THIS ISSUE, WHICH IS R AISED AS A MATTER OF AN AFTERTHOUGHT. AS THE GROUND DOES NOT EMANATE FROM T HE ORDERS OF THE LOWER AUTHORITIES, THIS GROUND CANNOT BE ADMITTED BY US A T THIS POINT OF TIME AS THE ADMISSION AND ADJUDICATION CALL FOR SOME INVESTIGAT ION INTO THE FACTS RELATING TO THE QUANTUM OF EXCESSIVE OR/AND UNREASONABLE, WHICH THE REVENUE FAILED TO DO. THEREFORE, THEREFORE, THE ORDER OF THE CIT(A) DOES NOT CALL FOR ANY INTERFERENCE. ACCORDINGLY, THE GROUNDS RAISED IN THE APPEAL OF TH E REVENUE ARE DISMISSED . 10. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSED . ORDER PRONOUNCED IN THE COURT ON 29-7-2011. (SHAILDENDRA KUMAR YADAV) (D.KARUNAKARA RAO) JUDICIAL MEMBER ACCO UNTANT MEMBER PUNE, DATED THE JULY, 2011 *VNR 11 ITA 48/PN/2010 SHRI SATISH SABNIS COPY OF THE ORDER IS FORWARDED TO : 1. ASSESSEES AS MENTIONED IN THE CAUSE TITLE 2. ITO, WARD 3(1), SOLAPUR. 3. CIT -II, PUNE. 4. CIT CONCERNED, 5. D.R. ITAT A BENCH, PUNE. 6. GUARD FILE BY ORDER ASSISTANT REGISTRAR I.T.A.T PUNE