THE DCIT, Circle-4, Ahmedabad V. H.Nyalchand Financial Services Ltd., Ahmedabad

ITA 57/AHD/2010

• Counselvise Citation: 5720514 RSA 2010
• Duration Of Justice: 2 year(s) 9 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-11-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 04-09-2012
• Assessment Year: 2003-2004
• Appeal Filed On: 06-01-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: H P TALATI
• Assessee Lawyers: P M MEHTA
• Section: 143(3); 2

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH AHMEDABAD (BEFORE SHRI D. K. TYAGI, JM AND SHRI A. MOHAN ALAN KAMONY, AM) ITA NO. 57/AHD/2010 A. Y.: 2003-04 THE D. C. I. T., CIRCLE-4, NAVJIVAN TRUST BUILDING, OFF. ASHRAM ROAD, AHMEDABAD VS H. NAYALCHAND FINANCIAL SERVICES LTD., 304, ANAND CHAMBERS, NAVRANGPURA, AHMEDABAD P. A. NO. AABCH 1528 G (APPELLANT) (RESPONDENT) APPELLANT BY SHRI H. P. TALATI, SR. DR RESPONDENT BY SHRI P. M. MEHTA, AR DATE OF HEARING: 4-09-2012 DATE OF PRONOUNCEMENT: 02-11-2012 O R D E R PER A. MOHAN ALANKAMONY: THIS APPEAL IS FILED BY THE REVENUE AGGRIEVED BY THE ORDER OF THE LEARNED CIT(A)-I, AHM EDABAD DATED 27-10- 2009 IN APPEAL NO.CIT(A)-I/CC.1(3)/537/2006-07,FOR THE ASSESSMENT YEAR 2003-04 PASSED U/S 250 READ WITH SECTION 143(3) AND 254 OF THE ACT. 2. IN THIS APPEAL, THE REVENUE HAS RAISED 6 ELABORA TE GROUNDS WHEREIN GROUNDS NO.5 AND 6 ARE GENERAL IN NATURE AND DO NOT SURVIVE FOR ADJUDICATION. THE CRUX OF THE ISSUE INVOLVED IN GR OUNDS NO.1 TO 4 OF THE APPEAL IS RELATING TO DELETION OF DISALLOWANCE OF R S.8,42,000/- BEING PAYMENT OF SUB-BROKERAGE. ITA NO.57/AHD/2010 (AY: 2003-04) DCIT, CIR-4, AHMEDABAD VS H. NYALCHAND FINANCIAL SE RVICES LTD. 2 3. THE ASSESSEE, A LIMITED COMPANY ENGAGED IN THE B USINESS SHARE TRADING FILED ITS RETURN OF INCOME FOR AY 2003-04 D ECLARING TOTAL INCOME OF RS.38,01,030/- ON 17-11-2003. ASSESSMENT ORDER WAS PASSED U/S 143(3) OF THE ACT ON 31-03-2006 DETERMINING TOTAL INCOME O F THE ASSESSEE AT RS.48,43,030/- WHEREIN ONE OF THE DISALLOWANCE WAS FOR RS.8,42,000/- ON ACCOUNT OF SUB-BROKERAGE PAID TO SHRI RAJUBHAI B. VADHECHA DURING THE YEAR AS THE ASSESSEE COULD NOT PRODUCE CONFIRMATION STATEMENT FROM SHRI RAJUBHAI B. VADHECHA. ON APPEAL BY THE ASSESSEE, TH E LEARNED CIT(A) RESTORED THE ISSUE OF DISALLOWANCE OF SUB-BROKERAGE AMOUNTING TO RS.8,42,000/- WAS RESTORED TO THE LEARNED AO WITH D IRECTION TO VERIFY THE GENUINENESS OF THE PAYMENT BY ISSUING NECESSARY SUM MONS TO THE SUB- BROKER AT THE GIVEN ADDRESS AND ALLOW THE DEDUCTION IF SUCH PAYMENT IS FOUND TO BE BONAFIDE . ACCORDINGLY, THE LEARNED AO ISSUED SUMMONS TO SHRI VADHECHA AT BOTH THE ADDRESSES GIVEN BY HIM AS KING HIM TO ATTEND THE LEARNED AO WITH THE FOLLOWING DETAILS: (I) FILE COPY OF LEDGER ACCOUNT OF H. NAYLCHAND FIN ANCIAL SERVICES LTD. FOR F. Y. 2002-03. (II) PROOF OF FILING OF RETURN OF INCOME FOR A. Y. 2003-04 ALONG WITH PROFIT & LOSS A/C. AND BALANCE-SHEET. (III) CASH BOOK AND LEDGER FOR F. Y. 2002-03 MAY AL SO BE PRODUCED FOR VERIFICATION. THE ENTIRE SUMMONS WAS RETURNED UN-SERVED BY THE PO STAL AUTHORITY DUE TO NON-AVAILABILITY OF SHRI VADHECHA AND THUS IDENTITY OF SHRI VADHECHA COULD NOT BE PROVED. DURING THE ASSESSMENT PROCEEDINGS AL SO THE ASSESSEE COULD NOT PRODUCE SHRI VADHECHA TO PROVE GENUINENES S OF THE TRANSACTIONS. ACCORDINGLY, THE LEARNED AO SUSTAINED THE ADDITION MADE AT THE TIME OF ASSESSMENT PROCEEDINGS ON 31-03-2006. ITA NO.57/AHD/2010 (AY: 2003-04) DCIT, CIR-4, AHMEDABAD VS H. NYALCHAND FINANCIAL SE RVICES LTD. 3 4. THE ASSESSEE CARRIED THE MATTER BEFORE THE LEARN ED CIT(A). THE LEARNED CIT(A) CONSIDERING THE SUBMISSIONS OF THE A PPELLANT, DIRECTED THE LEARNED AO TO ALLOW THE SUB-BROKERAGE CHARGES AS DE DUCTABLE EXPENSE BY OBSERVING IN PARA 6 AND 6.1 OF HIS ORDER AS UNDER: 6. I HAVE CONSIDERED THE SUBMISSIONS OF THE APPELL ANT. IT IS NOTICED THAT MY PREDECESSOR LD. CIT(A) VIDE APPELLA TE ORDER DATED 24.7.2006, DIRECTED ON THIS ISSUE AS UNDER: I HAVE CONSIDERED THE ABOVE SUBMISSIONS. THE SUB-B ROKER TO WHOM THE PAYMENT OF RS.8,42,000/- IS MADE IS DULY R EGISTERED WITH SEBI. A COPY OF THE DRIVING LICENSE IS ALSO FI LED. IN THESE CIRCUMSTANCES, IT WOULD SERVE THE INTEREST OF JUSTI CE OF THE ASSESSING OFFICER IS DIRECTED TO VERIFY THE GENUINE NESS OF THE PAYMENT BY ISSUE OF NECESSARY SUMMONS AT THE GIVEN ADDRESS. ASSESSING OFFICER IS DIRECTED TO VERIFY TH E ABOVE PAYMENT TO ALLOW THE SAME IF THE GENUINENESS IS EST ABLISHED BY ISSUING NECESSARY SUMMONS. GROUND OF APPEAL NO.2 IS ALLOWED. 6.1 IN PURSUANCE OF ABOVE DIRECTIVE, THE ASSESSING OFFICER HAS ISSUED SUMMONS AND THE SAME WAS SENT BY SPEED POST, WHICH HAS BEEN RETURNED BY THE POSTAL AUTHORITIES WITH THE PE RSON I.E. SHRI RAJUBHAI B. VADHECHA WAS RESIDING AT THE GIVEN ADDR ESS AND THEREAFTER, HE HAS LEFT THE PLACE. IT IS TRUE THAT THEREAFTER, THE APPELLANT COMPANY COULD NOT LOCATE THE SUBSEQUENT W HEREABOUTS OF SHRI RAJUBHAI B. VADHECHA. HOWEVER, TO MIND, THE AP PELLANT HAS ESTABLISHED THE IDENTITY OF THE PARTY. SHRI RAJUBHA I VADHECHA HAILS FROM VIRAMGAM AND HENCE, IT IS NOT POSSIBLE FOR THE APPELLANT TO KEEP DAY TO DAY TRACK OF RAJUBHAI VADHECHA. HOWEVER, THE PRIMARY EVIDENCES, WHICH ESTABLISHES THE IDENTITY AND THE G ENUINENESS OF PAYMENT TO SHRI RAJUBHAI VADHECHA HAVE ALREADY BEEN FURNISHED BY THE APPELLANT. THE COPY OF DRIVING LICENSE, REGISTR ATION DETAILS ETC. OF SHRI RAJUBHAI VADHECHA HAVE ALSO BEEN PRODUCED BY T HE APPELLANT. TO MIND, THERE IS NO CASE OF DISALLOWANCE OF DEDUCT ION OF PAYMENT TO SHRI RAJUBHAI VADHECHA OF RS.8,42,000/- AND SAME IS DIRECTED TO BE ALLOWED. 5. BEFORE US, HE LEARNED AR SUBMITTED THAT THERE I S NO BASIS FOR DISALLOWANCE MADE BY THE LEARNED AO AS THE ASSESSEE HAD SUBMITTED THE EVIDENCES AVAILABLE WITH IT BEFORE THE LEARNED AO A S WELL AS BEFORE THE ITA NO.57/AHD/2010 (AY: 2003-04) DCIT, CIR-4, AHMEDABAD VS H. NYALCHAND FINANCIAL SE RVICES LTD. 4 LEARNED CIT(A) TO ESTABLISH THE IDENTITY OF THE SUB -BROKER, GENUINENESS OF THE PAYMENT. IT WAS SUBMITTED THAT THE AMOUNT WAS E XPENDED FOR BUSINESS PURPOSES. IT WAS FURTHER SUBMITTED BY THE LEARNED A R THAT THE LEARNED AO HAD DISALLOWED THE CLAIM OF THE ASSESSEE FOR PAYMEN T OF SUB-BROKERAGE MADE TO SHRI RAJUBHAI B. VADHECHA ONLY ON THE GROUN D OF NON-FILING OF CONFORMATION STATEMENT FROM SHRI VADHECHA. THE ASS ESSEE ALSO CITED VARIOUS DECISIONS INCLUDING THE DECISION IN THE CAS E OF ACIT VS SHREE SAJJAN MILLS LTD., 302 ITR (AT) 88 (INDORE TM) AN D PRAYED THAT THE ORDER OF THE LEARNED CIT(A) ALLOWING THE CLAIM OF DISALLO WANCE OF SUB-BROKERAGE PAYMENT MADE BY THE ASSESSEE MAY BE UPHELD. 6. THE LEARNED DR RELIED ON THE ORDER OF THE AO AN D SUBMITTED THAT HIS ORDER MAY BE UPHELD. 7. WE HAVE HEARD THE RIVAL SUBMISSIONS AND CAREFULL Y PERUSED THE MATERIAL ON RECORD INCLUDING THE PAPER BOOK CONTAIN ING PAGES 101 TO 119. ON PERUSAL OF THE RECORDS, IT IS APPARENT THAT THE ASSESSEE HAD FILED REASONABLE RELEVANT EVIDENCES BEFORE THE LEARNED AO AS WELL AS BEFORE THE LEARNED CIT(A) SUCH AS (A)DETAILS OF BUSINESS EARN ED THROUGH SHRI SHRI RAJUBHAI B. VADHECHA FROM WHICH THE ASSESSEE EARNED BROKERAGE OF RS.12,17,612/-. (B) DETAILED OF ACCOUNTS OF ALL THE 3 PARTIES (PB 101), (C) COPY OF LEDGER ACCOUNT OF SHRI RAJUBHAI B. VADHECHA (PB-105), (D) COPY OF BANK STATEMENT - BANK OF MAHARASHTRA FOR JULY, 2002 WHEREIN CHEQUES RECEIVED FROM SHRI RAJUBHAI B. VADHECHA WERE DEPOSI TED (PB106 107) AND COPY OF BANK STATEMENT - BANK OF MAHARASHTRA FO R NOV,2002 IN WHICH SUB BROKERAGE OF RS.8,37,873/- WERE PAID TO SHRI RA JUBHAI B. VADECHA WERE DEBITED(PB-108), DRIVING LICENCE OF SHRI RAJUB HAI B. VADHECHA. HOWEVER, THE LEARNED AO HAD DISALLOWED THE CLAIM OF THE ASSESSEE WITHOUT CONSIDERING THE AFORESAID RELEVANT DOCUMENTS. THE L EARNED CIT(A) HAD ITA NO.57/AHD/2010 (AY: 2003-04) DCIT, CIR-4, AHMEDABAD VS H. NYALCHAND FINANCIAL SE RVICES LTD. 5 DELETED THE DISALLOWANCE AFTER VERIFICATION OF ALL THE RELEVANT RECORDS PRODUCED BY THE ASSESSEE. UNDER THESE CIRCUMSTANCES , WE DO NOT THINK THAT THERE IS ANY REASON OR JUSTIFICATION FOR US TO INTERFERE WITH THE ORDER OR THE LEARNED CIT(A). WE THEREFORE CONFIRM THE ORDER OF THE LEARNED CIT(A) AND DISMISS THE APPEAL OF THE REVENUE. 9. IN THE RESULT, THE APPEAL OF THE REVENUE IS DIS MISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 02-11-2012. SD/- SD/- (D. K. TYAGI) JUDICIAL MEMBER (A. MOHAN ALANKAMONY) ACCOUNTANT MEMBER LAKSHMIKANT LAKSHMIKANT LAKSHMIKANT LAKSHMIKANTA AA A DEKA / DEKA / DEKA / DEKA / COPY OF THE ORDER FORWARDED TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT CONCERNED 4. THE CIT(A) CONCERNED 5. THE DR, ITAT, AHMEDABAD 6. GUARD FILE BY ORDER ASSISTANT REGISTRAR, ITAT, AHMEDABAD 1. DATE OF DICTATION: 05-10-2012 DIRECT ON COMP UTER. 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE T HE DICTATING MEMBER: 15-10-2012 OTHER MEMBER: 3. DATE ON WHICH APPROVED DRAFT COMES TO THE SR. P. S./P.S.: 4. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE TH E DICTATING MEMBER FOR PRONOUNCEMENT: 5. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE S R. P.S./P.S.: 6. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK: 7. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK: 8. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT REGISTRAR FOR SIGNATURE ON THE ORDER: 9. DATE OF DESPATCH OF THE ORDER: