ACIT 18(3), MUMBAI V. JAYESH RAMANLAL PATEL, MUMBAI

ITA 6172/MUM/2011

• Counselvise Citation: [2012] 119 COUNSELVISE.COM (IT) 9314 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 3 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-12-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: J
• Next Hearing Date: 06-12-2012
• Assessment Year: 2008-2009
• Appeal Filed On: 07-09-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: MITESH N SHAH
• Keywords: Additional evidence
• Section: 133(6)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES J MUMBAI BEFORE SHRI B.R. MITTAL, JUDICIAL MEMBER AND SHRI RAJENDRA, ACCOUNTANT MEMBER ITA NO. 6172/MUM/2011 ASSESSMENT YEAR 2008-09 ASST. COMMISSIONER OF INCOME TAX 18(3), ROOM NO. 209, 2 ND FLOOR, PIRAMAL CHAMBERS, LALBAUG, MUMBAI. VS. SHRI JAYESH RAMANLAL PATEL, 303, KRISHNA KUNJ, SENAPATI BAPAT MARG, MATUNGA, MUMBAI-400 016. PAN : AAAPP 7897 C (APPELLANT) (RESPON DENT) REVENUE BY : SHRI RAKESH RANJAN ASSESSEE BY : SHRI MITESH N. SHAH DATE OF HEARING : 06-12-2012 DATE OF PRONOUNCEMENT : 31-12-2012 O R D E R PER B.R. MITTAL, J.M. THE PRESENT APPEAL HAS BEEN FILED BY THE REVENUE AG AINST THE ORDER OF THE CIT(A)-29, MUMBAI DT. 30-06-2011 FOR T HE ASSESSMENT YEAR (AY) 2008-09 DISPUTING DELETION OF ADDITION OF COMMISSION PAYMENT OF RS. 77,14,215/- BY ADMITTING ADDITIONAL EVIDENCES IN VIOLATION OF RULE 46A. ITA NO. 6172/MUM/2011 SHRI JAYESH RAMANLAL PATEL 2 2. THE BRIEF FACTS OF THE CASE ARE THAT, THE APPELLANT IS A MEMBER OF THE VADODARA STOCK EXCHANGE LTD., AND IS CARRYING O N THE BUSINESS OF SUB-BROKING IN SHARES AND SECURITIES. HE HAS AROUN D 15 OFFICES IN BARODA EQUIPPED WITH BOLT FOR ONLINE TRADING IN SHA RES AND SECURITIES. HE CARRIES ON HIS BUSINESS FROM THESE OFFICES WITH THE ASSISTANCE OF CERTAIN EMISSARIES TO WHOM COMMISSION IS PAID AS A CONSIDERATION FOR THEIR SERVICES AT CERTAIN PERCENT AGE OF BROKERAGE RECEIVED BY HIM. DURING THE PREVIOUS YEAR, THE ASS ESSEE RECEIVED SUB-BROKERAGE OF RS. 1,41,66,117/- FROM VSE STOCK S ERVICES LTD., OUT OF WHICH HE CLAIMED TO HAVE PAID COMMISSION OF RS. 77,14,215/- TO THE EMISSARIES. ON BEING ASKED BY THE ASSESSING OF FICER TO PRODUCE DETAILS OF COMMISSION PAID, HE PRODUCED COPY OF TRI PARTITE AGREEMENT BETWEEN THE CLIENT AND THE BROKER AND THE SUB-BROKE R AND KYC FORM. HE FURTHER EXPLAINED THAT HE WAS NOT A MAIN BROKER BUT A SUB-BROKER AND THE DETAILS CALLED FOR WERE APPLICABLE TO A MAI N BROKER AND NOT TO A SUB-BROKER. NEVERTHELESS, ASSESSEE SUBMITTED THE DETAILS OF 30 PARTIES TO WHOM COMMISSION WAS CLAIMED TO HAVE BEEN PAID DURING THE PREVIOUS YEAR. THE ASSESSING OFFICER (AO) TO C OLLECT CERTAIN INFORMATION ISSUED NOTICE U/S. 133(6) AND COLLECTED DIRECTLY FROM THOSE EMISSARIES INCLUDING HOLDING OF NCFM CERTIFICATE, A PROFESSIONAL QUALIFICATION, REQUIRED FOR CAPITAL MARKET SEGMENT. OUT OF THOSE 30 MEMBERS, NOTICES ISSUED TO 4 PERSONS WERE RECEIVED BACK WITH POSTAL REMARK NOT KNOWN AND IN RESPECT OF 6 PERSONS NO REP LY WAS RECEIVED. IN OTHER WORDS, 20 PERSONS FURNISHED THE REQUIRED I NFORMATION CALLED FOR BY THE AO AND CONFIRMED THE AMOUNT OF COMMISSIO N RECEIVED BY THEM BUT THEY WERE NOT HOLDING NCFM CERTIFICATE AS ASKED FOR BY THE AO. 3. THE AO WAS NOT SATISFIED WITH THE REPLIES GIVEN BY THE SAID PERSONS AND OBSERVED THAT, NONE OF THE SAID PERSONS WAS HOL DING NCFM CERTIFICATE AND FURTHER OBSERVED THAT THOSE PERSONS HAD PROVIDED THE SERVICES LIKE DELIVERY OF BILL, COLLECTION AND PAYM ENT OF CHEQUES, ITA NO. 6172/MUM/2011 SHRI JAYESH RAMANLAL PATEL 3 COLLECTION AND DEPOSITING, THE SERVICES WHICH COULD NORMALLY BE DONE BY A PEON OR CLERK AND AS SUCH THE PAYMENT OF SUCH A HEFTY COMMISSION WAS NOT JUSTIFIABLE. AO STATED THAT IT WAS A FALSE STORY PUT FORWARD BY THE ASSESSEE. THUS, AO AS SUCH MADE AN ADDITION OF RS. 77,14,215/- TO THE INCOME OF THE ASSESSEE BY DIS-AL LOWING THE ENTIRE COMMISSION CLAIMED. BEING AGGRIEVED, ASSESSEE FILE D APPEAL BEFORE THE LD. CIT(A). 4. LD.CIT(A) AFTER HEARING THE MATTER, DELETED THE DIS -ALLOWANCE OF THE COMMISSION OF RS. 77,14,215/- IN FAVOUR OF THE ASSE SSEE BY OBSERVING AS UNDER: A) THE APPELLANT HAS OFFERED A TOTAL INCOME OF RS. 1,4 1,66,117/- FROM SUB-BROKERAGE AND IN TURN HAS PAID A COMMISSION OF RS. 77,14,215/- TO EMISSARIES TO EARN THAT INCOME. THE EXPENSES ARE D IRECTLY RELATED TO THE INCOME OF THE APPELLANT AND IS AN INTEGRAL PAR T OF THE PROFIT MAKING PROCESS. THE EMISSARIES HAVE RENDERED SERVICES SUC H AS MANAGING THE INDIVIDUAL BOLTS, PROCURING THE CLIENTS, RECOVERY O F DUES AND THEY ARE ALSO RESPONSIBLE FOR BAD DELIVERY, LOSS DUE TO AUCT ION IN RESPECT OF BUSINESS CARRIED OUT BY THE CLIENTS INTRODUCED BY T HEM. THE BILL WISE DETAILS OF COMMISSIONS GIVEN TO THE EMISSARIES RELA TING TO THEIR TRANSACTION HAVE BEEN ALSO SUBMITTED. THEREFORE IT CANNOT BE SAID THAT SERVICES WERE NOT RENDERED. B) ALL PAYMENTS HAVE BEEN MADE BY ACCOUNT PAYEE CHEQUE THROUGH NORMAL BANKING CHANNELS. TDS HAS BEEN DEDUCTED ON C OMMISSION. INCOME HAS BEEN OFFERED BY THE RECIPIENT IN THEIR R ESPECTIVE I.T. RETURNS. PAN NUMBERS HAVE BEEN GIVEN. C) THE COMMISSION WAS ALSO PAID IN EARLIER YEARS AND THEY HAVE BEEN EXAMINED AND ACCEPTED IN SCRUTINY ASSESSMENTS. D) THE ASSESSING OFFICER STATED THAT NOTICE TO 4 PERSO NS U/S. 133(6) RECEIVING THE COMMISSION AMOUNTING TO RS. 22,25,290 /- RETURNED BACK UNSERVED WITH POSTAL REMARKS NON KNOWN. HOWEVER, APPELLANT HAD SUBMITTED CONFIRMATION OF THESE PARTIES TO THE ASSE SSING OFFICER DURING ASSESSMENT PROCEEDINGS LATER. ALL THE FOUR PERSONS I.E., BHARAT S. PREKH, SMT. REKHABEN SHAH, SNEHA PAREKH, NIKITH K S HAH HAVE FILED INDIVIDUAL CONFIRMATION, COPY OF THEIR I.T. RETURNS , COMPUTATION OF INCOME AND PROFIT & LOSS ACCOUNT DISCLOSING THE COMMISSION INCOME. THEY HAVE ALSO CONFIRMED SERVICES RENDERED BY THEM. THE Y CONFIRMED THAT THEY HAVE INTRODUCED THE CLIENTS AND FUNCTIONED AS EMISSARIES. THEY HAVE NOT PROVIDED NCFM CERTIFICATE AS BCFM CERTIFIC ATE WAS APPLICABLE TO THEM. HENCE, NOT RECEIVING OF CONFIRMATION FROM THESE 4 PARTIES ITA NO. 6172/MUM/2011 SHRI JAYESH RAMANLAL PATEL 4 CANNOT BE HELD AGAINST THE APPELLANT. E) APART FROM THIS 20 OTHER RECIPIENTS HAVE ALREADY CO NFIRMED TO THE ASSESSING OFFICER REGARDING RECEIPT OF COMMISSION. F) AS REGARDS THE 6 OTHER PERSONS FROM WHOM CONFIRMATI ONS WERE NOT RECEIVED INSPITE OF LETTERS THE APPELLANT HAS FILED COPIES OF THEIR CONFIRMATION. MOST OF THEM ARE ASSESSED TO TAX, TH EIR PANS HAVE BEEN FILED. IT CAN ALSO BE SEEN THAT SHRI NILESH PATEL WHOM THE ASSESSING OFFICER ALLEGES DID NOT REPLY ACTUALLY HAS REPLIED TO THE ASSESSING OFFICER AND THE ASSESSING OFFICER HAS REFERRED TO T HIS REPLY IN THE COURSE OF THE ASSESSMENT ORDER. G) THERE IS NO ADVERSE EVIDENCE ON RECORD REGARDING TH E PAYMENT OF COMMISSION. NOT A SINGLE PERSON HAS DENIED THE RE CEIPTS OR HAVE STATED THAT NO SERVICES ARE RENDERED. BEING AGGRIEVED, THE REVENUE HAS FILED THE PRESENT APPEAL. 5. WE HAVE HEARD THE REPRESENTATIVES OF BOTH THE PARTI ES AND HAVE ALSO GONE THROUGH THE MATERIAL PLACED ON FILE. THE LD. DEPARTMENTAL REPRESENTATIVE (DR) HAS SUBMITTED THAT LD.CIT(A) HA S WRONGLY ALLOWED THE APPEAL AS THE ASSESSEE HAS FAILED TO JUSTIFY TH E PAYMENT OF COMMISSIONS TO DIFFERENT PERSONS. EVEN NOTICES SER VED UPON 4 PERSONS WERE RECEIVED BACK FOR WANT OF CORRECT ADDR ESSES AND 6 PERSONS DID NOT FILE ANY REPLY TO THE NOTICE ISSUED BY AO. ON THE OTHER HAND, THE LD. AUTHORISED REPRESENTATIVE (AR) HAS SU BMITTED THAT APPELLANT HAS AROUND 15 OFFICES IN BRAND BOLT FOR O NLINE TRADING IN SHARES WHICH ARE MANAGED BY THESE EMISSARIES, WHO N OT ONLY ATTEND THE OFFICE REGULARLY BUT ALSO PERSUADE THE CLIENTS TO TRANSACT IN THE SHARE MARKET. ALL THE EMISSARIES HAVE CONFIRMED TH E RECEIPT OF COMMISSION. THEY ARE PAN HOLDERS, THE PAYMENTS WERE MADE THROUGH BANKING CHANNEL AND EVEN THE COPIES IN THEIR STATEM ENT OF ACCOUNTS AND ACKNOWLEDGMENT AS WELL AS ASSESSMENT ORDERS WER E ALSO PRODUCED BEFORE THE AO. THERE WAS NO DOUBT ABOUT T HE PAYMENT OF COMMISSION TO THOSE PERSONS. FURTHER, THE LD. AR HAS SUBMITTED THAT THE NOTICES COULD NOT BE ITA NO. 6172/MUM/2011 SHRI JAYESH RAMANLAL PATEL 5 SERVED UPON 4 PERSONS AS THEY HAD GONE TO THEIR NAT IVE PLACES DURING DIWALI VACATION. HOWEVER, THE ASSESSEE HAD FURNISH ED THE RECORD OF PAYMENT CONFIRMATION TO THOSE 4 PERSONS ALONG WITH LETTER DT. 15-12- 2010. EVEN OTHER SIX PERSONS HAVE ALSO FURNISHED T HE CONFIRMATION AFTER 13 TH DECEMBER 2010. EVEN THE AO IN HIS ASSESSMENT ORDE R HAS CONSIDERED THE REPLY FURNISHED BY ONE OF THOSE 6 EM ISSARIES NAMELY SHRI NILESH PATEL, WHO HAS CONFIRMED THE RECEIPT OF COMMISSION AND NATURE OF SERVICES RENDERED BY HIM. THE LD. AR HAS FURTHER SUBMITTED THAT NCFM CERTIFICATE IS REQUIRED FOR TRADING IN SH ARES OF NATIONAL STOCK EXCHANGE. WHEREAS IN THE CASE IN HAND, THE T RADING WAS CARRIED OUT IN BOMBAY STOCK EXCHANGE FOR WHICH BCFM CERTIFICATE IS REQUIRED AND THE SAID PERSONS WERE HAVING BCFM CERT IFICATES. THAT THE AO FAILED TO CONSIDER THE FACT THAT, THE EMISSA RIES WERE ALSO RESPONSIBLE FOR RECOVERY OF DUES, BAD DELIVERY, LOS S DUE TO AUCTION IN RESPECT OF BUSINESS CARRIED OUT BY THE CLIENTS INTR ODUCED BY THE EMISSARIES. HENCE, LD. CIT(A) HAS RIGHTLY DELETED THAT DIS-ALLOWANCE MADE BY AO. 6. ON CONSIDERATION OF SUBMISSIONS OF LD. REPRESENTATI VES OF BOTH PARTIES & REASONING GIVEN BY LD. CIT(A), TO DELETE THE DIS-ALLOWANCE OF COMMISSION OF RS. 77,14,215/- MADE BY AO, WE HOLD T HAT THERE IS NO INFIRMITY IN THE ORDER OF LD. CIT(A). 7. SO FAR THE SECOND GROUND TAKEN BY THE DEPARTMENT IN ITS APPEAL REGARDING ADMISSION OF ADDITIONAL EVIDENCE IN THE F ORM OF COPIES OF BILLS & BCFM CERTIFICATES ETC., IS CONCERNED, IT IS OBSERVED THAT THE ASSESSEE HAD ALREADY GIVEN THE RECORD IN THE SHAPE OF ACCOUNT STATEMENT, PAN NUMBERS, PAYMENT CONFIRMATION RECEIP TS AND EVEN INCOME TAX ASSESSMENT ORDERS OF THE EMISSARIES TO T HE AO. THE DOCUMENTS LIKE BCFM CERTIFICATE OR CERTAIN BILLS ET C., WERE IN THE SHAPE OF CORROBORATING EVIDENCE TO THE TRANSACTIONS , WHICH WERE ITA NO. 6172/MUM/2011 SHRI JAYESH RAMANLAL PATEL 6 CONSIDERED BY THE AO. HENCE, IN OUR VIEW, THE LD. CIT HAS NOT ERRED WHILE CONSIDERING THOSE DOCUMENTS. SINCE THERE IS NO INFIRMITY IN THE ORDER OF LD. CIT(A), WE UPHOLD HIS ORDER BY REJECTI NG THE GROUND OF APPEAL TAKEN BY THE DEPARTMENT. IN THE RESULT, APPEAL OF THE DEPARTMENT IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 31 ST DECEMBER, 2012. SD/- SD/- (RAJENDRA) (B.R. MITTAL) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATE: 31 ST DECEMBER, 2012 TNMM COPY TO: 1. APPELLANT 2. RESPONDENT 3. THE CONCERNED CIT (A) 4. THE CONCERNED CIT 5. DR J BENCH, ITAT, MUMBAI 6. GUARD FILE (TRUE COPY) BY ORDER ASST. REGISTRAR, INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCHES, MUMBAI