South Gujarat Share & Share Borkers Ltd., Surat V. The ACIT.,Circle-4, Surat

ITA 672/AHD/2008

• Counselvise Citation: 67220514 RSA 2008
• Duration Of Justice: 3 year(s) 8 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-10-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Next Hearing Date: 19-10-2011
• Assessment Year: 2000-2001
• Appeal Filed On: 20-02-2008
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: B L VADAV DR
• Keywords: Opportunity of being heard; Bad and doubtful debts
• Section: 37

Judgement Text

, , , , IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH D AHMEDABAD , !' !' !' !' !.!.$%&, ' BEFORE SHRI BHAVNESH SAINI, JUDICIAL MEMBER AND SHRI A.L.GEHLOT, ACCOUNTANT MEMBER './ ITA NO. 672/AHD/2008 ) *) ) *) ) *) ) *) / / / / ASSESSMENT YEAR: 2000-01 DATE OF HEARING:13.10.11 DRAFTED:13.10.11 SOUTH GUJARAT SHARES & SHARE BROKERS LTD., OPP. LINER BUS STOP, 3 RD FLOOR, BELGIUM CHAMBERS, RING ROAD, SURAT PAN NO.AADCS3610A / V/S . ASSTT. COMMISSIONER OF INCOME-TAX, CIRCLE- 4, SURAT +,/ APPELLANT .. -.+,/ RESPONDENT +,/ BY APPELLANT SHRI HARDIK VORA, AR -.+, / 0 / BY RESPONDENT SHRI B.L. VADAV, DR 12 / &' / DATE OF HEARING 19/10/2011 3%* / &' / DATE OF PRONOUNCEMENT 21/10/2011 / / / / ORDER !. !. $%&, ' /PER A.L.GEHLOT, ACCOUNTANT MEMBER:- THIS IS AN APPEAL BY THE ASSESSEE. THE ASSESSMENT INVOLVED IN THIS APPEAL IS 2000-01. THE APPEAL IS INSTITUTED AGAINST THE ORDER OF THE CIT(A)-I, SURAT, DATED 31- 12-2007. GROUND REPRODUCED AS UNDER:- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AS WELL AS LAW ON THE SUBJECT, THE LEARNED COMMISSIONER OF INCOME-TAX (AP PEALS) HAS ERRED IN CONFIRMING THE ACTION OF THE ASSESSING OFFICER IN R EOPENING OF ASSESSMENT U/S.147 OF THE ACT. ITA NO.672/AHD/2008 A.Y. 2000-01 SGS & SB LTD. V. ACIT CIR-4, SRT PAGE 2 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AS WELL AS LAW ON THE SUBJECT, THE LEARNED COMMISSIONER OF INCOME-TAX (AP PEALS) HAS ERRED IN CONFIRMING THE ACTION OF THE ASSESSING OFFICER IN O RDERING SPECIAL AUDIT U/S.142(2A) OF THE ACT. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AS WELL AS LAW ON THE SUBJECT, THE LEARNED COMMISSIONER OF INCOME-TAX (AP PEALS) HAS ERRED IN CONFIRMING THE ACTION OF THE ASSESSING OFFICER IN M AKING DISALLOWANCE OF RS.12,71,061/- ON ACCOUNT OF BAD DEBTS. 4. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AS WELL AS LAW ON THE SUBJECT, THE LEARNED COMMISSIONER OF INCOME-TAX (AP PEALS) HAS ERRED IN CONFIRMING THE ACTION OF THE ASSESSING OFFICER IN M AKING DISALLOWANCE OF RS.26,000/- ON ACCOUNT OF PENALTY. 5. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AS WELL AS LAW ON THE SUBJECT, THE LEARNED COMMISSIONER OF INCOME-TAX (AP PEAL\S) HAS ERRED IN CONFIRMING THE ACTION OF THE ASSESSING OFFICER IN M AKING DISALLOWANCE OF RS.1,04,201/- FOR LOSS ON SHARES. 6. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AS WELL AS LAW ON THE SUBJECT, THE LEARNED COMMISSIONER OF INCOME-TAX (AP PEALS) HAS ERRED IN CONFIRMING THE ACTION OF THE ASSESSING OFFICER IN M AKING ADDITION OF RS.6,33,740/- ON ACCOUNT OF BROKERAGE. 7. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AS WELL AS LAW ON THE SUBJECT, THE LEARNED COMMISSIONER OF INCOME-TAX (AP PEALS) HAS ERRED IN PARTLY CONFIRMING THE DISALLOWANCE OF RS.1,00,000/- OUT OF TOTAL DISALLOWANCE OF RS.2,00,000/- MADE BY ASSESSING OFFICER FOR SALARY AND BONUS. 8. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AS WELL AS LAW ON THE SUBJECT, THE LEARNED COMMISSIONER OF INCOME-TAX (AP PEALS) HAS ERRED IN CONFIRMING THE ACTION OF THE ASSESSING OFFICER IN M AKING DISALLOWANCE OF RS.7,35,779/- ON ACCOUNT OF BROKERAGE INCENTIVE. 9. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AS WELL AS LAW ON THE SUBJECT, THE LEARNED COMMISSIONER OF INCOME-TAX (AP PEALS) HAS ERRED IN CONFIRMING THE ACTION OF THE ASSESSING OFFICER IN C HARGING OF INTEREST U/S.234B OF THE ACT. 2. GROUND NO.1 & 2 NOT PRESSED BY THE LD. AUTHORIZE D REPRESENTATIVE. THEREFORE SAME ARE DISMISSED AS NOT PRESSED. 3. THE BRIEF FACTS OF THE GROUND NO.3 ARE THAT ASSE SSEE CLAIMED BAD DEBT OF RS.12,71,061/- AND ISSUE OF BAD DEBT WAS REFERRED F OR SPECIAL AUDIT U/S 142(2A) OF ITA NO.672/AHD/2008 A.Y. 2000-01 SGS & SB LTD. V. ACIT CIR-4, SRT PAGE 3 THE ACT IN THE AUDITOR. IT WAS REPORTED THAT THE AS SESSEE HAS CLAIMED ONLY PART OF RS.12,71,061/- AS BAD DEBTS AS ON 31-03-2000 AND CA RRIED FORWARD BALANCE OF RS.20,49,610/- IN THE SUBSEQUENT YEAR AS RECEIVABLE . THE SUBMISSION OF THE ASSESSEE BEFORE ASSESSING OFFICER THAT ONE OF THE S UB-BROKERS M/S TRUPTI INVESTMENTS HAD CHEATED THE ASSESSEE-COMPANY BY GIV ING FAKE, FORGED AND STOLEN SHARES TO THE ASSESSEE-COMPANY AND SOLD THESE SHARE S THROUGH ASSESSEE-COMPANY. THESE SHARES WERE RETURNED BY STOCK EXCHANGE AND AS SESSEE-COMPANY HAD A LOSS. THE AO DID NOT ACCEPT THE ASSESSEES CLAIM ON THE G ROUND AND ASSESSEE HAS PARTLY CLAIMED AND ASSESSEE-COMPANY SOLD RECOVERED AMOUNT PARTLY. THE TRANSACTIONS OF SHARE WERE NEVER WRITTEN OFF THROUGH PROFIT AND LOS S ACCOUNT. THE ASSESSEE RECEIVED A BROKERAGE INCOME AND THE SHARE TRANSACTIONS ARE N EVER WRITTEN OFF THROUGH PROFIT AND LOSS ACCOUNT. A SIMILAR CLAIM OF ASSESSEE WAS R EJECTED IN A.Y 2001-02. THE LD. CIT(APPEALS) CONFIRMED THE ADDITION. 4. AT THE OUTSET, LD. AR SUBMITTED THAT ISSUE IS SQ UARELY COVERED IN FAVOUR OF ASSESSEE IN ASSESSEES OWN CASE IN ITA NO.1502/AHD/2004 ORDER DATED 16-05- 2008, WHEREIN THE TRIBUNAL FOLLOWING THE JUDGMENT O F HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT V. ABDUL RAZAK & CO. 136 ITR 825 (GUJ) AND OTHERS HAS CITED BY LD. AR THAT TRANSACTION IN QUESTION HAVING BEEN CARRIED ON BY THE ASSESSEE IN NORMAL COURSE CARRYING ON ITS BUSINESS. THE NON- RECOVERY OF AMOUNT PAID BY IT FOR AND ON BEHALF OF CUSTOMERS, THE LOSS SUFFERED BY TH E ASSESSEE WAS AS BAD DEBT AND CONSEQUENTLY ALLOWABLE AS DEDUCTION ASSESSEE AS A T RADING LOSS U/S.28(1) OF THE ACT. 5. AFTER HEARING LD. REPRESENTATIVE OF THE DEPARTME NT WE FIND THAT ON IDENTICAL SET OF FACTS AS THE ASSESSING OFFICER HAS RELIED UP ON HIS EARLIER ORDERS FOR A.Y 2001- 02 AND IN A.Y 2001-02 THE ISSUE HAS DECIDED IN FAVO UR OF ASSESSEE BY ITAT IN THE LIGHT OF FACT FOLLOWING THE ABOVE ORDER OF ITAT IN ASSESSEES OWN CASE (SUPRA), THE ADDITION CLAIMED BY ASSESSEE IS ALLOWED AND ACCORDI NG ADDITION OF RS.12,71,061/- IS DELETED. 6. THE BRIEF FACTS OF GROUND NO.4 ARE THAT THE SPEC IAL AUDITOR HAS REPORTED THAT AGGREGATED AMOUNT OF RS.26,000/- WAS DEBITED TO PRO FIT AND LOSS ACCOUNT, WHICH WAS PAID TO NSCCL AS PENALTY FOR VIOLATING RULES. THE A SSESSING OFFICER DISALLOWED ITA NO.672/AHD/2008 A.Y. 2000-01 SGS & SB LTD. V. ACIT CIR-4, SRT PAGE 4 INVOKING EXPLANATION BELOW SECTION 37 OF THE ACT. T HAT EXPENDITURE INCURRED IS IN NATURE OF PENALTY VIOLATING OF LAW. THE LD. CIT(APP EALS) CONFIRMED THE ORDER OF ASSESSING OFFICER. 7. LD. AR SUBMITTED THAT THE ASSESSEE IS A SUB-BROK ER AND AMOUNT PAID TO NSCCL HAS BEEN RECOVED FROM THE CUSTOMERS. THE RECO VERED AMOUNT HAS SHOWN BY THE ASSESSEE AS INCOME IN PROFIT AND LOSS ACCOUNT. LD. AR SUBMITTED THAT IF AT ALL IT IS DISALLOWABLE ONLY THE NET AMOUNT IS DISALLOWABLE. L D. AR FURTHER SUBMITTED THAT ASSESSEE HAS RECOVERED MORE AMOUNT FROM THE CUSTOME RS. 8. AFTER HEARING LD. DR WE FIND THAT THE CONTENTION OF THE ASSESSEE THAT THE PENALTY AMOUNT HAS BEEN RECOVERED FROM THE CUSTOMER S, WHICH HAS BEEN CREDITED TO PROFIT AND LOSS ACCOUNT AND THE PENALTY PAID DEBITE D TO PROFIT AND LOSS ACCOUNT. THE CONTENTION OF THE LD. AR IS SUBJECT TO VERIFICATION AS THERE IS NO RELEVANT FINDING STATEMENT OR OTHER MATERIALS ON THE BASIS OF WHICH THE CONTENTION OF THE ASSESSEE CAN BE VERIFIED. WE THEREFORE FIND APPROPRIATE TO S END THIS ISSUE TO THE FILE OF ASSESSING OFFICER ACCEPTING IN PRINCIPLE THAT THE P ENALTY PAID AND SAME IS RECOVERED FROM THE CUSTOMERS AGAINST THE SAID PENALTY PAID, T HE NET EFFECT IS REQUIRED TO BE GIVEN IN PROFIT AND LOSS ACCOUNT. THE AO IS DIRECTE D TO VERIFY THE FACTS AND DECIDE THE ISSUE IN THE LIGHT OF THE ABOVE DISCUSSION AND IN A CCORDANCE WITH LAW AFTER PROVIDING REASONABLE OPPORTUNITY OF BEING HEARD TO ASSESSEE. 9. THE BRIEF FACTS OF GROUND NO.5 ARE THAT ASSESSEE HAS DEBITED RS.1,04,201/- IN RESPECT OF LOSS ON SALE OF SHARES. THE ASSESSING OF FICER FOLLOWED EARLIER YEARS ORDER FOR A.Y 2001-02, MADE THE ADDITION. THE LD. CIT(APP EALS) ALSO FOLLOWED HIS PREDECESSORS ORDER FOR A.Y. 2001-02 AND CONFIRMED THE ORDER OF A.O. 10. AT THE OUTSET, LD. AR SUBMITTED THAT IN EARLIER YEAR I.E. A.Y. 2001-02 THE ITAT IN ASSESSEES OWN CASE (SUPRA) VIDE PARA 19 OF THE ORDER SENT BACK THE ISSUE TO THE FILE OF A.O FOR FRESH DISPOSAL IN ACCORDANCE WITH L AW. 11. AFTER HEARING LD. DR AND SINCE ASSESSING OFFICE R AND LD. CIT(APPEALS) HAVE FOLLOWED THEIR EARLIER ORDERS FOR A.Y 2001-02, THE ITAT HAS SENT BACK THIS ISSUE TO THE ITA NO.672/AHD/2008 A.Y. 2000-01 SGS & SB LTD. V. ACIT CIR-4, SRT PAGE 5 FILE OF ASSESSING OFFICER. THEREFORE, WE ARE ALSO S ENDING BACK THIS ISSUE TO THE FILE OF AO FOR IDENTICAL DIRECTIONS. 12. THE BRIEF FACTS OF GROUND NO.6 ARE DURING THE A SSESSMENT PROCEEDINGS THE ASSESSING OFFICER NOTICED THAT ASSESSEE HAD NOT SHO WN BROKERAGE INCOME OF RS.6,33,740/- IN RESPECT OF SUB-BROKER. THE ASSESSE ES SUBMISSION BEFORE AO THAT AN EMPLOYEE OF ASSESSEE HAD COMMITTED FRAUD AND THE REFORE THIS BROKERAGE WAS NOT CLEAR. THE ASSESSEE CAME TO KNOW THAT THE EMPLOYEE HAS SIPHONED THIS BROKERAGE OF CURRENT YEAR AND THIS HAS BEEN OFFERED TO TAX IN A. Y 2002-03. THE AO DID NOT ACCEPT THE ASSESSEES CONTENTION AND MADE THE ADDITION ON THE GROUND THAT SPECIAL AUDITOR STATED THAT BROKERAGE INCOME OF RS.6,33,716/- IS ES CAPED ASSESSMENT BECAUSE THIS WAS NOT SHOWN IN PROFIT AND LOSS ACCOUNT FOR THE YE AR UNDER CONSIDERATION. BEFORE THE LD. CIT(APPEALS), IT WAS STATED BY THE ASSESSEE THA T AMOUNT HAS ALREADY BEEN OFFERED IN TAX IN A.Y 2002-03, THEREFORE SAME INCOM E TAX IN THE YEAR UNDER CONSIDERATION IS DOUBLE ADDITION. THE LD. CIT(A) CO NFIRMED THE ORDER OF ASSESSING OFFICER OBSERVING THAT THE BROKERAGE INCOME PERTAIN S TO THE CURRENT YEAR, HENCE ASSESSEE CANNOT TAKE THE GROUND THAT IT HAS BEEN OF FERED IN A.Y 2002-03. 13. AT THE OUTSET, LD. AR SUBMITTED THAT ON IDENTIC AL SET OF FACTS IN A.Y 2001-02, THE ITAT DELETED THE ADDITION OBSERVING AS UNDER:- 7. AFTER CAREFUL CONSIDERATION OF THE RIVAL SUBMIS SIONS AND THE FACTS AND CIRCUMSTANCES OF THE CASE, WE ARE OF THE OPINION TH AT THE REVENUE HAVING NOT DISPUTED THE FACT THAT THERE WAS A FRAUD WHICH CAME TO THE ASSESSEES KNOWLEDGE ONLY IN JULY-2002 AND THE ASSESSEE ADOPTE D THE REMEDIAL MEASURES BY DECLARING THE AMOUNT OF BROKERAGE, SINC E NOT DECLARED IN ASST. YEARS 2000-01 AND 2001-02, IN ASST. YEAR 2002-03, T HE AMOUNT IN QUESTION WAS RIGHTLY CONSIDERED AS INCOME FOR ASST. YEAR 200 2-03. FURTHER, THE REVENUE ALSO HAVING NOT RAISED ANY OBJECTION AGAINS T THE ASSESSEES DECLARATION OF SUCH INCOME IN ASST. YEAR 2002-03 AN D HAVING TAXED THE SAME IN ASST. YEAR 2002-03 CANNOT TAX THE SAME AMOUNT IN ASST. YEARS 2000-01 OR 2001-02, AS THE CASE MAY BE, ON THE GROUND THAT INC OME BELONGED TO THE YEAR. 8. IN VIEW OF ABOVE FACTS AND CIRCUMSTANCES OF THE CASE, THE ADDITION OF RS.7,45,360/- IS DIRECTED TO BE DELETED. 14. AFTER HEARING LD. REPRESENTATIVE OF T HE PARTY, WE FIND THAT THE CONTENTION OF ASSESSEE THAT IT HAS BEEN OFFERED TO TAX IN A.Y 2002-03 IS SUBJECT TO VERIFICATION AS NO SUCH MATERIAL AVAILABLE AT THIS STAGE. UNDER THE CIRCUMSTANCES, WE ARE SENDING BACK THE MATTER BACK TO THE FILE OF ASS ESSING OFFICER FOR A LIMITED POINT TO ITA NO.672/AHD/2008 A.Y. 2000-01 SGS & SB LTD. V. ACIT CIR-4, SRT PAGE 6 VERIFY THE MATTER IN THE LIGHT OF FINDING GIVEN BY ITAT IN A.Y 2001-02 AND DECIDE THE ISSUE ACCORDINGLY. 15. THE BRIEF FACTS OF GROUND NO.7 ARE THAT DURING THE ASSESSMENT PROCEEDINGS THE ASSESSEE HAS FAILED TO PRODUCE ON RECORD IN RES PECT OF INCREASING SALARY & BONUS EXPENSES. THE ASSESSING OFFICER AFTER CONSIDERING T HE ASSESSEES SUBMISSION AND A LUMP SUM ADDITION OF RS.2 LAK WAS MADE. THE LD. CIT (APPEALS) REDUCED THE ADDITION FROM RS.2 LAKH TO RS.1 LAKH. 16. AFTER HEARING LD. REPRESENTATIVE OF THE PARTY W E NOTICED THAT THE ASSESSING OFFICER MADE THE ADDITION SIMPLY ON THE BASIS THAT THE ASSESSEE HAS CLAIMED HIGHER AMOUNT OF RS.2 LAKH IN THE YEAR UNDER CONSIDERATION IN COMPARISON TO EARLIER YEAR. THE LD. CIT(A) NOTED THAT THE ASSESSEES SUBMISSION THEIR DAILY ATTENDANCE REGISTER OF ALL EMPLOYEES AND PHOTO COPIES OF MONTHLY SALARY SHEET DULY SIGNED BY ALL THE EMPLOYEES. THE ASSESSEE HAS STATED THAT THE INCREAS E CANNOT BE SAID TO BE UNREASONABLE CONSIDERING THE NORMAL RISE IN SALARY. WE FIND THAT LD. CIT(A) WITHOUT CONSIDERING THE ASSESSEES SUBMISSION ARBITRARILY R EDUCED FROM RS.2 LAKH TO RS.1 LAKH. THE AO HAS ALSO MADE THE ADDITION A LUMP SUM ON PRESUMPTORY BASIS AND IT IS NOT THE CASE OF AO THAT EXPENDITURES WERE NOT INCUR RED FOR THE PURPOSE OF BUSINESS. WE THEREFORE OF THE VIEW THAT ON THE BASIS OF PRESU MPTION A LUMP SUM ADDITION CANNOT BE MADE. WE THEREFORE DELETED THE ADDITION O F RS.1 LAKH SUSTAINED BY LD. CIT(A). 17. THE BRIEF FACTS OF GROUND NO.8 ARE THAT THE ASS ESSEE CLAIMED BROKERAGE INCENTIVE OF RS.11,63,205/-. THE ASSESSING OFFICER ASKED THE ASSESSEE TO PRODUCE CONFIRMATION OF ALL PARTIES TO WHOM BROKERAGE INCEN TIVE WAS PAID DURING THE YEAR. THE ISSUE WAS ALSO REFERRED FOR SPECIAL AUDIT U/S.1 42(2A) OF THE ACT. THE AUDITOR REPORTED THAT BROKERAGE INCENTIVE IS CREDITED TO SE CURITY DEPOSIT OF CLIENT SUB- BROKERAGE BUT IT WAS NOT SUPPORTED BY ACTUAL RECEIV ED OF FUNDS IN THE BANK ACCOUNT AND IT WAS MERELY ON BOOK ENTRY. ON DETAIL INVESTIG ATION IN A.Y 2001-02, SHRI VASANAATBHAI GOLWALA, SHRI NIVESH JHAVERI AND TEJAS GANDHI DENIED TO RECEIVE THE BROKERAGE INCENTIVE FROM ASSESSEE-COMPANY IN THE ST ATEMENT RECORDED U/S.131 OF THE ACT. THE ASSESSEE HAS ACCOUNTED FOR IN THE BOOK S OF ACCOUNT BUT SAME WAS NOT PAID TO SUB-BROKER. THIS FACT WAS ADMITTED BY SHRI ANIL J CHOKSI, MANAGING DIRECTOR ITA NO.672/AHD/2008 A.Y. 2000-01 SGS & SB LTD. V. ACIT CIR-4, SRT PAGE 7 OF THE ASSESSEE-COMPANY IN THE STATEMENT REPORTED U /S.131 OF THE ACT ON 20-06- 2003. 18. AFTER EXAMINING THE ASSESSEES SUBMISSION, THE ASSESSING OFFICER MADE ADDITION OF RS.7,35,279/- AFTER ALLOWING RS.4,27,92 6/- AS THE ASSESSEE HAS SUBMITTED CONFIRMATION AND RELEVANT DETAILS IN RESPECT OF THE PAYMENT OF RS.4,27,926/-. WHILE MAKING THIS ADDITION OF RS.7,35,279/-, THE AO NOTED THAT ON SIMILAR GROUND ADDITION WAS MADE IN A.Y 2001-02 ALSO. 19. AT THE OUTSET, LD. AR SUBMITTED THAT ON IDENTIC AL SET OF FACTS, THE ITAT IN A.Y 2001-02 HAS ALLOWED THE CLAIM OF ASSESSEE AS UNDER: - 12. AFTER CAREFUL CONSIDERATION OF THE RIVAL SU9MI SSIONS AND THE FACTS AND CIRCUMSTANCES OF THE CASE, WE ARE OF THE OPINION TH AT THE DISALLOWANCE OF ASSESSEES CLAIM SIMPLY BECAUSE THE ASSESSEE HAD CR EDITED THE ACCOUNT OF THE SUB-BROKERS, BUT HAD NOT PAID, WAS NOT JUSTIFIE D, BECAUSE, THE ASSESSEE HAVING FOLLOWED THE MERCANTILE SYSTEM OF ACCOUNTING WAS ENTITLED TO DEDUCTION JUST ON INCURRING THE LIABILITY. THE REVENUE HAS NO WHERE DISPUTED THAT THE ASSESSEE HAD NO INCURRED THE LIABILITY. THE SUB-BRO KERS WERE RIGHT IN DENYING THEY HAD NOT BEEN PAID INCENTIVE CREDITED IN THEIR RESPECTIVE ACCOUNTS INS THAT YEAR, BUT DID NOT EARN THAT THE LIABILITY INCURRED BY THE ASSESSEE WAS NOT CORRECT. ON THE FACTS AND CIRCUMSTANCES OF THE CASE , WE ARE OF THE OPINION THAT THE ASSESSEE HAVING FOLLOWED THAT MERCANTILE SYSTEM OF ACCOUNTING WAS ENTITLED TO THE DEDUCTION ON ACCOUNT OF EXPENDITURE PROVIDED FOR INCENTIVE TO SUB-BROKERS. 20. LD. DR ON THE OTHER HAND SUBMITTED THAT THE YEA R UNDER CONSIDERATION THE FACTS ARE SLIGHTLY DIFFERENT AS IN THE YEAR UNDER C ONSIDERATION THE SPECIAL AUDITOR APPOINTMENT U/S. 142(2A) OF THE ACT HAS CLEARLY REP ORTED THAT BROKERAGE INCENTIVE IS CREDITED THE SECURITY DEPOSIT OF CLIENT BUT IT WAS NOT SUPPORTED BY ACTUAL RECEIVED OF FUNDS IN BANK ACCOUNT AND IT IS MERELY A BOOK ENTRY . 21. WE HAVE HEARD THE LD. REPRESENTATIVE OF PARTY A ND PERUSED THE RECORDS, WE FIND THAT THOUGH THE ASSESSING OFFICER AND LD. CIT( APPEALS) BOTH HAVE FOLLOWED THEIR EARLIER ORDERS FOR A.Y 2001-02 AND ITAT IN A.Y 2001 -02 HAS DECIDED THE ISSUE AND RELEVANT FINDING HAS BEEN PRODUCED ABOVE. WE FIND S UBSTANCE IN LD. DR'S SUBMISSION THAT THE AO HAS NOTED THE CONTENTS OF TH E SPECIAL AUDITOR REPORTED AT PAGE-9 READS AS SUNDER:- THIS ISSUE WAS ALSO REFERRED FOR SPECIAL AUDIT U/S .142(2A) AND SPECIAL AUDITOR IN HIS REPORT SUBMITTED THAT THE BROKERAGE INCENTIVE IS CREDITED TO ITA NO.672/AHD/2008 A.Y. 2000-01 SGS & SB LTD. V. ACIT CIR-4, SRT PAGE 8 SECURITY DEPOSIT OF CLIENT SUB-BROKER BUT IT IS NOT SUPPORTED BY ACTUAL RECEIPT OF FUNDS IN THE BANK ACCOUNT AND IT IS MERELY A BOOK E NTRY. SINCE THE RELEVANT COMPLETE AUDIT REPORT AND OTHER FACTS ARE NOT AVAILABLE ON RECORD, WE THEREFORE THINK PROPER TO SEND BACK THE MATTER T O THE FILE OF ASSESSING OFFICER WITH A DIRECTION TO DECIDE THE ISSUE KEEPING IN VIEW THE FINDING OF ITAT IN A.Y 2001-02 AND AFTER VERIFYING THE FACTS FROM AUDITORS REPORT IN ACCORDANCE WITH LAW. 22. IN THE RESULT ASSESSEES APPEAL IS PARTLY ALLOWED F OR STATISTICAL PURPOSES. 4 / 3%* 5'6 21 / 10 /2011 % '1 : / $2 THIS ORDER PRONOUNCED IN OPEN COURT ON 21/10/ 2011 . SD/- SD/- ( ) (' ) (BHAVNESH SAINI) (A.L.GEHLOT) (JUDICIAL MEMBER) (ACCOUNTANT MEMBER) AHMEDABAD, 21/10/2011 *DKP / // / - -- -&= &= &= &= >=*& >=*& >=*& >=*& / COPY OF ORDER FORWARDED TO:- 1. +, / APPELLANT 2. -.+, / RESPONDENT 3. '' & 1@ / CONCERNED CIT 4. 1@- / CIT (A) 5. =$ -& , , / DR, ITAT, AHMEDABAD 6. $) E4 / GUARD FILE. BY ORDER/ , /TRUE COPY/ F/ 'G ,