ACIT 19(2), MUMBAI V. HEM RAJ TEJUJA, MUMBAI

ITA 6741/MUM/2012

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 92479 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 6 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-05-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: H
• Next Hearing Date: 11-05-2015
• Assessment Year: 2007-2008
• Appeal Filed On: 05-11-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Business expenditure

Judgement Text

, INCOME TAX APPELLATE TRIBUNAL,MUMBAI - H BENCH , , BEFORE S/SH. I P BANSAL,JUDICIAL MEM BER & RAJENDRA,ACCOUNTANT MEMBER /. ITA NO. 674 1 /MUM/20 12 , / ASSESSMENT YEAR - 20 07 - 08 ACIT - 19(2) ROOM NO.315, 3RD FLOOR PIRAMAL CHAMBERS, LALBAUG PAREL, MUMBAI - 400 012 VS SHRI HEM RAJ TEJUJA 601, ANAND BHAWAN EAST EAST AVENUE, SANTAC RUZ (W) MUMBAI - 400 054. PAN:ABXPT 0533 D ( / A PPELLANT ) ( / RESPONDENT ) /ASSESSEE BY : NONE / REVENUE BY :SHRI SANJAY PUNGLIA - DR / DATE OF HEARING : 11 - 05 - 2015 / DATE OF PRONOUNCEMENT : 11 - 0 5 - 2015 , 1961 254 ( 1 ) ORDER U/S.254(1)OF THE INCOME - TAX ACT,1961(ACT) CHALLENGING THE ORDER DT. 7.8.12 OF THE CIT(A) - 35 ,MUMBAI, ASSESSING OFFICER(AO) HAS RAISED FOLLOWING GROUNDS OF APPEAL: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) HAS ERRED IN DELETING THE DISALLOWANCE OF EXPENSES ON ACCOUNT OF DEALING ERRORS OF RS.19,97,521/ - AND DELAY PAYING CHARGES OF RS.10,29,908/ - AFTER HOLDING THAT THESE EXPENSES ARE NORMAL EXPENDITURE AS PER SEBI GUIDELINES WHICH ARE TO BE PAID BY THE SUB - BROKER TO THE MAIN BROKER DUE TO DELAY IN SETTLEMENT OF ACCOUNT AND FULLY ALLOWABLE AS BUSINESS EXPENSES, WITHOUT APPRECIATING THE FACTS THAT THE DELAY PAYMENT CHARGES AND DEALING ERROR PAYMENTS ARE PENAL PAYMENTS WHICH ARE NOT ALLOWABLE EXPENSES FOR T HE BUSINESS PURPOSES AS PER PROVISIONS OF THE ACT AND ALSO THE ASSESSEE IS SILENT ON FURTHER RECOVERY OF THESE CHARGES FROM THE CLIENTS OF THE ASSESSEE. 2. THE APPELLANT PRAYS THAT THE ORDER OF THE CIT(A) ON THE ABOVE GROUND BE SET ASIDE AND THAT OF THE AS SESSING OFFICER BE RESTORED. ASSESSEE , AN INDIVIDUAL , IS A SUB - BROKER AND HAD FILED ITS RETURN OF INCOME ON 31.10. 2007 , ADMITTING HIS TOTAL INCOME AT RS . 18.56 LACS .THE AO COMPLETED THE A SSESSMENT U/S.143(3) OF THE ACT, ON 24/12/2009 ,DETERMINING THE INCOME OF THE ASSESSEE AT RS. 39.63 LACS 2. DURING THE ASSESSMENT PROCEEDING THE AO FOUND THAT THE ASSESSEE HAD SHOWN BROKERAGE INCOME RS. 1.01 CR ORES, THAT HE H AD DEBITED VARIOUS EXPENSES AGAINST THE SAID INCOME WHICH INCLUDED DEALING ERROR OF RS.19.97 LACS AND DE LAYED PAYMENT OF CHARGES RS.10. 2 9 LACS . HE DIRECTED THE ASSESSEE TO EXPLAIN AS TO HOW THE ABO V E EXPENDITURE WAS ALLOWABLE. AFTER CONSIDERING THE EXPLANATION OF THE ASSESSEE, THE AO HELD THAT DELAYED PAYMENT AND DEALING ERROR ( RS. 19.97 LACS) WERE ON ACCOUN T OF DEFAULTS /DELAY IN SETTLEMENT OF ACCOUNTS COMMITTED BY THE CLIENTS WHICH IN TURN HAD RESULTED IN LEVY OF THE SAME BY T HE ASSESSEES PRINCIPAL BROKER, THAT THE ASSESSEE HAD NOT RECOVERED THE EXPENSES FROM THE CLIENTS, THAT THE DEFAULT COMMITTED BY THE C LIENTS WAS TAKEN OVER BY THE ASSESSEE, THAT THE PAYMENT MADE BY THE ASSESSEE WAS NOT COMPELLED BY BUSINESS EXIGENCI - ES, THAT IT COULD NOT B E HELD AS BUSINESS EXPENDITURE, THAT THE SAME DID NOT QUALIFY FOR DEDUCTION 6741/12 HEM RAJ TEJUJA (AY:07 - 08) 2 FROM THE INCOME OFFERED FOR TAXATION, THAT TH E EXPENSES INCURRED BY THE ASSESSEE WERE NOT LEGITIMATE BU SINESS EXPENDITURE.AS A RESULT,HE MADE ADDITION S UNDER THE BOTH THE HEADS TO THE TOTAL INCOME OF THE ASSESSEE. 3. AGGRIEVED BY THE ORDER OF THE AO,THE ASSESSEE PREFERRED AN APPEAL BEFOR E THE FIRST A PPELLATE AUTHORITY(FAA).BEFORE HIM , IT WAS ARGUED THAT THE DETAILS OF DEALING ERRORS, ALONGWITH CONFIRMA - TION AND LEDGER ACCOUNT , WERE PRODUCED BEFORE THE AO,THAT DETAILS PRODUCED BY HIM WERE NOT CONSIDERED BY THE AO , THAT COPY OF BROKING ACCOUNT FROM THE MA IN BROKER I.E. SHAREKHAN CLEARLY REFLECTED THE DEALING ERRORS CHARGED BY THE MAIN BROK ER, THAT THE DEALING ERRORS WERE NORMAL BUSINESS EXPENDITURE IN THE BUSINESS OF BROKING OF SHARES, THAT THE ERRORS WERE COMMITTED BY THE STAFF OF THE ASSESSEE AT THE TI ME OF PUNCHING OF PURCHASES/SALES OF SHARES ON BEHALF OF THE CLIENTS, THAT THE SAID AMOUNT FOR DEALING ERRORS COULD NOT BE RECOVERED FROM THE CLIENTS AS HELD BY THE AO, THAT THE AO DISALLOWED RS.19.97 LACS AGAINST DEALING ERROR CHARGES, THAT THE ASSESSEE H AD FILED CONFIRMATIONS AND THE LEDGER AC COUNT COPY OF THE BROKING FIRM, THAT THE AO HAD NOT GIVEN ANY REASON FOR D ISALLOWANCE OF THE EXPENDITURE, THAT THE DELAY IN PAYING CHARGES WAS NORMAL BUSINESS EXPENDITURE AS PER SEBI GUIDELINES . AFTER CONSIDERING THE SU BMISSIONS OF THE ASSESSEE AND THE ASSESSMENT ORDER, THE FAA HELD THAT THE OBSERVATION MADE BY THE AO THAT DEALING ERRORS AND DELAY PAYMENT CHARGES WERE NOT COMPELLED BY THE BUSINESS EXIGENCIES WAS NOT JUSTIFIABLE, THAT THE NATURE OF THE BUSINESS OF THE ASSE SSEE WAS SHARE BROKING, THAT THE EXPENSES INCURRED BY THE ASSESSEE WERE THE NORMAL BUSINESS EXPENSES WHICH WERE RELATED TO T HE NORMAL BUSINESS TRANSACTION, THAT THE EXPENSES WERE FULLY ALLOWABLE. HE REFERRED TO THE CASE OF GOLD CREST CAPITAL MARKET LTD. (33ITC L283 OF BBENCH OF MU MBAI TRIBUNAL) IN THAT REGARD. ACCORDINGLY , HE DIRECTED THE AO TO DELETE THE ADDITION. 4. BEFORE US, DEPARTMENTAL REPRESENTATIVE(DR) RELIED UPON THE ORDER OF THE A O.NONE APPEARED FOR ASSESSEE,AS STATED EARLIER. WE FIND THAT THE AO HAD DISALL OWED DEALING ERRORS AND DELAYED PAYMENT CHARGES, THAT HE WAS OF THE OPINION THAT THE EXPENDITURE WAS NOT INCURRED WHOLLY AND EXCLUSIVELY FOR THE BUSINESS OR THAT THERE WAS NO BUSINESS EXIGENCIES, THAT THE ASSESSEE HAD FILED DETAILED EXPLANATION OF BOTH THE ITEMS OF EXPENDITURE. THE ASSESSEE BEING A SHARE BROKER HAD TO DEAL WITH THE CLIENTS AND THE MAIN SHARE BROKER. IT IS COMMON FEATURE OF THE SHARE BROKING BUS IN ESS WHERE PU NCHING ERRORS HAPPEN REGULARLY. THE SUB - BROKER S ARE SUPPOSED TO MAKE PAYMENT FOR THESE ERRORS AS THE MISTAKES WOULD BE COMMITTED BY THE STAFF OF THE SUB - BROKER. CLEARLY , THE PAYMENT IS DIRECTLY RELATED WITH THE SUB - BROKING BUS I NESS. THE AO HAS NOT DOUBTED THE GENUINENESS OF THE PAYMENT. THE ASSESSEE HAS NOT VIOLATED ANY LAW OF THE LAND. SIMILA R IS THE POSITION OF THE OTHER PAYMENT FOR WHICH THE ASSESSEE HAD FURNISHED ALL THE NECESSARY DETAILS. THE AO CANNOT DECIDE THE REQUIREMENT OF THE BUSINESS OF AN ASSESSEE. IT IS THE PREROGATIVE OF THE ASSESSEE TO RUN ITS BUSINESS IN ITS OWN WAY AND THE EXPE NDITURE INCURRED BY IT HAS TO BE ALLOWED UNLESS AND UNTIL IT IS NOT AS PER PROVISIONS OF SEC.37 OF THE ACT. IN THE CASE UNDER CONSIDERATION THE AO HAS NOT BROUGHT ON RECORD ANYTHING THAT COULD JUSTIFY THE DISALL OWANCE. IN THESE CIRCUMSTANCES, WE ARE OF THE O PINION THAT THE ORDER OF THE FAA DOES NOT SUFFER FROM ANY LEGAL OR FACTUAL INFIRMITY. THEREFO RE, CONFIRMING HIS ORDER, WE DECIDE THE EFFECTIVE GROUND OF APPEAL AGAINST THE AO. AS A RESULT,APPEAL FILED BY THE AO STANDS DISMIS SED. . 6741/12 HEM RAJ TEJUJA (AY:07 - 08) 3 ORDER PRONOUNCED IN THE OPEN COURT ON 11TH , MAY ,2015. 11 , 2015 SD/ - SD/ - ( /I P BANSAL) ( / RAJENDRA) / JUDICIAL MEMBER / ACCOUNTANT MEMBER / MUMBAI, /DATE: 11 .0 5 .2015 JV.SR.PS / COPY OF THE ORDER FORWARDED TO : 1. APPELLANT / 2. RESPONDENT / 3. THE CONCERNED CIT(A)/ , 4. THE CONCERNED CIT / 5. DR A BENCH, ITAT, MUMBAI / , , . . . 6. GUARD FILE/ //TRUE COPY// / BY ORDER, / DY./ASST. REGISTRAR , / ITAT, MUMBAI.