SANJAY SAREES P.LTD, MUMBAI V. ITO WD 4(3)(4), MUMBAI

ITA 8159/MUM/2010

• Counselvise Citation: [2012] 119 COUNSELVISE.COM (IT) 7573 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 3 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-03-2012
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Next Hearing Date: 21-03-2012
• Assessment Year: 2001-2002
• Appeal Filed On: 25-11-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SATBEER SINGH

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL 'SMC' BENCH, MUMBAI BEFORE SHRI D. MANMOHAN, VICE PRESIDENT ITA NO. 8159/MUM2010 (ASSESSMENT YEAR: 2001-02) M/S. SANJAY SAREES PVT. LTD. INCOME TAX OFFICER - 4 (3)(4) 9/11, 1ST CROSS HANUMAN LANE MUMBAI KALBADEVI ROAD, MUMBAI 400002 VS. PAN - AAACS 6128 G APPELLANT RESPONDENT APPELLANT BY: SHRI SHALIN S. DIVATIA/ MS. PARVATHI R. IYER RESPONDENT BY: SHRI SATBEER SINGH DATE OF HEARING: 21.03.2012 DATE OF PRONOUNCEMENT: 11.03.2012 O R D E R PER D. MANMOHAN, V.P. THIS APPEAL IS FILED AT THE INSTANCE OF THE ASSESSE E AGAINST THE ORDER OF THE CIT(A) VIII, MUMBAI DATED 16.09.2010. DISALLOWA NCE OF ` 2,14,610/- REFERABLE TO BROKERAGE AND COMMISSION PAID BY THE A SSESSEE TO SHRI SANJAY JHUNJHUNWALA, MRS. BABITA JHUNJHUNWALA, MRS. SITADE VI JHUNJHUNWALA AND MRS. SARIKA JHUNJHUNWALA IS THE SUBJECT MATTER OF DISPUTE BEFORE US. 2. THE FACTS NECESSARY FOR DISPOSAL OF THE CASE ARE ST ATED IN BRIEF. ASSESSEE COMPANY IS A DEALER IN SARIS. FOR THE YEAR UNDER CONSIDERATION IT DECLARED TOTAL INCOME OF ` 60,660/- WHEREAS THE ASSESSMENT WAS COMPLETED ON A TOTAL INCOME OF ` 2,90,366/-, WHICH IS MAINLY ON ACCOUNT OF DISALLOWANCE OF ` 2,14,610/- REFERABLE TO THE PROVISION FOR BROKERAGE . ALL THE ADDITIONS WERE CHALLENGED BY THE ASSESSEE IN APPEAL AND FINALLY THE APPELLATE TRIBUNAL, VIDE ITS ORDER DATED 19.05.2006, SET ASID E THE MATTER TO THE FILE OF THE ASSESSING OFFICER WITH A DIRECTION TO ADJUDICAT E THE ISSUE AFRESH AFTER TAKING INTO CONSIDERATION THE BALANCE SHEET, CONFIR MATION LETTERS, ETC. PRODUCED BY THE ASSESSEE. IT IS NOT OUT OF PLACE TO MENTION THAT ASSESSEE CLAIMED BROKERAGE OF 1.5% OF THE SALES AFFECTED, IN THE CASE OF SHRI SANJAY JHUNJHUNWALA, 1% IN THE CASE MRS. BABITA JHUNJHUNWA LA AND 2% IN THE ITA NO. 8159/MUM2010 M/S. SANJAY SAREES PVT. LTD. 2 CASE OF MRS. SITADEVI JHUNJHUNWALA AND MRS. SARIKA JHUNJHUNWALA. IN THE LEDGER ACCOUNT ASSESSEE MADE A PROVISION ON THE LAS T DAY OF THE ACCOUNTING YEAR. AS COULD BE NOTICED FROM PAGE NO. 3 OF THE PA PER BOOK, NAMES OF THE PERSONS TO WHOM COMMISSION/BROKERAGE IS PAYABLE WAS CLEARLY MENTIONED UNDER THE CAPTION OUTSTANDING COMMISSION. IT WAS CLAIMED AS DEDUCTION IN THE P & L ACCOUNT UNDER THE HEAD BROKERAGE. THE O UTSTANDING PAYMENT WAS ALSO REFLECTED IN THE BALANCE SHEET. THE PARTIE S TO WHOM COMMISSION WAS PAID HAVE CONFIRMED RECEIPT OF THE SAME AND THE RETURNS FILED BY THEM INDICATE THAT THEY HAVE ALSO INCLUDED THE COMMISSIO N RECEIVABLE AS THEIR INCOME FOR THE ASSESSMENT YEAR UNDER CONSIDERATION. 3. ASSESSING OFFICER, HOWEVER, OBSERVED THAT THE ASSES SEE HAS ONLY MADE JOURNAL ENTRIES AND CREATED PROVISION IN THE LEDGER ACCOUNT ON THE LAST DAY OF THE ACCOUNTING YEAR WITHOUT MENTIONING SPECIFIC NAM ES OF THE PARTIES TO WHOM BROKERAGE WAS PAID. HE FURTHER OBSERVED THAT T HE BROKERAGE WAS STATED TO HAVE BEEN PAID TO FOUR PARTIES WHO ARE DI RECTORS AND SHAREHOLDERS OF THE ASSESSEE COMPANY AND SPECIFIC NAMES WERE NOT MENTIONED THEREIN. INDIVIDUAL LEDGER ACCOUNTS OF THE PARTIES FILED ALO NGWITH THE RETURNS ALSO WERE STATED TO HAVE NOT BEEN TALLYING. ACCORDINGLY HE DISALLOWED THE CLAIM OF DEDUCTION. THE LEARNED CIT(A) AFFIRMED THE ORDER OF THE AO AND THUS ASSESSEE IS IN APPEAL BEFORE US. 4. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THOUGH THESE FOUR PERSONS ARE DIRECTORS OF THE ASSESSEE COMPANY THE F ACT REMAINS THAT THE NAMES WERE MENTIONED IN THE LEDGER ACCOUNTS SPECIFI CALLY AND THE TAX AUTHORITIES WERE NOT JUSTIFIED IN HOLDING THAT SPEC IFIC NAMES WERE NOT MENTIONED. IT WAS FURTHER CONTENDED THAT THE TAX AU THORITIES ERRED IN HOLDING THAT THE BROKERAGE AMOUNT WAS NOT SPECIFICA LLY OFFERED TO TAX IN THE HANDS OF THE INDIVIDUALS TO WHOM PAYMENTS WERE MADE . IN THIS REGARD THE LEARNED COUNSEL REFERRED TO PAGE NO. 1 OF THE PAPER BOOK (CONFIRMATION LETTER STATING THAT SHRI SANJAY SANTOSH JHUNJHUNWALA RECEI VED COMMISSION OF ` 80,183/-). IN PAGE NO. 3 OF THE PAPER BOOK, UNDER T HE HEAD INCOME FROM OTHER SOURCES, ` 80,183/- WAS SHOWN AS BROKERAGE AMOUNT. SIMILARLY P AGE NO. 5 & 7 OF THE PAPER BOOK PROVES THAT SMT. SITADE VI JHUNJHUNWALA HAS OFFERED THE IMPUGNED AMOUNT TO TAX. PAGE NO. 9 TO 1 1 AND 12 TO 14 REFERS TO ITA NO. 8159/MUM2010 M/S. SANJAY SAREES PVT. LTD. 3 CONFIRMATIONS OF SMT. BABITA JHUNJHUNWALA AND SARIK A JHUNJHUNWALA. THE LEARNED COUNSEL THUS CONTENDED THAT DESPITE SPECIFI C DIRECTIONS BY THE TRIBUNAL, TAX AUTHORITIES HAVE NOT APPRECIATED THE FACTS IN THE CORRECT PERSPECTIVE. 5. ON THE OTHER HAND, THE LEARNED D.R. RELIED UPON THE ORDER PASSED BY THE TAX AUTHORITIES. 6. I HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIONS A ND PERUSED THE RECORD. ADMITTEDLY THE ASSESSEE HAS SHOWN THE AMOUN T PAYABLE TO THE ABOVE MENTIONED PARTIES IN THE LEDGER ACCOUNT BY SPECIFIC ALLY MENTIONING THE NAMES OF EACH PERSON AND THE SAME AMOUNT WAS OFFERE D TO TAX IN THEIR RESPECTIVE RETURNS WHICH CLEARLY GOES TO PROVE THAT THE PAYMENT IS GENUINE. IT IS NOT THE CASE OF THE REVENUE THAT THE ASSESSEE IS NOT ENTITLED TO CLAIM DEDUCTION OF EXPENDITURE, UNDER MERCANTILE SYSTEM O F ACCOUNTING, WITH REFERENCE TO THE AMOUNT PAYABLE BY TAKING INTO CONS IDERATION THE LIABILITIES THAT ACCRUED. SALES ARE NOT DISPUTED BY THE TAX AUT HORITIES. IT IS NOT THE CASE OF THE REVENUE THAT THE PARTIES TO WHOM BROKERAGE W AS PAID WERE NOT ENTITLED TO RECEIVE ANY COMMISSION EITHER ON THE GR OUND THAT THEY HAVE NOT RENDERED ANY SERVICE OR ON THE GROUND THAT THERE IS NO AGREEMENT TO THAT EFFECT. IN THE INSTANT CASE THE LIABILITY HAVING BE EN PROVED BEYOND DOUBT AND THE PARTIES HAVING DECLARED THIS AMOUNT RECEIVABLE IN THEIR RESPECTIVE RETURNS, I AM OF THE FIRM VIEW THAT THE DISALLOWANC E MADE BY THE TAX AUTHORITIES IS NOT IN ACCORDANCE WITH LAW. AS PRONO UNCED IN THE OPEN COURT, I DIRECT THE AO TO ALLOW THE CLAIM OF DEDUCTION TOW ARDS OUTSTANDING COMMISSION, I.E. BROKERAGE PAYABLE. 7. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE COM PANY IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 21 ST MARCH 2012. SD/- (D. MANMOHAN) VICE PRESIDENT MUMBAI, DATED: 21 ST MARCH 2012 ITA NO. 8159/MUM2010 M/S. SANJAY SAREES PVT. LTD. 4 COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) VIII, MUMBAI 4. THE CIT IV, MUMBAI CITY 5. THE DR, SMC BENCH, ITAT, MUMBAI BY ORDER //TRUE COPY// ASSISTANT REGISTRAR ITAT, MUMBAI BENCHES, MUMBAI N.P.