Brokerage disallowance fails where identity, banking trail and business nexus are proved by primary documentary evidence.

Brokerage expenditure could not be disallowed merely because the payees did not personally appear before the Assessing Officer when the assessee had produced primary documentary evidence of identity, banking trail, PAN details, income-tax returns, addresses and sale-linked material. In the absence of any defect in the books or contrary evidence to disprove the recorded payment and business nexus, the non-appearance of the brokers was insufficient to treat the brokerage as ingenuine. The disallowance was therefore deleted in favour of the assessee.

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Issues: Whether the disallowance of brokerage of Rs. 8,90,000 paid to three brokers could be sustained merely because they did not appear before the Assessing Officer, despite the assessee furnishing their identity details, income-tax returns, bank statements, PAN particulars and sale-linked evidence.

Analysis: The assessee produced documentary material showing payment of brokerage through banking channels, along with the brokers' income-tax returns, bank statements, PAN details and addresses. The record also showed reflection of the brokers in the sale invoices. The only adverse circumstance relied upon was their personal non-appearance before the Assessing Officer. In the absence of any defect in the assessee's books or any contrary material to disprove the documentary evidence, mere non-appearance of the brokers could not justify treating the brokerage as ingenuine.

Conclusion: The disallowance was not sustainable and was deleted, in favour of the assessee.

Ratio Decidendi: Where the assessee has adduced primary documentary evidence establishing the identity of payees, banking trail, and business nexus of the payment, the expenditure cannot be disallowed solely on the ground that the payees did not personally appear for verification.

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