TaxTMI 
TaxTMI 
TaxTMI 
2010 (12) TMI 688
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.... 8) Paresh Thole Rs. 75,000/- 9) G.B. Kala Rs.1,35,000/- 10) Gokanta Impex Pvt. Ltd. Rs.2,10,000/- 11) Sangeeta Amarnani Rs.2,45,000/- 12) Devidas Amarnani Rs.5,02,512/- 13) Hemchand Velgi Rs.1,75,000/- 14) M/s. Swan Finance Ltd. Rs.4,49,419/- 15) Dinanath Shah Rs.1,44,222/- 2.1 With a view to finding out the genuineness of sub-brokerage payments, the AO obtained the address of the parties and issued notices under section 133(6). The AO noted that the parties mentioned at Sr. Nos. 1, 2 were not found at the address given. Later Shri Premji Satra was produced by the assessee and he admitted having received commission but could not link the commission to any party introduced by him. The AO also found that parties at Sr. Nos. 4, 5 and 6 were engaged in the business of provisional store or derived salary income. They had no experience in the business of finance. The assessee explained that Shri Girish Savla and Vallabhji Devji Savla (HUF) had stated that they have involved in finance made available to M/s. Ushdev International Ltd to the extent of Rs. 10 crores. However, Ushdev International later vide letter dated 12.12.08 informed the AO that there were not i....
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....entions raised by the assessee. It was observed by him that the services rendered had not been established by the assessee. Substantial brokerage had also been paid to the family members of the directors. He was thus not satisfied about genuineness of brokerage payment. However CIT(A) observed that the assessee had earned substantial income by way of brokerage and therefore it was possible that it may have utilized services of some sub-brokers. He therefore allowed 20% of brokerage claimed amounting to Rs.4,99,497/- and the balance addition was confirmed. Aggrieved by the said decision the assessee is in appeal. 2.3 Before us the Learned AR for the assessee reiterated the submissions made before lower authorities that brokerage had been paid for introducing parties and for such services no experience/expertise was required. It was also submitted that the payment had been made by account payee cheque and the tax had also been deducted at source. It was pointed out that denial by the three parties for not rendering services had not been confronted to the assessee. It was also argued that brokerage income had increased this year by 34% compared to the earlier year and the sub-....
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....ds two parties which were related to the directors the assessee has submitted that the provisions of section 40A(2)(b) were not applied. The submission is devoid of any merit. Provisions of section 40A(2)(b) can be applied when the payment is found to be excessive compared to services rendered. In this case there is no evidence of any services rendered and therefore entire claim can be disallowed. It has also been argued that income from brokerage this year has increased and that brokerage payment this year is lower compared to the earlier year in which there was no disallowance. This argument can also not been accepted as there is no evidence to link the increase in brokerage income to any services rendered by sub-brokers. Further, merely because there was no disallowance in the earlier year, cannot be ground for no disallowance this year as in the earlier year claim was allowed without any examination as the assessment was covered under summary scheme. Thus on the facts of the case and considering the material on record the entire claim of commission could be disallowed. However CIT(A) has taken a liberal view and considering that the assessee was in the business of finance he ha....
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.... and Rs.38,000/- per month in case of Honda Accord and the excess of Rs.22,44,000/- was disallowed under section 40A(2)(b). In appeal the assessee submitted that the Income-tax Department hire Tavera/Scorpio at Rs.28,000/- per month and that too for 8 hours per day whereas in case of the assessee the vehicles were used for 12 hours and the same were to be maintained in spic and span conditions for escorting top officials of banks/financial institutions to the factory of customers many of whom are reputed limited companies. The claim was therefore reasonable and should be allowed. CIT(A) however did not accept the contentions raised. It was observed by him that Income-tax Department was regularly hiring Maruti SX4 Sedan Cars for use by departmental officers @ 29,900/- per month for 11 hours per day and for 6 days in a week. The said cars were quite close of Honda City car in rates and performance. Therefore the Honda city cars could be procured @ 34,000/- per month for 11 hours per day. Considering the facts that the assessee was utilizing the vehicle for longer hours for 7 days per week CIT(A) held that hire charges for Honda City would be Rs. 42,500/- per month and for Honda Accor....