TaxTMI 
TaxTMI 
2011 (7) TMI 660
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....earned CIT(A) has erred on facts and in law in deleting the addition of Rs. 78,50,000 on the basis that the assessing officer has not excluded the amount of sub-brokerage from the income of Shri Ashok Sabnis and Smt. Sujata Sabnis, not appreciating the factual and legal position that there is no such requirement of law to exclude such income by the assessing officer. (4) The learned CIT(A) has erred on facts and in law in deleting the addition of Rs. 78,50,000 though the assessee failed to prove any rendering of service by Shri Ashok Sabnis who is father of the assessee and Smt. Sujata who is wife of the assessee. (5) The learned CIT(A) has erred on facts and in law in not appreciating that the assessee entirely failed to discharge the onus cast on it in respect of such payment to prove the business necessitated of such payment in case of a person specified u/s 40a(2)(a)(b) of the income tax Act, 1961. 3. Briefly stated, the facts of the case are that the assessee, with regard to the addition of Rs. 78,50,000, are that the assessee is a share broke and a member of national Stock Exchange - NSE. Assessee credited commission of Rs. 1,25,30,459 in the Profit and Loss account.....
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....e: (i) the assessee failed to prove that he received the services; (ii) also failed to prove the services rendered are not commensurate with the pay outs; (iii) failed to reveal all the facts in the Audit report, which is the report of the specialized persons; (iv) failed to file the evidences to prove that the Ashok Sabnis and Sujatha Subnis brought the customer/clients to the assessee; (v) failed to demonstrate that the so called clients of the father and the spouse are the dedicated ones these persons etc. On the other hand, the arguments of the Ld Counsel include (i) assessee demonstrated that the both Ashok Sabnis and Sujatha Sabnis are assessee to tax; (ii) they were in the business of the sub brokerage; (iii) they have dedicated clients of their own; (iv) they have been consistently receiving/earning the identical commission/ sub-brokerage in the past years and the same is subjected to tax in the relevant years; (v) it is not the case of the revenue that they have evidence to rebut the stand of the assessee regarding the clientele or earning of the income; (vi) in fact, they are members of the Pune Stock Exchange too; (vii) there is no tax losses to the revenue as the assess....
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....Sabnis. Considering the fact that huge bad debts have been incurred by the appellant during this year, the explanation of the appellant cannot be said to be unacceptable. Secondly, Shri Ashok Sabnis and Smt. Sujata Sabnis being family members, there was no pressure on the appellant to make the payment in cash from time to time. Thirdly, it is important to consider that though brokerage was credited to their respective accounts by way of journal entries, both Shri Ashok Sabnis and Smt. Sujata Sabnis had paid their respective advance tax on the income receivable from the appellant. I am also inclined to agree with the contention of the appellant that non-reporting of the payment of brokerage in the tax audit report by the tax auditors cannot be made a ground for disallowing the brokerage paid. It cannot be the case of the assessing officer that non-reporting of payments in the tax audit report conclusively means that corresponding entries have not been made in the books of account and therefore, the payment of some brokerage to Shri Ashok Sabnis and Smt. Sujata Sabnis is not supported by the books of account. What is most surprising on the part of the assessing officer is the fact th....
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.... of terminal operator. (iv) Procedural matters of Stock Exchange & its compliance. (v) Continuous monitoring of Bank account position. In consideration of all the above work, handled by Smt. Sabnis, she received sub-brokerage. (3.2) This claim is general, unsubstantiated, unfounded and an afterthought, submitted six months after the query was raised in the questionnaire dated 11.09.2003, evasive reply dated 13.11.2003 & 27.1.2004. ........ As admitted by Smt. Sabnis in her statement dated 3.3.2004 (Ans 2) that as authorised signatory of Shri Satish Sabnis, she took care of banking operations, cheque payments, reconciliation of bank and business accounts, and office administration e.g. deciding salaries, office supplies, general office maintenance; and supervising Pune Office operations when Shri Satish Sabnis went out of Pune. Thus the payment of sub-brokerage was not related to the clients, or the transactions or the brokerage income of the respondent. (3.3) In case of Shri Ashok Sabnis also the reply dated 13.11.2003 to AO's specific query dated 11.09.2003 regarding sub-brokerage receipt of Rs. 58.50 lakhs from the respondent, was cryptic and vague. ....
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.... sub-brokerage by the respondent to Shri Ashok Sabnis, during two previous years i.e. FY 1998-99 and 1999-2000, ...... although the respondent did earn brokerage income from such clients in these years ...... (6) Ld. CIT(A) has allowed payment of sub-brokerage to the two related persons on the following grounds:-........... (6.2) It is humbly submitted that even the respondent being a share broker himself with a handsome strength of salaried staff and was equally if not more competent and capable. He was also was acting as authorised representative and signatory of Shri Ashok Sabnis for business transaction, and perhaps for Smt. Sujata Sabnis also. It is common in a family business to authorise each other for business/bank transactions. These do not justify the claim of expenses. (6.3) The respondent was never short of funds, as believed by Ld. CIT(A),..... (7) It is prayed that in view of absence of any independent evidence (documentary or other-wise) to suggest that services were actually rendered by the two persons to the respondent, and also the fact that all the evidences are created by respondent alone, which are self-serving, wavering and hence unreliable, the im....
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....r that the clientele list suffers from credibility or their clients are bogus or non-existent. Revenue has not done anything to demonstrate the sub-brokers failed to bring any clients to the assessee. Further, we find that it is a fact the impugned sub-brokerage recipients are related parties (i.e. father and spouse) and all them are Stock Brokers/sub-brokers and they furnished a list of their clientele and the revenue has not rebutted the same. Further it is not case of the revenue that any of the said clients from the said list have given any incriminating statement that they are not introduced by the Ashok Sabnis or Sujatha Subnis to the assessee. Further, also, it is a fact they are in this line of business activity over the years. It is evident from the way they earned income and taxing of the same by the revenue. The same accepted by the revenue. There are no counter evidences in the possession of the revenue that the sub brokers are not capable of having their own clientele, who were said to have been diverted to the assessee and earned the impugned sub-brokerage. Both Sujatha Sabnis and Ashok Sabnis are associated with this activity of earning brokerage for many years, the ....