TaxTMI 
TaxTMI 
2017 (8) TMI 1063
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....he circumstances of the case and in law, the Ld. CIT(A), has erred in deleting the addition of Rs. 2,50,000/- made by the AO. on account of low gross profit. 2. On the facts and in the circumstances of the case and in law, the Ld. CIT(A), has erred in deleting the addition of Rs. 34,00,000/- made by the A.O. on account of Brokerage/ commission. 3. The appellant prays that the order of CIT(A) on the above grounds be set aside and that of the Assessing Officer be restored." 3. The brief facts of the case are that the assessee is in the business of trading in iron and steel. The AO observed that the assessee had declared total turnover of Rs. 9,92,48,746/- with gross profit of Rs. 88,12,531/- and net profit of Rs. 10,52,658/- from the business of trading in iron and steel. During the course of assessment proceedings u/s 143(3) r.w.s. 143(2) of the 1961 Act, the assessee was asked to furnish month wise details of purchases and sales for the financial year 2008-09. The assessee did not furnish month wise details of purchase and sales and also the assessee did not furnish the justification, explanation and genuineness of brokerage expenses claimed w.r.t. certain p....
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....een maintained. The AO observed that the tax audit report only shows the quantity of purchases, sales and balance in the closing stock. Against these observations of the A.O., the assessee explained as under:- "Low G.P.:- Your honour has observed that the cost of the total sales upto November' 2008/February' 2009 as reduced by G.P do not match with the purchases till those months inclusive of opening stock. In this connection, your kind attention is invited to the Trading, Profit & Loss A/c wherein while determining the GP, Transport charges and rate differences are also considered whereas it appears your honour has proceeded without considering the transport charges and rate difference while arriving at the inference stated in the impugned letter. Thus the very basis relied upon by your honour to arrive at the inference stated in the said letter is fallacious. Incidentally it may please be noted that the complete details with regard to the purchases and sales in terms of the Qty./MTS/NOS is filed along with the Audit Report filed at your end vide letter dated 28/9/2011 filed on 29/9/2011 at Pg. 59. In view of this your honour is requested to consider the ....
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.... Rs. 1,50,000 b) Bharatkumar Indrasen Trading Pvt. Ltd., Devji Ratanshi Marg, Carnac Bunder, Mumbai 400009 Rs. 92,54,239 (1.44%) 3 Marendra Thakur, 4C/20 Rajendra Nagar, New Delhi A) Jasmine Industrial Corpn., 505 Giriraj, S.T. Road, Mumbai 400009 Rs.59,98,516 Rs. 1,50,000 B) Steel Rolling Mill of Maharashtra, Kholsa Bunder, Darukhana, Mumbai 400010 Rs. 20,33,936 4 Rajendra Kumar HUF, A-4/442, Paschim Vihar, New Delhi Executive Trading Co. Pvt. Ltd., 59E, Baroda Street, Carnac Bunder, Mumbai 400009 Rs.1,23,71,585 Rs.150,000 BROKERAGE CLAIM IN RESPECT OF SALES 5 Neelam Bhatia, C- 716, NFS, New Delhi a)Utkarsh Steel Corporation, 40 Carnac Siding Road, Carnac Bunder, Mumbai 400009 Rs. 58,50,717 Rs.5,00,000 (8.55%) 6 Punit Gupta, A-4, 442, Pachim Vihar, New Delhi a) Ganon Dunkerly Co, Mumbai b)Remi Metals, Gujarat Rs.12,39,152 Rs. 18,73,030 Rs.160,000 (5.15%) 7 Deepika Grover, H11, West Patel Nagar, New Delhi Kamal Trading Corpn. Hubli Rs.44,18,981 Rs.150,000 (3.39%) 8 Dilip Grover, H-11, W....
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....upation/antecedent, PAN, age, details of other brokerage activities etc were not brought on record by the assessee. It was also observed that in some case very high rate of brokerage is paid in some cases which is abnormally high. The AO observed that there is no evidence of actual rendering of services by these brokers. Thus, the A.O. disallowed the claim of brokerage expenses of Rs. 34,00,000/- as the same were not considered to be wholly and exclusively for the purposes of business and it was held that it did not fulfill the parameters of Section 37 of the Act, vide assessment order dated 02-12-2011 passed by the AO u/s 143(3) of the 1961 Act. 4. Aggrieved by the assessment order dated 02-12-2011 passed by the AO u/s 143(3) of the 1961 Act, the assessee carried the matter in appeal before the ld. CIT(A). who allowed the appeal of the assessee by holding as under:- "4.3 Decision :- I have considered the facts of the case and the submissions made by the assessee. It becomes clear from the perusal of purchase and sales reconciliation statements that assessee has excluded the VAT from the purchases and has bunched labor charges in the purchase value has shown th....
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....09 Rs. 96,49,834 Rs. 1,20,000 2 Geetanjali Thakur, 4C/20 Rajendra Nagar, New Delhi c) Uttam Galva Steels LKtd.,69, P.D. Mellow Road, Carnac Bunder, Mumbai 400009 Rs. 21,62,284 (1.29%) Rs. 1,50,000 d) Bharatkumar Indrasen Trading Pvt. Ltd., Devji Ratanshi Marg, Carnac Bunder, Mumbai 400009 Rs. 92,54,239 (1.44%) 3 Narendra Thakur, 4C/20 Rajendra Nagar, New Delhi C) Jasmine Industrial Corpn., 505 Giriraj, S.T. Road, Mumbai 400009 Rs.59,98,516 Rs. 1,50,000 D) Steel Rolling Mill of Maharashtra, Kholsa Bunder, Darukhana, Mumbai 400010 Rs. 20,33,936 4 Rajendra Kumar HUF, A-4/442, Paschim Vihar, New Delhi Executive Trading Co. Pvt. Ltd., 59E, Baroda Street, Carnac Bunder, Mumbai 400009 Rs.1,23,71,585 Rs.150,000 BROKERAGE CLAIM IN RESPECT OF SALES 5 Neelam Bhatia, C- 716, NFS, New Delhi a)Utkarsh Steel Corporation, 40 Carnac Siding Road, Carnac Bunder, Mumbai 400009 Rs. 58,50,717 Rs.5,00,000 (8.55%) 6 Punit Gupta, A-4, 442, Pachim Vihar, New Delhi a)Ganon Dunkerly Co, Mumbai b)Remi Metals, Gujarat Rs.....
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.... to bring in evidence which disproves the assessee's claim. No claim can be disregarded based on analysis and inferences, but only based on substantial evidence. Moreover, the Assessing Officer missed the basic issue of comparison of commission/brokerage in the earlier and subsequent years vis-a-vis turnover of the assessee. The assessee during the appellate proceedings submitted this data which is as under:- A.Y. Turnover Commission/brokerage 2007-08 1,71,60,423 10,48,623 2008-09 4,94,11,685 27,89,709 2009-10 9,92,48,745 36,29,799 2010-11 1,82,35,031 41,744 2011-12 2,30,08,541 2,99,272 5.3.3 The above details indicate that the assessee had maximum turnover during the previous year relevant to the AY 2009-10 and also maximum payment commission/brokerage during this year only. The assessee had paid Rs. 27.89 lacs when the turnover was only Rs. 4.94 crore in the A.Y. 2008-09. Similarly, for the AY 2010-11 & 2011-12 also the commission/brokerage payments are corresponding to turnover only. Thus, from the comparison, I do not find any unreasonableness in the payment made towards commission/brokerage and it is as per the....
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....rned CIT (A), while additional evidences were admitted by learned CIT(A) without forwarding the same to the AO for examination/verification and no remand report was called by ld. CIT(A) from the AO. which is in violation of Rule 46A of the Income-tax Rules, 1962. It was submitted that their was a disallowance of Rs. 34 lacs on account of brokerage and commission which was allowed by the ld. CIT(A) by accepting the contentions of the assessee without any evidence. It was submitted that some confirmations were produced by the assessee. It was submitted that no party was produced by the assessee before the AO. It is submitted that the learned CIT(A) granted relief to the assessee by holding that the AO did not made any enquiry with the said brokers as no notices u/s 133(6) nor any summons u/s 131 of the 1961 Act were issued by the AO, but it is contended that learned CIT(A) could have issued the notices u/s 133(6) or summons u/s 131 of the 1961 Act as the power of learned CIT(A) is co-terminus with powers of the AO. It is submitted that brokers are different in each year although the parties from whom purchases were made are same every year, which clearly shows that brokerage expenses....
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....R, which additional evidences were admitted by learned CIT(A) without forwarding the same to the AO for examination/verification by the AO and no remand report was called by learned CIT(A) from the A.O. which is in clear breach of Rule 46A of the Income-tax Rules,1962. The Rule 46A of the 1962 Rules is not an empty formality and cannot be given a complete go bye by learned CIT(A) in a lighter manner as fresh material before learned CIT(A) has to stood the test of examination and verification by the AO who is both an investigator and adjudicator. In our considered view keeping in view factual matrix of the case, this matter need to be set aside to the file of the AO for denovo determination of the issue on merits afresh in accordance with law. Since, It is on record that the assessee filed part details as sought by the AO only at the fag end when the assessment was getting time barred thereby preventing any meaningful enquiry and examination by the AO and the AO made adhoc estimation of the addition to the tune of Rs. 2,50,000/- to the total income of the assessee on account of low GP, this is an open remand so far as this issue is concerned and the AO shall be entitled to make addi....
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....sp; F) Steel Rolling Mill of Maharashtra, Kholsa Bunder, Darukhana, Mumbai 400010 Rs. 20,33,936 4 Rajendra Kumar HUF, A-4/442, Paschim Vihar, New Delhi Executive Trading Co. Pvt. Ltd., 59E, Baroda Street, Carnac Bunder, Mumbai 400009 Rs.1,23,71,585 Rs.150,000 BROKERAGE CLAIM IN RESPECT OF SALES 5 Neelam Bhatia, C- 716, NFS, New Delhi a)Utkarsh Steel Corporation, 40 Carnac Siding Road, Carnac Bunder, Mumbai 400009 Rs. 58,50,717 Rs.5,00,000 (8.55%) 6 Punit Gupta, A-4, 442, Pachim Vihar, New Delhi a)Ganon Dunkerly Co, Mumbai b)Remi Metals, Gujarat Rs.12,39,152 Rs. 18,73,030 Rs.160,000 (5.15%) 7 Deepika Grover, H11, West Patel Nagar, New Delhi Kamal Trading Corpn. Hubli Rs.44,18,981 Rs.150,000 (3.39%) 8 Dilip Grover, H-11, West Patel Nagar, New Delhi -do- -do- Rs.150,000 (3.39%) 9 Sanjeev Datta, A269, Sarita Vihar, New Delhi Goa Shipyard, Vasco De Gama, Goa Rs.3,00,65,158 Rs.5,00,000 (3.33%) 10 Varun Datta, A-269, Sarita Vihar, New Delhi Goa Shipyard, Vasco De Gama, Goa Rs.3,00,65,158 Rs.4,00,000 (3.33%) ....
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....rendering of services by these brokers. Thus, the A.O. disallowed the claim of brokerage expenses of Rs. 34,00,000/- as the same were not considered to be wholly and exclusively for the purposes of business and it was held that it did not fulfill the parameters of Section 37 of the Act. It is on record that the assessee filed part details as sought by the AO only at the fag end when the assessment was getting time barred thereby preventing any meaningful enquiry and examination by the AO. The learned CIT(A) deleted the aforesaid additions. We have observed that the ld. CIT(A) granted relief to the assessee on the ground that the A.O. has not issued notice u/s 133(6) or summons u/s 131 of the Act to these Delhi based Brokers who have allegedly provided services to the assessee for organizing sale/purchase of goods dealt within by the assessee. We have observed that the power of ld. CIT(A) is co-terminus with the power of A.O. including power of enhancement as enshrined in Section 251(1)(a) of the 1961 Act. It is on record that the assessee filed part details as sought by the AO only at the fag end when the assessment was getting time barred thereby preventing any meaningful enqui....