TaxTMI 
TaxTMI 
TaxTMI 
2017 (8) TMI 1063
X X X X Extracts X X X X
X X X X Extracts X X X X
....IT(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 parties. The AO observed that some part details were given by the ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ance 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 above explanation." The explanation offered by the assessee were rejected by A.O. The A.O. observed that the GP rate was....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... 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, West Patel Nagar, New Delhi -do- -do- Rs.150,000 (3.39%) 9 Sanjeev Datta, A- Goa Shipyard, Vasco Rs.3,00,65,158 Rs.5,00,000 269, Sarita Vihar, New Delhi De Gama, Goa (3.33%) 10 Varun Datta, A-269, Sarita Vihar, New Delhi Goa Shipyard, Vasco ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....sallowed 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 the net amount as purchases in the P & L Account and has shown transport charges separately on the debit side of the P & L Account. Similarly assessee has bunched net sales value of Rs. 9,77,13,831/- with the forwarding charges of Rs. 15,34,914/- and shown sales at Rs. 9,92,48,745/- and has taken the VAT billed to parties of Rs. 24,28,727/- separately to t....
X X X X Extracts X X X X
X X X X Extracts X X X X
....r, 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.12,39,152 Rs. 18,73,030 Rs.160,000 (5.15%) 7 Deepak Grover, H11, West Patel Nagar, New Delhi Kamal Trading Corpn. Hubli Rs.44,18,981 Rs.150,000 (3.39%) 8 Deepak Grover, H11, 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.3,00,6....
X X X X Extracts X X X X
X X X X Extracts X X X X
....5 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 business needs. Apart from the above the assessee has duly made TDS, filed confirmations and recipients are assessed to tax. In the light of the above, the disallowance made by the Assessing Officer is not justified and therefore the same is deleted. Thus, the grounds of appeal are allowed." The learned CIT(A), thus allowed the claim of the assessee vide appellate order dated 18-03-2014. 5. Aggrieved by the appellate order dated 18-03-2104 passed by the ld. CIT(A), the Revenue is in appeal before the Tribunal. 6. At the time when the appeal was called for hearing befo....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... 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 claimed by the assessee were not genuine. 8. We have heard ld. D.R. and also perused the material available on record. We have observed that the assessee is in the business of trading in iron and steel. It is observed that the assessee had declared total turnover of Rs. 9.92 crores with gross profit of Rs. 88.12 lacs and net profit of Rs. 10.53 lacs during the previous year relevant to the impugned assessment year. The GP ratio was shown at 8.88% in A.Y.2009-10. which is lower than the GP ratio shown in assessment year 2007-08 at 9.82% and 10.62% in A.Y. 2008- 09. The GP ratio ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... 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 additions, if so warranted after considering the evidences and explanations filed by the assessee uninhibited by the earlier adhoc addition of Rs. 2.50 lacs on account of low GP made in original assessment proceedings u/s 143(3) r.w.s. 143(2) of the 1961 Act. The assessee shall be entitled to file evidences and explanation in its defense which shall be admitted by the AO in the interest of justice and shall be evaluated on merits in accordance with law. Needless to say that the AO shall give proper and adequate opportunity of being heard to the assessee in accordance with principles of natural justice in accordance....
X X X X Extracts X X X X
X X X X Extracts X X X X
....rading 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%) 11 Ghanshyamdas Chemical Goyal, HUF, Giriraj, Jaina, Maharashtra Western Shipyard, Goa India Rs.5,99,34,476 Rs.8,70,000 (1.45%) TOTAL Rs.34,00,000 The assessee claimed before the AO that all the details with respect to these brokers were submitted like addresses, PAN etc. It was submitted that merely because the parties were based in New Delhi. cannot be a ground for disallowing the same. It was submitted that perusal of details will clearly reveal the nature of services rendered which were both for purchases/sales effected, specifying the quantum of the goods and the persons from whom said purchases and to whom sales were made. The assessee submitted that it has no power to enforce attendance of these parties before the Revenue and it was submitted that the....