TaxTMI 
TaxTMI 
2026 (7) TMI 38
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.... Income Tax (Appeals) [CIT(A)] has erred in law and on facts in confirming the action of the Assessing Officer in passing the assessment order without providing the Appellant a reasonable and adequate opportunity of being heard. 3. The learned Commissioner of Income Tax (Appeals) [CIT(A)] has erred in law and on facts in confirming the action of the Assessing Officer in making a disallowance of Rs. 1,33,02,020/- under section 37(1) of the Income Tax Act, 1961. 4. Alternatively, and without prejudice to the other grounds, the learned Commissioner of Income Tax (Appeals) [CIT(A)] has erred in law and on facts in not granting full relief to the Appellant in respect of disallowance of service tax amounting to Rs. 14,63,270/- under section 37(1) of the Income Tax Act, 1961. 5. The learned Commissioner of Income Tax (Appeals) [CIT(A)] has erred in law and on facts in confirming the action of the Assessing Officer without properly appreciating and considering the submissions, evidences, and supporting documents placed on record by the Appellant during the course of assessment as well as appellate proceedings. 6. The learned Commissioner of Income Tax (A....
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....details of such payments. Therefore, there was no failure on the part of the assessee to disclose fully and truly all material facts necessary for assessment. The Ld. AR further contended that reopening was merely based upon reappraisal of existing material and amounted to a change of opinion, which is impermissible in law. 8. The Ld. DR, on the other hand, relied upon the orders of the lower authorities. 9. We have carefully considered the rival submissions and perused the material available on record. It is an undisputed fact that the original assessment was completed u/s 143(3) of the Act on 08.12.2017. The notice u/s 148 was issued on 20.03.2021, admittedly beyond four years from the end of Assessment Year 2015-16. The provision of Section 147 reads as under:- "147. If the Assessing Officer has reason to believe that any income chargeable to tax has escaped assessment for any assessment year, he may, subject to the provisions of sections 148 to 153, assess or reassess such income and also any other income chargeable to tax which has escaped assessment and which comes to his notice subsequently in the course of the proceedings under this section, or recompute the ....
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....essee has failed to furnish a report in respect of any international transaction which he was so required under section 92E; (c) where an assessment has been made, but- (i) income chargeable to tax has been under assessed ; or (ii) such income has been assessed at too low a rate; or (iii) such income has been made the subject of excessive relief under this Act ; or (iv) excessive loss or depreciation allowance or any other allowance under this Act has been computed; ^52[(ca) where a return of income has not been furnished by the assessee or a return of income has been furnished by him and on the basis of information or document received from the prescribed income-tax authority, under sub-section (2) of section 133C, it is noticed by the Assessing Officer that the income of the assessee exceeds the maximum amount not chargeable to tax, or as the case may be, the assessee has understated the income or has claimed excessive loss, deduction, allowance or relief in the return;] (d) where a person is found to have any asset (including financial interest in any entity) located outside India. Explanation 3.-For the pur....
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..../- paid as brokerage to its directors is in contravention to the provisions of the said Regulation. Accordingly, expenditure incurred by the assessee as sub brokerage, which is prohibited by law, is required to be disallowed as per the Section 37 (1) of the IT Act. This has resulted in escaped assessment of income of Rs. 1,33,02,020/-, 3. Analysis of information collected/received Explanation to Section 37(1) of the Act stipulates that any expenditure incurred by an assessee for any purpose which is an offence or prohibited by law shall not be deemed to have been incurred for the purpose of business or profession UME TAX DEPARTM Further, as per Regulation 15A (Inserted w.e.f. 23-9-2003) of Securities and Exchange Board of India (Stock Brokers and Sub Brokers) Regulation, 1992, no director of a stock broker shall act as sub-broker to the same stock broker. On perusal of the assessment records for the year under consideration, it is found that the assessee company has made payment of Rs. 1,33,02,020/- to its directors towards brokerage payments which was incorrectly shown in the Tax audit report as remuneration which was also reflected in the certi....
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....tors is in contravention to the provisions of the said Regulation. In view of the facts enumerated above it can reasonably concluded that the expenditure of Rs. 1,33,02,020/- incurred by the assessee as sub brokerage, which is prohibited by the provisions of the SEBI Regulation, is required to be disallowed as per the Section 37(1) of the IT Act and therefore the same requires to be added to the total income. Therefore, I have reasons to believe that income chargeable to tax to the extent of Rs. 1,33,02,020/- has escaped the assessment within the meaning of section 147 of the I. T. Act and it is a fit case to issue notice u/s 148 of the Act. 7. Seventh paragraph will include escapement of income chargeable to tax in relation to any assets (including financial interest in any entity) located outside India: Not Applicable. 8. Applicability of the provisions of section 147/151 to the facts of the case: In this case, return of income was filed for the AY 2015-16 by the assessee and regular assessment u/s 143(3) was made on 18.12.2017. Since, 4 years from the end of the relevant year has expired in this case and the assessee has not truly and correctl....
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.... the end of assessment year under consideration. Hence necessary sanction to issue notice u/s 148 has been obtained separately from Pr. Commissioner of Income Tax as per the provisions of Section 151 of the act." 10. On perusal of the reasons recorded, we find that the entire basis of reopening arises from examination of the assessment records already available with the Assessing Officer. The reasons recorded specifically state that the alleged escapement was noticed "on perusal of the assessment records" and no reference whatsoever has been made to any fresh tangible material, external information, investigation report, audit objection or other material coming into possession of the Assessing Officer subsequent to completion of the original assessment. 11. The Assessing Officer himself admits that the annual report, audited accounts and books of account were furnished by the assessee. Having accepted the existence of such disclosure, no specific material fact alleged to have been withheld by the assessee has been identified in the reasons recorded. The bald observation that the facts were "embedded" in the records cannot substitute the statutory requirement of demonstrating ....
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....e deduction owing to SEBI regulations and disallowed the amount paid to the Directors u/s 37(1) of the Act. 16.1 Aggrieved by the order of the Assessing Officer, the Assessee filed appeal before the Ld. CIT(A) who upheld the order of the Assessing Officer. 16.2 Aggrieved by the order of the Ld. CIT(A), the Assessee filed appeal before the Tribunal. 16.3 Before us, the Ld. Counsel argued that it was well submitted before the Revenue Authorities that the amount does not represent sub-brokerage and there was no agreement or arrangement between the directors and the assessee for payment of sub-brokerage. No invoice of sub-broker services has ben issued by the Directors to the assessee. The Ld. AR submitted that the Arranger Fees shared with the Directors cannot be held to be the brokerage earned by the company from the public issue of corporate Bonds. The arrangers fees shared with the directors is not from the Brokerage earned by the company from the securities transaction during the FY 2014-15 and it cannot be treated as a sub-brokerage agent or the director of the company is acting as sub-broker of its company. The Ld. AR further submitted that assessee-company has not cont....