Income Tax Appellate Tribunal - Mumbai
Ito 13(2)(4), Mumbai vs Paras Steel Corporation, Mumbai on 23 August, 2017
आयकर अपील
य अ धकरण "C" यायपीठ मब
ंु ई म ।
IN THE INCOME TAX APPELLATE TRIBUNAL "C" BENCH, MUMBAI
BEFORE SHRI SAKTIJIT DEY, JUDICIAL MEMBER
AND SHRI RAMIT KOCHAR, ACCOUNTANT MEMBER
आयकर अपील सं./I.T.A. No. 467 1/Mum/2014
( नधा रण वष / Assessment Year : 2009-10)
Income Tax Officer - बनाम/ M/s Paras Steel
13(2)(4), Corporation,
v.
R No. 412, 4 t h floor , 505, Gup ta Bhavan,
Aayakar Bhavan, M-2, Steel Ce ntre,
M.K. Road, Iron Market,
Mumbai 400 020. Mumbai - 400 009.
थायी ले खा सं . /PAN : AAAFP 117 2 A
(अपीलाथ /Appellant) .. ( यथ / Respondent)
Revenue by : Shri Rajat Mittal,DR
Assessee by : None
ु वाई क तार ख / Date of Hearing
सन : 31.7.2017
घोषणा क तार ख /Date of Pronouncement : 23.08.2017
आदे श / O R D E R
PER RAMIT KOCHAR, Accountant Member
This appeal, filed by the Revenue being ITA No. 4671/Mum/2014, is directed against the appellate order dated 18th March, 2014 passed by learned Commissioner of Income Tax (Appeals)-24, Mumbai (hereinafter called "the CIT(A)"), for assessment year 2009-10, the appellate proceedings before the learned CIT(A) has arisen from the assessment order dated 02-12-2011 passed by the learned Assessing Officer, Mumbai (Hereinafter called "the AO") u/s 143(3) of the Income-tax Act,1961 (Hereinafter called "the Act").
2 ITA 4671/Mum/2014
2. The grounds of appeal raised by the Revenue in the memo of appeal filed with the Income-Tax Appellate Tribunal, Mumbai (hereinafter called "the tribunal") read as under:-
"1. 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. 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 assessee at the fag end when the assessment was getting time barred preventing close examination and verification and hence is to be decided based on material on record keeping in view time limitation period for framing assessment as prescribed under the provisions of the 1961 Act.
3 ITA 4671/Mum/2014 The A.O. observed that the assessee had declared gross profit during the current year and preceding years , as mentioned below:-
Asst. Year Total turnover Gross profit Rate of GP 2007-08 Rs. 1,71,60,423/- Rs. 16,84,935/- 9.82% 2008-09 Rs. 4,94,11,686/- Rs. 52,51,573 10.62% 2009-10 Rs. 9,92,48,745/- Rs. 88,12,530/- 8.88% It was observed by the AO that there was a fall in the GP rate for A.Y. 2009- 10 as compared to the GP rate for the preceding two years and assessee was asked to explain the same. The assessee vide its letter dated 18.10.2011 submitted as under:-
"In so far as fall in GP from 10.62% to 8.8% is concerned, it is submitted that the sales of assessee have increased from Rs. 4,94,11,685/- to Rs. 9,92,48,746 and thus in order to increase the sales, margin of GP has slightly decreased in as much as the turnover is roughly doubled. Thus, there is full justification for a slight fall in GP."
The A.O. rejected the explanation of the assessee and observed that the turnover for A.Y. 2008-09 has gone up twice(nearly thrice) as compared to preceding year turnover i.e. for A.Y. 2007-08, the GP rate had also gone up from 9.82% to 10.62%. The A.O. analysed the purchases as compared with the sales in the following way:-
"For example, from April, 2008 upto the month of November, 2008, the total sales are shown to be Rs.9,57,32,953/- and after reducing the GP component (8.88%) the cost of sales comes to Rs.8,72,31,866/-. But, from April, 2008 upto November, 2008 the purchases and the opening stock totally come to Rs.8,42,15,936/- only. Besides this, upto the month of February 2009, the total sales are shown to be Rs.10,59,10,550/- and the cost of the sales (by reducing GP) comes to Rs.9,65,05,693/-
4 ITA 4671/Mum/2014 whereas the purchases upto February, 2009 together with opening stock totally comes to Rs.8,96,91,449/- only."
Thus, the A.O. came to the conclusion that the books results were not reliable for the reason that the day to today stock register had not been 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 above explanation."
The explanation offered by the assessee were rejected by A.O. The A.O. observed that the GP rate was 9.94% for trading account upto 30th November 2008 while the same was 12.57% for the period upto February 2009, which were totally different than GP ratio of 8.88% declared for previous year relevant to the impugned assessment year 2009-10 .It was also observed that figure of sales and purchases extracted from the concerned registers by the assessee itself are different from those in Profit and Loss Account enclosed with tax audit report u/s 44AB. The AO observed that as per month wise 5 ITA 4671/Mum/2014 details (register) the total sales are Rs. 10,71,38,782/- whereas the profit and loss account shows sales of Rs. 9,92,48,746/- . It was also observed that the total purchases as per month wise details , the total purchases are Rs. 8,60,11,897/- whereas the profit and loss account shows purchases to the tune of Rs. 8,34,28,183/- . Thus, the AO observed that the assessee's book results were not genuine and by invoking provisions of Section 145(3) of the 1961 Act , the AO made an addition of Rs. 2,50,000/- on estimate basis to the total income of the assessee on account of low GP.
The A.O. further observed that the assessee had paid brokerage or commission of Rs. 36,29,799/- to various parties , out of which the following parties belongs to New Delhi:-
i) Sanjeev Datta
ii) Varun Datta
iii) Dipika Grover
iv) Geetanjali Thakur
v) Neelam Bhatia
The assessee was asked by the AO to prove claim of the brokerage paid to Delhi based parties. However, photocopies of credit notes issued by the assessee and confirmations of some of the recipients of brokerage were submitted by the assessee. The details of some brokers of New Delhi who were paid brokerage by the assessee are as under:-
Sr Name & address of Name and address of Value of goods Brokerage No. recipient of the supplier of goods involved brokerage 1 N.K. Jain & Sons M/s Kothari Steel Rs. 96,49,834 Rs. 1,20,000 HUF, 199/2B Street Syndicate, 202 Gupta No. 10, Tansingh Bhavan, Nagar, Anand Ahmedabad Street,
6 ITA 4671/Mum/2014 Prabat, New Delhi Mumbai 400009 2 Geetanjali Thakur, a) Uttam Galva Rs. 21,62,284 Rs. 1,50,000 4C/20 Rajendra Steels LKtd.,69, (1.29%) Nagar, P.D. Mellow New Delhi Road, Carnac Bunder, Mumbai 400009
b) Bharatkumar Rs. 92,54,239 Indrasen (1.44%) Trading Pvt.
Ltd., Devji
Ratanshi Marg,
Carnac Bunder,
Mumbai 400009
3 Marendra Thakur, A) Jasmine Rs.59,98,516 Rs. 1,50,000
4C/20 Rajendra Industrial
Nagar, New Delhi Corpn., 505
Giriraj, S.T.
Road, Mumbai
400009
B) Steel Rolling Mill Rs. 20,33,936
of Maharashtra,
Kholsa Bunder,
Darukhana,
Mumbai 400010
4 Rajendra Kumar Executive Trading Co. Rs.1,23,71,585 Rs.150,000
HUF, A-4/442, Pvt. Ltd., 59E, Baroda
Paschim Vihar, New Street, Carnac Bunder, Delhi Mumbai 400009 BROKERAGE CLAIM IN RESPECT OF SALES 5 Neelam Bhatia, C- a)Utkarsh Steel Rs. 58,50,717 Rs.5,00,000 716, NFS, New Delhi Corporation, 40 (8.55%) Carnac Siding Road, Carnac Bunder, Mumbai 400009 6 Punit Gupta, A-4, a)Ganon Dunkerly Co, Rs.12,39,152 Rs.160,000 442, Pachim Vihar, Mumbai (5.15%) New Delhi b)Remi Metals, Gujarat Rs.18,73,030 7 Deepika Grover, H- Kamal Trading Corpn. Rs.44,18,981 Rs.150,000 11, West Patel Hubli (3.39%) Nagar, New Delhi 8 Dilip Grover, H-11, -do- -do- Rs.150,000 West Patel Nagar, (3.39%) New Delhi 9 Sanjeev Datta, A- Goa Shipyard, Vasco Rs.3,00,65,158 Rs.5,00,000 7 ITA 4671/Mum/2014 269, Sarita Vihar, De Gama, Goa (3.33%) New Delhi 10 Varun Datta, A-269, Goa Shipyard, Vasco Rs.3,00,65,158 Rs.4,00,000 Sarita Vihar, New De Gama, Goa (3.33%) Delhi 11 Ghanshyamdas Western India Rs.5,99,34,476 Rs.8,70,000 Chemical Goyal, Shipyard, Goa (1.45%) HUF, Giriraj, Jaina, Maharashtra TOTAL Rs.34,00,000 The assessee claimed 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 AO has all the powers to enforce the attendance of these parties before Revenue.
The A.O. after considering the explanations of the assessee observed that the assessee carried its business from the premises 505, Gupta Shawan, Ahmedabad Street, Carnac Bunder, Mumbai, and the purchases mentioned in the above cases were by and large from the same locality where office of the assessee is situated . The AO observed that purchases mentioned against Sr. No. (1) above is from a concern located in the same building (Viz.Gupta Bhavan) where the assessee is located. It was observed by the AO that the transaction of purchase from that concern was also stated to be done through a broker of New Delhi. The other purchases from Carnac Bunder locality near to the assesee's business premises were all claimed to be done through New Delhi brokers and also the address of most of the broker parties are one and 8 ITA 4671/Mum/2014 same. The AO observed that the assessee was asked to produce the brokers but the said brokers were not produced by the assessee. The assessee was also asked to produce the service rendered by the Delhi parties but nothing was brought on record to prove this factual aspect. It was observed by the AO that details of occupation/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 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 the VAT account. Thus, basically, the difference in purchases and sales amount in the registers of the assessee and the P& L Account is because the VAT in the purchases bills and VAT in the sales bills have been taken to a separate account in the balance sheet for effecting its VAT payments. Thus, the 9 ITA 4671/Mum/2014 difference in the purchase and sales figures are basically due to accounting of VAT and nothing else and that was not understood by the Assessing Officer while examining the books of account vis-a-vis the P& L Account. Moreover, this did not call for rejection of books of account under section 145(3) of IT. Act, 1961 to justify the addition of Rs. 2,50,000/- on account of lower gross profits. In nutshell, the rejection of books under section 145(3) of IT. Act, 1961 and the addition of Rs. 2,50,000/- by the Assessing Officer are not justified at all in the facts of the case and in law and the same is deleted. Assessee's grounds of appeal no. 1 & 2 are allowed."
With respect to second issue of disallowance of Brokerage and commission expenditure by the AO , the learned CIT(A) held as under:
"5.3 Decision:-
I have considered the facts of the case and the submissions made by the assessee. It appears from assessee's CAs submissions that all the purchase brokerage and sales brokerage parties have confirmed the transactions of brokerage and are assessed to tax. Tax deduction at source was also done in their cases and TDS was p[aid by the assessee in time. Assessee's CA has submitted confirmation letters from the respective parties in Delhi about the receipt of brokerage on deals brokered by them regarding purchases made by the assessee and the sales effected by the assesse as follows:-
Sr Name & address of Name and address of Value of goods Brokerage No. recipient of the supplier of goods involved brokerage 1 N.K. Jain & Sons M/s Kothari Steel Rs. 96,49,834 Rs. 1,20,000 HUF, 199/2B Street Syndicate, 202 Gupta No. 10, Tansingh Bhavan, Nagar, Anand Ahmedabad Street, Prabat, New Delhi Mumbai 400009 2 Geetanjali Thakur, c) Uttam Galva Rs. 21,62,284 Rs. 1,50,000 4C/20 Rajendra Steels LKtd.,69, (1.29%) Nagar, P.D. Mellow New Delhi Road, Carnac Bunder, Mumbai 400009 10 ITA 4671/Mum/2014
d) Bharatkumar Rs. 92,54,239 Indrasen (1.44%) Trading Pvt.
Ltd., Devji
Ratanshi Marg,
Carnac Bunder,
Mumbai 400009
3 Narendra Thakur, C) Jasmine Rs.59,98,516 Rs. 1,50,000
4C/20 Rajendra Industrial
Nagar, New Delhi Corpn., 505
Giriraj, S.T.
Road, Mumbai
400009
D) Steel Rolling Mill Rs. 20,33,936
of Maharashtra,
Kholsa Bunder,
Darukhana,
Mumbai 400010
4 Rajendra Kumar Executive Trading Co. Rs.1,23,71,585 Rs.150,000
HUF, A-4/442, Pvt. Ltd., 59E, Baroda
Paschim Vihar, New Street, Carnac Bunder, Delhi Mumbai 400009 BROKERAGE CLAIM IN RESPECT OF SALES 5 Neelam Bhatia, C- a)Utkarsh Steel Rs. 58,50,717 Rs.5,00,000 716, NFS, New Delhi Corporation, 40 (8.55%) Carnac Siding Road, Carnac Bunder, Mumbai 400009 6 Punit Gupta, A-4, a)Ganon Dunkerly Co, Rs.12,39,152 Rs.160,000 442, Pachim Vihar, Mumbai (5.15%) New Delhi b)Remi Metals, Gujarat Rs.18,73,030 7 Deepak Grover, H- Kamal Trading Corpn. Rs.44,18,981 Rs.150,000 11, West Patel Hubli (3.39%) Nagar, New Delhi 8 Deepak Grover, H- -do- -do- Rs.150,000 11, West Patel (3.39%) Nagar, New Delhi 9 Sanjeev Datta, A- Goa Shipyard, Vasco Rs.3,00,65,158 Rs.5,00,000 269, Sarita Vihar, De Gama, Goa (3.33%) New Delhi 10 Varun Datta, A-269, Goa Shipyard, Vasco Rs.3,00,65,158 Rs.4,00,000 Sarita Vihar, New De Gama, Goa (3.33%) Delhi 11 Ghanshyamdas Western India Rs.5,99,34,476 Rs.8,70,000 Chemical Goyal, Shipyard, Goa (1.45%) 11 ITA 4671/Mum/2014 HUF, Giriraj, Jaina, Maharashtra TOTAL Rs.34,00,000 5.3.2 The Assessing Officer analysed the above, data and as per the Assessing Officer's analysis, the inferences drawn are that some of the parties to whom commission/brokerage paid are located at Delhi and some of them are staying in the same address. Further, the Assessing Officer has also commented on the issue regarding the services rendered by these parties to the assessee in procuring part of the purchases and entire sales are not furnished and assessee has not been able to produce a single party for examination before the Assessing Officer. The Assessing Officer also observed that, when the assessee was effecting purchases from Bombay parties whose offices were located in these same building and or nearby buildings, the assessee paid brokerage to four parties located in Delhi at rates ranging from 1.25% to 1.4% and when the same goods were supplied to parties located in Mumbai/Goa, the brokerage at rates ranging from 3.33% to 8.55% were paid to parties located again in Delhi/New Delhi/Jalna. Thus, as per the circumstantial evidence, the Assessing Officer came to a conclusion that the entire payment totaling Rs. 34,00,000/- was effected by the assessee was bogus and unjustified vls-a-vls the business needs of the assessee. It is observed from the above analysis and information that the Assessing Officer has presumed that the brokerage/commission paid was not for the business needs. He did not make any enquiries by issuing notices u/s 133(6) or summoning the parties u/s 131 of IT. Act. When a claim made by the assessee is doubted, it is the duty of an investigating officer 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 12 ITA 4671/Mum/2014 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 before the Bench in open Court, none appeared on behalf of the assessee, therefore, we proceed to dispose of this appeal after hearing ld. D.R. . From the order sheet entries, it is observed that on the last day of hearing i.e. 12th July, 2017 hearing was adjourned to 31st July, 2017 at the request of the assessee's counsel Ms. Nidhi Patel, Chartered Accountant subject to payment of cost of Rs. 5000/- imposed by the Bench , to be deposited with the Prime Minister's Relief Fund within a period of one week. When the appeal was called for hearing on 31- 07-2017 in open Court, none appeared on behalf of the assessee nor any compliance to order of the Bench passed on 12-07-2017 for depositing cost of 13 ITA 4671/Mum/2014 Rs 5000/- was on record , nor any adjournment application was moved by the assessee. Thus, under these circumstances we proceeded with the appeal by hearing learned DR. It is also on record vide order sheet entries that the assessee has in past sought large number of adjournments i.e. as many as eight times from time to time when the appeal was called for hearing in open court, while on one occasion on 29-05-2017 , the assessee did not entered appearance before the Bench when the appeal was called for hearing in open court as is emerging from order sheet entries.
7. The ld. D.R. submitted that the GP rate declined in the year under consideration from 10.62% in preceding year to 8.88% in the year under consideration. The ld. D.R. drew our attention to the orders of the authorities below. It is submitted that addition of Rs. 2,50,000/- was made by the A.O. which was deleted by the ld. CIT(A), but no explanations were given regarding VAT differential before the AO and it is for the first time before learned CIT(A) such a plea is taken. It is submitted that additional evidences were submitted before learned 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 14 ITA 4671/Mum/2014 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 shown by the assessee during the preceding year's and current year is as follows:-
Asst. Year Total turnover Gross profit Rate of GP 2007-08 Rs. 1,71,60,423/- Rs. 16,84,935/- 9.82% 2008-09 Rs. 4,94,11,686/- Rs. 52,51,573 10.62% 2009-10 Rs. 9,92,48,745/- Rs. 88,12,530/- 8.88% The assessee has submitted before the AO that the reason for fall in GP ratio was that the sales of assessee have increased from Rs. 4,94,11,685/- in AY 2008-09 to Rs. 9,92,48,746 in AY 2009-10 and thus in order to increase the sales, margin of GP has slightly decreased in as much as the turnover is roughly doubled . The assessee did not submitted details of monthly purchase and sale before the AO and also submitting part information called for by AO and that too only at the fag end when the assessment was getting time barred, thereby preventing proper enquiry and examination by the AO. Under these afore-stated circumstances, the AO made an adhoc addition of Rs. 2,50,000/- on estimate basis on account of low GP ratio to the income of the assessee. While before the ld. CIT(A) during appellate proceedings an altogether different stand was taken by the assessee, it is contended by the 15 ITA 4671/Mum/2014 assessee that the difference is due to exclusion of VAT differential from the purchases and sales which is taken to separate VAT account . The ld. CIT(A) granted relief to the assessee by deleting additions made by the AO by accepting contention of the assessee that the difference in the amount of purchase and sales were basically due to accounting in the VAT which is taken to separate account. Thus altogether different plea is taken by the assessee before learned CIT(A) and additional evidences were filed before learned CIT(A) as is emerging from records as well arguments of learned DR, 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 de-
novo 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 16 ITA 4671/Mum/2014 AO shall give proper and adequate opportunity of being heard to the assessee in accordance with principles of natural justice in accordance with law. We order accordingly.
With respect to the second addition made by the AO w.r.t. commissions and brokerage paid to Delhi based brokers for organizing sales/purchases of the goods dealt with by the assessee , the A.O. had observed that the assessee had paid brokerage or commission of Rs. 36,29,799/- to various parties , out of which the following parties belongs to New Delhi:-
vi) Sanjeev Datta
vii) Varun Datta
viii) Dipika Grover
ix) Geetanjali Thakur
x) Neelam Bhatia
The assessee was asked by the AO to prove claim of the brokerage paid to Delhi based parties. However, photocopies of credit notes issued by the assessee and confirmations of some of the recipients of brokerage were submitted by the assessee before the AO. The details of some brokers of New Delhi who were paid brokerage by the assessee are as under:-
Sr Name & address of Name and address of Value of goods Brokerage No. recipient of the supplier of goods involved brokerage 1 N.K. Jain & Sons M/s Kothari Steel Rs. 96,49,834 Rs. 1,20,000 HUF, 199/2B Street Syndicate, 202 Gupta No. 10, Tansingh Bhavan, Nagar, Anand Ahmedabad Street, Prabat, New Delhi Mumbai 400009 2 Geetanjali Thakur, e) Uttam Galva Rs. 21,62,284 Rs. 1,50,000 4C/20 Rajendra Steels LKtd.,69, (1.29%) Nagar, P.D. Mellow New Delhi Road, Carnac
17 ITA 4671/Mum/2014 Bunder, Mumbai 400009
f) Bharatkumar Rs. 92,54,239 Indrasen (1.44%) Trading Pvt.
Ltd., Devji
Ratanshi Marg,
Carnac Bunder,
Mumbai 400009
3 Marendra Thakur, E) Jasmine Rs.59,98,516 Rs. 1,50,000
4C/20 Rajendra Industrial
Nagar, New Delhi Corpn., 505
Giriraj, S.T.
Road, Mumbai
400009
F) Steel Rolling Mill Rs. 20,33,936
of Maharashtra,
Kholsa Bunder,
Darukhana,
Mumbai 400010
4 Rajendra Kumar Executive Trading Co. Rs.1,23,71,585 Rs.150,000
HUF, A-4/442, Pvt. Ltd., 59E, Baroda
Paschim Vihar, New Street, Carnac Bunder, Delhi Mumbai 400009 BROKERAGE CLAIM IN RESPECT OF SALES 5 Neelam Bhatia, C- a)Utkarsh Steel Rs. 58,50,717 Rs.5,00,000 716, NFS, New Delhi Corporation, 40 (8.55%) Carnac Siding Road, Carnac Bunder, Mumbai 400009 6 Punit Gupta, A-4, a)Ganon Dunkerly Co, Rs.12,39,152 Rs.160,000 442, Pachim Vihar, Mumbai (5.15%) New Delhi b)Remi Metals, Gujarat Rs.18,73,030 7 Deepika Grover, H- Kamal Trading Corpn. Rs.44,18,981 Rs.150,000 11, West Patel Hubli (3.39%) Nagar, New Delhi 8 Dilip Grover, H-11, -do- -do- Rs.150,000 West Patel Nagar, (3.39%) New Delhi 9 Sanjeev Datta, A- Goa Shipyard, Vasco Rs.3,00,65,158 Rs.5,00,000 269, Sarita Vihar, De Gama, Goa (3.33%) New Delhi 10 Varun Datta, A-269, Goa Shipyard, Vasco Rs.3,00,65,158 Rs.4,00,000 Sarita Vihar, New De Gama, Goa (3.33%) Delhi 18 ITA 4671/Mum/2014 11 Ghanshyamdas Western India Rs.5,99,34,476 Rs.8,70,000 Chemical Goyal, Shipyard, Goa (1.45%) HUF, Giriraj, Jaina, Maharashtra 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 AO has all the powers to enforce the attendance of these parties before Revenue.
The A.O. after considering the explanations of the assessee observed that the assessee carried its business from the premises 505, Gupta Shawan, Ahmedabad Street, Carnac Bunder, Mumbai, and the purchases mentioned in the above cases were by and large from the same locality where office of the assessee is situated . The AO observed that purchases mentioned against Sr. No. (1) above is from a concern located in the same building (Viz.Gupta Bhavan) where the assessee is located. It was observed by the AO that the transaction of purchase from that concern was also stated to be done through a broker of New Delhi. The other purchases from Carnac Bunder locality near to the assesee's business premises were all claimed to be done through New Delhi brokers and also the address of most of the broker parties are one and same. The AO observed that the assessee was asked to produce the brokers but the said brokers were not produced by the assessee. The assessee was also asked to produce the detail and nature of service rendered by the Delhi parties but nothing was brought on record to prove this factual aspect. It was 19 ITA 4671/Mum/2014 observed by the AO that details of occupation/antecedent , PAN, age, details of other brokerage activities etc were not brought on record by the assessee. It was also observed by the AO 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. 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 enquiry and examination by the AO . Under such peculiar factual circumstances of the case, it was incumbent on the learned CIT(A) to have conducted enquiry himself by issuing notices u/s 133(6) or summons u/s 131 of the 1961 Act to these brokers based at New Delhi to make enquiries about genuineness of brokerage and commission paid by the assessee to these Delhi based brokers, as the powers of learned CIT(A) is co-terminus with powers of the AO , more-so it was within knowledge of the learned CIT(A) 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 20 ITA 4671/Mum/2014 meaningful enquiry and examination by the AO. The assessee has claimed these brokerage and commission expenses by debiting in Profit and Loss account and deducting as an expenditure while computing income chargeable to tax and hence onus and burden is on the assessee to prove that these expenses were incurred wholly and exclusively for the purposes of business of the assessee and mandate of Section 37(1) of the 1961 Act is fulfilled/complied with . In our considered view, this matter also needs to be set aside and restored to the file of the A.O. for de novo determination of the issue on merits after conducting such enquiry and verifications as may deem fit by the AO in accordance with law. 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 by AO 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 with law. We order accordingly.
9. In the result, appeal of the Revenue in ITA No. 4671/Mum/2014 for assessment year 2009-10 is allowed for statistical purpose.
Order pronounced in the open court on 23rd August, 2017. आदे श क घोषणा खुले #यायालय म% &दनांकः 23-08-2017 को क गई ।
Sd/- sd/-
(SAKTIJIT DEY) (RAMIT KOCHAR)
JUDICIAL MEMBER ACCOUNTANT MEMBER
मुंबई Mumbai; &दनांक Dated 23.08.2017
[
21 ITA 4671/Mum/2014
व.9न.स./ R.K., Ex. Sr. PS
आदे श क! " त$ल%प अ&े%षत/Copy of the Order forwarded to :
1. अपीलाथ / The Appellant
2. यथ / The Respondent.
3. आयकर आयु:त(अपील) / The CIT(A)- concerned, Mumbai
4. आयकर आय:
ु त / CIT- Concerned, Mumbai
5. =वभागीय 9त9न?ध, आयकर अपील य अ?धकरण, मुंबई / DR, ITAT, Mumbai "C" Bench
6. गाडC फाईल / Guard file.
आदे शानुसार/ BY ORDER, स या=पत 9त //True Copy// उप/सहायक पंजीकार (Dy./Asstt. Registrar) आयकर अपील य अ धकरण, मुंबई / ITAT, Mumbai