G R PANDYA SHARE BROKING LTD Vs. ITO
LAWS(IT)-2008-9-2
INCOME TAX APPELLATE TRIBUNAL
Decided on September 30,2008

Appellant
VERSUS
Respondents

JUDGEMENT

R.K. Panda, A.M. - (1.) THIS appeal filed by the assessee is directed against the order dated 24-3-2005 of the Commissioner (Appeals)-IV, Mumbai relating to assessment year 2001-02.
(2.) In the revised grounds of appeal No. 1, the assessee has challenged the order of the Commissioner (Appeals) in confirming the disallowance of Rs. 11,62,897 made by the assessing officer on account of remissery charges/sub-brokerage charges. 2.1 Facts of the case, in brief, are that the assessee is a member of Bombay Stock Exchange and its business comprises of share and stock broking. The assessing officer, during the course of assessment proceedings, observed that the assessee has shown brokerage income of Rs. 80,26,582 and after sub-brokerage charges of Rs. 11,62,897 had declared net brokerage of Rs. 68,63,685. The assessing officer asked the assessee to furnish the details on the basis of which such brokerage was paid along with particulars of the sub-brokers along with their clientele, copy of their account duly confirmed, SEBI registration certificate, etc. However, the assessee furnished only the name and address of the sub-brokers and no other details were furnished. On being asked to furnish the requisite details to examine the sub-brokerage, the assessee vide its letter dated 21-11-2003 made the following submission: We never paid any sub-brokerage to sub-broker as brokerage charged to sub-broker in their transactions same as like a normal client. Hence the quantum of sub-brokerage paid or payable is not applicable. In the absence of furnishing of such details/confirmation, the assessing officer observed that the assessee failed to discharge its onus in proving the genuineness of the expenses claimed. He, therefore, disallowed an amount of Rs. 11,62,897 claimed by the assessee as sub-brokerage.
(3.) BEFORE Commissioner (Appeals), the assessee explained that the said sub-brokerage was given to one Mr. Shailesh Sheth who had provided a very big group of clients to the assessee whereby the assessee has received huge brokerage. Mr. Shailesh Sheth was entitled to remissier charges @ 50 per cent on the brokerage earned by the assessee through the clients group introduced by him. Accordingly, an amount of Rs. 11,62,897 was credited to the accounts of Mr. Shailesh Sheth. It was further submitted that the clients account of Mr. Shailesh Sheth was produced before the assessing officer but the same was rejected by the assessing officer for want of confirmation letters. The Commissioner (Appeals) forwarded the sub-brokerage confirmation letters of Mr. Shailesh Sheth to the assessing officer and directed him to issue summon to Mr. Shailesh Sheth and examine the genuineness of the sub-brokerage. The assessing officer deputed his Ward Inspector at the address furnished by the assessee. However, the Ward Inspector reported that the address furnished by the assessee was bogus as the party does not exist at the given address for which the summon could not be served. The assessing officer issued a letter to the assessee dated 16-2-2005 asking him to produce the sub-broker for his examination to prove the identity of the party and genuineness of the sub-brokerage paid but the assessee failed to produce the said party. The Commissioner (Appeals) called for the comments of the assessee on assessing officer's report. It was submitted before the Commissioner (Appeals) that Mr. Shailesh Sheth was not available at the above address since he had left the premises on account his hospitalisation and subsequently he died. It was further submitted that the assessee is taking steps to obtain the death certificate of Mr. Shailesh Sheth. However, xerox copy of his confirmation letters, xerox copy of his application for cancellation of land line filed with Stock Exchange, Mumbai on 22-3-2001 and a xerox copy of his PAN card, xerox copy of his application form, etc., were filed before the Commissioner (Appeals).;


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