MRS. LOBO CRYSTAL,MANGALURU vs. ASSISTANT COMMISSIONER OF INCOME TAX, CIRLCE-1(1) & TPS, MANGALURU

The common issue involved for both the years in these appeals are disallowance of commission expenses as not genuine and non- deduction of tax at source u/s. 194H of the Act. For AY 2015-16 the issue is disallowance of commission expenses of Rs.99,34,400 in kind by transfer of shares of Cipla Ltd. These appeals were heard together and disposed of by this common order.

The brief facts of the case are that assessee is an individual engaged in share trading and related business. For the AY 2015-16 the assessee filed return of income on 05.11.2015 declaring total income from business including trading in share (speculative as well as delivery based). The case was selected for scrutiny and statutory notices were issued to the assessee. The AO noted the brief modus operandi of the business activity of the assessee as under:-

“3. During the course of scrutiny, the assessee stated that she is engaged in business of tracing old shares of individual parties which is inherited from their family members. The assessee stated that she also renders services for resolving the problems relating to loss of share certificates, unclaimed dividend, converting physical shares into DEMAT etc. Similar business activities appears to have been carried out by assessee's spouse Mr.Ajith Jude Lobo. The assessee also stated that the dealing in tracing is a confidential business which involves finding out unclaimed old shares, getting the legal heir certificate approved by the High Court, necessary permissions from ROC and other authorities, etc. For the above services, assessee claims to be getting a portion of the shares obtained on transfer to the clients, as commission. After obtaining transfer of shares for the clients, the assessee's DEMAT account will be credited OFFLINE by certain number of shares, as per the agreement with the client.

During the year under scrutiny, the assessee alongwith her husband has carried out only one such transaction during the previous year and carried out tracing in respect of shares of CIPLA Ltd. The assessee has received income in the form of certain number of shares on the basis of an agreement dated 29- 04-2014 with certain parties for the above services. It is noticed that the clients have agreed to transfer 3,60,000 shares in Cipla Ltd to the assessee as per agreement and accordingly the assessee obtained commission in the form of shares from the above party.

From the data, the AO noted that the assessee has carried out substantial business activity and made investments in the earlier years and no return of income was filed earlier. The assessee admitted there was taxable income for AY 2014-15 and filed manual return declaring income of Rs.33,16,380. The AO observed from the details that assessee is engaged in business of trading of shares, F&O and trading of currency and declared 8% of the turnover on presumptive basis.

On appeal, the ld. CIT(Appeals) confirmed the order of the AO on the above disallowances. Aggrieved, the assessee is in appeal before the Tribunal.

The assessee has filed additional evidence at pages 107 to 132 as follows:-

The ld. AR submitted that the additional evidence will have impact on the additions made by the AO as non-genuine expenditure and requested for admission of the same. He further argued extensively on merits and submitted that the expenditure was incurred through banking channels and details were also furnished before the AO regarding name and address of the parties concerned.

On the other hand, the ld. DR relied on the orders of lower authorities and submitted that they have rightly observed that the assessee was unable to prove the genuineness of the expenditure incurred and not complied with the provisions of section 194H. Therefore the orders of lower authorities should be upheld.

After hearing both the sides, perusing the entire material on record and the orders of the lower authorities, we note that the additional evidence filed by the assessee has impact on the issues involved and therefore the same is admitted. The assessee has paid commission through banking channel as well as in the form of transfer of shares. The AO noted that no return was filed by the assessee for AY 2014-15, which was subsequently filed belatedly. The AO issued enquiry letters to the parties concerned but received no response. We note from the assessment order that the AO has obtained information from the data about the business activities of the assessee from FY 2012-13 to FY 2015-16. The revenue authorities have disallowed the same since the assessee failed to establish that it was genuine expenditure and it is also held that the assessee failed to comply with the TDS provisions u/s. 194H. The assessee has got the books of accounts audited u/s. 44AB in this year for the first time. The ld. AR stated that the turnover of the assessee was below the taxable limit and therefore section 194H regarding deduction of tax at source is not applicable. We think it fit to remit the matter to the file of the AO for fresh consideration in the light of additional evidence. Needless to say that the assessee may be reasonable opportunity of being heard by the AO before making fresh assessment as per law. The assessee is directed to produce all the relevant documents to substantiate its claim and avoid seeking unnecessary adjournment for early disposal of the case. The issue being common on identical facts, both the appeals are remitted to the file of Assessing Officer in the above terms. Thus, ground Nos. 2 to 4 for AY 2014-15 and ground No.2 for AY 2016-17 are disposed accordingly.

Ground No. 5 for AY 2015-16 and ground No.3 for AY 2016-17 were not pressed and dismissed accordingly. The other grounds in these appeals are general / consequential in nature requiring no adjudication.

In the result, both the appeals are allowed for statistical purposes. The common order passed shall be kept in the respective case files.