SHANTI LAL JAIN vs. COMMISSIONER OF INCOME TAX KO

The appeal has been preferred as against order dated 19.9.2008 passed by the Income Tax Appellate Tribunal dismissing the appeal no.716/JP/2007. The Assessment Officer has made the addition of Rs.16,47,512/- . The same has been affirmed by the Commissioner of Income Tax in appeal as also by Income Tax Appellate Tribunal. Aggrieved by the aforesaid addition, the assessee has come out with the appeal under Section 260A of the Income Tax Act.

The submission raised is that payment of commission paid by the assessee to Shri Uttam Chand Jain and Smt. Sunita Jain, who are son and daughter-in-law, ought not to have been added. It was a business expenditure.

Shri Agrawal has submitted that the documents on record prove that the amount paid to Shri Uttam Chand Jain and Smt. Sunita Jain was towards commission as such business expenditure, though they

After hearing learned counsel for the appellant at length and going through the material on record, we find that the decision taken by the Assessment Officer, Commissioner of Income Tax (Appeals) and Income Tax Appellate Tribunal, is based upon the facts of the case and the material which has been placed on record. The brokerage given to the son and daughter-in-law, was not mentioned as brokerage but has been shown as payment made to the family members. The Income Tax Appellate Tribunal in its order, has assigned various grounds for confirming the addition. Paras 16 and 17 are thus quoted :- “16. The brief facts of the case are that out of the total brokerage/commission of Rs.80,56,910/- received by the , he has shown payment brokerage/commission

We have heard the rival contentions and perused the facts of the case. The assessee has earned brokerage from various companies on account of investments made by the various investors including his relatives Shri Uttam Chand Jain and Smt. Sunita Jain who are son and daughter in law of the assessee. The assessee claims the brokerage of Rs.16,47,512/- since the same has been passed over to the said relatives. The case is squarely covered under the Provisions of Section 40A(2)(b) of the Act. The assessee has not passed over the brokerage to any other investors and nothing has been brought on record that it is a practice to pass over the brokerage to the investors whereas the assessee has passed over the total brokerage to his relatives. Therefore, the said expenditure claimed by the assessee is excessive/unreasonable to the fair market value. Therefore, we find no infirmity in 4 the order of the ld. CIT(A) who has rightly confirmed the action of the AO. Thus Ground No.3 of the assessee is dismissed.”

It is apparent that Assessment Officer has examined various statements of the brokerage which were furnished by the assessee before him, and in the case of investors, the assessee has not shown any payment of brokerage to the investor concerned and it has only shown payment of brokerage to his family members. It has been found by the Assessment Officer that it has been done to divert his income to his family members which would have otherwise become taxable in his own hands. Shri Uttam Chand Jain and Smt. Sunita Jain were having huge brought forward loss. The income was also diverted as against the huge loss. Provisions of Section 40A(2)(b) of the Act has been attracted.

Shri Agrawal has relied upon the decision of the Madras High Court in Commissioner of Income-Tax v. Computer Graphics Ltd., [2006] 285 ITR 84 (Mad), in which the decision was based upon the material which was placed on record so as to treat the payment made as business expenditure. It depends upon the facts of each case, as such case has no application. Reliance has also been placed upon Commissioner of Income-Tax v. Print Systems And Products, [2006] 285 ITR 337 (Mad). Relevant material was considered. Relevant material in every case differ as such the decision cannot be said to be applicable in the facts of the case.

There are findings of fact recorded by the Assessment Officer, Commissioner of Income Tax (Appeals) and the Income Tax Appellate Tribunal, in this regard and we do not find any infirmity in the findings of facts. No substantial question arises in the appeal. Appeal is dismissed in limine. (Dr. Meena V. Gomber) J.