Loading judgment…
No AI summary yet for this case.
Income Tax Appellate Tribunal, “SMC” BENCH, MUMBAI
Before: SRI MAHAVIR SINGH
This appeal by the assessee is arising out of the order of Commissioner of Income Tax (Appeals)-2, Thane [in short CIT(A)], in order dated 22.12.2017. The Assessment was framed by the Income Tax Officer, Ward-3(3), Thane (in short ‘ITO/ AO’) for the 23.03.2016 under section 143(3) of the Income Tax Act, 1961 (hereinafter ‘the Act’).
The first issue in this appeal of assessee is against the order of CIT(A) confirming the action of the AO in making addition on account of discrepancy found in the receipts recorded as per service tax return and as per accounts of the assessee without allowing reasonable opportunity of being heard to the assessee. For this assessee has raised the following grounds: -
“1. On the fact and the circumstances of the case and in law, the Hon'ble Commissioner of Income Tax (Appeals)-2 Thane ['CT(A)'] erred in upholding the additions made by the Income Tax Officer -Ward 3(3), Thane (herein after referred as 'the AO'), amounting to Rs. 25,20,802/- solely on the basis of discrepancy found in the service tax return and without obtaining any further corroborative evidence to support the addition.
2. The Appellant humbly prays that he may be allowed to present the audited books of accounts and any other corroborative documents as additional evidence and that the addition amounting to Rs. 25,20,802/- be deleted.
Briefly stated facts are that the assessee is a broker in MCX commodity exchange. The AO during the course of assessment proceedings notice from the profit and loss accounts that the assessee has declared net brokerage income of ₹ 21,37,785/- as against the total brokerage receipt of ₹ 1,30,72,603/- declared in service tax returns filed with the service tax department. The AO noted from the accounts of the assessee that the assessee claimed to have received and booked the 1,05,51,801/- as against the receipt declared at ₹ 1,30,72,603/- in the service tax return. As there was a discrepancy in the service tax return and the accounts of the assessee in respect of recording of the receipts, the AO treated differential amount of ₹ 25,20,802/- as undisclosed income and added to the returned income of the assessee as undisclosed brokerage receipt. Aggrieved, assessee preferred the appeal before CIT(A).
Before CIT(A), assessee filed affidavit of the partner of the firm, letter dated 25.02.2016 filed before service tax officer ST divison-7, Thane, noting of the errors in the figures of ST return and also letter dated 01.03.2016 filed before AO during the assessment proceedings. The CIT(A) has again gone into these details but finally, observed that there cannot be any mistake regarding recording of wrong figures of brokerage receipts in the four quarters. The CIT(A) has narrated the correct figures and wrong figures uploaded but finally, held that there is no possibility of committing mistake in adding brokerage of merely three months. Hence, he has not accepted the explanation and confirm the addition. Aggrieved, assessee is in second appeal before me.
Before me, the learned Counsel for the assessee only requested for filing of entire reconciliation with supporting evidences and also setting aside the matter to the AO for examining afresh the issue in entirety. On this the learned Sr. Departmental Representative has not objected.
I have gone through the facts and circumstances of the case in entirety and notice that the assessee could establish that there is some mistake in uploading of wrong figures of brokerage receipts in all the four quarters in the service tax return. Let this be verified and assessee will file the re-conciliation as to how the mistake has occurred. The AO will consider the issue in entirety after examining all the details and accordingly decide this issue. This issue of assessee’s appeal is remanded back to the file of the AO and allowed for statistical purposes.
The next issue in this appeal of assessee is against the order of CIT(A) confirming the action of the AO in disallowing the claim of loss/ bad debts. For this assessee has raised the following ground: -
“1. On the facts and circumstances of the case and in law, the Hon'ble CIT (A) erred in upholding the additions made by the AO. The AO erred in disallowing the claim of loss incurred by the Appellant during the course of its business amounting to Rs.14,36,879/- either as a trade loss or as bad debts.
2. The Appellant prays that the AO be directed to allow the loss amounting to Rs. 14, 36,879/-”
Briefly stated facts are that the AO noticed from the profit and loss account filed by the assessee that the assessee has incurred brokerage expenses of ₹ 81,94,177/- on the following : -
Name of the sub-broker Brokearge TDS deducted claimed Mamta Gupta 38710 3871 Minakshi Sawant 5673081 567308 Smita S Mane 1436879 0 Madhu Kedia 1045507 104416 Total 81,94,177 9. The AO verified and finally noted that in the case of brokerage claimed at ₹ 14,36,879/- in the name of Smita S Mane is not genuine. But to verify this, the AO issued notice under section 133(6) of the Act, whereby in compliance Smita S Mane informed the AO that she was not Sub broker of M/s SK associates. She has also not file any return of income and do not file any document regarding sub-brokership. When
29.03.2016, assessee filed complete copy of account of Smita S Mane in its books of account. It was claimed by assessee that Smita S Mane has made net loss of 34,05,583/- in the commodity market but the AO has not accepted the contention of the assessee and made addition by disallowing the claim of loss of ₹ 14,36,879/- claimed on account of default in payment by Smita S Mane. Aggrieved, assessee preferred the appeal before CIT(A), who also confirmed the action of the AO on the premises that Smita S Mane denied that she was not broker of SK associates. Aggrieved, assessee preferred the appeal before Tribunal.
I have heard the rival contentions and gone through the facts and circumstances of the case. I find that in the bank statement of Smita S Mane, filed by the assessee, reveals the following transactions in the name of M/s SK Associates.
Date Particulars Name of the Cheque No. Nature of party Transaction Debit/ Credit 10.07.2012 TR RTGS SK Associates 16,00,000 12.07.2012 TR RTGS SK Associates 442491 9,00,000 19.07.2012 TR NEFT SK Associates 1,50,000 02.08.2012 CL SK Associates 442497 9,00,000 06.08.2012 TR RTGS SK Associates 3,50,000 07.08.2012 TR RTGS SK Associates 5,00,000 07.08.2012 TR RTGS SK Associates 10,00,000 11.08.2012 TR RTGS SK Associates 5,00,000 11. From the above, details it is clear that the assessee firm is having regular dealing with Smita S Mane but she could not offer any explanation or justification that how these transactions were entered into by Smt. Smita S Mane with M/s SK Associates it means that there is some connection between Smt. Smita S Mane and the assessee. But the facts are not clear and even the assessee was not provided opportunity to examine Smt. S. mane, who has denied the transaction
131 of the Act. hence, I restore this issue back to the file of the AO for examining Smt. Smita S Mane and also allow opportunity to the assessee to explain the entire facts on the issue. The AO will decide the issue after undertaking this exercise. Accordingly, this issue of assessee is also remanded back to the file of the AO and allowed for statistical purposes.
In the result, the appeal of the assessee is allowed for statistical purposes.
Order pronounced in the open court on 27-07-2018. AadoSa kI GaaoYaNaa Kulao mao idnaMk 27-07-2018 kao kI ga[- .