SURYA BUILDHOME PVT. LTD.,NEW DELHI vs. ACIT, NEW DELHI

ORDER Per L.P. Sahu, A.M.: This is an appeal filed by the assessee against the order of ld. CIT(A)-XXXII, Delhi dated 27.06.2012 for the assessment year 2008-09 on the following grounds : “

1. It is contended that the order framed u/s. 153C/143(3) of the Act and confirmed by CIT(Appeals) is without jurisdiction.

2. The CIT(Appeals) has erred in holding that processing of Return of Income u/s. 143(1) of the Act does not amount to assessment. He has erred in holding that assessment is not concluded by processing of Return of Income u/s. 143(1) of the Act. These findings are opposed to the legal mandate of 2nd proviso to sec. 153A of the Act.

3. The lower authorities have erred in disallowing the Commission & Brokerage expenditure of Rs.8,39,062/-. The findings of the lower

ITA No. 4296/Del./2012 2 authorities that the same is unexplained expenditure is opposed to evidences on record.

, the assessee did not press grounds Nos. 1 &

2. The same are accordingly dismissed as not pressed. Grounds Nos. 3 to 5 challenge the sustenance of disallowance of Rs.8,39,062/- on account of unexplained expenditure booked for commission & brokerage.

3. The brief facts of the issue are that the appellant company is engaged in the business of development & Construction of real estate projects. A search and seizure operation was carried out u/s. 132 on 29.01.2009 in the cases of M/s. Saamag Group of cases, in which the business premises of assessee was also covered. Accordingly, notice u/s. 153C was issued to the assessee, in response to which return of income was filed on 05.10.2010 declaring an income of Rs.8,14,280/-. On scrutiny of accounts, the AO noticed that the assessee had shown work in progress at Rs.8,39,062/- in profit and loss account on account of ITA No. 4296/Del./2012 3 commission & brokerage. On being asked the assessee furnished the details showing payment of brokerage and commission of Rs. 8,22,158/- to Jai Matadi Buildcon (P) Ltd. and Rs.16,904/- to Jyoti Estates, totaling to Rs.8,39,062/-. On perusal of the bills raised for commission by the above parties, the AO observed that all the bills were raised against booking of plots for Saga Spring On NH-24 Hapur Project. The assessee, however, has not shown any advances received against these booking of plots nor the bills for commission were raised by the above parties to the assessee. The AO accordingly, did not accept the booking of expenses for commission against the above two parties shown as work in progress and disallowed the claim of Rs.8,39,062/- adding the same to the total income of the assessee. The appellant carried the matter in appeal before the ld. CIT(A), who after considering the submissions of the assessee and the documentary evidences furnished before, sustained the addition vide impugned order. Aggrieved by this order, the appellant is in appeal before the Tribunal.

4. Reiterating the submissions made before the ld. CIT(A), the ld. AR submitted that a Consortium agreement was entered amongst 16 companies, including the appellant company to develop a real estate project in Hapur and the said project was carried out by appellant in association with other members of the consortium, consisting of companies belonging to the one group known as Saamag Group. The ITA No. 4296/Del./2012 4 appellant was assigned to arrange finance and the sale of plots were undertaken through various real estate agents/brokers who identified the prospective buyers and the appellant had paid commission to them. It was submitted that though the bills of commission were raised in the name of other companies, but their payment was diverted to the appellant company and the appellant had made payments to the brokers out of its available monies, as is evident from books of account and bank statement. On the strength of these contentions, the appellant urged to delete the disallowance.

5. On the other hand, the ld. DR relied on the orders of the authorities below and submitted that the appellant has not shown to have received any Revenue, whereas corresponding expenditure have been booked in the profit and loss account. He, therefore, submitted that the ld. Authorities below have rightly disallowed the expenditure claimed by the assessee.

6. We have considered the rival submissions and have gone through the entire material available on record and we find no justification to interfere with the order of the first appellate authority. It is an admitted fact that the bills pertaining to alleged commission/brokerage were raised by the brokers in the name of M/s. Max Buildtech Pvt. Ltd. and not to the appellant. Therefore, as per commission

ITA No. 4296/Del./2012 5 bills, the appellant was not liable to make payment of commission. The diversion of liability to pay the commission from other company of the consortium to the appellant is not established by any documentary evidences or by referring to any such clause of the consortium agreement. Moreover, it stands proved on record that the booking amounts too were not received by the appellant but by M/s. Max Buildtech Pvt. Ltd. and M/s. Buildtech Pvt. Ltd. repaid the booking amounts to the customers after dissolution of consortium, as is also evident from the bank statement of M/s. Buildtech Pvt. Ltd. placed at pages 95 to 105 of the paper book. Therefore, the ld. CIT(A) appears to have committed no error while observing that the appellant has debited the entire sum of Rs.8,39,062/- to their Profit and loss account as revenue expenditure without crediting the corresponding receipts to their profit and loss account and as such, the claim of revenue expenses cannot be allowed if the corresponding receipts are not recognized in the accounts of the same year. The decision in the case of Birlasoft (India) Ltd. vs. DCIT of ITAT New Delhi , 44 SOT 664, relied by the assessee does not render any help to the assessee as in that case the question of foreign traveling expenses were considered to have been incurred for the purpose of business and in that circumstances, the Tribunal observed that such expenditure do not require presence of receipts. In the instant case, the brokerage expenses have direct nexus with the booking amounts of plots and therefore, the ld. CIT(A) was quite justified to observe that for want of ITA No. 4296/Del./2012 6 recognition of corresponding receipts, the brokerage expenses debited by assessee cannot be accepted as revenue expenditure.

7. Apart from the above we have also gone through the statement of assessable income placed by assessee at page 10 of the paper book and we find that while computing the income from business, the assessee itself has added back commission of Rs.8,22,158/- paid to Jai Matadi Buildcon Ltd., treating it as income from other sources and the commission of Rs.16,904/- paid to Jyoti Estates as expenses disallowed by assessee itself. Further the assessee has shown to have received interest income of Rs. 14,20,274/-, from which he has deducted the alleged brokerage of Rs.8,22,158/- paid to Jai Matadi Buildtech Pvt. Ltd. However, no nexus of this expenditure has been established by the assessee with the interest income received. Therefore, the assessable income returned by the assessee does not appear justified. In the totality of facts, circumstances and above discussion, we, therefore, find no justification to interfere with the order of the ld. CIT(A).