BPM SECURITIES P.LTD,MUMBAI vs. ITO 2(1)(1), MUMBAI

The assessee has raised the following grounds:- Ground No.1 “

The brief facts of the case are that the assesse filed the return of income on 31.10.2005 declaring total income to the tune of Rs.Nil. The assessment was completed u/s.143(3) of the Income Tax Act, 1961 (in short “the Act”) on 12.12.2007 assessing total income to the tune of Rs.34,14,180/-. At the time of assessment, it was observed that the expenses in respect of brokerage paid to Banhem Securities P. Ltd. Of Rs.25,00,000/- was not found incurred for the purpose of business of the assessee. Therefore, the penalty was levied to the tune of Rs.8,75,000/-. The assessee filed an appeal before the CIT(A) who confirmed the order passed by the Assessing Officer, therefore, the assessee has filed the present appeal before us.

Issue no.1 & 2 are interconnected, therefore are being taken up together for adjudication. Under these issues, the assessee has challenged the confirmation to levy the penalty to the tune of Rs.8,75,000/- by the Assessing Officer. Learned representative of the assessee has argued that the assessee has furnished all the details, documents and explanation to substantiate the claim of brokerage expenses but the claim was disallowed which cannot be treated as concealment of income in view of the law settled in CIT Vs. Reliance Petrochemicals Pvt. Ltd., 322 ITR 154, therefore, the penalty confirmed by the CIT(A) is wrong against law and facts and is liable to be deleted. However, on the other hand the learned representative of the department has placed reliance upon the order passed by the CIT(A) in question. On appraisal of the above mentioned orders and also documents on the file, it came into the notice that the assessee has shown the payment of Rs.25,00,000/- in Profit & Loss Account being brokerage paid to Banhem Securities Pvt. Ltd., however, the contention of the assessee was not found correct. The CIT(A) has also confirmed the order and the Hon’ble Income Tax Appellate Tribunal, Mumbai bench in for A.Y.2005-06 in the assessee’s own case dated 30.06.2011 confirmed the disallowance with a view that no service was rendered to the assessee by M/s. Banhem Securities Pvt. Ltd. and disallowed the brokerage u/s.37(1) of the Act. Anyhow, the quantum has been confirmed. The Assessing Officer took the view on the basis of this fact that the Bank of Rajashtan wrote to the Assessing Officer u/s.133(6) of the Act that M/s. Banhem Securities nowhere rendered services to the assessee. In the said circumstances, it is to be seen whether the claim of the assessee has been disallowed simply which does not attract the penalty in ITA No.7061/M/2013 A.Y.2004-05 view of the law settled in CIT Vs. Reliance Petrochemicals Pvt. Ltd., 322 ITR 154 or not. Before going further, it is necessary to advert the finding of the CIT(A) on record:-

The assessee has claimed to be paid the brokerage to M/s Benhem securities therefore it was incumbent upon the assessee to prove the transaction beyond the shadow of reasonable doubts which he failed to do so. Even Hon’ble ITAT in appeal N 5684/mum/2009confirmed the order passed by the Assessing officer. The transaction was not found genuine. It was not rightful claim which has been declined by the Assessing officer. There was nothing with the assessee to prove the genuineness of the transaction. The latter issued by the Bank of Rajasthan makes more clear about the transaction in which bank speaks about ignorance of transaction. Anyhow the claim was not found in accordance with law. The law