SUNRAJ PLASTICS,MUMBAI vs. DCIT CIR 22(2), NAVI MUMBAI

This appeal has been preferred by the assessee against order dated 18/07/2014 passed by the Ld. CIT(Appeals)-33 Mumbai for the Asst. Year 2006-07, whereby the Ld. CIT(A) confirmed the penalty levied by the A.O u/s 271(1)(c) of the Income Tax Act, 1961 (in short ‘the Act’) and dismissed the appeal of the assessee.

1. “On facts and in law, the CIT(A) erred in confirming the penalty levied by the A.O u/s 271(1)(c) of the Income Tax Act, 1961 without properly appreciating the facts of the case and assessee’s explanation thereof.

3. At the outset the Ld. AR submitted that in quantum appeal both the additions confirmed by the Ld. CIT(A) have been deleted by the ITAT vide order dated 11/12/2014. Therefore, the penalty order does not sustain.

4. On the other hand the Ld. DR did not controvert the aforesaid facts. In the light of the respective submission, we perused the documents placed before us. We find that the co-ordinate Bench of the Tribunal has deleted the addition of Rs. 11,59,144/- paid by the assessee to the broker holding as under:-

“2.3 First we shall deal with the payment of brokerage/commission amounting to Rs.11,59,144/-paid by the assessee to the broker. The payment was paid by the assessee to the broker to Pranav Maritime Services Pvt. Ltd. for procuring goods from Sunflag Iron and Steel Comp. Ltd. and R.L. Steels Ltd. The Assessing Officer made enquiries from the concerned parties. As per the Revenue, Sunflag Iron and Steel Comp. Ltd. vide their letter dated 05/12/2008 claimed that they made the sales directly to the assessee and R.L. Steels neither confirmed nor denied the existence of any broker. A query was raised by the Bench to the ld counsel for the assessee regarding these replies. It was explained that due to business exigencies sometimes it is not told to the party as to for whom the brokers were working and such brokers are providing the goods and at competitive rates. What it may be, we find that payments were made by the assessee to the broker and deducted tax at source on such payments which were made through account payee cheque. The assessee duly filed the affidavit of the broker right from assessment stage and later stages also confirming the payment/receipt of brokerage. The claim was denied by the Assessing Officer on the plea that there was no evidence of rendering of services. Broadly, we are of the view, it is always not possible to produce evidence of rendering of services and the ld. Commissioner of Income tax (Appeals) has merely endorsed the stand of the Assessing Officer without making an elaborate enquiry. The assessee also produced agreement dated 05/04/2005 between the assessee and Shri Manish Shawant, Director of M/s Pranav Maritime Services Pvt. Ltd. supported by an affidavit regarding rendering of services. The ld. CIT (A) discarded the agreement dated 05/04/2005 which was filed as additional evidence merely on the ground that it was not filed before the Assessing Officer. Another fact to be noted here is that in the subsequent assessment year, the Department accepted the payment of brokerage to the same broker while passing order u/s 143(3) of the Act for A.Y. 2007-08. As canvassed by the ld. Counsel for the assessee, Shri Manish Shawant, pursuant to enquiry by the Assessing Officer, vide reply dated 08/10/2009 categorically told that he received the commission from the assessee (page-64 of the paper book), wherein, the bank statement, receiving the payment through cheque by the assessee was also annexed alongwith the ledger account for the period from 01/04/2006 to 31/03/2007. It is also noted that the broker also claimed such brokerage income by filing a return alongwith computation of income which was also made available to the Assessing Officer. It seems that denial of relief to the assessee is based upon presumption. In such a situation, we are of the view, presumption cannot take the shape of evidence, however strong it may be, more specifically when enough material is available on record evidencing the brokerage payment. The reply of the broker was in response to letter dated 01/10/2009 written to him (page - 65 of the paper book) by the DCIT. The assessee has also duly shown the amount by way of credit note (page-66 of the paper book) and ledger account (page-67 of the paper book). In view of these facts, we are of the opinion that the addition was wrongly made, thus this ground of the assessee is allowed.”