SEA SHELL ESTATE DEVELOPMENT P.LTD,MUMBAI vs. ITO 9(3)(1), MUMBAI

This is the second round of proceedings. Assessee is engaged in the business of financing and real estate. The assessee had claimed brokerage expenses of Rs.2,99,100/-, which was claimed to have been paid to Hemant Sakhale (HUF) (Rs.1,49,550/-) and Smt. Hemangi

The Ld. Counsel for the assessee submitted that the assessee had furnished all the details relating to brokerage expenses paid, viz., cheque details, bank account copy evidencing encashment of the cheque, receipts issued by the payees, details of Tax Deducted at source from the brokerage payments. She submitted that the Ld. CIT(A) has confirmed the disallowance by placing reliance on the sworn statement taken from Shri Hemant Sakhale on 2.1.2014 wherein, he had expressed ignorance about the financial arrangement in the replies given to some of the questions. The Ld. Counsel invited my attention to the answer given by Shri Hemant Sakhale to question nos. 6, 9, 19 and 20. The Ld. Counsel submitted that Shri Hemant Sakhale was very much inconsistent in giving replies to various questions. Though he had stated that he or his wife did not know about M/s. Ahuja Properties, yet he has confirmed that he has received commission from the assessee herein in respect of services rendered by him in the answer given to question no. 9. Further, he has stated that he has not provided any service to the assessee in the answer given to question no. 19 and, at the same time, he has stated that he has offered the brokerage received from the assessee for taxation. Since Shri Hemant Sakhale was giving contradictory statements, Ld. CIT(A) was not justified in placing reliance on the statement given by Shri Hemant Sakhale on pick and choose basis. The Ld. Counsel submitted that the statements in which contradictory replies were given cannot be relied upon. In this regard, she placed reliance on the decision rendered by the Tribunal in the case of DCIT vs. Nahar Spinning Mills, 8 SOT 6 and CIT V P.V. Kalyanasundaram, 282 ITR 259 (Mad). The Ld. Counsel submitted that identical addition made in Assessment Year 2006-07 has been deleted by the Ld. CIT(A) and the Revenue has accepted the decision rendered by Ld. CIT(A). The Ld.

On the contrary, the Ld. DR submitted that the Tribunal had restored the matter to the file of the Assessing Officer in the first round of proceedings with the direction to examine the nature of services rendered by the brokers, terms and conditions for making payment of brokerage, etc. However, the assessee did not furnish the details of services rendered by the brokers and hence there was no occasion for the AO to examine them as per the direction of the Tribunal. Hence the AO was constrained to disallow the expenditure claimed by the assessee, since it was not proved to be incurred for the purposes of business.

In the rejoinder, the Ld. Counsel submitted that the finance arrangements made with Ahuja Developers was continuing during the year under consideration also and hence the assessee was constrained to pay the brokerage amount out of business expediency.

I have heard rival contentions and perused the record. We have earlier noticed that the co-ordinate bench of the Tribunal has restored the matter to the file of the assessing officer with the direction to examine the nature of services and the terms and conditions relating to the same. I notice that the assessee did not furnish those details and instead, relied upon the evidences available with it relating to payment and TDS deduction. I find merit in the submissions of Ld D.R that the assessing officer could not examine the nature of services and terms and conditions relating to the same, since the assessee did not provide

The Ld A.R submitted that the financial arrangement made with Ahuja Properties continued during the year under consideration also and hence the brokerage was paid. I notice that the assessee had paid the brokerage in the immediately preceding year in respect of financial arrangement made in that year. The said loan continued during the year also and hence again the brokerage was paid in respect of the same financial arrangement. When a specific question was asked as to whether the assessee has given any fresh loan to M/s Ahuja Properties during the year under consideration, the Ld A.R submitted that the old loan has continued during the year under consideration. In my view, the normal trade practice is to give brokerage in respect of first financial arrangement and it is doubtful whether a prudent business man will give brokerage again for continuing the loan. The Ld A.R submitted that the identical payment made in the earlier year was allowed by Ld CIT(A). However, on a perusal of the order passed by Ld CIT(A) in that year, I notice that the disallowance was made by the AO on noticing contradictions in the 6 M/s. Sea Shell Estate Development Pvt. Ltd.

In view of the foregoing discussions, I am of the view that the assessee has failed to prove the nature of services rendered by brokers and the terms and conditions of brokerage, as directed by the division bench of Tribunal. Hence I am of the view that the Ld CIT(A) was justified in confirming the disallowance of brokerage expenditure.

In the result, the appeal filed by the assessee is dismissed.