PUNIT SHANTILAL SHAH,BHARUCH vs. ASST. COMMISSIONER OF INCOME TAX, BHARUCH

Assessee represented by Shri Mukund Rao, A.R. Department represented by Shri Vinod Kumar, Sr. DR Date of hearing 20/02/2023 Date of pronouncement 20/02/2023 Order under Section 254(1) of Income Tax Act PER: PAWAN SINGH, JUDICIAL MEMBER: 1. This appeal by the assessee is directed against the order of learned Commissioner of Income Tax (Appeals)-4, Surat, (in short, the ld. CIT(A)) dated 15/03/2022 for the Assessment year (AY) 2012-13 wherein the assessee has raised following grounds of appeal: “1. The addition made of Rs. 1,00,037/- on account of disallowance of expense u/s 40(a)(ia) of the Act be squashed.

2. The addition made of Rs. 4,88,642/- on account of disallowance of Net Loss of Son Air be squashed.

3. The addition made of Rs. 2,79,606/- on account of LTCG be squashed.”

2. At the outset of hearing, the learned Authorised Representative (ld. AR) of the assessee submits that he is not pressing ground No. 1 of the appeal. The learned Senior Departmental Representative (ld. Sr. DR) for the Revenue has no objection if this ground of appeal is dismissed as not Punit Shantilal Shah Vs ACIT pressed. Therefore, considering the submissions of both the parties, ground No. 1 of the appeal raised by the assessee is dismissed being not pressed.

3. Facts qua grounds No. 2 and 3 of the appeal are that the assessee is an individual and derived his business income from three proprietorship concerns namely M/s Son Air, M/s Vikram Chemicals and M/s Son Air NX. The assessee also earned income of long term capital gain (Capital Gain) and from ‘other sources’ for the year under consideration. The assessee filed his return of income on 30/09/2022 declaring income of Rs. 29,92,610/-. The case was selected for scrutiny. During the assessment, the Assessing Officer noted that the assessee has claimed loss of Rs. 4,88,642/-. The assessee was issued show cause notice to produce books of account and other supporting documents in order to verify the genuineness of loss claimed in the proprietary concerned namely M/s Son Air. The assessee vide his reply dated 30/12/2014 contended that the assessee suffered loss in M/s Son Air because of reduction in business in that segment. The expenses due to which the assessee suffered loss were above Rs. 20,000/- were mostly a routine and fixed business expenses, consisting of depreciation on assets, vehicle expenses, petrol and maintenance, post and telecom, VAT, salary and wages which are necessary expenses. The Assessing Officer recorded that the assessee failed to produce his supporting evidence for various expenses claimed in the Profit & Loss Account. The Assessing Officer further noted that vide 2 Punit Shantilal Shah Vs ACIT order sheet noting dated 13/01/2015, the ld. AR of the assessee stated that he has no objection if the claim of loss of Rs. 4,88,643/- is disallowed and added to the income of the assessee. The Assessing Officer, accordingly disallowed the loss of one of the proprietory concerned to the extent of Rs. 4,88,643/-.

4. The Assessing Officer further noted that the assessee has shown long term capital gain of Rs. 22,97,378/- on account of sale of two properties in Mumbai. The Assessing Officer asked the assessee to furnish the details of property sold during the year and details of working of capital gain with evidence. The assessee filed its reply dated 30/12/2014 and submitted the working of long term capital gain. On perusal of such details, the Assessing Officer found that the assessee has shown sale consideration of Rs. 63.00 lacs and claimed brokerage of Rs. 2,50,042/- in respect of property at 4th floor, Central point, Mumbai. The Assessing Officer recorded that the assessee failed to submit the proof of payment of brokerage in the computation of income. The Assessing Officer issued show cause notice as to why in absence of any supporting evidence by the claim of brokerage should not be disallowed and recomputed the long term capital gain. The Assessing Officer recorded that the ld. AR of the assessee failed to furnish any explanation and submitted that he has no objection if long term capital gain is computed without considering the claim of brokerage. Accordingly, the Assessing Officer recomputed the Punit Shantilal Shah Vs ACIT claim of long term capital gain by disallowing the brokerage expenses of Rs. 2,50,042/-.

5. On appeal before the ld. CIT(A), both the additions/disallowances were upheld by the ld. CIT(A) by taking a view that during the assessment, the assessee agreed for the additions and further the assessee has not produced any such details which was not considered by the Assessing Officer for warranting relief. Further aggrieved, the assessee has filed the present appeal before this Tribunal.

6. I have heard the submissions of the ld. AR of the assessee and the ld. Sr. DR for the revenue and have perused the orders of the lower authorities carefully. Ground No. 2 of the appeal relates to disallowance of loss of Rs. 4,88,642/-. The ld. AR of the assessee submits that one of the business segment of assessee is of manufacturing and maintenance of Air conditioner. For maintaining the warranty, the assessee entered into agreement of annual maintenance contract with various parties and incurred routine expenses consisting of electricity charges, depreciation, vehicle and petrol expenses, salary of employees and VAT Tax. Such expenses are routine expenses and necessary for maintaining the business segment. The assessee suffered loss of Rs. 4,88,642/-. The ld. CIT(A) not considered the claim of assessee by holding that during the assessment, the assessee agreed for addition. The ld. AR of the assessee submits that he has no occasion to agree for such addition which was genuine business expenses. The ld. AR of the assessee submits that the 4 Punit Shantilal Shah Vs ACIT lower authorities wrongly disallowed the claim of assessee by holding that the AR for the assessee agreed for additions.

7. On the other hand, the ld. Sr. DR for the revenue submits that the assessee was represented by well-known professional as recorded in para 2 of the assessment order. In para 4.3 of the assessment order, the Assessing Officer clearly recorded that the ld. AR of the assesse agreed for addition. Once the assessee agreed, the assessee has no right to file appeal against such admission. The ld. Sr. DR for the revenue submits that even otherwise the assessee failed to prove such expenses with documentary evidence. Mere raising claim is not sufficient. The ld SR DR for the revenue prayed to uphold the action of lower authorities.

8. In short rejoinder submission, the ld. AR of the assessee submits that the issue may be restored to the file of Assessing Officer for verification of claim with direction to examine the issue afresh as he never agreed for addition.

9. I have considered the submissions of both the parties and have gone through the orders of the lower authorities carefully. I find that the Assessing Officer after issuing show cause notice recorded that vide order sheet noting dated 13/01/2015, the ld. AR of the assessee made no objection if amount of Rs. 4,88,643/- claimed as a loss is added/disallowed. The ld. CIT(A) also dismissed the corresponding ground by taking a view that the addition was made on the basis of consent of assessee. Before me, the same ld. AR, who represented the 5 Punit Shantilal Shah Vs ACIT assessee before the Assessing Officer, vehemently submitted that he has not agreed for such addition/disallowance and disallowance was made without verification. I instead of going in to the controversy, whether the ld AR for the assessee agreed or not, find that the claim of assessee was not verified on merit, therefore, considering the facts and circumstances of the issue under/ ground No. 2 of the appeal is restored back to the file of Assessing Officer to examine it afresh after considering the necessary documentary evidence and to pass the order afresh in accordance with law. The Assessing Officer shall keep in mind that the assessee was having two other business segments and will cross verify whether such expenses were common or not and were claimed or not in other business segment and to pass the order accordingly.

is allowed for statistical purposes.

11. Ground No. 3 of the appeal relates to disallowance of commission payment which was not allowed in working of long term capital gain. The ld. AR of the assessee submits that the property/ asset was purchased eight years back and details of payment of brokerage was duly recorded in the books of account which was never doubted by the income tax authorities in past. The Assessing Officer considered the cost of asset without brokerage expenses at Rs. 53,14,000/-. The assessee was having half share in the property. The Assessing Officer has not considered the cost of commission expenses of Rs. 2,50,042/-. The ld. AR submits that the brokerage/commission payment was a genuine 6 Punit Shantilal Shah Vs ACIT expenses and ought to have considered by the Assessing Officer. The ld. CIT(A) not considered the claim of assessee by holding that such addition/disallowance was made on the consent of ld. AR of the assessee. The ld. AR of the assesse submits that he never agreed for such addition rather it is a genuine expenses and required to be allowed while making calculation of long term capital gain. During the hearing, I confronted the ld. AR of the assessee to disclose the name, address of the persons or institution to whom such payment was made or any proof of payment in the form of receipt or details of cheque or banking transaction. The ld. AR of the assessee fairly submitted that no such details are readily available as the transaction relates to eight years old period.

12. On the other hand, the ld. Sr. DR for the revenue submits that before the Assessing Officer, the assessee failed to furnish any detail of the person or the individual to whom such commission was paid and form of payment of commission. The Assessing Officer on the admission of assessee, made addition and not including such commission payment while making working of long term capital gain. The ld. CIT(A) rightly confirmed the addition by holding that the addition is based on the consent of ld. AR of the assessee.

13. I have considered the submission of both the parties and have gone through the orders of the lower authorities carefully. I find that the assessee has claimed brokerage expenses on his share of Rs. 2,50,042/- 7 Punit Shantilal Shah Vs ACIT , on the half value of cost of asset of Rs. 27,82,020/-. Such brokerage expenses is about 5% of the sale consideration. No details including name, address or any other particular was furnished by the assessee either before the Assessing Officer or before the Tribunal except explaining that transaction was eight years old and no such details are available except recorded in the books of account which was never allegedly doubted or disputed by the department. I do not find any convincing reason in not disclosing the name, address of the person or the institution to whom such brokerage expenses was paid, moreover, the brokerage expenses is not reasonable which is about 5% of the cost of asset. Therefore, I do not find any justification in allowing such huge expenses which is claimed only to reduce the quantum of long term capital gain. Therefore, considering the totality of facts and circumstances of the case, I do not find any reason to allow such commission expenses, therefore, the disallowance is upheld with these additional observations on merit as well.