2009 (8) TMI 843 - AT - Income Tax

Summary

Issues Involved:
1. Disallowance of jobbing loss.
2. Disallowance of excess brokerage paid back.
3. Penalty under section 271(1)(c) of the Income-tax Act.

Detailed Analysis:

1. Disallowance of Jobbing Loss:
The Assessing Officer disallowed the jobbing loss of Rs. 17,35,790 for the assessment year 2000-01, considering it as speculative business loss that cannot be set off against brokerage and interest income. This was based on previous assessments where similar transactions were deemed speculative. For the assessment year 2001-02, a similar disallowance of Rs. 18,20,040 was made. The Tribunal restored the issue to the Assessing Officer for fresh consideration, following its earlier decision for assessment years 1996-97 and 1998-99.

2. Disallowance of Excess Brokerage Paid Back:
The Assessing Officer disallowed Rs. 14,17,888 for the assessment year 2000-01 and Rs. 2,05,920 for 2001-02, alleging that the brokerage paid back was a diversion of income. The assessee's explanations, including incentives for introducing new clients and reimbursements, were not substantiated with evidence. The CIT(A) and the Tribunal upheld the disallowance, noting that the assessee failed to provide adequate justification and details for the brokerage refunds.

3. Penalty under Section 271(1)(c):
The Assessing Officer imposed penalties of Rs. 12,14,166 for 2000-01 and Rs. 98,841 for 2001-02 under section 271(1)(c) for concealment of income. The CIT(A) cancelled the penalty related to the jobbing loss but sustained it for the excess brokerage paid back, citing lack of evidence and proper accounting by the assessee. The Tribunal upheld the penalty, concluding that the assessee's explanations were not substantiated and lacked bona fide. The Tribunal found that Explanation 1 to section 271(1)(c) was rightly invoked, as the assessee failed to offer a credible explanation for the brokerage refunds.

Conclusion:
The Tribunal dismissed the appeals filed by the assessee for both assessment years and the appeal filed by the department for the assessment year 2000-01. The penalties imposed for the disallowance of excess brokerage paid back were upheld, while the penalty related to the jobbing loss was not imposed due to the matter being restored for fresh consideration.