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2022 (5) TMI 1372 - AT - Income TaxDisallowance of brokerage paid to various persons by considering them to be ingenuine - HELD THAT - As noted that the assessee has provided all the details of the brokers like Income Tax Returns, Copy of Bank Statements, Pan Card Details, Addresses of the brokers and nothing has been found wrong except the lady brokers did not appear before the AO for verification. When the Department has accepted the Income Tax Returns of the brokers and did not find any infirmity then it is not imperative by the AO to compel the lady brokers for verification whose details have already been provided by the ld. AR of the assessee as per the format of the AO. Hence, in this view of the matter, we do not concur with the orders of the lower authorities and the disallowance sustained by the ld. CIT(A) is deleted. Thus the appeal of the assessee is allowed.
Issues Involved:
1. Disallowance of brokerage expenses amounting to Rs. 8.90 lakhs. Issue-wise Detailed Analysis: 1. Disallowance of Brokerage Expenses: Facts of the Case: The assessee, engaged in trading precious and semi-precious stones under the trade name M/s. Bharat Exports, filed a return of income declaring Rs. 4,38,190/-. The case was selected for scrutiny, and the Assessing Officer (AO) disallowed brokerage expenses of Rs. 8,90,000/- paid to three brokers, considering them ingenuine as they did not appear before the AO due to illness despite submitting supporting documents like Income Tax Returns (ITRs), bank statements, and medical certificates. First Appeal: The Commissioner of Income Tax (Appeals) [CIT(A)] upheld the AO's decision, stating that the brokers were not produced for verification, and no documents proved their work for the assessee. The CIT(A) noted that mere payment by cheque or TDS deduction does not establish genuineness without corroborating evidence of services rendered. Assessee's Argument: The assessee argued that the primary onus was discharged by providing all necessary details and that the brokers complied with the AO's summons through their authorized representatives. The assessee contended that the disallowance was solely based on the brokers' non-appearance due to medical reasons, which should not penalize the assessee. The assessee referenced multiple case laws supporting the claim that non-appearance alone does not invalidate genuine transactions, especially when supported by proper documentation and no defects in the books of accounts. Relevant Case Laws Cited: 1. Tirmuala Seven Hills Pvt. Ltd. vs JCIT: Non-service of notice does not make an assessee bogus if complete details are furnished. 2. CIT v. M/s Nangalia Fabrics (P.) Ltd: Brokerage commission paid through account payee cheques cannot be deemed bogus if linked to actual sales. 3. CIT v. Inbuilt Merchant Pvt Ltd: Books of accounts maintained in the ordinary course of business are relevant and cannot be discarded without appropriate reasons. 4. CIT v. Bhawani Oil Mills (P.) Ltd: Non-appearance of creditors alone cannot justify disallowance if confirmations and affidavits are provided. 5. Syntexa vs. ACIT: The primary onus is discharged by furnishing names, addresses, and payment details. 6. M/s Beauty Tax vs DCIT: Non-appearance of suppliers without corroborating evidence does not justify disallowance. 7. CIT vs Nikunj Eximp Enterprises (P.) Ltd: Non-appearance of suppliers does not invalidate purchases if supported by proper documentation. Tribunal's Decision: The Tribunal noted that the assessee provided comprehensive details of the brokers, including ITRs, bank statements, and PAN details. The Tribunal observed that the AO's disallowance was based on the brokers' non-appearance, despite their compliance through authorized representatives. The Tribunal emphasized that the Department accepted the brokers' ITRs without finding any infirmity, and the assessee should not be penalized for the brokers' non-appearance due to medical reasons. The Tribunal concluded that the disallowance was not justified and deleted the disallowance of Rs. 8,90,000/-. Conclusion: The Tribunal allowed the assessee's appeal, holding that the disallowance of brokerage expenses was unwarranted given the substantial compliance and documentation provided by the assessee. Order Pronouncement: The appeal was allowed, and the order was pronounced in the open court on 13/04/2022.
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