BANOO P. PATEL, MUMBAI v. ITO WD 16(2)(4), MUMBAI

ITA 448/MUM/2010 | 2006-2007
Pronouncement Date: 25-03-2011 | Result: Partly Allowed

Appeal Details

RSA Number 44819914 RSA 2010
Bench Mumbai
Appeal Number ITA 448/MUM/2010
Duration Of Justice 1 year(s) 2 month(s) 5 day(s)
Appellant BANOO P. PATEL, MUMBAI
Respondent ITO WD 16(2)(4), MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 25-03-2011
Appeal Filed By Assessee
Order Result Partly Allowed
Bench Allotted B
Tribunal Order Date 25-03-2011
Date Of Final Hearing 16-03-2011
Next Hearing Date 16-03-2011
Assessment Year 2006-2007
Appeal Filed On 19-01-2010
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH B MUMBAI BEFORE SHRI R.S. SYAL (AM) AND SMT. ASHA VIJAYARAGH AVAN (JM) ITA NO. 448/MUM/2010 ASSESSMENT YEAR-2006-07 MRS. BANOO P. PATEL 8 JAMSHED HALL 2 ND FLOOR FORJETT STREET MUMBAI-400 036 PAN-AIUPP 8628B VS. THE ITO WARD 16(2)(4) MUMBAI (APPELLANT) (RESPONDENT) APPELLANT BY: SHRI MEHERNASH DUMASIA RESPONDENT BY: SHRI SURENDRA KUMAR O R D E R PER ASHA VIJAYARAGHAVAN (JM) THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAIN ST THE ORDER DATED 11.12.2009 PASSED BY THE LD. CIT(A)-27 FOR THE ASSE SSMENT YEAR 2006- 07. 2. FACTS OF THE CASE ARE THAT ASSESSEE IS AN INDIVI DUAL A 70 YEAR OLD PARSI WIDOW WHO IS DOING BUSINESS OF SELLING AND MA RKETING VARIOUS INVESTMENT PRODUCTS LIKE GOVERNMENT BONDS POSTAL S AVINGS CERTIFICATE CORPORATE FIXED DEPOSITS ETC. THE ASSESSING OFFICE R IN HIS ASSESSMENT ORDER HAS STATED THAT THE ASSESSEE IS IN RECEIPT OF INTEREST OF RS. 37 39 280/- BUT HAD ONLY DISCLOSED COMMISSION NET O F EXPENSES AT RS. 2 82 127/-. IT WAS CLAIMED BY THE ASSESSEE THAT SH E HAD PAID BACK COMMISSION TO CUSTOMERS AND VARIOUS OTHERS TO THE E XTENT OF RS. 26.6 LAKHS OUT OF RS. 31.01 LAKHS RECEIVED. THE AO AFTE R MAKING VARIOUS ENQUIRIES HAS COME TO THE CONCLUSION THAT THE ASSES SEE WAS AN OLD LADY ITA NO. 448/MUM/2010 2 OF 67 YEARS OF AGE OF INDIFFERENT HEALTH AND IT WAS DIFFICULT FOR HER TO UNDERTAKE SUCH A VIGOROUS BUSINESS OF MARKETING SEC URITIES AND BONDS. MOST OF THE BUSINESS WAS DONE BY A COMPANY M/S. POW ER PUSHERS FINANCIAL SERVICES LTD. WHOSE EMPLOYEES AND DIRECTO R WERE THE CHILDREN OF THE ASSESSEE. THE AO STATED THAT MOST OF THE CL IENTS FROM WHOM ENQUIRIES WERE MADE HAVE STATED THAT THE INCENTIVE COMMISSION WAS RECEIVED FROM THE COMPANY M/S. POWER PUSHERS AND T HE BUSINESS WAS CONTROLLED AND ROUTED BY THE COMPANY ONLY. THE AO HELD THAT PAYMENT OF SUCH HIGH AMOUNT OF COMMISSION WAS NOT JUSTIFIED AND HENCE HE HAS DISALLOWED 1/3 RD OF THE TOTAL CLAIM OF COMMISSION. 3. BEFORE THE LD. CIT(A) THE ASSESSEE MADE ELABORAT E SUBMISSIONS WHICH HAS BEEN BROUGHT OUT AT PAGE 2 TO 5 OF THE C IT(A)S ORDER AT PARA 4 4. THE LD. CIT(A) HELD AS FOLLOWS: LOOKING TO THE REPLY OF THE APPELLANT IT IS SEEN THAT APPELLANT HAS PASSED AWAY MAJOR PORTION OF HER COMMISSION TO HER CLIENTS AND OTHER PARTIES AND SHE HAS RETAINED ONLY A VERY SMAL L PERCENTAGE OF THE COMMISSION I.E. OUT OF RS. 31 LAKHS SHE HAS GIV E OUT RS. 26.5 LAKHS AS SUB-BROKERAGE COMMISSION WHICH SHOWS THAT HER MARGIN IS VERY MINISCULE. THE REPLY FILED BY THE APPELLANT D OES NOT SEEM TO BE VERY CONVINCING. CONSIDERING THE TYPE OF CANVASSIN G THAT IS NEEDED IN THIS BUSINESS AND THE EFFORTS REQUIRED I WOULD BE M ORE INCLINED TO ACCEPT THE CONTENTION OF THE AO THAT MOST OF THE BU SINESS IS CARRIED OUT BY THE PVT. LTD. CO. M/S. POWER PUSHERS. HOWEV ER THERE SEEMS TO BE LITTLE JUSTIFICATION FOR PAYING SUCH HIGH COM MISSION AND RETAINING ONLY 1/6 TH OF IT AS HER SHARE. UNDER SUCH CIRCUMSTANCES THE HIGH PAYMENT OF COMMISSION DOES NOT SEEM TO BE JUSTIFIED. THE APPELLANT HAS NOT GIVEN ANY CONVINCING REASONS FOR PAYING BACK THIS COMMISSION TO THE PARTIES WHOSE BUSINESS SHE GOT AN D THERE IS NO JUSTIFICATION FOR PAYING SUCH LARGE AMOUNT OF COMMI SSION. IF SHE WAS TO PAY SUCH HIGH COMMISSION SHE WOULD BARELY EARN VERY LITTLE INCOME FOR HERSELF AND THERE IS NO BUSINESS PROVISI ON TO RETURN SUCH HIGH COMMISSION AND KEEP JUST 5% FOR HERSELF. THE AOS ACTION IN DISALLOWING 1/3 RD OF THE COMMISSION APPEARS TO BE CORRECT AND THE ADDITION MADE BY HIM IS CONFIRMED. THIS GROUND OF APPEAL STANDS REJECTED. ITA NO. 448/MUM/2010 3 5. AGGRIEVED ASSESSEE PREFERRED AN APPEAL BEFORE U S AND SUBMITTED THAT THE ASSESSEE IS IN THIS BUSINESS FOR OVER 20 Y EARS LONG BEFORE THE ASSESSEES CHILDREN OR POWER PUSHER WAS INTO THIS B USINESS. THE PLACE OF OPERATIONS OF THE ASSESSEE AND POWER PUSHER ARE AT COMPLETELY DIFFERENT PLACES. THE PRODUCTS DEALT WITH BY THE ASSESSEE ( POSTAL SAVING SCHEMES AND RELIEF BONDS) ARE COMPLETELY DIFFERENT THAN THA T OF POWER PUSHER (MUTUAL FUNDS INSURANCE AND INTER-CORPORATE DEPOSI TS). THE ASSESSEE HAS ACQUIRED THE AGENCIES IN HER OWN NAME AFTER QUA LIFYING CERTAIN EXAMS. THE INCOME RECEIVED BY THE ASSESSEE IS IN H ER OWN NAME. THE COMMISSION IS RECEIVED FROM POSTAL AUTHORITIES AND RESERVE BANK WHO CANNOT BE IN CONNIVANCE OF ANY SORT WITH THE ASSESS EE OR POWER PUSHER AS THE AO HAS MADE. THE PROFIT OF POWER PUSHER WAS RS. 11 10 607/- AFTER DEDUCTING REMUNERATION PAYMENT TO DIRECTORS R S. 10 40 000/- COMPARED TO ASSESSEES RETURNED INCOME OF RS. 2 31 851/- LOOKING AT THIS THERE IS NO INFERENCE THAT THINGS ARE DONE TO DIVER THE INCOME OF POWER PUSHER TO ASSESSEE. 6. THE LD. COUNSEL FOR THE ASSESSEE SHRI MEHERNASH DUMASIA RELIED ON THE DECISION IN THE CASE OF JAMSHEDPUR MOTOR ACC ESSORIES STORES VS CIT 95 TAXMAN 664 (PAT.) WHEREIN IT WAS HELD THAT UNLESS THERE IS A LIMITATION PUT BY THE LAW ON THE AMOUNT OF EXPENDIT URE A LESSER AMOUNT THAN THE AMOUNT EXPENDED CANNOT BE ALLOWED MERELY B ECAUSE THE ASSESSING AUTHORITY THINKS THAT THE ASSESSEE COULD HAVE MANAGED BY PAYING A LESSER AMOUNT AS A PRUDENT BUSINESSMAN. HE FURTHER SUBMITTED THAT ADHOC DISALLOWANCES SHOULD NOT BE MADE AND EVEN IF THEY ARE MADE THEY CAN BE MADE EVEN IF CONCRETE AND CONCLUSIVE EVIDENCE IS AVAILABLE THAT THE CLAIM BY AN ASSESSEE IS NOT G ENUINE AND NOT BONAFIDE INCURRED FOR THE PURPOSE OF BUSINESS. ITA NO. 448/MUM/2010 4 7. THE LD. DEPARTMENTAL REPRESENTATIVE SHRI SURENDR A KUMAR RELIED ON THE ORDER OF THE LOWER AUTHORITIES. 8. WE HEARD BOTH THE PARTIES. WE FIND THAT THE ASS ESSEE HAS NOT GIVEN ANY REASON WHICH CAN JUSTIFY THE PAYING BACK OF COM MISSION TO THE PARTIES TO WHOM SHE GOT BUSINESS. THE ASSESSEE HAS RETAINED ONLY 1/6 TH OF THE COMMISSION AS HER SHARE AND HENCE DISALLOWAN CE MADE BY THE LOWER AUTHORITIES CANNOT BE DISMISSED AS TOTALLY IN CORRECT. HOWEVER SINCE THE DISALLOWANCE MADE BY THE LD. CIT(A) IS ON THE HIGHER SIDE WE RESTRICT TO 20% INSTEAD OF 1/3 RD DISALLOWANCE MADE BY THE LD. CIT(A). 9. IN THE RESULT THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED ON THIS 25 TH DAY OF MARCH 2011 SD/- SD/- (R.S. SYAL) (ASHA VIJAYARAGHAVAN) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI DATED 25 TH MARCH 2011 RJ COPY TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT-CONCERNED 4. THE CIT(A)-CONCERNED 5. THE DR B BENCH TRUE COPY BY ORDER ASSTT. REGISTRAR I.T.A.T MUMBAI ITA NO. 448/MUM/2010 5 DATE INITIALS 1 DRAFT DICTATED ON: 2 3 . 0 3 .201 1 SR. PS/PS 2. DRAFT PLACED BEFORE AUTHOR: 2 3 .0 3 .2011 ______ SR. PS/PS 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER: _________ ______ JM/AM 4. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER: _________ ______ JM/AM 5. APPROVED DRAFT COMES TO THE SR. PS/PS: _________ ______ SR. PS/PS 6. KEPT FOR PRONOUNCEMENT ON: _________ ______ SR. PS/PS 7. FILE SENT TO THE BENCH CLERK: _________ ______ SR. PS/PS 8. 9. DATE ON WHICH FILE GOES TO THE HEAD CLERK: DATE ON WHICH FILE GOES TO AR _________ ______ 10 . DATE OF DISPATCH OF ORDER: _________ ______