TMI Blog1997 (8) TMI 107X X X X Extracts X X X X X X X X Extracts X X X X ..... . Jyoti H. Mehta for operating their bank account inDelhi. The assessee had shown a lump sum brokerage of Rs. 1.50 lakh each from Shri Harshad Mehta, Shri Ashwin Mehta and Smt. Jyoti H. Mehta in Assessment year 1992-93. Besides this, the assessee had received a lump sum amount of Rs. two lakhs from H.S. Mehta Group as Office Administration expenses. The brokerage charged from H.S. Mehta Group was a very nominal amount as compared to the brokerage charged on such transactions in the market. The assessee had not received the aforesaid amount of brokerage from H.S. Mehta Group aggregating to Rs. 4,50,000 by cheques but only a debit entry was made on25th March, 1992. Such amount of brokerage of Rs. 4.5 lakhs from H.S. Mehta Group was shown as receivable without issuing any bills. No statement of account, delivery statement etc. were signed by any official of Delhi Stock Exchange. The assessee also failed to file any confirmation from H.S. Mehta Group to prove the veracity of such brokerage entry made by him in his books of account. It was stated before the Assessing Officer that the assessee received a sum of Rs. 2 lakhs from M/s. H.S. Mehta by account-payee cheque dated16-5-1991drawn ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f Rs. 12,48,12,635 which worked out to Rs. 9,36,094. The assessee had shown total brokerage of Rs. 1,94,036 and the difference i.e.,(Rs.9,36,094 -Rs. 1,94,036) -- Rs. 7,42,058 was added to the income of the assessee. (i) The CIT(Appeals) confirmed the aforesaid additions made by the Assessing Officer for assessment years 1992-93 and 1993-94. 4. Ground Nos. 1 to 7 raised by the assessee in his appeal for assessment year 1992-93 and Ground Nos. 1 to 3 raised in appeal for assessment year 1993-94 relate to the aforesaid additions of Rs. 22,63,320 made in assessment year 1992-93 and addition of Rs. 7,42,058 made in assessment year 1993-94. In these grounds of appeal, the assessee has challenged the finding given by the CIT(Appeals) holding that the book profits as disclosed by the assessee were liable for rejection and against confirming the estimate of the earning by way of brokerage made by the Assessing Officer. (i) Shri G.C. Sharma, the learned senior Advocate vehemently contended that the rejection of accounts by the Assessing Officer and confirmed by the CIT(Appeals) is patently erroneous and invalid. The Assessing Officer has substituted and imaginary income as against the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... brokerage income recorded in the books of account of the assessee. The burden lies on the department to prove that the income recorded in the books of account of the assessee does not represent the real and actual income. The department has to prove by brining on records positive material to show that any extra amount of brokerage was paid by Shri Harshad Mehta Group to the assessee. He also submitted that the assessee was summoned by the ADI vide notice under section 131, dated 16-7-1992 in connection with the Income-tax proceedings in case of M/s. Harshad S. Mehta Group. He produced his books of account before the ADI and nothing adverse was found by the ADI. Once again the assessee was summoned by the ADI vide notice, dated 13-12-1994 requiring him to produce his books of account for financial years 1991-92 and 1992-93 along with the copy of account of all the members of Harshad S. Mehta Group alongwith copies of contract notes, bills raised by the assessee and other relevant documents. The assessee produced all such records, books of account and other documents before the ADI. The ADI did not find anything against the assessee during the course of search investigations. (ii) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of account of all those persons and concerns of Harshad S. Mehta Group. It was also mentioned in the said order that the Assessing Officer may either summon the seized records or may himself visit those places and examine the books of account and other relevant records of those concerns of Harshad S. Mehta Group for purposes of verifying the correctness of the entries appearing in the books of account of the assessee. The Assessing Officer was required to submit a remand report after carrying out necessary scrutiny and verification to the Tribunal within a period of two months from the date of receipt of order dated20th March, 1997. The case was fixed for hearing on2-6-1997. On2-6-1997, the learned Senior Departmental Representative asked for a month's time more. The hearing was accordingly adjourned to2nd July, 1997. The learnedSenior DRagain submitted an application on1-7-1997stating that certain information sought from Mumbai have not yet been received and he, therefore, prayed for a month's time more. The hearing was finally adjourned to28-7-1997. On that date, the learned Senior Departmental Representative, submitted a remand report along with letter dated23-7-1997from Shri S. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ehta or Smt. Jyoti Mehta have nowhere in the statement recorded on 17-7-1997 stated that brokerage in Assessment year 1993-94 was paid at such varying rates and not on the basis of lump sum amount of brokerage. The learned Senior DR submitted that in view of the peculiar facts of the present case, it would be necessary to verify the correctness of brokerage income from the books of account from Harshad Mehta Group and such verification can be made only after the books of account of Harshad Mehta Group are completed by the auditors appointed by the designated Court. He submitted that everybody including the revenue should be granted a fair chance and a fair play, which is more imperative in a case where the assessee had transaction of large volume with persons and concerns of Harshad S. Mehta who are the persons involved in a very notorious share scam. 8. We have carefully considered the submission made by the learned representatives of the parties and have gone through the entire relevant documents to which our attention was drawn during the course of hearing. (i) After giving our deep and thoughtful consideration to the submissions made by the learned representatives and the e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aid to Shri M.D. Khandelwal towards brokerage and services rendered as a consultancy. He has emphatically denied that brokerage was not linked to the percentage of volume of business done. This reply is contrary to the facts disclosed by the assessee for assessment year 1993-94, where brokerage has been charged from Harshad Mehta Group at varying rates. This also needs clarification from Shri Harshad S. Mehta and as well as verification from books of account and records maintained by Harshad Mehta Group. Considering, the entirity of the facts and circumstances of the present case, we are of the firm view that it is absolutely necessary to restore back this issue to the Assessing Officer so that proper investigation and verification may be carried out by him in accordance with the provision of law. We, therefore, set aside the order of the CIT(Appeals) and that of the Assessing Officer and restore the matter back to the Assessing Officer for both the years under consideration in relation to the aforesaid grounds with the direction that he will pass a fresh order in accordance with the provisions of law. 9. The next common point relates to an addition of Rs. 2,52,011 and Rs. 9,01,0 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Rs. 9,01,054 in Assessment year 1993-94. (iii) Shri G.C. Sharma, the learned Senior Advocate submitted that the assessee had filed confirmation of seven clients out of the total list of 36 clients. Complete addresses of all clients were furnished before the CIT(Appeals). All the transactions made on behalf of such clients were made by cheques. No one is related to the assessee. Bills for purchase and sales were issued by the brokers which includes commission in respect of all such transactions. He also drew our attention towards various documents submitted in the compilation at pages 88 to 121. 10. The learnedSenior DRpointed out that the index of the paper book submitted by the assessee clearly indicates that various documents submitted in the compilation were not submitted before the Assessing Officer on the ground that those documents were received by the assessee subsequently. He strongly urged that the assessee should not be allowed to submit any fresh evidence or additional evidence at this stage. The assessee was also not entitled to furnish any additional evidence before the CIT(Appeals). He, thus, strongly supported the order of the CIT(Appeals). 11. We have cons ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... provisions of law after providing reasonable opportunity to the assessee. This covers ground Nos. 8 to 10 of assessee's appeal for assessment year 1992-93 and ground Nos. 4 to 6 of assessee's appeal for assessment year 1993-94. 12. Ground Nos. 11 12 raised by the assessee in assessment year 1992-93 relates to confirmation of an addition of Rs. 1,13,287 added by the Assessing Officer on account of certain unverifiable transaction as discussed on page 11 of the assessment order. The CIT (Appeals) confirmed the said addition. (i) The learned counsel for the assessee submitted that hundreds of transactions are recorded in the 'chopri' everyday. At the end of the day, if the concerning broker does not confirm the transactions, it is treated as cancelled or a transaction which did not materialise at all. The Assessing Officer has failed to properly consider the submission made on behalf of the assessee. (ii) The learnedSenior DRrelied upon the reasons mentioned in the assessment order. (iii) We have considered the submissions made by the learned representatives of the parties. The aforesaid addition has been made pursuant to the audit note No. 7 given by the auditors in their r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hares were got rectified in the next year when a sum of Rs. 9,000 was further debited. The transactions relating to bad deliveries have no financial impact on the income of the broker as the credit for bad deliveries is supported by a corresponding debit to the account of the party from whom such shares were purchased. He, therefore, contended that the aforesaid addition should be deleted. (ii) The learnedSenior DRrelied upon the reasons mentioned in the assessment order and in the order of the CIT(Appeals). (iii) We have carefully considered the submissions made by the learned representatives of the parties and orders of the learned DR authorities. The learned DR could not dispute the correctness of the assessee's submissions that the entries relating to bad delivery does not affect the income of the assessee, who only receives brokerage on such transactions. The 150 shares returned by M/s. J.H. Mehta as bad delivery were returned back by the assessee to M/s. Rathi Co. from whom these shares have been received. The aforesaid transactions were completed handing over the fresh shares in lieu of the bad delivery, partly in the year under consideration and partly in the next yea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ddition of Rs. 5,29,200 made to the total income of the assessee on the findings that 3,600 shares of M/s J.K. Inds. Ltd. which were sold to M/s. Dass Co. on 6-1-1992 were received by the assessee from Shri Ashwani Mehta on 6-1-1992 and the bill was made on 7-1-1992 whereas as per the finding in the special audit report relied upon in the assessment order the same were received by the assessee much later on 7-9-1992 only as per bill No. 106. 2. That on the facts and in the circumstances of the case, the learned CIT (Appeals) has erred in holding that before making the addition the assessee's explanation on the above discrepancy was not called for ignoring the fact that the assessee in his written objections to the audit report, filed before the Assessing Officer did not offer any explanation relating to the point at issue namely transfer of shares on a date earlier to their acquisition. 3. That because of the factual discrepancy the proper course for the CIT (Appeals) would have been to give an opportunity to the Assessing Officer to appreciate the evidence produced by the assessee at the appellate stage instead of granting straight relief to the assessee by admitting such ev ..... X X X X Extracts X X X X X X X X Extracts X X X X
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