TMI Blog2003 (9) TMI 337X X X X Extracts X X X X X X X X Extracts X X X X ..... the impugned asst. yr. 1992-93. On filing of the return of income, the assessee-firm was requisitioned to get its accounts audited under s. 142(2A) of the IT Act. The requisition was complied with and a Special Audit Report was submitted. The assessment was completed on the basis of various observations made in the Special Audit Report. Finally, the income was determined at Rs. 2,67,77,870. The AO made about 16 additions to the income returned by the assessee-firm. 3. The assessment was taken in first appeal. The CIT(A) examined all the issues raised before him. While disposing of the first appeal, the CIT(A) remitted the case of two additions back to the AO for fresh consideration. The CIT(A) also confirmed an addition of Rs. 16,16,000. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... In security dealings, the delivery of physical stock/SGL/BR takes place every fortnight and the transactions are completed between buying and the selling bank only on the delivery of the physical stock/SGL/BR. The assessee receives cheques for brokerage only on the delivery of the physical stock/SGL/BR. It was noticed that though the normal delivery period is 15 days, there have been many transactions where the delivery has been effected in 1992-93 for contracts entered into in the accounting year 1991-92. Because of such delay in delivery of the physical stock/SGL/BR, the brokerage receipts have also been postponed to the year 1992-93. Since the assessee accounts the brokerage on receipt basis, all such receipts which should have been acc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ence, there is no postponement in accounting the same . The assessee's contention cannot be accepted for want of documentary evidence in support of his contention. Accordingly, an addition of Rs. 16,16,000 is added back to the total income of the assessee." The addition was accordingly made. 8. In first appeal, the CIT(A) was of the view that it was a design drafted by the assessee-firm to defer the payment of tax on the income otherwise accrued for the impugned asst. yr. 1992-93. Therefore, the CIT(A) relied on the decision of the Hon ble Supreme Court, rendered in McDowels Co. Ltd. vs. CTO (1985) 47 CTR (SC) 126 : (1985) 154 ITR 148 (SC) and confirmed the addition made by the AO. 9. The grounds raised by the assessee-firm with r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arned chartered accountant submitted that the percentage of brokerage earned by the assessee in dealing in Government securities are so minimal that in order to earn a brokerage income of Rs. 16,16,000, the assessee had to deal in transactions of securities worth crores of rupees. The issue and subscription of these Government securities are managed by the bankers to the issue and the assessee had no role to influence those financial institutions and banks in delaying the delivery of the instruments, so that the assessee would be in a position to postpone the accrual of income to succeeding assessment years. The learned chartered accountant, submitted that the finding of the CIT(A) that it was a design drafted by the assessee-firm is only a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the usual period of 15 days, the income would have been accrued for the asst. yr. 1992-93. Now, the issue is whether the delay for delivery of the instruments and receipts of the cheques was, in fact, stage managed by the assessee-firm or not. The AO does not have any evidence before him to hold that the assessee had deliberately stage-managed the occurance of delay in settling the disputed transactions after the normal period of 15 days. As a matter of fact, the AO has not made any enquiries in this direction, so as to confirm his suspicion with evidence. The AO has not made any enquiries with the banks and financial institutions, who were the managers of the issue. The suspicion of the AO has been converted into a finding without any ev ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly carried away by the suspicion transmitted from the assessment order. There is no basis in the present case to go to the extent of relying on the decision of the Hon ble Supreme Court in McDowells vs. CTO. This is because the assessee-firm had already offered the said income of Rs. 16,16,000 for taxation for the succeeding asst. yr. 1993-94. The assessee-firm had already accounted for the said income in its books of accounts for the previous year 1992-93. So, there is no case of any evasion of tax, as feared by the CIT(A). We are afraid that the finding of the CIT(A) is exaggerated. 14. In the facts and circumstances of the case, we are of the considered view that the brokerage income of Rs. 16,16,000 need to be assessed for the asst. y ..... X X X X Extracts X X X X X X X X Extracts X X X X
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