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M/s Richline Leasing and Finance Pvt. Ltd. Versus ITO-4 (3) (2) , Mumbai

Penalty levied u/s.271(1)(c) - disallowing sub-brokerage payment - Held that:- Mere suspicions, surmises and 'no evidence' should not form basis for adjudicating any matter where strong evidence against the assessee is not available with the Revenue. In the instant case, the assessee has been able to substantiate its transactions with the payee parties and has also provided confirmations. The Revenue, on the other hand, has no evidence to substantiate its claim as regards the alleged dubiousness .....

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nalty u/s.271(1)(c) of I.T.Act. 2. In this appeal assessee is aggrieved for levying penalty by disallowing sub-brokerage payment made by the assessee. 3. Rival contentions have been heard and record perused. Facts in brief are that the assessee is a sub-broker of M/s Caprilloy Polymers Pvt. Ltd., which is a member of National Stock Exchange and is engaged in the business of share broking. During the course of scrutiny assessment payment made to sub-broker was disallowed and penalty was levied u/ .....

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e Act in respect of the disallowance so made. It was further contended that the assessee during the course of the assessment proceedings, submitted all the relevant documents and details in order to substantiate the genuineness of the transactions entered into by it with M/s. Regina Investment & Trading Pvt. Ltd. and other sub brokers amounting to ₹ 74,15,000. Further, there has been no subsequent search / survey action or discovery of any incriminating material/ confessional statement .....

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nd it was contended that if the evidences were sufficient to confirm the disallowance in the original proceedings, the Hon'ble IT AT vide its order dated 25.04.2012 would not have set aside the matter to the AO for further examination. Hence, if enough evidence was not available to the satisfaction of the ITAT for confirming the quantum order, penalty under section 271(1)(c) of the Act cannot be confirmed based on the same material available on record. The above contention. is supported by t .....

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by the learned AO: Clear business expediency for entering into the transaction. Confirmations of parties regarding provision of services. Bank Statements reflecting the payments. Normal trade practice of paying sub-brokerage. 5. On the other hand it was contended by ld. DR that assessee could not substantiate genuineness of the payment so made to the sub-broker, therefore, the AO was justified in levying penalty u/s.27(1)(c) of the Act by disallowing the same. 6. We have considered rival conten .....

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order dated 25-4-2012 had clearly observed and stated that the appellant company has furnished all the relevant bank accounts of the payee parties during the course of the assessment proceedings, which remains unexamined by the learned A.O. before making the said disallowance. Relevant extract of the said order is reproduced hereunder ... 19. After hearing both the sides and perusing the material available on record and in absence of any distinguishing feature brought on record by the parties, .....

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uced as under :- " ... 11. We have carefully considered the submissions of the rival parties and perused the material available on record. We find that there is no dispute that the appellant has filed relevant documentary evidence to prove that the payment of sub-brokerage of ₹ 35 lacs was made by him to M/s Surasik Services Ltd. However, the same was denied by M/s Surasik Services Ltd. We further find that in support of its claim, the appellant has also filed relevant bank account sh .....

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ed by the Revenue and it requires a fresh adjudication has set aside the issue to the file of the A O. 13. Since the issue needs further examination at the end of the A.O., and keeping in view the order of the Tribunal in appellant's own case (supra) we are of the view that the matter should go back to the file of the AO. and accordingly we set aside the orders passed by the Revenue Authorities on this account and send back the matter to the file of the AO. to decide the same afresh in the l .....

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amined again by the learned AO before passing any judgment. However, it is evident that the learned AO had passed the order disregarding the directions of the Hon'ble ITAT and refused to analyze facts of the case in light of the appellate authorities, similar to the assessment proceedings. 7. Now, coming to the merit of the penalty, we found that the parties to whom the subbrokerage was paid were not associated to the assessee in any way, therefore, the possibility of any collusion by the as .....

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the course of assessment proceedings to the learned A.O. The said bank statements also indicate that the amount of sub-brokerage had been paid from their bank account. Further, the bank statement also affirms the validity of the payment by the assessee towards sub-brokerage. Hence, the same is an outgo which can be validly claimed as an expense for the purposes of computing the taxable income of the assessee. There is neither allegation nor any evidence on record that the assessee has received .....

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se of Commissioner Of Income-Tax, Orissa vs Orissa Corporation (P) Ltd on 19 March, 1986 wherein the Hon'ble Supreme Court relied on its decision in the case of Messrs. Lalchand Bhagat Ambica Ram vs The Commissioner Of Income-Tax, Bihar and Orissa [37 ITR 288]. Relevant extract the said judgement relied upon by the Supreme Court is reproduced as under: "This Court was concerned there with the encashment of high denomination notes. In that case some unexplained high denomination notes we .....

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