ITAT deleted addition as assessee had explained commission income

1. Assessee was engaged in trading of shares and securities. During the year under Consideration, a survey u/s. 133A (of Income Tax Act, 1961) was conducted on the business premises of the assessee from where several documents including exercise book and hard disk of computer were impounded. On the basis of these documents and deposition of assessee made on the date of survey, the AO found huge mismatch in the brokerage income disclosed to the department and, therefore, he recorded reasons to believe that the assessee's income has escaped assessment and accordingly, he issued notice u/s. 148 (of Income Tax Act, 1961). The AO collated information from the hard disk and computed the calculation in respect to purchase of shares as well as sale of shares, the receipts from brokerage and computed the brokerage at Rs.14,72,350/- as unexplained brokerage for the AY 2006-07. The assessee had disclosed brokerage income in its return of income at Rs.1,14,208. AO made addition of Rs.3,52,173/- on account of advances received by the appellant holding the same to be bogus.

2. CIT(A)confirmed the action of AO.

3. ITAT held as under:

“We find that both the authorities below that the assessee is having two types of income i.e. profit from sale and purchase of shares i.e. their own transactions and brokerage from the trading transactions. When these comparative calculations were confronted to Ld. Sr. DR, he could not find any fault in the same but only relied on the assessment order and that of the order of CIT(A). In view of the above facts and circumstances, we are of the view that the assessee is able to explain in entirety that the commission income earned by assessee from STP Securities Ltd. is to the extent of Rs.1,14,208/- and not as calculated by the AO at Rs.15,86,558/-. In term of the above facts and circumstances, we delete the addition and allow this issue of assessee's appeal.

We find from the facts of the case that the assessee filed complete details of advance taken from parties along with PAN. Ld. Counsel for the assessee also filed complete details of sale and purchase made with these parties and these are running parties and easily can be verified from I. T. records of the respective parties. According to assessee, these are simply trade creditors and advance received are adjusted against sales made to these parties either in this year or in the immediate next year. We find from the facts of the case that none of these facts have been denied by AO or by CIT(A) and even now before us Ld. SR. DR. In term of the above, we feel that once these are running parties, and accordingly, when PANs are given, this cannot be treated as unexplained in the absence of any enquiry. Accordingly, we delete the addition and allow this issue of assessee's appeal.”

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