Case Law Details
Brief of the Case
In the present facts of the Case, the Hon’ble tribunal held that businessman is the best Judge to find out what is the best for his business and to whom he should employ as the Commercial Expediency is only known to him.
Facts of the Case
Assessee was engaged in the business of consultancy and advisory services in shares and securities, who filed his return of income on 30.09.2009 admitting total income of Rs.38.92 lacs. The AO completed the assessment on 24.12.10 , u/s. 143(3) of the Act determining the income of the assessee at Rs.68.37 lacs. The assessee had debited consultancy charges in the names his father and friend. The AO was of the view that the assessee had not been able to establish the genuine need of the business and therefore made an addition of Rs.29.45 lacs.
Contention of the Assessee
The assessee contended before the first Appellate authority that he had filed explanation with regard to genuineness of payment of sub-consultancy fee. The jobbing business was highly volatile, that it required daily analysis of share market quotations and trends, that all these activities could not be performed by one person single handedly, that he took advise from persons who were experienced and expert in the line of this activity and the businessman is the best judge of the people to be employed to carry on the business activity.
Contention of the Revenue
The ld. Counsel for the Revenue relied upon the order of the AO and submitted that the services were not rendered to the Assessee.
Held by the CIT(A) The ld. CIT(A) while deleting the amount added by the AO held that that both the recipients of sub-consultancy were income tax assessees and had offered the corresponding incomes in their returns, that both of them had filed confirmation of payment, copies of income tax statement and bank statement before the AO, that both of them had appeared before AO in response to the summons issued u/s. 131, that in their statement on oath, they had confirmed the services rendered as well as receipt of sub consultancy charges. Also, in the stock market consultancy and advisory is given on real time basis and continuously, that in such a trade customary practice as well as circumstantial evidences had to be looked in.
Held by the Tribunal
The Hon’ble Tribunal held that that the disallowance was made by the AO, as he was of the opinion that there was no business need to make sub consultancy charges and then services were not rendered by the consultants, The, sub consultancy charges were offered for taxation. Further it was held that it is the assessee and not the AO who has to decide the needs of the business and payment to be made. The only exception is provisions of section 40(A)(2)(b)of the Act. But the AO has not discharged the onus that the assessee had violated that section. From the affidavits filed by both the recipients of the sub-consultancy, it was clear that they had rendered services to the assessee. Accordingly, the decision was given in the favour of the assessee.
The duty of the department whether any expenditure actually incurred or not during the course of business and not in the nature of personal or capital. Further it is the assessee and not the AO who has to decide the needs of the business and payment to be made. The only exception is provisions of section 40(A)(2)(b)of the Act.