K. Sivasubramaniam (Deceased) Vs ITO (Madras High Court)
Introduction: The case of K. Sivasubramaniam (Deceased) vs ITO before the Madras High Court revolves around an assessment order dated 19.01.2021, which raised questions about the application of mind while passing the order. This article provides an in-depth analysis of the case, focusing on the dispute related to brokerage costs.
Background Information: The petitioner filed a Writ Petition seeking to quash the assessment order dated 19.01.2021 issued by the second respondent under Section 154 of the Income Tax Act, 1961, for the assessment year 2012-13.
Brokerage Cost Dispute: The primary issue in this case pertains to the brokerage cost of Rs. 58,75,569/- that the petitioner allegedly paid to various brokers. The brokers and their PAN details were provided in the assessment order.
Original Assessment Order: The original assessment order dated 16.12.2019 had stated that the petitioner claimed Rs. 58,75,771/- as a deduction for brokerage. However, the evidence produced only accounted for Rs. 14,95,241/-. This led to a significant discrepancy.
Subsequent Petition: In response to the original assessment order, the petitioner filed a petition under Section 154 of the Income Tax Act, 1961, on 19.01.2021. The impugned order was a result of this petition.
Impugned Order: The impugned order made an addition of Rs. 43,80,530/- for brokerage paid. It noted that the petitioner provided confirmation letters only from one broker, M/s. KPM Projects P. Ltd, and failed to produce evidence for the remaining brokers.
Non-Responsive Brokers: The petition claimed brokerage payments to several brokers, including R. Thiagarajan, K. Saravanan, and K. Sethuraman. These brokers did not respond or provide confirmation letters, and there was no evidence of these payments in their income tax returns.
Nature of Transactions: The respondents argued that transactions by cheque only proved the payment but not the nature of the transaction. They questioned whether these payments were indeed for brokerage related to land sales.
Excessive Brokerage Claim: The assessment pointed out that the petitioner’s claim of 7.7% as brokerage in this transaction was significantly higher than the industry average of 2%, which amounted to Rs. 15,24,280/-.
Conclusion: In conclusion, a careful examination of the impugned order and the Assessment Order dated 19.01.2021 suggests a lack of proper application of mind. As a result, the Madras High Court has quashed the impugned order and remitted the case back to the respondents for fresh consideration in accordance with the law. The amount of Rs. 40,04,017/- confirmed in the impugned order is treated as a Show Cause Notice, and the petitioner is given an opportunity to respond. This article provides an overview of the case’s background and the key issues surrounding brokerage payments and the assessment order.
FULL TEXT OF THE JUDGMENT/ORDER OF MADRAS HIGH COURT
This Writ Petition has been filed, to quash the order dated 19.01.2021 passed by the second respondent under Section 154 of the Income Tax Act, 1961 for Assessment year 2012-13 reference PAN AABPS1313F.
2. The issue that survives for consideration in this case is relating to brokerage cost of Rs.58,75,569/- which was allegedly paid by the petitioner to the following brokers as detailed below:-
