2014 (9) TMI 1182 - HC - Income Tax

Disallowance of consultancy charges - ingenuity of claim - tribunal allowed part claim - HELD THAT - We are of the view that when the A.O. has accepted the genuineness he might have allowed the entire claim of the assessee. But there was no reason to give the partial relief. In these circumstances we uphold the order of the appellate authority who has rightly deleted the addition. Hence the impugned order is set-aside and the order of the first appellate authority is hereby sustained - Decided in favour of assessee.

Summary

Issues:
Appeal against Income Tax Appellate Tribunal's order for assessment year 1996-97 - Legality of Tribunal's order - Disallowance of liability claimed by assessee - Appeal by department against deletion of addition by C.I.T.(A) - Tribunal's restoration of addition - Assessee's challenge to Tribunal's decision.

Analysis:
The appeal was admitted based on the substantial question of law regarding the legality of the Tribunal's order. The assessee, engaged in manufacturing sugar machinery, claimed a liability of Rs. 1,85,800 to Mr. Ashok Bhardwaj for services. The Assessing Officer (A.O.) disallowed a portion of the claim, but the C.I.T.(A) accepted the entire amount. The Tribunal, however, restored the full addition, prompting the current appeal.

The assessee's counsel argued that the Tribunal erred in restoring the entire liability, contending that the A.O.'s decision to disallow part of the claim was correct. The counsel emphasized that the payment details were provided, and Mr. Bhardwaj's authenticity was acknowledged by the C.I.T.(A), warranting the deletion of the addition.

Conversely, the department's counsel supported the Tribunal's decision, asserting that since the A.O. had already allowed a portion of the claim, no further relief was warranted. After hearing both parties and reviewing the evidence, the Court noted the C.I.T.(A)'s finding that the consultancy charges were genuine and paid to Mr. Bhardwaj against raised bills.

The Court cited precedents establishing the appellate authority's powers being co-terminus with the A.O.'s powers, subject to legal restrictions. Ultimately, the Court upheld the C.I.T.(A)'s decision to delete the addition, finding no justification for partial relief by the Tribunal. Consequently, the impugned order was set aside, and the assessee's appeal was allowed, with the substantial question of law decided in favor of the assessee against the department.