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2018 (8) TMI 916 - AT - Income TaxRevision of assessment order u/s 263 - an order which is erroneous or detrimental to the interest of the revenue - invoking the provisions of section 36(1)(ii) - Commission paid to directors for services rendered - performance bonus paid to directors for services rendered to the company in terms of the board resolution. - Payment to avoid payment of dividend distribution tax (DDT) - Held that:- The AO has called for necessary enquiries during the course of assessment proceedings in respect of payment of performance bonus for which the assessee has filed a detailed reply alongwith Board Resolution authorizing payment of performance bonus, reasons for payment of such bonus to Shri Dilip Raghavan. These facts were not disputed by the AO as the same are part of discussion in the body of the assessment order. The AO has discussed the issue of payment of performance bonus to the director in his assessment order and applied the provisions of section 40A(2) to disallow excess amount of ₹ 4,57,020. The PCIT is only on the point that the enquiries conducted by the AO is inadequate and he applied wrong provisions of the Act, which caused prejudice to the interest of the revenue. In the opinion of the PCIT, the enquiries conducted by the AO may be inadequate, but that by itself, would not be a ground for the PCIT to revise assessment order passed by the AO unless the PCIT specifically points out that the AO has grossly overlooked the issue during assessment proceedings. In this case, on perusal of details filed by the assessee, we find that the AO has caused necessary enquiries and the assessee has filed all details to justify payment of performance bonus, therefore, we are of the considered view that the PCIT was incorrect in terming the assessment order passed by the AO as erroneous and prejudicial to the interest of the revenue. The PCIT was totally incorrect in coming to the conclusion that payment of performance bonus is a colorable device for evading payment of dividend distribution tax. The PCIT was in correct in setting aside the assessment order passed by the AO u/s 263 of the Income-tax Act, 1961 - Revision order set aside - Decided in favor of assessee.
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