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2021 (1) TMI 557 - AT - Income TaxRevision u/s 263 - payments made by the Assessee to doctors disallowed u/s 37 - Disallowance u/s 14A read with rule 8D - allowability of expenses u/s 43B - HELD THAT:- We do not agree with the conclusion of the Ld. PCIT that he had concluded that the order was erroneous, but has not made further investigation to determine, whether the order passed by AO is prejudicial to the interest of revenue. Instead, he remitted this issue back to AO to verify and investigate the issue once again and finalize the assessment order. PCIT should have verified or investigated the issue afresh by asking the assessee to submit all relevant information. Assessee claims the payments were made to doctors on regular consultancy fees and not relating to freebees. It is the duty of Ld. PCIT to establish that these payments were in fact freebees and not regular consultation fees, without actually finding that these are freebees and payments are in violation of conditions specified in Circular No. 5 of 2012, he proceeded to annul the assessment order. The issue involved in this appeal is, whether payments are consultancy fees or freebees. AO has proceeded with the view that there are regular consultancy fees and accepted the submissions of assessee. AO did not discuss anything in his order. The department taking clue from audit query, they are presuming that the payments are relating to freebees. There is no evidence brought on record by the revenue authorities to substantiate that there were actually freebees. Mere presumption without any cogent material to indicate that these payments are actually freebees is far fetched. In our view, Ld. PCIT has not determined the other condition how it is prejudicial to the interest of revenue. As discussed above, the payments were made to doctors, is it freebees or not is the issue. If it is freebees, it is the duty of Ld. PCIT to bring on record that these payments are in fact disallowable under section 37 of the Act. There are various decisions submitted before us by Ld. AR that the payment made to doctors by the pharmaceutical companies and allied healthcare industries are not in violation of Circular No. 5 of 2012. It is applicable only to the practicing doctors. As discussed above, Ld. PCIT has not clearly brought on record that the payments were actually in contravention of circular and provision of section 37(1) of the act. Even on disallowance under section 14A, from the records submitted before us, clearly indicate that the relevant information was submitted before AO and AO has accepted the submissions made by assessee and AO came to conclusion and taken one of the views, which may not be acceptable to Ld. PCIT. PCIT has come to conclusion that the order passed by AO is erroneous, but has not verified nor investigated to determine the other condition i.e. how it is prejudicial to the interest of revenue. As held in numerous case law and it is settle position of law that to initiate proceedings under section 263, twin conditions has to be satisfied. In the given case, Ld. PCIT has not fulfilled second condition before initiating proceedings under section 263 - Decided in favour of assessee.
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