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2023 (10) TMI 711 - DELHI HIGH COURTDisallowance of salary u/s 40A(2)(b) - Payment of salary and interest to specified persons - appellant/assessee could not substantiate the nature of work done by concerned people mentioned - HELD THAT:- As examined the explanations advanced on behalf of the appellant/assessee at different stages of the proceedings, whereby the appellant/assessee tried to justify payment of salaries to the persons concerned. But we find the same no better than mere curriculum vitae. No evidence at all was adduced before any of the authorities by the appellant/assessee as regards the educational qualification, experience and work profile of any of the persons concerned, which could be taken as their contribution in the growth of business of the appellant/assessee. The provision u/s 40A(2)(a) clearly shows that before recording disallowance, AO has to form an opinion; and that opinion has to be having regard to inter alia legitimate needs of the business or benefit derived or even what would be the fair payment outgo for services rendered. Such an opinion cannot be arrived at without adducing necessary evidence. That being so, AO was duty bound to provide an opportunity to the appellant/assessee to place on record the requisite evidence to justify its claim. But all that the Assessing Officer did was to ask the appellant/assessee to justify the salaries paid, and without seeking relevant evidence, simply rejected claim. To our mind, therefore, the best way forward would be to grant an opportunity to the appellant/assessee to adduce appropriate evidence – documentary or otherwise before the AO in order to establish its claim regarding educational qualification, experience, the work profile and in particular the duties discharged by the concerned persons to justify claim of the appellant/assessee qua payment of salary to the persons concerned. The orders impugned in the present appeals are set aside and matters are remanded to the Assessing Officer with liberty to the appellant/assessee to adduce evidence on the lines indicated above
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