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2016 (5) TMI 44 - ITAT MUMBAI

2016 (5) TMI 44 - ITAT MUMBAI - TMI - Addition u/s 40A(2)(b) - excessive and unreasonable payments to the directors - Held that:- No cogent materials was brought on record by the AO or by the CIT(A) to prove that the payment was excessive and unreasonable to the directors of the assessee to whom the payments were made equal to 30% total advisory fee received by the assessee of ₹ 73,66,218 from Yatra Art Fund. The provision of section 40A (2) are very clear that the disallowance could only .....

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d as deduction. In the instant case the AO has failed to prove that the payment made to the directors was excessive having regard to the fair market value of the said goods or services as no comparable case was brought on record to substantiate the disallowance made by the AO. The AO also did not bring any cogent evidence to prove that the assessee has not received any services and paid the mony. In view of this fact the order of CIT(A) confirming the addition made by the AO u/s 40A(2)(b) cannot .....

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ised before First Appellate Authority. In the present circumstances and facts we are of the view that this issue should go back to the file of CIT(A) for fresh adjudication. We, therefore, without going into the merits of the case restore this issue to the file of the ld. CIT(A) to examine the issue raised by the assessee regarding section 271AAA of the Act and decide the same in accordance with law after affording the opportunity of being heard to the assessee. - Decided in favour of the assess .....

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bearing ITA No.682/Mum/2014 in which the assessee has raised following grounds : 1. The Learned Commissioner of Income Tax (Appeals) is not justified in confirming an ad-hoc disallowance of 25%. of travelling expenses at ₹ 16,17,742/- on the specious ground that personal travel cannot be ruled out, without any. iota of evidence whatsoever in this regard. 2. The Learned Commissioner of Income Tax (Appeals) failed to consider that the appellant in subject to statutory and tax Audit under sec .....

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id, to the directors of the appellant, by invoking provisions of section 40 A (2) without proper basis. 5. The Learned Commissioner of Income Tax (Appeals) is not justified in holding that payment of advisory fees to the directors of the company is not substantiated. 6. The Learned Commissioner of Income Tax (Appeals) is not justified in concluding that no services are rendered by the directors of the appellant to Yatra Art Fund without putting to test the arguments made out in the hand of Yatra .....

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he appellant had. not camouflaged the said payment as part of the director's salaries by the appellant, in which case said payments would have passed muster without demur. 9. The learned Commissioner of Income Tax (Appeals) is not justified in confirming the levy' of interest under Section 234 B of the Act at ₹ 18,18,526/- and under section 234 C in the' sum of ₹ 15,825/ disregarding the factual and legal submissions made that proper credit for taxes paid is not given. 10 .....

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s. During the year the assessee filed its return of income on 29.09.2009 declaring an income of ₹ 2,57,72,440/-. The case of the assessee was selected for scrutiny and statutory notices u/s 143(2) and 142(1) were issued and served upon the assessee. During the course of assessment proceedings the AO framed the assessment vide order dated 30.12.2011 at ₹ 3,97,54,450/- by making various additions inter alia of ₹ 16,17,742/- for traveling expenses being 25% of total expenses claim .....

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s of the expenses incurred for genuine business requirements and thus reached a conclusion that the same were attributable to personal travelling. On the second issue the ld CIT(A) observed that 30% of the total advisory fee was paid to the directors Shri Sanjay kumar and Ms Geeta Mehra without proving the business exigencies and needs for making such payments. 5. The ld AR submitted before us that the full details which were tally generated were filed before the AO as well as the CIT(A) giving .....

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said expenses paid to the directors out of genuine business needs were disallowed without bringing any materials on records proving the same to excessive and unreasonable which was pre-requisite of making such disallowance. The ld counsel further submitted that there was no loss of revenue for these payments made as the assessee as well as the directors were assessed to tax at maximum rate and therefore disallowance was wrong and deserved deletion. The Ld DR on the other hand relied heavily on t .....

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and we, therefore, restrict the disallowance to the extent of 10% of total travelling which come to ₹ 6,47,097/- thereby deleting the addition to the extent of ₹ 9,70,645/-. Therefore, the issue raised in the ground nos.1, 2 & 3 is partly allowed. In respect of disallowance u/s 40 A (2) of ₹ 11,14,272/- paid to the directors as advisory fee, we find that no cogent materials was brought on record by the AO or by the CIT(A) to prove that the payment was excessive and unreason .....

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t is made or the legitimate needs of the business or profession of the assessee or the benefit derived by or accruing to him therefrom, then so much of the expenditure as is so considered by the AO to be excessive or unreasonable shall not be allowed as deduction. In the instant case the AO has failed to prove that the payment made to the directors was excessive having regard to the fair market value of the said goods or services as no comparable case was brought on record to substantiate the di .....

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re do not require any adjudication. 8. In the result, the assessee appeal is partly allowed. 9. Now we shall take up the appeal for the assessment year Assessment Year 2007-08. 10. Grounds of appeal taken by the assessee are as under : 1. The Learned Commissioner of Income Tax (Appeals) is not justified in confirming the penalty levied u/s 271 (1)( c ) at ₹ 7,40,520/- without construing para 6 to 10 of statement facts filed along with appeal. 2. The Learned Commissioner of Income Tax (Appe .....

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me Tax (Appeals) failed to construe that the alleged payment of cash of ₹ 16 lakhs found in seized record Annexure A1-12, was not corroborated contemporaneously with the parties involved in the transaction and that the appellant was made to admit the alleged transaction as unaccounted during the course of search and no further independent investigation was carried out to link the admission of the ₹ 22 lakhs suo-moto and voluntarily in the return of income filed by the appellant as ad .....

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Commissioner of Income Tax (Appeals) failed to appreciate that the cumulative banking of cash sales which does not represent any specific bill made out by the assessee and which aggregate to Rs.l2,98,0001- and duly deposited the bank accounts of the appellant with HDFC bank and Punjab National Bank are covered by the alleged instances of cash referred to in seized records. 7. The Learned Commissioner of Income Tax (Appeals) is not justified in confirming the penalty on alleged concealment of  .....

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nd for such other grounds that may be adduced at the time of hearing it is prayed that the order of the Commissioner of Income Tax (Appeals) be cancelled. 11. The assessee has also raised additional grounds which are as under: 1. Your Petitioner/appellant craves the indulgence of the Hon'ble income Tax Appellate Tribunal to raise the following additional grounds of appeal. a. The Learned CIT (A) is not justified in sustaining the penalty levied under section 271 (1) (c) when the statutory ex .....

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his order dismissing the' appeal and no action thereon has been taken so far. 3. The additional grounds raised are legal issues, going into the very root of the subject matter of levy of concealment penalty, and if left unadjudicated will cause irreparable loss to the appellant on the substantial question of law relating thereto. 4. In view of the above the two additional grounds may be admitted. on record for disposal on merits. 12. The facts of the case are that the search and seizure act .....

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bove its normal income as per audited final accounts covering various discrepancies found in the record. The AO observed that the concealment of the income was detected by the department at the time of conducting search on 17.04.2007 and it was only in consequences to such detection, the assessee declared in the return filed on 31.7.2007 which is after date of search. Accordingly, the AO initiated penalty proceedings against the assessee for concealment of income. In its reply dated 11.01.2010 a .....

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ved, by the decision of the AO, the assessee preferred an appeal before the ld. CIT(A) who also confirmed the action of the AO by holding as under :. 7.0 The facts of the case, the grounds of appeal, the stand taken by the AO in the penalty order and the submissions made by he appellant have been carefully considered. 7.1 In the case of the appellant, a search & seizure action was carried out on 17.04.2007 and at the time of search action, various incriminating documentary evidences confirmi .....

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e was no search action in the case of the appellant, it would have not incorporated the admitted undisclosed income in the return of income. Since the disclosure of the additional I income of ₹ 22,OO,OOO/- is consequent to search action u/s 132 of the Act-and the appellant itself admitted such additional income to compensate for the unaccounted sales, concealment of income is established by its own conduct of admission, inviting the levy of penalty u/s.271 (1)(c) of the Act. The various ju .....

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