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I-T - Whether AO can make disallowances in remand proceedings on issues which were not approved by ITAT, in absence of new evidences found during remand - NO: HC

By TIOL News Service

AHEMDABAD, JAN 23, 2017: THE ISSUE IS - Whether the AO is justified in making disallowances during remand proceedings on the issues which were not approved by the ITAT, in absence of new additional material collected during remand. NO is the verdict.

Facts of the case:

The Revenue preferred the present appeal challenging the order, whereby the ITAT deleted the disallowance of Rs.20.10 lakhs towards consulting charges paid to Satellite Management Services, Rs. 14.59 lakhs towards management consultancy paid to CAs and Rs. 11.51 lakhs towards commission paid to Jayesh Parikh despite the fact that the AO had rightly disallowed these expenses for not being wholly and exclusively for business purpose.

On appeal, the HC held that,

++ it is in not in dispute that earlier the AO disallowed the Rs. 20.10 lakhs towards consulting charges and Rs. 14.59 lakhs paid to Chartered Accountant for management of consultancy and Rs. 11.51 Lakhs towards commission. Against the order passed by the AO, the matter was carried to the Tribunal and the ITAT remanded the matter to the AO only qua the disallowance of Rs. 20.10 lakhs towards consulting charges and set aside the order passed by the AO with respect to other disallowance. Despite the above, on remand the AO again made disallowance of not only Rs. 20.10 lakhs towards consulting charges, he also disallowed Rs.14.59 lakhs paid to Chartered Accountant for management consultancy and Rs. 11.51 lakhs towards commission which was as such earlier not approved by the Tribunal. Therefore, the Tribunal is justified in deleting disallowance of Rs. 14.59 lakhs paid to Chartered Accountant for management consultancy and Rs. 11.51 lakhs towards commission, which by observing that thereafter the AO has not justified on remand in making the aforesaid disallowance which was not earlier approved by the Tribunal;

++ while dealing the disallowance of Rs. 20.10 Lakhs towards consulting charges, CIT(A) as well as Tribunal have observed that on remand the AO has not found any additional material and therefore, in absence of any further material collected during the remand, the AO was not justified in making the disallowance of Rs. 20.10 Lakhs towards consulting charges. Even no reasons were assigned by the AO while passing the order in remand and again making disallowance of Rs. 20.10 lakhs. He only reiterated what was stated in the original assessment order which as such was set aside by the Tribunal and the matter was remanded. Considering the aforesaid facts and circumstances of the case, it cannot be said that the Tribunal has committed any error in deleting the disallowance of Rs. 20.10 lakhs towards consulting charges also.

(See 2017-TIOL-153-HC-AHM-IT)


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