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2016 (5) TMI 44 - ITAT MUMBAIAddition 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 be made if expenditure incurred by the assessee by making payment to specified persons including the directors by the company is excessive or unreasonable having regard to the fair market value of the goods, services or facilities for which the payment 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 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 be sustained and therefore, the addition to be deleted by deciding issue in favour of the assessee. Penalty u/s 271AAA - Held that:- We find from the additional grounds raised by the assessee vide application dated 02.07.2015 qua ignoring the statutory construction of section 271(AAA) of the Act and other issues of sustaining the penalty u/s 271(1)(c) when the statutory explanation to the said section does not apply to the assessee’s case. It is also a fact that this issue was not raised 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 assessee for statistical purposes.
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