2012 (11) TMI 1199 - AT - Income Tax

Summary

Issues Involved:
1. Assumption of jurisdiction by the CIT u/s 263 of the Income-tax Act, 1961.
2. Disallowance of Trade Scheme Expenditure.
3. Disallowance of commission payment.

Summary:

1. Assumption of jurisdiction by the CIT u/s 263 of the Income-tax Act, 1961:
The assessee challenged the CIT's assumption of jurisdiction u/s 263, arguing that there was no mistake by the Assessing Officer (AO) in allowing the claim. The Tribunal had previously allowed similar claims for A.Ys. 2003-04, 2004-05, and 2005-06. The AO had conducted a detailed inquiry and allowed the claim based on the books of account, bills, and vouchers. The Tribunal held that the CIT cannot reopen a settled issue and must follow the Tribunal's binding orders. The CIT's direction to disallow the expenditure was annulled.

2. Disallowance of Trade Scheme Expenditure:
The CIT directed the AO to disallow Trade Scheme Expenditure of Rs. 3,35,17,143 paid to M/s. Gayatri Marketing Agencies and M/s. ARK Marketing Agencies, alleging it was a spurious deduction. The Tribunal had previously allowed similar claims for earlier years, and the CIT was bound by these decisions. The Tribunal reiterated that the CIT cannot take a contrary view on a settled issue and annulled the CIT's order u/s 263.

3. Disallowance of commission payment:
For A.Y. 2007-08, the CIT(A) sustained a disallowance of Rs. 1,84,145 out of Rs. 6,84,145 incurred towards commission payment. The Tribunal had previously allowed a reasonable extent of commission payments due to their inevitability in the business. The Tribunal found the ad-hoc disallowance by the AO to be on the higher side but justified sustaining the disallowance at Rs. 1,84,145.

Conclusion:
- ITA No. 692/Hyd/2011 (A.Y. 2006-07) - Allowed.
- ITA No. 499/Hyd/2011 - Dismissed as infructuous.
- ITA No. 1420/Hyd/2011 (A.Y. 2007-08) - Partly allowed.

Order pronounced in the open court on 16th November, 2012.