2011 (11) TMI 773 - AT - Income Tax

Summary

Issues involved:
The correctness of the order dated 21st January 2009, passed by the Commissioner (Appeals) in the matter of assessment u/s 143(3) of the Income Tax Act, 1961, for the assessment year 2006-07 is questioned.

Admissibility of Additional Evidence:
The Assessing Officer contended that the Commissioner (Appeals) erred in accepting additional evidence without affording an opportunity, as required by Rule 46A of the Income Tax Rules 1962.

Explanation for Bonus Payment:
The Assessing Officer raised concerns about the justification for a one-time sign-off bonus payment of &8377; 7,35,73,500 to employees, questioning the qualifications and terms of employment of the recipients.

Arm's Length Transaction:
The Auditor's acknowledgment in Form 3CEB that the transaction was conducted at arm's length was highlighted, indicating that the amount received was for services rendered to Man Financial UK.

Verification of Bonus Payment:
The failure to call for confirmation from employees and their income tax returns to verify if the bonus had already been received and offered for taxation during the relevant year was noted.

Timing of Payments:
The timing of payments was questioned as not reflecting normal practice, as payments were made to employees much after the receipt of the amount.

Summary of Judgment:
The Appellate Tribunal upheld the Commissioner (Appeals)'s decision to delete the addition of &8377; 7,35,73,500, ruling that the amount received by the assessee from its associated enterprise was not to be treated as income. The Tribunal found that the money was received with an obligation to pay over the same to specified persons, and no part of it was retained by the assessee. The Tribunal concluded that the Assessing Officer's grievances were devoid of legally sustainable merits, and the deletion of the addition was justified. The appeal was dismissed on 2nd November 2011.