2012 (7) TMI 610 - AT - Income Tax

Additional evidence - Rule 46A - Addition under the head advertisement and publicity expenses - Disallowance of reimbursement of expenses to holding company Held that - From the index to paper book, it emerges that certain details and documents have been furnished/produced before CIT(A) in support of the appeal on this issue and CIT(A) has not only admitted such material, but also considered the same for granting relief to the assessee without associating the Assessing Officer with appeal proceedings or calling for remand report form the Assessing Officer. - there is a clear violation of Rule 46A of the I.T. Rules in this regard - set aside the orders of the authorities below - matter back on the file of the AO.

Summary

Issues:
1. Deletion of addition of Rs.8,74,048/- on account of advertisement and publicity expenses.
2. Deletion of addition of Rs.41,28,145/- on account of reimbursement of expenses to Holding Company.

Analysis:

Issue 1:
The first issue revolves around the deletion of the addition of Rs.8,74,048/- under the head of "advertisement and publicity" expenses. The Assessing Officer disallowed this amount as the assessee failed to produce sufficient documentary evidence to support the expenditure. However, the CIT(A) accepted the plea of the assessee and deleted the addition. The CIT(A) observed that the Assessing Officer did not investigate the genuineness of the payments made to the concerned party and did not ascertain whether services were rendered. The CIT(A) noted that the appellant had submitted details of payments made and had entered into an agreement for marketing services, hence ruling in favor of the assessee. The department appealed against this decision, arguing that the CIT(A) did not verify the claim adequately. The tribunal set aside the CIT(A) order, citing a violation of Rule 46A of the I.T. Rules, and directed the Assessing Officer to reconsider the issue after granting the assessee a fair opportunity.

Issue 2:
The second issue pertains to the deletion of Rs.41,28,145/- on account of reimbursement of expenses to the holding company. The Assessing Officer disallowed this amount, representing 50% of the total payment to the holding company, as the basis of disbursement was not furnished by the assessee. The CIT(A) deleted this addition after considering the submissions of the appellant, noting that the genuineness of services rendered by the holding company was not questioned, and there was no tax implication involved. The department contended that the CIT(A) erred in deleting the addition without proper substantiation from the assessee. The tribunal found a violation of Rule 46A in this regard as well, and remanded the issue back to the Assessing Officer for a fresh decision after providing the assessee with a fair opportunity.

In conclusion, the tribunal accepted the department's appeal for statistical purposes, setting aside the orders of the authorities below in both issues and directing a reevaluation by the Assessing Officer while ensuring due process for the assessee.