2014 (12) TMI 1104 - AT - Income Tax

Disallowance of consultancy charges expenses - Charges not been incurred wholly and exclusively for the purpose of business of the assessee - Held that - We have gone through the application as well as the documents which are sought to be produced by the assessee company by way of additional evidence, which are consisting of copies of correspondence, agreements etc. done by the said two companies with government agencies as well as the assessee company. The above said documents as has been pleaded by the assessee company were not traceable at the time of proceedings before the lower authorities. Keeping in view the application of the assessee as well as the nature of the documents, we feel that the documents sought to be produced in evidence by the assessee are necessarily required to be looked into, as the same go to the root of the case and are vital for the just and proper decision of the case. We therefore allow the application of the assessee for additional evidence and the matter is remanded back to the file of the AO for decision afresh on the issue. - Decide din favour of assesse.

Summary

Issues:
1. Disallowance of consultancy charges paid to alleged sister concerns.
2. Failure to prove services rendered by sister concerns.
3. Addition confirmed by CIT(A) due to lack of evidence.
4. Application for additional evidence submitted by the assessee.
5. Tribunal allowing the additional evidence and remanding the matter to AO.

Analysis:
1. The appeal was filed against the disallowance of consultancy charges paid to M/s. Jindal Steel & Alloys Ltd. and M/s. Vrindavan Services Ltd., alleged sister concerns of the assessee, for assessment year 2009-10.
2. The Assessing Officer disallowed the consultancy charges, claiming they were paid to associate concerns of the assessee without proof of services rendered. The CIT(A) confirmed the disallowance due to lack of convincing evidence.
3. The CIT(A) observed that the assessee failed to prove the actual services provided by the sister concerns, their infrastructure, and the purpose of the payments made. Thus, the disallowance was upheld.
4. The assessee submitted an application for additional evidence, including documents showing services rendered by the sister concerns, which were not presented earlier due to being old and untraceable.
5. The Tribunal reviewed the additional evidence application and documents, finding them crucial for a just decision. Consequently, the Tribunal allowed the additional evidence, remanded the matter to the AO for a fresh decision, and instructed the AO to provide the assessee with an opportunity to present the necessary documents. As a result, the appeal of the assessee was allowed for statistical purposes.

This detailed analysis highlights the issues surrounding the disallowance of consultancy charges, the lack of evidence provided by the assessee, the confirmation of the addition by the CIT(A), the submission of additional evidence, and the Tribunal's decision to allow the additional evidence and remand the matter for a fresh decision.