2022 (5) TMI 165 - AT - Income Tax

Payments of salary to the specified persons - reasonable or not - HELD THAT - Before me, AR has filed an application under Rule 29 of the I.T. Rules for admission of the additional evidences in the form of ledger account and bank account reflecting the payment. Before me, Learned AR has also pointed to the reasons as to why the aforesaid documents could not be filed before the authorities. we find force in the submissions of the Learned AR for non submission before the authorities. In such a situation, we hereby admit the additional evidences filed by the assessee. Since these evidences were not before the lower authorities - matter needs to be restored back to the file of CIT(A) to decide the issue afresh in accordance with law after considering the additional evidences filed by the assessee. Thus the Ground No.1 is allowed for statistical purposes.

Summary

Issues:
1. Disallowance of salary payable to specified persons not actually paid during the relevant previous year.
2. Violation of the scheme of e-assessment and principles of natural justice.
3. Non-disposal of the ground related to the benefit of exemption under section 10(23C)(iiiae) of the Act.

Issue 1 - Disallowance of Salary:
The appeal was filed by a charitable trust against the disallowance of Rs. 10,50,000 being the salary payable to specified persons not actually paid during the relevant previous year. The trust followed the accrual system of accounting, and the disallowance was made under section 40A(2) of the Act by the Assessing Officer (AO) due to a difference between the salary paid and the amount reflected in the bank account. The Commissioner of Income Tax (Appeals) upheld the AO's order as the trust failed to explain the discrepancy and provide relevant documentary evidence. The trust submitted additional evidence, including ledger accounts and bank statements, to prove the payment was made in the immediate succeeding years. The Tribunal admitted the additional evidence and remanded the matter back to the CIT(A) for fresh consideration, allowing the appeal for statistical purposes.

Issue 2 - Violation of E-assessment Scheme:
The trust contended that the AO's addition was in violation of the e-assessment scheme and principles of natural justice as no draft assessment order or show-cause notice was issued before making the addition. However, this ground was not disposed of by the CIT(A). The Tribunal directed the CIT(A) to adjudicate this issue after considering the submissions of the trust and in accordance with the law, granting both parties adequate hearing opportunities.

Issue 3 - Benefit of Exemption under Section 10(23C)(iiiae):
The trust also raised a ground regarding the benefit of exemption under section 10(23C)(iiiae) of the Act, which was not addressed by the CIT(A). The Tribunal remanded this issue back to the CIT(A) for proper adjudication after considering the trust's submissions and in compliance with legal procedures.

In conclusion, the Tribunal allowed the appeal of the trust for statistical purposes, admitting additional evidence related to the disallowance of salary and directing the CIT(A) to reconsider the issues of the e-assessment scheme violation and exemption benefit under section 10(23C)(iiiae) of the Act. The decision emphasized the importance of following due process and granting parties fair opportunities for presenting their cases.