2023 (7) TMI 1035 - AT - Income Tax

Special discount on sales to sister concern to M/S Ess Ess Kay Marketing Company Pvt. Ltd through credit notes, rebate and discount to other parties, travelling expenses etc. either to director or other employees - HELD THAT - We in complete consonance with the comparative trading and as well as net profits results of the company Volume II dated 30th June, 2022, which has been ignored by not appreciating. We consider that it is a fit case to be remanded back to the Ld. CIT(A) to adjudicate the issue afresh with due consideration of submissions of the appellant in respect of viewing comparative analysis of the trade discount vis a vis special discount and comparative financial results and the applicable comparables for deciding the reasonableness of Trade discount and other claims of expenditure while arriving at the conclusion whether the addition made by AO were justified, in respect of both the assessment year by passing a speaking order. Assessee appeals are allowed for statistical purpose.

Summary

Issues:
- Disallowance of special discount to related party
- Disallowance of rebate and discount to other parties
- Disallowance of travelling expenses
- Request for remand to the CIT(A) for fresh adjudication

Special Discount to Related Party:
The appellant claimed a special discount to a related party due to adverse market conditions, but the AO found the claim misleading and made an addition for unexplained special discount. The CIT(A) upheld the addition, stating that the related party's existence was solely dependent on the appellant, indicating a collusive arrangement to reduce tax liability. The CIT(A) held that the appellant failed to justify the special discount and confirmed the AO's addition.

Rebate and Discount to Other Parties:
The AO disallowed rebate and discount to other parties, which the CIT(A) confirmed. The appellant argued that proper replies were filed before the AO, but the CIT(A) upheld the disallowance. The issue of rebate and discount to other parties was remanded to the CIT(A) for fresh adjudication.

Travelling Expenses:
The disallowance of travelling expenses was also challenged by the appellant. The CIT(A) did not appreciate the appellant's submissions regarding travelling expenses and other claims. The matter was requested to be remanded back to the CIT(A) for a speaking order.

Request for Remand:
The appellant requested a remand to the CIT(A) for fresh adjudication on various grounds, including the claim of special discount, rebate and discount to other parties, and travelling expenses. The Tribunal allowed the appeals for statistical purposes and remanded the issues to the CIT(A) for reevaluation after considering the appellant's submissions.

This judgment addresses various issues raised by the appellant against the order of the Commissioner of Income Tax (Appeals). The primary contention was the disallowance of a special discount given to a related party, which the AO deemed unexplained and misleading. The CIT(A) upheld this addition, citing the related party's dependency on the appellant and a collusive arrangement to reduce tax liability. The disallowance of rebate and discount to other parties was also confirmed, with the matter remanded for fresh adjudication. Additionally, the challenge to the disallowance of travelling expenses was raised, leading to a request for remand to the CIT(A) for a detailed review. Ultimately, the Tribunal allowed the appeals for statistical purposes and directed a reevaluation of the issues by the CIT(A) after considering the appellant's submissions.