2004 (2) TMI 295 - AT - Income Tax

Summary

Issues Involved:

1. Deletion of addition of Rs. 1,25,800 on account of disallowance of consultancy charges.
2. Genuineness of the consultancy charges paid to Mr. Ashok Bhardwaj.
3. Examination of the evidence and statements regarding consultancy services and payments.

Issue-wise Detailed Analysis:

1. Deletion of Addition of Rs. 1,25,800 on Account of Disallowance of Consultancy Charges:

The Revenue appealed against the CIT(A)'s order which deleted the addition of Rs. 1,25,800 made by the AO on account of disallowance of consultancy charges. The AO had disallowed these charges, considering them non-genuine. The AO observed that the assessee-company claimed to have paid consultancy charges of Rs. 1,85,800 to Mr. Ashok Bhardwaj, but no actual payment was made during the relevant financial years. The AO suspected the genuineness of the consultancy services and payments, noting that the payments were made through bearer cheques after a significant delay, and the cheques were encashed by different individuals not associated with Mr. Bhardwaj.

2. Genuineness of the Consultancy Charges Paid to Mr. Ashok Bhardwaj:

The assessee argued that the consultancy services were genuine, involving detailed drawings and site visits for fabrication work. The AO, however, questioned the authenticity of the consultancy services, citing Mr. Bhardwaj's statement where he denied rendering such services and claimed that he signed blank papers in a state of intoxication. The CIT(A) accepted the genuineness of the consultancy charges, noting that Mr. Bhardwaj had signed the bearer cheques and raised bills on his letterhead. The CIT(A) also mentioned that the books of account were audited and no defects were found.

3. Examination of the Evidence and Statements Regarding Consultancy Services and Payments:

The CIT(A) considered various submissions and concluded that the consultancy services were genuine, partly based on the acceptance of Rs. 60,000 by Mr. Bhardwaj. However, the Tribunal found that the CIT(A) did not adequately consider the AO's findings and Mr. Bhardwaj's statement denying the consultancy services. The Tribunal noted that the CIT(A) failed to refer to the evidence indicating that Mr. Bhardwaj was offered crossed cheques, which he allegedly refused. The Tribunal also highlighted the inconsistency in the payment method, questioning the necessity of issuing bearer cheques after a substantial delay.

The Tribunal concluded that the CIT(A) erred in deleting the addition without thoroughly examining the evidence and statements recorded by the AO. The Tribunal emphasized that the payments made through bearer cheques and the delayed payment timeline did not support the genuineness of the consultancy charges. Consequently, the Tribunal allowed the Revenue's appeal, reinstating the addition of Rs. 1,25,800.

Conclusion:

The appeal filed by the Revenue was allowed, and the addition of Rs. 1,25,800 on account of disallowance of consultancy charges was reinstated. The Tribunal found that the CIT(A) did not adequately consider the AO's findings and the evidence questioning the genuineness of the consultancy services and payments.