2017 (1) TMI 1259 - HC - Income Tax

Addition of consulting charges and amount paid to Chartered Accountant for management of consultancy and towards commission - Held that - Tribunal remanded the matter to the AO only qua the disallowance towards consulting charges and set aside the order passed by the AO with respect to other disallowance. Despite the above, on remand the AO again made disallowance of not only towards consulting charges, he also disallowed amount paid to Chartered Accountant for management consultancy and commission which was as such earlier not approved by the learned Tribunal. Therefore, the learned Tribunal is justified in deleting disallowance paid to Chartered Accountant for management consultancy and towards commission, which by observing that thereafter the AO has not justified on remand in making the aforesaid disallowance which was not earlier approved by the learned Tribunal. Disallowance towards consulting charges - CIT(A) as well as learned Tribunal have observed that on remand the learned AO has not found any additional material and therefore, in absence of any further material collected during the remand, the AO was not justified in making the disallowance towards consulting charges. Even no reasons were assigned by the AO while passing the order in remand and again making disallowance. He only reiterated what was stated in the original assessment order which as such was set aside by the learned Tribunal and the matter was remanded. Considering the aforesaid facts and circumstances of the case, it cannot be said that the learned Tribunal has committed any error in deleting the disallowance of towards consulting charges also. - Decided against revenue

Summary

Issues:
1. Disallowance of consulting charges
2. Disallowance of management consultancy fees
3. Disallowance of commission payment

Analysis:
1. The appellant challenged the order of the Income Tax Appellate Tribunal regarding the disallowance of consulting charges paid to Satellite Management Services, management consultancy fees paid to Chartered Accountants, and commission payment to Jayesh Parikh. The Tribunal had remanded the matter to the Assessing Officer (AO) only concerning the consulting charges. However, the AO, upon remand, also disallowed the management consultancy fees and commission payment. The Tribunal, therefore, rightly deleted the disallowance of the management consultancy fees and commission payment, as the AO failed to justify these additional disallowances made on remand, which were not approved earlier by the Tribunal.

2. Regarding the disallowance of consulting charges, both the Commissioner of Income Tax (CIT) and the Tribunal noted that the AO did not present any new material during the remand process. The AO failed to provide reasons for the disallowance upon remand and merely reiterated the original assessment order, which had been set aside by the Tribunal. Given the lack of new material and reasoning, the Tribunal's decision to delete the disallowance of consulting charges was deemed appropriate.

3. The Court concluded that no substantial question of law arose from the issues presented. Consequently, the appeal was dismissed as the Tribunal's decisions to delete the disallowances were found to be justified based on the lack of new material and reasoning provided by the AO upon remand.