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TMI Blog2018 (5) TMI 1684X X X X Extracts X X X X X X X X Extracts X X X X ..... ramod Kumar AM And Mahavir Prasad JM] For The Appellant : Mudit Nagprl For The Respondent : S. N. Devetia ORDER Per Pramod Kumar, AM: 1. This appeal is directed against learned CIT(A) s order dated 8th September 2015 for the assessment year 2012-13. 2. Grievance of the appellant is that learned CIT(A) has erred in law and on facts in deleting the disallowance of ₹ 52,57,032/- made under section 40A(2)(b) of the Act, without properly appreciating the facts of the case and material on record . 3. The issue in appeal lies in a narrow compass of material facts. The assessee before us is a closely held company engaged in running a clinic providing treatment to hemato oncology patients. During the course of scrutiny assessment proceedings, the Assessing Officer noticed that, out of the total professional receipts of ₹ 5,93,44,045/-, the assessee company has paid ₹ 3,50,46,881/- to four doctors namely Dr. Bhavin Shah, Dr. Chirag Desai, Dr. Sandip Shah and Dr. Shailesh Talati, who are promoter directors of this company, whereas only ₹ 64,09,696/- payments cover the payments to seven other doctors. Even though it was explai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sideration in spite of the fact that the appellant company was older by more than 3 years. Thus, by no parameter the payment of professional fee to the promoter directors was unreasonable and excessive, having regard to the fair market value of the services for which payment was made. 3.12. It has also been seen that promoter directors have included the professional fee in their returns of income and paid the tax at the maximum marginal rate thereupon. Thus, there is no planning of any tax evasion by making any excess payment to the promoter directors as has been held by the AO. 3.13. The taxes on such professional receipts were paid by the promoter at the maximum marginal rate as was applicable in the case of appellant and this was a revenue neutral exercise. Therefore, no adverse view is required to be taken in view of the judgment of Hon'ble Supreme Court in the case of CIT, Delhi Vs. Glaxmo Smithkline Pvt. Ltd. (supra). Judgment of Hon'ble Bombay High Court in the case of Indo Saudi Services (Travel) (P) Ltd. (2009) 310 IT 306 also supports this view. Further, Circular No. 6-P dated 6/7/1968 also supports the appellant's plea for no disallowance under th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e, the disallowance u/s. 40A(2)(b) was not justified. CIT Vs. Siya Ram Garg, HUF [237 CTR 321) [PH] It is held that in view of the sister concerns were being taxed at the same rate, there was no reason for the assessee to show higher rate for purchases made by it from them. DCIT Vs. Meet Heat Engineers [ITA No. 3654/07 dt. 23/07/2010] ITO Vs. Cello Paper Co. [ITA No. 1815/AHD/2010 dt.28/12/2012] Bativala and Karani Vs. ACIT [2 SOT 379 (Mum)] 3.15. The related grounds of appeal are accordingly allowed . 4. Aggrieved by the relief so granted by the CIT(A), the Assessing Officer is in appeal before us. 5. We have heard the rival contentions, perused the material on record and duly considered facts of the case in the light of the applicable legal position. 6. We have noted that there is no finding by the Assessing Officer about as to what constitutes fair market price of the services rendered by the promoter directors and that he has simply proceeded to make an adhoc disallowance @ 15% out of the payments made to these persons. As to the question whether such a disallowance is permissible, we find guidance from the judgm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... value', there cannot be an occasion to make a disallowance under section 40A(2). The very scheme of Section 40A(2) does not envisage an adhoc disallowance as has been made in the present case. For this short reason alone, the impugned deletion of disallowance must stand confirmed. There is, however, one more reason for doing so. As evident from a plain reading of the assessment order, the Assessing Officer, had called upon the assessee to demonstrate that the payment made by the assessee to the specified persons is not unreasonable or excessive, and it is thus failure of the assessee which has resulted in disallowance under section 40A(2). However, proving a negative, as the assessee has been called upon to do in this case, is an impossible onus to perform. In any event, this onus is on the Assessing Officer and the AO has failed to discharge the said onus. For this reason also, the disallowance is unsustainable in law. As regards the discrepancy in the figures of the tax audit report and the assessee, neither such a situation can be a reason enough to make a disallowance under section 40A(2) nor the onus of explaining such a variation is on the assessee. A tax auditor is an i ..... X X X X Extracts X X X X X X X X Extracts X X X X
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