Summarizing the details Submitted to the AO in Tabular Form, before the CIT(A) is not New Evidence: ITAT [Read Order]

In M/s. Aasia Advisory Services Ltd vs. ACIT, the Mumbai bench of the Income Tax Appellate Tribunal (ITAT) held that Summarizing the details submitted to the Assessing Officer (A.O.) in tabular form, before the Commissioner of Income Tax (Appeals) (CIT(A)) is not new evidence and hence no violation of Rule 46A of the Income Tax Rules, 1962.

The assessee is engaged in the profession of rendering management consultancy services to the Hinduja Group. in assessment years 2008-09 and 2009-10 the assessee’s claim for management fee was disallowed by the Assessing Officer (A.O.). By the impugned order the Commissioner of Income Tax (Appeals) (CIT(A)) confirmed the action of the AO in assessment years 2008-09 and 2009-10, however for A.Y. 2010-11 the CIT(A) allowed assessee’s appeal. Against the order of the CIT(A) assessee appealed for A.Y. 2008-09 & 2009-10, whereas Revenue is in further appeal for A.Y. 2010-11.

The AO had made disallowance of payment made to 15 Management Graduates amounting to Rs. 1.71 Crores holding that as the assessee had not furnished any evidence in support of its claim, the expenses for management graduates incurred by the assessee amounting to Rs.1.71 Crores could not be said to be for the purpose of business. CIT(A) upheld the addition made by the AO. However, for A.Y. 2010-11 the CIT(A) allowed assessee’s appeal. The Revenue appealed before the ITAT.

The bench comprising of Judicial Member Amarjit Singh and Accountant Member R.C. Sharma observed that as the assessee was engaged in business of management consultancy services, employee cost was major expenditure of the assessee. They noted that a perusal of the employment agreements reveal that 15 trainees were regular employees of the assessee company. The Tribunal also ruled out the application of Section 40A (2) since payment was made to the employees who were unrelated third parties and no payment had been made to the group companies or related parties. They noted that the principal reason for the Commissioner (Appeals) in allowing the appeal was the fact that the Assessing Officer had failed to issue specific notice with regard to the services provided and further, he had come to the conclusion that expenses were not incurred for the purpose of business on the basis of details of expenses, employment agreement and Form 16 and agreement with Group Companies for rendering the services filed during assessment proceeding itself.

Regarding the allegation of filing additional evidence, the Court observed “It was only to further verify that the expenses are incurred for the purpose of business that the CIT(A) asked the assessee to submit the details of service rendered in tabular form and employee wise. Knowledge of the Revenue to the documentary evidence adduced at the appellate stage, is per se apparent on the face of the record and assessee has not submitted any new evidence but has only summarized the details submitted before AO in tabular form and employee wise. Thus, it was a clear-cut case of exercise of the overriding power under rule 46A (4) of the rules and not really a case of permitting an assessee to file fresh document on the prayer of the assessee. Thus, there is no violation of provisions of Rule 46A.”