2014 (6) TMI 1040 - AT - Income Tax

Tribunal upholds CIT(A) decision on addition deletion, emphasizing need for proof of illegality.

M/s. Cosmos International Versus ACIT, Circle 32 (1), 1, New Delhi And Vice-Versa.

M/s. Cosmos International Versus ACIT, Circle 32 (1), 1, New Delhi And Vice-Versa. - TMI Issues Involved:1. Justification of deletion of addition made by the A.O. under Section 37(1) of the I.T. Act.2. Admission of additional evidences by CIT(A) in violation of Rule 46A.3. Validity of reassessment proceedings initiated under Section 147 read with Section 148 of the I.T. Act.Issue-wise Detailed Analysis:1. Justification of Deletion of Addition Made by the A.O. under Section 37(1) of the I.T. Act:The revenue challenged the CIT(A)'s decision to delete the addition of Rs. 49,25,296/- made by the A.O. on the grounds that the payment was made as kickbacks to Iraqi authorities under the UNO's Oil for Food Programme. The CIT(A) allowed the relief on merits, which was contested by the revenue. The ITAT referred to prior decisions, including the ITAT Calcutta Bench in the case of TIL Limited vs. ACIT and DCIT vs. Rajrani Exports Ltd., where similar additions were deleted. The Tribunal noted that there was no evidence showing the payment was a kickback or illegal. The payments were made for business purposes, specifically for procuring export orders and after-sales services. The Tribunal emphasized that the Volcker Committee's Report did not implicate private Indian parties or prove that the payments were illegal. Consequently, the Tribunal upheld the CIT(A)'s decision to delete the addition, concluding that the payments were legitimate business expenses and not prohibited by law.2. Admission of Additional Evidences by CIT(A) in Violation of Rule 46A:The revenue contended that the CIT(A) admitted additional evidences in violation of Rule 46A, which governs the conditions under which additional evidence can be admitted. However, the Tribunal did not find merit in this argument, as the CIT(A) had provided sufficient opportunities for the A.O. to examine these details. The Tribunal's decision did not explicitly address this issue in detail, implying that the procedural aspect of Rule 46A was not violated in a manner that would affect the outcome.3. Validity of Reassessment Proceedings Initiated under Section 147 Read with Section 148 of the I.T. Act:The assessee filed cross objections challenging the validity of the reassessment proceedings initiated under Sections 147 and 148. The assessee argued that the initiation of these proceedings was not in compliance with statutory conditions and procedures, and that the reasons recorded for reopening were contrary to the facts. The Tribunal, however, did not delve deeply into these objections, as the primary focus was on the merits of the addition. The cross objections were ultimately dismissed for non-prosecution, indicating that the assessee did not actively pursue these arguments during the hearing.Conclusion:The Tribunal upheld the CIT(A)'s decision to delete the addition made by the A.O., finding no evidence of illegal payments or kickbacks. The procedural objections regarding Rule 46A and the validity of reassessment proceedings were not addressed in detail, with the cross objections being dismissed for non-prosecution. The Tribunal's decision was consistent with prior rulings on similar issues, reinforcing the principle that legitimate business expenses should not be disallowed without concrete evidence of illegality.