2016 (10) TMI 1390 - AT - Income Tax

Tax Tribunal Dismisses Appeals, Upholds CIT(A) Rulings on Travel, VRS, and Commission Expenses; Invalidates Section 153A Assessment.

Dy. Commissioner of Income Tax (OSD) – I Central Range–7, Mumbai Versus M/s. Simplex Realty Ltd. and Vica-Versa

The ITAT Mumbai dismissed the revenue's appeals and allowed the assessee's cross objections. The Tribunal upheld the CIT(A)'s deletion of disallowances ... Assessment u/s 153A - approval u/s.153D without application of mind - HELD THAT:- Approval has been given u/s.153D of the Act without application of mind. Assessment u/s.153A of the Act is wrong against law and facts and is not liable to be sustained in the eyes of law, therefore the assessment order u/s 153A is hereby ordered to be set aside Issues Involved:- Disallowance of foreign travel expenses of directors- Disallowance of VRS expenditure- Addition on account of unaccounted commission expenses- Validity of assessment under section 153ADisallowance of Foreign Travel Expenses of Directors:The revenue challenged the deletion of disallowance of foreign travel expenses of directors. The assessee incurred expenses not wholly and exclusively for business purposes. The case involved the assessment years 2003-04 to 2009-10. The assessee had filed a return of income showing a loss, which was determined by the assessment. The company underwent changes and a search and seizure action was conducted on the Simplex Group of Companies. Various incriminating documents were found during the search. The revenue raised specific grounds for disallowance, which were deleted by the CIT(A).Disallowance of VRS Expenditure:Another issue raised was the disallowance of expenditure in respect of VRS paid before the introduction of section 35DDA. The assessee claimed the expenditure at the rate of 1/10th for each year. The revenue challenged the deletion of this disallowance by the CIT(A). The case involved the assessment years 2003-04 to 2009-10.Addition on Account of Unaccounted Commission Expenses:The revenue also disputed the deletion of the addition made on account of unaccounted commission expenses paid to Divya Textile Agency. The CIT(A) had deleted this addition, which was contested by the revenue. The case pertained to the assessment years 2003-04 to 2009-10.Validity of Assessment under Section 153A:The validity of the assessment under section 153A of the Income Tax Act was questioned. The assessee raised legal issues regarding the approval granted under section 153D without proper application of mind. The ITAT, Mumbai had previously ruled on similar cases, and based on those precedents, the assessment under section 153A was deemed wrong against law and facts. The assessment order under section 153A was set aside, and the appeals by the revenue were dismissed. The cross objections by the assessee were allowed, leading to the dismissal of the appeals filed by both the revenue and the assessee.This comprehensive analysis covers the disallowance of expenses, validity of assessments, and the final outcomes of the appeals and cross objections in the judgment delivered by the Appellate Tribunal ITAT Mumbai in 2016.