Tribunal overturns Assessing Officer's disallowances, citing lack of evidence.

The tribunal allowed the appeal of the assessee, finding that the disallowances made by the Assessing Officer were not justified as they were based on surmises and conjectures without proper consideration of relevant evidence. The tribunal emphasized that the AO failed to prove the payments were excessive or unreasonable. The order was pronounced in the Open Court on 18th August 2017.

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Issues Involved:
1. Legality of the appellate order passed by CIT(A).
2. Legality of the assessment order passed by the Assessing Officer (A.O).
3. Disallowance of Rs. 32,65,000 on account of ground handling charges.
4. Disallowance of Rs. 2,20,800 on account of conveyance expenses paid to two directors.

Detailed Analysis:

1. Legality of the appellate order passed by CIT(A):
The appellant argued that the appellate order passed by the CIT(A) was illegal and against the principles of natural justice. The tribunal noted that the CIT(A) confirmed the additions/disallowances made by the Assessing Officer without considering the relevant evidence and submissions provided by the assessee.

2. Legality of the assessment order passed by the Assessing Officer (A.O):
The appellant contended that the assessment order was illegal and against the principles of natural justice as it was passed without providing a proper and effective opportunity of hearing. The tribunal observed that the query regarding ground handling charges was raised by the AO on 17/12/2012 with compliance required by 24/12/2012, and the assessment order was passed on 28/12/2012, within 11 days of raising the query. The AO ignored the written submissions filed by the assessee on 24/12/2012, indicating that proper opportunity of hearing was not provided.

3. Disallowance of Rs. 32,65,000 on account of ground handling charges:
The assessee argued that the disallowance was made because the payments were to the wives of the directors and certain details were not filed. The assessee explained that ground handling services were outsourced to Mrs. Rupam Malik and Mrs. Zinnia Singh due to the complexity and lack of internal infrastructure. The tribunal noted that the AO disallowed the charges on the basis of surmises and conjectures without considering the relevant evidence, such as confirmations from the recipients, their IT returns, and TDS certificates. The tribunal held that the disallowance was not justified as the AO did not provide any finding that the amount paid was excessive or unreasonable concerning the fair market value of the services rendered. The tribunal cited several case laws supporting that the reasonableness of the expenditure should be viewed from the perspective of a prudent businessman and not the revenue authorities.

4. Disallowance of Rs. 2,20,800 on account of conveyance expenses paid to two directors:
The assessee contended that the conveyance expenses were reimbursed to the directors as per the Board Resolution and were not treated as perquisites. The AO disallowed the expenses on the ground that the amounts were not shown as perquisites. The tribunal found that the payments were genuine, verifiable, and made by account payee cheques. The tribunal agreed with the assessee's explanation that the company did not own vehicles to avoid overhead expenses, and the fixed reimbursement of conveyance expenses could not be treated as perquisites. The tribunal held that whether the reimbursement was exempt or taxable should be examined in the case of the directors and not the company.

Conclusion:
The tribunal allowed the appeal of the assessee on both issues, finding that the disallowances made by the AO were based on surmises and conjectures without considering the relevant evidence and submissions provided by the assessee. The tribunal emphasized that the AO failed to discharge the onus of proving that the payments were excessive or unreasonable under Section 40A(2) of the Act.

Order Pronounced:
The appeal of the assessee was allowed, and the order was pronounced in the Open Court on 18th August 2017.

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