2018 (6) TMI 837 - AT - Income Tax

ITAT upholds disallowance of Commission payment & deduction under 80IB

The ITAT upheld the disallowance of Commission payment, the reopening of assessment, and the disallowance of deduction u/s. 80IB. It affirmed the AO's ... Validity of reopening u/s 147 - Disallowance of Commission payment - Held that:- The commission paid to the same / similar parties was already disallowed in later years and the same was also got confirmed by the ITAT. Thus, there is no merit in the contentions that commission amount is eligible for deduction - thus we find that there is no merit in the contentions of assessee on the issue of reopening and also disallowing the claim of commission - hence AO has correctly exercised his jurisdiction in enquiring about the commission payments and disallowing the same - Decided against the assessee. Disallowance of deduction u/s. 80IB - whether AO has exercised his powers wrongly - Held that:- the proceedings u/s. 147 were initiated, as assessee withdrew the 80IB claim in later years and filed revised return for this year and paid taxes. To regularise the same, AO has initiated the proceedings and assessee has accepted the same - AO accordingly disallowed the deduction claimed u/s. 80IB and accepted the revised return filed in response to the notice u/s. 148. Thus, the escaped income for which proceedings were initiated were brought to tax. AO has power to make enquiry on other issues also and the issue of commission was already being enquired in AY. 2008-09 - thus we do not find any reason to hold that AO has exercised his powers wrongly. - Decided in favour of revenue Issues:1. Disallowance of Commission payment.2. Reopening of assessment and disallowance of deduction u/s. 80IB.3. Legality of making additions on the basis of roving enquiries.Issue 1: Disallowance of Commission payment:The assessee contested the disallowance of Commission payment of Rs. 14,16,938 by the Commissioner of Income Tax (Appeals) and the subsequent confirmation by the ITAT. The contention was that the commission was incurred wholly and exclusively for the business. The Assessing Officer (AO) disallowed the claim as the assessee failed to substantiate it with evidence. The ITAT upheld the disallowance, citing similar disallowance in the AY 2008-09. The ITAT concluded that the commission payment was not eligible for deduction, as it had been disallowed in later years as well. The ITAT emphasized that the AO had the power to make enquiries on other issues, including commission payments, as part of the reassessment proceedings.Issue 2: Reopening of assessment and disallowance of deduction u/s. 80IB:The AO initiated proceedings under Section 147 as the assessee had withdrawn the claim of exemption u/s. 80IB for subsequent years and revised the return for the relevant year. The AO concluded that the exemption claimed u/s. 80IB had escaped assessment for the AY 2007-08 and issued a notice u/s 148. The assessee submitted that they voluntarily withdrew the deduction claimed u/s. 80IB and filed a revised return. The AO disallowed the deduction and accepted the revised return in response to the notice u/s. 148. The ITAT held that the AO had validly initiated proceedings under Section 147 and correctly disallowed the deduction claimed u/s. 80IB.Issue 3: Legality of making additions on the basis of roving enquiries:The assessee argued that the AO could not make roving enquiries in the reopening proceedings, citing case laws. The ITAT, however, held that the AO had the authority to make additions on any other income that had escaped assessment and came to his notice during the proceedings under Section 147. The ITAT emphasized that the AO had the power to enquire about commission payments, which had already been disallowed in previous years. The ITAT dismissed the contention that the reopening was bad in law and upheld the AO's exercise of jurisdiction in enquiring about commission payments and disallowing the same.In conclusion, the ITAT dismissed the appeal of the assessee, upholding the disallowance of commission payment, the reopening of assessment, and the disallowance of deduction u/s. 80IB. The ITAT affirmed the AO's authority to make additions on issues that had escaped assessment and were brought to his notice during the proceedings under Section 147.