AI OCR 
TaxTMI 
TaxTMI 
TaxTMI 
2026 (4) TMI 115
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....e of the Trustee of that trust Shri Prakash Nath Swamiji was also covered u/s. 132 of the Act. 3. Information has been flagged on Insight Portal as per Risk Management Strategy of Central Board of Direct Taxes wherein it was found that during post-search proceedings in case of Shri Prakash Nath Swamiji it was revealed that he was paid consultancy charges by the Assessee company. Further enquiries regarding the nature of consultancy services availed by the Assessee were made by the Deputy Commissioner of Income Tax, Circle 2(4), Bangalore wherein Assessee as per submission dated 22.09.2021 stated that consultancy services have been rendered by Shri Prakashnath Swamiji to the Assessee company and also submitted the copies of the consultancy agreement entered into and the ledger account of Swamiji in the books of the Assessee. 4. As per the above fact and on examination of Ledger it was found that a sum of Rs. 1,37,00,000/- has been paid by the assessee to Swamiji on account of consultancy charges. Assessee could not produce relevant documentary evidence in the form of bank statements to show that the amounts have been incurred and further invoices or vouchers to prove the genui....
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....Act. Further, it was contested that Assessing Officer should have invoked the provisions of section 153C of the act and further on the merits it was submitted that Assessee has submitted the agreement, Swamiji has offered income of the above commission. The details of consultancy services were providing inputs with respect to the customers behavior, their buying pattern, for branding and customer outreach and was a strategic business decision and therefore it would not have been disallowed u/s. 37 (1) of the Act. 9. The Ld. CIT(A) considered the explanation of the Assessee and thereafter held that there is no infirmity in the order of the Ld. Assessing Officer as the Assessee has failed to prove any specific services rendered, such expenses incurred cannot be considered wholly and exclusively for business purpose. Accordingly, this ground of appeal was dismissed. 10. Aggrieved with the same the Assessee is in appeal before us. The Assessee has raised following grounds of appeal: 1. The learned Commissioner of Income Tax (Appeals) ["CIT(A)"] erred in rejecting the grounds of appeal and upholding the impugned assessment order. The order is bad in law and liable to be q....
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....ction, erroneous presumption of jurisdiction, failure to comply with the principles of natural justice. No specific arguments were advanced by the Assessee and therefore ground No. 1 of the Appeal is dismissed. 13. Ground No. 2 is against the initiation of reassessment proceedings u/s. 147 of the act in absence of valid information suggesting escapement of income and without independent application of mind. The Ld. Authorized Representative reiterated the same ground in her submission. 14. We have carefully considered the contention of the Ld. Authorized Representative. We find that the search took place in case of some trust on 17.02.2021. There was also a search u/s. 132 in case of one of the Trustee. Information was flagged on Insight Portal as per Risk Management Strategy of the Board. Post-search proceedings also revealed that Assessee has paid consultancy charges to Shri Prakash Nath Swami. Therefore, there was specific tangible information coming into the possession of the Assessing Officer that the consultancy services charges paid by the Assessee to one Swamiji requires examination. According to that the necessary notices were issued based on the enquiry carried out ....
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....and relating to customers etc., Swamiji has already paid tax thereon. Therefore, this disallowance has resulted in double taxation of income. 18. On careful consideration, the facts clearly show that the Assessee has paid consultancy charges of Rs. 1,37,00,000/- to Shri Prakash Nath Swamiji on account of Vaastu and are related to growth and development of business. No doubt the Assessee submitted copy of the agreement, ledger account and bank statement along with the proof of tax deduction at source. According to the agreement dated 06.06.2018 between the Assessee and the Swamiji it was stated that Swamiji is residing in Bangalore and provides ancillary services to be rendered from time to time as per recital (B) of the agreement. According to clause 2, Swamiji was to provide his advisory and consultancy services in general from time to time to the party of the first part (Assessee) for the purpose of running Jewelry and other general services. Surprisingly clause No. 2 also says that Swamiji will also assist the Assessee to handle all local issues connected to his business in and around Karnataka. In consideration of the above services, Swamiji would be paid a monthly fee of Rs....
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....ces rendered to the assessee. 27. Thus, the claim of the assessee is bald, bereft of genuineness and lacking any evidence to support it. Agreement is also a make-believe document. 28. According to the provisions of section 37 (1) of the Act, the expenses incurred by the Assessee are allowable to the Assessee as deduction only if such expenses are wholly and exclusively incurred by the Assessee for the purposes of the business. In the present case the Assessee could not produce a single instance of rendition of services and therefore the expenditure incurred could not be said wholly and exclusively for the purposes of the business of the Assessee. 29. In view of the above facts, we do not find any infirmity in the order of the Ld. Lower Authorities in confirming the about disallowance u/s. 37 of the act. Accordingly ground No. 4 - 6 of the appeal are dismissed. 30. Ground No. 7 is with respect to the disallowance of the Employees' contribution to the provident fund and ESI amounting to Rs. 20,39,196/- u/s. 36(1) (va) of the Act deposited beyond the due dates prescribed under the respective employee welfare Acts. This fact shows that as per the tax audit report filed by t....