DCIT 1(1)(2), MUMBAI vs. HSBC ASSETS MANAGEMENT (I) P.LTD, MUMBAI

O R D E R

PER RAM LAL NEGI, JM

2. In the present case, the assessee filed its return of income for the assessment year under consideration declaring the total income of Rs. 80,84,70,797/-. Since, the assessee has entered into international transactions with its associated enterprises, value of which was over 15 crores, the case was selected for scrutiny, Accordingly, order u/s 92CA(3) of the Act was passed by the Transfer Pricing Officer (TPO), Mumbai and assessment was completed u/s 143 (3) of the Act determining the total income at Rs. 81,70,82,170/-. The assessee challenged the assessment order before the Ld. CIT (A). The Ld. CIT (A) partly allowed the relief in respect of disallowance on account of credit card expenses and business promotion expenses, however, upheld the additions on account of prior period expenses and also upheld the disallowance of 80G deduction. Still aggrieved, the assessee challenged the impugned order before the ITAT. The revenue also filed the cross appeal. The ITAT partly allowed both the appeals and set aside the issue relating to business promotion expenses amounting to Rs. 69,93,864/- to the file of AO observing that the authorities below have not examined the record filed by the assessee. During the set aside proceedings, 3. After going through the submissions made by the assessee and the documents furnished the AO found that the assessee has not furnished complete details and documents to substantiate its claim. Accordingly, the AO afforded further opportunity to furnish the evidence, however, the assessee failed to comply with the same. Accordingly, the AO invoking provisions of section 144 of the Act proceed to disallow 50% of the business promotion expenses and determined the total income at Rs. 82,40,76,031/-. The assessee challenged the assessment order passed u/s 143 (3) r.w.s. 254 of the Act before the Ld. CIT (A). The Ld. CIT (A) after hearing the assessee set aside order passed u/s of 144 of the Act and consequently deleted the disallowance made by the AO.

4. Whether on the facts and in the circumstances of the case and in Law, the ld. CIT (A) erred in not upholding the order of the AO by admitting additional evidence in the form of paper book furnished during appellate proceedings which was not furnished during assessment proceedings and thereby violating Rule 46A as no opportunity has been given to the AO to examine the additional evidence?

5. At the outset, the Ld. Departmental Representative (DR) submitted that the AO has passed the assessment order by invoking section 144 of the Act as the assessee failed to produce the evidence to substantiate its claim despite giving sufficient opportunity for this purpose. During the set aside proceedings, the assessee was asked by the AO to produce the details of prior period expenses and explanation for nature of expenditure with supporting documents, details of nature purpose and evidence of business promotion payments with justification of claim and reconciliation of reversal entries of the said expenditure with respect to reverse entries discussed in the order of the Ld. CIT (A). In response thereof the assessee submitted some of the details along with the written submissions. The Ld. DR invited our attention to the submissions made by the assessee before AO to demonstrate that the assessee did not produce the required documents/evidence during the set aside proceeding. The Ld. DR further submitted that since the documents were not produced before AO the Ld. CIT(A) ought to have sought remand report from the assessee or sent the same to the AO for verification. The Ld. DR further submitted that since, the documents relied upon by the Ld. CIT(A) have not been verified, the same are required to be verified, therefore the impugned order may be set aside and the matter may be sent back to AO for deciding the issue on merit in the light of the documents relied upon by the Ld CIT(A) 6. Per contra, the Ld. counsel for the assessee submitted that all the documents and details were furnished before the AO during the set aside proceedings and since, the Ld. CIT(A) has passed the order after examining the documents on record in the light of the submissions of the assessee, there is no infirmity in the said order to interfere with. 7. We have heard the rival submissions and also perused the material on record in the light of the contentions of the parties. The AO has made disallowance in question for the reasons that the assessee has failed to produce the documents and details to substantiate the claim. The AO has reproduced the submissions made by the assessee in response to the details called for u/s 142 (1) of the Act, which is as under:- “……………………… As regards Ground No. 2: Addition of the prior period Expenses 1. During the caption year under consideration, expenses with regard to the Victory lap context had been incurred to the tune of Rs. 7,93,016/-. The said contest was held in the previous year 2004-05 and is evidence from the business promotion expenses

submitted in the course of assessment proceedings. However, the invoice/bill was received only in the caption F.Y. As regard Ground 3: Disallowance of Business promotion expenses: 2. We had submitted all the relevant, details a called for a in the assessment proceedings. The ledger for the business promotion expenses submitted in the course of assessment is attached herewith. 3. As far as the reversal of Rs. 70,48,933/- is concerned, the details are as under:- a) We had incurred on aggregate expenditure of Rs. 3,00,31,686/- as initial expenses in respect of launch of HSBC Advantage India Fund of the Mutual Fund. In accordance with regulations 52(4) to 52(7) of SEBI (Mutual Funds) Regulation, 1996, asset management company may charge the mutual fund with investment and advisory services under regulation Asset management company may charge the mutual funds with the expenses mentioned in regulation 52(4) of SEBI (Mutual Funds) Regulation, 1996. Therefore, the appellant has reversed an amount of Rs. 70,48,933/- as charged to the schemes…………….”