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Income Tax Appellate Tribunal, “E” BENCH, MUMBAI
Assessee by .. Shri. Rajesh Gupte, AR Revenue by .. Shri. Vishwas Mundhe, DR Date of hearing .. 07-12-2016 Date of pronouncement .. 07-12-2016 O R D E R PER MAHAVIR SINGH, JM:
These two appeals by the assessee are arising out of the common order of the CIT (A)-24, Mumbai in appeal Nos. CIT (A)-22& 24/IT-77/2013-14 dated 14-01- 2016 for the A.Y. 2010-11 & 2012-13. The Assessments were framed by DCIT Circle-10(3), Mumbai for the AY 2010-11 & 2011-12 vide order dated 16-03-2013 & 21-01-2015 under section 143(3) of the Income Tax Act, 1961 (hereinafter ‘the Act’).
At the outset, the learned Counsel for the assessee stated that the issue is regarding the order of CIT(A) confirming the disallowance of excess payment on account of professional fee in both the years i.e. for A.Y. 2010-11 amounting to Rs.30.69 lacs and in A.Y. 2012-13 amounting to Rs.41.07 lacs and he stated that this common issue is covered in favour of assessee and against Revenue. He took us through the order of the AO for A.Y. 2010-11 and demonstrated that the AO has relied on the order of A.Y. 2008-09 and 2009-10, wherein the Tribunal has deleted the addition. He referred to the following Para 5 of the AO’s order: - “Mr. G.D. Rajadhyaksha who is one of the directors of company, has received professionals fees amounting to Rs.33,09,000/-. During the previous assessment years i.e. for A.Y. 2008-09 & 2009-10, the fees paid to Mr. G.D. Rajadhyaksha was restricted to Rs.201000/- per month for detailed reasons mentioned in the assessment order for A.Y, 2008-09. During the present assessment year, the 2 assessee did not furnish any fresh evidences to merit any change in view of restricting the professional fees to Rs.20,000/- per month. The facts and circumstances of the case remained unchanged as compared to A.Y. 2008-09 & 2009-10 on this issue. In view of the same after allowing deduction of Rs.2,40,000/-, the excess payments made on account of professional fees of Rs.30,69,000I- (33,09,000 - 2140000) is added' to total income of the assessee u/s 40A(2)(b) of the IT. Act, 1961. Penalty proceedings u/s 271(1)(c) of the Act are initiated separately.”
In view of the above assessment order, the learned Counsel for the assessee stated that the Tribunal in assessee’s own case for A.Y. 2008-09 & 2009-10 in ITA Nos. 1762/Mum/2012 & ITA No.2214/Mum/2013 vide order dated 06-04-2016 decided this issue as under: - “We notice that the C.A has been paid retainer fee on monthly basis. It is quite common in trade circles to engage a professional as a retainer on the payment of monthly retainer fee. As against the monthly payment of Rs.1.25 lakhs, the AO has restricted the same to Rs.20,000/-. The assessing officer has done so with the observation that the payment is in excess of prevailing market price for the services rendered by the C.A. However, it is pertinent to note that the AO has not brought any material on record to support his conclusions. It is in the common knowledge of every one that the fee of a professional would depend upon the knowledge and experience of the professional. For similar type of work, two professionals may charge two different rates. Generally the public approaches a professional by considering various criteria such as knowledge, experience, name & fame in the market, reliability, dependability etc. Hence a professional is chosen depending upon the choice of a business man and after agreeing to the terms and conditions of the professional, the work is entrusted to him. In this scenario, we are of the view that the AO was not justified in questioning the reasonableness of payment made to the C.A by the assessee, when the assessee has taken a conscious decision to pay the same. It is also pertinent to note that the assessing officer has not brought any material on record to show that the professional fee payment has been inflated or beyond market rates, except making an observation in that regard. It is stated that the C.A is carrying out all types of taxation and compliance work and he is well experienced and knowledgeable. Hence we are of the view that the tax authorities cannot question the choice exercised by the assessee without bringing any material on record. We have also noticed that the disallowance has been made without bringing any material on record. For these reasons, we are of the view that the disallowance made u/s 40A(2)(a) is not justified. Accordingly we set aside the order of Ld CIT(A) on this issue and direct the AO to delete the disallowance.
In view of this the learned Counsel for the assessee stated that the issue is covered in favour of the assessee and there is no difference in facts of these two years
3 under consideration as what was before the Tribunal. On query from the Bench the learned Sr. DR conceded the position. Respectfully following the Tribunal decision in assessee’s own case, we allow these two appeals of the assessee.
In the result, both the appeals of the assessee are allowed. Order pronounced in the open court on 07-12-2016.