Permod Ricard India Pvt. Ltd Vs PCIT (ITAT Delhi)
ITAT Delhi held that trade scheme payment to sales promoters whether pure reimbursement or not needs proper verification and since AO granted relief without proper verification and application of mind, PCIT rightly invoked revisionary proceedings u/s. 263.
Facts- Post original assessment, PCIT observed that treatment of service agreements with the sales promoters and passing of explicit trade scheme are reimbursement proceedings shows a principal and agent relationship rather than pure reimbursement. In the light of these findings, it is evident that AO’s order granting relief is erroneous and prejudicial to the interest of Revenue, especially given the lack of comprehensive documentation and failure to establish the reimbursement nature of the payment. By rejecting the submissions of the assessee, PCIT invoked the provisions of clause (a) & (b) of Explanation 2 to section 263 and treated the order passed by the AO as erroneous and prejudicial to the interest of Revenue without making enquiries or verifications and allowed the relief without enquiring into the claim.
Conclusion- Mere verification on the basis of the documents before the AO, which he has, no doubt, allowed only 33% to 50% in the respective years, cannot it be called verification, he has only verified whether the relevant discount are relevant for the respective assessment year and accordingly he allowed the same. This is not the mandate given to him. He was directed to verify the payments to sales promoters are falling under the category of reimbursement or not. In case he is satisfied with the documentation he has to demonstrate by passing a speaking order. He has miserably failed in that aspect. He has given relief without proper verification and application of mind.
