Davanam Jewelers Private Limited Vs ACIT (ITAT Bangalore)
The Bangalore ITAT dismissed the appeal of M/s. Davanam Jewelers Pvt. Ltd. and upheld the reassessment proceedings as well as major additions made by the Assessing Officer. The case arose from information flagged during post-search proceedings indicating payment of ₹1.37 crore as consultancy charges to a Swamiji.
The Tribunal held that reopening under Section 147 was valid, as there was tangible material from post-search enquiries suggesting possible escapement of income. It rejected the assessee’s argument that proceedings should have been initiated under Section 153C, noting that no incriminating material belonging to the assessee was found during the search.
On merits, the Tribunal confirmed disallowance of consultancy charges under Section 37(1), observing that the assessee failed to prove actual rendering of services. The agreement was vague, lacked clarity on the nature of services, and no supporting evidence such as work done, expertise, or business nexus was furnished. Mere payment through banking channels or taxation in the hands of the recipient was held insufficient to establish genuineness.
Further, the Tribunal upheld disallowance of employees’ PF/ESI contributions deposited beyond due dates, relying on the Supreme Court ruling in Checkmate Services. It also sustained disallowance under Section 40(a)(ia) for non-deduction of TDS on advertisement expenses.
Accordingly, the entire appeal of the assessee was dismissed.
FULL TEXT OF THE ORDER OF ITAT BANGALORE
