2015 (10) TMI 1002 - AT - Income Tax

Tribunal upholds CIT(A)'s order on pay channel expenses & evidence

The Tribunal dismissed the Revenue's appeal and the Cross Objection filed by the assessee, affirming the CIT(A)'s order regarding the disallowance of pay ... Disallowance of 20% of the expenses incurred under the head “Pay Channel Expenses” - CIT(A) deleted the addition admitting the additional evidence - Held that:- On perusal of the agreement dated 18th August, 2008, we observe that the assessee is bound to procure the pay channel expenses by virtue of clause 2.2 of the agreement and has to bear all the pay channel expenses from its own fund. The AO has conveniently omitted to refer to the said agreement of the appellant company with City Cable Network Ltd. which was placed on record during the assessment proceedings. The ld. CIT(A), therefore, admits the TDS certificates and the bank statements under Rule 46A(1)(a) as additional evidence in view of the settled law as laid down in the judicial pronouncements. These documents deserve to be admitted for the purpose of adjudication of the present appeal. In the remand report submitted by the ld. A.O, we find that the AO has acknowledged the receipt of letter dated 15/12/2008 but has denied the receipt of letter dated 24/12/2008. However, in the remand report the ld.A.O has accepted the acknowledgement of the documents. Further, we observe that all the payments made to the channels have been made vide account payee cheques only. We, therefore, do not find any infirmity in the order passed by the ld. CIT(A). We, therefore, uphold the order of the ld. CIT(A) and the grounds of the Department are thereby dismissed. - Decided against revenue. Issues involved:1. Disallowance of pay channel expenses by the Assessing Officer.2. Admission of additional evidence by the Commissioner of Income Tax (Appeals).3. Interpretation of the agreement between the appellant company and City Cable Network Ltd.Issue 1: Disallowance of pay channel expensesThe appeal involved the disallowance of pay channel expenses by the Assessing Officer (AO) during the assessment proceedings for the relevant year. The AO disallowed 20% of the expenses under the head 'Pay Channel Expenses,' resulting in an addition to the income of the assessee. The Commissioner of Income Tax (Appeals) (CIT(A)) observed that all pay channel expenses were paid through account payee cheques with TDS deducted, supported by bank statements and TDS certificates. The CIT(A) found the disallowance made by the AO to be adhoc and deleted it. The CIT(A) noted that no additional evidence was filed during the appellate proceedings, as all relevant documents were submitted during the assessment proceedings, and there was no violation of Rule 46A.Issue 2: Admission of additional evidenceThe Revenue challenged the admission of additional evidence by the CIT(A) regarding pay channel expenses. The Revenue contended that the assessee failed to provide details and evidence despite multiple opportunities. In contrast, the assessee argued that all details were substantiated by bank statements and TDS certificates, demonstrating the genuineness of the expenses. The CIT(A) considered the TDS certificates and bank statements as statutory documents that could be verified directly. The CIT(A) admitted these documents under Rule 46A(1)(a) as they were crucial for adjudication. The agreement between the appellant company and City Cable Network Ltd. was also a vital document in this context.Issue 3: Interpretation of the agreementThe agreement dated 18th August, 2008 between the appellant company and City Cable Network Ltd. played a significant role in determining the legitimacy of pay channel expenses. The agreement obligated the appellant to bear all pay channel expenses, as specified in clause 2.2. The AO overlooked this agreement in making the disallowance. The CIT(A) admitted the TDS certificates and bank statements as additional evidence based on established legal principles. The Tribunal upheld the CIT(A)'s decision, emphasizing the importance of documentary evidence and statutory certificates in verifying expenses.In conclusion, the Tribunal dismissed the Revenue's appeal and the Cross Objection filed by the assessee, affirming the CIT(A)'s order regarding the disallowance of pay channel expenses and the admission of additional evidence. The judgment highlighted the significance of documentary evidence, statutory certificates, and contractual agreements in determining the genuineness of expenses and upholding the principles of natural justice in tax assessments.