TaxTMI 
TaxTMI 
2016 (7) TMI 507
X X X X Extracts X X X X
X X X X Extracts X X X X
.... that the assessee did not discharge the onus of proving the genuineness of the loan transactions." 3. Apropos these grounds, we have heard the arguments of both the sides and carefully perused the relevant material on record. The ld. DR strongly supported the action of the AO and submitted that the AO provided ample opportunities to the assessee to explain the amount of Rs. 218.86 lakhs claimed to have been taken by the assessee as unsecured loans during the period under consideration but there was no compliance. The ld. DR further pointed out that in view of the non cooperation of the assessee the AO had no alternative but to draw adverse inference and he rightly held that the assessee has failed to discharge its onus with regard to unsecured loans taken during the year as the assessee has failed to file any documents which could prove the genuineness of transaction, credit worthiness and identity of the parties from whom the assessee has claimed to have taken unsecured loans during the period under consideration. The ld. DR further pointed out that the AO was quite correct and justified treating the amount as assessee company's own company introduced in the books of accounts ....
X X X X Extracts X X X X
X X X X Extracts X X X X
...., the ld. CIT(A) noted that the AO himself has not doubted the existence, identity and credit worthiness of M/s Sabarmati Network P. Ltd. Therefore, merely because the assessee could not file bank statement of a party which was not within the assessee's control, addition cannot be held as justified. 6. The ld. AR further pointed out that the ld. CIT(A) granted relief to the assessee on this ground by holding as under: "I find that the addition in question has been made by the Id. AO primarily on the ground that no confirmation and other evidence in support of the credits appearing in the names of M/s Gujarat Telelinks and M/s Sabarmati Networks Pvt. Ltd. were filed by the appellant Co. in the course of assessment proceedings. However, a perusal of assessment records reveals that in the course of assessment, the appellant Co. vide its letter dated 21/12/2009 has filed duly confirmed detailed copies of accounts of both the parties." 7. The ld. AR further pointed out that the ld. CIT(A) granted relief to the assessee by relying on the order of his predecessor i.e. ld. CIT(A) for A.Y 2006-07 wherein the first appellate authority granted relief to the assessee. The ld. AR also ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....4/Del/2010 10. Ground Nos. 3, 4 and 5 of the assessee are general in nature and require no adjudication. Remaining effective ground Nos. 1 and 2 read as under: "1. That the following additions/disallowances made by the ld. CIT(A) towards the assessable income of the appellant are arbitrary, unjust and illegal on various factual and legal grounds: a) Rs. 1,05,01,777/- on account of alleged understatement of subscription fee b) Rs. 1,49,67,891/- being the disallowance on account of pay channel expenses Rs. 2,54,69,668/- Various observations made by the ld. CIT(A) while making the above addition/disallowances on his own are either incorrect or are not tenable. 2. That no proper and legal enhancement notice had been issued by the ld. CIT(A) before making the above addition/disallowances and consequently the income enhanced by the ld. CIT(A) by Rs. 2,25,89,668 is wholly unjustified." 11. Briefly stated, the facts of the case are that the AO completed assessment u/s 143(3) of the Act by making addition of Rs. 218.86 lakhs on account of unsecured loans and adhoc disallowance of expenses @ 7.5% claimed by the assessee. Aggrieved, the ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....y determined by the Parties to this Agreement from time to time but not exceeding 90% of the collections received by the said Co. and not 90% of the bills raised by the said Co. on the cable operators. In the immediately preceding assessment year viz. 2006-07 the Assessee had declared such receipts viz. 90% of the collections which were duly accepted and assessed to tax as is evident from copy of assessment order passed u/s 143(3) placed at pages 78 - 79 of the paper book. Similarly for the assessment year 2008-09 also, the Revenue had accepted such income by passing an assessment order u/s 143(3) on 15/12/2010, copy enclosed as Annexure I at pages G - °\ to these Synopsis. 5. Details/breakup of income from distribution charges of Rs. 1,60,65,485/- shown in the P & L A/c at page 114 of the paper book is placed at pages 124 - 125 of the paper book. Copy of A/c of the Assessee Co. in the books of M/s Wire & Wireless (I) Ltd. formerly known as Siti Cable Network Ltd. for the year under consideration is placed at pages 24 - 28 of the paper book from which the month-wise collections as made by them are evident. 6. The Assessee having duly declared collection charges as per cla....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... Rs.6,05,290 3. Hence, there is no basis for the Ld. CIT(A) to presume and hold that since no revenue for the three months of January to March, 2007 was booked/recognized, therefore, the following payments made to pay channels for the same three months period are also not allowed: Rs.44,54,704 to M/s Zee Pack - kindly see page 159 of the paper book. Rs.57,91,162 to M/s Star Pack - kindly see pages 160- 161of the paper book. Rs.24,94,655 to M/s Sony Pack - kindly see page 162 of the paper book. Rs.22,27,730 to M/s ESPN & Star Sports - kindly see page 163 of the paper book Rs. 1,49,67,891 Tota Rs. 28,80,000 Disallowance as made by AO Less Rs. 1,20,87,891 Enhanced disallowance made by CIT(A) As shown above, revenue for three months period ended March, 2007 was duly accounted for by the Assessee and hence, the very basis/rationale for making the disallowance of pay channel expenses for such three months period by the Ld. CIT(A) did not exist. 4. In para 5.4.3 at page 10, the Ld. CIT(A) has himself observed as under: "However, a perusal of records maintaine....
X X X X Extracts X X X X
X X X X Extracts X X X X
....d Rice Mills vs. CIT (P & H High Court), in which it was held as under: "That even assuming that the proviso was attracted, the income-tax authorities, not having determined any basis or manner of computation of the true income, profit and gains of the assessee-firm, were not justified in arbitrarily adding Rs. 15,000 in round figure to the income of the assessee-firm. " 94 TTJ 736, ACIT vs. Arthur Anderson & Co. (ITAT Mumbai Bench), in which it was held as under "Even though the AO has given categorical finding that the expenditure was for the purpose of the business and commercially expedient and the same was admissible as deduction, he made a token disallowance of 20 per cent of such expenses on the ground that element of excessiveness in such reimbursement cannot be ruled out - Not justified -AO has accepted that the accounts were duly admitted - Disallowance was inherently based on surmises and conjectures and devoid of a legally sustainable foundation - CIT(A) justified in deleting the disallowance". ITAT Delhi Bench judgment in the case of Duli Chand Narender Kumar Exports Pvt. Ltd Vs. ACIT" 13 Replying to the above, the ld. DR first of all drew ou....
X X X X Extracts X X X X
X X X X Extracts X X X X
....rder of the ld. CIT(A) pointed out that the documents relating to subscription charges levied as per bills raised by the SITI cable during the period April to December 2006 were examined by the ld. CIT(A) and it was found that during the said period, total service charges/ subscription fees of Rs. 2.95,19,181/- excluding the service tax and other government levies was to be collected from the cable operators/ subscribers and thus, as per the distribution agreement, the assessee company was to receive 90% of the said billed amount i.e. 2,65,67,262/- during the period April to December 2006 and as against Rs. 2,65,67,262/- the assessee company has shown only income of Rs. 1,60,65,485/- only. Therefore, it was rightly held that the assessee under stated the revenue collected by it during the period. The ld. DR also pointed out that the ld. CIT(A) from the perusal of assessee's account as appearing in the books of SITI cable, noted that the SITI cable has raised bills and debited the account of the assessee on a monthly basis and the amounts debited in the accounts of the assessee company represented the Revenue which had become due during the period under consideration and therefore, ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... this count. Therefore, the order of the ld. CIT(A) may kindly be upheld. 17. The ld. AR also placed rejoined to the above submissions of the ld. Sr. DR and submitted that on one hand the ld. CIT(A) is alleging that the assessee understated the subscription fee and therefore, he made enhancement of Rs. 1,05,01,777/- and at the same time, the ld. CIT-DR alleged that the assessee made payment of pay channel fees for the period January 2007 to March 2007 i.e. for three months for which no subscription fees has been shown as collected. The ld. AR pointed out that the Revenue cannot blow hot and cold at the same time as the addition for understatement of subscription i.e. the Revenue receipt on one hand and disallowance on pay channel expenses for the same part of the financial period on the other hand because when the understatement of subscription is there, and the addition is being made on this count, then pay channel expenses has to be allowed to the assessee. Therefore, the order of the ld. CIT(A) cannot be held as sustainable on facts and on the provisions of the Act. 18. On careful consideration of the above rival submissions, from the relevant part of the order of the ld. ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ith the contention of the ld. DR that the assessee has not shown subscription fees/charges from the period January to March 2007 and the distribution charges shown by the assessee of Rs. 6,05,290/- cannot justify the actual amount of subscription received by the assessee for these three months because on one hand the assessee is paying huge charges of Rs. 1,49,67,891/- continuously for the period of last months i.e. January to March 2007 without collecting Revenue which is not an acceptable fact, even for a man of ordinary prudence, in the ordinary course of business. As we have noted earlier that collection of subscription fees as well as payment of pay channel charges was under the control of the assessee, then if due to some dispute between the assessee and the SITI the subscription charges was not allowed to be collected by the assessee for his period of three months, then it is not acceptable that the assessee continuously made payments for the last three months of the year despite the fact that he could not collect any subscription from respective clients for the same period of three months. 20. The bills raised by the assessee for this period against SITI have not been ve....