TaxTMI 
TaxTMI 
2025 (9) TMI 1111
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....n pan masala, zarda, perfumery compounds and herbs, mouth freshener, salt, spices, snack food, dairy products, confectionary products and processing of silver etc. and for the year under reference, the appellant filed original return of income on 29.11.2016 declaring total income of Rs. 10,23,11,890 (after claiming deduction under section 80IC) under normal provisions of the Act. Since, Minimum Alternate Tax ('MAT') liability tax on book profits under section 115JB of the Act was higher, the appellant paid tax of Rs. 126,74,93,300 on book profits amounting to Rs. 593,90,73,432. The case was selected for scrutiny and reference was made to TPO u/s 92CA of the Act. The TPO based on adjustments made in earlier assessment years, vide order dated 31/10/2019 proposed TP adjustment in respect of transactions between eligible and non-eligible units resulting in reduction of claim of deduction u/s 80IC of the Act to the extent of Rs. 162,15,97,109/-. The assessing officer completed the assessment after making adjustment as proposed by the TPO and further made addition to the tune of Rs. 76,44,17,147/- u/s 69A in respect of claim of expenses under the head "Sales Promotion and Entertainment E....
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....ddition of Rs. 5,91,92,961/-, without there being any factual or legal basis or any opportunity. (vi) That reference to statement of Sh. Sulabh Dixit is highly arbitrary and misconceived in the absence of any corroborative evidence and opportunity for cross examination. 2. That CIT(A) has wrongly confirmed the action of the AO in making addition u/s. 69C even though there is no dispute that these expenses are fully recorded and verifiable from the books of accounts. 3. That on the facts and circumstances of the case, the Ld. CTT(A) was not justified in making 20% ad-hoc disallowance of expenses amounting to Rs. 1.25 crores u/s 37(1) in respect of which additions was made by AO u/s. 69C of the Act even though there is no dispute or doubt over the genuineness of the claim of expenses towards Sales Promotion and advertisement from various parties or source of expenditure. 4(1) That on the facts and circumstances of the case, the Ld. CIT(A) was not justified in confirming disallowance of expenses amounting to Rs. 1.19 crores u/s 37(1) in respect of which additions was made by AO u/s. 69C of the Act even though there is no dispute or doubt over the ge....
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....mpany with the party M/s Best News Company Pvt Ltd. during the period under consideration ignored that the said entity claimed heavy losses during the period under consideration and having weak financial statements creating doubt about the genuineness of the transactions. 6. Whether on facts & in the circumstances of the case, the Ld CIT(A) erred in law & on facts in deletion of the addition of Rs. 16,80,00,000/- u/s 69C of the Act w.r.t the transaction of the assessee company with the party M/s Jewel Xchange Pvt Ltd during the period under consideration ignored that the said entity was non-existence to the said address. 7. Whether on facts & in the circumstances of the case, the Ld CIT(A) erred in law & on facts in deletion of the addition of Rs. 6,44,62,706/- u/s 69C of the Act w.r.t the transaction of the assessee company with the party M/s Jagdishwar Lal Jewellers (P) Ltd. during the period under consideration ignored that the said entity was non-existence to the said address. 8. Whether on facts & in the circumstances of the case, the Ld CIT(A) erred in law & on facts in passing direction of the addition/part addition w.r.t Rs. 7,44,00,000/- u/s 37(1....
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....5), being the alleged arm's length price, by applying the provisions of sections 80IA(8) read with section 80IC(7) of the Act. In view of the aforesaid allegation, the assessing officer held that the inter-unit transfer/ purchase was shortly recorded at eligible units by an amount of Rs. 129,08,82,032 [Rs. 705,45,20,164 (-) Rs. 576,36,38,132] and, accordingly, re- computed the profits of the eligible unit and made the disallowance of deduction under section 80IC of the Act by the aforesaid amount. 4.1 Next, ld. AO made adjustment of claim of deduction u/s 80IC to the extent of Rs. 2,76,10,488/- in terms of provisions of section 80IC(7) read with section 80IA(8) of the Act in respect of allocation of interest to eligible units. In the TPO order, it has been alleged that the total interest amount of Rs. 88,37,08,283/- should have been allocated to all the eligible and non-eligible units and therefore, there is short allocation of interest amounting to Rs. 6,52,97,261/- of which Rs. 2,76,10,488/- was calculated as pertaining to eligible units, which has resulted in overstatement of profits of the units eligible for deduction under section 80IC of the Act. 4.2 Then Ld. AO mad....
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....ined advertisement services from the said company. The assessing officer has drawn adverse inference on the basis of report obtained from the assessing officer of the said company stating that the company has taken large amount of unsecured loans and is under heavy losses. 5.2 In regard to addition made for expenses incurred with Jewel Xchange (P) Ltd. assessee has claimed that same pertains to the purchase of silver coins/items for distribution purposes of Rs. 16,80,00,000. The assessee has claimed to have purchased silver coins/products from this party for the purpose of distribution to retailer and business associates as part of marketing activities. The assessing officer has considered the addition on the basis of report of on the spot verification carried out. As per the inspector report, it was stated that the said party was operational only till FY 2015-16 and has discontinued the operation since then. It has been further alleged that most of the billing/sale was done by the said party to the appellant only. 5.3 Coming to addition made on account of disputed expenditure with Jagdishwar Lal Jewellers (P) Ltd. assessee has claimed it to be on account of purchase of silve....
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....m the parties which is duly subjected to VAT, there is no valid basis for making addition u/s 69A of the Act. 9. To invoke section 69C of the Act the foundation is that expenditure is not accounted for or there is no source behind incurring such expenditure then only section 69C could be invoked. However, such is not the case of the AO as he failed to point out any expenditure incurred without source or which is unrecorded. Hence provisions of S.69C were wrongly invoked. Even ld. CIT(A) has reached the same conclusion as in para 9.12 and 9.13 he held that the invocation of 69C in respect of recorded expenditure is invalid as there is no dispute with regard to source of such expenses. The focus of Section 69C is on the "source" of such expenditure and not on the authenticity of the expenditure itself. This view is duly supported by the decision of Mumbai Bench in I.T.A. No.6617/Mum/2014 Earthmoving Equipment Service Corporation Versus DCIT, Mumbai order dated May 2, 2017; Hon'ble Bombay High Court decision in CIT-1 v. B.G. Shirke Construction Technology (P.) Ltd. [2018] 96 taxmann.com 608 and co-ordinate bench decision at Delhi benches in case of ITA No.2497/Del/2024 Alexis G....
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....na Media is big television studio operating Sadhna Channel which is a famous and well-known channel for showing religious/devotional/spiritual content all over India and commands immense viewership. The assessing officer considered the disallowance on the basis of so-called statement of an employee Shri. Sulabh Dixit, working with Sadhna Group and the report of the assessing officer of the said party as extracted at page 250-251 para 34 of the assessment order. As with regard to Kamdhenu Media (P) Ltd. and Prabhatam Advertising (P) Ltd., the case is similar to Sadhna Media (P) Ltd. 12.2 Coming to addition to 18 parties the case of the assessee is that notice under section 133(6) of the Act was issued by the assessing officer to 33 parties to whom the appellant company had made payments towards sales promotion, entertainment, advertisement and publicity expenses during the year. Out of the notices issued to 33 parties, it is submitted that replies from 14 parties have been received and accepted by the assessing officer in the assessment order and for balance 19 parties, it has been held that no reply has been received there from. In this regard, it is pointed out that out of the ....
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.... explained above, all the details sought by the assessing officer in the nature of invoices and mode and proof of payment etc., were duly submitted/ provided by the appellant. The assessing officer, and also the CIT(A) however, totally disregarded the documents furnished by the appellant company evidencing incurrence of such expenditure and its genuineness, without granting reasonable opportunity of being heard, has proceeded to complete the assessment proceedings by making addition under section 69C of the Act on the ground that the notices issued by the assessing officer were not responded/replied. 13. In regard to addition made for expenses paid to Sadhna Media P. Ltd., ld. AR submitted that the assessee has obtained advertisement services from M/s. Sadhna Media which is a big television studio operating Sadhna Channel telecasting various entertainment/commercial/spiritual content all over India and commands immense viewership. However, the assessing officer considered the addition in respect of claim of expenses on the alleged ground that Sadhna Group was engaged in providing bogus billing. The assessing officer has also made reference to the statement of an employee Shri Su....
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.... upon appreciation of the facts of the case and after taking into consideration the assessment order in the case of Sadhna Media P. Ltd., the CIT(A) vide finding recorded at Page 48-51 Para 9.14 deleted the substantial addition to the extent of Rs. 27,08,07,039/- out of total addition of Rs. 33,00,00,000/-. However, without there being any case of the ld. AO and without any sort of evidences the ld. CIT(A) has assumed that expenses to extent of Rs. 5,91,92,961/- incurred by the M/s. Sadhna Media P. ltd. out of its unaccounted income is attributable to the assessee and the source of such expenses would have emanated from the assessee company. This conclusion is not only without any evidence but also does not match the assessment as stands concluded in the hands of M/s. Sadhna Media P. ltd. In this context we also find substance in the contention of ld. AR that the abbreviation used in the assessment is 'DS' which has been presumed to be with reference to DS group to which the assessee belongs. However, DS group is a conglomerate consisting of various companies and as such the drawing of adverse presumption by singling out the case of the assessee company is not justified. Then at Pa....
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....identity of the party or genuineness of the services rendered. Even otherwise, it is not the case of DCIT Central Circle 32 having jurisdiction over M/s. Kamdhenu Media P. Ltd. that this issue arise out of the assessment order or based on any material or evidence in his possession. Then ld. AR has also drawn support from the fact that Kamdhenu Media P. ltd. is an independent company and active as per MCA status and to connect it with Sadhan Group is not justified. 19. In regard to expenses of Prabhatam Advertising P. ltd., ld. AR has submitted that the assessee has availed advertisement services which includes outdoor hoardings. The transaction is supported from ledger account and invoices and subject to TDS u/s 194C. Further, the payment has been made through banking channel. The party has complied with notice u/s 133(6) of the Act. The documentary evidences are placed in PB Pg 185-228. We find that the assessing officer has not given any specific basis for considering the addition. The ld.CIT(A) has upheld the addition vide finding making reference to search on Sadhna Group and Prabhatam group, which cannot be considered to be set of evidence to connect Sadhna Group and Prabha....
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....hat no adverse inference could be drawn merely on the ground of non-compliance to notice u/s 133(6) in absence of any clear adverse finding about genuineness of the expense particularly when the payment has been made through banking channel after deduction of TDS and the claim is supported from documentary evidences. The assessee is big company and avails services from various parties and suppliers spread all over India and the non-compliance of notice u/s 133(6) by few of the parties could be attributable to various factors such as change of address or non-delivery of notice. However, it is trite law that failure to comply to notice u/s 133(6) per se cannot be the valid ground for disputing the genuineness of transaction in absence of any fault on part of the assessee. Reliance is rightly placed by ld. AR on decision of Hon'ble Delhi high Court in PCIT Versus Wel Trade (P) Ltd. [2023] 152 taxmann.com 663. Non compliance of the notices issued by the AO u/s 133(6), cannot lead to conclusion that the transactions were bogus. Had the AO harboured any doubt regarding creditworthiness of this company, he could have made enquiry from the respective AO's of the above company as all th....