TaxTMI 
TaxTMI 
2026 (11) TMI 169
X X X X Extracts X X X X
X X X X Extracts X X X X
....lve a common body of facts and evidence, they were heard together and are being disposed of by this consolidated order. 2. The assessee is a domestic company incorporated in the year 1995 and was formerly known as Ventures Advertising Private Limited. Its name was subsequently changed to Ventures Integrated Communications Private Limited. The assessee is engaged in the business of advertising and integrated communication services and releases advertisements on behalf of its clients through print media, including newspapers and periodicals; electronic media, including radio and television channels; digital media; and outdoor media. Besides conventional media placement, the assessee undertakes creative, production, event and exhibition assignments involving designing and preparation of advertising material, flex printing, wall paintings, monoliths, display material, branding and other turnkey activities. Its invoices ordinarily comprise the media cost charged by the media owner and the agency commission or service income earned by the assessee for releasing and executing the advertisement. 3. The assessee filed its return of income on 11.10.2022 declaring total income of Rs.30,....
X X X X Extracts X X X X
X X X X Extracts X X X X
....below: Sr. No. Nature of addition/disallowance Amount Decision of learned CIT(A) A. Additions challenged by the assessee 1. Alleged suppression of sales arising from the difference between turnover reported in GSTR-9C and the audited financial statements Rs.13,38,745 Confirmed 2. Alleged unexplained expenditure relating to invoices raised by D.B. Corp Ltd. (under section 69C) Rs.46,735 Confirmed 3. Disallowance for non-deduction of tax from payment made to CMYK Printech Ltd. (under section 40(a)(ia)) Rs.1,20,438 Confirmed Total additions challenged by the assessee Rs.15,05,918 B. Additions challenged by the Revenue 4. Disallowance of professional and consultancy fees (under section 37) Rs.89,00,000 Deleted 5. Addition relating to the running loan account of director Smt. Nandini Shah (under section 68) Rs.13,80,000 Deleted 6. Addition in respect of loan received from Smt. Lata Gulabani (under section 68) Rs.1,00,00,000 Deleted 7. Addition relating to transactions with Adrella India LLP (under section 69C) Rs.1,07,15,177 Deleted Total additions....
X X X X Extracts X X X X
X X X X Extracts X X X X
....rresponding business segment and the related revenue stream. Professional fees exceeding Rs.63 lakh were shown to be directly attributable to the production segment. Sample invoices raised by the professionals, invoices raised by the assessee upon its customers, including government departments, and the bank statements evidencing payments to the respective service providers were also placed on record. The learned CIT(A), after examining the sample invoices, bank statements and payment particulars and noting that the Assessing Officer had neither rejected the books nor identified any particular payment as non-genuine, deleted the disallowance. 10. We have considered the rival submissions and examined the material placed in the paper book. The entire premise of the disallowance is that the professional expenditure increased disproportionately while the aggregate turnover remained broadly similar to that of the preceding year. Such a comparison, by itself, does not establish that the expenditure was either fictitious or not incurred for the purposes of the business. Aggregate turnover is only one financial indicator and cannot be viewed in isolation from the nature and composition ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....of Rs.47,50,000 from her through seven banking transactions. Against this, the assessee repaid Rs.23,30,000 through various banking transactions, leaving a closing balance of Rs.24,20,000. During the assessment proceedings, the Assessing Officer issued notice under section 133(6) directly to Smt. Nandini Shah. She responded to the notice and furnished the relevant bank statements and particulars of her account with the assessee. The Assessing Officer did not dispute the aggregate amounts advanced by her but observed that repayment entries aggregating to Rs.13,80,000 were not corroborated by the bank statements furnished and treated the same as unexplained cash credits under section 68. 13. The assessee placed on record the confirmation and ledger account of Smt. Nandini Shah; her income-tax return and balance sheet; statements of her HDFC Bank account and two Bank of Baroda accounts; and the assessee's own Kotak Mahindra Bank statement showing the corresponding payments made to her individual or joint bank accounts. The explanation was that the loan receipts and repayments had moved through different identified bank accounts maintained by the lender and that all the entries were....
X X X X Extracts X X X X
X X X X Extracts X X X X
....dition of Rs.1,00,00,000 under section 68 in respect of the loan received from Smt. Lata Gulabani. During the assessment proceedings, the Assessing Officer issued notice under section 133(6) to the lender, which was duly complied with. The lender furnished the relevant confirmation, bank statements and financial particulars. The assessee also furnished her income-tax return, balance sheet, ledger account and corresponding entries in its own books and bank account. The Assessing Officer referred to an amount of Rs.20,00,000 transferred by the assessee to Smt. Lata Gulabani on 31.03.2021. He observed that this amount did not appear in her balance sheet as at 31.03.2022 and regarded this circumstance, coupled with non-deduction of tax on interest and what he described as "undisclosed fund transfers", as rendering the dealings doubtful. On that reasoning, he treated the entire loan of Rs.1,00,00,000 as unexplained under section 68. 17. On examination of the material placed in the paper book, we find that the identity of the lender stands conclusively established. She is an existing income-tax assessee, and her income-tax return, balance sheet and bank statements were furnished. Her ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....material capable of discrediting them. No such material has been brought on record. The learned CIT(A) was therefore justified in deleting the addition of Rs.1,00,00,000. Ground No. 3 raised by the Revenue is dismissed. Addition of Rs.1,07,15,177 under section 69C in respect of Adrella India LLP 20. Ground No. 4 concerns the deletion of the addition of Rs.1,07,15,177 made under section 69C in respect of transactions with Adrella India LLP. On the basis of information appearing in AIS, the Assessing Officer noted that Adrella India LLP had reported sales aggregating to Rs.2,83,48,936 to the assessee, whereas the assessee had recorded purchases, net of GST, of Rs.1,76,33,759. The difference of Rs.1,07,15,177 was treated as unexplained expenditure under section 69C without separately examining the constituent invoices or the accounting treatment of the transactions. 21. The assessee explained that Adrella India LLP functioned both as a supplier and contractor. During the year, it supplied ACP boards required for fabrication and installation of monoliths at outdoor locations and petrol pumps. Adrella India LLP raised Invoice No. 0021 dated 31.03.2022 for Rs.1,14,75,294, compri....
X X X X Extracts X X X X
X X X X Extracts X X X X
....that expenditure over and above what is recorded in the books was actually incurred and was met from a source which the assessee failed to explain. In the present case, the amount of Rs.97,24,825 is relatable to a specifically identified invoice dated 31.03.2022. Its recognition in the succeeding financial year is supported by the delivery challan showing receipt of goods on 07.04.2022, the subsequent ledger entry, the purchase orders relating to the projects in which the material was used and the bank statement evidencing payment. The dispute is therefore one of timing of recognition and not an unexplained source of expenditure. The goods could not have been consumed or utilised before their physical receipt, and the corresponding cost was recognised in the period in which the material was received and used for the related projects. 25. Likewise, the balance difference of Rs.9,90,352 represents amounts not accepted by the assessee because of delayed or deficient performance and non-performance. A supplier may report the full invoice value as its turnover; however, unless the purchaser accepts the liability or makes payment over and above the amount recorded, the difference cann....
X X X X Extracts X X X X
X X X X Extracts X X X X
....explanation, he observed that cash discounts were not required to be recorded in the books and inferred that the assessee had not disclosed the true and complete affairs of its business. 29. The assessee explained that it operated through different branches and GST registrations and that GSTR-9C was prepared on a State-wise basis. The consolidated turnover reported through the respective GSTR-9C statements was reconciled as under: Branch Turnover as per GSTR-9C Maharashtra branch/head office Rs.28,38,16,740 Delhi branch Rs.1,77,96,292 Hyderabad branch Rs.16,65,088 Kolkata branch Rs.1,92,72,142 Aggregate turnover as per GSTR-9C Rs.32,25,50,262 Less: non-GST commercial credit notes Rs.12,25,803 Less: rounding difference Rs.97 Turnover as per audited financial statements Rs.32,13,24,362 30. The assessee explained that GST had been paid on the original invoice values. Subsequently, cash discounts and rate-difference adjustments were granted to certain customers through commercial or non-GST credit notes. Since the conditions for reducing the taxable value under the GST provisions were not satisfied, the assessee did not reduce....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... the customer's account must be adjusted so that it reflects the amount actually recoverable and ultimately settled. A trade discount shown on the face of the invoice may directly reduce the sale value, but a subsequent cash discount or rate-difference adjustment necessarily requires an accounting entry. In the present case, the credit notes are party-specific, bear identifiable reference numbers and dates and are reflected in the corresponding ledgers. The Assessing Officer has not found any of them to be fabricated, nor has he brought any evidence showing that the amounts represented by the credit notes were nevertheless realised by the assessee. The books and audited financial statements were not rejected. No enquiry from the concerned customers has been referred to which would contradict the credit notes or show payment of the gross amount. Thus, the allegation of sales suppression does not emanate from positive evidence but only from an unreconciled comparison of figures prepared under two different reporting frameworks. The assessee has satisfactorily explained the difference through non-GST credit notes of Rs.12,25,803 and the rounding difference of Rs.97. We accordingly dir....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... the books or obtained any reimbursement from its customer in respect of the disputed amount. The assessee's regular ledger with D.B. Corp Ltd. contains recorded transactions exceeding Rs.85 lakh; therefore, there was no discernible reason for it to omit only Rs.46,735 if the liability had genuinely been accepted and discharged. 35. The response under section 133(6) establishes no more than the fact that D.B. Corp Ltd. raised the invoices. It does not establish that the assessee accepted those invoices or paid them from an unexplained source. In the absence of evidence of actual expenditure or payment, the first condition for invoking section 69C is not satisfied. Accordingly, the addition of Rs.46,735 is deleted and the relevant ground raised by the assessee is allowed. Disallowance of Rs.1,20,438 under section 40(a)(ia) 36. The final substantive issue relates to the disallowance of Rs.1,20,438 under section 40(a)(ia), being 30% of the payment of Rs.4,01,461 made to CMYK Printech Ltd. The Assessing Officer treated the payment as liable for deduction of tax at source and, in the absence of such deduction, disallowed 30% thereof. The assessee explained that it was an advert....