M/s. West Delhi Cable Network Pvt. Ltd., New Delhi V. ITO, New Delhi

CO 39/DEL/2011

• Counselvise Citation: [2015] 123 COUNSELVISE.COM (IT) 1196 (ITAT-DELHI)
• Duration Of Justice: 4 year(s) 6 month(s) 16 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 04-09-2015
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: H
• Next Hearing Date: 03-09-2015
• Assessment Year: 2006-2007
• Appeal Filed On: 17-02-2011
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: AND CROSS OBJECTION
• Assessee Lawyers: ARE DIRECTED A GAINST
• Keywords: Additional evidence; Revenue expenditure

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH:I NEW DELHI BEFORE SHRI N.K. SAINI, ACCOUNTANT MEMBER & SMT. BEENA PILLAI, JUDICIAL MEMBER I.T.A .NO. 85/DEL/2011 (ASSESSMENT YEAR-2006-07) & CROSS OBJECTION NO. 39/DEL/2011 (ASSESSMENT YEAR-2006-07) ORDER PER BEENA PILLAI, JUDICIAL MEMBER : THE APPEAL FILED BY THE REVENUE AND CROSS OBJECTIO N BY THE ASSESSEE ARE DIRECTED AGAINST THE ORDER PASSED BY THE LD. CI T(A) DATED 29.10.2010 FOR A.Y. 2006-07. 2. GROUNDS RAISED BY THE REVENUE IN ITA NO. 85/D/20 11 ARE AS FOLLOWS: ITO, WARD 18(3), ROOM NO. 248, C.R. BLDG., NEW DELHI. VS WEST DELHI CABLE NETWORK P. LTD., B-10, LAWRENCE ROAD, INDUSTRIAL AREA, NEW DELHI. AAACW1326J WEST DELHI CABLE NETWORK P. LTD., B-10, LAWRENCE ROAD, INDUSTRIAL AREA, NEW DELHI. AAACW1326J VS ITO, WARD 18(3), ROOM NO. 248, C.R. BLDG., NEW DELHI. APPELLANT BY SH. J.P. CHANDREKAR, SR. DR RESPONDENT BY SH. O.P. SAPRA, ADV. SH. SANJEEV SAPRA, ADV. DATE OF HEARING 03.09.2015 DATE OF PRONOUNCEMENT 04.09.2015 ITA NO. 85/D/2011 & CO NO. 39/D/2011 2 1. DESPITE AMPLE OPPORTUNITY, THE ONLY MATERIAL THAT WAS SUBMITTED DURING THE ASSESSMENT PROCEEDINGS IN SUPP ORT OF PAY CHANNEL EXPENSES WERE COPIES OF THE CONCERNED L EDGER ACCOUNTS WHICH WAS NOT SUFFICIENTLY ADEQUATE TO PRO VE GENUINENESS OF THE ENTIRE CLAIM. 2. DESPITE AMPLE OPPORTUNITY THE ONUS CAST ON THE ASSE SSEE TO PRODUCE CONFIRMATIONS OF THE PAY CHANNELS WAS NEITH ER DISCHARGED BY IT NOR SHIFTED BY IT. 3. ALL THE EVIDENCE FILED DURING THE APPELLATE PROCEEDI NGS OTHER THAN COPIES OF THE LEDGER ACCOUNTS OF PAY CHANNEL E XPENSES WERE ADDITIONAL EVIDENCE WHICH COULD WELL HAVE BEEN FILED AT THE TIME OF ASSESSMENT PROCEEDINGS BUT WAS NOT SO F ILED EVIDENTLY TO AVOID IN-DEPTH ENQUIRY. 4. THE CONDITIONS LAID DOWN IN RULE 46A FOR ADMISSION OF ADDITIONAL EVIDENCE ARE NOT SATISFIED IN THE CASE. 3. BRIEF FACTS OF THE CASE UNDER CONSIDERATION AR E AS UNDER: THE ASSESSEE DURING THE RELEVANT ASSESSMENT YEAR WA S CARRYING ON WITH THE BUSINESS OF CABLE NETWORKING SERVICES. THE ASSESSEE FILED ITS RETURN OF INCOME ON 29/11/2006 DECLARING TOTAL INCOME AT NIL, WHICH WAS PROCESSED U/S 143(1). THIS CASE WAS SELECTED FOR SCRUTINY AND NOTICE U/S 143(2) OF THE I.T. ACT, 1961 WAS ISSUED. THE ASSESSEE IN ITS RETURN HAD INCURRED FOL LOWING EXPENDITURE UNDER THE HEAD PAY CHANNEL EXPENSES: SONY PACKAGE 1,22,68,262.00 ESPN PACKAGE 68,70,519.00 STAR PACKAGE 1,78,47,027.00 ZEE PACKAGE 86,05,829.00 TOTAL 4,55,91,637.00 4. THE ASSESSEE HAD SUBMITTED THE BOOKS OF ACCOUNT S WHICH WERE CALLED FOR AND EXAMINED ON TEST CHECK BASIS. THE A O AT THE TIME OF PASSING THE ASSESSMENT ORDER DISALLOWED 20% OF THE EXPENSES INCURRED UNDER THE HEAD PAY CHANNEL EXPENSES OF RS. 4,55,9 9,637/- AND ACCORDINGLY, AN ADDITION OF RS. 91,18,327/- WAS MAD E. ITA NO. 85/D/2011 & CO NO. 39/D/2011 3 5. AGGRIEVED BY THE ORDER PASSED BY THE AO THE ASSE SSEE FILED AN APPEAL BEFORE THE LD. CIT(A). THE LD. CIT(A) HELD THAT ALL THE PAY CHANNEL EXPENSES HAD BEEN PAID BY ACCOUNT PAYEE CHEQUES ON WHICH TDS WAS DEDUCTED AND WAS VERIFIABLE FROM BANK STATEMENT OF THE ASSESSEE AND THAT THE TDS CERTIFICATE WHICH WAS DULY FILED BEFOR E THE AO. THEREFORE, THE ADHOC DISALLOWANCE @ 20% MADE BY THE AO WAS DEL ETED. THE LD. CIT(A) ALSO RECORDED THE ISSUE RELATING TO ADMITTAN CE OF ADDITIONAL EVIDENCE FILED BEFORE HIM BECAUSE HE HAD GIVEN DUE OPPORTUNITY TO THE LD. AO AND CALLED THE ASSESSEE WITH ACCOUNTS BOOK A ND RELEVANT RECORD EXAMINED THEM AND THEN SUBMITTED HIS REMAND REPORT. THEREFORE, THE LD. CIT(A) OBSERVED THAT THERE WAS NO VIOLATION OF RULE 46A AND THAT NO ADDITIONAL EVIDENCE WAS FILED. 7. AGGRIEVED BY THE ORDER OF THE LD. CIT(APPEALS), THE REVENUE IS IN APPEAL BEFORE US. 8. THE LD. DR SUBMITTED THAT THERE WAS NO DETAIL TH AT WAS FILED IN RESPECT OF THE PAYMENTS REGARDING THE PAY CHANNEL E XPENSES. THE LD. DR SUBMITTED THAT VARIOUS ENTRIES IN THE ORDER SHEE T INDICATE THE NUMBER OF OPPORTUNITIES GIVEN TO THE ASSESSEE TO FI LE THE DETAILS REGARDING THE PAY CHANNEL EXPENSES. LD.DR SUBMITS THAT THE ASSESSEE COULD NOT PRODUCE ANY PROOF NOR COULD ADDUCE ANY EV IDENCE TO SUBSTANTIATE THE CLAIM IN SPITE OF SEVERAL OPPORTUN ITIES AFFORDED TO THE ASSESSEE. 9. ON THE CONTRARY THE LD. AR SUBMITS THAT THE OBSE RVATIONS OF THE AO IN THE ASSESSMENT ORDER ARE FACTUALLY INCORRECT AND CONTRARY TO THE MATERIAL PLACED ON RECORD. IT HAS BEEN SUBMITTED TH AT THE ENTIRE DETAILS OF PAY CHANNEL EXPENSES HAVE BEEN PLACED ON RECORD DULY SUBSTANTIATED BY BANK STATEMENTS SHOWING DEBIT OF P AY CHANNEL PAYMENTS AS WELL AS TDS CERTIFICATES ISSUED BY THE ASSESSEE COMPANY. ITA NO. 85/D/2011 & CO NO. 39/D/2011 4 10. THE LD. AR SUBMITTED THAT THE APPELLANT COMPANY , SINCE ITS INCORPORATION IS IN THE BUSINESS OF DISTRIBUTION OF CHANNEL SIGNALS TO CABLE OPERATORS. THE CHANNEL SIGNALS REPRESENTS SI GNALS OF VARIOUS TV CHANNELS WHICH ARE BEING CONTROLLED BY DIFFERENT TV COMPANIES. THE LD. AR SUBSTANTIATES THE PAYMENTS SO MADE TO THE TV CHANNELS BY THE AGREEMENT THAT HAS BEEN ENTERED WITH BETWEEN THE AS SESSEE AND CITY CABLE NETWORK LTD., (NOW KNOWN AS WIRE AND WIRELESS INDIA LTD.) WHICH IS PROVIDER OF ENTIRE NETWORK AND TECHNICAL E QUIPMENT ETC., REQUIRE FOR RUNNING THE BUSINESS OF THE COMPANY. T HE SAID AGREEMENT DATED 18 TH AUGUST, 2008 HAS BEEN ENCLOSED TO THE PAPER BOOK A T PAGE 139 TO 147. THE LD. AR TOOK US THROUGH THE VARIOUS CLAUSES I.E. RELEVANT TO DECIDE THE ISSUE BEING CLAUSE NO. 2.1(I I) AND CLAUSE NO. 2.2. IT IS SUBMITTED THAT THE PAY CHANNEL EXPENSES HAVE BEEN INCURRED FOR THE PURPOSE OF BUSINESS AND AS PER THE REQUIREMENTS UNDER THE AGREEMENT DATED 18 TH AUGUST, 2008. THE LD.AR SUBMITS THAT AS PER THE AFORESAID CLAUSES UNDER THE AGREEMENT SPECIFICALLY MENTIONED HEREIN, THE ASSESSEE HAS TO INCUR THE PAY CHANNEL EXPENSES TO EARN INCOME FROM THE ACTIVITY. THEREFORE, IT IS PLEADED THAT T HE SAME NEED TO BE CONSIDERED AS REVENUE EXPENDITURE. 11. THE LD. AR FURTHER SUBMITS THAT THESE PAYMENTS ARE FULLY SUPPORTED WITH DOCUMENTARY EVIDENCES AND ARE VERIFIABLE FROM THE BOOKS OF ACCOUNTS WHICH WERE DULY PRODUCED BEFORE THE AO AS IS EVIDENT FROM THE ASSESSMENT ORDER ITSELF. IT IS SUBMITTED THE L D.AO HAS NOT FOUND ANY DISCREPANCY OR DEFECT IN THE BOOKS OF ACCOUNT. EVEN WITH THE LEDGER ACCOUNTS OF THE VARIOUS PAY CHANNEL EXPENSES AS WELL AS THE BANK STATEMENT AND TDS CERTIFICATES FURNISHED BY TH E ASSESSEE COMPANY NO DISCREPANCY OR DEFECTS HAVE BEEN OBSERVE D AND POINTED OUT BY THE AO. ITA NO. 85/D/2011 & CO NO. 39/D/2011 5 12. WE HAVE PERUSED THE RECORDS AND THE PAPER BOOK FILED BEFORE US. IT IS OBSERVED FROM THE ASSESSMENT ORDER THAT THE AO H IMSELF RECORDS THAT THE BOOKS OF ACCOUNTS WERE CALLED AND THE SAME HAS BEEN EXAMINED ON THE TEST CHECK BASIS. FURTHER IT IS OBSERVED THAT T HE DETAILS CALLED FOR WERE SUBMITTED BY THE ASSESSEE AND THE SAME HAS BEE N EXAMINED. THE LD. CIT(A), HOWEVER, FORWARDED THE SUBMISSION MADE BY THE ASSESSEE TO THE AO AND HAD CALLED FOR THE REMAND REPORT. THE AO SUBMITTED THE REMAND REPORT DATED 02.07.2010. IT APPEARS FROM TH E REMAND REPORT THAT THE ASSESSEE HAS NOT FILED THE CONFIRMATION OF FOUR PARTIES TO WHOM THE PAYMENT OF PAY CHANNEL EXPENSES WAS MADE. IN T HE EVENT OF WHICH THE AO CONSIDERED IT NECESSARY TO DISALLOW 20% OF T HE PAY CHANNEL EXPENSES CLAIMED BY THE ASSESSEE. FROM THE ORDER P ASSED BY THE LD. CIT(A) IT APPEARS THAT THE ASSESSEE HAD PLACED ON R ECORD DURING THE ASSESSMENT PROCEEDINGS THE TDS RETURNS FILED BY THE ASSESSEE ASSUMING THOUGH THE TDS CERTIFICATES WERE NOT FILED DURING THE ASSESSMENT PROCEEDINGS. IT HAS BEEN RECORDED BY TH E LD. CIT(A) THAT THE TDS CERTIFICATES ARE STATUTORY CERTIFICATES AND CAN BE DIRECTLY VERIFIED FROM THE RECORDS AVAILABLE WITH THE INCOME TAX DEPARTMENT. THE DETAILS OF THE PARTIES TO WHOM THE PAYMENTS HAV E BEEN MADE AGAINST WHICH THE TDS HAS BEEN DEDUCTED BY THE ASSE SSEE ARE VERIFIABLE FROM THE TDS RETURNS PRODUCED AT THE TIM E OF ASSESSMENT. THE LD. CIT(A) ACCORDINGLY HELD THAT THE TDS CERTIF ICATES CANNOT BE TERMED AS ADDITIONAL EVIDENCE AS SOUGHT TO BE SUGGE STED IN THE REMAND REPORT. THE LD. CIT(A) FURTHER RECORDS THAT THE AO HAS NOT GIVEN THE BASIS AS TO WHO HE HAS ARRIVED AT A FIGURE OF 20% F OR THE PURPOSE OF DISALLOWANCE OF PAY CHANNEL EXPENDITURE. 13. ON PERUSAL OF THE AGREEMENT DATED 18 TH AUGUST, 2008, WE OBSERVE THAT THE ASSESSEE IS BOUND TO PROCURE THE PAY CHANN EL EXPENSES BY VIRTUE OF CLAUSE 2.2 OF THE AGREEMENT AND HAS TO BE AR ALL THE PAY ITA NO. 85/D/2011 & CO NO. 39/D/2011 6 CHANNEL EXPENSES FROM ITS OWN FUND. THE AO HAS CON VENIENTLY OMITTED TO REFER TO THE SAID AGREEMENT OF THE APPELLANT COM PANY 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 ADDITIO NAL EVIDENCE IN VIEW OF THE SETTLED LAW AS LAID DOWN IN THE JUDICIA L PRONOUNCEMENTS. THESE DOCUMENTS DESERVE TO BE ADMITTED FOR THE PURP OSE OF ADJUDICATION OF THE PRESENT APPEAL. 14. 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. HOW EVER, IN THE REMAND REPORT THE LD.A.O HAS ACCEPTED THE ACKNOWLEDGEMENT OF THE DOCUMENTS. FURTHER, WE OBSERVE THAT ALL THE PAYMENTS MADE TO T HE CHANNELS HAVE BEEN MADE VIDE ACCOUNT PAYEE CHEQUES ONLY. 15.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. 16.IN RESPECT OF THE CROSS OBJECTION FILED BY THE A SSESSEE BEING CO NO. 39/D/2011 STANDS INFRUCTUOUS AS NO RELIEF HAS BEEN SOUGHT FOR. THE CROSS OBJECTION FILED BY THE ASSESSEE MERELY SUPPOR TS THE ORDER OF THE LD. CIT(A) 17.THE APPEAL FILED BY THE REVENUE IS THEREBY DISMI SSED AND THE CROSS OBJECTION FILED BY THE ASSESSEE STANDS DISMISSED. THE ORDER IS PRONOUNCED IN THE OPEN COURT ON 04.09.2 015 SD/- SD/- (N.K. SAINI) (BEENA PILLAI) ACCOUNTANT MEMBER JUDICIAL MEMB ER DATED: 04.09.2015 *KAVITA, P.S. ITA NO. 85/D/2011 & CO NO. 39/D/2011 7 COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT ASSISTANT REGISTRAR ITAT NEW DELHI ITA NO. 85/D/2011 & CO NO. 39/D/2011 8 DATE 1. DRAFT DICTATED ON 03.09.2015 2. DRAFT PLACED BEFORE AUTHOR 04.09.2015 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER 04.09.2015 4. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER. 04.09.2015 5. APPROVED DRAFT COMES TO THE SR.PS/PS 04.09.2015 6. KEPT FOR PRONOUNCEMENT ON 04.09.2015 7. FILE SENT TO THE BENCH CLERK 07.09.2015 8. DATE ON WHICH FILE GOES TO THE AR 9. DATE ON WHICH FILE GOES TO THE HEAD CLERK. 10. DATE OF DISPATCH OF ORDER.