M/s Ad Vantage Biz Solutions IndiaPrivate Limited, Hyderabad V. Dy.CIT., Cent.Cir-1(1), Hyderabad

ITA 1106/HYD/2013

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 74747 (ITAT-HYDERABAD)
• Duration Of Justice: 7 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-03-2014
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Assessment Year: 2009-2010
• Appeal Filed On: 29-07-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: P SOMASEKHAR REDDY
• Keywords: Reasonable cause

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH A', HYDERABAD BEFORE SHRI B.RAMAKOTAIAH, ACCOUNTANT MEMBER AND SMT. ASHA VIJAYARAGHAVAN, JUDICIAL MEMBER ITA NO.1106/HYD/13 : ASSESSMENT YEAR 2009 - 10 M/S. AD VANTAGE BIZ SOLUTIONS INDIA P. LTD.,. HYDERABAD ( PAN - AAGCA 9852 R ) V/S. DY. COMMISSIONER OF INCOME - TAX, CENTRAL CIRCLE 1(1), HYDERABAD (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI A.SRINIVAS RESPONDENT BY : SHRI P.SOMA SEKHAR REDDY DATE OF HEARING 6.3.2014 DATE OF PRONOUNCEMENT 21.3.2014 O R D E R PER SMT. ASHA VIJAYARAGHAVAN, JUDICIAL MEMBER: THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME - TAX(APPEALS) - II, HYDERABAD DATED 13.5.2013 , FOR THE ASSESSMENT YEAR 2009 - 10. 2. EFFECTIVE GRIEVANCE OF THE ASSESSEE IN THIS APPEAL RELATES TO ESTIMATED DISALLOWANCE MADE OUT OF THE EXPENDITURE CLAIMED BY THE ASSESSEE. 3. FACTS OF THE CASE IN BRIEF ARE THAT THE ASSESSEE COMPANY IS A SUB - CONTRAC TOR FOR PROVIDING SERVICES OF PUBLICITY PROGRAMS OF THE GO V ERNMENT OF ANDHRA PRADESH. THE YEAR UNDER APPEAL IS THE FIR S T YEAR OF INCORPORATION OF THE COMPANY. IT WAS STA T ED THAT THE GOVERNMENT OF ANDH R A PRADESH AWARDED A PUBLICITY CONTRACT TO M/S. WA LLA & CO., NEW DELHI FOR GIVING AUDIO/VIDEO PUBLICITY IN SOME VILLAGES OF NINE DISTRICTS. M/S. WALLA & CO IN TURN ENTRUSTED THE WORK TO TH E ASSESSEE ON SUB - CON TRACT BASIS. THE NATURE OF WORK WAS TO DISPLAY WELFARE PROGRAMS OF THE ST ATE GOVERNMENT IN BETWEEN D ISPLAY OF THE FILMS. THE GROSS RECEIPTS ARE RS.25,33,33,512, AGAINST WHICH THE OPERATIONAL EXPENSES DEBITED WAS R S .24,37,22,5331. THE ASSESSING OFFICER NOTED THAT THE ITA NO. 1106/ HYD/20 13 M/S. AD VANTAGE BIZ SOLUTIONS INDIA P. L TD. HYDERABAD 2 OPERATIONAL EXPENSES INCLUD E D SUB - CON T RACT PAYMENTS OF RS .15.63 CRORES AND DIRECT CASH EX PENDITURE OF RS .8.73 CRORES , AND DETAILS OF SUCH SUB - CONTRACT PAYMENTS ARE AS FOLLOWS - SL. NO. NAME AMOUNT RS. 1. G.S.PRAKASH RAO 1,57,44,000 2. G.SANJEEV KUMAR 2,00,00,000 3. SOCIAL MEDIA INDIA LTD. 8,03,70,000 4. MOHD. ISHAQ HUSSAIN 9,80,000 5. SURYA ADVERTISING 3,48,85,880 6. SRI SRINIVAS GOUD 44,08,000 TOTAL 15,63,87,880 4. DURING THE COURSE OF ASSESSMENT, ASSESSEE WAS ASKED TO FURNISH CONFIRMATION LETTERS FORM THE SUB - CONTRACTORS. THE ASSESSING OFFICER VIDE NOTICES UN D ER S.133(6) HAS ALSO CALLED FOR INFORMATION OF TRANSACTION S MADE BY SUCH SUB - C ONT RACTORS OF THE ASSESSEE. THOUGH CONFIRMATION LETTERS WERE RECEIVED FROM THREE OF THE ABOVE PARTIES, BEING THE ONES AGAINST SL.NO.S1, 3 AND 4 IN THE ABOVE TABLE, WITH RESPECT TO THE OTH E R THREE, VIZ. THOSE AGAINST SL.NOS.2 , 5 AND 6, T HE RE WAS NO RESPONSE AT ALL. EVEN AFTER GIVING SUFFICIENT TIME TO THE ASSESSEE, ASSESSEE COULD NEITH E R PRODUCE THE SUBCONTRACTORS NOR VOUCHERS IN SUPPORT OF THE CONTENTION THAT SUB - CON T R A CT WORK HAS BEEN CONDUCTED BY THE ABOVE PARTIES. AFTER DETAILED VERIFICATION FROM THE RESP ECTIVE ASSESSING OFFICERS HAVING JURISDICTION OVER THE ABOVE SIX SUB - CONTRACTORS, IN THE ABS E N C E OF AGREEMENTS AS TO THE NATURE OF WORK, GENUINENESS O F THE TRANSACTIONS , THE AMOUNTS PAID TO SHRI G.SANJEEV KUMAR, M/S. SURYA ADVERTISING , AND SHRI SRINIVAS GOUD OF R S .2 CRORES, RS.3.48 CRORES AND RS.44 LACS WERE DISALLOWED AND ADDED BACK TO THE INCOME RETURNED. WITH REGARD TO THE ISSUE OF THE EXPENDITURE INCURRED IN CASH OF RS.8,73,34,651 THE EXACT NATURE OF EXPENDITURE WAS NO T FURNISHED EXCEPT SUB M I T TING T HAT IT CONS IS TS OF LABOU R PAYMENT, POWER AND FUEL AND THE AMOUNT WAS INCURRED BY VILLAGE ITA NO. 1106/ HYD/20 13 M/S. AD VANTAGE BIZ SOLUTIONS INDIA P. L TD. HYDERABAD 3 SAR PANCH/VAO AND PAID TO THEM. AS THE ASSESSEE HAS NO T PRODUCED ANY VOUCHERS EXCEPT FOR THE LEDGER COPY, SOME DAILY PROGRAMME SHEETS INDICATING THE NAME OF THE VILLA GE, TIME OF PROGRAMME, NUMBER OF AUDIENCE ETC., BUT THE PROOF OF EXPENDITURE LI K E THE NA ME OF TH E PAYEE, NATURE OF EXPENDITURE WERE NO T FIL E D. THE ASSESSING OFFICER AFTER THOROUGH VERIFICATION , THEREFORE, HAS DI S ALLO W ED R S .87,33,465, BEING 10% OF SUCH EXP ENDITURE IN CASH OF RS.8,73,34,651. 5. AGGRIEVED INTER ALIA BY THE DISALLOWANCE MADE OUT OF EXPENDITURE INCURRED THROUGH CASH PAYMENTS, ASSESSEE PREFERRED APPEAL BEFORE THE CIT(A), WHO RESTRICTED SUCH DISALLOWANCE TO 8%, AND PARTY ALLOWED THE APPEAL.. 6. STILL AGGRIEVED, ASSESSEE IS IN SECOND APPEAL BEFORE US. 7. THE LEARNED COUNSEL FOR THE ASSESSEE REITERATING THE CON T ENTION S ADVANCED BEFORE THE REVENUE AUTHORITIES SUBMITTED THAT SINCE THE EXPENDITURE IN QUESTION WAS INCURRED IN REMOTE VILLAGES, THERE WAS A JUSTIFIED REASON FOR THE ASSESSEE FOR INCURRING SUCH EXPENDITURE IN CASH. IN ANY EVENT, HE SUBMI T TED THAT THE DISALLOWANCE SUSTAINED BY TH E CIT(A) IS ALSO ON A HIGH SIDE, AND THE SAME SHOULD B E RESTRICTED TO 5%. 8, THE LEARNED DEPARTMENT AL REPRESENTATIVE ON THE O T H E R HAND, STRONGLY SUPPORTED THE ORDER OF TH E CIT(A) AND SUBMITTED THAT THE CIT(A) HAS ALREADY GIVEN A REASONABLE RELIEF AND NO INTERFERENCE WITH HIS ORDER IS CALLED FOR. 9. WE HEARD BOTH SIDES AND PERUSED THE IMPUGNED ORDERS OF THE REVENUE AUTHORITIES AND OTHER MATERIAL AVAILABLE ON RECORD. IT IS AN ADMITTED FACT THAT THE EXPENDITURE IN QUESTION HAS BEEN INCURRED IN VILLAGES AND THE PAYMENTS WERE MADE TO THE VILLAGERS. THERE IS , THEREFORE, JUSTIFICATION FOR THE ASSESSEE FOR INCURRING THE EXPENDITURE IN QUESTION IN CASH, AND THERE IS ALSO ITA NO. 1106/ HYD/20 13 M/S. AD VANTAGE BIZ SOLUTIONS INDIA P. L TD. HYDERABAD 4 REASONABLE CAUSE FOR THE ASSESSEES INABILITY TO SUBSTANTIATE THE ENTIRE EXPENDITURE ON THE BASIS OF VOUCHERS. CONSIDERING THESE FACTORS, THE CIT(A) HAS RESTRICTED THE DISALLOWANCE MADE BY THE ASSESSING OFFICER WORKING OUT THE SAME AT 10%, TO 8%. HOWEVER, CON S I D ERIN G TOTALITY OF FACTS AND CIRCUMSTANC E S OF THE CASE, WE FIND IT FAIR AND REASONABLE TO SUSTAIN A DISALLOWANCE WORKED OUT AT 7% OF RS.8,73,34,650, AS AGAINST THE ASSESSEES PLEA FOR ADOPTING A RATE OF 5%. WE DIRECT THE ASSESSING OFFICER ACCORDINGLY, AND PARTLY ALLOW THE G R OUNDS OF THE ASSESSEE IN THIS APPEAL. 10. IN THE RESULT, ASSESSEES APPEAL IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE COURT ON 21.3.2014 SD/ - SD/ - ( B.RAMAKOTAIAH ) (ASHA VIJAYARAGHAVAN) ACCOUNTANT MEMBER JUDICIAL MEMBER DT/ - 21 ST MARCH, 2014 COPY FORWARDED TO: 1. M/S. AD VANTAGE BIZ SOLUTIONS INDIA P. LTD., H.NO.3 - 5 - 1092/A, PLOT NO.52, NARAYANGUDA, HYDERABAD 2 . DY. CIT, CIRCLE 1(1), HYDERABAD 3. 4. COMMISSIONER OF INCOME - TAX(APPEALS) II, HYDERABAD COMMISSIONER OF INCOME - TAX I HYDERABAD 5. DEPARTMENTAL REPRESENTATIVE, ITAT, HYDERABAD. B.V.S