Mallikarjuna udayshankar, Bengaluru V. Assistant commissioner of Income tax, Circle-6(2)(1), Bengaluru

ITA 2235/BANG/2018

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 5142 (ITAT-BANGALORE)
• Duration Of Justice: 1 year(s) 6 month(s) 30 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-02-2020
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: C
• Next Hearing Date: 29-01-2020
• Assessment Year: 2008-2009
• Appeal Filed On: 20-07-2018
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: H L SOWMYA ACHAR BENG ALURU
• Keywords: Business expenditure; Set aside
• Section: 69C; 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH : BANGALORE BEFORE SHRI N.V. VASUDEVAN, VICE PRESIDENT AND SHRI B R BASKARAN, ACCOUNTANT MEMBER ITA NO. 2235/BANG/2018 ASSESSMENT YEAR: 2008-09 MR. MALLIKARJUNA UDAYSHANKAR # 148, 6 TH MAIN, 2 ND PHASE, 2 ND STAGE, MAHALAKSHMIPURAM, BENGALURU - 560086 PAN: AACPU 0412C VS. THE ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE 6(2)(1), BENGALURU 560 095. APPELLANT RESPONDENT APPELLANT BY : SHRI NITESH RANJAN, CA RESPONDENT BY : SMT. H.L. SOWMYA ACHAR, ADDL.CIT(DR)(ITAT), BENGALURU. DATE OF HEARING : 29.01.2020 DATE OF PRONOUNCEMENT : 19.02.2020 O R D E R PER N.V. VASUDEVAN, VICE PRESIDENT THIS APPEAL BY THE ASSESSEE IS AGAINST THE ORDER DATED 13.4.2018 OF THE CIT(APPEALS), BENGALURU-6, BENGALURU RELATIN G TO ASSESSMENT YEAR 2008-09. 2. THE ASSESSEE IN THIS APPEAL IS AN INDIVIDUAL DER IVING INCOME FROM CONSTRUCTION OF FLATS. FOR AY 2008-09, THE ASSESSM ENT WAS COMPLETED U/S. 143(3) OF THE INCOME-TAX ACT, 1961 [THE ACT] AND IN THE ASSESSMENT SO COMPLETED, THE AO DISALLOWED THE CLAIM OF ASSESSEE FOR DEDUCTION OF A SUM OF RS.88,50,000 PAID TO M/S. ORANGE PROPERTIES. ITA NO.2235/BANG/2018 PAGE 2 OF 6 3. THE AFORESAID ADDITION WAS CHALLENGED BY THE ASS ESSEE BEFORE THE CIT(APPEALS), WHO CONFIRMED THE ORDER OF THE AO. A GAINST THE ORDER OF CIT(APPEALS) THE ASSESSEE PREFERRED APPEAL BEFORE T HE TRIBUNAL AND THE TRIBUNAL IN ITA NO.975/BANG/2015 BY ORDER DATED 30. 9.2015 REMANDED THE ISSUE WITH REGARD TO DISALLOWANCE OF ADVERTISEMENT EXPENSES TO THE AO FOR FRESH CONSIDERATION WITH THE FOLLOWING OBSERVATIONS :- 08. WE HAVE PERUSED THE ORDERS AND HEARD THE RIV AL CONTENTIONS. IT IS NOT DISPUTED THAT ASSESSEE HAD M ADE PAYMENTS TO M/S. ORANGE PROPERTIES THROUGH BANKING CHANNELS. AS SESSEE NO DOUBT HAD PRODUCED AN INVOICE FROM M/S. ORANGE PROP ERTIES BEFORE THE CIT (A). ONE OF THE REASONS CITED BY THE CIT (A) TO CONFIRM THE DISALLOWANCE IS THAT BILL DT.16.01.2008 OF M/S. ORANGE PROPERTIES COULD NOT BE CORRELATED WITH PAYM ENTS REFLECTED IN THE LEDGER OF THE ASSESSEE. ASSESSEE H AD PRODUCED COPIES OF ADVERTISEMENT PLACED IN NEWSPAPER BY M/S. ORANGE PROPERTIES. IN OUR OPINION, THE EVIDENCE PRODUCED B Y THE ASSESSEE REQUIRED MORE DETAILED EXAMINATION AT THE LEVEL OF THE AO. EVEN THOUGH THE CONCERNED M/S. ORANGE PROPERTIES IS UNTR ACEABLE, THERE ARE WAYS AND MEANS AVAILABLE WITH THE AO TO V ERIFY THE AUTHENTICITY AND CORRECTNESS OF THE CLAIM PREFERRED BY THE ASSESSEE. WE ARE OF THE OPINION THAT THE ISSUE REQU IRES A FRESH LOOK BY THE AO. WE SET ASIDE THE ORDERS OF THE LOWE R AUTHORITIES ON THIS ISSUE AND REMIT IT BACK TO THE FILE OF THE AO FOR FRESH CONSIDERATION IN ACCORDANCE WITH LAW. 4. AFTER THE ORDER OF TRIBUNAL, THE ISSUE WAS AGAI N EXAMINED BY THE AO IN SUCH SET ASIDE PROCEEDINGS AND HE CAME TO THE CO NCLUSION THAT THE SERVICES RENDERED BY ORANGE PROPERTIES WERE NOT PRO VED WITH PROPER DOCUMENTARY EVIDENCE. THE CLAIM OF ASSESSEE WAS TH AT PAYMENTS TO ORANGE PROPERTIES HAD BEEN MADE THROUGH BANKING CHA NNEL AND THAT BECAUSE OF CERTAIN CRIMINAL PROCEEDINGS INITIATED A GAINST ORANGE PROPERTIES, THEY WERE NOT TRACEABLE AND HENCE THE A SSESSEE WAS UNABLE TO PRODUCE THE CONCERNED PARTIES, FOR EXAMINATION BY T HE AO NOR OBTAIN THEIR CONFIRMED. THE ASSESSEE SUBMITTED THAT IN THE CIRC UMSTANCE OF THE CASE, NO ADVERSE INFERENCE CAN BE DRAWN AGAINST THE ASSES SEE. THE ASSESSEE ITA NO.2235/BANG/2018 PAGE 3 OF 6 ALSO POINTED OUT THAT SUMMONS ISSUED TO ORANGE PROP ERTIES COULD NOT BE SERVED AS THEY WERE NO LONGER CARRYING ON BUSINESS AT THE ADDRESS KNOWN TO THE ASSESSEE; THAT THE PAYMENT TO ORANGE PROPERT IES WAS NOT ONLY FOR CARRYING OUT ADVERTISEMENTS, BUT FOR CANVASSING BUS INESS ON BEHALF OF ASSESSEE. THE AO WAS OF THE VIEW THAT THERE WAS NO AGREEMENT REGARDING TERMS OF CANVASSING AND ALSO FOR CARRYING OUT ADVER TISEMENTS. IN THE SET ASIDE PROCEEDINGS, A CONFIRMATION WAS FILED WHEREBY ORANGE PROPERTIES SUBMITTED THAT THEY HAD RECEIVED PAYMENTS FROM THE ASSESSEE AND THAT PAYMENT WAS THROUGH BANKING CHANNELS AND WAS IN THE NATURE OF COMMISSION FOR SALES EFFECTED BY THE ASSESSEE AND C OMMISSION RECEIVED BY THEM WAS RS.82,32,467. WHEN THIS CONFIRMATION W AS FILED BEFORE THE AO, THE AO CALLED FOR BOOKS OF ACCOUNT AND MR. VIJA Y RAVIPATHI TATA OF ORANGE PROPERTIES SUBMITTED BEFORE THE AO THAT BOOK S OF ACCOUNT AND BANK STATEMENTS WERE ALL GUTTED IN FIRE AND ALL REC ORDS STORED IN THE OFFICE WERE DESTROYED. 5. THE AO AGAIN DISALLOWED THE CLAIM OF ASSESSEE BY HOLDING AS FOLLOWS:- IN VIEW OF THE ABOVE, THE ASSESSEE WAS GIVEN ONE MORE OPPORTUNITY STATING THAT THE ASSESSEE'S CONTENTION THAT RS.88,50,000/- IS PAID AS ADVERTISEMENT CHARGES IS NOT ACCEPTABLE FOR THE REASON THAT THE SAME COULD NOT BE CONFIRMED FROM THE M/S ORANGE PROPERTIES AND THE STATEMENTS GIVEN BY BOTH THE PARTIES ARE CONTRADICTORY WITH RESPECT TO THE NATURE OF EXP ENDITURE. M/S ORANGE PROPERTIES HAVE NOT FURNISHED THE COMPLETE D ETAILS AS CALLED FOR BY THIS OFFICE. IN VIEW OF THIS, THE CLA IM OF THE ADVERTISEMENT EXPENDITURE BY THE ASSESSEE CANNOT BE CONSIDERED. IN THE CIRCUMSTANCES, I ONCE AGAIN TREAT THE EXPEND ITURE CLAIMED UNDER THE HEAD ADVERTISEMENT CHARGES OF RS.88,50,00 0/- WHICH IS DISALLOWED AS PER THE PROVISION OF SECTION 69C OF T HE IT ACT, 1961 VIDE ORDER DATED: 28/12/2010 IS CORRECT AND TH E ASSESSMENT IS COMPLETED AS UNDER: ITA NO.2235/BANG/2018 PAGE 4 OF 6 6. ON APPEAL BY THE ASSESSEE, THE CIT(APPEALS) CONF IRMED THE ORDER OF AO. 7. THE CIT(APPEALS) PROCEEDED ON THE BASIS THAT OR ANGE PROPERTIES COULD NOT BE LOCATED DESPITE BEST EFFORTS WHEREAS T HE FACT IS THAT THE ORANGE PROPERTIES FILED CONFIRMATION AND EVEN APPEA RED BEFORE THE AO. AGGRIEVED BY THE ORDER OF CIT(A), THE ASSESSEE HAS PREFERRED THE PRESENT APPEAL BEFORE THE TRIBUNAL. A PETITION FOR ADMISSI ON OF ADDITIONAL GROUNDS OF APPEAL WAS FILED IN WHICH THE ASSESSEE HAS RAISE D A PLEA THAT THE IMPUGNED ADDITION WAS MADE BY THE AO BY INVOKING TH E PROVISIONS OF SEC.69C OF THE ACT, WHEREAS SUCH PROVISIONS ARE APP LICABLE ONLY WHEN THE EXPENDITURE IS NOT RECORDED IN THE BOOKS OF ACCOUNT S OF THE ASSESSEE WHEREAS THE ASSESSEE HAS DULY RECORDED THE EXPENDIT URE IN THE BOOKS OF ACCOUNTS AND HAS ALSO EXPLAINED THE SOURCE. THE AD DITIONAL GROUND IS ONLY ONE FACET OF THE ARGUMENT IN SUPPORT OF THE ASSESSE ES PLEA FOR DELETION OF THE ADDITION AND WILL BE TAKEN UP FOR CONSIDERATION , IF NECESSARY. 8. WE HAVE HEARD THE RIVAL SUBMISSIONS. THE LD. DR REITERATED THE STAND OF THE AO CONTAINED IN THE ORDER OF ASSESSMEN T AND ALSO MADE REFERENCE TO THE OBSERVATIONS OF THE CIT(APPEALS) I N THE FIRST ROUND OF LITIGATION, WHICH IN OUR VIEW, BECOMES REDUNDANT BE CAUSE OF THE SUBSEQUENT ORDER OF THE TRIBUNAL SETTING ASIDE THAT ORDER. 9. THE LD. COUNSEL FOR THE ASSESSEE BROUGHT TO OUR NOTICE THE FACT THAT THE ASSESSEE HAS RAISED INVOICES FOR ADVERTISEMENT EXPENDITURE TO ORANGE PROPERTIES. OUR ATTENTION WAS DRAWN TO THE CONFIRM ATION FILED BY ORANGE PROPERTIES WHICH IS AT PAGE 23 OF THE ASSESSEES PB , BESIDES COPY OF BANK STATEMENT OF ASSESSEE EVIDENCING PAYMENTS TO ORANGE PROPERTIES. MORE PARTICULARLY, OUR ATTENTION WAS DRAWN TO THE VARIOU S ADVERTISEMENTS ISSUED BY ORANGE PROPERTIES ON BEHALF OF ASSESSEE. ITA NO.2235/BANG/2018 PAGE 5 OF 6 10. WE HAVE CONSIDERED THE EVIDENCE ON RECORD AND W E FIND THAT FROM THE ADVERTISEMENTS A COPY OF WHICH IS AT PAGE 110 O F PB, IT IS CLEARLY MENTIONED THEREIN THAT THE PROPERTY IS BEING DEVELO PED BY AKSHAY I.E., THE ASSESSEE, WHICH IS THE BUSINESS NAME OF ASSESSEE AN D THAT THE PROPERTY IS BEING MARKETED BY ORANGE PROPERTIES. IT IS ALSO SE EN THAT IN THE PROCEEDINGS BEFORE THE AO AFTER SET ASIDE BY THE TR IBUNAL, THE ASSESSEE HAS CLARIFIED THAT ORANGE PROPERTIES SOLD FLATS TO ITS CUSTOMER AND THOSE FLATS WERE DEVELOPED BY THE ASSESSEE AND THE PAYMEN T MADE TO ORANGE PROPERTIES IS NOT JUST FOR ADVERTISEMENT, BUT ALSO FOR CANVASSING THE SALE OF PROPERTIES ON BEHALF OF ASSESSEE. WE ALSO FIND THA T IN THE CONFIRMATION FILED BY THE ASSESSEE BEFORE THE CIT(APPEALS), ORANGE PRO PERTIES CONFIRMED HAVING RECEIVED THE COMMISSION TO THE EXTENT OF RS. 82,32,467. IN OUR VIEW, THE EVIDENCE ON RECORD SHOWS THAT TO THE EXTENT OF RS.82,32,467 CONFIRMED BY THE ORANGE PROPERTIES, THE EXPENDITURE SHOULD BE ALLOWED AS BUSINESS EXPENDITURE AS NOTHING ADVERSE HAS BEEN BROUGHT ON RECORD. THEREFORE, TO THIS EXTENT, WE DIRECT THAT THE ADDITION SUSTAINED BY THE CIT(APPEALS) SHOULD BE DELETED. 11. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PA RTLY ALLOWED. PRONOUNCED IN THE OPEN COURT ON THIS 19 TH DAY OF FEBRUARY, 2020. SD/- SD/- ( B R BASKARAN ) ( N V VASUDEVAN ) ACCOUNTANT MEMBER VICE PRE SIDENT BANGALORE, DATED, THE 19 TH FEBRUARY, 2020. / DESAI S MURTHY / ITA NO.2235/BANG/2018 PAGE 6 OF 6 COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT, BANGALORE. 6. GUARD FIL E BY ORDER ASSISTANT REGISTRAR ITAT, BANGALORE.