ACIT, Circle - 2(1), Kolkata , Kolkata V. M/s. India Cable Net Co. Ltd., , Kolkata

ITA 2525/KOL/2017

• Counselvise Citation: [2019] 115 COUNSELVISE.COM (IT) 3072 (ITAT-KOLKATA)
• Duration Of Justice: 1 year(s) 2 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-03-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2004-2005
• Appeal Filed On: 22-12-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RADHEY SHYAM
• Assessee Lawyers: S M SURANA; A T TEKRIWAL
• Keywords: Rejection of books of accounts; Principle of natural justice; Set aside
• Section: 143(3); 133(6)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B, BENC H KOLKATA BEFORE SHRI A.T.VARKEY, JM &DR. A.L.SAINI, AM ./ITA NO.2525/KOL/2017 ( / ASSESSMENT YEAR:2004-05) ACIT, CIRCLE-2(1), KOLKATA AAYAKAR BHAWAN, P-7, CHOWRINGHEE SQUARE, KOLKATA-700069. VS. M/S INDIA CABLE NET CO. LTD. PLOT NO. X1-4, SALT LAKE ELECTRONIF /COMPLEX, BLOCK EP & GP, SECTOR-V, SALT LAKE, KOLKATA-700091. ./ ./PAN/GIR NO.: AABCR 4726 Q (ASSESSEE) .. (RESPONDENT) C.O. NO. 34/KOL/2018 (ARISING OUT OFITA NO.2525/KOL/2017) ( / ASSESSMENT YEAR: 2004-05) M/S INDIA CABLE NET CO. LTD. PLOT NO. X1-4, SALT LAKE ELECTRONIF /COMPLEX, BLOCK EP & GP, SECTOR-V, SALT LAKE, KOLKATA-700091. VS. DCIT, CIRCLE- 1, KOLKATA AAYAKAR BHAWAN, P-7, CHOWRINGHEE SQUARE, KOLKATA-700069. ./ ./PAN/GIR NO.: AABCR 4726 Q (CROSS OBJECTOR) .. (RESPONDENT) ASSESSEE BY :SHRI RADHEYSHYAM, CIT DR RESPONDENT BY : SHRI S.M. SURANA, ADVOCATE & SHRI A .T.TEKRIWAL, FCA / DATE OF HEARING : 31/12/2018 /DATE OF PRONOUNCEMENT : 06/03/2019 M/S INDIA CABLE NET CO. LTD. ITA NO.2525/KOL/2017 C.O. NO.34/KOL/2018 ASSESSMENT YEAR:2004-05 P PP PA AA AG GG GE EE E | || | 2 22 2 / O R D E R PER DR. A. L. SAINI: THE CAPTIONED APPEAL FILED BY THE REVENUE AND THE C ROSS OBJECTIONS FILED BY THE ASSESSEE, PERTAINING TO ASSESSMENT YEAR 2004-05, AR E DIRECTED AGAINST AN ORDER PASSED BY THE LEARNED COMMISSIONER OF INCOME TAX (A PPEALS)-1, KOLKATA [ (IN SHORT THE LD. CIT(A)], WHICH IN TURN ARISE OUT OF A N ASSESSMENT ORDER PASSED BY THE ASSESSING OFFICER U/S 143(3) OF THE INCOME TAX ACT, 1961 ( IN SHORT THE ACT) DATED 21/11/2006. 2. THE GROUNDS OF APPEAL RAISED BY THE REVENUE ARE AS FOLLOWS: I) WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF T HE CASE AND IN LAW, THE LD. CIT(A) WAS JUSTIFIED IN DELETING THE A DDITION OF RS. 14,99,135/-, IGNORING THE SPECIFIC POINTS IN THE AR GUMENT BETWEEN THE ASSESSEE AND M/S SET DISCOVERY PVT. LTD. AND THE PO INTS RAISED IN THE REMAND REPORT AS WELL? II) WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE AND IN LAW, THE LD. CIT(A) WAS JUSTIFIED IN DELETING THE ADDITI ON OF RS. 7,30,470/- DISREGARDING THE DETAILS REFLECTED IN THE REMAND RE PORT? III) WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE AND IN LAW, THE LD. CIT(A) WAS JUSTIFIED IN DELETING THE ADDITI ON OF RS. 2,38,60,000/- WITHOUT CONSIDERING THE FAILURE OF TH E ASSESSEE IN DISCHARGING THE ONUS AGAINST THE CLAIM OF BUSINESS LOSS? IV) THAT IT IS PRAYED TO SET ASIDE THE ORDER PASSED BY THE LD. CIT(A)-1 AND RESTORE THE ASSESSMENT ORDER PASSED BY THE ASSE SSING OFFICER IN THIS CASE. V) DEPARTMENT CRAVES LEAVE TO ADD, ALTER OR MODIFY ANY OR ALL OF THE ABOVE GROUNDS OF APPEAL AT OR BEFORE THE TIME OF HE ARING OF THE APPEAL. 3. GROUND NO. 1 RAISED BY THE REVENUE RELATES TO AD DITION OF RS. 14,99,135/- SUSTAINED BY LD CIT(A) IGNORING THE SPECIFIC POINTS IN THE ARGUMENT BETWEEN THE M/S INDIA CABLE NET CO. LTD. ITA NO.2525/KOL/2017 C.O. NO.34/KOL/2018 ASSESSMENT YEAR:2004-05 P PP PA AA AG GG GE EE E | || | 3 33 3 ASSESSEE AND M/S SET DISCOVERY PVT. LTD. AND THE PO INTS RAISED IN THE REMAND REPORT AS WELL. 4. THE BRIEF FACTS QUA THE ISSUE ARE THAT DURING TH E ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER NOTED THAT THE ASSESSEE COMPANY E NTERED INTO AN AGREEMENT WITH M/S SET DISCOVERY PVT. LTD, VIDE AGREEMENT DATED 31 .03.2004, FOR PAYMENT OF DISTRIBUTION FEES TO M/S SET DISCOVERY PVT. LTD. AS PER PARA 9 OF THE SAID AGREEMENT BETWEEN ASSESSEE AND M/S SET DISCOVERY PV T. LTD, THE ASSESSEE WILL GET 5% DISTRIBUTION COMMISSION OF MONTHLY FEES RECEIVED BY THE M/S SET DISCOVERY PVT LTD. THE TOTAL DISTRIBUTION FEE PAID TO M/S SET DISCOVERY PVT. LTD. FOR THE FINANCIAL YEAR 2003-04 RELEVANT TO ASSESSMENT YEAR 2004-05 WAS TO THE TUNE OF RS. 8,62,42,695/-.AS PER THE AGREEMENT, THE DISTRIBUTIO N COMMISSION COMES TO RS. 43,12,135/- (RS.8,62,42,695 X 5%), BUT THE ASSESSEE HAS SHOWN DISTRIBUTION COMMISSION INCOME FROM THIS PARTY ONLY TO THE TUNE OF RS. 28,13,000/-. THEREFORE THE ASSESSING OFFICER NOTED THAT THE ASSESSEE HAS S UPPRESSED INCOME IN FORM OF DISTRIBUTION COMMISSION BY RS. 14,99,135/- (RS. 43, 12,135 - RS. 28,13,000). THEREFORE THE ASSESSING OFFICER MADE THE ADDITION T O THE TUNE OF RS. 14,99,135/-. 5. ON APPEAL BY THE ASSESSEE, THE LD. CIT(A) DELETE D THE ADDITION MADE BY THE ASSESSING OFFICER. AGGRIEVED THE REVENUE IS IN APPE AL BEFORE US. 6. THE LD. DR HAS PRIMARILY REITERATED THE STAND TA KEN BY THE ASSESSING OFFICER WHICH WE HAVE ALREADY NOTED IN OUR EARLIER PARA AND IS NOT BEING REPEATED FOR THE SAKE OF BREVITY. ON THE OTHER HAND, THE LD. COUNSEL FOR THE ASSESSEE HAS DEFENDED THE ORDER PASSED BY THE LD. CIT(A). 7. WE HAVE HEAD BOTH THE PARTIES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. WE NOTE THAT THE LD. CIT(A) HAD ASKED THE ASSESSING OFFICER TO EXAMINE THE DOCUMENTS AND SUBMISSIONS MADE BY THE ASSESSEE DURI NG THE APPELLATE PROCEEDINGS. THE ASSESSING OFFICER, IN TURN, HAVING EXAMINED THE DOCUMENTS AND SUBMISSIONS OF THE ASSESSEE, SUBMITTED THE REMAND R EPORT TO THE LD CIT(A). WE NOTE THAT IN THE REMAND REPORT THE ASSESSING OFFICE R HAS NOT POINTED OUT ANY M/S INDIA CABLE NET CO. LTD. ITA NO.2525/KOL/2017 C.O. NO.34/KOL/2018 ASSESSMENT YEAR:2004-05 P PP PA AA AG GG GE EE E | || | 4 44 4 SPECIFIC MISTAKE SO FAR THIS ADDITION IS CONCERNED. WHATEVER THE SUBMISSIONS MADE BY THE ASSESSEE, THE ASSESSING OFFICER IN HIS REMAN D REPORT ACCEPTED. WE NOTE THAT THE ASSESSING OFFICER ON THE BASIS OF AN AGREEMENT DATED 31.01.2004, W.E.F. 01.09.2003, ENTERED INTO BY THE ASSESSEE COMPANY WI TH M/S SET DISCOVERY PVT. LTD., FOR PAYMENT OF DISTRIBUTION FEES, THE ASSESSI NG OFFICER CAME TO CONCLUSION THAT THE ASSESSEE OUGHT TO HAVE SHOWN COMMISSION IN COME OF RS. 43,12,135/- BEING 5% OF RS. 8,62,42,695/-,THE AMOUNT PAID / PAY ABLE AS DISTRIBUTION FEES TO M/S SET DISCOVERY PVT. LTD. FOR THE PERIOD FROM 01. 09.2003 TO 31.03.2004. WE NOTE THAT THE COMMISSION WAS RECEIVABLE ONLY WHEN T HE PAYMENT OF MONTHLY FEE COVERED UNDER THE DISTRIBUTION AGREEMENT WAS MADE B EFORE THE LAST DATE OF FOLLOWING MONTH AND THERE WERE OUTSTANDING OPENING BALANCE OF RS. 2,06,81,434/- AS ON 01.09.2003 ON ACCOUNT OF FEE, THE PAYMENT OF WHICH WAS NOT ELIGIBLE FOR COMMISSION SINCE THE SAME WAS NOT COVERED UNDER THE AGREEMENT. THE ASSESSEE FURTHER SUBMITTED THE DETAILS OF COMPUTATION OF COM MISSION ACTUALLY RECEIVED,HOWEVER, THE ASSESSING OFFICER ADDED BACK THE DIFFERENCE OF COMMISSION RECEIVABLE AS PER AGREEMENT OVER THE AMOUNT OF COMM ISSION DISCLOSED I.E. OF RS. 14,99,135/- (RS.43,12,135- RS.28,13,000). 8. WE NOTE THAT THE DISTRIBUTION COMMISSION FROM M/ S SET DISCOVERY PVT. LTD CONTAINS BOTH OLD DUES AND CURRENT FEES AND THE DIS TRIBUTION COMMISSION IS AVAILABLE ONLY ON MONTHLY DISTRIBUTION FEES. THIS A SPECT HAS BEEN IGNORED BY THE AO. WE NOTE THAT THE COMMISSION WAS RECEIVABLE ONLY WHEN PAYMENT OF MONTHLY FEE COVERED UNDER THE DISTRIBUTION AGREEMENT WAS MA DE BEFORE THE LAST DATE OF FOLLOWING MONTH AND THERE WERE OUTSTANDING (OPENING ) BALANCE OF RS. 2,06,81,434/- AS ON 01.09.2003, ON ACCOUNT OF FEE, THE PAYMENT OF WHICH WAS NOT ELIGIBLE FOR COMMISSION, SINCE THE SAME WAS NOT COV ERED UNDER THE AGREEMENT. HOWEVER, WE NOTE THAT NONE OF THE PAYMENT DURING TH E FINANCIAL YEAR 2003-04 WAS MADE WITHIN THE CREDIT PERIOD AS LAID DOWN BY THE C LAUSE 8 OF THE REFERRED AGREEMENT. WE NOTE THAT THE ASSESSEE FILED DETAILE D COMPUTATION OF THE COMMISSION, DURING THE ASSESSMENT STAGE, HOWEVER, T HE ASSESSING OFFICER WITHOUT MAKING ANY CROSS-VERIFICATION OF ACTUAL RECEIPT OF COMMISSION OR ENQUIRY WITH M/S SET DISCOVERY PVT. LTD. TO ASCERTAIN WHETHER THE CO MPUTATION GIVEN BY THE M/S INDIA CABLE NET CO. LTD. ITA NO.2525/KOL/2017 C.O. NO.34/KOL/2018 ASSESSMENT YEAR:2004-05 P PP PA AA AG GG GE EE E | || | 5 55 5 ASSESSEEWAS CORRECT OR NOT, DISALLOWED THE AMOUNT. THEREFORE, WE NOTE THAT THE ACTION OF THE ASSESSING OFFICER INSOFAR AS THIS ADD ITION IS CONCERNED IS NOT JUSTIFIABLE. IN VIEW OF THE ABOVE FACTS AND CIRCUMS TANCES OF THE CASE, WE ARE OF THE VIEW THAT CATEGORICAL FINDINGS OF THE ASSESSING OFF ICER IN THE REMAND PROCEEDINGS WHICH SPEAK CLEARLY THAT M/S SET DISCOVERY PVT. LTD . HAD PAID TOTAL AMOUNT OF RS. 28,12,621/- OUT OF WHICH RS. 9,46,414/- WAS ACTUALL Y PAID IN THE FINANCIAL YEAR 2003-04. THEREFORE, THE ADDITION OF RS. 14,99,135/- WAS MADE MERELY ON THE BASIS OF CALCULATION AS PER AGREEMENT (WITHOUT BRINGING O N RECORD ANY EVIDENCE OF RECEIPT OF HIGHER COMMISSION) BY THE ASSESSING OFFI CER IN RESPECT OF DISTRIBUTION COMMISSION. THAT BEING SO, WE DECLINE TO INTERFERE IN THE ORDER PASSED BY THE LD. CIT(A), HIS ORDER ON THIS ISSUE, IS HEREBY UPHELD A ND THE GROUND RAISED BY THE REVENUE IS DISMISSED. 9. GROUND NO. 2 RAISED BY THE REVENUE RELATES TO AD DITION OF RS. 7,30,470/- ON ACCOUNT OF DISCOUNT PAYABLE TO CABLE OPERATORS. 10. THE BRIEF FACTS QUA THE ISSUE ARE THAT THE ASS ESSEECOMPANY ALLOWSDISCOUNT TO CABLE OPERATORS ON THE AMOUNT OF SERVICE CHARGES RE CEIVED/ PAYABLE FROM THEM. THE ASSESSING OFFICER, ON PERUSAL OF PROFIT AND LOS S ACCOUNT FOR THE YEAR ENDED 31.03.2003 AND 31.03.2004 NOTED THAT PERCENTAGE OF DISCOUNTS IN THE ASSESSMENT YEAR 2003-04 WAS @ 2.39%,WHEREAS, THE PERCENTAGE OF DISCOUNT IN THE ASSESSMENT YEAR 2004-05 WAS @ 2.92%. THEREFORE, BASED ON THE C OMPARATIVE STUDY OF THE PERCENTAGE, THE ASSESSING OFFICER NOTED THAT THE RA TE OF DISCOUNT ALLOWED IN FINANCIAL YEAR 2002-03 WAS MUCH LOWER THAN THAT IN THE FINANCIAL YEAR 2003-04, ALTHOUGH THE TOTAL SERVICE CHARGES IS HIGHER IN THE FINANCIAL YEAR 2003-04. THE ASSESSEE COMPANY WAS REQUESTED TO EXPLAIN THE REASO NS FOR ALLOWING HIGHER RATE OF DISCOUNT IN THE FINANCIAL YEAR 2003-04. IN RESPONSE, THE ASSESSEE SUBMITTED THAT DISCOUNT T O CABLE OPERATORS IS ALLOWED ON TOTAL BILLS. APART FROM THE NORMAL DISCOUNT, THERE WEREOTHER VARIABLE FACTORS DUE TO WHICH THE AMOUNT OF DISCOUNT MAY VARY. HOWEVER, THE ASSESSING OFFICER REJECTED THE CONTENTION OF THE ASSESSEE AND HELD THAT ALLOWA BILITY OF EXPENSES IN THE FORM OF DISCOUNT IS REQUIRED TO BE JUDGED WITH REFERENCE TO PAST RECORDS. IN THE M/S INDIA CABLE NET CO. LTD. ITA NO.2525/KOL/2017 C.O. NO.34/KOL/2018 ASSESSMENT YEAR:2004-05 P PP PA AA AG GG GE EE E | || | 6 66 6 ASSESSEESCASE, THE AVERAGE RATE OF DISCOUNT IN THE ASSESSMENT YEARS 2003-04 AND 2004-05 COMES TO @ 2.67%.THE EXPENDITURE IN FORM OF DISCOUNT WAS ALLOWED @ 2.67% OF SERVICE CHARGES EARNED, WHICH COMES TO RS. 77,57,044/- ( RS. 29,05,26,000 X2.67%), AND AS A RESULT THE DISALLOWA NCE WAS WORKED OUT AT RS. 7,30,470/- ( RS. 84,87,514/- ACTUAL DISCOUNT - RS. 77,57,044/- AMOUNT COMPUTED BY AO). 11. AGGRIEVED BY THE STAND SO TAKEN BY THE ASSESSIN G OFFICER THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE LD. CIT(A) WHO HAS ALLOWED THE APPEAL OF THEASSESSEE. AGGRIEVED BY THE ORDER OF THE LD. CIT( A), THE REVENUE IS IN APPEAL BEFORE US. THE LD. DR FOR THE REVENUE HAS PRIMARILY REITERATED THE STAND TAKEN BY THE ASSESSING OFFICER WHICH WE HAVE ALREADY NOTED I N OUR EARLIER PARA AND THE SAME IS NOT BEING REPEATED FOR THE SAKE OF BREVITY. ON THE OTHER HAND, THE LD. COUNSEL FOR THE ASSESSEE HAS DEFENDED THE ORDER PAS SED BY THE LD. CIT(A). 12. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. WE NOTE THAT IT IS INFERRED FROM THE A.OS FINDINGS , REMAND REPORT AND REJOINDER OF THE ASSESSEE THAT IN THE REMAND PROCEEDINGS, THE A. O. MADE ENQUIRIES U/S 131/133(6) FROM 18 PARTIES, AND ASKED THE ASSESSEE TO RECONCILE THE DIFFERENCE IN THE AMOUNT OF DISCOUNT ALLOWED. IN RESPONSE, THE AS SESSEE FILED THE SUBMISSIONS, RECONCILING, INTER ALIA, THE DISCOUNT ALLOWED TO TH E SAID PARTIES. IT IS FOUND THAT ADMITTEDLY THE A.O. HAS NOT MADE ANY ADVERSE REMARK S IN HIS REMAND REPORT DATED 28.03.2016.IN VIEW THEREOF, WE NOTE THAT THERE IS M ERIT IN THE ASSESSEES CONTENTION THAT THE DISCOUNTS OF RS. 84,87,514/- WAS ALLOWED T O THE CUSTOMERS ON A CASE TO CASE BASIS WHICH WAS DULY ENTERED INTO BOOKS OF ACC OUNTS OF THE ASSESSEE AS THE A.O. IS FOUND TO HAVE ERRED IN WORKING OUT DISCOUNT ALLOWED BY THE A.O. AT RS. 77,57,044/- BEING THE AVERAGE RATE OF DISCOUNT @ 2. 67% OF SUBSCRIPTION INCOME ON THE BASIS OF AVERAGE RATE OF DISCOUNT ALLOWED IN TH E PRECEDING YEAR AND THE CURRENT YEAR. THE RATE OF SUCH DISCOUNT OF 2.67% WAS DERIVE D BY THE ASSESSING OFFICER, IN PLACE OF THE DISCOUNT ALLOWED OF RS. 84,87,514/- AC TUALLY SHOWN IN THE AUDITED STATEMENT OF ACCOUNTS. THE AO DID NOT GIVE ANY FIND ING THAT THE DISCOUNT PAID WAS NOT FOR THE PURPOSE OF BUSINESS AND WAS PAID FOR EX TRA COMMERCIAL M/S INDIA CABLE NET CO. LTD. ITA NO.2525/KOL/2017 C.O. NO.34/KOL/2018 ASSESSMENT YEAR:2004-05 P PP PA AA AG GG GE EE E | || | 7 77 7 CONSIDERATION,THEREFORE, WE NOTE THAT FINDINGS OF T HE AO IS NOT BASED ON ANY COGENT EVIDENCE AND HENCE WE DO NOT ACCEPT THE SAME. WE ALSO NOTE THAT THE A.O. HAS PROCEEDED TO COMPUTE THE AVERAGE DISCOUNT ALLOWED WITHOUT EITHER REJECTING THE BOOK RESULTS OR BRINGI NG ON RECORD ANY PATENT DEFECTS IN THE METHOD OF ACCOUNTING FOR THE SAID TRANSACTIONS IN THE ASSESSEES AUDITED BOOKS OF ACCOUNTS OR CONFRONTING ANY SUCH DISCREPANCY TO THE ASSESSEE, WHICH IS CONTRARY TO THE PRINCIPLES OF NATURAL JUSTICE. THEREFORE, TH E A.O. WAS NOT JUSTIFIED IN MAKING THE DISALLOWANCE OF THE IMPUGNED DISCOUNT OF RS.7,3 0,470/-. THAT BEING SO, WE DECLINE TO INTERFERE IN THE ORDER PASSED BY THE LD. CIT(A), HIS ORDER ON THIS ISSUE, IS HEREBY UPHELD AND THE GROUND RAISED BY THE REVENUE IS DISMISSED. 13. GROUND NO. 3 RAISED BY THE REVENUE RELATES TO A DDITION OF RS. 2,38,60,000/- MADE BY THE ASSESSING OFFICER ON ACCOUNT OF DISTRIB UTORSHIP FEES. 14. THE BRIEF FACTS QUA THE ISSUE ARE THAT DURING T HE ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER NOTED THAT ASSESSMENT YEAR UNDER CONSIDERATION,IS THE FIRST YEAR OF THE ASSESSEE, WHO HAS STARTED THE BUSINESS OF DI STRIBUTORSHIP. THE TOTAL AMOUNT OF DISTRIBUTORSHIP FEES PAID AS PROFIT AND LOSS ACC OUNT WAS TO THE TUNE OF RS. 19,60,73,000/- WHICH HAD BEEN ALLOWED TO TWO PARTIE S VIZ. M/S STAR, RS. 10,98,30,000/- AND M/S SET DISCOVERY PVT. LTD. RS. 8,62,42,695/-. ON THE OTHER HAND, THE DISTRIBUTION FEES (SERVICE CHARGES) RECEI VED FROM CABLE OPERATORS WAS SHOWN IN THE PROFIT & LOSS ACCOUNT TO THE TUNE OF R S. 17,22,13,000/-. THEREFORE, THE GROSS LOSS IN DISTRIBUTORSHIP BUSINESS WAS WORKED O UT BY THE ASSESSING OFFICER TO THE TUNE OF RS.2,38,60,000/- (19,60,73,000 17,22, 13,000). DURING THE ASSESSMENT PROCEEDINGS, THE ASSESSEE WAS ASKED TO EXPLAIN THE REASONS OF SUCH GROSS LOSS. IN RESPONSE, THE ASSESSEE SUBMITTED THAT DISTRIBUTION FEE WAS ALLOWED ON THE BASIS OF AGREEMENT.THE TERM OF AGREEMENT PROVED THAT THE IND IAN CABLE NET CO. PVT. LTD. WILL HAVE TO PAY MINIMUM GUARANTEED AMOUNT IRRESPE CTIVE OF WHAT IS BILLED TO CUSTOMERS. THE INDIAN CABLE NET CO. LTD. COULD NOT BILL FOR THE AMOUNT WHAT IT AGREED TO CONSEQUENCE HUGE LOSS WAS INCURRED AND TH IS PARTICULAR BUSINESS WAS SHORTLY SHUT. THE ASSESSEE SUBMITTED THE DISTRIBUTI ON AGREEMENT BEFORE THE M/S INDIA CABLE NET CO. LTD. ITA NO.2525/KOL/2017 C.O. NO.34/KOL/2018 ASSESSMENT YEAR:2004-05 P PP PA AA AG GG GE EE E | || | 8 88 8 ASSESSING OFFICER AND DETAILS OF DISTRIBUTION FEE A LLOWED UNDER THIS AGREEMENT. THE ASSESSEEHAS ALSO SUBMITTED A MONTH-WISE BREAD UP DI STRIBUTION FEE RECEIVED. AFTER HAVING GONE THROUGH THE ASSESSEES SUBMISSIO N, THE ASSESSING OFFICER NOTED THAT THE ASSESSEE HAS FAILED TO FILE THE COMPLETE D ETAILS OF DISTRIBUTORSHIP FEE, COLLECTED FROM 273 CABLE OPERATORS,THEREFORE HE DIS ALLOWED GROSS LOSS IN DISTRIBUTORSHIP BUSINESS TO THE TUNE OF RS. 2,38,60 ,000/-. 15. AGGRIEVED BY THE STAND SO TAKEN BY THE ASSESS ING OFFICER, THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE LD. CIT(A) WHO HAS DELETED THE ADDITION MADE BY THE ASSESSING OFFICER. AGGRIEVED BY THE ORD ER OF THE LD. CIT(A), THE REVENUE IS IN APPEAL BEFORE US. THE LD. DR HAS PRIM ARILY REITERATED THE STAND TAKEN BY THE ASSESSING OFFICER WHICH WE HAVE DISCUSSED IN OUR EARLIER PARA AND THE SAME IS NOT BEING REPEATED FOR THE SAKE OF BREVITY. ON T HE OTHER HAND, THE LD. COUNSEL FOR THE ASSESSEE HAS DEFENDED THE ORDER PASSED BY THE L D. CIT(A). 16. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. WE NOTE THAT THE ASSESSEE COMPANY HAD DECLARED LOSS OF RS. 2,38,60,000/- FROM CABLE DISTRIBUTORSHIP BUSINESS DURING THE RELEVANT FINANCIAL YEAR ENDING 31.03.2004. THE A.O. FOUND THAT THE TOTAL AMOUNT OF DISTRIBUTORSHIP FEES PAID AS PER PROFIT & LOSS ACCOUNT IS RS. 19,60,73,000/-, WH ICH WAS ALLOWED TO TWO PARTIES VIZ. M/S STAR, RS.10,98,30,000/- AND M/S SET DISCOV ERY, RS.8,62,42,695/-, WHEREAS THE DISTRIBUTION FEES (SERVICE CHARGES) RECEIVED FR OM CABLE OPERATORS AS SHOWN IN THE PROFIT & LOSS ACCOUNT IS RS.17,22,13,000/-, RES ULTING IN GROSS LOSS IN DISTRIBUTORSHIP BUSINESS OF RS. 2,38,60,000/-(19,60 ,73,000 - 17,22,13,000). THE REASONS FORTHE SAID LOSS WERE EXPLAINED BY THE ASSE SSEE AS MAINLY DUE TO THE PAYMENT OF THE 'DISTRIBUTION FEE, WHICH WAS ALLOWED AS PER TERMS OF AGREEMENT THAT THE INDIAN CABLE NET CO. LTD. WILL HAVE TO PAY MINI MUM GUARANTEED AMOUNT IRRESPECTIVE OF WHAT IS BILLED TO CUSTOMER. THE ASS ESSEE COMPANY WAS UNABLE TO BILL FOR THE AMOUNT AGREED UPON AND THEREFORE RESULTED IN HUGE LOSS AND THIS PARTICULAR BUSINESS WAS SHORTLY SHUT. THE ASSESSEE HAD SUBMITT ED COPY OF THE DISTRIBUTION AGREEMENT, DETAIL OF DETAIL OFDISTRIBUTION FEE ALLO WED THEREUNDER ALONGWITH MONTH- M/S INDIA CABLE NET CO. LTD. ITA NO.2525/KOL/2017 C.O. NO.34/KOL/2018 ASSESSMENT YEAR:2004-05 P PP PA AA AG GG GE EE E | || | 9 99 9 WISE BREAK- UP OF THE DISTRIBUTION FEE RECEIVED. TH E A.O OBSERVED THAT THE REASONS FOR LOSS AS STATED, IN THE EXPLANATION MAY BE TRUE OR MAY NOT BE TRUE, BUT AFTER POINTING OUT THAT ALTHOUGH ASSESSEE HAD FILED A LIS T OF 273 PERSONS GIVING ADDRESS, BUT MOST SURPRISINGLY, NO AMOUNT WAS MENTIONED AGAI NST THOSE PERSONS. AS PER DETAILS FILED BY THE ASSESSEE FOR DISTRIBUTION FEES COLLECTED/EARNED FOR 273 PERSONS IS RS. 17,22,13,000/- , BUT PARTY-WISE BREAK UP/DET AILS IN RESPECT OF AMOUNT HAS NOT BEEN FURNISHED. THE A.O EXPRESSED SUSPICION AS TO W HETHER ANY OTHER PARTY/ CABLE OPERATOR OTHER THAN 273 CABLE OPERATORS HAS BEEN RE CEIVED AND DISALLOWED THE LOSS OF DISTRIBUTORSHIP FEE OF RS. 2,38,60,000/- DISCLOS ED BY THE ASSESSEE. BEFORE US, THE LDCOUNSEL HAS REITERATED THE SUBMISSIONS MADE BEFO RE THE A.O DURING THE ASSESSMENT PROCEEDINGS AND SUBMITTED THE COMPLETE D ETAILS/DOCUMENTARY EVIDENCES FOR PAYMENT AND RECEIPT OF DISTRIBUTORSHI P FEE WITH ITS WRITTEN SUBMISSIONS, WHICH WERE FORWARDED TO THE A.O. FOR V ERIFICATION IN REMAND PROCEEDINGS. THE ASSESSEE HAD EXPLAINED THAT TERMS OF THE AGREEMENT PROVIDED THAT THE ASSESSEE HAD TO PAY MINIMUM GUARANTEED AMOUNT I RRESPECTIVE OF WHAT IS BILLED TO THE CUSTOMER ON A MINIMUM GUARANTEED BASE OF SUB SCRIBERS. 17. BEFORE US, THE LD COUNSEL SUBMITTED COPIES OF A GREEMENTS, AMOUNT PAID TO BROADCASTERS, LIST OF MONTHLY FEE RECEIVED FROM THE CABLE OPERATORS/MULTI SYSTEM OPERATORS TOTALING RS.7,67,93,125/- PLUS 273 CABLE OPERATORS TOTALING RS.9,53,20,053/- I.E. TOTAL OF 306 CABLE OPERATORS WITH THEIR ADDRESSES TO WHOM RS. 17,22,13,000/- WAS PAID. HOWEVER, THE A.O WITHOUT M AKING ENQUIRIES U/S 133(6)/131 OF THE I.T. ACT CONCLUDED THAT THE ASSES SEE AVOIDED FURNISHING COMPLETE DETAILS OF DISTRIBUTORSHIP FEE RECEIVED FROM EACH A ND EVERY CABLE OPERATOR. AFTER VERIFICATION OF THE DOCUMENTARY EVIDENCES FILED DUR ING THE ASSESSMENT/REMAND PROCEEDINGS, THE A.O HAS CONCLUDED IN THE REMAND RE PORT AS FOLLOWS: 'ON VERIFICATION OF THE RECONCILIATION OF ACCOUNT, COPIES OF LEDGER ACCOUNTS OF THE PARTIES, INVOICES OF THE PARTIES, C REDIT NOTES AND CONFIRMATION OF THE PARTIES AND OTHER RELEVANT DOCU MENTS PRODUCED BY THE ASSESSEE, IT IS SEEN THAT THE PARTIES WHO HAVE REPL IED TO THE NOTICES U/S. 133(6) HAVE SHOWN TO HAVE PAID DISTRIBUTION FEE AS WELL AS CABLE SERVICE FEE TO THE ASSESSEE COMPANY. DETAILS OF INCOME CABLE SE RVICES OF RS. 29,05,26,2251/- AS AVAILABLE IN THE ASSESSMENT RECO RDS AND ALSO SUBMITTED BY THE ASSESSEE IN COURSE OF REMAND PROCEEDINGS IS ALSO EXAMINED. ON M/S INDIA CABLE NET CO. LTD. ITA NO.2525/KOL/2017 C.O. NO.34/KOL/2018 ASSESSMENT YEAR:2004-05 P PP PA AA AG GG GE EE E | || | 1 11 10 00 0 FURTHER ANALYSIS OF THE RECONCILIATION FILED IN THI S REGARD ALONG WITH THE RELEVANT EVIDENCES IT IS FOUND THAT THE INCOME DISC LOSED BY THE ASSESSEE IS IN EXCESS OF THE AMOUNT DISCLOSED BY THE PARTIES. IT I S ALSO SEEN THAT THE DISCOUNT TO CABLE OPERATORS HAS ALSO BEEN RECONCILE D WITH THAT SHOWN BY THE PARTIES.' AFTER GOING THROUGH THE MATERIAL ON RECORD, WE NOTE THAT THERE IS SUBSTANCE IN THE ARGUMENT OF THE LD COUNSEL THAT THE A.O HAD MISPERC EIVED THE NATURE OF RECEIPTS AND EXPENSES BILLED BY THE ASSESSEE COMPANY AS PART OF ITS INCOME FROM DISTRIBUTION BUSINESS OF SUBSCRIBED CHANNELS OF BR OADCASTERS LIKE M/S STAR INDIA PVT. LTD. AND M/S SET DISCOVERY PVT. LTD, WITHOUT CONDUCTING PROPER ENQUIRIES OR APPRAISAL OF THE AMOUNTS BILLED BY THE ASSESSEE AS DEPICTED IN THE AUDITED ACCOUNTS. 18. WE NOTE THAT THE A.O HAS APPARENTLY CONSIDERED ONLY PART OF THE DISTRIBUTION RECEIPTS/EXPENSES (STAR & SONY) FOR THE PERIOD 01.0 9.2003 TO 31.03.2004 AND OBSERVED THAT AGAINST THE TOTAL AMOUNT OF DISTRIBUT ORSHIP FEES PAID AS PER PROFIT & LOSS ACCOUNT IS RS. 19,60,73,000/- WHICH HAS BEEN A LLOWED TO TWO PARTIES VIZ. M/S. STAR, RS.10,98,30,000/- AND M/S. SET DISCOVERY PVT. LTD, RS. 8,62,42,695/,WHEREAS, DISTRIBUTION FEES (SERVICE CH ARGES) RECEIVED FROM CABLE OPERATORS AS SHOWN IN THE PROFIT & LOSS ACCOUNT IS RS. 17,22,13,000/- TO WORK OUT AND DISALLOWED THE GROSS LOSS OF DISTRIBUTORSHIP FE E OF RS. 2,38,60,000/-, WITHOUT MAKING PROPER ENQUIRIES OR ANALYZING THE RECEIPTS A ND EXPENDITURE DEPICTED BY THE ASSESSEE IN ITS AUDITED PROFIT & LOSS ACCOUNT. FROM PERUSAL OF THE COMPANY'S AUDITED ACCOUNTS FOR THE RELEVANT F.Y.2003-04,IT IS FOUND THAT ADMITTEDLY THE ASSESSEE HAD DISCLOSED THE DISTRIBUTORSHIP INCOME I N THE PROFIT & LOSS ACCOUNT, UNDER THE HEAD, 'INCOME FROM SERVICES' AGGREGATING TO RS. 50,49,46,000/- (VIDE SCHEDULE-L0),AS PER BREAK-UP THEREOF, THE 'INCOME F ROM CABLE SERVICES' OF RS.29,05,26,225/- FOR THE PERIOD 01.04.2003 TO 31.0 8.2003 AND 'DISTRIBUTORSHIP INCOME' OF RS. 17,22,13,178/- FOR THE PERIOD 01.09. 2003 TO 31.03.2004, TOTALING RS. 46,27,12,178/-,WHICH FORMED PART OF THE AGGREGA TE 'INCOME FROM SERVICES', WHICH WAS DULY ACCOUNTED FOR IN THE AUDITED ACCOUNT S BY THE ASSESSEE COMPANY. THIS IS ALSO FOUND TO BE CORROBORATED BY THE OBSERV ATION OF THE A.O IN THE REMAND REPORT, WHEREIN IT WAS STATED THAT,' ON FURTHER, AN ALYSIS OF THE RECONCILIATION FILED M/S INDIA CABLE NET CO. LTD. ITA NO.2525/KOL/2017 C.O. NO.34/KOL/2018 ASSESSMENT YEAR:2004-05 P PP PA AA AG GG GE EE E | || | 1 11 11 11 1 IN THIS REGARD ALONG WITH THE RELEVANT EVIDENCES IT IS FOUND THAT THE INCOME DISCLOSED BY THE ASSESSEE IS IN EXCESS OF THE AMOUN T DISCLOSED BY THE PARTIES.' WE NOTE THAT ASSESSEE`S BOOKS OF ACCOUNTS ARE AUDIT ED AND THE AO HAS NOT REJECTED THE BOOKS OF ACCOUNTS UNDER SECTION 145(3) OF THE A CT. THE AO DID NOT FIND ANY SPECIFIC DEFECTS IN THE BOOKS OF ACCOUNTS MAINTAINE D BY THE ASSESSEE. WE NOTE THAT A.O. HAS ERRED IN DISALLOWING THE DISTRIBUTORSHIP F EE OF RS. 2,38,60,000/- WITHOUT BRINGING ON RECORD ANY ADVERSE EVIDENCE THAT THE AS SESSEE HAD EITHER INFLATED THE DISTRIBUTORSHIP EXPENSES OR SUPPRESSED THE RECEIPTS . WE NOTE THAT WORK OF THE AO WAS BASED ON SURMISE AND CONJECTURES WHICH IS NOT A CCEPTABLE AND HENCE THE A.O WAS NOT JUSTIFIED IN DISALLOWING OF GROSS LOSS OF D ISTRIBUTORSHIP FEE OF RS. 2,38,60,000/-. THAT BEING SO, WE DECLINE TO INTERFE RE IN THE ORDER PASSED BY THE LD. CIT(A), HIS ORDER ON THIS ISSUE, IS HEREBY UPHELD A ND GROUNDS RAISED BY THE REVENUE IS DISMISSED. 19. THE CROSS OBJECTIONS FILED BY THE ASSESSEE IN C .O. NO. 34/KOL/2018 IS ONLY SUPPORTIVE TO THE ORDER OF THE LD. CIT(A), SINCE WE HAVE ALREADY ACCEPTED THE ORDER OF THE LD. CIT(A) IN DELETING THE VARIOUS DISALLOWA NCE MADE BY THE ASSESSING OFFICER THEREFORE, THE CROSS OBJECTION FILED BY THE ASSESSEE BECOMES INFRUCTUOUS AND DOES NOT REQUIRE ANY ADJUDICATION. 20. IN THE RESULT, THE APPEAL OF THE REVENUE IS DIS MISSED AND THE CROSS OBJECTION OF THE ASSESSEE IS ALSO DISMISSED AS INFRUCTUOUS. ORDER PRONOUNCED IN THE COURT ON 06.03.2019 SD/- SD/- [A T VARKEY] [A.L. SAINI] JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 06.03.2019 SB, SR. PS M/S INDIA CABLE NET CO. LTD. ITA NO.2525/KOL/2017 C.O. NO.34/KOL/2018 ASSESSMENT YEAR:2004-05 P PP PA AA AG GG GE EE E | || | 1 11 12 22 2 COPY OF THE ORDER FORWARDED TO: 1. ACIT, CIR-2(1), KOLKATA 2. M/S INDIA CABLE NET CO. LTD. 3. C.I.T(A)- 4. C.I.T.- KOLKATA. 5. CIT(DR), KOLKATA BENCHES, KOLKATA. 6. GUARD FILE. TRUE COPY BY ORDER ASSIST ANT REGISTRAR ITAT, KOLKA TA BENCHES