Rajdhani Systems & Estates Pvt. Ltd., Bhubaneswar V. ACIT, Corporate Circle-1(2), Bhubaneswar

ITA 270/CTK/2018

• Counselvise Citation: [2022] 106 COUNSELVISE.COM (IT) 5988 (ITAT-CUTTACK)
• Duration Of Justice: 4 year(s) 1 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-08-2022
• Appeal Filed By: Assessee
• Order Result: PartlyAllowed
• Bench Allotted: DB
• Assessment Year: 2011-2012
• Appeal Filed On: 01-07-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Business expenditure; Principle of natural justice; Tangible material; Competent authority; TDS
• Section: 68; 37; 263; 40A(3); 40(a)(ia); 250; 64; 40a(ia)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL CUTTACK BENCH, CUTTACK BEFORE SHRI C.M. GARG, JUDICIAL MEMBER AND SHRI ARUN KHODPIA, ACCOUNTANT MEMBER ITA No.270/CTK/2018 Assessment Year: 2011-12 Rajdhani Systems & Estates (P) Ltd., Plot No.A-103, Saheed Nagar, Bhubaneswar – 751007. PAN: AABCR8271L Vs. ACIT, Corporate Circle-1(2), Bhubaneswar-751007. (Appellants) (Respondents) Assessee by : Shri B.D. Ojha, AR Revenue by : Shri Abhay Kumar Rout, Sr. DR Date of Hearing : 27.05.2022 Date of Pronouncement : 18.08.2022 ORDER PER C.M. GARG, JM: This appeal has been filed by the assessee against the order of the CIT(A)- 1, Bhubaneswar, dated 24.08.2018 for AY 2011-12. 2. The grounds raised by the assessee in this appeal read as follows:- “1. Because that the learned Commissioner of Income Tax(Appeals)-1,Bhubaneswar erred in law as well as in fact by in not treating the Order as illegal, arbitrary, unjust and contrary to the provisions of the Act. 2. Because that the learned Commissioner of Income Tax(Appeals)-1, Bhubaneswar erred in law as well in fact by confirming the addition of Rs. 1,42,70,806/- U/s 68 of The Act in ITA No.270/CTK/2018 2 respect of incremental advance received from customers in respect of old projects during the year in spite of the fact that the same was verified during the during the remand proceedings for A/y 2000-01 to 2006-07. 3. Because that the learned Commissioner of Income Tax(Appeals)-1, Bhubaneswar erred in law as well as in fact by confirming the disallowance of the land development expenses of Rs.41,87,700/- representing the amount paid to land owners as premium for sale of land in excess of the amount as mentioned in the conveyance deeds which is the business practice in such business and same is liable to be allowed. 4. Because that the learned Commissioner of Income Tax(Appeals)-1, Bhubaneswar erred in law as well in fact by confirming the disallowance of 15% Scheme promotion expenses amounting to Rs.3,53,223/- without appreciating the necessity of incurring such expenses which is based on presumptions & surmises and same is liable to be allowed. 5. Because that the learned Commissioner of Income Tax (Appeals)-1, Bhubaneswar erred in law as well as in fact by confirming the disallowance of Rs.1,93,673 /- being 25% of the miscellaneous expenses of which is based on presumptions & surmises and same is liable to be allowed. 6. Because that the learned Commissioner of Income Tax(Appeals)-1, Bhubaneswar erred in law as well as in fact by confirming the disallowance of Rs.15,12,266/- U/s 40a(ia) for payments of interest to customers. 7. The appellant may add, alter, delete or amend any of the grounds at the time of hearing of the matter.” 3. The grounds No.1 and 7 taken by the assessee being general in nature are dismissed as such. The remaining grounds are being adjudicated as follows:- ITA No.270/CTK/2018 3 Ground No.2: 4. The ld. AR submitted that in the assessment order, the AO has made addition in the hands of the assessee by observing that the assessee has failed to lead any credible and worthwhile proof with regard to the credits appearing in its books of account to accept the claim of the assessee and the AO made addition on total incremental amount u/s 68 of the Act treating the same as amount of credits for which the assessee has not adduced any tangible material evidence explaining the source. The ld. AR explained that the impugned assessment order has been passed in pursuance of order of the ld.PCIT u/s 263 of the Act. It was also explained that the AO in the earlier assessment order dated 24.03.2014 passed u/s 143(3) of the Act had already made addition of Rs.32,73,594/- and in addition to that, the AO also made addition of Rs.1,09,97,212/-. Thus, the total incremental amount of Rs.1,42,70,806/- was added in the hands of the assessee without considering the correct factual position. The ld. AR vehemently contended that the incremental advance from customers cannot be considered for addition u/s 68 of the Act. The ld. AR also drew our attention towards the order of ITAT, Cuttack Bench dated 21.09.2017 in assessee’s own appeals (cross appeals) in ITA No.253 & 254/CTK/2012 for AYs 2007-08 & 2008-09 and Departmental appeals No.232 & 233/CTK/2012 AYs. 2007-08 and 2008-09 and submitted that the customer advance cannot be considered for addition u/s 68 of the Act. ITA No.270/CTK/2018 4 5. The ld. AR also submitted that the Court of the Presiding Officer, Designated Court, OPID Act, Cuttack, by order dated 15.07.2019 in the case of State of Orissa vs. Five opposite parties including the present assessee as opposite party No.2 in para 2 observed that the assessee and other associate concern defaulted in return of deposits to the depositors on their failure to provide plotted land to them. In concluding paragraph at page 11, the Court further observed that the Applicant-Petitioner-cum-Competent Authority of State of Orissa is directed to realize the deposit amount o Rs.63,55,49,227/- along with interest accrued thereon lying in the UCO Bank, Collectorate Branch account of the Court bearing No.22020310052143 for equitable distribution among the investors/depositors. The ld. AR further submitted that the Competent Authority of the Government of Orissa issued a public notice in the local newspaper to call upon the claimants to submit online applications regarding their claims against the assessee and other associates. Copy of the Court order dated 15.07.2019 (supra) and copy of the advertisement in the local newspaper (supra) is available at pages 11-23 of the assessee’s paper book. 6. Further, placing reliance on the judgment of the Hon’ble Gujarat High Court in the case of CIT vs. Sapna Land Developers, dated 29.06.2011 in Tax Appeal No.651 of 2010 reported as 2011-ITL-153 (Gujarat) which affirmed the order of the Ahmedabad Bench of ITAT, dated 23.10.2009 in the case of ITO vs. Sapna Land Developers, submitted that the provisions of section 68 are not ITA No.270/CTK/2018 5 applicable to the amount of advance from customers/investors, therefore, ground No.2 of the assessee may kindly be allowed. 7. Replying to the above, the ld. Sr. DR submitted that the assessee failed to discharge the onus lay on his shoulders to come out from the trigger of section 68 of the Act. No evidence has been submitted by the assessee that this amount has been paid to the respective creditors/customers/investors. Therefore, the order of the AO may kindly be confirmed. 8. Placing rejoinder to the above, the ld. AR submitted that the ld.CIT(A) had passed order on 24.08.2018 and at that point of time, the Court order was not in existence and the Court order was pronounced on 15.07.2019 which clearly reveals that the assessee and its other associates deposited the amount of Rs.63.55 crores with the UCO Bank, Collectorate Branch of the Designated OPID Court and the Court directed the Competent Authority to distribute this amount among the respective claimants/customers/investors. These facts are very much clear from the copy of the Court order and local newspaper advertisement issued by the Competent Authority. 9. On careful consideration of the above submissions, we are of the considered view that in the case of CIT vs. Sapna Land Developers (supra), the Hon’ble Gujart High Court affirmed the order of the Tribunal dated 23.10.2009, wherein the Tribunal observed as follows:- ITA No.270/CTK/2018 6 “10. We have carefully considered the rival contentions. The facts narrated in the preceding paragraphs would show that the assessee did file the relevant details regarding the members who paid the advance instalments and the booking amounts before the AO. Copious details including ledger account extracts have been filed by the assessee. They were all filed before 24-12- 2007. In fact most of the details were filed under cover of letter dated 26-10- 2007. The details called for by letter dated 24-12-2007 were filed on 26-12- 2007. The assessee is in the business of buying and selling lands and its modus operandi is to buy plots of land in villages which had scope for development, take members who are willing to buy the plots, collect monthly instalments from them as also an initial booking amount and transfer the land to them once the instalments are fully paid. When the land is transferred, the advances are treated as sales and taken to the trading account. The AO, as pointed out by the CIT(A), has not disputed the modus operandi of the business and has even proceeded to estimate the profits of the Ilahi Park scheme. The CIT(A) has held that the AO has failed to keep in mind the nature of the assessee's business while examining the contribution made by the members in monthly instalments, even though he was fully aware of the business of the assessee. We are inclined to agree with the decision of the CIT(A) and also with his observation that the AO has taken contradictory stands. If he accepts that the business of the assessee involved taking of monthly advances from the members and booking amounts from them and that the income arose from the sale of the plots in the year in which the plots were registered in the names of the members and possession given, then it follows that the amounts shown as advances or instalments from the members stood proved. The AO has not disputed the fact that the advance instalments stood transferred to the sales account when the plot was transferred in the name of the member. Thus, the credits in the accounts of the members are nothing but advance payments or instalments in anticipation of the sale pursuant to the booking of the plot in the particular scheme. During the relevant accounting year, there were 57 sales and the assessee has contended before the AO in its letter dated 26-12-2007 that the instalment and booking amounts standing to the credit of these members were transferred to the sale of plots account which was taken to the trading account. If this claim is not disputed, as it has not been disputed by the AO, then it follows that the amounts shown in the accounts of the members cannot be assessed as cash credits under Section 68 of the Act. This aspect of the matter has also been highlighted by the CIT(A) and we are in agreement with his view on this aspect. The papers compiled in the ITA No.270/CTK/2018 7 paper book also show that all the details which are relevant and which show the nature and source of the amounts credited in the advance instalments account and the members booking account have been filed before the AO. In these circumstances, we are unable to differ from the view taken by the CIT(A). We are also not inclined to accept the submission of the learned CIT-DR that the CIT(A) erred in not following the procedure prescribed by Rule 46A. It has not been pointed out by him as to what was the additional evidence adduced before the CIT(A) by the assessee. Since complete details were filed before the AO himself, there is also no need to send back the matter for fresh consideration. Even if the AO did not have the time to examine those papers, the CIT(A) whose powers are co-terminus with those of the AO has examined them and has taken the decision. It is therefore unnecessary to restore the matter for fresh examination. Thus, the first two grounds taken by the department are dismissed.” 10. In view of the above, it is very clear that the amount received from customers/investors in installments or as advance cannot be treated as income of the assessee u/s 68 of the Act. In the present case, the ld. Sr. DR has not disputed the fact that the assessee and its associate developer companies under Designated OPID Court, Cuttack order dated 15.07.2019, deposited an amount of Rs.63,55,49,227/- to the UCO Bank, Collectorate Branch, account bearing No.XXX2143 and the OPID Court directed the competent authority to realize the deposited amount from the bank and distribute the same among the claimants/investors. The ld. Sr. DR has also not controverted the fact that the amount deposited by the assessee and its associate companies in the account of the Designated Court of OPID Act, Cuttack includes the impugned amount of addition of Rs.1,42,70,806/-. When the assessee company, under Court order had deposited the amount to the bank account of the Court by the judgment dated ITA No.270/CTK/2018 8 15.07.2019 (supra), the Court directed the competent authority to realize the deposit amount and distribute the same among the claimants/depositors, then, nothing remains in the hands of the assessee which required addition in the hands of the assessee u/s 68 of the Act. It is pertinent to mention that the ld. Sr.DR has not made any comment or arguments pertaining to the Court order dated 15.07.2019 (supra) and advertisement issued by the Competent Authority in the local newspaper dated 16.07.2021, copies of which are available at pages 11-23 of the assessee’s paper book. 11. Therefore, in view of the foregoing discussion, we reach to a logical conclusion that the addition made by the AO and confirmed by the ld.CIT(A) u/s 68 of the Act cannot be held as sustainable and, therefore, we direct the AO to delete the same. Accordingly, ground No.2 of the assessee is allowed. Ground No.3: 12. Apropos ground No.3, the ld. AR drew our attention to the assessee’s paper book page 2 and submitted that the AO made addition by wrongly observing that any extra amount paid for the land acquisition is in contravention to the rate fixed by the State Government. Therefore, such expenses paid under ‘Land’ are not allowable under the provisions of the Income-tax Act, 1961. The ld. AR vehemently submitted that the AO was not correct in making addition/disallowance in the hands of the assessee pertaining to the amount paid in excess of sale deed value as for builders and developers they are bound to pay ITA No.270/CTK/2018 9 extra amount to agriculturists to purchase the big land area. Therefore, under business expediency the assssee had to pay excess amount to the farmers after finalization of original amount as per purchase deal because farmers some times deny to comply with the sale agreement which may result into non-availability of composite land and the business of the assesseee may adversely be affected. Therefore, out of business expediency, this amount is paid to the agriculturists /farmers towards their efforts for beautification and development of land to be purchased by them from the assessee. The ld. AR has also placed reliance on the judgment of the Hon’ble High Court of Bombay in the case of CIT vs. Shree Panchaganga Sahakari Sakhar Karkhana Ltd. (Para 4) reported as 250 ITR 772 (Bom. 13. Replying to the above, the ld. Sr.DR vehemently opposed to the submissions of the ld. AR and submitted that the excess amount paid to the farmers/land owners is a payment over and above the amount given in sale deed in the guise of land development expenses which is not allowable. Therefore, the orders of the authorities below may kindly be confirmed. The ld. Sr. DR also submitted that the judgment of the Hon’ble Bombay High Court is not applicable to the facts and circumstances of the present case as it was the case of excess payment of a sugar mill to the sugarcane farmers. ITA No.270/CTK/2018 10 14. Placing rejoinder to the above, the ld. AR submitted that the judgment of the Hon’ble High Court of Bombay in the case of CIT vs. Shree Panchaganga Sahakari Sakhar Karkhana Ltd. (supra) is squarely applicable to the present case as in that case also the assessee company had to pay excess amount over and above the rate of sugarcane fixed by the State Government wholly and exclusively for the purpose of business under commercial expediency. Therefore, the Hon’ble High Court upheld the order of the Tribunal wherein the Tribunal disallowed the additions made on account of excess price of sugarcane being charged by the assessee. 15. On careful consideration of the above rival submissions, we are of the considered view that neither the AO nor the ld.CIT(A) nor ld. Sr. DR before us have disputed the quantum of amount claimed by the assessee under the head ‘Land development expenses’ to the farmers/land owners. From the orders of the authorities below, we clearly note that the main basis for making the disallowance is that the excess payment made to the land owners over and above the price mentioned in the sale deed cannot be allowed under the provisions of the Income-tax Act as the assessee had not been able to prove the genuineness of these payments. The ld.CIT(A) in para 3.2 observed that the assessee has not been able to establish the genuineness of the alleged payments to the land owners in the garb of land development expenses and the payments having been made in cash called for disallowance u/s 40A(3) of the Act. From careful reading of ITA No.270/CTK/2018 11 assessment order as well as the first appellate order, we clearly observe that the quantum of the expenditure has not been disputed. The assessee before the ld.CIT(A) submitted the detailed submissions which have been noted by the ld.CIT(A) in para 3.1. For the sake of completeness of this order, we find it appropriate to reproduce the submissions of the assessee made before the ld. First Appellate Authority, which read as follows:- "3. Grounds of Appeal No.3 is with regard to disallowance of land development expenses representing the excess amount paid to land sellers above the bench mark price amounting to Rs. 41,87,700/- 3.1 The company is in real estate business and the activities of the company is to buy, develop, sub divide and sell land. The land development expenses consists of amount paid for sand filling, laying of roads, road side plantation of the projects, construction of culverts and amount paid over and above the registered value of land to, the land owners. The land development expenses of Rs. 41,87,700/- represent amount of money paid to the sellers of the land in excess of Bench Mark price fixed by State Govt, which is for collecting stamp duty. Such payments are akin to premiums paid to sellers of land for purchasing their land which is the prevailing market practice in such business. 3.2 The appellant enters to a agreement either written or verbal with the owners of the land for payment of a fixed sum as consideration on prevailing market price of the land of the particular area. After the owner of the land is paid in full the agreed amount, the land is registered in the name of the appellant. At the time of registration of land, the amount of consideration mentioned in the conveyance deed is debited to Land Purchase account and the balance amount is debited to land development account through journal entry. 3.3 The price at which the appellant acquires land is a business decision on commercial expediency to run the business. If the appellant sticks to the bench mark price fixed by the State Govt, on which the stamp duty is paid, then the appellant cannot purchase any land as the bench mark price was always lower than the market price ITA No.270/CTK/2018 12 which would) affect the running of the business of the appellant. The value of consideration in conveyance deed is for the purpose of collecting stamp duty and not the actual consideration of the transaction. Where the actual consideration is less than the Bench Mark Price ,the stamp duty is paid on the Bench Mark Price not on the consideration of the transaction. 3.4 Regarding the allegation that the price paid over and above the registration price is a violation of Registration Act, it is to be humbly submitted that the appellant is to be pay fine or penalty for such violation if the State Govt, initiates action against it and such fine or penalties are not deductible U/s 37 of The I.T. Act, 1961. The amount paid over and above the registered price is not a fine nor a penalty which can be disallowed U/s 37 of The I.T. Act,1961. 3.5 The payments made over and above the registered price is in accordance with the prevailing business practice adhering to the principle of commercial expediency and the same is allowable as business expenditure U/s 37 of The I.T. Act, 1961 as decided in Bombay High Court in case of COMMISSIONER OF INCOME TAX Vs. SHREE PANCHAGANGA SAHAKARI SKHAR KARKHANA LTD., reported in (2001) 250 ITR 772(Bom).” 16. From the order of the AO and the ld. First appellate authority, we clearly gather that the AO, in the scrutiny assessment order dated 24.03.2014 (para 2), made disallowance/addition by observing that the amount paid in excess of sale deed value is not allowable expenses. The ld. CIT(A) went a step ahead that the payments having been made in cash, called for disallowance u/s 40A(3) of the Act. We are unable to see any show cause to the assessee by the ld.CIT(A) for showing his intention to confirm the addition u/s 40A(3) of the Act, therefore, these observations of the ld.CIT(A) in para 3.2 are not in accordance with the principles of natural justice. So far as the sustainability of the additions made by the AO and confirmed by the ld.CIT(A) on the allegation of genuineness of ITA No.270/CTK/2018 13 alleged payments to the land owners is concerned, the assessee, in the written submissions placed before the ld.CIT(A), categorically submitted that the price paid over and above the registration price is in accordance with the prevailing business practice adhering to the principles of commercial expediency and the same is allowable under business expenditure under section 37 of the Act as per the judgment of the Hon’ble High Court of Bombay in the case of CIT vs Shree Panchaganga Sahakari Sakhar Karkhana Ltd. (supra). On careful reading of the said judgment of the Hon’ble High Court of Bombay (para 4), it is clear that their Lordships evaluated the reasonableness of expenditure from the point of view of a businessman and not from the point of view of taxman. In that case, the assessee sugar mill paid over and above the amount to the sugarcane growers in excess without obtaining the approval of the Director of Sugar, Government of Maharashtra which was allowed by the Tribunal and the Hon’ble High Court confirmed the order of the Tribunal by observing that if the expenditure has been incurred out of commercial expediency, then, it cannot be disallowed merely because the payment was in breach of some bye-laws. The relevant para 4 of this judgment reads as follows:- “ In the present matter, the Department took the view that the price charged by the Karkhana was without obtaining the approval of the Director of Sugar, Government of Maharashtra, and, therefore, the price charged was clearly in breach of bye-law No. 64 of the assessee-society. Accordingly, the Department disallowed the excess cane price which resulted in addition of Rs. 2.35 lakhs to the income of the Karkhana. In other words, expenditure incurred by the Karkhana by way of payment of cane price to the sugarcane growers ITA No.270/CTK/2018 14 came to be disallowed. Such additions were made for both the aforestated two assessment years. In our view, the Tribunal was right in ordering deletion of such additions. While fixing the cane price, the Karkhana took into account the price paid by the neighbouring sugar factories. If the Karkhana had paid a lesser price, the Karkhana could not have been able to procure sugarcane for running of the factory because the sugarcane growers would not have supplied sugarcane to the assessee-Karkhana if it offered a price below the price offered by the neighbouring Karkhanas. Therefore, the price fixed by the Karkhana was based on commercial expediency and merely because the price paid was in contravention of the bye-laws, it cannot be said that the payment was unreasonable. The reasonableness of the expenditure has to be judged from the point of view of businessmen. The payment was not a sham. The payment was purely for business purposes. Under the Income-tax Act one has to see whether the expenditure was incurred only and exclusively for the purposes of business. If the expenditure has been incurred out of commercial expediency then it cannot be disallowed merely because the payment was in breach of some bye-laws. The breach of the bye-law, if any, in the present case cannot be a ground for disallowing a bona fide expenditure. Accordingly, we hereby uphold the decision of the Tribunal. Accordingly, question No. 2 is answered in favour of the assessee and against the Department. In the case of K. C. P. Ltd. v. CIT , the assessee carried on the business of manufacturing and selling sugar. The assessee sold sugar at a price higher than the levy price fixed by the Government. The question which arose for determination before the Supreme Court was whether the excess price charged by the assessee constituted a trading receipt in the assessee's hands. It was held that the excess amount realised by the assessee was a trading receipt. In that matter, the Supreme Court observed that there was nothing on record to find out how and in what manner, the accounts were maintained by the assessee. The judgment of the Supreme Court in K. C. P. Ltd. v. CIT [2000] 245 ITR 421, has no application to the facts of the present case. As stated above, in the judgment of this court reported in CIT v. Chhatrapati Saha-kari Sakhar Karhhana Ltd. [2000] 245 ITR 498, this court on an examination of the bye-laws, came to the conclusion that fixation and payment of price of sugarcane form part of trading operations of the assessee. That was not so in the case before the Supreme Court. Secondly, in the present case, the Karkhana was required to purchase sugarcane from the growers by paying a price. Such payment constituted expenditure. The Karkhana claimed deduction for such expenditure. This expenditure was disallowed on the ground that it ITA No.270/CTK/2018 15 was an excess price charged in violation of the bye-laws. We have held that for income-tax purposes, one has to go by the test of commercial expediency. On the other hand, in the case before the Supreme Court, the assessee was in the business of manufacturing and selling sugar. It was a case of sale of sugar at a price higher than the levy price fixed by the Government. It was a case of income accruing to the assessee, whereas in the present case, we are concerned with disallowance of expenditure claimed by the assessee. Therefore, the judgment of the Supreme Court has no application to the facts of the present case.” 17. After careful and respectful perusal of the said order of the Hon’ble Bombay High Court and facts and circumstances of the case, we decline to accept the contention of the ld. Sr. DR that the proposition rendered by the Hon’ble Bombay High Court in the case of Shree Panchaganga Sahakari Sakhar Karkhana Ltd. (supra) is not applicable to the present case. Per contra, we are of the respectful view that the Hon’ble High Court of Bombay has cleared the clouds and all confusions on the issue by observing that the reasonableness of the expenditure has to be judged from the point of view of a businessman when the payment was not a sham, the payment was purely for business purposes, then, under the Income-tax Act, one has to see whether the expenditure was incurred wholly and exclusively for the purpose of business. If the expenditure has been incurred out of commercial expediency, then, it cannot be disallowed merely because the payment was in breach of some bye-laws. In the present case, undisputedly, the assessee is a builder and developer who has to collect land from scattered land owners/farmers and to buy or collect a big piece of land, it has to buy land pieces from various farmers and in this process, if the practice of ITA No.270/CTK/2018 16 business required, then, he has to pay some excess amount to please and control the land sellers which is charged by the land sellers on account of development and beautification of the land and, therefore, such kind of expenditure which is out of commercial expediency purely for the purpose of business has to be allowed u/s 37 of the Act. Therefore, ground No.3 of the assessee is allowed and the AO is directed to delete the disallowance/addition. Ground No.4 18. The ld. AR submitted that the ld.CIT(A) has erred in confirming the disallowance of 15% towards Scheme Promotion Expenses without appreciating the necessity of incurring such expenses. 19. Replying to the above, the ld. Sr. DR supported the orders of the authorities below and submitted that the ld.CIT(A) was right in confirming the disallowance made by the AO on account of complete absence of evidence in support of the expenses. The ld. Sr. DR pointed out that the AO could have disallowed the entire expenditure, but, he took a liberal view by disallowing 15% of the expenses which appeared to be quite reasonable, and, therefore, no further relief or discount could be allowed to the assessee. 20. On careful consideration of the above contentions, we are of the considered view that neither before the AO nor before the ld.CIT(A) the assessee submitted any evidence in support of the claim of expenses towards scheme promotion. In ITA No.270/CTK/2018 17 our humble view, the authorities below have taken a very balanced and justified view in making disallowance of only 15% of the total claim in spite of absence of evidence in support of claim of expenses towards scheme promotion. Therefore, we decline to interfere with the findings arrived at by the authorities below. Accordingly, the ground No.4 of the assessee is dismissed. Ground No.5 21. The ld. AR submitted that the ld.CIT(A) has erred in confirming the disallowance of 25% towards Miscellaneous Expenses, since such disallowance, according to him, was based on presumptions and surmises. 22. Replying to the above, the ld. Sr. DR supported the orders of the authorities below and submitted that the ld.CIT(A) was right in confirming the disallowance made by the AO on account of complete absence of evidence in support of the expenses. The ld. Sr. DR pointed out that the AO could have disallowed the entire expenditure, but, he took a liberal view by disallowing 25% of the expenses which appeared to be quite reasonable, and, therefore, no further relief or discount could be allowed to the assessee. 23. On careful consideration of the above contentions, we are of the considered view that neither before the AO nor before the ld.CIT(A) the assessee submitted any evidence in support of the claim of expenses towards Miscellaneous Expenses. In our humble view, the authorities below have taken a very balanced ITA No.270/CTK/2018 18 and justified view in making disallowance of only 25% of the total claim in spite of absence of evidence in support of claim of expenses towards scheme promotion. Therefore, we decline to interfere with the findings arrived at by the authorities below. Accordingly, the ground No.5 of the assessee is dismissed. Ground No.6: 24. Apropos ground No.6, the ld. AR submitted that the ld.CIT(A) has erred in law as well as in fact by confirming the disallowance of Rs.15,12,266/- u/s 40(a)(ia) of the Act towards payment of compensatory interest to the customers under the orders of the District Consumer Dispute Redressal Forum, Puri. The ld. AR submitted that the payment of compensatory interest payment to customers does not attract the provisions of TDS and, therefore, the disallowance made by the AO and confirmed by the ld.CIT(A) may kindly be deleted. 25. The ld. Sr. DR strongly supported the assessment as well as the first appellate order and submitted that the AO called for the details of interest paid to the customers and on perusal of the same, it was seen that such payments though made as interest to customers, has not been subjected to TDS. Therefore, since the assessee was obliged to make TDS, failure of which calls for disallowance u/s 40(a)(ia) of the Act, the same was rightly added to the income of the assessee. However, in all fairness, the ld. Sr. DR submitted that in the event of compensatory interest payment under court order, the provisions of TDS is not applicable to such payments. ITA No.270/CTK/2018 19 26. On careful consideration of the above submissions, we are of the considered view that the quantum of payment has neither been disputed by the AO nor by the ld.CIT(A) and nor by the ld. Sr. DR while arguing the case before this Bench. Now, the issue remains that whether the TDS provisions are applicable to the payment of interest made by the assessee to its customers under the order of the District Consumer Dispute Redressal Forum. We may point out that from the copy of the judgment dated 09.12.2010 in CD Case No.54 of 2010 in the case of Bhakti Bhusan Malik vs. Rajadhani System and Estate Pvt. Ltd. (the assessee), from the operative part of the order at last page, we observe that the Consumer Dispute Redressal Forum, allowing the complaint of an allottee assessee observed as follows:- “In view of the foregoing discussions the complaint is allowed on contest. The O.P is directed to refund the total amount paid to it by the complainant i.e. Rs.70,500/- along with compensatory interest @ 18% per annum from the date of respective deposits till actual payment. O.P is further directed to pay the complainant a sum of Rs. 2,000/- as costs of litigation. The order by complied with within a period of one month from the date of receipt of copy of the order failing which the amounts ordered to be paid, will carry penal interest @ 20% per annum till actual payment.” 27. In view of the above, the impugned payment of interest to the customers under the order of District Consumer Disputes Redressal Forum dated 09.12.2010 (supra) is compensatory interest to be paid to the consumer/customer/investor under the order of the Court. Therefore, we are in agreement with the contention of the ld. AR that the TDS provisions are not applicable to the payments made by ITA No.270/CTK/2018 20 the assessee under ‘Compensatory interest’ to its customers. Therefore, the addition made by the AO and confirmed by the ld.CIT(A) u/s 40(a)(ia) of the Act cannot be held to be sustainable and we direct the AO to delete the same. 28. In the result, the appeal filed by the assessee is partly allowed. Order pronounced on 18.08.2022 under Rule 34(4) of IT(AT) Rules, 1963. Sd/- Sd/- (ARUN KHODPIA) (C.M. GARG) ACCOUNTANT MEMBER JUDICIAL MEMBER Dated: 18 August, 2022. dk Copy forwarded to : 1. Appellant 2. Respondent 3. CIT 4. CIT(A) 5. DR Asstt. Registrar, ITAT, Cuttack