M/s Euroamer Garuda Resorts India Pvt Ltd , Bangalore V. Deputy Commissioner of Income Tax Circle-2(1)(2), Bangalore

ITA 2755/BANG/2017

• Counselvise Citation: [2019] 116 COUNSELVISE.COM (IT) 8653 (ITAT-BANGALORE)
• Duration Of Justice: 1 year(s) 6 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-07-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 15-05-2019
• Assessment Year: 2013-2014
• Appeal Filed On: 19-12-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: VIKAS SURYAVAMSHI
• Assessee Lawyers: RAMPRIYADAS
• Keywords: Unexplained expenditure; Earning of tax free income; Commercial expediency; Rule 8D; Set aside
• Section: 69C; 14A; 37(1); 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, BENGALURU BEFORE SHRI N.V. VASUDEVAN, VICE PRESIDENT AND SHRI JASON P BOAZ, ACCOUNTANT MEMBER ITA NO. 2755 / BANG/201 7 (ASSESSMENT YEAR: 2013 - 14 ) M/S.EUROAMER GARUDA RESORTS (INDIA) PVT. LTD. NO.78/1, K.R. ROAD, BASAVANAGUDI, BENGALURU - 560004. PAN:AAACE6342G VS. APPELLANT DEPUTY COMMISSIONER OF INCOME - TAX, CIRCLE 2(1)(2), BENGALURU. RESPONDENT APPELLANT BY : SHRI RAMPRIYA DAS, CA. RESPONDENT BY : SHRI VIKAS SURYAVAMSHI, ADDL.CIT(DR) DATE OF HEARING: 0 8 /0 7 /2019 DATE OF PRONOUNCEMENT: 12 /0 7 /2019 O R D E R PER N.V. VASUDEVAN, VP: THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER DATED 22/9/2017 OF THE CIT(APPEALS), BENGALURU-2, BENGALURU, RELATING TO ASSESSMENT YEAR 2013-14. 2. GROUND NO.1 RAISED BY THE ASSESSEE IS GENERAL IN NATURE AND CALLS FOR NO SPECIFIC ADJUDICATION. GROUND NOS.2 AND 3 RAISED BY THE ASSESSEE ARE WITH REGARD TO DISALLOWANCE OF EXPENSES INCURRED IN EARNING INCOME WHICH DOES NOT FORM PART OF THE TOTAL INCOME UNDER CHAPTER III OF THE INCOME-TAX ACT,1961 ['THE ACT' FOR SHORT] BY INVOKING THE PROVISIONS OF SECTION 14A OF THE ACT AND RULE 8D OF THE INCOME TAX RULES, 1962 (RULES). ITA NO.2755/BANG/2017 PAGE 2 OF 14 3. AS FAR AS THIS GROUND OF APPEAL IS CONCERNED, WE HAVE PERUSED THE PROFIT AND LOSS ACCOUNT OF THE ASSESSEE, A COPY OF WHICH IS PLACED AT PAGE 8 OF THE ASSESSEES PAPER BOOK. PERUSAL OF THE SAME REVEALS THAT THE ASSESSEE EARNED INCOME FROM OPERATIONS I.E. INCOME FROM ITS BUSINESS OF MAINTENANCE OF MALL, CONSTRUCTION AND REAL ESTATE AS WELL AS INCOME WHICH ARE NOT OPERATING INCOME. NOTE NO.16 TO THE PROFIT AND LOSS ACCOUNT SHOWS THAT NON- OPERATING INCOME WERE INTEREST ON FIXED DEPOSITS, FOREX VARIATION AND LIQUIDATED DAMAGES. IT IS THUS EVIDENT FROM THE PERUSAL OF THE PROFIT AND LOSS ACCOUNT THAT ASSESSEE DID NOT ANY EXEMPT INCOME DURING THE RELEVANT PREVIOUS YEAR. IN THE ABSENCE OF ANY EXEMPT INCOME EARNED BY THE ASSESSEE, PROVISIONS OF SECTION 14A OF THE ACT CANNOT BE INVOKED. THE HONBLE DELHI HIGH COURT IN THE CASE OF CHEMINVEST LTD. V. CIT 378 ITR 33 (DEL) HAS CATEGORICALLY HELD THAT SECTION 14A ENVISAGES THAT THERE SHOULD BE ACTUAL RECEIPT OF INCOME WHICH WAS NOT INCLUDIBLE IN THE TOTAL INCOME DURING THE RELEVANT PREVIOUS YEAR FOR THE PURPOSE OF DISALLOWING ANY EXPENDITURE IN RELATION TO THE SAID INCOME. WHEREVER THERE IS NO EXEMPT INCOME INCLUDIBLE IN THE TOTAL INCOME OF THE ASSESSEE, THE PROVISIONS OF SECTION 14A CANNOT BE INVOKED. THE RELEVANT OBSERVATIONS OF THE JUDGMENT OF THE HONBLE DELHI HIGH COURT ARE EXTRACTED HEREUNDER:- 15. TURNING TO THE CENTRAL QUESTION THAT ARISES FOR CONSIDERATION, THE COURT FINDS THAT THE COMPLETE ANSWER IS PROVIDED BY THE DECISION OF THIS COURT IN CIT V. HOLOLCIM INDIA (P) LTD. (DECISION DATED 5TH ITA NO.2755/BANG/2017 PAGE 3 OF 14 SEPTEMBER 2014, IN I.T. A. NO. 486 OF 2014). IN THAT CASE, A SIMILAR QUESTION AROSE, VIZ., WHETHER THE INCOME-TAX APPELLATE TRIBUNAL WAS JUSTIFIED IN DELETING THE DISALLOWANCE UNDER SECTION 14A OF THE ACT WHEN NO DIVIDEND INCOME HAD BEEN EARNED BY THE ASSESSEE IN THE RELEVANT ASSESSMENT YEAR ? THE COURT REFERRED TO THE DECISION OF THIS COURT IN MAXOPP INVESTMENT LTD. (SUPRA) AND TO THE DECISION OF THE SPECIAL BENCH OF THE INCOME-TAX APPELLATE TRIBUNAL IN THIS VERY CASE, I.E., CHEMINVEST LTD. V. CIT [2009] 317 !TR (AT) 86 (DELHI) [SB]. THE COURT ALSO REFERRED TO THREE DECISIONS OF DIFFERENT HIGH COURTS WHICH HAVE DECIDED THE ISSUE AGAINST REVENUE. THE FIRST WAS THE DECISION IN CIT V. LAKHANI MARKETING INCL. (DECISION DATED APRIL 2, 2014, OF THE HIGH COURT OF PUNJAB AND HARYANA IN I. T. A. NO. 970 OF 2008)-- SINCE REPORTED IN [2015] 4 ITR-OL 246 (P&H)-- WHICH IN TURN REFERRED TO TWO EARLIER DECISIONS OF THE SAME COURT IN CIT V. HERO CYCLES LTD. [2010] 323 ITR 518 (P&H) AND CIT V. WINSOME TEXTILE INDUSTRIES LTD. [2009] 319 ITR 204 (P&H). THE SECOND WAS OF THE GUJARAT HIGH COURT IN CIT V. CORRTECH ENERGY (P.) LTD. [2014] 223 TAXMANN 130 (GUJ) ; [2015] 372 1TR 97 (GUJ) AND THE THIRD OF THE ALLAHABAD HIGH COURT IN CIT V. SHIVAM MOTORS (P) LTD. (DECISION DATED 5TH MAY, 2014, IN T.A. NO. 88 OF ITA NO.1 1071BANG12016 2014). THESE THREE DECISIONS REITERATED THE POSITION THAT WHEN AN ASSESSEE HAD NOT EARNED ANY TAXABLE INCOME IN THE RELEVANT ASSESSMENT YEAR IN QUESTION 'CORRESPONDING EXPENDITURE COULD NOT BE WORKED OUT FOR DISALLOWANCE.' 5. IN THE LIGHT OF THE AFORESAID JUDGMENT, THE PROVISIONS OF SECTION 14A CANNOT BE INVOKED AS THERE IS NO EXEMPT INCOME IN THE HANDS OF THE ASSESSEE. IN VIEW OF THE AFORESAID LEGAL POSITION, WE HOLD THAT THERE CAN BE NO DISALLOWANCE U/S 14A OF THE ACT IN THE GIVEN FACTS AND CIRCUMSTANCES OF THE CASE. THE ADDITION MADE IN THIS REGARD IS, THEREFORE, DIRECTED TO BE DELETED AND THE RELEVANT GROUNDS OF APPEAL ARE TREATED AS ALLOWED. ITA NO.2755/BANG/2017 PAGE 4 OF 14 4. GROUND NO.4 RAISED BY THE ASSESSEE IS WITH REGARD TO DISALLOWANCE OF INTEREST EXPENSES U/S 36(1)(III) OF THE ACT. AS FAR AS THE AFORESAID GROUND IS CONCERNED, FACTS ARE THAT THE ASSESSEE IS A COMPANY ENGAGED IN THE BUSINESS OF MAINTENANCE OF MALL, CONSTRUCTION AND REAL ESTATE. THE AO NOTICED THAT THE ASSESSEE HAD ADVANCED A SUM OF RS.19.98 CRORES TO RELATED PARTIES. DESPITE OPPORTUNITY, ASSESSEE DID NOT FILE DETAILS OF LOANS. THE ASSESSEE, HOWEVER, TOOK A STAND THAT INTEREST-FREE ADVANCES WERE GIVEN TO SISTER CONCERNS OWING TO COMMERCIAL EXPEDIENCY. NO EVIDENCE OF COMMERCIAL EXPEDIENCY WHATSOEVER WAS FURNISHED BY THE ASSESSEE. THE AO ALSO NOTICED THAT THE ASSESSEE HAD BORROWED FUNDS ON WHICH IT HAD PAID INTEREST. THE AO HAS MENTIONED IN THE ORDER OF ASSESSMENT THAT INTEREST EXPENDITURE WAS SUM OF RS.65,92,495/-. HOWEVER, ON PERUSAL OF NOTE 18 TO THE PROFIT & LOSS ACCOUNT WHICH GIVES DETAILS OF FINANCIAL COSTS AND THE BREAK-UP OF FINANCE COSTS, IT IS SEEN THAT THE TOTAL FINANCIAL COST WAS SUM OF RS.65,92,495/- AND THE BREAK-UP OF THE FINANCE COST IS AS FOLLOWS: 18 FINANCE COSTS BANK CHARGES 69009 INTEREST 42251 PROCESSING FEES 60000 BANK GUARANTEE AMENDMENT CGS 198095 INTEREST ON TERM LOAN 6223140 6,592,495 THE AO, HOWEVER, PROCEEDED TO MAKE AN OBSERVATION IN THE ORDER OF ASSESSMENT THAT THE ASSESSEE SHOULD HAVE USED ITS OWN FUNDS TO GIVE INTEREST-FREE LOANS TO SISTER CONCERNS RATHER THAN UTILIZING THE BORROWED FUNDS ON WHICH INTEREST WAS PAID. MAKING ABOVE ITA NO.2755/BANG/2017 PAGE 5 OF 14 OBSERVATIONS, AO DISALLOWED THE ENTIRE FINANCIAL COSTS OF RS.65,92,495/-. 5. BEFORE CIT(APPEALS), ASSESSEE REITERATED ITS STAND THAT ADVANCES MADE TO SISTER CONCERN WERE OWING TO COMMERCIAL EXPEDIENCY AND THAT THE ADVANCES TO SISTER CONCERNS WERE GIVEN OUT OF OWN FUNDS OR THAT THE ASSESSEE HAD SUFFICIENT OWN FUNDS TO GIVE THE INTEREST FREE ADVANCES TO SISTER CONCERNS. CIT(APPEALS) HAS, HOWEVER, OBSERVED THAT NO PROOF WHATSOEVER WAS FURNISHED BY THE ASSESSEE TO SUBSTANTIATE ITS CASE. CIT(A), THEREFORE, UPHELD THE ORDER OF THE AO. 6. BEFORE THE TRIBUNAL, THE LEARNED COUNSEL FOR ASSESSEE SUBMITTED DETAILS OF LOANS ADVANCED TO RELATED PARTIES WERE AS FOLLOWS: 11 LONG TERM LOANS AND ADVANCES (UNSECURED, CONSIDERED GOOD) LOANS AND ADVANCES TO RELATED PARTIES FORTUNE BUILDERS & DEVELOPERS 62,130,662 GARUDA VRIDDHI WELLNESS PVT. LTD. (ASSOCIATE) GARUDA BUILDERS PVT. LTD. (PROMOTERS) 124,317,241 MAVERICK HOLDINGS AND INVESTMENTS (ASSOCIATE) 12,572,926 WALLTECH GARUDA STRUCTURES INDIA P LTD. (SUBSIDIARY) 299,109 (A) DEPOSITS 540,236 TOTAL 199,860,084 LEARNED COUNSEL FOR ASSESSEE SUBMITTED BEFORE US THAT EVEN BEFORE AO, THE ASSESSEE EXPLAINED THAT IT WAS IN THE BUSINESS OF MAINTENANCE OF MALL, CONSTRUCTION AND REAL ESTATE. IT OWNED PROPERTIES IN DEVANAHALLY TALUK WHICH WERE SOLD TO M/S. AEROZONA, A PARTNERSHIP FIRM AND BECAUSE THE SALE COULD NOT BE COMPLETED, A JOINT DEVELOPMENT AGREEMENT (JDA) DATED 27/5/2010 WAS ENTERED INTO BETWEEN M/S. AEROZONA, ASSESSEE AND M/S.FORTUNE BUILDERS AND ITA NO.2755/BANG/2017 PAGE 6 OF 14 DEVELOPERS (FBD). AS PER THE AGREEMENT, FBD AGREED TO DEVELOP PROPERTY ON A JOINT VENTURE BASIS AND THE ADVANCES IN QUESTION WERE GIVEN IN CONNECTION WITH AFORESAID JDA. HE, THEREFORE, SUBMITTED THAT INTEREST-FREE ADVANCES WERE GIVEN OWING TO COMMERCIAL EXPEDIENCY. PAPER BOOK WAS FILED BEFORE US CONTAINING COPY OF JDA AND THE SAME IS AT PAGES 48 TO 95 OF THE ASSESSEES PAPER BOOK. AT PAGE 47, THE ASSESSEE HAS ALSO GIVEN LEDGER ACCOUNT OF FBD. LEDGER ACCOUNT SHOWS THE PAYMENT MADE ON VARIOUS DATES BY THE ASSESSEE TOWARDS ADVANCES. IT HAS BEEN CERTIFIED BY THE LEARNED COUNSEL FOR ASSESSEE THAT THESE DOCUMENTS HAD BEEN FILED BEFORE LOWER AUTHORITIES. 7. FROM PERUSAL OF THE ORDERS OF THE AO AND THE CIT(APPEALS), THERE HAS BEEN NO DISCUSSION ON THIS ASPECT OF THE CASE. WE ARE, THEREFORE, OF THE VIEW THAT THIS ISSUE REQUIRES FRESH EXAMINATION BY THE AO ON THE FACTS BROUGHT TO OUR NOTICE BY THE LEARNED COUNSEL FOR ASSESSEE. IN OTHER WORDS, THE PLEA OF INTEREST-FREE ADVANCES TO FBD AS OWING TO COMMERCIAL EXPEDIENCY SHOULD BE RE-EXAMINED BY THE AO. WE ALSO MAKE IT CLEAR THAT THE ENTIRE FINANCE COST CANNOT BE DISALLOWED AND IF AT ALL ONLY INTEREST ON BORROWINGS THAT CAN BE DISALLOWED U/S 36(1)(III) OF THE ACT. BANK CHARGES, PROCESSING FEE ETC., CANNOT BE DISALLOWED U/S 36(1)(III) OF THE ACT. THIS ASPECT MAY ALSO BE TAKEN NOTE OF BY THE AO IN THE SET ASIDE PROCEEDINGS. BESIDES THE ABOVE, IF THE ASSESSEE HAD SUFFICIENT INTEREST FREE FUNDS WHICH WERE EQUAL TO OR MORE THAN THE INTEREST FREE ADVANCES GIVEN TO SISTER CONCERNS, THEN THE DISALLOWANCE MADE U/S.36(1)(III) OF THE ACT CANNOT BE SUSTAINED. IN THIS REGARD THE LEARNED COUNSEL FOR THE ASSESSEE ITA NO.2755/BANG/2017 PAGE 7 OF 14 HAS RELIED ON THE DECISION OF HONBLE KARNATAKA HIGH COURT IN THE CASE OF PRL.CIT VS. GOLDMAN SACHS SERVICES PVT.LTD. 409 ITR 268(KARN.) WHEREIN IT WAS HELD THAT IF THE OWN FUNDS AVAILABLE WERE SUFFICIENT TO COVER THE INTEREST FREE ADVANCES THEN NO DISALLOWANCE OF INTEREST CAN BE MADE. THIS ASPECT ALSO NEEDS EXAMINATION BY THE AO FOR WHICH PERUSAL OF FINANCIAL STATEMENTS WOULD BE SUFFICIENT. GROUND NO.4 RAISED BY THE ASSESSEE IS ACCORDINGLY TREATED AS ALLOWED FOR STATISTICAL PURPOSES. 8. GROUND NOS.5 AND 6 RAISED BY THE ASSESSEE READ AS FOLLOWS: 5. CESSATION OF LIABILITY UNDER SECTION 41(1) OF THE ACT - RS. 25,00,000 THE CIT(A) FURTHER ERRED IN DISALLOWING THE CESSATION OF LIABILITY TOWARDS AN OUTSTANDING CREDIT BALANCE OF SUNDRY CREDITOR WITHOUT NOTICING THAT THE SAID CREDIT WAS AN OUTSTANDING/ OPENING BALANCE WHICH WAS CARRIED FORWARD FROM FY 2011-12 AND NOT A LIABILITY WHICH WAS WRITTEN OFF DURING THE RELEVANT FY 2012-13 UNDER CONSIDERATION AND THERE WAS NO CESSATION OF LIABILITY TO BE ADJUSTED UNDER SECTION 41(1). 6. CIT(A) ERRED IN BRINGING ON RECORD ANY REASONS/FINDING FOR APPLICATION OF THE SAID AMOUNT UNDER SECTION 69C AS UNEXPLAINED EXPENDITURE BY THE APPELLANT. THE FINDING BY CIT(A) THAT THE EXISTENCE OF SUCH A LIABILITY IS DOUBTFUL IS NOT SUBSTANTIATED BY ANY CONFIRMATION FROM THE CREDITOR OR ANY OTHER EVIDENCES ON RECORD. AS FAR AS ABOVE SAID GROUNDS OF APPEAL ARE CONCERNED, THE FACTS ARE THAT THERE WAS LOAN OF RS.25 LAKHS GIVEN BY THE ASSESSEE TO S.C.MOHONOT. THIS WAS AN OPENING BALANCE OF EARLIER YEAR APPEARING IN THE LIST OF SUNDRY CREDITORS FOUND IN THE BALANCE-SHEET. THE AO CALLED UPON THE ASSESSEE TO FURNISH DETAILS OF THE AFORESAID LOAN AND AS TO WHETHER THE LIABILITY STILL EXISTS. IT APPEARS THAT THE ASSESSEE DID NOT FURNISH ANY DETAILS AND IN THE CIRCUMSTANCES, AO CONSIDERED ITA NO.2755/BANG/2017 PAGE 8 OF 14 THE LIABILITY OF THE ASSESSEE AS NON-EXISTING AND MADE ADDITION OF RS.25 LAKHS BY INVOKING THE PROVISIONS OF SECTION 41(1). 9. BEFORE CIT(APPEALS), THE ASSESSEE CONTENDED THAT SECTION 41(1) IS NOT APPLICABLE AS THERE WAS NO EVIDENCE TO SHOW CESSATION OF LIABILITY. CIT(APPEALS), HOWEVER, HELD THAT THE ASSESSEE FAILED TO PROVE THAT THERE WAS ACTUAL LIABILITY AND THEREFORE, ACTION OF THE AO WAS JUSTIFIED. 10. AGGRIEVED BY THE ORDER OF THE CIT(APPEALS), THE ASSESSEE HAS RAISED GROUND NOS.5 AND 6 BEFORE THE TRIBUNAL. 11. WE HAVE HEARD THE RIVAL SUBMISSIONS. IT IS UNDISPUTED THAT THERE WAS MATERIAL BEFORE THE AO TO COME TO CONCLUSION THAT THE LIABILITY TO THE EXTENT OF RS.25 LAKHS PAYABLE TO S.C.MOHONOT AND IT HAS CEASED TO EXIST. IN SUCH CIRCUMSTANCES, ADDITION IN QUESTION CANNOT BE MADE U/S 41(1) OF THE ACT. CIT(APPEALS), IN HIS ORDER, HAS OBSERVED THAT THE ASSESSEE COULD HAVE PAID AMOUNT FROM UNDISCLOSED SOURCES AND THEREFORE, ADDITION CAN BE JUSTIFIED U/S 69C OF THE ACT. THIS CONCLUSION OF THE CIT(APPEALS) IS AGAIN WITHOUT ANY BASIS AND IS PURELY A SURMISE. THEREFORE, THE ADDITION IN QUESTION CANNOT BE SUSTAINED U/S 41(1) OR U/S 69C OF THE ACT. THE ADDITION IS DIRECTED TO BE DELETED. THE RELEVANT GROUNDS OF APPEAL ARE TREATED AS ALLOWED. 12. GROUND NO.7 RAISED BY THE ASSESSEE READS AS FOLLOWS: ITA NO.2755/BANG/2017 PAGE 9 OF 14 7. DISALLOWANCE OF UNPROVED SUNDRY CREDITORS UNDER SECTION 41(1) THE CIT(A) HAS ERRED IN DISALLOWING THE SUNDRY CREDITORS FOR ADVANCE RECEIVED FOR SUNCITY VILLAS WITHOUT APPRECIATING THAT THERE WAS A LIABILITY TO PAY THE AMOUNT RECEIVED AS ADVANCE TO THE RECIPIENTS AND THE SAME IS NOT ANY AMOUNT WRITTEN OFF IN THE BOOKS OF ACCOUNTS OF APPELLANT AND HENCE NO INCOME ARISES TO THE APPELLANT ON SUCH TRANSACTIONS. AS FAR AS AFORESAID GROUND OF APPEAL IS CONCERNED, THE FACTS ARE THAT THE AO NOTICED THAT CERTAIN ADVANCES RECEIVED BY THE ASSESSEE IN CONNECTION WITH A PROJECT BY NAME SUNCITY, A SUM OF RS.3,02,05,231/-. THE ASSESSEE HAD FILED CONFIRMATION FROM ONE OF THE PARTIES WHO HAD PAID ADVANCES VIZ., MR.ARTUR ALBARRAN OF A SUM OF RS.2,41,52,031/-. NO CONFIRMATION WAS FILED IN RESPECT OF REMAINING PARTIES. IT IS ALSO UNDISPUTED THAT THE ENTIRE BALANCES APPEARING AS ADVANCES RECEIVED ARE ALL OPENING BALANCES AND NO ADVANCES WERE RECEIVED DURING THE RELEVANT PREVIOUS YEAR. IN THE LIGHT OF THE AFORESAID CIRCUMSTANCES, THE AO CALLED UPON THE ASSESSEE TO FILE CONFIRMATION FROM VARIOUS PERSONS FROM WHOM ASSESSEE CLAIMED TO HAVE RECEIVED ADVANCES EXCEPT MR. ARTUR ALBARRAN. THE ASSESSEE, HOWEVER, EXPLAINED THAT IT HAD PLANNED TO DEVELOP RESORTS AT VENKATAGIRI KOTA, DEVANAHALLY BY BUILDING VILLAS. ADVANCES WERE RECEIVED FROM PARTIES BUT THE VILLAS WERE NOT COMPLETED AND HANDED OVER. IN THE LIGHT OF THE AFORESAID REPLY OF THE ASSESSEE, THE AO REACHED THE FOLLOWING CONCLUSION AND MADE ADDITION OF RS.60,53,200/- TO THE TOTAL INCOME OF THE ASSESSEE: THE SUBMISSIONS OF THE ASSESSEE ARE NOTED BUT NOT ACCEPTABLE FOR THE FOLLOWING REASONS: ITA NO.2755/BANG/2017 PAGE 10 OF 14 A) ALTHOUGH THE ASSESSEE SUBMITS THAT THE MONEY HAS BEEN COLLECTED ON SALE OF THE VILLAS, IT HAS NOT OFFERED THIS INCOME TO TAX IN ANY OF THE PREVIOUS YEARS. B) AS PER THE ASSESSEE, THESE ADVANCES HAVE BEEN RECEIVED QUITE A FEW YEARS BACK AND AFTER MANY YEARS IT WOULD NOT BE POSSIBLE, ON THE ALTERNATIVE, THAT THE ASSESSEE WOULD ACTUALLY RETURN THESE ADVANCES AND HENCE IT IS CONCLUDED THAT THERE IS CESSATION OF LIABILITY. THE ASSESSEE HAS FAILED TO PROVIDE CONFIRMATION ON WHETHER THESE AMOUNTS ARE STILL REFUNDABLE AND HENCE THEY ARE CONCLUDED TO BE INCOME ON SALE OF LANDS. C) THE ASSESSEE'S SUBMISSION THAT THESE ARE ALL ADVANCES RECEIVED FROM VARIOUS PARTIES IS T BACKED BY ANY SORT OF CONFIRMATION FROM THE PARTIES TO AN EXTENT OF RS. 60,53,200/-. D) IN THE ABSENCE OF ANY PROOF REGARDING THE PENDING LIABILITY, THE AMOUNT OF RS.60,53,200/- IS ADDED TO INCOME U/S 41(1) OF THE ACT. E) ALTERNATIVELY, THE AMOUNT IS ALSO ADDED TO INCOME U/S 68 AS CASH CREDIT. 13. IT IS THUS EVIDENT FROM THE ORDER OF THE AO THAT HE HAS MADE ADDITION U/S 41(1) OF THE ACT I.E. CESSATION OF LIABILITY. ON APPEAL BY THE ASSESSEE, CIT(APPEALS) CONFIRMED THE ACTION OF THE AO BY HOLDING THAT ADDITION COULD BE SUSTAINED U/S 41(1) OR U/S 68 OF THE ACT AS THERE WAS NO CONFIRMATION FILED BY THE ASSESSEE FROM THE PARTIES BUT PAID ADVANCES TO THE ASSESSEE. AGGRIEVED BY THE ORDER OF THE CIT(APPEALS), THE ASSESSEE HAS RAISED GROUND NO.7 BEFORE THE TRIBUNAL. 14. WE HAVE HEARD THE RIVAL SUBMISSIONS. WE ARE OF THE VIEW THAT THE ADDITION CANNOT BE SUSTAINED EITHER U/S 41(1) OR U/S 68 OF THE ACT. AS FAR AS ADDITION U/S 41(1) OF THE ACT IS CONCERNED, THERE WAS NO EVIDENCE BEFORE THE AO TO SHOW THAT LIABILITY IN QUESTION HAS CEASED TO EXIST. AS FAR AS ADDITION U/S 68 OF THE ACT IS CONCERNED, ITA NO.2755/BANG/2017 PAGE 11 OF 14 ADMITTEDLY THESE ARE NOT CREDITS AVAILED BY THE ASSESSEE DURING THE RELEVANT PREVIOUS YEAR. EVEN IN THE ORDER OF THE AO, IT HAS BEEN MENTIONED THAT THESE ARE ADVANCES RECEIVED IN THE PAST AND DID NOT RELATE TO RELEVANT ASSESSMENT YEAR 2013-14. ADDITION U/S 68 CAN BE MADE ONLY IN THE PREVIOUS YEAR IN WHICH CREDIT ENTRY IN QUESTION HAS BEEN MADE BY THE ASSESSEE IN THE BOOKS OF ACCOUNT. THIS CONDITION, BEING ABSENT, ADDITION U/S 68 CANNOT BE SUSTAINED. GROUND NO.7 RAISED BY THE ASSESSEE IS THEREFORE, ALLOWED. 14. GROUND NO.8 RAISED BY THE ASSESSEE READS AS UNDER: 8. DISALLOWANCE OF CONSULTATION CHARGES - RS. 69,00,000/- THE CIT (A) ERRED IN DISALLOWING THE CONSULTATION CHARGES PAID TO MRS. SUMALATHA AMBARISH FOR HER LIAISONING WORK PERFORMED FOR THE APPELLANT WITHOUT THERE BEING ANY EVIDENCE TO CONTRADICT THE REQUIREMENT 86 THE EXPLANATION PROVIDED BY THE APPELLANT FOR PAYING THE SAID CONSULTATION CHARGES AND DISALLOWED THE SAME WITHOUT ANY REASONS OR EVIDENCE ON RECORD. AS FAR AS GROUND NO.8 IS CONCERNED, FACTS ARE THAT THE ASSESSEE MADE PAYMENT OF RS.69 LAKHS TO MRS. SUMALATHA AMBARISH. THE AO CALLED UPON THE ASSESSEE TO EXPLAIN THE NATURE OF THE AFORESAID PAYMENT. THE ASSESSEE EXPLAINED THAT MRS.SUMALATHA IS RETAINED BY THE ASSESSEE TO LIAISON WITH VARIOUS AGENCIES INCLUDING GOVERNMENT AND MUNICIPAL CORPORATION FOR SMOOTH RUNNING OF THE MALL AND THAT SHE IS A BRAND AMBASSADOR OF THE MALL AND ASSISTS IN THE PROMOTION OF THE MALL. AO, HOWEVER, DID NOT ACCEPT THE CLAIM OF THE ASSESSEE FOR THE FOLLOWING REASONS: MRS.SUMALATHA IS A CINE STAR AND MARRIED TO AN ACTOR WHO IS POLITICIAN AND FORMER MINISTER AND THERE IS NO PROOF THAT SHE HAD DONE ITA NO.2755/BANG/2017 PAGE 12 OF 14 ANY WORK FOR THE ASSESSEE OR THAT SHE HAS ACTED AS BRAND AMBASSADOR FOR THE MALL. THERE WAS NO AGREEMENT OR ANY OTHER EVIDENCE TO SUBSTANTIATE THE CLAIM OF THE ASSESSEE. THE EXPENDITURE WAS THEREFORE, DISALLOWED U/S 37(1) OF THE ACT AS EXPENDITURE NOT INCURRED FOR THE PURPOSE OF BUSINESS OF THE ASSESSEE. 15. THE CIT(APPEALS) CONFIRMED THE ORDER OF THE AO. 16. AGGRIEVED BY THE ORDER OF THE CIT(A), THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL. THE LEARNED COUNSEL FOR ASSESSEE BROUGHT TO OUR NOTICE THAT THERE WAS AN AGREEMENT BETWEEN THE ASSESSEE AND MRS. SUMALATHA DATED 27/8/2014. IT WAS HIS CONTENTION THAT SERVICES AS MENTIONED IN THIS AGREEMENT WERE RENDERED BY MRS. SUMALATHA. IT WAS ALSO CONTENDED THAT IN THE PAST SUCH EXPENSES HAD BEEN ALLOWED BY THE AO IN THE CASE OF THE ASSESSEE. OUR ATTENTION WAS ALSO DRAWN TO THE FACT THAT SERVICE TAX PAYABLE ON PAYMENTS FOR SERVICES RENDERED BY MRS. SUMALATHA HAVE BEEN PAID. IT WAS CONTENDED THAT IN THE LIGHT OF THE AFORESAID EVIDENCE, THE CLAIM MADE SHOULD HAVE BEEN ALLOWED. 16.1 LEARNED DR, WHILE RELYING ON THE ORDER OF THE AO SUBMITTED THAT THE EXPENSES OF AGREEMENT OR PAYMENT OF SERVICE TAX IS NOT CONCLUSIVE TO ALLOW THE EXPENDITURE IN QUESTION UNLESS EVIDENCE FOR RENDERING SERVICES FOR WHICH PAYMENT WAS MADE IS FURNISHED BY THE ASSESSEE. ITA NO.2755/BANG/2017 PAGE 13 OF 14 16.2 LEARNED COUNSEL FOR ASSESSEE PRAYED THAT THERE ARE ENOUGH EVIDENCE AND CIRCUMSTANCES TO SHOW NATURE OF SERVICES RENDERED AND THAT EVEN THE RECIPIENT CAN BE PRODUCED BEFORE THE AO FOR EXAMINATION AND PRAYED FOR ORDER OF REMAND OF THE ISSUE TO THE AO. THIS PRAYER WAS, HOWEVER, OPPOSED BY THE LEARNED DR FOR THE REASON THAT THE ASSESSEE CANNOT BE GIVEN SECOND CHANCE HAVING FAILED TO PRODUCE ANY MATERIAL EITHER BEFORE THE REVENUE AUTHORITIES OR BEFORE THE TRIBUNAL. 17. WE HAVE GIVEN CAREFUL CONSIDERATION TO THE RIVAL SUBMISSIONS AND ARE OF THE VIEW THAT THERE IS NO EVIDENCE BROUGHT ON RECORD BY THE ASSESSEE TO SUBSTANTIATE ITS CASE. AS RIGHTLY POINTED BY THE LEARNED DR, THE FACT THAT THERE WAS AN AGREEMENT BETWEEN PARTIES AND THAT SERVICE TAX HAS BEEN PAID, IS NOT CONCLUSIVE IN THE MATTER AND THE ASSESSEE HAS TO SHOW THAT SERVICES WERE RENDERED BY MRS. SUMALATHA FOR WHICH PAYMENT IN QUESTION HAS BEEN MADE. SINCE THERE IS NO SUCH EVIDENCE PRODUCED BY THE ASSESSEE, WE ARE OF THE VIEW THAT DISALLOWANCE CAN BE MADE BY THE REVENUE AUTHORITIES. THE PLEA OF THE ASSESSEE FOR REMAND OF THE ISSUE TO THE AO CANNOT BE ACCEPTED AS THERE IS NO BASIS ON WHICH SUCH A PLEA IS BEING MADE. EVEN BEFORE THE TRIBUNAL NO EVIDENCE WHATSOEVER HAS BEEN LAID SO AS TO PROMPT US TO REMAND THE ISSUE TO THE AO FOR CONSIDERATION AFRESH OF THE NATURE OF SERVICES RENDERED FOR WHICH THE PAYMENT IN QUESTION HAS BEEN MADE. THE PRAYER FOR REMAND IS THEREFORE NOT ACCEPTED. IN THE CIRCUMSTANCES, WE UPHOLD THE ORDERS OF THE REVENUE AUTHORITIES ON THIS ISSUE AND DISMISS GROUND NO.8 RAISED BY THE ASSESSEE. ITA NO.2755/BANG/2017 PAGE 14 OF 14 18. IN THE RESULT, THE APPEAL BY THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 12 TH JULY, 2019. SD/ - SD/ - ( JASON P BOAZ ) ( N.V.VASUDEVAN ) ACCOUNTANT MEMBER VICE PRESIDENT PLACE : BENGALURU DATED : 12/07/2019 SRINIVASULU, SPS COPY TO : 1 APPELLANT 2 RESPONDENT 3 CIT(A)- 4 CIT 5 DR, ITAT, BANGALORE. 6 GUARD FILE BY ORDER ASSISTANT REGISTRAR INCOME-TAX APPELLATE TRIBUNAL BANGALORE