ACIT - 5(2), MUMBAI V. M/s. MIDDAY MULTIMEDIA LTD., MUMBAI

ITA 3221/MUM/2007

• Counselvise Citation: 322119914 RSA 2007
• Duration Of Justice: 6 year(s) 7 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-12-2013
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: F
• Next Hearing Date: 05-12-2013
• Assessment Year: 2001-2002
• Appeal Filed On: 25-04-2007
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: RAVI PRAKASH
• Keywords: Revised return; Revenue expenditure

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL F BENCH, MUMBAI . . , , , BEFORE SHRI P.M. JAGTAP , ACCOUNTANT MEMBER AND SHRI AMIT SHUKLA , JUDICIAL MEM BER . / ITA NO. 3221 / MUM./ 2007 ( / ASSESSMENT YEAR : 20 01 02 ) ASSTT. COMMISSIONER OF INCOME TAX CIRCLE 5(2), AAYAKAR BHAVAN 101, M.K. ROAD, MUMBAI 400 020 .. / APPELLANT V/S M/S. MIDDAY MULTIMEDIA LTD. 1 56, D.J. DADAJEE ROAD TARDEO, MUMBAI 400 034 .... / RESPONDENT . / PERMANENT ACCOUNT NUMBER AAACM7512L / REVENUE BY : MR. RAVI PRAKASH / ASSESSEE BY : NONE / DATE OF HEARING 0 5 . 1 2 .2013 / DATE OF ORDER 11.12.2013 / ORDER , / PER AMIT SHUKLA , J.M. THE PRESENT APPEAL HA S BEEN PREFERRED BY THE REVENUE CHALLENGING THE IMPUGNED ORD ER DATED 15 TH FEBRUARY 2007 , PASSED BY THE LEARNED COMMISSIONER (APPEALS) V , MUMBAI, FOR THE ASSESSMENT YEAR 20 01 02 . THE SOLE ISSUE RAISED BY THE REVENUE IS, WHETHER OR NOT THE LEARNED COMMISSIONER (APPEALS) WAS JUSTIFIED IN CANCELLING THE PENALTY OF ` 24 ,12,560 IMPOSED BY THE ASSESSING OFFICER UNDER SECTION 271(1)(C) OF THE INCOME TAX ACT, 1961 (FOR SHORT 'THE ACT' ), VIDE ODER DATED 26 TH JULY 2013. M/S. MIDDAY MULTIMEDIA LTD. 2 2 . AT THE OUTSET, IT HAS BEEN SUBMITTED BEFORE US THAT IN THE QUANTUM PROCEEDINGS, MOST OF THE ISSUES IN RELAT ION TO WHICH THE PENALTY HAS BEEN LEVIED HAVE BEEN SET ASIDE TO THE FILE OF THE ASSESSING OFFICER OR HAS BEEN DELETED BY THE TRIBUNAL. 3 . THE SUBJECT MATTER OF LEVY OF PENALTY UNDER SECTION 271(1)(C) IS MAINLY ON ACCOUNT OF FOLLOWING DISALLOWANCES: I ) NON ALL OWANCE OF REDUCTION CLAIMED IN RESPECT OF INCOME OF ` 26,25,860 WRONGLY ACCOUNTED IN EXCESS; II ) DISALLOWANCE OF ` 13,02,100 OUT OF PAYMENT TO MID DAY OUTDOOR LTD; III ) DISALLOWANCE OF PROFESSIONAL CHARGES AND TRAVELLING EXPENSES OF ` 9,75,125; IV ) DISALLOWANCE OF NOTIONAL ADVERTISEMENT CREDITS OF ` 11,97,040; 4 . AFTER CAREFULLY CONSIDERING THE RELEVANT FINDINGS OF THE ASSESSING OFFICER AND THE LEARNED COMMISSIONER (APPEALS) AS WELL AS THE ORDER OF THE TRIBUNAL DATED 26 TH JULY 2013, WE FIND THAT THE TRIBUNAL ON THE ISSUES / ADDITIONS GIVEN IN SERIAL NUMBER (I), (II) AND (III) HAS SET ASIDE THE ISSUE TO THE FILE OF THE ASSESSING OFFICER AND THAT GIVEN AT SERIAL NUMBER (IV) HAS DELETED THE SAME. 5 . WITH REGARD TO THE ISSUE OF DISALLOWANCE OF DEDUCTION CLAIMED IN RESPECT OF INCOME OF ` 26,25,860 WRONGLY ACCOUNTED, THE TRIBUNAL HAS SET ASIDE THIS ISSUE TO THE FILE OF THE ASSESSING OFFICER AFTER OBSERVING AND HOLDING AS UNDER: 10.4 WE HAVE PERUSED THE RECORDS AND CONSIDERED MATTER CAREFULLY. THE DISPUTE IS REGARDING REDU CTION OF INCOME BY RS. 26,25,860/ - ON THE GROUND OF DOUBLE BILLING IN THE MONTHS OF JANUARY - 2001, FEBRUARY - 2001 AND MARCH - 2001. THE MISTAKE HAD BEEN EXPLAINED DUE TO DEFECT IN THE NEW BILLING SOFTWARE. THE ASSESSEE HAD, THEREFORE, REDUCED THE INCOME IN THE REVISED RETURN FILED. THE AUTHORITIES BELOW HAVE NOT ALLOWED THE CLAIM ON THE GROUND THAT THE SAME WAS NOT SUBSTANTIATED BY ANY DOCUMENTARY EVIDENCE BY SHOWING COMPARATIVE RATES. HOWEVER WE NOTE THAT THE ASSESSEE VIDE LETTER DATED 3.7.2004 FILED BEFORE CI T(A) HAD GIVEN COMPARATIVE STATEMENT OF BILLING DONE IN THE MONTH M/S. MIDDAY MULTIMEDIA LTD. 3 OF DECEMBER 2000, FEBRUARY 2001, MARCH 2001 AND APRIL 2001 TO DEMONSTRATE THAT BILLING IN THE MONTHS OF JANUARY 2001 TO MARCH 2001 FOR SIMILAR ADVERTISEMENTS HAD BEEN MADE AT DOUBLE RATE. TH ESE DETAILS WHICH HAD BEEN FILED FIRST TIME BEFORE THE CIT(A) HAVE NOT BEEN EXAMINED. IN OUR VIEW, TO ARRIVE AT A FAIR DECISION IN THE MATTER, THESE DETAILS ARE REQUIRED TO BE EXAMINED AT THE LEVEL OF AO. WE, THEREFORE, SET ASIDE THE ORDER OF CIT (A) ON TH IS POINT AND RESTORE THE ISSUE TO THE FILE OF AO FOR PASSING A FRESH ORDER AFTER NECESSARY EXAMINATION AND AFTER ALLOWING OPPORTUNITY OF HEARING TO THE ASSESSEE. THUS THE GROUND RAISED ON THIS ISSUE IN ASSESSMENT YEAR 2001 - 02 AND THE ADDITIONAL GROUND FOR ASSESSMENT YEAR 2002 - 03 WHICH IS CONNECTED ARE RESTORED TO THE FILE OF AO. 6 . IN VIEW OF THE AFORESAID DECISION OF THE TRIBUNAL, THE PENALTY LEVIED BY THE ASSESSING OFFICER ON THIS SCORE IS SET ASIDE AND THE ASSESSING OFFICER WILL BE AT LIBERTY TO INITIATE THE PENALTY PROCEEDINGS AFRESH , IF FOUND SO UNDER THE FACTS AND IN THE PROVISIONS OF LAW. 7 . ON THE SECOND ISSUE OF DISALLOWANCE OF ` 13,02,100 , OUT OF PAYMENTS TO MIDDAY OUTDOOR, WE FIND THAT THE TRIBUNAL HAS ALSO SET ASIDE THIS ISSUE TO THE FILE OF THE A SSESSING OFFICER AFTER OBSERVING AND HOLDING AS UNDER: 11.3 WE HAVE PERUSED THE RECORDS AND CONSIDERED MATTER CAREFULLY. THE DISPUTE IS REGARDING DISALLOWANCE OF EXPENSES ON ACCOUNT OF ASSET UTILIZATION WHICH ALSO INCLUDED INTEREST ELEMENT. THE CLAIM OF THE ASSESSEE IS THAT IT HAD TAKEN CERTAIN OUT DOOR CONTRACTS FOR WHICH IT HAD NO INFRASTRUCTURE OF ITS OWN AND HAD UTILIZED THE FACILITIES OF MOL FOR WHICH THE COST INCURRED BY MOL HAD BEEN REIMBURSED BY THE ASSESSEE. THE CLAIM OF THE ASSESSEE HAD BEEN DIS ALLOWED BY THE AO. CIT (A) IN ASSESSMENT YEAR 2003 - 04 HAS HELD THAT THE ASSESSEE HAD AN AGREEMENT WITH MOL BUT THERE WAS NOTHING IN THE AGREEMENT TO SHOW THAT THE ASSESSEE WILL UTILIZE THE SERVICES OR MAKE PAYMENT TO MOL. HOWEVER IN ASSESSMENT YEAR 2001 - 20 02 HE HAS GIVEN A FINDING THAT THE ASSESSEE HAD NOT FILED ANY DOCUMENTARY EVIDENCE TO PROVE THAT THE ASSESSEE HAD USED THE FACILITY OF MOL, HE HAS HOWEVER ADMITTED THAT AGREEMENT HAD BEEN PRODUCED BUT THE SAME WAS NOT ON STAMP PAPER. IN ASSESSMENT YEAR 200 2 - 03 CIT (A) HAS GIVEN A FINDING THAT THERE WAS AN AGREEMENT WHICH REQUIRED THE ASSESSEE TO COMPENSATE THE MOL IN RESPECT OF USE OF FIXED ASSET AND THE EMPLOYEES OF MOL. BUT THERE WAS NO CLAUSE FOR BEARING THE INTEREST BURDEN. HE HAD THEREFORE CONFIRMED TH E DISALLOWANCE OF INTEREST AND THE BALANCE DISALLOWANCE HAD BEEN DELETED. THUS WE FIND DISCREPANCIES IN THE FINDINGS OF CIT(A) IN DIFFERENT YEARS. THE ASSESSEE HAS ALSO CLAIMED THAT IT HAD NOT MADE ANY CLAIM IN ASSESSMENT YEAR 2002 - 03. WE ALSO NOTE FROM PA GE 78 OF THE PAPERBOOK FOR ASSESSMENT YEAR 2001 - 02, THAT THE ASSESSEE HAS GIVEN DETAILS OF EXPENSES INCLUDING DETAILS OF ASSETS. WHEREAS IT IS NOT CLEAR WHETHER THESE DETAILS WERE BEFORE CIT(A). WE FURTHER NOTE THAT AO HIMSELF HAS ALLOWED 50% OF EXPENSES W HICH MEANS HE HAS ADMITTED THE USE OF ASSETS BUT HAS GIVEN NO BASIS FOR DISALLOWANCE OF M/S. MIDDAY MULTIMEDIA LTD. 4 50%. THEREFORE, IN OUR VIEW, THE ISSUE REQUIRES FRESH EXAMINATION AT THE LEVEL OF AO. WE, THEREFORE, SET ASIDE THE ORDERS OF CIT(A) AND RESTORE THE MATTER TO THE FILE OF AO FOR PASSING A FRESH ORDER AFTER NECESSARY EXAMINATION AND AFTER ALLOWING OPPORTUNITY OF HEARING TO THE ASSESSEE. 8 . IN VIEW OF THE AFORESAID DECISION OF THE TRIBUNAL, THE PENALTY LEVIED BY THE ASSESSING OFFICER ON THIS SCORE IS SET ASIDE AND THE ASSESS ING OFFICER WILL BE AT LIBERTY TO INITIATE THE PENALTY PROCEEDINGS AFRESH IF FOUND SO UNDER THE FACTS AND IN THE PROVISIONS OF LAW. 9 . ON THE ISSUE OF DISALLOWANCE OF PROFESSIONAL CHARGES AND TRAVEL EXPENDITURE OF ` 9,25,125, THE TRIBUNAL HAS SET ASIDE THIS ISSUE TO THE FILE OF THE ASSESSING OFFICER AFTER OBSERVING AND HOLDING AS UNDER: 12.4 WE HAVE PERUSED THE RECORDS AND CONSIDERED MATTER CAREFULLY. THE DISPUTE IS REGARDING ALLOWABILITY OF CLAIM OF DEDUCITON OF RS. 859225 ON ACCOUNT OF PROFESSIONAL FEES AND RS. 115900 ON ACCOUNT OF TRAVELLING EXPENSES. THESE EXPENSES HAD BEEN INCLUDED BY THE ASSESSEE IN THE SHARE ISSUE EXPENSES. HOWEVER LATER ON THE ASSESSEE CLAIMED THESE EXPENSES AS REVENUE EXPENDITURE INCURRED FOR THE PURPOSE OF BUSINESS. THE AO DID NO T ALLOW THE CLAIM ON THE GROUND THAT THESE EXPENSES WERE ALREADY INCLUDED IN THE SHARE ISSUE EXPENSES. THE ASSESSEE HAS HOWEVER POINTED OUT THAT SHARE ISSUE EXPENSES HAD BEEN DEDUCTED FROM SHARE PREMIUM IN THE BALANCE SHEET WHICH IS CLEAR FROM SCHEDULE B O F THE AUDITED ACCOUNT PLACED AT PAGE 107 OF THE PAPER BOOK. THEREFORE, IT IS CLEARE THAT SHARE ISSUE EXPENSES HAD NOT BEEN CLAIMED AS REVENUE EXPENDITURE IN THE PL ACCOUNT. THUS APPARENTLY THERE IS NO DOUBLE CLAIM OF DEDUCITON. HOWEVER CIT(A) HAS ALSO GIVE N A FINDING THAT THERE WAS NO EVIDENCE THAT THESE EXPENSES WERE INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS. THIS ASPECT HAS NOT BEEN EXAMINED BY THE AO AS HE DISALLOWED THE CLAIM ON THE GROUND THAT THESE WERE ALREADY INCLUDED IN THE SHARE ISSUE EXPENSES AND CLAIMED IN THE P&L ACCOUNT. WE, THEREFORE, RESTORE THE ISSUE AS TO WHETHER THE EXPENSES HAVE BEEN INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS TO THE FILE OF AO FOR PASSING A FRESH ORDER AFTER NECESSARY EXAMINATION AND AFT ER ALLOWING OPPORTUNITY OF HEARING TO THE ASSESSEE. 10 . IN VIEW OF THE AFORESAID DECISION OF THE TRIBUNAL, THE PENALTY LEVIED BY THE ASSESSING OFFICER ON THIS SCORE IS SET ASIDE AND THE ASSESSING OFFICER WILL BE AT LIBERTY TO INITIATE THE PENALTY PROCEEDINGS AFRESH IF FOUND SO UNDER THE FACTS AND PROVISIONS OF LAW. M/S. MIDDAY MULTIMEDIA LTD. 5 11 . LASTLY, ON THE DISALLOWANCE OF NOTIONAL ADVERTISEMENT CREDITS OF ` 11,97,040, THE TRIBUNAL HAS DELETED THE ADDITION AFTER OBSERVING AS UNDER: 14.2 WE HAVE PERUSED THE RECORDS AND CONSIDERED THE RIVAL CONTENTIONS CAREFULLY. THE DISPUTE IS REGARDING TREATING THE NOTIONAL CREDIT OF RS. 1197040/ - ON ACCOUNT OF ADVERTISEMENT ISSUED IN THE ASSESSEES OWN NEWSPAPER AS INCOME OF THE ASSESSEE. THE ASSESSEE IN CONNECTION WITH IPO HAD PUBLISHED ADVERTIS EMENTS IN ITS OWN NEWSPAPERS IN RESPECT OF WHICH THE EXPENDITURE INCURRED HAD BEEN CLAIMED AS REVENUE EXPENDITURE. THE ASSESSEE HAD SHOWN THE INCOME FROM SUCH ADVERTISEMENT ON NOTIONAL BASIS IN THE ACCOUNTS WHICH WERE TREATED BY THE AO AS INCOME. CIT(A) HA S CONFIRMED THE ADDITION ON THE GROUND THAT THE AUDITORS HAD ALSO NOT MADE ANY QUALIFICATION REGARDING THE NOTIONAL ENTRY. IN OUR VIEW ORDER OF CIT(A) CANNOT BE UPHELD. THERE IS NO FINDING GIVEN EITHER BY AO OR CIT(A) THAT THE ASSESSEE HAD RECEIVED ANY IN COME. THE CLAIM OF THE ASSESSEE THAT NO INCOME HAD BEEN ACTUALLY RECEIVED AND IT WAS ONLY NOTIONAL ENTRY HAS NOT BEEN CONTROVERTED BEFORE US BY PRODUCING ANY MATERIAL. THE ASSESSEE HAD PUBLISHED THE ADVERTISEMENT FOR ITS OWN BUSINESS AND, THEREFORE, THE AS SESSEE COULD NOT EARN INCOME FROM ITSELF. NO INCOME COULD, THEREFORE, BE ASSESSED ON ACCOUNT OF NOTIONAL INTRY. WE ARE, THEREFORE, UNABLE TO SUSTAIN THE ORDER OF CIT(A) AND THE SAME IS SET ASIDE AND THE ADDITION MADE IS DELETED. 12 . THUS, O NCE THE ADDITION I TSELF HAS BEEN DELETED, THEN THE LEVY OF PENALTY ON THIS SCORE HAS NO LEGS TO STAND AND, THEREFORE , THE SAME IS HEREBY DELETED. 13 . 13 . IN THE RESULT, REVENUES APPEAL IS TREATED AS PARTLY ALLOWED FOR STATISTICAL PURPOSES. 11 TH DECEMBER 2013 ORDER PRONOUNCED IN THE OPEN COURT ON 11 TH DECEMBER 2013 SD / - . . P.M. JAGTAP ACCOUNTANT MEMBER SD / - AMIT SHUKLA JUDICIAL MEMBER MUMBAI, DATED : 11 TH DECEMBER 2013 M/S. MIDDAY MULTIMEDIA LTD. 6 / COPY OF THE ORDER FORWARDED TO : ( 1 ) / THE A SSESSEE ; ( 2 ) / THE REVENUE; ( 3 ) ( ) / THE CIT(A ) ; ( 4 ) / THE CIT, MUMBAI CITY CONCERNED ; ( 5 ) , , / THE DR, ITAT, MUMBAI ; ( 6 ) / GUARD FILE . / TRUE COPY / BY ORDER . / PRADEEP J. CHOWDHURY / SR. PRIVATE SECRETARY / / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI