M/s. Pearl Drinks Ltd., New Delhi V. ITO, New Delhi

ITA 3529/DEL/2014

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 5210 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 2 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-08-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: F
• Next Hearing Date: 12-06-2017
• Assessment Year: 2008-2009
• Appeal Filed On: 11-06-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: V K JAIN
• Keywords: Principle of natural justice; Wrong claim; Accommodation entries
• Section: 133(6); 6

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH F , NEW DELHI BEFORE SH. N. K. SAINI, AM AND SH. KULDIP SINGH , JM ITA NO. 3529 /DEL/201 4 : ASSTT. YEAR : 2008 - 0 9 PEARL DRINKS LTD., 702, ANSAL BHAWAN, 16, K.G. MARG NEW DELHI - 110001 VS INCOME TAX OFFIC ER, WARD - 14(2), NEW DELHI (APPELLANT) (RESPONDENT) PAN NO. AAACP1210C ITA NO. 3528/DEL/2014 : ASSTT. YEAR : 2006 - 07 PEARL BEVERAGES LTD., 702, ANSAL BHAWAN, 16, K.G. MARG NEW DELHI - 110001 VS INCOME TAX OFFICER, WARD - 14(2), NEW DELHI (APPELLANT) ( RESPONDENT) PAN NO. A AACP4560D ASSESSEE BY : SH. V. K. JAIN, CA REVENUE BY : SH. ATIQ AHMAD , SR. DR DATE OF HEARING : 09 .08 .201 7 DATE OF PRONOUNCEMENT : 14 . 0 8 .201 7 ORDER PER N. K. SAINI, AM : THESE TWO A PPEAL S BY THE ASSESSEE S ARE DIRECTED AGAINST THE SEPARATE ORDER S EACH DATED 22.11.2013 OF LD. CIT(A) - X V II , NEW DELHI . 2. SINCE THE APPEALS HAVING COMMON GROUNDS WERE HEARD TOGETHER SO THESE ARE BEING DISPOSED OFF BY THIS CONSOLIDATED ORDER FOR THE SAKE OF CONVENIENCE AND BREVITY. ITA NOS. 3528 & 3529 /DEL /201 4 PEARL DRINKS & BEVERAGE LTD. 2 3. AT THE FIRST INSTANCE WE WILL DEAL WITH THE APPEAL IN ITA NO. 3529/DEL/2014 IN THE CASE OF M/S PEARL DRINKS LTD., NEW DELHI VS ITO, WARD - 14(2), NEW DELHI. FOLLOWING GROUNDS HAVE BEEN RAISED IN THIS APPEAL: 1. THE ORDER PASSED BY THE HON'BLE CIT(A) IS BAD IN LAW, WRONG ON FACTS AND AGAINST THE PRINCIPLES OF NATURAL JUSTICE. 2. (A) THE HON'BLE CIT(A) HAS ERRED IN CONFIRMING THE DISALLOWANCE OF A SUM OF RS.50,01,227 / - OUT OF ADVERTISEMENT AND PUBLICITY EXPENSES REPRESENTING WALL PAINTING AND OTHER ADVERTISEMENT EXPENSES PAID TO M/S. VISION & IMAGES BY RELYING UPON ORDER PASSED BY HON'BLE CIT(A) IN THE CASE OF THE APPELLANT COMPANY FOR ASSESSMENT YEAR 2007 - 08 AND IN THE CASE OF M/S PEARL BEVERAGES LTD. FOR ASSESSMENT YEAR 2006 - 07 O N THE ALLEGED BELIEF THAT THE PARTY WAS MERELY USED AS A CONDUIT FOR PROVIDING FAKE BILLS OF VARIOUS EXPENSES. (B) THE HON'BLE CIT(A) HAS ERRED IN CONFIRMING THE DISALLOWANCE OUT OF ADVERTISEMENT EXPENSES PAID TO M/S. VISION & IMAGES IGNORING THE FACT THA T THE EXPENDITURE ON WALL PAINTING ETC. IS DULY SUPPORTED BY BILLS AND OTHER EVIDENCES PRODUCED BEFORE THE LD. A.O. AND ALSO THE ENTIRE PAYMENT TO THE AFORESAID PARTY WAS MADE BY WAY OF ACCOUNT PAYEE CHEQUES AND THEREFORE THERE IS NO OCCASION TO CONFIRM TH E DISALLOWANCE OF THE AFORESAID EXPENDITURE. THE HON'BLE CIT(A) HAS FAILED TO APPRECIATE THAT THE APPELLANT COMPANY DURING THE COURSE OF APPELLATE PROCEEDINGS HAD DULY FILED THE COPY OF ACCOUNT WITH THE AFORESAID PARTY DULY MENTIONING THE PAN NO. OF THE PA RTY, COPY OF BILLS, COPY OF BANK STATEMENT ETC THEREBY EVIDENCING THE GENUIN EN ESS OF THE TRANSACTION. (C) THE HON'BLE CIT(A) HAS CONFIRMED THE DISALLOWANCE OUT OF ADVERTISEMENT AND PUBLICITY EXPENSES ON THE GROUND THAT ITA NOS. 3528 & 3529 /DEL /201 4 PEARL DRINKS & BEVERAGE LTD. 3 M/S. VISION IMAGES IS A BOGUS PARTY ENGAGED IN PROVIDING ACCOMMODATION ENTRIES ON THE BASIS OF STATEMENT OF SHRI RAJENDER KUMAR RECORDED BY THE INCOME TAX DEPARTMENT WITHOUT APPRECIATING THE FACT THAT IN THE AFORESAID STATEMENT SHRI RAJENDER KUMAR HAS NOT EVEN ONCE MENTIONED THE NAME OF THE APPELLANT COMPANY AND ALSO THE ADDRESS OF M/S. VISION & IMAGES AS PROVIDED BY SHRI RAJENDER KUMAR IN THE AFORESAID STATEMENT DOES NOT TALLY WITH THE PARTY WHO HAS UNDERTAKEN ADVERTISEMENT AND PUBLICITY WORK ON BEHALF OF THE APPELLANT COMPANY AND THEREFORE THE ADDITION MADE BY THE LD. AO IS NOT WARRANTED. (D) THE HON'BLE CIT(A) HAS CONFIRMED THE DISALLOWANCE ON THE GROUNDS THAT NOTICE U/S 133(6) ISSUED TO THE AFORESAID PARTY WAS RECEIVED BACK UNSERVED AND THAT THE INSPECTOR OF THE ID. AO WHO WENT TO INSPE CT THE OFFICE OF M/S. VISION AND IMAGES DID NOT FIND THE PARTY AND A.O HAS FAILED TO TAKE INTO CONSIDERATION THE BILLS, VOUCHERS, BANK STATEMENTS, TDS CERTIFICATES ISSUED, WORK CONTRACT TAX DEDUCTED ETC. DULY FILED DURING THE COURSE OF ASSESSMENT AND APPEL LATE PROCEEDINGS. THE HON'BLE CIT(A) HAS FAILED TO APPRECIATE THAT THE APPELLANT COMPANY HAD TRANSACTIONS WITH THE PARTY IN EARLIER YEARS IT IS NOT NECESSARY THAT THE PARTY WOULD BE OPERATING FROM THE AFORESAID ADDRESS AFTER A PASSAGE OF 3 - 4 YEARS AND THER EFORE NO DISALLOWANCE ON THIS GROUND IS WARRANTED. 3. THE HON'BLE CIT(A) HAS ERRED IN CONFIRMI NG THE ADDITION OF A SUM OF RS. 50,012 / - ON ACCOUNT OF ALLEGED COMMISSION EXPENSE S PAID BY THE APPELLANT COMPANY @ 1 % OF RS. 50,01,227 / - BEING THE AMOUNT OF ADVER TISEMENT CHARGES PAID TO M/S. VISION & IMAGES WITHOUT PLACING ON RECORD ANY EVIDENCE SUBSTANTIATING THE FACT THAT THE ALLEGED COMMISSION WAS PAID. ITA NOS. 3528 & 3529 /DEL /201 4 PEARL DRINKS & BEVERAGE LTD. 4 THE APPELLANT CRAVES LEAVE TO ADD, ALTER AMEND, DELETE FOREGO OR MODIFY ANY OF THE GROUNDS OF APPEAL BEFORE O R AT THE TIME OF HEARING. 4. FROM THE ABOVE GROUNDS, IT IS GATHERED THAT THE GRIEVANCE OF THE ASSESSEE RELATES TO THE CONFIRMATION OF DISALLOWANCE MADE BY THE AO OUT OF ADVERTISEMENT AND PUBLICITY EXPENSES AND THE ALLEGED COMMISSION EXPENSES. 5. DUR ING THE COURSE OF HEARING, THE LD. COUNSEL FOR THE ASSESSEE AT THE VERY OUTSET SATED THAT THE ISSUES UNDER CONSIDERATION ARE SQUARELY COVERED IN ASSESSEE S FAVOUR VIDE ORDER DATED 03.08.2016 IN ITA NO. 2123/DEL/2011 FOR THE ASSESSMENT YEAR 2007 - 08 IN ASSES SEE S OWN CASE (COPY OF THE SAID ORDER WAS FURNISHED WHICH IS PLACED ON RECORD). 6. IN HIS RIVAL SUBMISSIONS THE LD. DR ALTHOUGH SUPPORTED THE ORDERS OF THE AUTHORITIES BELOW BUT COULD NOT CONTROVERT THE AFORESAID CONTENTION OF THE LD. COUNSEL FOR THE AS SESSEE. 7. WE HAVE CONSIDERED THE SUBMISSIONS OF BOTH THE PARTIES AND CAREFULLY GONE THROUGH THE MATERIAL AVAILABLE ON THE RECORD. IT IS NOTICED THAT AN IDENTICAL ISSUE HAVING SIMILAR FACTS WAS A SUBJECT MATTER OF THE ASSESSEE S APPEAL IN THE PRECEDING A SSESSMENT YEAR I.E. ASSESSMENT YEAR 2007 - 08 IN ITA NO. 2123/DEL/2011 (SUPRA) WHEREIN THE ISSUE HAS BEEN DECIDED IN FAVOUR OF THE ASSESSEE AND AGAINST THE DEPARTMENT. THE ITA NOS. 3528 & 3529 /DEL /201 4 PEARL DRINKS & BEVERAGE LTD. 5 RELEVANT FINDINGS HAVE BEEN GIVEN IN PARA S 6 & 7 OF THE ORDER DATED 03.08.2016 WHICH R EAD AS UNDER: 6. ON CAREFUL CONSIDERATION OF ABOVE IN THE PRESENT CASE THE A.O DISMISSED CLAIM OF THE ASSESSEE BY MERELY OBSERVING THAT THE NOTICE ISSUED U/S 133 (6) OF THE ACT COULD NOT BE SERVED ON THE PAYEE (M/S IMAGES) AS IT LEFT THE PREMISES. THE CI T(A) PROCEEDED TO CONFIRM THE SAME BY OBSERVING THAT NO PAYMENT HAS BEEN MADE UP TO 3 RD JULY 2006 AND ALL THE PAYMENTS HAVE BEEN MADE ON TWO DATES I.E. ON 5/8/2006 THROUGH 13 CHEQUES OF AROUND FIGURE OF RS.4,00,000/ - EACH. THE CIT(A) FURTHER OBSERVED, FRO M THE COPY OF THE FIR OF PAYEE, THAT A SUM OF RS.137,391/ - HAS BEEN SHOWN AS INCOME FROM 7 FIRMS. THE CIT(A) ALSO ALLEGED THAT THE BALANCE SHEET AND P & L A/C OF PAYEE HAVE BEEN SUBMITTED AND ONLY RS.25,224/ - HAS BEEN SHOWN AS INCOME FROM THE FIRM VISIO N AND M/S IMAGES. THE CIT(A) ALSO ALLEGED THAT ONLY A SMALL SUM OF RS.43,557/ - HAS BEEN SHOWN UNDUE THE HEAD CASH AND BANK BALANCES WHICH CLEARLY SHOWN THAT IT DID NOT HAVE ANY SOURCE FOR INCURRING HUGE EXPENSES ON SALARY MATERIAL CONSUMED ETC FROM ITS OW N POCKET AND THERE ARE DISCREPANCIES IN THE TDS CLAIM PLACED BY SHRI RAJENDER KUMAR, THE PROPRIETOR OF PAYEE FIRM. AFTER OBSERVING ABOVE, THE CIT(A) UPHELD THE DISALLOWANCE BY CONCLUDING THAT MR. RAJENDERA KUMAR HAS BEEN USED AS A CONDUIT FOR PROVIDING F AKE BILLS OF VARIOUS EXPENSES IN THE VARIOUS FIELDS. 7. IN OUR CONSIDERED OPINION THE ALLEGATIONS LABELED AGAINST THE PAYEE CANNOT BE HELD AS SUSTAINABLE AND ACCEPTABLE FOR MAKING DO ALLOWANCE WITHOUT BRINGING ON ANY COGENT EVIDENCE OR ALLEGATION TO SHOW THAT THE ASSESSEE SHIFTED FUNDS IN THE GARB OF FAKE BILLS BY USING MR. RAJENDRA KUMAR AS CONDUIT FOR MAKING FALSE CLAIM. IT IS ALSO NOT CASE OF THE CIT(A) THAT MR. RAJENDRA KUMAR AND HIS PAYEE FIRM IS NOT IN THE BUSINESS OF ADVERTISEMENT AND PUBLICITY AND THESE BILLS ARE BOGUS AND THE ASSESSEE RECEIVED THE IMPUGNED AMOUNT OF PAYMENT MAKE FROM MR. RAJENDRA KUMAR AND THUS IT IS NOT ALLOWABLE. WE MAY POINT OUT THAT THE LACK OF FINANCIAL RESOURCES FOR CONDUCT OF BUSINESS AND MAJOR INCOME OR LOW INCOME BY THE P AYEE CANNOT BE A BASIS AND MAJOR ITA NOS. 3528 & 3529 /DEL /201 4 PEARL DRINKS & BEVERAGE LTD. 6 INCOME OR LOW INCOME BY THE PAYEE CANNOT BE A BASIS FOR MAKING DISALLOWANCE AS TO BASIS OF DOUBT ONLY. THE PAYEE IS A TAX PAYER AND IF HE LEFT THE EARLIER PLACE OF BUSINESS THEN HE MAY BE CALLED FROM NEW ADDRESS TO EXPLAIN HIS POSITION AND IN THE EXTENT OF RETURN OF NOTICE UNSERVED ON THE OLD ADDRESS CAN BE OBTAINED FROM THE PAYER ASSESSEE TO ESTABLISH ITS CLAIM. WE ARE OF THE CONSIDERED OPINION THAT THE LEARNED CIT(A) UPHELD THE ADDITION ON WRONG PREMISE AND BY CONSIDERING THE IRRELEVANT FACTS AND THUS WE DECLINE TO ACCEPT CONCLUSION DRAWN IN THE FIRST APPELLATE ORDER. AT THE SAME TIME, FROM THE EXPLANATION AND DOCUMENTS FILED BY THE ASSESSEE WE CLEARLY OBSERVE THAT THE ASSESSEE SUBMITTED ALL RELEVANT DOCUMENTS, EVIDENCE AND EXPLANATION WITHIN HIS CONTROL TO ESTABLISH ITS CLAIM AND BY SHOWING THAT THE PAYEE M/S VISION AND IMAGES RECEIVED PAYMENT THROUGH BANKING CHANNELS TOWARDS BILLS RAISED FOR LOGO AND WALL PAINTING WHICH IS NOTHING BUT ACTUAL ADVERTISEMENT AND PUBLICS EXPEN SES. THE DR DID NOT TAKE THE ASSESSEE TO SUBMIT NEW ADDRESS OF THE PAYEE THUS ADDITION CANNOT BE MADE ONLY BECAUSE NOTICE U/S 133(B) OF THE ACT COULD NOT BE SERVED UPON THE ASSESSEE DUE THE REASONS BEYOND CONTROL. WE MAY ALSO POINT OUT THAT 10 YEARS HAVE B EEN ELAPSED AFTER TRANSACTION THUS AT THIS STAGE WE CANNOT EXPECT THE ASSESSEE TO SUBMIT MORE EVIDENCES TO SUPPORT ITS CLAIM WHICH IS SUFFICE TO ESTABLISH GENUINENESS OF THE CLAIM WHICH WAS INCORRECTLY DISALLOWED BY THE AUTHORITIES, IN VIEW OF ABOVE DISCUS SION, WE DEMOLISH THE CONCLUSION OF THE CIT(A) AND WE DIRECT THE AO TO ALLOW THE CLAIM OF THE ASSESSEE. ACCORDINGLY, GROUND NO. 2(A) IS ALLOWED. 8 . IT IS RELEVANT TO POINT OUT THAT THE AO MADE THE ADDITIONS ON THE BASIS OF AFORESAID ASSESSMENT YEAR 2007 - 08 AND THE LD. CIT(A) ALSO SUSTAINED THE ADDITIONS ON THE BASIS OF THE EARLIER DECISION FOR THE ASSESSMENT YEAR 2007 - 08, WHICH HAS BEEN ADJUDICATED BY THE ITAT AND THE ADDITIONS MADE IN THE SAID ASSESSMENT YEAR 2007 - 08 WERE DELETED VIDE ORDER DATED 03.08.2 016. SO, RESPECTFULLY FOLLOWING THE AFORESAID ITA NOS. 3528 & 3529 /DEL /201 4 PEARL DRINKS & BEVERAGE LTD. 7 REFERRED TO ORDER DATED 03.08.2016, THE ADDITIONS MADE BY THE AO AND SUSTAINED BY THE LD. CIT(A) ARE DELETED. 9 . IN THE CASE OF M/S PEARL BEVERAGES LTD., DELHI VS ITO, WARD - 14(2), NEW DELHI IN ITA NO. 3528/DEL /2014, IDENTICAL ISSUES AR E INVOLVED HAVING SIMILAR FACTS, TH EREFORE, OUR FINDINGS GIVEN IN THE FORMER PART OF THIS ORDER IN RESPECT OF M/S PEARL DRINKS LTD., NEW DELHI VS ITO, WARD - 14(2), NEW DELHI SHALL APPLY MUTATIS MUTANDIS. IN THAT VIEW OF THE MATTER, THE ADDITIONS MADE BY THE AO AND SUSTAINED BY THE LD. CIT(A) ARE DELETED IN THE CASE OF THIS ASSESSEE ALSO. 1 0 . IN THE RESULT, THE APPEAL S OF THE ASSESSEE S ARE ALLOWED . ( ORDER PRON OUNCED IN THE COURT ON 14 /0 8 /2017 ) SD/ - SD/ - ( KULDIP SINGH ) (N. K. SAINI) JUDICIAL MEMBER ACCOUNTANT MEMBER DAT ED: 14 /08 /2017 *SUBODH* COPY FORWARDED TO: 1 . APPELLANT 2 . RESPONDENT 3 . CIT 4 . CIT(APPEALS) 5 . DR: ITAT ASSISTANT REGISTRAR