PERNOD RICHARD INDIA PVT. LTD., GURGAON V. DCIT, CC- 19, NEW DELHI

ITA 3847/DEL/2017

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 3686 (ITAT-DELHI)
• Duration Of Justice: 7 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-01-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: I
• Assessment Year: 2005-2006
• Appeal Filed On: 13-06-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: YOGESH VERMA
• Keywords: Transfer pricing; Document seized; International transaction; Documents seized
• Section: 143(3); 92B; 153A; 234B; 14A; 37(1); 132; 12

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH I-1, NEW DELHI BEFORE SHRI R. K. PANDA, ACCOUNTANT MEMBER AND MS. SUCHITRA KAMBLE, JUDICIAL MEMBER ITA NOS.3847 & 3848/DEL/2017 ASSESSMENT YEARS : 2005-06 & 2006-07 PERNOD RICHARD INDIA PVT. LTD., 15 TH FLOOR, BUILDING NO.8C, DLF CYBER CITY, DLF PHASE-II, GURGAON. VS. DCIT, CC- 19, NEW DELHI. PAN : AAACS4781P (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI DEEPAK CHOPRA, ADV. DEPARTMENT BY : SHRI YOGESH VERMA, CIT-DR DATE OF HEARING : 02-11-2017 DATE OF PRONOUNCEMENT : 31-01-2018 O R D E R PER R. K. PANDA, AM : THE ABOVE TWO APPEALS FILED BY THE ASSESSEE ARE DIR ECTED AGAINST THE SEPARATE ORDERS DATED 16.12.2016 OF THE CIT(A)- 44, NEW DELHI RELATING TO ASSESSMENT YEARS 2005-06 AND 2006-07 RESPECTIVELY. SINCE IDENTICAL GROUNDS HAVE BEEN TAKEN BY THE ASSESSEE IN BOTH THE APPEALS , THEREFORE, THESE WERE HEARD TOGETHER AND ARE BEING DISPOSED OF BY THIS COMMON O RDER. 2. FIRST WE TAKE UP ITA NO.3847/DEL/2017 AS THE LEA D CASE. FACTS OF THE CASE, IN BRIEF, ARE THAT THE ASSESSEE IS ENGAGED IN THE BUSINESS OF MANUFACTURING OF INDIAN MADE FOREIGN LIQUOR. IT FILED ITS RETURN OF INCOME ON 30.10.2005 2 ITA NOS.3847 & 3848/DEL/2017 DECLARING TOTAL INCOME OF RS.71,28,29,530/-. THE A SSESSING OFFICER COMPLETED THE ASSESSMENT U/S 143(3) DETERMINING THE TOTAL INC OME AT RS.87,01,47,084/- BY MAKING FOLLOWING ADDITIONS :- A. PROVISION FOR TRANSIT BREAKAGES - RS.16,86,688 /- B. TRANSFER PRICING ADJUSTMENT - RS.9,38,40,978/- (44,45,002 + 8,93,95,976 ON ACCOUNT OF MARKET SUPPORT SERVICE AND BRAND EXPENSES RESPECTIVELY) C. BRAND EXPENSES U/S 37(1) - RS.4,67,34,266/- D. DISALLOWANCE U/S 40A(2A) - RS.1,50,55,622/- TOTAL - RS.87,01,47,084/- 3. SUBSEQUENTLY, A SEARCH U/S 132 WAS CONDUCTED IN THE CASE OF THE ASSESSEE ON 15.02.2011. IN RESPONSE TO NOTICE U/S 153A, THE ASSESSEE FILED ITS RETURN OF INCOME ON 30.02.2012 DECLARING THE SAME INCOME AS W AS RETURNED IN THE ORIGINAL RETURN OF INCOME. THE ASSESSING OFFICER COMPLETED THE ASSESSMENT U/S 153A ON 22.03.2013 DETERMINING THE TOTAL INCOME AT RS.94,58 ,94,504/- BY MAKING THE FOLLOWING ADDITIONS :- A. TRANSFER PRICING ADJUSTMENT ON ACCOUNT OF MARKET SUPPORT SERVICES - RS. 44,45,002/- B. TRANSFER PRICING ADJUSTMENT ON ACCOUNT OF AMP EXPENSES - RS.8,93,95,976/- C. DISALLOWANCE OF BRAND EXPENSES U/S 37(1) - RS.9,34,68,532/- D. DISALLOWANCE OF PROVISION FOR TRANSIT BREAKAGES - RS. 16,86,688/- 3 ITA NOS.3847 & 3848/DEL/2017 E. DISALLOWANCE OF REIMBURSEMENT OF TRADE SCHEME TO PROMOTERS - RS.2,83,63,949/- F. PAYMENT TO OFFICIALS - RS. 10,80,000/- G. DISALLOWANCE MADE U/S 14A - RS. 14,70,300/- H. DISALLOWANCE OF BRAND REGISTRATION EXPENSES U/S 37( 1) - RS.1,31,54,527/- TOTAL - RS.94,58,94,504/- 4. THE ASSESSEE FILED AN APPEAL BEFORE THE LD. CIT( A), WHO GAVE PART RELIEF TO THE ASSESSEE. 5. AGGRIEVED WITH SUCH ORDER OF THE LD. CIT(A), THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL BY RAISING THE FOLLOWING GROUND S :- 1. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF T HE CASE AND IN LAW, THE ORDER PASSED BY THE COMMISSIONER OF INCOME TAX (APPEALS) ['CIT(A )'], TO THE EXTENT PREJUDICIAL TO THE APPELLANT, IS BAD IN LAW AND VOID AB-INITIO. RE: JURISDICTIONAL GROUNDS 2. THAT THE CIT(A) ERRED IN CONFIRMING THE ACTION OF T HE ASSESSING OFFICER ('AO') IN ASSUMING JURISDICTION UNDER SECTION 153A OF THE INC OME-TAX ACT, 1961 ('ACT'). 2.1 THAT THE CIT(A) GROSSLY ERRED IN SUSTAINING THE ORDER PASSED BY THE AO UNDER SECTION 153A OF THE ACT, WITHOUT APPRECIATING THAT THERE WAS NO INCRIMINATING MATERIAL SEIZED DURING THE COURSE OF THE SEARCH CON DUCTED. 2.2 THAT THE CIT(A) GROSSLY ERRED IN SUSTAINING TH E ORDER PASSED BY THE AO UNDER SECTION 153A OF THE ACT, WITHOUT APPRECIATING THAT THE 'MATERIAL' SO SEIZED PERTAINED TO A Y 2002-03 AND AS SUCH WAS BEYOND THE SCOPE OF SECTION 153A OF THE ACT. 2.3 THAT THE CIT(A) GROSSLY ERRED IN UPHOLDING THE ACTION OF THE AO IN ASSUMING JURISDICTION AND FRAMING THE ASSESSMENT IN THE CASE OF THE APPELLANT, WHILST OBSERVING THAT SIMILAR ERRONEOUS JURISDICTION HAD A LREADY BEEN EXERCISED BY THE AO IN THE APPELLANT'S SISTER CONCERN I.E. SEAGRAM D ISTILLERIES PVT LTD'S CASE FOR A Y 2005-06 TO'2009-10 WHERE ON THE SAME 'MATERIAL' , ADDITIONS HAD BEEN MADE. RE: TRANSFER PRICING ADDITION MADE ON ACCOUNT OF MA RKETING SUPPORT SERVICES ('MSS') OFFERED BY THE APPELLANT TO ITS ASSOCIATED ENTERPRISE ('AE') 3. THAT THE CIT(A) ERRED IN UPHOLDING THE TRANSFER PRI CING ADJUSTMENT MADE ON ACCOUNT OF MSS SEGMENT WITHOUT THERE BEING ANY MATE RIAL LET ALONE INCRIMINATING MATERIAL FOUND DURING THE COURSE OF THE SEARCH SO A S TO EMPOWER THE AO/TPO TO MAKE SUCH ADJUSTMENT. 3.1 WITHOUT PREJUDICE TO THE ABOVE, THE CIT(A) ERRE D ON FACTS AND IN LAW IN SUSTAINING 4 ITA NOS.3847 & 3848/DEL/2017 THE ADDITION MADE BY THE TPO/AO ON ACCOUNT OF MARKE TING SUPPORT SERVICES PROVIDED BY THE APPELLANT TO ITS AE. 3.2 THAT THE CIT(A) ERRED ON FACTS AND IN LAW IN NO T APPRECIATING THAT THE REIMBURSEMENT OF EXPENSES RECEIVED BY THE APPELLANT DID NOT HAVE ANY PROFIT ELEMENT IN THEM AND FURTHER ERRED IN NOT TAKING COG NISANCE OF THE FACT THAT THE APPELLANT WAS ALREADY BEING COMPENSATED SEPARATELY FOR THE FUNCTIONS CARRIED OUT IN THE SAID SEGMENT. 3.3 THAT THE CIT(A) HAS GROSSLY ERRED IN UPHOLDING THE INCLUSION OF THE REIMBURSED EXPENSES IN THE COST BASE AS WELL AS INCOME BASE FO R COMPUTING THE PROFIT MARGIN OF THE APPELLANT IN THE MARKETING SUPPORT SERVICES SEG MENT. 3.4 THAT THE CIT(A) GROSSLY ERRED IN REJECTING THE COMPARABLE DATA USED BY THE APPELLANT TO BENCH MARK ITS PROFIT MARGIN FROM THE MARKETING SUPPORT SERVICES SEGMENT. TRANSFER PRICING ADDITION MADE ON ACCOUNT OF ADVERT ISEMENT, MARKETING AND PROMOTIONAL ('AMP') EXPENSES 4. THAT THE CIT(A) ERRED IN UPHOLDING THE TRANSFER PRI CING ADJUSTMENT MADE ON ACCOUNT OF AMP EXPENSES INCURRED BY THE APPELLANT W ITHOUT THERE BEING ANY MATERIAL MUCH LESS INCRIMINATING MATERIAL FOUND DUR ING THE COURSE OF THE SEARCH SO AS TO EMPOWER THE AO/TPO TO MAKE SUCH ADJUSTMENT . 4.1. WITHOUT PREJUDICE TO THE ABOVE, THE CIT(A)/TPO / AO ERRED IN MAKING/SUSTAINING THE TRANSFER PRICING ADJUSTMENT IN RESPECT OF AMP E XPENSE TO THE TUNE OF INR 8,93,95,976/-. 4.2. THAT THE CIT(A) GROSSLY ERRED IN UPHOLDING THE JURISDICTION OF TPO UNDER SECTION 92CA OF THE ACT, IN RESPECT OF TRANSACTIONS WHICH D ID NOT PARTAKE THE CHARACTER OF 'INTERNATIONAL TRANSACTIONS' WITHIN THE MEANING OF THE TERM AS DEFINED IN SECTION 92B READ WITH SECTION 92F(V) OF THE ACT. 4.3. THAT THE CIT(A) GROSSLY ERRED ON FACTS AND IN LAW IN ASSUMING THAT THE AE BENEFITED IN THE FORM OF THIRD PARTY SALES IN INDIA DUE TO THE BRAND BUILDING EFFORTS OF THE APPELLANT IN INDIA. 4.4. THAT THE CIT(A) GROSSLY ERRED IN NOT APPRECIAT ING THAT THE TPO/AO HAD FAILED TO DISCHARGE THE PRELIMINARY ONUS PLACED UPON THEM TO ESTABLISH THE EXISTENCE OF ANY 'ARRANGEMENT' WHEREBY THE AE BEING THE OWNER OF THE INTELLECTUAL PROPERTY HAD DIRECTED ANY LEVEL OF AMP EXPENDITURE TO BE INCURRE D BY THE APPELLANT. 4.5. THAT THE CIT(A) GROSSLY ERRED IN NOT APPRECIAT ING THAT THE BRANDS, IN CONNECTION WITH WHICH AMP EXPENSES WERE UNDERTAKEN BY THE APPE LLANT, WERE INDIA SPECIFIC AND AS SUCH NO BENEFIT COULD BE SAID TO BE ACCRUED TO THE AE, AS ALSO HELD BY CIT(A) IN ORIGINAL ASSESSMENT PROCEEDINGS, WHICH FI NDING HAS BEEN CONFIRMED BY THIS HON'BLE TRIBUNAL. 4.6. THAT THE CIT(A) GROSSLY ERRED IN IGNORING THE FACT THAT THE AMP EXPENSES INCURRED BY THE APPELLANT WERE IN RESPECT OF ITS OWN BUSINES S OPERATIONS IN INDIA AND THE RESULTANT BENEFIT THAT AROSE TO THE APPELLANT WAS I N THE FORM OF INCREASED SALES WHICH WERE ALREADY BEING OFFERED TO TAX IN INDIA. 4.7. THAT THE CIT(A) FAILED TO APPRECIATE THAT NO B ENEFIT, INCIDENTAL OR OTHERWISE, CAN BE SAID TO HAVE ACCRUED TO THE AE AS THE APPELLANT DOES NOT PAY ANY ROYALTY TO ITS AE FOR USE OF ITS TRADEMARKS. 4.8. THAT THE CIT(A) ERRED IN IGNORING THE VARIOUS DECISIONS OF THE JURISDICTIONAL HIGH COURT / TRIBUNAL, WHICH CLEARLY STATE THAT NO AMP ADJUSTMEN T CAN BE MADE IN THE 5 ITA NOS.3847 & 3848/DEL/2017 CASE OF A LICENSED MANUFACTURER UNTIL AND UNLESS TH E REVENUE PROVES THERE EXISTS AN EXPLICIT AGREEMENT / ARRANGEMENT BETWEEN THE APPELLANT AND ITS AE FOR TH E PURPOSES OF INCURRING AMP EXPENSES. 4.9. THAT THE CIT(A)/TPO/ AO ERRED IN NOT APPRECIAT ING THAT THE AMP EXPENDITURE ALREADY FORMED PART OF THE BENCHMARKING ANALYSIS OF THE MANUFACTURING SEGMENT OF THE APPELLANT, AND THEREFORE, HAVING DETERMINED THE PROFITABILITY OF MANUFACTURING SEGMENT TO BE AT ARM'S LENGTH, IT WAS NOT OPEN FOR THE TPO TO BENCHMARK AMP EXPENDITURE SEPARATELY. CORPORATE TAX GROUNDS 5. WITHOUT PREJUDICE TO CIT(A)'S FINDING, THE AO ER RED ON FACTS AND IN LAW IN DISALLOWING AN AMOUNT OF INR 9,34,68,532/- UNDER SE CTION 37(1) OF THE ACT ON ACCOUNT OF BRAND EXPENSES BEING CAPITAL IN NATURE, WITHOUT APPRECIATING THAT SUCH DISALLOWANCE WAS NOT WARRANTED AS NOT BEING EMANATI NG OUT OF ANY 'SEIZED MATERIAL' AND HENCE OUT OF THE PURVIEW OF SECTION 1 53A OF THE ACT. 6. THAT THE CIT(A) ERRED IN SUSTAINING THE DISALLOW ANCE MADE BY THE AO ON ACCOUNT OF PROVISION FOR TRANSIT BREAKAGES. 7. THAT THE CIT(A) GROSSLY ERRED IN NOT APPRECIATIN G THAT THE AO HAD ERRONEOUSLY ASSUMED JURISDICTION FOR MAKING THE DISALLOWANCE UN DER SECTION 40(A)(IA) OF THE ACT IN RESPECT OF REIMBURSEMENTS MADE BY THE APPELL ANT WITHOUT THERE BEING ANY MATERIAL FOUND DURING THE COURSE OF THE SEARCH WHIC H WOULD SUGGEST SUCH INCOME HAVING ESCAPED ASSESSMENT OR REASSESSMENT SO AS TO FALL WITHIN THE AMBIT OF POWERS VESTED IN THE AO UNDER SECTION 153A OF THE A CT. 7.1. THAT THE ORDER OF THE CIT(A) IS PERVERSE IN AS MUCH AS ONCE HAVING ACCEPTED THAT THERE WAS NO REQUIREMENT TO DEDUCT TDS ON SUCH REIM BURSEMENTS, WITHOUT APPRECIATING THE EVIDENCE ON RECORD WHICH ESTABLISH ED THAT THE COMMISSION PAYMENTS TO THE PROMOTERS AND REIMBURSEMENTS MADE T O THEM WERE SEPARATE TRANSACTIONS, THOUGHT IT FIT TO REMAND THE MATTER B ACK TO THE AO. 7.2. THAT THE CIT(A) COMPLETELY FAILED TO APPRECIAT E THAT THE PAYMENTS MADE BY THE PROMOTERS, WHICH WERE CLAIMED AS REIMBURSEMENTS, WE RE NOT MADE OUT OF THE GROSS COMMISSION BEING PAID BY THE APPELLANT TO SUC H PROMOTERS. 7.3. THAT THE CIT(A) GROSSLY ERRED ON FACTS AND IN LAW IN NOT APPRECIATING THAT AS FAR AS THE REIMBURSEMENTS MADE BY THE APPELLANT TO THE SALE PROMOTERS FOR EXTENDING INCENTIVES TO THE RETAILERS WAS CONCERNED, THE SAME DID NOT EMANATE OUT OF THE PRINCIPAL-AGENT RELATIONSHIP BETWEEN THE SALE PROMO TER AND THE APPELLANT, BUT WAS RATHER A PASS THROUGH EXPENSE FOR THE BENEFIT O F THE RETAILERS, ON A PRINCIPAL TO PRINCIPAL BASIS, WHICH WAS OUT OF THE PURVIEW OF SECTION 194H OF THE ACT AND HENCE NO DISALLOWANCE UNDER SECTION 40(A)(IA) OF TH E ACT WAS WARRANTED. 8. THAT THE CIT(A) ERRED ON FACTS AND IN LAW IN UPH OLDING THE DISALLOWANCE MADE BY THE AO UNDER SECTION 37(1) OF THE ACT AMOUNTING TO INR 10,80,000/- TREATING THE SAME AS UNEXPLAINED EXPENSES ON CONJECTURES AND SUR MISES. 8.1. THAT THE CIT(A) GROSSLY ERRED ON FACTS AND IN LAW IN NOT APPRECIATING THAT THE SEIZED DOCUMENTS PERTAINED TO A Y 2002-03 AND HENCE THE SAME COULD NOT HAVE BEEN THE SUBJECT MATTER OF THE PRESENT PROCEEDINGS. 8.2. THAT THE CIT(A) GROSSLY ERRED IN NOT APPRECIAT ING THAT THE DOCUMENTS OTHERWISE WERE FULLY EXPLAINABLE AND WERE NOT IN RESPECT OF A NY UNACCOUNTED PAYMENTS OR UNEXPLAINED EXPENSES. 8.3. THAT WITHOUT PREJUDICE, THE CIT(A) ERRED ON FA CTS AND IN LAW IN UPHOLDING SUCH 6 ITA NOS.3847 & 3848/DEL/2017 DISALLOWANCE, WHILE OBSERVING THAT THE SAME DISALLO WANCE HAS ALREADY BEEN MADE IN THE CASE OF THE APPELLANT'S SISTER CONCERN I.E S EAGRAM DISTILLERIES PVT LTD'S CASE (NOW MERGED WITH THE APPELLANT) FOR A Y 2005-06 TO 2009-10 ON THE SAME SET OF SEIZED OF DOCUMENTS. 9. WITHOUT PREJUDICE TO CIT(A)'S FINDING, THE AO ER RED ON FACTS AND IN LAW IN DISALLOWING AN AMOUNT OF INR 14,70,300/- UNDER SECTION 14A OF THE ACT, WITHOUT APPRECIATING THAT SUCH DISALLOWANCE WAS NOT WARRANT ED AS NOT BEING EMANATING OUT OF ANY 'SEIZED MATERIAL' AND HENCE OUT OF THE P URVIEW OF SECTION 153A OF THE ACT. 10. WITHOUT PREJUDICE TO CIT(A)'S FINDING, THE AO E RRED ON FACTS AND IN LAW IN DISALLOWING AN AMOUNT OF INR 1,31,54,527/- AS BRAND REGISTRATION EXPENSES, WITHOUT APPRECIATING THAT SUCH DISALLOWANCE WAS NOT WARRANTED AS NOT BEING EMANATING OUT OF ANY 'SEIZED MATERIAL' AND HENCE OU T OF THE PURVIEW OF SECTION 153A OF THE ACT. RE: CONSEQUENTIAL GROUNDS 11. THAT THE CIT(A) ERRED IN UPHOLDING THE LEVY OF INTE REST UNDER SECTION 234A, 234B AND 234D OF THE ACT. 12. THAT THE LD. AO GROSSLY ERRED IN INITIATING THE PEN ALTY UNDER SECTION 271(1)(C) OF THE ACT. THAT THE ABOVE GROUNDS ARE WITHOUT PREJUDICE TO EAC H OTHER. THAT THE APPELLANT RESERVES ITS RIGHT TO ADD, ALTER , AMEND OR WITHDRAW ANY GROUND OF APPEAL EITHER BEFORE OR AT THE TIME OF HEARING OF T HIS APPEAL. 6. LD. COUNSEL FOR THE ASSESSEE AT THE TIME OF HEAR ING RAISED PRELIMINARY OBJECTION STATING THAT THE ORDER OF THE LD. CIT(A) IS BAD IN LAW IN SO FAR AS THE SAME RELATES TO SUSTAINING THE ORDER OF THE ASSESSI NG OFFICER U/S 153A IGNORING THE FACT THAT THERE WAS NO INCRIMINATING MATERIAL S EIZED DURING THE COURSE OF SEARCH CONDUCTED. LD. COUNSEL FOR THE ASSESSEE WHI LE ARGUING APPEAL FOR BOTH THE ASSESSMENT YEARS REFERRING TO PAGES 142-147 AND 102-126 IN THE APPEAL SET FOR ASSESSMENT YEAR 2005-06 AND 2006-07 RESPECTIVEL Y SUBMITTED THAT THE ASSESSMENTS FOR BOTH THE YEARS WERE COMPLETED U/S 1 43(3) VIDE ORDER DATED 08.12.2008 AND 27.09.2010 FOR THE ASSESSMENT YEARS 2005-06 AND 2006-07 RESPECTIVELY. THE SEARCH WAS CONDUCTED IN THE CASE OF THE ASSESSEE ON 7 ITA NOS.3847 & 3848/DEL/2017 15.02.2011. THE ASSESSING OFFICER COMPLETED THE AS SESSMENT U/S 153A FOR BOTH THE YEARS BY MAKING CERTAIN ADDITIONS WHICH WERE NO T BASED ON ANY INCRIMINATING MATERIAL FOUND DURING THE COURSE OF S EARCH. LD. COUNSEL FOR THE ASSESSEE FILED THE FOLLOWING CHART :- S.NO. ADDITIONS / DISALLOWANCES MADE IN 153A PROCEEDINGS AY 2005-06 AY 2006-07 CATEGORY 1: ADDITIONS MADE IN THE ORIGINAL ASSESSME NT ORDER AND REITERATED IN THE 153A ORDER 1. DISALLOWANCE OF PROVISION FOR TRANSIT BREAKAGES 16,86,688/ - 9,18,832/ - 2. TRANSFER PRICING ADJUSTMENT ON ACCOUNT OF AMP EXPENSES 8,93,95,976/- 5,99,91,091/- 3. TRANSFER PRICING ADJUSTMENT ON ACCOUNT OF MARKET SUPPORT SERVICES 44,45,002/- 25,54,330/- 4. DISALLOWANCE OF BRAND EXPENSES UNDER SECTION 37(1) DISALLOWANCE OF INR 4,67,34,266 (10% OF BRAND EXPENSES) WAS MADE IN ORIGINAL ORDER WHICH WAS INCREASED TO INR 9,34,68,532 (20% OF BRAND EXPENSES). DISALLOWANCE OF INR 5,29,67,70,90/- (10% OF BRAND EXPENSES) WAS MADE IN ORIGINAL ORDER WHICH WAS INCREASED TO INR 10,59,35,419/- (20% OF BRAND EXPNESES). 5. DISALLOWANCE UNDER SECTION 14A - 10,59,000/- CATEGORY 2: FRESH ADDITION MADE ON THE BASIS OF SEI ZED MATERIAL. 6. PAYMENT TO OFFICIALS 10,80,000/- 10,80,000/- CATEGORY 3: FRESH ADDITIONS IN RESPECT OF WHICH NO INCRIMINATING MATERIAL HAS BEEN UNEARTHED. 7. DISALLOWANCE MADE UNDER SECTION 14A OF THE ACT. 14,70,300/- - 8. DISALLOWANCE OF BRAND REGISTRATION EXPENSES UNDER SECTION 37(1) OF THE ACT. 1,31,54,527/- 69,42,279/- 9. DISALLOWANCE OF REIMBURSEMENT OF TRADE SCHEME TO PROMOTERS. 2,83,63,949/- 1,03,82,045/- 8 ITA NOS.3847 & 3848/DEL/2017 7. HE SUBMITTED THAT ALTHOUGH THE ASSESSEE HAD TAKE N A GROUND BEFORE THE LD. CIT(A) CHALLENGING THE JURISDICTION OF THE ASSESSIN G OFFICER IN COMPLETING THE ASSESSMENT U/S 153A IN ABSENCE OF ANY INCRIMINATING MATERIAL FOUND DURING THE COURSE OF SEARCH, HOWEVER, LD. CIT(A) FOLLOWING THE DECISION OF HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. ANIL KUMAR BHATIA REPORTED IN 352 ITR 433 DISMISSED THE JURISDICTIONAL GROUND RAISED BY THE A SSESSEE. WHILE DOING SO, HE DISTINGUISHED THE DECISION OF THE HONBLE DELHI HIG H COURT IN THE CASE OF CIT VS. KABUL CHAWLA REPORTED IN 388 ITR 573. HE SUBMI TTED THAT SINCE NO INCRIMINATING MATERIAL WAS FOUND/RECOVERED DURING T HE SEARCH RELATING TO THESE ASSESSMENT YEARS, THEREFORE, NO ADDITION COULD HAVE BEEN MADE IN THE HANDS OF THE ASSESSEE. FURTHER, ON THE BASIS OF SEIZED MATE RIAL, IDENTICAL ADDITIONS WERE MADE IN THE HANDS OF THE SISTER CONCERN OF THE ASSE SSEE NAMELY SEAGRAM DISTILLERIES PVT. LTD. FOR ASSESSMENT YEARS 2005-06 TO 2009-10. RELYING ON VARIOUS DECISIONS, LD. COUNSEL FOR THE ASSESSEE SUB MITTED THAT IN ABSENCE OF ANY INCRIMINATING MATERIAL FOUND DURING THE COURSE OF S EARCH, THE ASSESSING OFFICER IS NOT JUSTIFIED IN INITIATING PROCEEDINGS U/S 153A . REFERRING TO THE DECISION OF THE HONBLE DELHI HIGH COURT IN THE CASE OF PR.CIT VS. MEETA GUTGUTIA REPORTED IN 395 ITR 526, HE SUBMITTED THAT THE HON'BLE HIGH COURT IN THE SAID DECISION HAS HELD THAT THE PROVISIONS OF SECTION 153A COULD ONLY BE INVOKED IF DURING THE COURSE OF SEARCH U/S 132 INCRIMINATING MATERIAL JUS TIFYING THE REOPENING OF THE 9 ITA NOS.3847 & 3848/DEL/2017 ASSESSMENTS WAS FOUND AND NOT OTHERWISE. THE HONB LE HIGH COURT HAS ALSO CLARIFIED THE RATIO IN ANIL KUMAR BHATIA (SUPRA) AN D RECONFIRMED THE JURISPRUDENCE DEVELOPED IN KABUL CHAWLA (SUPRA) INA SMUCH AS RECOVERY OF INCRIMINATING MATERIAL WAS SINE QUA NON FOR THE INITIATION OF PROCEEDINGS U/S 153A. THEREFORE, IN ABSENCE OF THE SAME, HE SUBMIT TED THAT THE ASSESSING OFFICER WAS UNJUSTIFIED IN INITIATING PROCEEDINGS U /S 153A AND THE LD. CIT(A) WAS NOT JUSTIFIED IN UPHOLDING THE ACTION OF THE AS SESSING OFFICER. REFERRING TO THE RECENT DECISION OF HONBLE SUPREME COURT IN THE CASE OF SINHAGAD TECHNICAL EDUCATION SOCIETY, HE SUBMITTED THAT THE HON'BLE SU PREME COURT IN THE SAID DECISION HAS HELD THAT THE SEIZED MATERIAL MUST HAV E A CO-RELATION WITH THE ASSESSMENT YEAR TO WHICH THEY PERTAIN TO AND THEREF ORE INVOKING JURISDICTION U/S 153C FOR AN ASSESSMENT YEAR THAT HAD NO RELATION TO THE SEIZED MATERIAL IS BAD IN LAW. HE SUBMITTED THAT THE ADDITION OF RS.10,80,00 0/- MADE BY THE ASSESSING OFFICER ON THE BASIS OF SEIZED PAPER DOES NOT RELAT E TO THESE TWO YEARS AND THE PAPER RELATES TO ASSESSMENT YEAR 2002-03. THEREFOR E, INVOKING OF JURISDICTION U/S 153A ITSELF IS BAD IN LAW. 8. LD. DR ON THE OTHER HAND WHILE SUPPORTING THE OR DER OF THE LD. CIT(A) ON THIS ISSUE SUBMITTED THAT THE LD. CIT(A) HAS RELIED ON THE DECISION OF THE HONBLE DELHI HIGH COURT IN THE CASE OF ANIL KUMAR BHATIA ( SUPRA) WHEREIN IT HAS HELD THAT THE ASSESSING OFFICER HAS JURISDICTION TO ASSE SS OR REASSESS THE TOTAL INCOME 10 ITA NOS.3847 & 3848/DEL/2017 OF THE ASSESSEE U/S 153A. THEREFORE, THE ORDER OF THE LD. CIT(A) ON THIS ISSUE BE UPHELD AND THE GROUNDS RAISED BY THE ASSESSEE SHOUL D BE DISMISSED. 9. WE HAVE CONSIDERED THE RIVAL ARGUMENTS MADE BY B OTH THE SIDES, PERUSED THE ORDERS OF THE ASSESSING OFFICER AND THE LD. CIT (A) AND THE PAPER BOOK FILED ON BEHALF THE ASSESSEE. WE HAVE ALSO CONSIDERED TH E VARIOUS DECISIONS CITED BEFORE US. A PERUSAL OF THE ADDITION MADE BY THE A SSESSING OFFICER FOR BOTH THE ASSESSMENT YEARS SHOWS THAT THE DISALLOWANCE OF PRO VISIONS FOR TRANSIT BREAKAGES, TRANSFER PRICING ADJUSTMENT ON ACCOUNT O F BRAND EXPENSES, TRANSFER PRICING ADJUSTMENT ON ACCOUNT OF MARKET SUPPORT SER VICES WERE ALSO MADE IN THE ORIGINAL ASSESSMENT ORDER PASSED U/S 143(3). S O FAR AS DISALLOWANCE OF BRAND EXPENSES U/S 37(1) IS CONCERNED, THE SAME WAS DISALLOWED AT RS.4,67,34,266/- BEING 10% OF THE BRAND EXPENSES IN THE ORIGINAL ASSESSMENT WHICH WAS INCREASED TO RS.9,34,68,532/- BEING 20% O F THE BRAND EXPENSES IN THE ORDER PASSED U/S 153A/143(3) OF THE I.T. ACT. 10. SIMILARLY, AS PER THE DETAILS FILED BY THE ASSE SSEE, WE FIND THE ADDITION OF RS.14,70,300/- MADE U/S 14A, ADDITION OF RS.1,31,54 ,527/- ON ACCOUNT OF DISALLOWANCE OF BRAND REGISTRATION EXPENSES U/S 37( 1) AND ADDITION OF RS.2,83,63,949/- ON ACCOUNT OF DISALLOWANCE OF REIM BURSEMENT OF TRADE SCHEME TO PROMOTERS ARE NOT BASED ON ANY INCRIMINATING MAT ERIAL FOUND DURING THE COURSE OF SEARCH. SO FAR AS ADDITION OF RS.10,80,0 00/- ON ACCOUNT OF PAYMENT TO 11 ITA NOS.3847 & 3848/DEL/2017 OFFICIALS IS CONCERNED, THE SAME WAS MADE BY THE AS SESSING OFFICER ON THE GROUND THAT THE EXPENSES OF RS.15,000/- PER MONTH W ERE PAID TO EXCISE OFFICIALS FOR GETTING THE LICENCE AND FEE OF RS.75,000/- PER MONTH NEEDED TO BE PAID. IT IS THE SUBMISSION OF THE LD. COUNSEL FOR THE ASSESSEE THAT THE SHEET OF PAPER WHICH WERE RECOVERED DURING THE COURSE OF SEARCH CONDUCTE D ON 15.02.2011 PERTAINED TO ASSESSMENT YEAR 2002-03 AND, THEREFORE, THE SAME IS OUTSIDE THE PURVIEW OF SECTION 153A PROCEEDINGS FOR THE IMPUGNED ASSESSMEN T YEARS. IT IS ALSO HIS SUBMISSION THAT THE OBSERVATIONS MADE BY THE ASSESS ING OFFICER WERE BASED ON ISOLATED READING OF ALL THE PAGES INSTEAD OF READIN G OF ALTOGETHER. WE FIND MERIT IN THE ABOVE ARGUMENT OF THE LD. COUNSEL FOR THE AS SESSEE. THE SUBMISSION OF THE LD. COUNSEL FOR THE ASSESSEE THAT THE PAPER RELATES TO ASSESSMENT YEAR 2002-03 COULD NOT BE CONTROVERT BY THE LD. DR. WE FIND THE ASSESSING OFFICER ON THE BASIS OF THE SEIZED PAPER RELATING TO ASSESSMENT YE AR 2002-03 PRESUMED THAT SIMILAR EXPENDITURE MUST HAVE BEEN INCURRED BY THE ASSESSEE FOR WHICH HE MADE ADDITIONS IN BOTH THE YEARS UNDER APPEAL. WE FIND THE ISSUE IS NOW SETTLED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF THE HONB LE SUPREME COURT IN THE CASE OF CIT VS. SINHAGAD TECHNICAL EDUCATION SOCIETY IN CIVIL APPEAL NO.11081/2017 ORDER DATED 29.08.2017, WHEREIN THE H ON'BLE SUPREME COURT HAS OBSERVED THAT THE SEIZED MATERIAL MUST HAVE A C O-RELATION WITH THE ASSESSMENT YEAR TO WHICH THEY PERTAIN TO AND THEREF ORE INVOKING JURISDICTION U/S 12 ITA NOS.3847 & 3848/DEL/2017 153C FOR AN ASSESSMENT YEAR THAT HAD NO RELATION TO THE SEIZED MATERIAL IS BAD IN LAW. THE HONBLE DELHI HIGH COURT IN A PLETHORA OF RECENT DECISIONS HAS HELD THAT COMPLETED ASSESSMENTS CANNOT BE RE-OPENED BY I SSUE OF NOTICE U/S 153A IN ABSENCE OF ANY INCRIMINATING MATERIAL FOUND DURING THE COURSE OF SEARCH. SINCE IN THE INSTANT CASE, ADMITTEDLY NO INCRIMINATING MA TERIAL RELATING TO THESE TWO YEARS WERE FOUND DURING THE COURSE OF SEARCH, THERE FORE, IN VIEW OF THE DECISION OF HONBLE DELHI HIGH COURT IN THE CASE OF KABUL CH AWLA (SUPRA), MEETA GUTGUTIA (SUPRA) AND THE DECISION OF HONBLE SUPREM E COURT IN THE CASE OF SINHGAD TECHNICAL EDUCATION SOCIETY (SUPRA), WE HOL D THAT THE INVOKING OF JURISDICTION U/S 153A OF THE I.T. ACT BY THE ASSESS ING OFFICER IS UNSUSTAINABLE IN LAW. WE, THEREFORE, SET-ASIDE THE ORDER OF THE CIT (A) ON THIS ISSUE AND THE GROUNDS RAISED BY THE ASSESSEE CHALLENGING THE VALI DITY OF ASSESSMENTS PROCEEDINGS INITIATED U/S 153A ARE ALLOWED. 11. SINCE THE ASSESSEE SUCCEEDS ON THIS PRELIMINARY LEGAL ISSUE, THEREFORE, THE OTHER GROUNDS BECOME ACADEMIC IN NATURE AND, THEREF ORE, ARE NOT BEING ADJUDICATED. 12. IN THE RESULT, BOTH THE APPEALS FILED BY THE AS SESSEE ARE ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 31 ST JANUARY, 2018. SD/- SD/- (SUCHITRA KAMBLE) (R. K. P ANDA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 31-01-2018. SUJEET 13 ITA NOS.3847 & 3848/DEL/2017 COPY OF ORDER TO: - 1) THE APPELLANT 2) THE RESPONDENT 3) THE CIT 4) THE CIT(A) 5) THE DR, I.T.A.T., NEW DELHI BY ORDER //TRUE COPY// ASSISTANT REGISTRAR ITAT, NEW DELHI