IRIS MEDIAWORKS LIMITED, MUMBAI V. DCIT CC-2(2), MUMBAI

ITA 3889/MUM/2018

• Counselvise Citation: [2019] 114 COUNSELVISE.COM (IT) 6147 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 4 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-10-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2008-2009
• Appeal Filed On: 01-06-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: AKHTAR HANSARI
• Keywords: Business income; Depreciation; Search and seizure; Opportunity of being heard; Principle of natural justice; Validity of assessment; Accommodation entries; Set aside
• Section: 143(3); 132

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL SMC, BENCH MUMBAI BEFORE SHRI MAHAVIR SINGH, JUDICIAL MEMBER & G. MANJUNATHA, ACCOUNTANT MEMBE R ITA NO.3889 & 3890/MUM/2018 ( ASSESSMENT YEARS :2008-09 & 2009-10 ) IRIS MEDIAWORKS LIMITED B-302 WESTERN EDGE-II WESTERN EXPRESS HIGHWAY, BORIWALI EAST MUMBAI-400 066 VS. DCIT CC-2(2) MUMBAI PAN/GIR NO. AA ACB4506D APPELLANT ) .. RESPONDENT ) ASSESSEE BY NEERAJ MANGLA REVENUE BY AKHTAR H.ANSARI DATE OF HEARING 14/10/2019 DATE OF PRONOUNCEME NT 14 /10 /201 9 / O R D E R PER G.MANJUNATHA (A.M) : THESE TWO APPEALS FILED BY THE ASSESSEE ARE DIRECTE D AGAINST COMMON ORDERS OF THE COMMISSIONER OF INCOME TAX (AP PEALS) -48, MUMBAI, BOTH DATED 13/03/2018 AND THEY PERTAINS TO THE ASSESSMENT YEARS (AY) 2008-09 & 2009-10. SINCE, THE FACTS ARE IDENTICAL AND ISSUES ARE COMMON, FOR THE SAKE OF CO NVENIENCE, THESE APPEALS WERE HEARD TOGETHER AND ARE DISPOSED-OFF BY THIS CONSOLIDATED ORDER. 2. THE ASSESSEE HAS, MORE OR LESS FILED COMMON GROU NDS OF APPEAL FOR BOTH ASSESSMENT YEARS. THEREFORE, FOR T HE SAKE OF ITA NOS.3889 & 3890/MUM/2018 IRIS MEDIAWORKS LIMITED 2 BREVITY, GROUNDS OF APPEAL FILED FOR AY 2008-09 ARE REPRODUCED AS UNDER:- 1. UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE, THE APPELLATE ORDER PASSED BY THE LD. CIT (A) IS ILLEGAL BEING AGAINST THE PRINCIPLES OF NATURAL JUSTICE AND AGAINST THE PROVISIONS OF IT AC T, 1961 BEING PASSED WITHOUT ALLOWING ANY OPPORTUNITY OF BEING HEARD AND NOT ADJUDICATING THE WRITTEN SUBMISSIONS OF THE APPELLANT COMPANY IN TRUE SENSE. 2. THAT THE LD. CIT(A) GROSSLY ERRED IN CONFIRMING TH E ACTION OF LD, AO IN DISALLOWING BUSINESS LOSS OF RS. 34,37,146/-UNDER A PRESUMPTION THAT THE APPELLANT COMPANY WAS BEING MANAGED BY SH, SHIR ISH C. SHAH DURING A.Y. 2008-09 DESPITE THE FACT THAT FROM THE PERUSAL OF PARA 17 OF ASSESSMENT ORDER IT WAS EVIDENT THAT NO SUCH RELATI ON EXISTED IN THE YEAR UNDER CONSIDERATION. 3. THAT THE LD, CIT(A) GROSSLY ERRED IN FACTS OF T HE CASE IN CONFIRMING THE ADDITION OF RS. 25,000/- MADE BY THE LD. AO ALLEGIN G THAT TURNOVER OF THE APPELLANT COMPANY TO BE BOGUS DESPITE THE FACT THAT NO SUCH ALLEGATION EXISTED FOR THE YEAR UNDER CONSIDERATION. 4. THAT THE LD. CIT(A) GROSSLY ERRED IN LAW IN CONF IRMING THE ADDITIONS AND DISALLOWANCES MADE BY THE LD. AO DESPITE THE FACT T HAT NO INCRIMINATING EVIDENCES WERE EITHER FOUND OR SEIZED DURING THE CO URSE OF SEARCH. 5. THE APPELLANT CRAVES LEAVE TO ADD, ALTER, MODIFY AND WITHDRAW ANY GROUND OF APPEAL BEFORE OR DURING THE APPELLATE PRO CEEDINGS. 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E COMPANY IS ENGAGED IN THE BUSINESS OF MEDIA AND INFORMATION TE CHNOLOGY. A SEARCH AND SEIZURE ACTION U/S 132 OF THE I.T.ACT, 1 961 WAS CARRIED OUT IN THE CASE OF SHRI SHIRISH C. SHAH. PURSUANT T O REQUISITION OF CERTAIN MATERIAL ALLEGED TO BE PERTAINING TO THE AS SESEE COMPANY SEIZED DURING THE COURSE OF SEARCH ACTION ON SHRI S HIRISH C SHAH, AASSESSMENT PROCEEDINGS U/S 153C OF THE I.T.ACT 196 1 WERE INITIATED IN THIS CASE AND THE ASSESSMENT HAS BEEN COMPLETED U/S 143(3) R.W.S. 153C OF THE I.T.ACT, 1961, ON 22/03/2 016 AFTER MAKING ADDITION OF RS 25,000/- BEING 1% COMMISSION ON TOTA L ITA NOS.3889 & 3890/MUM/2018 IRIS MEDIAWORKS LIMITED 3 ACCOMMODATION ENTRIES PROVIDED DURING THE YEAR. FUR THER, THE LD. AO HAD ALSO DISALLOWED LOSS CLAIMED BY THE ASSESSEE UNDER THE HAED INCOME FROM BUSINESS OR PROFESSION AMOUNTING T O RS. 34,37,146/-, ON THE GROUND THAT THE ASSESSEE COMPAN Y DID NOT HAVE ANY SUBSTANTIAL BUSINESS ACTIVITIES, EXCEPT ROUTING THE TURNOVER WITHIN GROUP COMPANIES. 4. AGGRIEVED BY THE ASSESSMENT ORDER, THE ASSESSEE PREFERRED AN APPEAL BEFORE THE LD.CIT(A). BEFORE THE LD.CIT(A), THE ASSESSEE HAS CHALLENGED ASSESSMENT PROCEEDINGS INITIATED U/S 143(3) R.W.S. 153C OF THE I.T.ACT 1961, IN LIGHT OF CERTAIN JUDIC IAL PRECEDENTS. THE ASSESSE HAD ALSO CHALLENGED ADDITIONS MADE BY THE A O, ON THE GROUND THAT DURING THE YEAR UNDER CONSIDERATION THE RE WAS NO ACCOMMODATION ENTRIES BUSINESS, THEREFORE, THE QUES TION OF ESTIMATION OF COMMISSION DOES NOT ARISE. THE LD.CIT (A) AFTER CONSIDERING RELEVANT SUBMISSIONS OF THE ASSESSEE AN D ALSO BY RELIED UPON VARIOUS JUDICIAL PRECEDENTS REJECTED LEGAL GR OUND TAKEN BY THE ASSESSEE CHALLENGING VALIDITY OF ASSESSMENT ORDER P ASSED BY THE LD. AO U/S 153C OF THE I.T.ACT 1961. FURTHER, THE LD.CI T(A) HAD ALSO UPHELD THE ADDITIONS MADE BY THE AO TOWARDS 1% COMM ISSION INCOME ON TOTAL AMOUNT OF ACCOMMODATION ENTRIES PRO VIDED BY THE ASSESSEE. AGGRIEVED BY THE LD.CIT(A) ORDER, THE ASS ESSEE IS IN APPEAL BEFORE US. 5. THE LD. AR FOR THE ASSESSEE, AT THE TIME OF HEAR ING, SUBMITTED THAT THE LD.CIT(A) HAS DISMISSED, APPEAL FILED BY T HE ASSESSEE WITHOUT ALLOWING ANY OPPORTUNITY OF BEING HEARD AND ALSO DID NOT ADJUDICATING THE WRITTEN SUBMISSIONS OF THE ASSESSE E IN TRUE SENSE. THE LD. AR FURTHER SUBMITTED THAT IF, YOU GO THROUG H THE ASSESSMENT ITA NOS.3889 & 3890/MUM/2018 IRIS MEDIAWORKS LIMITED 4 ORDER, THE LD. AO HAD REPRODUCED SALES AND PURCHASE S MADE BY THE ASSESSEE TO VARIOUS GROUP COMPANIES, AS PER WHICH, THERE IS NO TRANSACTIONS FOR THE YEAR UNDER CONSIDERATION. THER EFORE, ESTIMATION OF COMMISSION @1% ON TOTAL SALES SHOWN DURING THE Y EAR AMOUNTING TO RS. 25 LACS IS INCORRECT. THE LD. AR, FURTHER SU BMITTED THAT THE LD. AO HAS DISALLOWED TOTAL BUSINESS LOSS CLAIMED BY TH E ASSESSEE, ON THE GROUND THAT THE ASSESSEE COMPANY DID NOT HAVE A NY BUSINESS ACTIVITY, EXCEPT PROVIDING ACCOMMODATION ENTRIES. T HE LD.CIT(A) HAS AFFIRMED THE FINDINGS OF THE LD. AO WITHOUT APPRECI ATING THE FACT THAT THE ASSESSEE HAS CLAIMED LOSS UNDER THE HEAD INCOME FROM BUSINESS /PROFESSION, AS PER WHICH, IT HAS CLAIMED VARIOUS EXPENSES, INCLUDING INTEREST ON LOANS AND DEPRECIATION. THERE FORE, THE ISSUE MAY BE SET ASIDE TO THE FILE OF THE AO TO VERIFY TH E FACTS WITH REGARD TO THE DETAILS OF ACCOMMODATION ENTRIES, IF ANY PRO VIDED FOR THE YEAR AND ALSO, VARIOUS EXPENSES CLAIMED BY THE ASSESSEE, INCLUDING INTEREST ON LOAN AND DEPRECIATION. 6. THE LD. DR, ON THE OTHER HAND, STRONGLY SUPPORTE D ORDER OF THE LD. AO, AS WELL AS THE LD.CIT(A). 7. WE HAVE HEARD BOTH THE PARTIES, PERUSED THE MATE RIAL AVAILABLE ON RECORD AND GONE THROUGH ORDERS OF THE AUTHORITIE S BELOW. WE FIND THAT THE LD. AO HAS ESTIMATED 1% COMMISSION INCOME ON ALLEGED ACCOMMODATION ENTRIES PROVIDED BY THE ASSESSEE. IT IS THE CLAIM OF THE ASSESSEE THAT FOR THE YEAR UNDER CONSIDERATION, THERE WERE NO ACCOMMODATION ENTRIES WITHIN GROUP COMPANIES. FOR T HIS, THE ASSESSEE REFERRED THE DETAILS OF INTERGROUP TRANSAC TIONS RECORDED BY THE AO IN PARA 17 ON PAGES 5 TO 10 OF ASSESSMENT OR DER. SIMILARLY, THE ASSESSEE CLAIMS THAT THE LD. AO HAS DISALLOWED TOTAL BUSINESS ITA NOS.3889 & 3890/MUM/2018 IRIS MEDIAWORKS LIMITED 5 LOSS CLAIMED FOR THE YEAR, ON THE GROUND THAT THE A SSESSEE COMPANY DID NOT HAVE ANY SUBSTANTIAL BUSINESS ACTIVITIES, E XCEPT ROUTING THE TURNOVER WITHIN THE GROUP COMPANIES, IGNORING THE F ACT THAT EXPENSES DEBITED INTO THE PROFIT AND LOSS ACCOUNT, INCLUDES INTEREST ON LOANS AND DEPRECIATION ON FIXED ASSETS. 8. HAVING CONSIDERED ARGUMENTS OF THE BOTH THE SIDE S, WE FIND THAT THE LD. AO WAS OF THE OPINION THAT THE ASSESSE E HAS ROUTED VARIOUS TRANSACTIONS WITHIN THE GROUP COMPANIES AND ACCORDINGLY, ESTIMATED 1% COMMISSION INCOME ON ALLEGED ACCOMMODA TION ENTRIES PROVIDED FOR THE YEAR. BUT, IF YOU GO THROU GH THE DETAILS OF ACCOMMODATION ENTRIES PROVIDED BY THE ASSESSEE WITH IN GROUP COMPANIES, WE FIND THAT IN THE CHART REPRODUCED BY THE LD. AO IN HIS ASSESSMENT ORDER, THERE ARE NO DETAILS OF PURCHASES , AS WELL AS SALES FOR THE AY 2008-09 AND 2009-10. THE ASSESSEE CLAIMS THAT FOR THE YEAR UNDER CONSIDERATION, THERE ARE NO TRANSACT IONS BETWEEN GROUP COMPANIES. IF YOU CONSIDER CLAIM OF THE ASSES EE, IN LIGHT OF DETAILS OF TRANSACTIONS REPRODUCED BY THE AO IN ASS ESSMENT ORDER, IT,S SEEMS THAT THERE IS NO TRANSACTIONS OF ACCOMMO DATION ENTRIES FOR THE YEAR UNDER CONSIDERATION. HOWEVER, THE FACT WIT H REGARD TO IS THERE ANY ACCOMMODATION ENTRIES WITHIN THE GROUP CO MPANIES FROM THE ASSESSEE FOR THE YEAR UNDER CONSIDERATION NEEDS FURTHER VERIFICATION FROM THE LD. AO. THEREFORE, WE SET ASI DE THE ISSUE TO THE FILE OF THE LD. AO FOR BOTH ASSESSMENT YEARS TO RE- EXAMINE THE CLAIM OF THE ASSESEE AND RE-DO THE ASSESSMENT DENOVO IN ACCORDANCE WITH LAW. ITA NOS.3889 & 3890/MUM/2018 IRIS MEDIAWORKS LIMITED 6 9. SIMILARLY, IN RESPECT OF DISALLOWANCE OF BUSINES S LOSS CLAIMED FOR THE YEAR, THE CLAIM OF THE ASSESSEE IS THAT OUT OF TOTAL EXPENDITURE DEBITED INTO THE PROFIT AND LOSS ACCOUNT, THE LD. A O DOES NOT EVEN CONSIDERED INTEREST PAID ON LOANS, AS WELL AS DEPRE CIATION CLAIMED ON FIXED ASSETS, WHILE DISALLOWING TOTAL BUSINESS LOSS CLAIMED FOR THE YEAR. FURTHER, THE ASSESSEE CLAIMS THAT EVEN, IF TH E ASSESSEE IS INTO THE BUSINESS OF PROVIDING ACCOMMODATION ENTRIES, TH E RESULTANT EXPENDITURE, INCLUDING INTEREST ON LOANS AND DEPREC IATION CANNOT BE DISALLOWED. WE FIND THAT THE LD. AO OBSERVED THAT T HE ASSESSEE DID NOT HAVE ANY BUSINESS ACTIVITY, EXCEPT PROVIDING AC COMMODATION ENTRIES TO GROUP COMPANIES. IN CASE THE FINDINGS OF THE LD. AO ARE CORRECT, THEN THE QUESTION OF ALLOWING HUGE EXPENDI TURE CLAIMED BY THE ASSESEE, INCLUDING INTEREST ON LOANS AND DEPREC IATION DOES NOT ARISE. HOWEVER, THE ASSESSEE CLAIMS THAT VARIOUS EX PENDITURE DEBITED INTO THE PROFIT AND LOSS ACCOUNT, INCLUDING INTEREST ON LOANS AND DEPRECIATION ON ASSETS IS GENUINE BUSINESS EXPE NDITURE INCURRED ONLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS. F ACTS ARE CONTRADICTING. WE, THEREFORE, ARE OF THE CONSIDERED VIEW THAT THIS ISSUE IS ALSO NEEDS VERIFICATION FROM THE LD. AO IN LIGHT OF CLAIMS OF THE ASSESEE AND VARIOUS EVIDENCES FILED DURING THE COURSE OF HEARING. HENCE, WE SET ASIDE THIS ISSUE TO THE FILE OF THE LD. AO FOR BOTH ASSESSMENT YEARS AND DIRECT THE AO TO RE-DO TH E ASSESSMENT DENOVO IN ACCORDANCE WITH THE LAW. 10. IN THE RESULT, APPEALS FILED BY THE ASSESSEE FO R AY S 2008-09 AND 2009-10 ARE TREATED AS ALLOWED FOR STATISTICAL PURPOSES. ITA NOS.3889 & 3890/MUM/2018 IRIS MEDIAWORKS LIMITED 7 ORDER PRONOUNCED IN THE OPEN COURT ON THIS 14 /10 /2019 SD/- ( MAHAVIR SINGH ) SD/- ( G. MANJUNATHA ) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; DATED 14 /10/2019 THIRUMALESH SR.PS COPY OF THE ORDER FORWARDED TO : BY ORDER, (ASSTT. REGISTRAR) ITAT, MUMBAI 1. THE APPELLANT 2. THE RESPONDENT. 3. THE CIT(A), MUMBAI. 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. //TRUE COPY//