M/s Shiv Network, Surat V. Deputy Commissioner of Income Tax Circle-3(3), Surat

ITA 4/SRT/2018

• Counselvise Citation: [2021] 107 COUNSELVISE.COM (IT) 9335 (ITAT-SURAT)
• Duration Of Justice: 3 year(s) 6 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-07-2021
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2006-2007
• Appeal Filed On: 02-01-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ANUPAMA SINGLA
• Assessee Lawyers: P M JAGASHETH
• Keywords: Rejection of books of accounts; Income from undisclosed sources
• Section: 143(3); 153C

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, SURAT BENCH, SURAT BEFORE SHRI PAWAN SINGH, JUDICIAL MEMBER AND DR. ARJUN LAL SAINI, ACCOUNTANT MEMBER ITA NO. 4/SRT/2018 (ASSESSMENT YEAR: 2006-07) ( VIRTUAL HEARING IN VIRTUAL COURT) M/S. SHIV NETWORK, 101-102,2 ND FLOOR, RATNA SAGAR, VARACHHA ROAD, SURAT-395006. [PAN : AAQFS0172B] VS THE DCIT, CIRCLE-3(3), ROOM NO 403, AAYAKAR BHAWAN, MAJURA GATE SURAT. APPELLANT RESPONDEDNT APPELLANT BY SHRI P. M. JAGASHETH, CA RESPONDENT BY MS ANUPAMA SINGLA, SR. DR DATE OF HEARING 25.06.2021 DATE OF PRONOUNCEMENT 26.07.2021 O R D E R PER PAWAN SINGH, JUDICIAL MEMBER : 1. THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS)-3 [IN SHORT THE CIT(A)-3], SURAT DATED 28.11.2017. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AS WELL AS LAW ON THE SUBJECT, THE LEARNED COMMISSIONER OF THE INCOME TAX (APPEALS) HAS ERRED IN CONFIRMING THE ACTION OF THE ASSESSING OFFICER IN MAKING ADDITION OF RS.10,55,000/- ON ACCOUNT OF DISALLOWANCE 50% OF SALARY AND BONUS EXPENSES. 2. IT IS THEREFORE PRAYED THAT THE ABOVE ADDITION MAY PLEASE BE DELETED AS LEARNED MEMBERS OF THE TRIBUNAL MAY DEEM IT PROPER. 3. APPELLANT CRAVES LEAVE TO ADD, ALTER OR DELETE ANY GROUND(S) EITHER BEFORE OR IN THE COURSE OF THE HEARING OF THE APPEAL. 2. BRIEF FACTS OF THE CASE ARE THAT ASSESSEE IS ENGAGED IN THE BUSINESS OF CABLE TELEVISION NETWORK. THE ASSESSEE FILED ITS RETURN OF INCOME FOR AY.2006-07 ON 04.04.2008. THE RETURN OF INCOME WAS FILED IN RESPONSE OF 2 ITA NO4/SRT/2018 AY 2006-07 SHIV NETWORK NOTICE UNDER SECTION 153C. THE ASSESSEE WAS COMPLETED UNDER SECTION 143(3) R.W.S. 153C ON 17.12.2008, DETERMINING TOTAL INCOME OF RS.52,61,247/- THEREBY MAKING ADDITION OF RS.42.09 LACS ON ACCOUNT OF UNACCOUNTED INCOME OF THE ASSESSEE AND RS.9.70 LACS ON ACCOUNT OF ESTIMATED NET PROFIT OF RS.9.70 LACS. ON APPEAL BEFORE THE LD. CIT(A), NO RELIEF WAS GRANTED TO THE ASSESSEE. ON FURTHER APPEAL, BEFORE THE TRIBUNAL, THE MATTER WAS RESTORED BACK TO THE FILE OF ASSESSING OFFICER (IN SHORT THE AO) AS THE A.O. HAS NOT CONSIDERED THE BOOKS OF ACCOUNTS LYING SEIZED WITH THE DEPARTMENT. THE ASSESSEE WAS ALSO DIRECTED TO FURNISH THE NECESSARY DOCUMENTS TO THE AO. THE AO IN AN ORDER GIVEN EFFECT AFTER GIVING OPPORTUNITY OF HEARING TO THE ASSESSEE MADE ADDITION OF RS.10.55 LACS BEING 50% OF SALARY AND BONUS EXPENSES IN THE ASSESSMENT ORDER DATED 29.03.2016 PASSED UNDER SECTION 143(3)/153C/254. ON FURTHER APPEAL BEFORE THE LD. CIT(A), THE APPEAL OF THE ASSESSEE WAS DISMISSED IN EX PARTE ORDER. THE LD. CIT(A) ALSO CONSIDERED THE MERIT OF THE CASE AND HELD THAT ASSESSEE HAS NOT FURNISHED REQUISITE EXPLANATION AND DOCUMENTARY EVIDENCE EITHER BEFORE AO OR BEFORE HIM. FURTHER AGGRIEVED, THE ASSESSEE HAS FILED PRESENT APPEAL BEFORE THIS TRIBUNAL. 3. WE HAVE HEARD THE SUBMISSION OF THE LD. AUTHORIZED REPRESENTATIVE (AR) FOR THE ASSESSEE AND THE LD. DEPARTMENTAL REPRESENTATIVE (DR) OF THE REVENUE AND PERUSED THE MATERIAL AVAILABLE ON RECORD. THE LD. AR OF THE ASSESSEE SUBMITS THAT FOR THE ASSESSMENT YEAR UNDER CONSIDERATION, THE ASSESSEE FILED APPEAL BEFORE LD. CIT(A) ON 22.04.2016. THE ASSESSEE SIMULTANEOUSLY FILED APPEAL BEFORE LD. CIT(A), AGAINST THE IDENTICAL ADDITIONS FOR ASSESSMENT YEAR (AY) 2007-08 ON 22.04.2016 ITSELF. THE APPEAL FOR THE 3 ITA NO4/SRT/2018 AY 2006-07 SHIV NETWORK YEAR UNDER CONSIDERATION WAS DISMISSED IN EX PARTE ORDER. THE LD. AR FOR THE ASSESSEE SUBMITS THAT ASSESSEE PARTICIPATED DURING THE HEARING BEFORE THE LD. CIT(A) AND SOUGHT ADJOURNMENT VIDE APPLICATION DATED 04.09.2017. THE LD. CIT(A) FIXED THE HEARING ON 23.10.2017. THE NOTICE ON 23.10.2017 WAS NOT COMPLIED AS IT WAS FESTIVAL SEASON. THE LD. AR FOR THE ASSESSEE SUBMITS THAT THE ASSESSEE HAS GOT GOOD CASE ON MERIT. THE AR FOR THE ASSESSEE PLACED ON RECORD, THE COPY OF ORDER OF LD. CIT(A)-3, SURAT DATED 10.06.2019 WHEREIN ON IDENTICAL GROUNDS OF APPEAL, ON SIMILAR SET OF FACTS THE ASSESSEE WAS ALLOWED FULL RELIEF FOR A.Y. 2007-08. THE LD. AR FOR THE ASSESSEE SUBMITS THAT FACT FOR YEAR UNDER CONSIDERATION IS IDENTICAL AS ON 2007-08, SIMILAR SALARY AND BONUS EXPENSES WERE DISALLOWED BY AO AND ON APPEAL BEFORE THE CIT(A), THE SIMILAR GROUND IS ALLOWED. THE LD. AR SUBMITS THAT IN FACT THIS GROUND OF APPEAL RAISED BY ASSESSEE, IS NOW COVERED IN FAVOUR OF ASSESSEE. 4. ON THE OTHER HAND, THE LD. DR FOR THE REVENUE SUPPORTED THE ORDER OF LD. CIT(A). THE LD. DR FOR THE REVENUE SUBMITS THAT THE ASSESSEE NEITHER FURNISHED REQUISITE DETAILS AND EVIDENCES BEFORE THE AO NOR BEFORE THE LD. CIT(A). THE ASSESSEE WAS GIVEN SUFFICIENT OPPORTUNITY TO MAKE SUBMISSION, HOWEVER, THE ASSESSEE FAILED TO FILE NECESSARY DETAILS BEFORE THE LD. CIT(A). THE CLAIM OF ASSESSEE IN THE GROUNDS OF APPEAL WAS NOT CONSIDERED AND ADJUDICATED BY FIRST APPELLATE AUTHORITY. THEREFORE, THE MATTER MAY BE RESTORED BACK TO THE FILE OF LD. CIT(A) TO CONSIDER THIS APPEAL AFRESH. 5. IN THE REJOINDER SUBMISSION, THE LD. AR OF THE ASSESSEE SUBMITS THAT NO USEFUL PURPOSE WOULD BE SERVED IN SENDING THE MATTER BACK TO THE FILE OF LD. CIT(A). THE MATTER PERTAINS TO AY.2006-07. THE LD. CIT(A) IN SUBSEQUENT 4 ITA NO4/SRT/2018 AY 2006-07 SHIV NETWORK YEAR VIDE ORDER DATED 10.06.2019 CONSIDERED THE IDENTICAL ISSUE AND GRANTED FULL RELIEF TO THE ASSESSEE. THE LD. AR FOR THE ASSESSEE FURTHER INVITED OUR ATTENTION ON THE DIRECTION OF TRIBUNAL IN FIRST GROUND OF APPEAL VIDE DATED 02.09.2014, RELEVANT PART OF WHICH IS EXTRACTED IN PARA NO.3 OF THE ASSESSMENT ORDER. THE LD. AR FOR THE ASSESSEE AFTER REFERRING THE RELEVANT PART OF ORDER OF TRIBUNAL SUBMITS THAT IT WAS CLEARLY DIRECTED TO CONSIDER THE BOOKS OF ACCOUNTS LYING SEIZED WITH THE DEPARTMENT. ALL RECORD RELATING TO THE BOOKS OF ACCOUNT WAS LYING SEIZED WITH THE DEPARTMENT AND WERE ALREADY IN POWER AND POSSESSION OF THE DEPARTMENT. THE LD. AR FOR THE ASSESSEE FURTHER REITERATED THAT THE BENCH MAY CONSIDER THE DECISION OF LD. CIT(A) IN SUBSEQUENT YEAR INSTEAD OF SENDING THE MATTER BACK TO THE FILE OF THE LD. CIT(A). 6. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS OF BOTH THE PARTIES AND PERUSED THE ORDERS OF THE LOWER AUTHORITIES AND THE MATERIAL AVAILABLE ON RECORD. FROM PERUSAL OF CONTENTS OF ASSESSMENT ORDER DATED 29.03.2016 PASSED UNDER SECTION 143(3) R.W.S 145C/254, WE FIND THAT THE MATTER WAS RESTORED BACK TO THE FILE OF THE AO WITH THE DIRECTION TO CONSIDER THE BOOKS OF ACCOUNT LYING SEIZED WITH THE DEPARTMENT, THOUGH THE ASSESSEE WAS DIRECTED TO PROVIDE DOCUMENTS AND DETAILS WHEN CALLED BY THE AO. IT WAS DIRECTED TO PROVIDE THE INFORMATION WITHIN THE FIFTEEN DAYS OF RECEIPT OF ORDER OR FIXING THE DATE OF HEARING. THE AO NOWHERE RECORDED THAT HE HAS CONSIDERED THE BOOKS OF ACCOUNT LYING SEIZED WITH THE DEPARTMENT. THE AO OBSERVED THAT SALARY AND BONUS EXPENSES ARE INCREASED COMPARATIVE TO EARLIER ASSESSMENT AND DISALLOWED 50% OF SALARY AND BONUS EXPENSES. THE AO HAS NOT REJECTED THE BOOKS OF ACCOUNTS. THERE IS NOT FINDING THAT SALARY 5 ITA NO4/SRT/2018 AY 2006-07 SHIV NETWORK AND BONUS EXPENSES ARE BOGUS AND NOT VERIFIABLE. THE LD. CIT(A) CONFERRED THE ORDER OF AO BY TAKING THAT NO DETAILS WERE FURNISHED. AT THE COST OF REPETITION, WE MAY NOTE THAT LD. CIT(A) PASSED THE ORDER OF EX PARTE WITHOUT VERIFICATION OF FACTS AND FOLLOWING THE MANDATE OF ORDER OF TRIBUNAL. WE HAVE SEEN THAT ON SIMILAR APPEAL FILED ON THE SAME DATE THAT IS ON 22.04.2016 FOR AY.2007-08. THE SUCCESSOR OF LD. CIT(A) PASSED THE FOLLOWING ORDER: 6.1.1. I HAVE CONSIDERED THE ASSESSMENT ORDER AS WELL AS THE SUBMISSIONS OF THE APPELLANT. THE GROUNDS OF APPEAL- GROUND NO. 1 PERTAINS TO MAKING ADDITION OF RS.10,55,000/- ON ACCOUNT OF DISALLOWANCE 50% OF SALARY AND BONUS EXPENSES. THE AO MADE THE ASSESSMENT U/S. 143(3) ON 17.12.2008 WHICH WAS UPHELD BY THE CIT(A)- 2, AHMEDABAD VIDE ORDER DATED 20.11.2009. THE HON'BLE ITAT VIDE HIS ORDER DATED 20.09.2014 RESTORED THE MATTER BACK TO THE FILE OF AO. THE AO HELD THAT ON VERIFICATION OF THE COMPARATIVE P & L A/C, IT IS SEEN THAT THERE IS HUGE INCREASE IN SALARY EXPENSES COMPARED TO A.Y. 2005-06 THOUGH THE INCOME HAS BEEN REDUCED. THE AO HELD THAT THERE IS NO JUSTIFICATION FOR SUCH AN INCREASE IN SALARY EXPENSES AND THEREFORE HE DISALLOWED THE 50% OF SALARY EXPENSES AND MADE THE ADDITION OF RS.10,55,000/-. THE APPELLANT SUBMITTED THAT THE AO HAS ONLY MADE THE ADDITION ON THE GROUND THAT THERE IS AN INCREASE IN SALARY IN COMPARISON TO EARLIER YEARS WITHOUT POINTING OUT ANY DEFECTS IN THE BOOKS OF ACCOUNTS OR POINTING OUT ANY DISCREPANCIES. 6.1.2. ON THE PERUSAL OF DETAILS, IT IS OBSERVED THAT THE AO HAS NOT POINTED OUT ANY DEFECTS OR DISCREPANCIES IN THE BOOKS OF ACCOUNTS WHILE MAKING THIS DISALLOWANCE. HE HAS MADE NO EFFORTS TO EXAMINE THE PERSONS TO WHOM SALARIES HAVE BEEN PAID. THE REASONABLENESS OF THE SALARY PAYMENT CANNOT BE QUESTIONED BY THE AO AS SUCH DECISIONS ARE GOVERNED BY COMMERCIAL EXPEDIENCIES AND BUSINESS REQUIREMENT. THE AO HAS NOT APPRECIATED THE SUBMISSION MADE BY THE APPELLANT AND HAS MADE NO ENQUIRIES IN THIS REGARD THAT THE STAR TV HAD INCREASED THEIR RATES MANY TIMES DUE TO THE CHANGE IN THE BROADCASTING SYSTEM FROM ANALOGUE SYSTEM TO DIGITAL SYSTEM BY THE TRAI. THEREFORE, SUCH AD-HOC ADDITIONS CANNOT BE SUSTAINED AND THE GROUND OF APPEAL IS ALLOWED. 7. WE HAVE NOTED THAT THE LD. CIT(A) WHILE CONSIDERING THE IDENTICAL GROUNDS OF APPEAL ON IDENTICAL FACT IN AY.2007-08 BY CONSIDERING THE DIRECTIONS OF 6 ITA NO4/SRT/2018 AY 2006-07 SHIV NETWORK TRIBUNAL DATED 20.09.2014 PASSED THE AFORESAID ORDER. THE LD. CIT(A) IN AY.2007-08 WHILE DELETING THE ADDITION FIND THAT NO DISCREPANCY IN THE BOOKS OF ACCOUNT WAS POINTED OUT WHILE MAKING DISALLOWANCE OF SALARY AND BONUS. FURTHER, REASONABLENESS OF SALARY WAS NOT QUESTIONED. THE LD. CIT(A) IN SUBSEQUENT YEAR ALSO OBSERVED THAT THE AO HAS NOT APPRECIATED STAR TV HAS INCREASED THEIR RATES MANY TIMES BECAUSE OF BROADCASTING SYSTEM FROM ANALOGUE SYSTEM TO DIGITAL SYSTEM BY TELECOM REGULATORY AUTHORITY OF INDIA (TRAI). CONSIDERING THE DETAILS DISCUSSION AND THE RELIEF GRANTED BY LD. CIT(A) IN SUBSEQUENT YEAR, ON IDENTICAL FACTS, WE FIND THAT THE GROUND OF APPEAL RAISED BY REVENUE IS SQUARELY COVERED IN FAVOUR OF ASSESSEE AND NO USEFUL PURPOSE WILL SERVE TO RESTORE THE MATTER BACK TO THE LD. CIT(A). HENCE, THE OBJECTION OF LD. DR FOR THE REVENUE IS NOT ACCEPTED. 10. IN THE RESULT, THE APPEAL RAISED BY THE ASSESSEE IS ALLOWED. THE ORDER PRONOUNCED ON 26.07.2021 BY PLACING THE RESULT ON THE NOTICE BOARD. SD/- SD/- (DR. A. L. SAINI) (PAWAN SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER SURAT, DATED: 26/07/2021 SAMANTA COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT(A) 4. CIT 5. DR /TRUE COPY/ BY ORDER ASSTT. REGISTRAR, ITAT, SURAT