Cheil Communication India Pvt. Ltd., Gurgaon V. DCIT, New Delhi

ITA 5890/DEL/2012

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 1249 (ITAT-DELHI)
• Duration Of Justice: 2 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-02-2013
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 14-01-2013
• Assessment Year: 2008-2009
• Appeal Filed On: 23-11-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: DR SUDHA KUMARI
• Keywords: Opportunity of being heard; Principle of natural justice; Deemed to accrue or arise in india; Wholly owned subsidiary
• Section: 143(3); 244A; 133(6)

Judgement Text

ITA NO. 5890/DEL/2012 1 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH B, NEW DELHI BEFORE SHRI R.P. TOLANI, JUDICIAL MEMBER AND SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER I.T.A. NO. 5890/DEL/2012 A.Y. : 2008-09 CHEIL INDIA PRIVATE LIMITED, FORMERLY KNOWN AS CHEIL COMMUNICATIONS INDIA PRIVATE LIMITED), 2 ND FLOOR, BLOCK-C, VIPUL TECH SQUARE, SECTOR-43, GOLD COURSE ROAD, GURGAON 122002, HARYANA (PAN:- AACCC2299Q) VS. DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE-3(1), NEW DELHI (APPELLANT (APPELLANT (APPELLANT (APPELLANT ) )) ) (RESPONDENT ) (RESPONDENT ) (RESPONDENT ) (RESPONDENT ) ASSESSEE BY : SH. SALIL KAPOOR, ADV. DEPARTMENT BY : DR. SUDHA KUMARI, C.I.T. (D.R.) ORDER ORDER ORDER ORDER PER SHAMIM YAHYA: AM PER SHAMIM YAHYA: AM PER SHAMIM YAHYA: AM PER SHAMIM YAHYA: AM THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST T HE ORDER OF THE ASSESSING OFFICER PASSED U/S. 143(3)/144 OF THE I .T. ACT AND PERTAINS TO ASSTT. YEAR 2008-09. 2. THE GROUNDS RAISED READ AS UNDER:- ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LA W, THE DEPUTY COMMISSIONER OF INCOME-TAX, CIRCLE-3(1), NEW D ELHI ('LEARNED AO') HAS ERRED IN PASSING THE ASSESSMENT ORDER UNDER SECTION 143(3) READ WITH SECTION 144C OF THE INCOME- TAX ACT, 1961 ('ACT') AFTER CONSIDERING THE FOLLOW ING: EACH OF THE GROUND IS REFERRED TO SEPARATELY, WHICH MAY KINDLY BE CONSIDERED INDEPENDENT OF EACH OTHER. ITA NO. 5890/DEL/2012 2 1. THAT THE LEARNED AO AND LEARNED DISPUTE RESOLUTION PANEL ('DRP') HAVE GROSSLY ERRED BOTH ON FACTS AND IN LAW IN HOLDING THE DIFFERENCE BETWEEN THE RECEIPTS IN T HE PROFIT AND LOSS ACCOUNT AND THE AMOUNT OF RECEIPT SH OWN IN THE TDS CERTIFICATES FURNISHED BY THE PAYER OF TH E INCOME AS THE DEEMED INCOME OF THE APPELLANT. 1.1. THAT THE LEARNED AO HAS GROSSLY ERRED IN ADOPTING A CONTRADICTORY APPROACH WHEREIN HE HAS MADE A DISALLOWANCE OF THE PAYMENTS MADE TO THIRD PARTIES AND HAS TERMED IT AS DEEMED INCOME DESPITE THE FACT THAT LEARNED DRP HAS CLEARLY HELD THAT THE DISALLOWANCE CANNOT BE TERMED AS DEEMED INCOME AND HAD DIRECTED THE LEARNED AO TO VERIFY THE PASS THROUGH COST. 1.2 THE LEARNED AO HAS GROSSLY ERRED BOTH ON FACTS AND IN LAW IN HOLDING A HUGE DISALLOWANCE WHICH IS BASED O N PRESUMPTIONS, ASSUMPTIONS, CONJECTURE AND SURMISES WITHOUT GIVING ADEQUATE OPPORTUNITY TO APPELLANT TO SUPPORT ITS CLAIM IN THE COURSE OF ASSESSMENT PROCEEDINGS AND DRP PROCEEDINGS AND SUCH AN ASSESSMENT VIOLATES THE PRINCIPLES OF NATURAL JUSTI CE AND DESERVES TO BE ANNULLED . 1.3. THE LEARNED AO AND LEARNED DRP DID NOT AFFORD ANY OPPORTUNITY OF BEING HEARD TO THE APPELLANT TO SUBSTANTIATE ITS CLAIM WITH RESPECT TO NOTICES THA T WERE ISSUED TO THE VENDORS OF THE APPELLANT UNDER ITA NO. 5890/DEL/2012 3 SECTION 133(6) OF ACT AND WHERE NO CONFIRMATION WA S RECEIVED FROM SUCH VENDORS. 1.4. THE LEARNED AO AND LEARNED DRP HAS COMPLETELY DISREGARDED THE DETAILS RELATED TO VENDOR PAYMENTS SUBMITTED BY THE APPELLANT WHICH INCLUDED CONFIRMATION FROM VARIOUS VENDORS, COPY OF LEDGER ACCOUNTS OF VENDORS INCORPORATING THE DETAILS OF INVOICES RECEIVED FROM THEM, PAYMENTS MADE TO THE VENDORS, ETC AND COPY OF BANK STATEMENTS EVIDENCING THE PAYMENT TO THE VENDORS. 2. THAT THE ADDITIONS/DISALLOWANCES MADE ARE ILLEGA L AND BAD IN LAW AND HAVE BEEN MADE IN TOTAL DISREGARD O F PRINCIPLE OF NATURAL JUSTICE. 3. WITHOUT PREJUDICE TO THE ABOVE, LEARNED AO AND LEARNED DRP HAVE ERRED IN DISALLOWING THE CLAIM OF A PPELLANT IN RESPECT OF THE VENDORS TO WHOM NO NOTICE WAS SENT BY THE LEARNED AO HIMSELF MERELY ON THE BASIS OF PRESUMPTION THAT CLAIM OF THE ASSESSEE IN RESPECT SUCH VENDORS IS AL SO NOT VERIFIABLE. SUCH PRESUMPTION VIOLATES THE PRINCIPLES OF NATURAL JUSTICE AND CONSEQUENTIAL IMPUGNED ADDITION TO THAT EXTENT DESERVES TO BE REJECTED. 4. WITHOUT PREJUDICE TO THE ABOVE, LEARNED AO AND LEARNED DRP HAVE ERRED IN DISALLOWING THE CLAIM OF A PPELLANT IN RESPECT OF AMOUNT WHICH HAS BEEN CONFIRMED BY VEN DORS. IN SOME CASES, EVEN LEARNED AO HAS HIMSELF ACKNOWLEDG ED THAT THERE IS NO DIFFERENCE IN THE AMOUNT CONFIRMED BY THE VENDORS AND AMOUNT CLAIMED BY THE APPELLANT. ITA NO. 5890/DEL/2012 4 5. WITHOUT PREJUDICE TO THE ABOVE, LEARNED AO AND LEARNED DRP ACTED IN COMPLETE DISREGARD TO PRINCIPLES OF NATURAL JUSTICE IN ALLEGING THAT VENDOR PAYMENTS MA DE BY THE APPELLANT ARE UNACCEPTABLE, INSPITE OF CONFIRMAT IONS RECEIVED FROM CERTAIN VENDORS IN RESPONSE TO NOTICE S ISSUED TO SAID VENDORS BY THE LEARNED AO HIMSELF. IN RESPO NSE TO SAID NOTICES, VARIOUS PARTIES CONFIRMED THAT PAYMEN TS WERE MADE BY THE APPELLANT DURING THE SUBJECT YEAR THOUGH AMOUNTS CONFIRMED DID NOT NECESSARILY MATCH DUE TO DIFFERENCE IN ACCOUNTING TREATMENT ADOPTED BY THE APPELLANT AND THE VENDORS. 6. WITHOUT PREJUDICE TO THE ABOVE, MATERIAL COLLECTE D BY THE LEARNED AO AND USED AGAINST THE APPELLANT AND T HE REMAND REPORT SUBMITTED BY LEARNED AO BEFORE THE LEAR NED DRP WAS NEITHER CONFRONTED NOR ANY OPPORTUNITY OF BE ING HEARD WAS GRANTED TO THE APPELLANT TO REBUT THE SAM E. HENCE, THE ADDITION/ DISALLOWANCE MADE ARE UNLAWFUL , UNJUST AND ARE AGAINST THE PRINCIPLES OF NATURAL JUSTICE A ND ARE ALSO HIGHLY EXCESSIVE. 7. THAT THE LEARNED AO AND LEARNED DRP HAS GROSSLY ERRED BOTH ON FACTS AND IN LAW IN TREATING THE ADVA NCES RECEIVED FROM ITS CLIENTS AS ACCRUED INCOME BY MEREL Y RELYING ON THE ACCOUNTING TREATMENT MADE BY THE CLI ENTS OF THE ASSESSEE. 8. THAT THE LD. ASSESSING OFFICER AND LD. DRP HAS ERRED ON FACTS AND IN LAW IN NOT FOLLOWING PRINCIPLE OF C ONSISTENCY ITA NO. 5890/DEL/2012 5 CONSIDERING THE FACT THAT ADVANCES OF SIMILAR NATURE WERE RECEIVED BY ASSESSEE IN A.Y. 2006-07 AND A.Y. 2007 -08 AND ITS TREATMENT OF CONSIDERING AS ADVANCES WAS NOT CHALLENGED BY THE LD. ASSESSING OFFICER IN THE AS SESSMENT OF THOSE YEARS. 9. WITHOUT PREJUDICE TO THE ABOVE, LEARNED AO AND L EARNED DRP HAS GROSSLY ERRED BY CONSIDERING THE ENTIRE AMOU NT OF ADVANCE AS INCOME OF THE ASSESSEE WITHOUT APPRECIAT ING THE FACT THAT SUCH ADVANCE INCLUDES THE PASS THROUGH C OST WHICH IS NOT THE INCOME OF THE ASSESSEE. THE LD. AS SESSING OFFICER AND DRP HAVE DISALLOWED THE PASS THROUGH C OST BY HOLDING THAT SUCH DETAILS WERE NOT SUBMITTED TO THE ASSESSING OFFICER WITHOUT APPRECIATING THE FACT T HAT SUCH DETAILS WERE NEVER ASKED FOR BY EITHER THE LD. ASSE SSING OFFICER OR LD. DRP. 10. THAT THE LEARNED AO HAS ERRED, IN LAW AND FACTS , IN HOLDING THAT THE APPELLANT HAS FURNISHED INACCURATE PARTICULARS AND HAS CONCEALED THE PARTICULARS OF IT S INCOME AND HAS ALSO ERRED IN INITIATING THE PENALTY PROCEE DINGS UNDER SECTION 271 (1 )(C) OF THE ACT. 11. THAT THE LEARNED AO, IN LAW AND FACTS, HAS ERRE D IN CHARGING INTEREST UNDER SECTION 234B, 234D AND 244A (WITHDRAWAL OF INTEREST ON REFUND) OF THE ACT. 12. THE LEARNED DRP HAS ERRED IN CONFIRMING THE ADDIT IONS PROPOSED BY THE LEARNED AO AND IN REJECTING THE OBJ ECTIONS FILED AGAINST THE DRAFT ASSESSMENT ORDER. ITA NO. 5890/DEL/2012 6 13. THAT THE LEARNED DRP HAS ERRED IN NOT GIVING ADE QUATE OPPORTUNITY OF BEING HEARD TO THE APPELLANT. 14. THAT THE EVIDENCES PLACED AND THE MATERIAL AVAIL ABLE ON RECORD HAS NOT BEEN PROPERLY AND JUDICIOUSLY CONS IDERED AND THE ADDITIONS HAVE BEEN MADE IGNORING THE MATER IAL ON RECORD AND ARE AGAINST THE PRINCIPLES OF NATURAL JUS TICE. THE APPELLANT CRAVES LEAVE TO ADD, AMEND, VARY, OMIT OR SUBSTITUTE ANY OF THE AFORESAID GROUNDS OF APPEAL A T ANY TIME BEFORE OR AT THE TIME OF HEARING OF THE APPEAL . THE APPELLANT PRAYS FOR APPROPRIATE RELIEF BASED ON THE SAID GROUNDS OF APPEAL AND FACTS AND CIRCUMSTANCES OF TH E CASE. 3. APROPOS ADDITION OF ` 1,581,163,105/- CHEIL INDIA IS WHOLLY OWNED SUBSIDIARY OF CHEIL CO MMUNICATIONS INC. THE COMPANY WAS INCORPORATED ON 08.7.2003 AND IS ENGAGED IN THE BUSINESS OF CREATIVE ADVERTISING, OUTDOOR AND E XHIBITION BUSINESS FOR RELATED SAMSUNG GROUP AND UNRELATED CUSTOMERS. ASSESSING OFFICER NOTED THAT WHILE EXAMINING TDS CERTIFICATES THAT TOTAL RECEIPTS AS PER THESE CERTIFICATES DURING THE YEAR ARE ` 179 ,79,77,515/-. BUT THE RECEIPTS SHOWN BY ASSESSEE IS ONLY ` 20,01,15,050/- . ACCORDINGLY, HE ASKED ASSESSEE TO FILE EXPLANATION FOR THE DIFFEREN CE AND RECONCILIATIONS, IF ANY. A RECONCILIATION STATEME NT WAS FILED BY ASSESSEE AS UNDER:- RECONCILIATION AMOUNT (`) GROSS AMOUNT RECEIVED/ RECEIVABLE FROM CLIENTS AS 1,797,977,515 ITA NO. 5890/DEL/2012 7 PER TDS CERTIFICATES LESS: ADVANCES RECEIVED FROM THE CLIENTS AS ON MARCH 31, 2008 16,699,360 BALANCE 1,781,278,155 LESS: AMOUNT / PAYABLE TO THIRD PARTY VENDORS 1,581 ,163,105 REVENUE (INCOME FROM ADVERTISING SERVICES) AS PER PROFIT AND LOSS ACCOUNT 200,115,050 IN ORDER TO VERIFY THE CLAIM OF ASSESSEE REGARDING AMOUNT PAID / PAYABLE TO THIRD PARTY VENDORS AMOUNTING TO ` 1,58 1,163,105, THE ASSESSING OFFICER ISSUED NOTICES U/S. 133(6) TO AL L SUCH VENDORS NUMBERING INTO 80. AS MENTIONED IN DRAFT ASSESSMEN T ORDER, OUT OF THE TOTAL 80 NOTICES, 52 WERE RECEIVED BACK UNSERV ED, THOUGH THE SAME WERE ISSUED ON THE ADDRESS PROVIDED BY THE ASS ESSEE COMPANY. IN 25 CASES THE RESPONSE WERE RECEIVED BUT THE AMOU NT SHOWN BY THE ASSESSEE WAS NOT MATCHING WITH THE CONFIRMED AMOUNT RECEIVED FROM THE PARTIES AND IN BALANCE 3 CASES THE NOTICES DID NOT RECEIVE BACK NOR ANY CONFIRMATION RECEIVED. ACCORDINGLY, ASSESSING OFFICER PROPOSED TO DISALLOW ENTIRE AMOUNT OF ` 1,58,11,63,105/-. 4. BEFORE THE DRP, IT WAS SUBMITTED THAT ASSESSEE UNDE RTAKES ADVERTISING SERVICES FOR ITS CLIENTS IN CAPACITY OF AN AGENT. THE ASSESSEE ACTS AS AN INTERMEDIARY BETWEEN ITS CLIENT S AND THE THIRD PARTY VENDORS IN ORDER TO FACILITATE THE PLACEMENT OF ADVERTISEMENT. THE ASSESSEE IS REMUNERATED ON THE BASIS OF AN AGR EED COMMISSION FIXED AS A PERCENTAGE OF THE ADVERTISEMENT SPENDS O N BEHALF OF ITS CLIENTS. THEREFORE, ONLY SUCH COMMISSION IS RECOG NIZED AS AN INCOME AND THE PAYMENTS TO BE MADE TO THIRD PARTY VENDORS R ECOGNIZED AS ITA NO. 5890/DEL/2012 8 PASS THROUGH COST AND ARE NOT DEBITED TO PROFIT AND LOSS ACCOUNT. THIS IMPLIES THAT THOUGH ABOVE LIABILITY TO THE VENDORS H AS BEEN RECOGNIZED IN THE BOOKS OF ACCOUNTS, THE SAME HAS NOT BEEN ROU TED THROUGH THE PROFIT AND LOSS ACCOUNT AS THE SAME HAS BEEN NETTED OFF AGAINST THE CORRESPONDING REVENUE RECEIVED FROM THE CLIENT FOR WHOM SUCH SERVICES ARE PURCHASED FROM VENDORS. FURTHER, IT WAS SUBMITTED THAT THE ASSESSEE PAYS TO T HE THIRD PARTY VENDORS ONLY WHEN CORRESPONDING AMOUNT IS RECOVERED FROM THE RELEVANT CLIENT. IN THE EVENT A CLIENT FAILS TO PAY ANY SUCH AMOUNTS TO THE ASSESSEE, THE CREDIT RISK IS BORNE BY THE THIR D PARTY VENDOR. THEREFORE, THE ASSESSEE DOES NOT ASSUME ANY RISK ON ACCOUNT OF NON- PAYMENT BY ITS DEBTORS AND SUCH RISK IS BORNE BY THE THIRD PARTY VENDOR. THAT ALL THE INVOICES AND / OR PURCHASE O RDERS FROM THIRD PARTY VENDORS NECESSARILY NEED TO CONTAIN ACCOUNT CUSTOME R NAME. FURTHER, IT MUST BE NOTED THAT THE APPOINTMENT OF THI RD PARTY VENDORS, FIXATION OF PRICING AN OTHER TERMS OF CONTRACT ETC. ARE TAKEN AFTER TAKING NECESSARY APPROVALS IN THIS REGARD FROM THE CLIENT. ACCORDINGLY, WITH RESPECT TO THE APPOINTMENT AND SPENDS ON ACCO UNT OF RENTING ADVERTISEMENT SPACE FROM THIRD PARTY VENDORS, THE ASS ESSEE OPERATES AS AN AGENT OF ITS CLIENT AND SUCH COST IS RECOGNIZ ED AS A PASS THROUGH COST. IT WAS THEREFORE SUBMITTED THAT THE AMOUNT PA ID / PAYABLE TO THE ABOVE VENDORS HAS BEEN REDUCED FROM THE CORRESPONDIN G AMOUNT RECEIVED FROM THE CLIENTS AND THEREFORE SUCH RECEIP TS DO NOT FORM PART OF REVENUE FROM ADVERTISING SERVICES CREDITED TO THE P&L ACCOUNT. 5. UPON ASSESSEES OBJECTIONS RAISED IN THIS REGAR D, THE DRP OBSERVED THAT ASSESSEE WAS HAVING THE MODUS OPERAND I FOR ACCOUNTING THE COMMISSION INCOME ONLY AND TREATING TH E BALANCE ITA NO. 5890/DEL/2012 9 AMOUNT AS PASS THROUGH COST. IT AGREED WITH THE ASSESSEE TO THE EXTENT THAT ASSESSING OFFICER SHOULD NOT HAVE PROP OSED TO MAKE ADDITION AS DEEMED INCOME. RATHER HE SHOULD MAKE ADDI TION ON ACCOUNT OF UNVERIFIABLE PASS THROUGH COST. BUT A T THE SAME TIME IT WAS FOUND THAT APPROACH OF ASSESSING OFFICER IS ALSO CORRECT TO VERIFY THE GENUINENESS OF THE CLAIM OF ASSESSEE OF PASS THR OUGH COST. THE ASSESSING OFFICER WAS FOUND TO BE WELL WITHIN HIS RIGHT TO VERIFY THE GENUINENESS OF THE CLAIM OF PASS THROUGH COST. IF THE RECIPIENTS OF SUCH PASS THROUGH COST EITHER DO NOT CONFIRM THE AMOU NT AT ALL OR CONFIRM ONLY PART AMOUNT, THE ASSESSING OFFICER WAS DUTY BOUND TO ADD REMAINING UNCONFIRMED AMOUNT AFTER GIVING OPPORTUN ITY TO THE ASSESSEE. BUT THE DRP OBSERVED THAT NO EFFORT HAS BEEN MADE BY THE ASSESSEE TO ENSURE THAT CONFIRMATION FROM REMAINING CASES ARE PRODUCED EXCEPT SUBMITTING THAT PAYMENT TO THEM HAS BEEN MADE BY CHEQUE. IT FURTHER OBSERVED THAT THEREFORE TO TH E EXTENT OF AMOUNT PERTAINING TO THESE PARTIES IN WHICH NO CONFIRMATION IS RECEIVED OR TO WHOM NOTICES RETURNED UNSERVED, THE ACTION OF ASSES SING OFFICER WAS CORRECT. DRP FURTHER OBSERVED THAT THE ASSESSING O FFICER IN THE REMAND REPORT FOUND THAT IN 18 CASES AMOUNT TOTALING TO ` 37,77,54,192/- WAS EXPLAINED AND THEREFORE ACCEPT ABLE. THE ASSESSING OFFICER WAS DIRECTED NOT TO MAKE ADDITIO N TO THIS EXTENT. 6. AGAINST THE ABOVE SAID ORDERS OF THE REVENUE, TH E ASSESSEE IS IN APPEAL BEFORE US. 7. WE HAVE HEARD THE RIVAL CONTENTIONS IN LIGHT OF THE MATERIAL PRODUCED AND PRECEDENT RELIED UPON. WE FIND THAT DRP HAS PROPERLY APPRECIATED THE MODE OF ACCOUNTING OF THE ASSESSEE. WE AGREE WITH THE DRP THAT ASSESSING OFFICER IS WELL WITHIN HIS R IGHTS TO VERIFY THE ITA NO. 5890/DEL/2012 10 GENUINENESS OF THE CLAIM OF PASS THROUGH COST. IF T HE RECIPIENTS OF SUCH PASS THROUGH COST EITHER DO NOT CONFIRM THE AMOUNT A T ALL OR CONFIRM ONLY PART AMOUNT, THE ASSESSING OFFICER IS CORRECT TO ADD REMAINING UNCONFIRMED AMOUNT AFTER GIVING OPPORTUNITY TO THE A SSESSEE. IN THIS REGARD, WE FIND THAT IN THIS CASE THE ASSESSING OFF ICER ISSUED NOTICES U/S. 133(6) TO ALL THE VENDORS OF THE ASSESSEE. VEN DORS NUMBERING 18 WERE FOUND ACCEPTABLE. IN THIS REGARD, WE NOTE THAT ASSESSEE HAS PLEADED THAT ADEQUATE OPPORTUNITY WAS NOT GIVEN TO THE ASSESSEE TO SUBSTANTIATE ITS CLAIM WITH RESPECT TO THE NOTICES THAT WERE ISSUED TO THE VENDORS OF THE ASSESSEE U/S. 133(6) OF THE ACT AND NO CONFIRMATION WAS RECEIVED FROM SUCH VENDORS. WE FIND CONSIDERAB LE COGENCY IN THE ASSESSEES SUBMISSIONS IN THIS REGARD. IN THIS REGA RD, WE NOTE THAT ITAT IN ASSESSEES OWN CASE IN I.T.A. NOS. 5161 & 5 162/DEL/2010 HAS CONSIDERED THE ANALOGICAL SITUATION AS UNDER:- 21. IN THIS REGARD, IT IS SEEN THAT INDEED, THE ASSESSING OFFICER COLLECTED EVIDENCE AT THE BACK OF THE ASSESSEE AND NEVER CONFRONTED THE SAME TO THE ASSESSEE. THE ASSESSEE WAS NOT ALLOWED ANY OPPORTUNITY TO REBUT THE EVIDENCE. HOWEVER, THE ASSESSING OFFICER WENT ON TO MAKE THE ADDITION OF ` 89,39,92,188/-, ON ACCOUNT OF THE ALLEGED SHORT RECEIPTS DECLARED IN THE PROFIT AND LOSS ACCOUNT. NOW, THIS IS ENTIRELY IN VIOLATION OF THE NATURAL JUSTICE PRINCIPLES OF AUDI ALTEREM PARTERM. NOBODY CAN BE CONDEMNED IN HEARING. ADDITION HEREIN HAVING BEEN MADE AT THE BACK OF THE ASSESSEE WITHOUT CONFRONTING THE SAME TO THE ASSESSEE ITA NO. 5890/DEL/2012 11 MUCH LESS ALLOWING THE ASSESSEE ANY OPPORTUNITY TO REBUT IT, THIS ADDITION, AS IT STANDS, IS NOT SUSTAINABLE IN THE EYE OF LAW. ACCORDINGLY, THIS ISSUE IS REMITTED TO THE FILE OF THE ASSESSING OFFICER, TO BE DECIDED AFRESH IN ACCORDANCE WITH LAW, ON PROVIDING DUE AND ADEQUATE OPPORTUNITY TO THE ASSESSEE TO REBUT THE EVIDENCE COLLECTED BY THE ASSESSING OFFICER AT THE BACK OF THE ASSESSEE. 22. IN THIS REGARD, A PERUSAL OF THE RELEVANT PORTI ON OF THE DRPS ORDER, AS REPRODUCED HEREIN ABOVE, SHOWS THAT THE ASSESSEE HAS PRODUCED CONFIRMATIONS FROM 45 VENDORS BEFORE THE DRP, AND THE DRP HAD FORWARDED THE SAME TO THE ASSESSING OFFICER FOR VERIFICATION. THE ASSESSING OFFICER HAD REQUESTED FOR MORE TIME TO MAKE THE VERIFICATION. THE DRP, HOWEVER, DIRECTED THE ASSESSING OFFICER TO VERIFY THE EVIDENCE AND IF THE ASSESSING OFFICER WERE SATISFIED, HE WAS TO RESTRICT THE DISALLOWANCE, IF ANY, WHICH, IN ANY CASE, AS PER THE DRP, COULD NOT EXCEED ` 89,39,92,188/-, THE PAYMENTS MADE TO THIRD PARTIES NOT VERIFIABLE. SINCE THE MATER I S NOW BEING REMITTED TO THE FILE OF ASSESSING OFFICER, AS ABOVE, THE ASSESSEE WOULD GET AMPLE OPPORTUNITY TO PROVE ITS CASE. ITA NO. 5890/DEL/2012 12 23. THE ENTIRE MATTER IS, ACCORDINGLY, REMITTED TO THE FILE OF THE ASSESSING OFFICER TO BE DECIDED AFRESH IN ACCORDANCE WITH LAW ON AFFORDING ADEQUATE, DUE AND PROPER OPPORTUNITY OF HEARING TO THE ASSESSEE BY CONFRONTING THE ENTIRE EVIDENCE COLLECTED TO THE ASSESSEE. 8. AS IN THE ABOVE CASE, IN THIS CASE WE NOTE THAT ASSESSEE NEEDS TO BE PROVIDED A FURTHER OPPORTUNITY TO SUBSTANTIATE I TS CLAIM IN CASE OF VENDORS FROM WHOM THE CONFIRMATION HAS NOT BEEN REC EIVED. HENCE, IN ACCORDANCE WITH ITAT DECISION AS ABOVE, WE REMIT THIS ISSUE TO THE FILE OF THE ASSESSING OFFICER TO CONSIDER THE ISSU E AFRESH, AFTER GIVING THE ASSESSEE PROPER OPPORTUNITY OF BEING HEARD. 9. APROPOS ADDITION OF ` 16,699,360/- ON THIS ISSUE THE ASSESSING OFFICER NOTED THAT AD VANCES CLAIMED TO BE RECEIVED AS ON MARCH 31, 2008 AMOUNTING TO ` 1 6,699,360/- AS APPEARING IN THE BALANCE SHEET ARE FROM FOLLOWING TW O PARTIES:- NAME OF THE PARTY AMOUNT (`) SAMSUNG INDIA ELECTRONICS PVT. LTD. 64,99,721/- SAMSUNG TELECOMMUNICATIONS INDIA PVT. LTD. 1,01,99,639/- THESE AMOUNTS HAVE NOT BEEN SHOWN AS RECEIPTS BY THE ASSESSEE. RATHER ASSESSEE HAS SHOWN THE SAME AS ADVA NCE. ON BEING ASKED BY THE ASSESSING OFFICER, IT WAS EXPLAINED TH AT AS PER THE PROVISIONS OF THE ACT, TAX HAS TO BE DEDUCTED BY THE PAYER EITHER ON ITA NO. 5890/DEL/2012 13 PAYMENT OR ON ACCRUAL OF EXPENSES WHICHEVER IS EARL IER. ACCORDINGLY, CLIENT OF THE ASSESSEE HAVE PAID ADVANCE FOR SERVIC ES AMOUNTING TO ` 1,66,99,360/- ON WHICH TAX HAS BEEN DEDUCTED BY THE M IN THE SUBJECT YEAR BUT THE ASSESSEE HAS RECOGNIZED IT AS INCOME IN THE SUBSEQUENT YEARS WHEN SERVICES ARE ACTUALLY RENDERED. ACCORD INGLY, SUCH AMOUNT HAS NOT BEEN SHOWN AS REVENUE FROM ADVERTISING SERVI CES IN THE YEAR UNDER CONSIDERATION. THE ASSESSING OFFICER ISSUED NOTICES U/S. 133(6) TO THESE TWO PARTIES WHO IN TURN HAD CONFIRMED HAVE BEEN PAID THIS AMOUNT AND BOOKED ALSO AS EXPENDITURE IN THEIR ACCO UNTS DURING THE YEAR ITSELF. THE ASSESSING OFFICER ACCORDINGLY HAS PROPOSED TO ADD THIS AMOUNT OF ` 1,66,99,360/- AS REVENUE RECEIPTS OF ASSESSEE DURING THE YEAR. 10. ASSESSEES SUBMISSIONS BEFORE THE DRP WAS AS UNDE R:- IT IS THE SUBMISSION OF THE ASSESSEE THAT IT FOLLOWS MERCANTILE METHOD OF ACCOUNTING AND RECOGNIZES THE INCOME IN THE YEAR IN WHICH SERVICES IS RENDERED. AS PER THE REVENUE RECOGNITION POLICY ADOPTED BY THE ASSESSEE CITED AS NOTE 1(F) OF THE NOTES TO ACCOUNTS DETAILED AT SCHE DULE 15 OF THE AUDITED FINANCIALS, RECEIPTS FROM COMMISSION INCO ME IN RESPECT OF ADVERTISEMENT PLACED WITH MEDIA, BY THE COMPANY, ON BEHALF OF ITS CLIENTS IS RECOGNISED AS I NCOME IN THE PERIOD DURING WHICH THE ADVERTISEMENT IS PUBLIS HED OR AIRED. FURTHER, WITH RESPECT TO FEES AND INCOME IN RESPECT OF PRODUCTION JOBS AND OTHER NON MEDIA RELATED SERVI CES, THE SAME IS RECOGNIZED ON THE COMPLETION OF JOBS AN D THE PROVISION OF SERVICES, RESPECTIVELY. LD. ARO HAS N OT APPRECIATED FACTS OF THE CASE AND MERELY ON THE BAS IS OF ITA NO. 5890/DEL/2012 14 THE TREATMENT GIVEN BY PAYER HAS PROPER TO ADD SUCH RECEIPTS AS TAXABLE INCOME OF THE ASSESSEE. 11. CONSIDERING THE ABOVE, DRP STATED THAT THE AMOUNT UNDER REFERENCE HAS BEEN RECEIVED BY THE ASSESSEE. THE PAYER HAS ALREADY TREATED THIS AMOUNT AS EXPENDITURE DURING THE YEAR. IF THE REVENUE IS RECOGNIZED IN THE CASE OF THE ASSESSEE DURING THIS YEAR ITSELF IT WILL LEAD TO ANOMALY. THEREFORE, IT DO NOT FIND ANY INFIRMIT Y IN THE PROPOSED ACTION OF THE ASSESSING OFFICER. AN ALTERNATE AR GUMENTS WAS RAISED BY THE ASSESSEE OF NOT GIVING CREDIT OF PASS THROUGH C OST IN CASE THE AMOUNT IS BEING TREATED AS REVENUE. DRP HELD THAT THE SAME ALSO COULD NOT HAVE BEEN ENTERTAINED BY ASSESSING OFFICE R AS NO DETAIL HAS BEEN PROVIDED BY THE ASSESSEE AS TO HOW MUCH IS PAS S THROUGH COST INCURRED DURING THE YEAR RELATING TO THESE RECEIPT S AND CONFIRMATION THEREOF, IF ANY. THEREFORE, DRP HELD THAT ALTERNA TE OBJECTION OF THE ASSESSEE ALSO CANNOT BE ENTERTAINED AND THEREFORE, REJECTED. 12. AGAINST THE ABOVE ORDERS OF THE REVENUE, THE AS SESSEE IS IN APPEAL BEFORE US. 13 WE HAVE HEARD THE RIVAL CONTENTIONS IN LIGHT OF THE MATERIAL PRODUCED AND PRECEDENT RELIED UPON. WE FIND THAT T HE PARTIES WHO HAVE PAID THE SAID ADVANCE HAS CLEARLY INFORMED THA T THE AMOUNT IN QUESTION HAS BEEN TREATED AS EXPENSES INCURRED BY THEM DURING THE YEAR. HENCE, THE PLEA OF THE ASSESSEE TO TREAT TH E AMOUNT RECEIVED AS ADVANCE IS NOT VERY COGENT. HOWEVER, WE FIND THAT T HERE IS CONSIDERABLE COGENCY IN THE ASSESSEES SUBMISSIONS T HAT PROPER CREDIT OF PASS THROUGH COST SHOULD BE TAKEN, IF THE AMOUNT IS BEING TREATED AS REVENUE RECEIPT. SINCE WE HAVE ALREADY REMITTED TH E FIRST ISSUE IN THIS CASE TO THE FILE OF THE ASSESSING OFFICER. WE FIND THAT INTEREST OF JUSTICE ITA NO. 5890/DEL/2012 15 WILL BE SERVED, IF THIS ISSUE IS ALSO REMITTED TO T HE FILE OF THE ASSESSING OFFICER. THE ASSESSING OFFICER WILL EXAMINE THE A SSESSEES SUBMISSION IN THIS REGARD REGARDING THE PASS THROUGH COST IN T HIS CASE. WE HOLD AND DIRECT ACCORDINGLY. 14. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE STANDS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 15/2/2013. SD/- SD/- [ [[ [R.P. TOLANI R.P. TOLANI R.P. TOLANI R.P. TOLANI] ]] ] [SHAMIM YAHYA] [SHAMIM YAHYA] [SHAMIM YAHYA] [SHAMIM YAHYA] JUDICIAL MEMBER JUDICIAL MEMBER JUDICIAL MEMBER JUDICIAL MEMBER ACCOUNTANT MEMBER ACCOUNTANT MEMBER ACCOUNTANT MEMBER ACCOUNTANT MEMBER DATE 15/2/2013 SRBHATNAGAR SRBHATNAGAR SRBHATNAGAR SRBHATNAGAR COPY COPY COPY COPY FORWARDED TO: FORWARDED TO: FORWARDED TO: FORWARDED TO: - -- - 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT (A) 5. DR, ITAT TRUE COPY BY ORDER, ASSISTANT REGISTRAR, ITAT, DELHI BENCHES ITA NO. 5890/DEL/2012 16