ACIT, New Delhi V. M/s Sandeep Marwah, New Delhi

ITA 6004/DEL/2010

• Counselvise Citation: [2018] 121 COUNSELVISE.COM (IT) 5965 (ITAT-DELHI)
• Duration Of Justice: 7 year(s) 4 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-05-2018
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: G
• Next Hearing Date: 23-05-2017
• Assessment Year: 2007-2008
• Appeal Filed On: 30-12-2010
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: K TIWARI
• Keywords: Business expenditure; Diversion of income; Corroborative evidences
• Section: 145

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH G , NEW DELHI BEFORE S H. H. S. SIDHU , ACCOUNTANT MEMBER AND S H . N. K. BILLAIYA , JUDICIAL MEMBER ITA NO. 6004/DEL/2010 ASSESSMENT YEAR: 2007 - 08 ACIT CIRCLE 23 (1), ROOM NO. 190 C. R. B UILDING , I. P. ESTATE NEW DELHI VS SANDEEP MARWAH W - 121, G. K. PART - I NEW DELHI AAGPM2292L (APPELLANT) (RESPONDENT) APPELLANT BY SH. K. TIWARI, SR. DR RESPONDENT BY SH. ANIL KUMAR AGGARWAL, CA SH. DINESH KUMAR AGGARWAL, CA CROSS OBJECTIO N NO. 33/DEL/2011 ASSESSMENT YEAR: 2007 - 08 SANDEEP MARWAH W - 121, G. K. PART - I NEW DELHI AAGPM2292L VS ACIT CIRCLE 23 (1), ROOM NO. 190 C. R. BUILDING , I. P. ESTATE NEW DELHI (APPELLANT) (RESPONDENT) APPELLANT BY SH. ANIL KUMAR A GGARWAL, CA SH. DINESH KUMAR AGGARWAL, CA RESPONDENT BY SH. K. TIWARI, SR. DR 2 ITA NO.1606 & 1607 /DEL/2014 ASSESSMENT YEAR: 2008 - 09 & 2007 - 08 SANDEEP MARWAH W - 121, G. K. PART - I NEW DELHI PAN AAGPM2292L VS ACIT CIRCLE 23 (1), ROOM NO. 19 0 , C. R. BUILDING , I. P. ESTATE , NEW DELHI (APPELLANT) (RESPONDENT) APPELLANT BY SH. ANIL KUMAR AGGARWAL, CA SH. DINESH KUMAR AGGARWAL, CA RESPONDENT BY SH. K. TIWARI, SR. DR DATE OF HEARING: 22 /0 5 /2018 DATE OF PRONOUNCEMENT: 2 5 / 0 5 /2018 ORDER PER N. K. BILLAIYA, AM: ITA NO.6004/DEL/2010 AND CO.NO.33/DEL/2011 ARE APPEAL BY REVENUE AND CROSS OBJECTION BY THE ASSESSEE DIRECTED AGAINST THE ORDER OF THE CIT (A) - XXIII, DELHI DATED 27.10.2010 PERTAINING TO A. Y. 2007 - 08. 2. I TA NO. 1606/DEL/2014 IS THE APPEAL BY THE ASSESSEE PREFERRED AGAINST THE ORDER OF THE CIT(A) - XXIII, DELHI DATED 31.12.2013 PERTAINING TO A. Y. 2008 - 0 9 AND ITA NO. 1607/DEL/2014 IS THE APPEAL BY THE ASSESSEE PREFERRED AGAINST THE ORDER OF CIT ( A) - XXIII, DE LHI DATED 31.12.2013 PERTAINING TO A. Y. 2007 - 08. ALL THESE APPEALS BELO NG TO THE SAME ASSESSEE AND WERE HEARD TOGETHER FOR THE SAKE OF CONVENIENCE. 3. WE FIRST TAKE UP THE ITA NO. 6004/DEL/2010 REVENUE S APPEAL FOR A. Y. 2007 - 08. 3 4. THE FIRST GRIEVANC E OF THE REVENUE RELATES TO THE DELETION OF THE ADDITION OF RS.83.88 LACS MADE BY THE ASSESSING OFFICER ON ACCOUNT OF PRODUCTION FEE. 5. THE ASSESSEE IS ENGAGED IN EDUCATION AND TRAINING OF STUDIES FOR FILM AND MEDIA THROUGH ITS PROPRIETARY CONCERN ASIAN ACADEMY OF FILM AND TELEVISION. 6. DURING THE COURSE OF THE SCRUTINY ASSESSMENT PROCEEDINGS THE ASSESSING OFFICER NOTICED THAT THE ASSESSEE HAS SHOWN RECEIPT OF RS. 2.20 CRORES ON ACCOUNT OF COURSE FEE AND RS. 39.33 LACS AS OTHER INCOME. THE ASSESSING O FFICER FOUND THAT THE AMOUNT OF COURSE FEE SHOWN BY ASSESSEE DOES NOT INCLUDE THE ENTIRE AMOUNT RECEIVED BY THE ASSESSEE F ROM STUD ENTS . THE ASSESSEE WAS ASKED TO FURNISH COPIES OF ACCOUNT. AFTER PERUSING THE DETAILS , THE ASSESSING OFFICER FOUND THAT THE AS SESSEE HAS NOT DEBITED THE PRODUCTION EXPENSES IN HIS P & L ACCOUNT AND HAS ALSO NOT CREDITED THE RECEIPT OF PRODUCTION FEES RECEIVED FROM THE STUDENTS IN HIS P & L ACCOUNT. THE ASSESSING OFFICER FOUND THAT THE SAME IS KEPT IN A SEPARATE ACCOUNT IN THE NA ME OF PRODUCTION FEE ACCOUNT THE ASSESSEE WAS ASKED TO JUSTIFY ITS STAND. THE ASSESSEE EXPLAINED THAT IT HAS SHOWN OF RECEIPT OF RS. 83.88 LACS FROM VARIOUS STUDENTS AND HAS MADE PAYMENT OF RS. 77.12 LACS TO M/S. MARWAH FILM & VIDEO PRODUCTIONS. IT WAS EXPLAINED THAT PURSUANT TO THE MOU WITH M/S. MARWAH FILM & VIDEO PRODUCTIONS THE PRODUCTION FEE WAS RECEIVED FROM THE STUDENTS WHICH WAS SUBSEQUENTLY ADJUSTED FROM THE PAYMENTS MADE. 7. THE ASSESSING OFFICER DID NOT ACCEPT THE CONTENTION OF THE ASSESSEE AND FORM A BELIEF THAT THIS IS NOTHING BUT DIVERSION OF INCOME. THE ASSESSING OFFICER WAS OF FIRM BELIEF THAT THE ASSESSEE SHOULD HAVE INCLUDED THE AMOUNT OF RS. 83.88 LACS IN HIS G ROSS RECEIPTS. INVOKE THE PROVISION OF SECTION 145 (3) OF THE ACT. THE AS SESSING OFFICER REJECTED THE DECLARED 4 RECEIPTS AND MADE AN ADDITION OF RS. 83.88 LACS. THE ASSESSING OFFICER FURTHER OBSERVED THAT I F THIS AMOUNT WAS PAID TO M/S. MARWAH FILM & VIDEO PRODUCTIONS THE SAME MAY BE TREATED AS A LEGITIMATE BUSINESS EXPENDITURE BUT SINCE THE ASSESSEE HAS NOT DE DUCTED TAX AT SOURCE THE SAME IS ALSO DISALLOWABLE U/S. 40 (A) (IA) OF THE IT ACT, 1961. 8. ASSESSEE STRONGLY AGITATED THE MATTER BEFORE THE CIT (A) AND BROUGHT TO THE NOTICE OF THE CIT(A) THAT THE AMOUNT HAS BEEN RECEI VED BY THE ASSESSEE ON ACCOUNT OF COURSE FEES AND PASSED ON TO M/S. MARWAH FILM & VIDEO PRODUCTIONS. IT WAS EXPLAINED THAT THIS HAS BEEN DONE AS PER THE MOU. AFTER CONSIDERING THE FACT AND THE SUBMISSIONS THE CIT (A) WAS CONVINCED THAT THE ASSESSEE HAS RECEIVED THE AMOUNT ON BEHALF OF THE M/S. MARWAH FILM & VIDEO PRODUCTIONS AS PART OF THE COURSE FEE. THE CIT (A) FURTHER FOUND THAT NO PART OF AMOUNTS RECEIVED IN THIS REGARD HAS BEEN RETAINED BY THE ASSESSEE AS INCOME. THE CIT (A) FURTHER OBSERVED THAT THE ASSESSEE HAS ONLY RECEIVED FEE ON BEHALF OF THE M/S. MARWAH FILM & VIDEO PRODUCTIONS TO FACILITATE A SINGLE POINT OF RECEIPT FOR THE PURPOSE OF STUDIES. THE CIT (A) ACCORDINGLY DIRECTED THE ASSESSING OFFICER TO DELETE THE ADDITION. 9. BEFORE US THE DR STRONGLY SUPPORTED THE ASSESSING OFFICER AND THE COUNSEL FOR THE ASSESSEE RELATE UPON THE FINDING OF THE CIT (A). 10. WE HAVE CAREFULLY CONSIDERED THE ORDERS OF THE AUTHORITIES BELOW. THE UNDOUBTED FACT IS THAT THE ASSESSEE WAS CREDITING THE COURS E FEE RS. 83.88 CRORES IN A SEPARATE ACCOUNT. IT IS ALSO NOT IN DISPUTE THAT THE FEES SO RECEIVED WAS REMITTED TO M/S. MARWAH FILM & VIDEO PRODUCTIONS. THE ASSESSING OFFICER HAS ALSO ADMITTED THE FACT THAT THE ASSESSEE HAS NOT RETAINED ANY PART OF THIS AM OUNT AS HIS INCOME. THE ASSESSING OFFICER HAS ALSO NOT DISPUTED THE CONTENTS OF THE MOU AND PURSUANT TO THE CONTRACT WITH M/S. MARWAH FILM & VIDEO PRODUCTIONS THE ASSESSEE HAD MADE THE ARRANGEMENT FOR THE BENEFIT OF STUDENTS SO THAT THEY DID NOT HAVE TO D EPOSIT 5 FEES AT TWO DIFFERENT PLACES. IN OUR CONSIDERED OPINION THE ASSESSING OFFICER HAS DISCARDED THE MOU ON SUSPICION AS NO MOTIVE TO REDUCE TAX LIABILITY HAS BEEN PROVED. THE REJECTION OF THE BOOKS OF ACCOUNTS BY THE ASSESSING OFFICER WITHOUT POINT ING OUT ANY SPECIFIC DETECT I S ALSO NOT IN ACCORDANCE WITH PROVISION OF SECTION 145 OF THE ACT. 11. CONSIDERING THE FACTS IN TOTALITY WE DO NOT FIND ANY REASON TO INTERFERE WITH THE FINDINGS OF THE CIT (A) GROUND NO. 1 IS ACCORDINGLY DISMISSED. 12. GROUND NO. 2 RELATES TO DELETION OF THE ADDITION OF RS. 27110/ - MADE BY THE ASSESSING OFFICER ON ACCOUNT OF DISALLOWANCE U/S. 40 ( A ) ( 3 ) OF THE IT ACT, 1961. 13. UNDER LYING FACTS IN THIS ISSUE RELATE TO THE CASH PAYMENT MADE BY THE ASSESSEE TO HIGHER FLYING TRA VELS AND CONCORD MARKER. THE ASSESSEE POINTED OUT THAT HE WAS DE ALING WITH THESE PARTIES FOR THE FIRST TIME AND THESE PERSONS WERE NOT READY TO ACCEPT THE SAME BY CHEQUE / DEMAND DRAFT, THEREFORE, THE ASSESSEE HAD NOT CHOICE BUT TO MAKE THE PAYMENTS IN CAS H. THE ASSESSING OFFICER DID NOT ACCEPT THIS CONTENTION OF THE ASSESSEE AND DI SALLOWED THE SUM OF RS. 27110/ - . 14. BEFORE THE CIT (A) THE ASSESSEE TOOK THE SAME PLEA FOR MAKING THE CASH PAYMENT. THE CIT (A) OBSERVED THAT THE TRANSACTIONS ARE NOT FREQUE NTLY AND ACCEPTED THE CONTENTION THAT THE OTHER PARTY DID NOT AGREE TO CHEQUE PAYMENT. THE CIT (A) ACCORDINGLY DELETED ADDITION. 15. BEFORE US THE DR STRONGLY SUPPORTED THE FINDINGS OF THE ASSESSING OFFICER COUNSEL FOR THE ASSESSEE REITERATED WHAT HAS B EEN STATED BEFORE THE LOWER AUTHORITIES. 6 16. WE HAVE CAREFULLY CONSIDERED THE ORDERS OF THE AUTHORITIES BELOW. THE UNDOUBTED FACT IS THAT THE ASSESSING OFFICER HAS NOT DOUBTED THE GENUINESS OF THE EXPENDITURE. THE ASSESSING OFFICER HAS ALSO NOT DOUBTE D THAT THE ASSESSEE WAS NOT HAVING ANY FREQUENT TRANSACTIONS WITH THESE PARTIES. THERE IS EVERY POSSIBILITY THAT THE PARTIES MUST HAVE REFUSE D TO TAKE THE PAYMENT BY CHEQUES/ DEMAND D RAFT. IN THE LIGHT OF THE FACTS WE DECLINE TO INTERFERE WITH THE FINDIN G OF THE CIT (A) GROUND NO. 2 IS ACCORDINGLY DISMISSED. 17. IN THE RESULT, APPEAL FILED BY THE ASSESSEE IS DISMISSED. CO. NO. 33/DEL/2011 GROUND NO. 1 AND 2 RELATES ON AD - HOC DISALLOWANCE BEING 50% OF BUSINESS PROMOTION EXPENSES AND 50% OF DRESS AND C OSTUME EXPENSES. DURING THE COURSE OF THE ASSESSMENT THE ASSESSING OFFICER OBSERVED THAT THE ASSESSEE PAID RS. 16.41 LACS AND RS. 4.35 LACS THROUGH CREDIT CARDS AND CLAIMED THE SAME AS EXPENDITURE UNDER THE HEAD BUSINESS PROMOTION AND DRESS AND COSTUME. O N FINDING NO SUPPORTING INVOICES TH E ASSESSING OFFICER PROCEEDED BY DISALLOWING 50% OF THE EXPENDITURE SO CLAIMED. 2. THE ASSESSEE CAR RIED THE MATTER BEFORE THE CIT (A) BUT WITHOUT ANY SUCCESS. 3. BEFORE US THE COUNSEL COULD NOT PRODUCE ANY SUPPORTING EVIDENCES IN RESPECT OF THE CLAIM OF EXPENDITURE . O NLY LEDGER ACCOUNT OF EXPENDITURE HAS BEEN PLACED ON RECORD. IN THE ABSENCE ANY SUPPORTING EVIDENCES WE DO NOT FIND ANY REASON TO INTERFERE WITH THE FINDINGS OF THE CIT (A). GROUND NO. 1 AND 2 ARE DISMI SSED. 4. GROUND NO. 3 IS RELATES TO THE DISALLOWANCE OF EXPENDITURE OF RS. 22.30 LACS INCURRED FOR HIGHER EDUCATION OF THE SON OF THE ASSESSEE. 7 5. DURING THE COURSE OF SCRUTINY ASSESSMENT PROCEEDINGS THE ASSESSING OFFICER FOUND THAT THE ASSESSEE HAS CL AIMED RS.22.30 LACS AS EXPENDITURE INCURRED ON HIGHER EDUCATION OF THE SON OF THE ASSESSEE. WHEN THE ASSESSEE WAS ASKED TO EXPLAIN THE BUSINESS NECESSITY OF THE EXPENDITURE THE ASSESSEE CLAIMED THAT THE E XPENDITURE WAS INCURRED FOR THE FUTURE BENEFIT. TH E CONTENTION OF THE ASSESSEE DID NOT FIND ANY FAVOUR WITH THE ASSESSING OFFICER WHO MADE THE DISALLOWANCE OF RS. 22.30 LACS. 6. THE ASSESSEE CARRIED THE MATTER BEFORE THE CIT(A) BUT WITHOUT ANY SUCCESS. 7. BEFORE US THE COUNSEL FOR THE ASSESSEE STATED THAT THE SON OF THE ASSESSEE WAS SPONSORED FOR HIGHER EDUCATION TO STUDY IN LONDON COLLEGE OF COMMUNICATION FOR A RESEARCH COURSE FOR A PERIOD OF ONE YEAR. IT WAS STRONGLY CONTENDED THAT SUCH COURSE WOULD BENEFIT THE ASSESSEE IN FUTURE, THEREFORE, THE EXPE NSES IS LE GITIMATE BUSINESS EXPENDITURE. PER CONTRA THE DR SUPPORTED THE FINDINGS OF THE ASSESSING OFFICER / CIT (A). 8. WE HAVE CAREFULLY CONSIDERED THE FACTS IN ISSUE. WE DO NOT FIND ANY MERIT IN THE CONTENTION OF THE COUNSEL EXPENDITURE WAS INCURRED ON HIGHER STUDIES OF THE SON CANNOT BE CONSIDERED BEING EXP E NDED FOR THE BUSINESS NECESSITY OF THE ASSESSEE WE DECLINE TO INTERFERE. GROUND NO. 3 IS DISMISSED. 9. GROUND NO. 4 AND 5 TAKEN TOGETHER RELATE TO TOUR AND TRAVELLING EXPENDITURE INCURRED BY THE SON OF THE ASSESSEE FOR HIGHER STUDIES IN LONDON. 10. SINCE WE HAVE DISMISSED THE CLAIM OF EXPENDITURE FOR HIGHER EDUCATION OF THE SON WE DO NOT FIND ANY MERIT IN THIS CLAIM OF THE ASSESSEE GROUND NO.4 AND 5 ARE TAKEN TOGETHER ARE DISMISSED. 8 11. GROU ND NO. 6 AND 7 ARE IN SUPPORT OF THE ORDER OF THE CIT (A) IN WHICH REVENUE IS IN APPEAL. SINCE WE HAVE DISMISSED REVENUE S APPEAL WE DO NOT FIND IT NECESSARY TO ADJUDICATE THESE GROUNDS. 12. IN THE RESULT, THE CROSS OBJECTION OF THE ASSESSEE IS DISMISS ED. ITA NO. 1606/DEL/2014 (A.Y. 2008 - 09) THE ASSESSEE HAS RAISED FOUR SUBSTANTIVE GROUND S OF APPEAL. 2. THE COUNSEL DID NOT PRESS GROUND NO. 1, 2 A AND 2 B AND THE SAME ARE DISMISSED AS NOT PRESSED. 3. GROUND NO. 3 RELATES TO THE DISALLOWANCE OF E XPENSES OF RS. 16.35 LACS INCURRED FOR HIGHER EDUCATION OF THE SON OF THE ASSESSEE. 4. SINCE WE HAVE DISMISSED THIS GROUND IN CO. NO.33 (SUPRA) . FOR THE REASONS GIVEN THEIR IN THIS GROUND IS DISMISSED. 5. GROUND NO. 4 & 5 RELATES TO THE ADDITION OF RS. 156513/ - ON EXPENSES UNDER THE HEAD BUSINESS PROMOTION THROUGH CREDIT CARD. 6. SIMILAR DISALLOWANCES HAVE BEEN CONFIRMED BY US IN CO. NO. 33/DEL/2011 (SUPRA) FOR THE SAME REASONS THESE GROUNDS ARE DISMISSED. 7. IN THE RESULT, THE APPEAL FILED BY THE A SSESSEE IS DISMISSED . 9 ITA NO. 1607/DEL/2014 A. Y. 2007 - 08 THE ONLY GRIEVANCE OF THE ASSESSEE IS THAT THE CIT (A) ERRED IN CONFIRMING PENALTY LEVIED U/S. 271 (1) (C) OF THE A C T ON THE FOLLOWING DISALLOWANCES MADE BY THE ASSESSING OFFICER WHICH WERE S USTAINED BY THE CIT (A). S. NO. ADDITION (RS.) NATURE OF ADDITION A 8,20,927/ - 50% AD - HOC DISALLOWANCE OUT OF BUSINESS PROMOTION EXPENSES B. 2,17,635/ - 50% AD - HOC DISALLOWANCE OUT OF COSTUME PROMOTION EXPENSES C. 22,30,505/ - DISALLOWANCE OF EXPENSES INCURRED FOR HIGHER EDUCATION AT LONDON OF SH. AKSHAY MARWAH, SON OF ASSESSEE. D. 1,94,414/ - EXPENSES INCURRED ON TOUR AND TRAVELLING OF SH. AKSHAY MARWAH, SON OF HIGHER STUDIES AT LONDON. 2. THE ROOTS FOR THE LEVY OF THE PENALTY LIE IN THE ASSESSMENT ORDER DATED 11.12.2009 FRAMED U/S. 143 (3) OF THE ACT. THIS ASSESSMENT ORDER IS UNDER APPEAL BEFORE US IN I TA NO. 6004/DEL/2014 (SUPRA). 3. NO DOUBT THE AD - HOC DISALLOWANCES MADE BY THE ASSESSING OFFICER HAS BEEN CONFIRMED BY US IN ITA NO. 6004/DEL/20 14 (SUPRA) BUT WE DO NOT FIND ANY MERIT IN THE LEVY OF PENALTY US/. 271 (1) (C) OF THE ACT BECAUSE IN OUR CONSIDERED OPINION NO PENALTY U/S. 271 (1) (C) OF THE ACT CAN BE LEVIED WHEN THE EXPENDITURE ARE DISALLOWED ON AD - HOC BASIS. WE ACCORDINGLY DIRECT TH E ASSESSING OFFICER TO DELETE THE PENALTY LEVIED U/S. 271 (1) (C) OF THE ACT. 4. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. 10 5. PRONOUNCED IN THE OPEN COURT ON 2 5 . 05.2018 . SD/ - SD/ - (H. S. SIDHU) ( N. K. BILLAIYA ) JUDICIAL MEMBER ACCOUNTANT MEMBER *NEHA* DATE: - 25 .05 .2018 COPY FORWARDED TO: 1 . APPELLANT 2 . RESPONDENT 3 . CIT 4 . CIT(APPEALS) 5 . DR: ITAT ASSISTANT REGI STRAR ITAT NEW DELHI 11 DATE 1. DRAFT DICTATED ON 24.05.2018 PS 2. DRAFT PLACED BEFORE AUTHOR 25.05.2018 PS 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER 25.05.2018 JM/AM 4. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER. 25.05.2018 JM/AM 5. APPROVED DRAFT COME S TO THE SR.PS/PS 25.05.2018 PS/PS 6. KEPT FOR PRONOUNCEMENT ON 25.05.2018 PS 7. FILE SENT TO THE BENCH CLERK 25.05.2018 PS 8. DATE ON WHICH FILE GOES TO THE AR 9. DATE ON WHICH FILE GOES TO THE HEAD CLERK. 10. DATE OF DISPATCH OF ORDER.