Appeal details
Counselvise Citation
618320114 RSA 2014
Assessee PAN
Bench
Appeal Number
Duration Of Justice
8 month(s) 3 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
16-07-2015
Appeal Filed By
Assessee
Order Result
Partly Allowed
Bench Allotted
B
Next Hearing Date
13-05-2015
Assessment Year
2007-2008
Appeal Filed On
12-11-2014
Judgement Text
IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH B NEW DELHI) BEFORE SHRI N.K. SAINI AND SHRI I.C. SUDHIR ITA NO. 6183/DEL/2014 ASSESSMENT YEAR: 2007-08 CHEIL INDIA PVT. LTD., VS. INCOME-TAX OFFICER, (FORMERLY KNOWN AS CHEIL WARD 3(3), COMMUNICATIONS INDIA PVT. LTD.), NEW DELHI. 2 ND FLOOR, BLOCK-C, VIPUL TECH SQUARE SECTOR-43, GOLF COURSE ROAD, GURGAON. (PAN: AACCC2299Q) (APPELLANT) (RESPONDENT) APPELLANT BY: SHRI SALIL KA POOR, ADV. AND SHRI VIKAS JAIN, CA RESPONDENT BY: SHRI SANJAY PRAS AD, CIT(DR) DATE OF HEARING : 18.05.2015 DATE OF PRONOUNCEMENT: 16 .07.2015 ORDER PER I.C. SUDHIR: JUDICIAL MEMBER THE ASSESSEE HAS QUESTIONED FIRST APPELLATE ORDER ON THE FOLLOWING GROUNDS: 1. THAT THE APPELLATE ORDER PASSED BY THE LEARNED CIT( A) IS CONTRARY TO THE FACTS OF THE CASE AND AGAINST THE PROVISIONS OF LAW AND HAS BEEN PASSED WITH PRE-CONCEIVED NOTIONS AND IS BASED ON CONJECTU RES AND SURMISES AND IS THEREFORE LIABLE TO BE QUASHED. 2. THAT THE LEARNED CIT(A) HAS GROSSLY ERRED BOTH ON F ACTS AND IN LAW, IN CONFIRMING THE ADDITION MADE BY INCOME-TAX OFFICER, WARD 3(3), NEW DELHI (LEARNED AO) BEING THE AMOUNT PAID/PAYABLE BY APPELLANT TO ITS VENDOR I.E. STAR INDIA PRIVATE LIMITED (STAR INDIA ) ON THE SOLE PREMISE THAT STAR INDIA DID NOT RESPOND TO THE NOTICE ISSUE D BY THE LEARNED AO UNDER SECTION 133(6) OF THE ACT. 2.1. THAT THE LEARNED CIT(A) HAS GROSSLY ERRED IN HOLDIN G A HUGE DISALLOWANCE WHICH IS BASED ON PRESUMPTIONS, ASSUMP TIONS, 2 CONJECTURE AND SURMISES AND WITHOUT APPRECIATING TH E FACT THAT PENALIZING THE APPELLANT FOR THE INACTION OF THIRD PARTY WHO ARE NOT UNDER ANY SORT OF CONTROL IS BLATANTLY INCORRECT. 3. THAT THE LEARNED CIT(A) HAS COMPLETELY DISREGARDED THE FACT THAT STAR INDIA HAD ALREADY FILED ITS CONFIRMATION WITH THE L EARNED AO ON MARCH 10, 2014. 4. WITHOUT PREJUDICE TO THE FACT THAT STAR INDIA HAD A LREADY FILED ITS CONFIRMATION AND SAME IS PLACED ON RECORDS, LEARNED CIT(A) HAS COMPLETELY DISREGARDED THE ALTERNATE EVIDENCE FILED BY THE APPELLANT RELATED TO PAYMENTS MADE TO STAR INDIA WHICH INCLUD ED COPY OF LEDGER ACCOUNT INCORPORATING THE DETAILS OF INVOICES RECEI VED AND PAYMENTS MADE TO STAR INDIA, COPY OF INVOICES ISSUED BY STAR INDIA AND EXTRACTS OF BANK STATEMENTS EVIDENCING THE PAYMENT TO STAR INDI A. 5. THAT THE LEARNED CIT(A) HAS GROSSLY ERRED BOTH ON F ACTS AND IN LAW IN HOLDING THAT AMOUNT NOT CONFIRMED BY STAR INDIA SHO ULD BE DISALLOWED UNDER SECTION 68 OF THE ACT. 6. THAT THE NOTICE ISSUED BY LEARNED CIT(A) FOR ENHANC EMENT OF ADDITIONS MADE BY LEARNED AO AND ENHANCEMENT SO MADE IS ILLEG AL, BAD IN LAW, UNJUST AND WITHOUT JURISDICTION. 7. THAT THE LEARNED CIT(A) HAS GROSSLY ERRED ON FACTS AND IN LAW ENHANCING THE ADDITION MADE BY LEARNED AO BY DIRECT ING THE LEARNED AO TO DISALLOW PAYMENTS MADE BY THE APPELLANT UNDER SECTION 40(A)(IA) OF THE ACT AND IGNORING THE FACT THAT THE APPEAL IS PREFERRED AGAINST THE ORDER PASSED UNDER SECTION 254 READ WIT H SECTION 143(3) OF THE ACT PURSUANT TO THE SPECIFIC DIRECTIONS OF HON BLE ITAT. 7.1. THE LEARNED CIT(A) HAS COMPLETELY DISREGARDED THE F ACT THAT THE HONBLE ITAT HAD REFERRED THE MATTER TO THE LEARNED AO ONLY FOR VERIFICATION OF PASS-THROUGH COST AND THEREFORE, EN HANCEMENT MADE IS ILLEGAL, BAD IN LAW AND WITHOUT JURISDICTION. 8. THAT THE LEARNED CIT(A) HAS GROSSLY ERRED ON FACTS AND IN LAW IN EXCEEDING HER JURISDICTION AND IN ENHANCING THE INC OME OF THE APPELLANT BY MAKING ADDITION ON ISSUE WHICH WAS NEV ER RAISED BY THE LEARNED AO 9. THAT THE LEARNED CIT(A) HAS ERRED ON FACTS AND IN L AW IN DISALLOWING PAYMENTS MADE TO STAR INDIA WITHOUT DEDUCTION OF TA X AT SOURCE UNDER SECTION 40(A)(IA) OF THE ACT ON THE GROUND THAT NO BILLS OR VOUCHERS WERE FILED BY THE APPELLANT TO SUBSTANTIATE PAYMENTS MAD E TO STAR INDIA. 3 9.1. THE LEARNED CIT(A) HAS COMPLETELY OVERLOOKED THOSE EXHAUSTIVE DETAILS THAT HAVE BEEN FILED BY APPELLANT TO SUBSTA NTIATE PAYMENTS MADE TO STAR INDIA. 9.2. THE LEARNED CIT(A) HAS COMPLETELY IGNORED THE SUBMI SSIONS OF THE APPELLANT THAT THE PAYMENTS MADE TO PRINT/ ELECTRON IC MEDIA ARE SPECIFICALLY EXEMPTED FROM DEDUCTION OF TAX AT SOUR CE AS PER CBDT CIRCULAR NO 715 DATED 8 AUGUST 1995 AND CIRCULAR NO 717DATED 14 AUGUST 1995. 9.3. WITHOUT PREJUDICE TO THE ABOVE, THE LEARNED CIT(A) HAS ERRED IN DISALLOWING THE AMOUNT PAID/ PAYABLE TO STAR INDIA BY THE APPELLANT WHEN SUCH AMOUNT HAS ALREADY BEEN DISALLO WED ON ACCOUNT OF NON-RECEIPT OF CONFIRMATION FROM STAR IN DIA AND THE SAME RESULTS INTO DOUBLE DISALLOWANCE OF THE SAME A MOUNT. 10. THAT THE LEARNED CIT(A) HAS ERRED ON FACTS AND IN L AW IN DISALLOWING PAYMENT OF RS 9,50,040 MADE TO DOORDARSHAN WITHOUT DEDUCTION OF TAX AT SOURCE UNDER SECTION 40(A)(IA) OF THE ACT ON THE GROUND THAT NIL WITHHOLDING CERTIFICATE SUBMITTED BY THE APPELLANT HAS BEEN ISSUED IN THE NAME OF CHEIL WORLDWIDE AND NOT THE APPELLANT. 10.1 WITHOUT PREJUDICE TO THE ABOVE, ABOVE DISALLOW ANCE IS BAD-IN-LAW AS THE PAYMENT MADE TO DOORDARSHAN ARE NOT SUBJECTE D TO DEDUCTION OF TAX AT SOURCE AS PER CBDT CIRCULAR NO 715 DATED 8 A UGUST 1995. 11. THAT THE LEARNED CIT(A) HAS ERRED ON FACTS AND IN L AW IN DISALLOWING THE PAYMENT OF RS 97,29,688 MADE BY THE APPELLANT T O ITS VENDORS WITHOUT DEDUCTION OF TAX AT SOURCE UNDER SECTION 40 (A)(IA) OF THE ACT. 11.1. THE LEARNED CIT(A) HAS DISREGARDED THE FACT THAT SU CH PAYMENTS WERE MADE WITHOUT DEDUCTION OF TAX IN LIGHT OF LOWE R TAX WITHHOLDING CERTIFICATE FURNISHED BY THE VENDORS AN D SUBMITTED BY APPELLANT TO LEARNED CIT(A). 11.2. THE LEARNED CIT(A) HAS ERRED IN DISALLOWING PAYMENT S AMOUNTING RS 67,75,238 MADE TO STAR INDIA PRIVATE LIMITED ON THE PREMISE THAT NO DOCUMENTS OR EVIDENCES WAS SUBMITTED BY THE APPELLANT WHEN SUCH SPECIFIC DOCUMENTS WERE NEVER ASKED BY LE ARNED CIT(A) TO VERIFY THE PAYMENT MADE TO SUCH VENDOR. 12. THAT THE LEARNED CIT(A) HAS ERRED ON FACTS AND IN L AW IN DISALLOWING THE PAYMENT OF RS 54,341 MADE TO ITS VENDORS FOR S UPPLY OF MATERIALS WITHOUT DEDUCTION OF TAX AT SOURCE UNDER SECTION 40 (A)(IA) OF THE ACT ON 4 THE GROUND THAT THESE PAYMENTS ARE MADE FOR WORK UN DERTAKEN BY THE VENDORS AND ARE SUBJECT TO WITHHOLDING TAX UNDER SE CTION 194C OF THE ACT. 13. THAT THE LEARNED CIT(A) HAS ERRED ON FACTS AND IN L AW IN DISALLOWING THE PAYMENT OF RS 13,14,406 MADE TO ITS VENDORS FOR SUPPLY OF MATERIALS WITHOUT DEDUCTION OF TAX AT SOURCE UNDER SECTION 40(A)(IA) OF THE ACT ON ADHOC BASIS AND PRESUMING THAT EVEN SUCH PAYMENTS ARE SUBJECT TO WITHHOLDING TAX. 14. THAT THE LEARNED CIT(A) HAS ERRED ON FACTS AND IN L AW IN DISALLOWING THE REIMBURSEMENTS MADE BY THE APPELLANT TO ITS EMP LOYEES WITHOUT DEDUCTION OF TAX AT SOURCE UNDER SECTION 40(A)(IA) OF THE ACT ALLEGING THAT NO EVIDENCES SUCH AS BANK STATEMENT OF EMPLOYE ES WERE FILED BY THE APPELLANT TO SUBSTANTIATE THAT SUCH EXPENSES HA VE ACTUALLY BEEN INCURRED AND PAID BY EMPLOYEES. 14.1. THE LEARNED CIT(A) HAS GROSSLY ERRED BOTH ON FACTS AND IN LAW IN MAKING SUCH IMPUGNED DISALLOWANCE BASED ON PRESUMPT IONS, ASSUMPTIONS, CONJECTURE AND SURMISES WITHOUT APPREC IATING THAT REIMBURSEMENT OF EXPENSES IS NOT INCOME OF THE RECI PIENT AND ACCORDINGLY, NO WITHHOLDING IS REQUIRED. 14.2. THE LEARNED CIT(A) WHILE MAKING SUCH DISALLOWANCE H AS COMPLETELY IGNORED THE EVIDENCES FILED BY THE APPEL LANT (I.E. SAMPLE BILLS, CREDIT CARD STATEMENTS, ETC.) TO SUBS TANTIATE THE FACT THAT SUCH EXPENSES WERE PURE COST TO COST REIMBURSE MENTS AND NO FURTHER SPECIFIC EVIDENCES WERE SOUGHT BY THE LEARN ED CIT(A). 14.3. WITHOUT PREJUDICE TO ABOVE, EVEN IF SUCH REIMBURSEM ENTS ARE TAXABLE IN THE HANDS OF EMPLOYEES AND ARE SUBJECT T O WITHHOLDING TAX UNDER SECTION 192 OF THE ACT, SAME CANNOT BE DI SALLOWED UNDER SECTION 40(A)(IA) OF THE ACT. 15. THAT THE LEARNED CIT(A) HAS GROSSLY ERRED IN DISALL OWING PAYMENTS AMOUNTING TO RS 13,185 UNDER SECTION 40(A)(IA) OF T HE ACT WITHOUT APPRECIATING THAT THE AMOUNT IS LESS THAN THE THRES HOLD PRESCRIBED FOR THE DEDUCTION OF TAXES UNDER THE ACT AND ACCORDINGLY, N O WITHHOLDING IS REQUIRED. 16. WITHOUT PREJUDICE TO THE ABOVE GROUNDS, IN VIEW OF THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN VIEW OF THE INSERT ION OF SECOND PROVISO TO SECTION 40(A)(IA) OF THE ACT, NO SUCH DISALLOWAN CE MADE BY LEARNED CIT(A) UNDER SECTION 40(A)(IA) OF THE ACT IS UNCALL ED FOR. 5 17. WITHOUT PREJUDICE TO THE ABOVE GROUNDS, BENEFIT OF SECOND PROVISO TO SECTION 40(A)(IA) OF THE ACT SHOULD BE ALLOWED IN T HE YEAR IN WHICH TDS IS DEEMED TO BE DEDUCTED AND PAID. 18. THAT THE LEARNED CIT(A) HAS EXCEEDED HER JURISDICTI ON BY DIRECTING THE LEARNED AO TO INITIATE PENALTY PROCEEDINGS UNDER SE CTION 201(1) OF THE ACT 19. THAT THE LEARNED CIT(A) HAS GROSSLY ERRED ON FACTS AND IN LAW BY COMPLETELY IGNORING THE PROVISIONS OF LAW, SUBMISSI ONS MADE BY THE APPELLANT, EVIDENCES PLACED AND THE MATERIAL AVAILA BLE ON RECORD AND HAS PASSED A PERVERSE ORDER IN UTMOST HASTE WITHOUT GIV ING ADEQUATE OPPORTUNITY OF BEING HEARD WHICH IS AGAINST THE PRI NCIPLES OF NATURAL JUSTICE. 2. HEARD AND CONSIDERED THE ARGUMENTS ADVANCED BY T HE PARTIES IN VIEW OF ORDERS OF THE AUTHORITIES BELOW, MATERIAL AVAILA BLE ON RECORD AND THE DECISIONS RELIED UPON. 3. GROUND NO.1 IS GENERAL IN NATURE, HENCE, DOES NO T NEED INDEPENDENT ADJUDICATION. 4. GROUND NOS.2 TO 5 : THE FACTS IN BRIEF ARE THAT THE APPELLANT IS ENGA GED IN THE BUSINESS OF ADVERTISING, COMMUNICATION, PUBL ICITY AND OTHER SERVICES FOR ITS CUSTOMERS. THE APPELLANT UNDERTAKES ADVERTI SING SERVICES FOR ITS CLIENTS IN CAPACITY OF AN AGENT. THE APPELLANT ACTS AS AN I NTERMEDIARY BETWEEN ITS CLIENTS AND THE THIRD PARTY VENDORS IN ORDER TO FAC ILITATE THE PLACEMENT OF ADVERTISEMENTS. THE APPELLANT IS REMUNERATED ON THE BASIS OF AN AGREED COMMISSION FIXED AS A PERCENTAGE OF THE ADVERTISEME NT SPENDS WITH THIRD 6 PARTY VENDORS ON BEHALF OF ITS CLIENTS. THEREFORE, ONLY SUCH COMMISSION IS RECOGNIZED AS AN INCOME AND THE PAYMENTS TO BE MADE TO THIRD PARTY VENDORS TOWARDS ABOVEMENTIONED ADVERTISEMENT SPEND ON BEHAL F OF CLIENT IS RECOGNIZED AS RECEIVABLE FROM CLIENT AS WELL AS PAY ABLE TO VENDORS IN BALANCE SHEET AND NOT ROUTED THROUGH PROFIT AND LOSS ACCOUN T. THIS ACCOUNTING TREATMENT IS IN ACCORDANCE WITH THE ACCOUNTING STAN DARDS PRESCRIBED IN INDIA. FOR THE ASSESSMENT YEAR A.Y 2007-08, THE APPELLAN T FILED ITS RETURN OF INCOME DECLARING A TOTAL INCOME OF RS.21,977,994. T HE CASE WAS PICKED UP FOR SCRUTINY ASSESSMENT UNDER SEC. 143(2) OF THE IN COME-TAX ACT, 1961 (THE ACT). 5. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, LD ASSESSING OFFICER HAD ASKED THE APPELLANT TO EXPLAIN THE DIFFERENCE B ETWEEN THE REVENUE RECOGNIZED IN THE PROFIT AND LOSS ACCOUNT AND THE A MOUNT ON WHICH TAX HAS BEEN DEDUCTED BY ITS CLIENTS AND WHY SUCH DIFFERENC E SHOULD NOT BE TREATED AS INCOME OF THE APPELLANT. IT WAS EXPLAINED THAT THE APPELLANT, BEING ENGAGED IN THE ADVERTISING BUSINESS IN CAPACITY OF AN AGENT FOR ITS CLIENT RECOGNIZES ONLY THE COMMISSION INCOME RECEIVED/RECEIVABLE FROM ADVERTISING SERVICES IN THE PROFIT AND LOSS ACCOUNT. THE AMOUNT INCURRED ON BEHALF OF ITS CLIENTS AND THE THIRD PARTY VENDORS ARE RECOGNIZED IN BALAN CE SHEET BOTH AS PAYABLE 7 TO THIRD PARTY VENDORS AND RECEIVABLE FROM CLIENT. THE APPELLANT ALSO FILED RECONCILIATION BETWEEN THE TWO AMOUNTS. FURTHER, TH E APPELLANT ALSO FURNISHED SUPPLEMENTARY DETAILS ALONG WITH ABOVE RE CONCILIATION SUCH AS PARTY WISE DETAILS OF AMOUNT PAID OR PAYABLE TO THE THIRD PARTY VENDORS AMOUNTING TO RS.893,992,187. 6. FINAL ASSESSMENT ORDER WAS PASSED UNDER SEC. 143 (3) READ WITH 144C OF THE ACT AND AN ADDITION OF RS.893,992,187 WAS MA DE ON ACCOUNT OF PASS THROUGH COST CLAIMED BY THE APPELLANT. AGGRIEVED BY THE FINAL ASSESSMENT ORDER, APPELLANT PREFERRED AN APPEAL WITH THE HONB LE INCOME-TAX APPELLATE TRIBUNAL (ITAT) ON THE GROUND THAT APPELLANT WAS NOT GIVEN PROPER OPPORTUNITY OF BEING HEARD. THE HONBLE ITAT AFTER HEARING THE COMPANYS CONTENTION REFERRED THE MATTER TO LD. A.O. FOR FRES H ADJUDICATION AFTER GIVING OPPORTUNITY OF BEING HEARD. PURSUANT TO THE ORDER OF THE HONBLE ITAT AND IN ORDER TO VERIFY THE PASS THROUGH COST DISALLOWED DURING THE COURSE OF ORIGINAL ASSESSMENT PROCEEDINGS, THE LD. A.O. ISSUE D FRESH NOTICES UNDER SEC. 133(6) OF THE ACT TO THE VENDORS OF THE APPELLANT. SUCH NOTICES WERE DULY COMPLIED BY ALL THE VENDORS EXCEPT IN THE CASE OF S TAR INDIA PVT. LTD. (STAR INDIA). THEREFORE, LD. A.O. HAS ADDED RS.45,541,55 7 (BEING AMOUNT CLAIMED BY THE APPELLANT AS PAID/PAYABLE TO STAR IN DIA) TO THE RETURNED 8 INCOME OF THE APPELLANT AND PASSED THE ASSESSMENT O RDER DATED FEBRUARY 28,2014. AS PER THE ASSESSMENT ORDER, STAR INDIA DI D NOT RESPOND TO THE NOTICE ISSUED BY THE LD. A.O. UNDER SEC. 133(6) OF THE ACT IN THE GIVEN TIME. 7. SUBSEQUENTLY, THE APPELLANT WAS INFORMED BY STAR INDIA THAT IT HAD RESPONDED TO THE NOTICES ISSUED BY LD. A.O. THROUGH SPEED POST AND THE SAME WAS DELIVERED TO THE LD. A.O. ON MARCH 10,2014. IN THE SAID RESPONSE FILED BY STAR INDIA, VENDOR HAS CONFIRMED THAT IT HAD COL LECTED RS.74,376,857 FROM THE APPELLANT IN A.Y 2007-08. COPY OF RESPONSE FILE D BY STAR INDIA OBTAINED FROM LD. A.O. IS ENCLOSED AS ANNEXURE II. SINCE CON FIRMATION HAS REACHED THE OFFICE OF THE LD. A.O. AFTER THE ORDER WAS PASS ED, COGNIZANCE OF SUCH CONFIRMATION HAS NOT BEEN TAKEN BY THE LD. A.O. HO WEVER, ONCE EFFECT OF SUCH CONFIRMATION IS CONSIDERED, THE ADDITIONS MADE BY THE LD. A.O. WILL NOT SURVIVE, CLAIMED THE ASSESSEE. 8. THE AGGRIEVED ASSESSEE WENT IN FIRST APPEAL BUT COULD NOT SUCCEED AS THE LEARNED CIT(APPEALS) HAS UPHELD THE DISALLOWANC E OF RS.4,55,41,557 ON ACCOUNT OF CLAIM OF PAYMENT MADE TO STAR INDIA PVT. LTD. AND CONFIRMED THE ADDITION OF RS.4,55,41,557 ON THE BASIS THAT STAR I NDIA PVT. LTD. WAS GIVEN SUFFICIENT OPPORTUNITY TO PROVE THE TRANSACTION BUT IT FAILED TO RESPOND. THIS 9 ACTION OF THE FIRST APPELLATE AUTHORITY HAS BEEN QU ESTIONED BEFORE THE ITAT IN GROUND NOS. 2 TO 5. 9. THE LEARNED AR CONTENDED THAT THE SOLE REASON FO R THE DISALLOWANCE WAS THAT CONFIRMATION FILED BY THE STAR INDIA PVT. LTD. REACHED THE OFFICE OF THE ASSESSING OFFICER AFTER THE ORDER WAS PASSED AN D ACCORDINGLY THE ASSESSING OFFICER DID NOT TAKE COGNIZANCE OF THE SA ID CONFIRMATION. HE REFERRED PAGE NO. 84 TO 92 OF THE PAPER BOOK-I WHER EIN COPY OF THE SAID CONFIRMATION HAS BEEN MADE AVAILABLE. THE LEARNED A R SUBMITTED THAT BESIDES THE SAID CONFIRMATION FILED BY STAR INDIA P VT. LTD. BEFORE THE ASSESSING OFFICER ON 10.3.2014 SUBSEQUENT TO THE PA SSING OF THE ASSESSMENT ORDER, THE ASSESSEE IN SUPPORT OF ITS CLAIM HAD ALS O SUBMITTED EVIDENCES LIKE LEDGER ACCOUNT, BANK STATEMENTS, CONFIRMATION OBTAI NED BY THE ASSESSEE TO SUBSTANTIATE THAT THE TRANSACTIONS CARRIED OUT BY T HE ASSESSEE ARE GENUINE. THE LEARNED CIT(APPEALS), HOWEVER, IGNORED THE SUBMISSI ONS AND MATERIAL ON RECORD AND DIRECTED THE ASSESSING OFFICER TO AGAIN ISSUE NOTICE UNDER SEC. 133(6) OF THE ACT TO STAR INDIA PVT. LTD. TO SEEK C ONFIRMATION AGAIN. ACCORDINGLY, THE ASSESSING OFFICER ISSUED NOTICE DA TED 25.8.2014 TO STAR INDIA PVT. LTD. AND IN HIS REMAND REPORT DATED 4.9. 2014, THE ASSESSING OFFICER STATED THAT NO CONFIRMATION WAS FILED BY ST AR INDIA PVT. LTD. WITHIN 10 THE TIME ALLOWED BY THE ASSESSING OFFICER. THE ASSE SSING OFFICER THUS IGNORED THE FACT THAT CONFIRMATION WAS ALREADY RECE IVED BY HIS OFFICE DURING THE REMAND PROCEEDINGS. BASED ON SUCH REMAND REPORT , THE LEARNED CIT(APPEALS) HAS UPHELD THE DISALLOWANCE AS UNCONFI RMED AMOUNT. THE LEARNED AR CONTENDED THAT THE ABOVE PAYMENTS HAVE B EEN MADE THROUGH THE BANK ACCOUNT OF THE ASSESSEE WHICH WERE ALSO ON REC ORD. THUS, THE ADDITION MADE IS BASED ON PRESUMPTION, ASSUMPTION, CONJECTUR ES AND SURMISES. THE LEARNED AR CONTENDED THAT THE EVIDENCES PLACED AND THE MATERIAL AVAILABLE ON RECORD HAS NOT BEEN PROPERLY AND JUDICIOUSLY CON SIDERED. THE LEARNED AR PLACED RELIANCE ON THE FOLLOWING DECISIONS: I) ITO VS. SUPER CHEMICALS DISTRIBUTOR 1 SOT 102 (DEL.); II) MATHER & PLATT (INDIA) LTD. VS. CIT 168ITR 4 93 (CAL.); III) CIT VS. NIKUNJ EXIMP ENTERPRISES PVT. LTD. 35 TAXMANN 384 (BOMBAY); IV ) SAGAR BOSE VS. ITO 56 ITD 561 (CAL.); V ) RAJESH P. SONI VS. CIT 100 TTJ 892 (AHD.); VI) ANISH AHMED & SONS VS. CIT 297 ITR 441 (S.C) ; 10. THE LEARNED AR SUBMITTED FURTHER THAT PROVISION S OF SECTION 68 ARE NOT APPLICABLE AS HELD BY THE LEARNED CIT(APPEALS) WHILE UPHOLDING THE 11 DISALLOWANCE SINCE THERE IS NO OUTSTANDING CREDIT B ALANCE OF RS.4,55,41,557 IN THE BOOKS OF THE ASSESSEE ON ACCOUNT OF STAR IND IA PVT. LTD. AND THE CLOSING BALANCE ON 31.3.2007 IS NIL. HE SUBMITTED T HAT ASSESSEE HAD AVAILED SERVICES FROM STAR INDIA PVT. LTD. ON BEHALF OF IT S CLIENTS AND SUCH PAYMENTS FORM PART OF THE PASS THROUGH COST AND WERE NOT MAD E TOWARDS PURCHASES. THE CREDIT IN THE ACCOUNT OF STAR INDIA PVT. LTD. I N THE SUBJECT ASSESSMENT YEAR WAS EXPLAINED BY WAY OF A CORRESPONDING DEBIT IN THE BOOKS OF THE ASSESSEE AS RECOVERABLE FROM CLIENTS WHICH ARE NO T DISPUTED BY THE AUTHORITIES BELOW. HE CONTENDED FURTHER THAT THE IS SUE OF ADDITION UNDER SEC. 68 OF THE INCOME-TAX ACT, 1961 WAS NOT SUBJECT MATT ER IN THE ORIGINAL ASSESSMENT OR REVISED ASSESSMENT FRAMED BY THE ASSE SSING OFFICER. WITHOUT PREJUDICE TO THE ABOVE SUBMISSIONS, THE LEARNED AR SUBMITTED THAT DISALLOWANCE UNDER SEC. 68 OF THE ACT IS UNWARRANTE D WHERE THE IDENTITY OF THE CREDITOR ( STAR INDIA PVT. LTD. ) IS ESTABLISHE D. HE PLACED RELIANCE ON THE FOLLOWING DECISIONS: I) MANOJ AGGARWAL & ORS. VS. DCIT 310 ITR 99 (DE L.); II) CIT VS. LOVELY EXPORTS 216 ITR 195 (S.C); 11. THE LEARNED AR SUBMITTED FURTHER THAT THE ASSES SEE IS ENGAGED IN THE BUSINESS OF ADVERTISING SERVICES AND UNDERTAKES THE SERVICES FOR ITS CLIENTS IN CAPACITY OF AN AGENT. THE ASSESSEE ACTS AS AN INTER MEDIARY BETWEEN ITS CLIENTS 12 AND THE THIRD PARTY VENDORS IN ORDER TO FACILITATE THE PLACEMENT OF ADVERTISEMENT. THE ASSESSEE IS REMUNERATED ON THE B ASIS OF AN AGREED COMMISSION FIXED AS A PERCENTAGE OF THE ADVERTISEME NT SPENT ON BEHALF OF ITS CLIENTS, THEREFORE, ONLY SUCH COMMISSION IS RECOGNI ZED AS AN INCOME AND THE PAYMENTS TO BE MADE TO THIRD PARTY VENDORS TOWARDS SUCH ADVERTISEMENT SPENT IS RECOGNIZED AS PASS THROUGH COST IN THE BALANCE SHEET AND IS NOT DEBITED TO THE PROFIT AND LOSS ACCOUNT. HE SUBMITTE D THAT THE ITAT IN THE CASE OF ASSESSEE FOR THE ASSESSMENT YEAR 2005-06 HAS DIS CUSSED NATURE OF THE BUSINESS OF THE ASSESSEE VIDE ORDER DATED 30.11.201 0 IN ITA NO. 712/DEL/2010 HOLDING THAT THE ASSESSEE SIMPLY ACTS AS AN INTERMEDIARY BETWEEN THE ULTIMATE CUSTOMERS AND THE THIRD PARTY VENDOR IN ORDER TO FACILITATE PLACEMENT OF THE ADVERTISEMENT. 12. THE LEARNED CIT(DR) ON THE OTHER HAND PLACED RE LIANCE ON THE ORDERS OF THE AUTHORITIES BELOW ON THE ISSUE WITH THE SUBM ISSION THAT DESPITE AVAILING SUFFICIENT OPPORTUNITY, THE ASSESSEE COULD NOT ESTABLISH THE GENUINENESS OF THE CLAIMED PAYMENT OF RS.4,55,41,55 7 MADE TO STAR INDIA PVT. LTD. SINCE THE ASSESSEE HAD FAILED TO DISCHARG E ITS ONUS TO ESTABLISH THE GENUINENESS OF THE ABOVE CLAIM AND STAR INDIA PVT. LTD. ALSO FAILED TO RESPOND NOTICE ISSUED UNDER SEC. 133(6) OF THE ACT TO THEM, THE ASSESSING 13 OFFICER WAS HAVING NO OPTION BUT TO MAKE THE DISALL OWANCE OF THE DOUBTED PAYMENT. 13. HAVING GONE THROUGH THE ORDERS OF THE AUTHORITI ES BELOW, WE FIND THAT OUT OF THE NOTICES UNDER SEC. 133(6) OF THE ACT ISS UED TO ELEVEN VENDORS OF THE COMPANY TO VERIFY THE DEEMED INCOME ON ACCOUNT OF SHORT RECEIPTS DECLARED IN PROFIT AND LOSS ACCOUNT OF RS.89,39,92, 000, TEN RESPONDED THE NOTICE AND FILED CONFIRMATION EXCEPT STAR INDIA PVT . LTD. THE ASSESSING OFFICER THUS IN ABSENCE OF CONFIRMATION FROM STAR I NDIA PVT. LTD. DISALLOWED THE PAYMENT CLAIMED TO HAVE BEEN MADE TO THEM BY TH E ASSESSEE AT RS.4,55,41,557. THE SAME HAS BEEN UPHELD BY THE LEA RNED CIT(APPEALS). WE THUS FIND THAT THE AUTHORITIES BELOW HAVE NOT BO THERED THEMSELVES TO VERIFY THE OTHER EVIDENCES FILED BY THE ASSESSEE BE FORE THE ASSESSING OFFICER IN SUPPORT OF THE GENUINENESS OF THE CLAIM, WHICH W ERE CONFIRMATION OBTAINED BY THE ASSESSEE FROM STAR INDIA PVT. LTD. ALONG WITH RECONCILIATION WITH THEIR ACCOUNTS MAINTAINED BY THE ASSESSEE; LED GER ACCOUNT OF STAR INDIA PVT. LTD. MAINTAINED BY THE ASSESSEE; INVOICE RECEI VED FROM STAR INDIA PVT. LTD.; RELEVANT EXTRACTS OF BANK STATEMENT HIGHLIGHT ING THE PAYMENTS MADE TO STAR INDIA PVT. LTD. BY THE ASSESSEE AND RECONCILIA TION BETWEEN AMOUNT CONFIRMED BY STAR INDIA PVT. LTD. TO THE ASSESSING OFFICER AND AMOUNT AS PER 14 ACCOUNTS OF ASSESSEE. THIS FACT HAD ALSO NOT BEEN REBUTTED BY THE DEPARTMENT THAT AFTER COMPLETION OF THE ASSESSMENT UNDER SEC. 254/143(3) ON 28.2.2014, THE STAR INDIA PVT. LTD. HAD FILED ITS CONFIRMATION TO THE ASSESSING OFFICER ON 10.3.2014, WHICH WAS NOT ENTERTAINED BY THE ASSESSI NG OFFICER SINCE HE HAD COMPLETED THE ASSESSMENT. DURING THE APPELLATE PROC EEDINGS, THE LEARNED CIT(APPEALS) CALLED FOR REMAND REPORT FROM THE ASSE SSING OFFICER. THE ASSESSING OFFICER AGAIN ISSUED NOTICE UNDER SEC. 13 3(6) OF THE ACT TO STAR INDIA PVT. LTD. ON 25.8.2014 WHICH WAS DELIVERED TO STAR INDIA PVT. LTD. ON 01.09.2014 BUT IN ABSENCE OF ANY RESPONSE, THE ASSE SSING OFFICER FURNISHED ITS REMAND REPORT DATED 04.09.2014 UPHOLDING THE DI SALLOWANCE. THUS, WE FIND THAT THE DISALLOWANCE HAS BEEN MADE AND UPHELD BY THE AUTHORITIES BELOW MERELY ON THE BASIS THAT THE STAR INDIA PVT. LTD. DID NOT BOTHER TO RESPOND THE NOTICES ISSUED UNDER SEC. 133(6) OF THE ACT BY THE ASSESSING OFFICER TO THEM. THE AUTHORITIES BELOW HAVE NOT BOT HERED TO EXAMINE THE VERACITY OF THE DOCUMENTS FILED BY THE ASSESSEE IN SUPPORT OF THE GENUINENESS OF THE CLAIMED PAYMENT MADE TO STAR INDIA PVT. LTD. IT IS A WELL ESTABLISHED POSITION OF LAW THAT GENUINENESS OF THE CLAIM CANNO T BE DENIED MERELY BECAUSE THE PARTY TO WHOM PAYMENT CLAIMED TO HAVE B EEN MADE IS NOT RESPONDING THE NOTICE ISSUED BY THE ASSESSING OFFIC ER ESPECIALLY WHEN THE ASSESSEE CLAIMANT HAD FILED SUFFICIENT DOCUMENTS IN SUPPORT OF THE CLAIMED 15 PAYMENT. THERE MAY BE SEVERAL REASONS FOR A PARTY FOR NON-APPEARANCE OR NON-COMPLIANCE BEFORE THE ASSESSING OFFICER, FOR W HICH THE ASSESSEE CANNOT BE PENALIZED. THOUGH WE ARE AWARE THAT IT IS SECOND ROUND OF THE APPEAL BEFORE THE ITAT, STILL TO MEET THE END OF JUSTICE T HE ONLY OPTION LEFT WITH US IS TO SET ASIDE THE MATTER TO THE FILE OF THE ASSESSIN G OFFICER TO EXAMINE THE VERACITY OF THE DOCUMENTS FILED BY THE ASSESSEE IN SUPPORT OF THE GENUINENESS OF THE CLAIMED PAYMENT OF RS.4,55,41,557 TO STAR IN DIA PVT. LTD. AFTER AFFORDING OPPORTUNITY OF BEING HEARD TO THE ASSESSE E AND DECIDE THE ISSUE AFRESH. IT IS ORDERED ACCORDINGLY. GROUND NOS. 2 TO 5 ARE THUS ALLOWED FOR STATISTICAL PURPOSE. 14. GROUND NOS. 6 TO 8 : SUPPORTING THESE GROUNDS, THE LEARNED AR CONTENDED THAT THE LEARNED CIT(APPEALS) WHILE DIREC TING THE ASSESSING OFFICER TO DISALLOW PAYMENTS MADE BY THE ASSESSEE U NDER SEC. 40(A)(IA) OF THE ACT HAS ALSO GROSSLY ERRED IN ENHANCING THE ADD ITION AND IGNORING THE FACT THAT APPEAL IS PREFERRED AGAINST THE ORDER PASSED U NDER SEC. 254 READ WITH SEC. 143(3) OF THE INCOME-TAX ACT, 1961 PURSUANT TO THE SPECIFIC DIRECTIONS OF THE ITAT. HE SUBMITTED THAT THE ITAT HAD REFERRED THE M ATTER TO THE ASSESSING OFFICER ONLY FOR VERIFICATION OF PASS THROUGH COST AND, THEREFORE, ENHANCEMENT MADE IS ILLEGAL AND WITHOUT JURISDICTIO N. THE LEARNED AR 16 SUBMITTED THAT DISALLOWANCE UNDER SEC. 40(A)(IA) OF THE ACT AS DIRECTED BY THE LEARNED CIT(APPEALS) WAS NOT THE SUBJECT MATTER OF THE EARLIER ASSESSMENT. HE PLACED RELIANCE ON THE DECISION OF HONBLE HIGH COURT OF DELHI IN THE CASE OF CIT VS. SARDARI LAL & CO. 251 ITR 864 (D EL.). HE ALSO PLACED RELIANCE ON THE FOLLOWING DECISIONS: I) SAHELI SYNTHETICS (P) LTD. VS. CIT 302 ITR 12 6 (GUJ.); II) DCIT VS. SURAT ELECTRICITY CO. LTD. 377 ITR 271 (GUJ.); III) CIT VS. UNION TYRES 107 TRAXMANN 447 (DEL.) ; & IV ) ITO VS. JABAL WOODCRAFTS INDIA ITA NO. 803/ DEL/2009 15. THE LEARNED CIT(DR) ON THE CONTRARY SUBMI TTED THAT THE FACTS OF THE ABOVE CITED CASE OF SARDARI LAL & CO. ARE DISTINGUI SHABLE HENCE IT IS NOT RELEVANT IN THE PRESENT CASE. HE SUBMITTED THAT IN THE CASE OF SARDARI LAL & CO.(SUPRA), THE ASSESSING OFFICER HAD NOT LOOKED I NTO SOME FACTS FOR WHICH DIRECTIONS WERE ISSUED BY THE APPELLATE AUTHORITY. IT WAS IN THIS LIGHT OF THE MATTER, THE HON'BLE DELHI HIGH COURT HELD AS LOOKI NG FROM THE AFORESAID ANGLES, THE INEVITABLE CONCLUSION IS THAT WHENEVER THE QUESTION OF TAXABILITY OF INCOME FROM A NEW SOURCE OF INCOME IS CONCERNED, WHICH HAD NOT BEEN CONSIDERED BY THE ASSESSING OFFICER, THE JURISDICTI ON TO DEAL WITH THE SAME IN APPROPRIATE CASES MAY BE DEALT WITH UNDER SEC. 147/ 148 AND SECTION 263, IF REQUISITE CONDITIONS ARE FULFILLED. IT IS INCONCEIV ABLE THAT IN THE PRESENCE OF 17 SUCH SPECIFIC PROVISION, A SIMILAR POWER IS AVAILAB LE TO THE FIRST APPELLATE AUTHORITY. THAT BEING THE POSITION, DECISION IN UNI ON TYRE CASE (SUPRA) OF THIS COURT EXPRESSES THE CORRECT VIEW AND DOES NOT MEET RECONSIDERATION. THIS REFERENCE IS ACCORDINGLY DISPOSED. 16. LEARNED CIT(DR) SUBMITTED THAT THE METHOD OF AC COUNTING FOLLOWED BY THE ASSESSEE AND THE FACT THAT SOME ITEMS ARE SH OWN AS PASS THROUGH WITHOUT DEDUCTION OF TAX WERE VERY MUCH INVESTIGATE D BY THE ASSESSING OFFICER IN BOTH THE ROUNDS OF ASSESSMENT. HE ALSO P LACED RELIANCE ON THE DECISION OF HON'BLE SUPREME COURT IN THE CASE OF CI T VS. SUN ENGINEERING (P) LTD. 198 ITR 297 (S.C). THE LEARNED CIT(DR) S UBMITTED FURTHER THAT THE ISSUE OF METHOD OF ACCOUNTING FOLLOWED BY THE A SSESSEE, NON-DEDUCTION OF TDS (EVIDENCED BY THE DISCREPANCY IN 26AS STATEM ENTS), PASSED THROUGH COSTS WERE VERY MUCH PART OF THE ORIGINAL ASSESSMEN T, DRPS ORDER AND THE SET ASIDE ORDER OF THE ITAT. HE SUBMITTED THAT THE ISSUE BEFORE THE ITAT WAS ON THE VIOLATION OF PRINCIPLES OF NATURAL JUSTICE A ND VIDE PARA NO. 23, THE ITAT HAS SIMPLY DIRECTED THAT THE ASSESSEE BE GRANT ED SUFFICIENT OPPORTUNITY. 17. HAVING CONSIDERED ARGUMENTS ADVANCED BY THE PAR TIES IN VIEW OF THE CITED DECISIONS, WE FIND THAT THE CONTENTION OF THE LEARNED AR IS THAT WHILE 18 DIRECTING THE ASSESSING OFFICER TO DISALLOW PAYMENT S MADE BY THE ASSESSEE UNDER SEC. 40(A)(IA) OF THE ACT, THE LEARNED CIT(AP PEALS) HAS ENHANCED THE INCOME WITHOUT APPRECIATING THAT THE APPEAL WAS PRE FERRED AGAINST THE ORDER PASSED BY THE ASSESSING OFFICER UNDER SEC. 254 READ WITH SEC. 143(3) OF THE ACT PURSUANT TO THE SPECIFIC DIRECTION OF THE ITAT, THUS, THE LEARNED CIT(APPEALS) HAS EXCEEDED THE JURISDICTION. THE CON TENTION OF THE LEARNED CIT(DR) ON THE OTHER HAND REMAINED THAT THE CITED D ECISIONS BY THE LEARNED AR HAVING DISTINGUISHABLE FACTS ARE NOT RELEVANT AN D THE LEARNED CIT(APPEALS) AS ALLEGED HAS NOT EXCEED HIS JURISDIC TION WHILE DIRECTING THE ASSESSING OFFICER TO DISALLOW PAYMENTS MADE BY THE ASSESSEE UNDER SEC. 40(A)(IA) OF THE ACT, SINCE ISSUE OF METHOD OF ACCO UNTING FOLLOWED BY THE ASSESSEE, NON-DEDUCTION OF TDS AND PASS THROUGH COS T WAS VERY MUCH PART OF THE ORIGINAL ASSESSMENT, DRPS ORDER AND THE SET ASIDE ORDER OF THE ITAT. WE, THUS FIND THAT THE SETTING ASIDE ORDER OF THE I TAT, HAS BECOME MORE RELEVANT TO DECIDE THE ISSUE. THE RELEVANT PARA NUM BERS 21 TO 24 OF THE ORDER DATED 31.1.2012 OF THE ITAT IS BEING REPRODUCED HER EUNDER: 21. IN THIS REGARD, IT IS SEEN THAT INDEED, THE A. O. COLLECTED EVIDENCE AT THE BACK OF THE ASSESSEE AND NEVER CONFRONTED TH E SAME TO THE ASSESSEE. THE ASSESSEE WAS NOT ALLOWED ANY OPPORTUN ITY TO REBUT THE EVIDENCE. HOWEVER, THE A.O. WENT ON TO MAKE THE ADD ITION OF RS.89,39,92,188, ON ACCOUNT OF THE ALLEGED SHORT RE CEIPTS DECLARED IN 19 THE PROFIT AND LOSS ACCOUNT. NOW THIS IS ENTIRELY I N VIOLATION OF THE NATURAL JUSTICE PRINCIPLES OF AUDI ALTEREM PARTEM. NO BODY CAN BE CONDEMNED IN HEARING. ADDITION HEREIN HAVING BEEN M ADE AT THE BACK OF THE ASSESSEE WITHOUT CONFRONTING THE SAME TO THE ASSESSEE MUCH LESS ALLOWING THE ASSESSEE ANY OPPORTUNITY TO REBUT IT, THIS ADDITION, AS IT STANDS, IS NOT SUSTAINABLE IN THE EYE OF LAW. ACCOR DINGLY, THIS ISSUE IS REMITTED TO THE FILE OF THE A.O., TO BE DECIDED AFR ESH IN ACCORDANCE WITH LAW, ON PROVIDING DUE AND ADEQUATE OPPORTUNITY TO THE ASSESSEE TO REBUT THE EVIDENCE COLLECTED BY THE A.O. AT THE BACK OF THE ASSESSEE. 22. IN THIS REGARD, A PERUSAL OF THE RELEVANT PORT ION OF THE DRPS ORDER, AS REPRODUCED HEREIN ABOVE, SHOWS THAT THE A SSESSEE HAS PRODUCED CONFIRMATIONS FROM 45 VENDORS BEFORE THE D RP, AND THE DRP HAD FORWARDED THE SAME TO THE A.O. FOR VERIFICA TION. THE A.O. HAD REQUESTED FOR MORE TIME TO MAKE THE VERIFICATIO N. THE DRP, HOWEVER, DIRECTED THE A.O. TO VERIFY THE EVIDENCE A ND IF THE A.O. WERE SATISFIED, HE WAS TO RESTRICT THE DISALLOWANCE, IF ANY, WHICH, IN ANY CASE, AS PER THE DRP, COULD NOT EXCEED RS.89,39,92, 188, THE PAYMENTS MADE TO THIRD PARTIES NOT VERIFIABLE. SINCE THE MAT TER IS NOW BEING REMITTED TO THE FILE OF THE A.O., AS ABOVE, THE ASS ESSEE WOULD GET AMPLE OPPORTUNITY TO PROVE ITS CASE. 23. THE ENTIRE MATTER IS, ACCORDINGLY, REMITTED TO THE FILE OF THE A.O. TO BE DECIDED AFRESH IN ACCORDANCE WITH LAW ON AFFO RDING ADEQUATE, DUE AND PROPER OPPORTUNITY OF HEARING TO THE ASSESS EE BY CONFRONTING THE ENTIRE EVIDENCE COLLECTED TO THE ASSESSEE. 20 24. IN THE RESULT, FOR STATISTICAL PURPOSES, THE AP PEAL OF THE ASSESSEE IS TREATED AS ALLOWED. 18. THE PERUSAL OF ABOVE ORDER OF THE ITAT, AS SUBM ITTED BY THE LEARNED CIT(DR) DOES NOT SUGGEST THAT THE ITAT HAS SIMPLY D IRECTED THAT THE ASSESSEE BE GRANTED SUFFICIENT OPPORTUNITY BUT OPPO RTUNITY WAS AFFORDED TO THE ASSESSEE TO REBUT THE EVIDENCE USED BY THE ASSE SSING OFFICER REGARDING THE ADDITION OF RS.89,39,92,188 MADE BY THE ASSESSI NG OFFICER ON ACCOUNT OF ALLEGED SHORT RECEIPTS DECLARED IN THE PROFIT AND L OSS ACCOUNT VIOLATING THE PRINCIPLES OF NATURAL JUSTICE. IN COMPLIANCE, THE A SSESSING OFFICER MADE THE ASSESSMENT ON THE ISSUE AFRESH UNDER SEC. 254 READ WITH 143(3) OF THE ACT, MAKING THE ADDITION OF RS.4,55,41,557 OUT OF RS.89, 39,92,188 WHICH WAS QUESTIONED BEFORE THE LEARNED CIT(APPEALS). THE LE ARNED CIT(APPEALS) NOT ONLY UPHELD THE ADDITION OF RS.04,55,41,557 MAD E ON ACCOUNT OF SHORT RECEIPTS DECLARED IN PROFIT AND LOSS ACCOUNT BUT EN HANCED THE INCOME BY DIRECTING THE ASSESSING OFFICER TO DISALLOW PAYMENT S MADE BY THE ASSESSEE UNDER SEC. 40(A)(IA) OF THE ACT. WE THUS FIND SUBST ANCE IN THE CONTENTIONS OF THE LEARNED AR THAT BY DIRECTING THE ASSESSING OFFI CER TO MAKE THE DISALLOWANCE OF PAYMENTS MADE BY THE ASSESSEE UNDER SEC. 40(A)(IA) OF THE ACT, THE LEARNED CIT(APPEALS) HAS INTRODUCED IN THE ASSESSMENT A NEW SOURCE OF INCOME, WHICH IS NOT ALLOWED IN AN ASSESS MENT WHICH WAS MADE BY 21 THE ASSESSING OFFICER STRICTLY IN COMPLIANCE OF THE ORDER OF THE ITAT FOR RECONSIDERATION OF ADDITION OF RS.89,39,92,188 AFTE R EXAMINING THE EVIDENCE AND UPHOLDING OPPORTUNITY OF BEING HEARD TO THE ASS ESSEE. IN THE CASE OF DCIT VS. SAHELI SYNTHETICS PVT. LTD. (SUPRA), IT WA S HELD THAT ORDER OF LEARNED CIT(APPEALS) TO SET ASIDE ASSESSMENT, WHICH DOES NOT INVOLVE A PROPOSAL FOR ENHANCEMENT CANNOT BE USED FOR THE PUR POSE OF EXPENDING THE SCOPE OF THE POWERS AVAILABLE TO THE ASSESSING OFFI CER WHILE MAKING FRESH ASSESSMENT PURSUANT TO A SET ASIDE. IN THE CASE OF CIT VS. SARDARI LAL & CO. (SUPRA), THE HONBLE JURISDICTIONAL HIGH COURT HAS BEEN PLEASED TO HOLD THAT THE ITAT WAS JUSTIFIED IN HOLDING THAT IN CALLING F OR A REMAND REPORT ON THE NOTED FOUR POINTS, THE AAC HAD EXCEEDED HIS JURISDI CTION. WHILE COMPUTING THE TOTAL BUSINESS INCOME OF THE ASSESSEE, THE ASSE SSING OFFICER IN THAT CASE HAD ESTIMATED THE SALES AT AN ENHANCED FIGURE AND H AD APPLIED A HIGHER RATE OF GROSS PROFIT. THUS, THE ONLY MATTER DEALT WITH B Y THE ASSESSING OFFICER IN THE ASSESSMENT ORDER WAS THE ESTIMATION OF PROFITS AND GAINS OF THE BUSINESS OF THE ASSESSEE. NONE OF THE NOTED FOUR POINTS HAD ANY BEARING ON THE QUESTION OF ESTIMATION OF EITHER THE SALES OR THE G ROSS PROFIT RATE. IT WAS HELD THAT ANY ADDITION ON ACCOUNT OF UNEXPLAINED INVESTM ENT WOULD CONSTITUTE A NEW SOURCE OF INCOME, WHICH WAS NOT THE SUBJECT MAT TER BEFORE THE ASSESSING OFFICER, THEREFORE, IT WAS NOT OPEN TO TH E FIRST APPELLATE AUTHORITY 22 TO DIRECT THE ASSESSING OFFICER TO CONDUCT INQUIRY ON THE SAID FOUR POINTS. HON'BLE HIGH COURT CAME TO THE CONCLUSION THAT WHEN EVER THE QUESTION OF TAXABILITY OF INCOME FROM A NEW SOURCE OF INCOME IS CONCERNED, WHICH HAD NOT BEEN CONSIDERED BY THE ASSESSING OFFICER, THE J URISDICTION TO DEAL WITH THE SAME IN APPROPRIATE CASES MAY BE DEALT WITH UND ER SEC. 147/148 OF THE ACT AND SECTION 263 OF THE ACT, IF REQUISITE CONDIT IONS ARE FULFILLED. IT IS INCONCEIVABLE THAT IN THE PRESENCE OF SUCH SPECIFIC PROVISIONS, A SIMILAR POWER IS AVAILABLE TO THE APPELLATE AUTHORITY, HELD THE HON'BLE HIGH COURT. TAKING STRENGTH FROM THE RATIOS OF THE ABOVE CITED DECISIONS, WE HOLD THAT THE DIRECTION TO THE ASSESSING OFFICER BY THE LEARNED C IT(APPEALS) TO DISALLOW PAYMENTS MADE BY THE ASSESSEE UNDER SEC. 40(A)(IA) OF THE ACT WAS A QUESTION OF TAXABILITY OF INCOME FROM A NEW SOURCE OF INCOME WHICH HAS NOT BEEN CONSIDERED BY THE ASSESSING OFFICER, HENCE IT WAS EXCEEDING OF JURISDICTION BY THE LEARNED CIT(APPEALS) IN A SET A SIDE MATTER BY THE ITAT IN THE PRESENT CASE. THE DECISIONS RELIED UPON BY T HE LEARNED CIT(DR) HAVING DISTINGUISHABLE FACTS ARE NOT RELEVANT AS MA IN THRUST OF THE LEARNED CIT(DR) IN HIS CONTENTIONS IS THAT THE LEARNED CIT( APPEALS) HAS CO- TERMINUS POWERS AS OF THE ASSESSING OFFICER, HENCE, HE IS EMPOWERED TO DO WHAT AN ASSESSING OFFICER CAN DO FOR THE ASSESSMENT AND THE DIRECTED DISALLOWANCE HAS BEARING ON THE QUESTION OF PASS-TH ROUGH COSTS. IT IS, 23 HOWEVER, NOT IN DISPUTE THAT THE DIRECTED DISALLOWA NCE WAS NEW SOURCE OF INCOME, WHICH WAS NOT THE SUBJECT MATTER OF SETTING ASIDE ORDER BY THE ITAT, IN COMPLIANCE OF WHICH ASSESSMENT UNDER SEC. 254 RE AD WITH SECTION 143(3) WAS FRAMED. WE THUS DECIDE THE ISSUE IN FAVOUR OF T HE ASSESSEE WITH FINDING THAT WHILE DIRECTING THE ASSESSING OFFICER TO DISAL LOW PAYMENTS MADE BY THE ASSESSEE UNDER SEC. 40(A)(IA) OF THE ACT, THE LEARN ED CIT(APPEALS) HAS EXCEEDED HER JURISDICTION ON AN ISSUE WHICH WAS NEV ER RAISED BY THE ASSESSING OFFICER OR REMAINED THE SUBJECT MATTER OF THE SETTING ASIDE ORDER OF THE ITAT. SIMILARLY, THE LEARNED CIT(APPEALS) HAS A LSO EXCEEDED HER JURISDICTION BY DIRECTING THE ASSESSING OFFICER TO INITIATE PENALTY PROCEEDINGS UNDER SEC. 201(1) OF THE ACT. IN RESULT, GROUND NO S. 6 TO 8 ARE ALLOWED IN FAVOUR OF THE ASSESSEE. IN CONSEQUENCE, GROUND NOS. 9 TO 18 (QUESTIONING THE DISALLOWANCE OF PAYMENT MADE BY THE ASSESSEE UNDER SEC. 40(A)(IA) AND INITIATION OF PENALTY U/S. 201(1) ON ITS MERIT) HA VE BECOME INFRUCTUOUS AND ARE THUS ACCORDINGLY DISPOSED OF. 19. IN RESULT, THE APPEAL IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 16 .07.2015 SD/- SD/- ( N.K. SAINI ) ( I.C. SUDHIR ) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 16 /07/2015 MOHAN LAL 24 COPY FORWARDED TO: 1) APPELLANT 2) RESPONDENT 3) CIT 4) CIT(APPEALS) 5) DR:ITAT ASSISTANT REGISTRAR DATE DRAFT DICTATED ON COMPUTER 15.07.2015 DRAFT PLACED BEFORE AUTHOR 15.07.2015 DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER DRAFT DISCUSSED/APPROVED BY SECOND MEMBER. APPROVED DRAFT COMES TO THE SR.PS/PS 23.07.2015 KEPT FOR PRONOUNCEMENT ON 16.07.2015 FILE SENT TO THE BENCH CLERK 23.07.2015 DATE ON WHICH FILE GOES TO THE AR DATE ON WHICH FILE GOES TO THE HEAD CLERK. DATE OF DISPATCH OF ORDER.
