The ACIT,(OSD)Circle-8, Ahmedabad V. Sales India Pvt.Ltd., Ahmedabad

ITA 972/AHD/2011

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 76834 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 2 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-06-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 04-06-2014
• Assessment Year: 2008-2009
• Appeal Filed On: 01-04-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: A K PANDEY
• Assessee Lawyers: PF JAIN
• Keywords: Unexplained expenditure; Rule of consistency; Notional interest; Revenue expenditure; Capital expenditure
• Section: 69C; 143(3); 133(6)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, AHMEDABAD (BEFORE SHRI D.K. TYAGI, J.M. & SHRI ANIL CHATURVED I, A.M.) I.T. A. NO. 972/AHD/2011 (ASSESSMENT Y EAR: 2008-09) THE A.C.I.T (OSD) CIRCLE-8, AHMEDABAD V/S SALES INDIA PVT. LTD, ASHRAM ROAD, AHMEDABAD (APPELLANT) (RESPONDENT) PAN: AABCS 5536R APPELLANT BY : SHRI A.K. PANDEY, SR. D.R. RESPONDENT BY : SHRI P.F. JAIN ( )/ ORDER DATE OF HEARING : 04-06-2014 DATE OF PRONOUNCEMENT : 13 -06-2014 PER SHRI ANIL CHATURVEDI,A.M. 1. THIS APPEAL IS FILED BY THE REVENUE AGAINST THE ORDER OF CIT(A)-XIV, AHMEDABAD DATED 28.01.2011 FOR A.Y. 2008-09. 2. THE FACTS AS CULLED OUT FROM THE MATERIAL ON REC ORD ARE AS UNDER. 3. ASSESSEE IS A COMPANY STATED TO BE ENGAGED IN TH E BUSINESS OF CONSUMER DOMESTIC HOUSE-HOLD APPLIANCES. ASSESSEE FILED ITS RETURN OF INCOME FOR A.Y. 2008-09 ON 22.09.2008 DECLARING TOTAL INCOME OF RS. 41,67,455/-. THE CASE WAS SELECTED FOR SCRUTINY AND THEREAFTER THE ASSESS MENT WAS FRAMED UNDER SECTION 143(3) VIDE ORDER DATED 22.12.2010 AND THE TOTAL INCOME WAS DETERMINED AT RS. 1,20,53,960/-. AGGRIEVED BY THE ORDER OF A.O, ASSESSEE CARRIED THE MATTER BEFORE CIT(A). CIT(A) VIDE ORDER DATED 28.01.2011 GRANTED ITA NO 972/AHD/2011 . A.Y. 2008- 09 2 SUBSTANTIAL RELIEF TO THE ASSESSEE . AGGRIEVED BY T HE ORDER OF CIT(A), THE REVENUE IS NOW IN APPEAL BEFORE US AND HAS RAISED T HE FOLLOWING GROUNDS:- 1. THE LD. CIT(A)-XIV, AHMEDABAD ERRED IN LAW AND ON FACTS IN DELETING THE DISALLOWANCE OF RS.20,78,870/- MADE BY THE ASSESSING OFFICER RELATI NG TO SHOW ROOM RENOVATION / REPAIRS EXPENSES. 2. THE LD. CIT(A)-XIV, AHMEDABAD ERRED IN LAW AND ON FACTS IN DELETING THE DISALLOWANCE OF RS.3,96,000/- MADE BY THE ASSESSING OFFICER ON ACCO UNT OF INTEREST U/S.36(1)(III). 3. THE LD. CIT(A)-XIV, AHMEDABAD ERRED IN LAW AND ON FACTS IN DELETING THE ADDITION OF RS. 18,50,275/- MADE BY THE ASSESSING OFFICER ON ACCOUN T OF ADVERTISEMENT U/S.40A(2)(B) OF THE ACT. 4. THE LD. CIT(A)-XIV, AHMEDABAD ERRED IN LAW AND ON F ACTS IN DELETING THE ADDITION OF RS.35,61,355/- MADE BY THE ASSESSING OFFICER ON ACC OUNT OF UNEXPLAINED EXPENDITURE ON ADVERTISEMENT U/S.69C OF THE ACT. GROUND NO. 1 IS WITH RESPECT TO DELETION OF DISALLO WANCE RELATING TO SHOW ROOM RENOVATION/REPAIR EXPENSES. 4. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, A.O NOTICED THAT ASSESSEE HAD DEBITED RS. 23,09,855/- AS EXPENSES FOR RENOVAT ION OF SHOW ROOM. THE SUBMISSION OF THE ASSESSEE THAT THE EXPENDITURE WAS MADE FOR DIFFERENT RENTED SHOW ROOMS OF THE COMPANY AND THE RENOVATION WAS MADE DUE TO SPOILED FURNITURE ON ACCOUNT OF HUMIDITY AND TERMIT E WAS NOT FOUND ACCEPTABLE TO THE A.O. ON PERUSING THE COPY OF THE LEDGER, A.O WAS OF THE VIEW THAT THE EXPENDITURE INCURRED UNDER THE HEAD RENOVATION WA S CAPITAL IN NATURE. A.O ALSO NOTICED THAT NO REPAIRS AND RENOVATION EXPENSE S WAS INCURRED BY THE ASSESSEE IN EARLIER YEARS. HE ACCORDINGLY DISALLOWE D THE CLAIM OF THE ASSESSEE. AGGRIEVED BY THE ORDER OF A.O, ASSESSEE C ARRIED THE MATTER BEFORE CIT(A). CIT(A) AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE DECIDED THE ISSUE IN FAVOUR OF ASSESSEE BY HOLDING AS UNDER:- DECISION : I HAVE GONE THROUGH ASSESSMENT ORDER AND THE SUBM ISSIONS OF THE ASSESSEE AND IT IS SEEN THAT THE ASSESSING OFFICER HAS TREATED I T AS CAPITAL EXPENDITURE BY OBSERVING THAT THE SHOWROOM RENOVATION PERTAINS TO ASHRAM ROAD ONLY AN D ACCORDING TO HIM IT WILL NOT REQUIRE REPAIRS AND RENOVATION AT ONE PARTICULAR OF TIME AN D ACCORDING TO HIM AS PER NARRATION OF THE LEDGER THESE ARE CAPITAL EXPENDITURE. FROM THE SUBM ISSION OF THE ASSESSEE AND THE DETAILS OF SHOWROOM RENOVATION EXPENSES IT IS SEEN THAT THESE EXPENSES RELATE TO VARIOUS SHOW ROOMS OF ASSESSEE AND IN THE EARLIER YEARS THESE EXPENSES WERE BORNE BY OTHER CONCERNS NAMELY ITA NO 972/AHD/2011 . A.Y. 2008- 09 3 M/S SALES INDIA, M/S SANTOSH TRADING CO, M/S SALES CENTRE AND M/S JOSE JONES WHOSE BUSINESS NOW STANDS MERGED IN THE BUSINESS OF THE A PPELLANT. THE ASSESSEE HAS ALSO EXPLAINED THAT THE SHOW ROOM AT ASHRAM ROAD IS SITU ATED AT CELLAR WHERE THE NATURAL MOISTURE IS BOUND TO HAPPEN WHICH WILL DAMAGE FURNI TURE AND FIXTURE. FROM THE SAMPLE COPIES OF BILLS, ALSO IT IS SEEN THAT THESE EXPENDITURE AR E BY WAY OF REPLACEMENT/ REPAIRING OF OLD EXISTING FURNITURE AND FIXTURES AND MODIFICATION MA DE TO FACILITATE THE DISPLAY OF CHANGED MODELS OF PRODUCTS OF COMPANIES WHOSE GOODS ARE SOL D BY IT. IT IS ALSO SEEN THAT DURING THE YEAR ASSESSEE HAS CAPITALIZED EXPENDITURE RELATING TO FURNITURE AND FIXTURES AMOUNTING TO RS 34,81,578/-. THE ASSESSEE HAS ALSO RELIED UPON DECI SION OF AHMEDABAD I.T.A.T IN THE CASE OF WELL KNOWN ORGANISER LTD. WHEREIN THE I.T.A.T RELIE D UPON GUJARAT HIGH COURT HOLDING THAT IF THE OUTGOING OR EXPENDITURE IS SO RELATED TO THE CA RRYING ON OR CONDUCT OF BUSINESS THAT IT MAY BE REGARDED AS AN INTEGRAL PART OF PROFIT EARNING P ROCESS AND NOT FOR ACQUISITION OF AN ASSET OR A RIGHT OF A PERMANENT CHARACTER, THE POSSESSION OF WHICH IS A CONDITION OF CARRYING ON OF THE BUSINESS, THE EXPENDITURE MAY BE REGARDED AS REVENU E EXPENDITURE. IT AISO SEEN THAT NO SHOW-CAUSE NOTICE WAS ISSUED ' BEFORE MAKING THIS A DDITION. CONSIDERING ALL THESE FACTS IN TOTALITY I FIND FORCE IN THE SUBMISSION OF THE ASSE SSEE AND IMPUGNED EXPENDITURE OF RS.23,09,855 ON REPAIRS AND RENOVATION OF SHOW ROOM S IS DIRECTED TO BE TREATED AS REVENUE EXPENDITURE BEING IN THE NATURE OF CURRENT REPAIRS AND THIS GROUND OF APPEAL IS ALLOWED. 5. AGGRIEVED BY THE ORDER OF CIT(A), THE REVENUE IS NOW IN APPEAL BEFORE US. 6. BEFORE US, LD. D.R. TOOK US THROUGH THE FINDINGS OF A.O. AND SUPPORTED HIS ORDER. THE LD. A.R. ON THE OTHER HAND REITERATED TH E SUBMISSIONS MADE BEFORE CIT(A) AND SUPPORTED HIS ORDER. 7. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. WE FIND THAT CIT(A) AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE AND ON PERUSING THE COPIES OF THE BILLS HAS GIVEN A FINDIN G THAT THE EXPENDITURE INCURRED BY THE ASSESSEE WAS BY WAY OF REPLACEMENT/ REPAIRING OF OLD EXISTING FURNITURE AND FIXTURES AND MODIFICATION MADE TO FAC ILITATE THE DISPLAY OF CHANGED MODELS OF PRODUCTS OF COMPANIES WHICH ARE S OLD BY ASSESSEE. CIT(A) AFTER RELYING ON THE DECISION OF THE AHMEDAB AD TRIBUNAL IN THE CASE OF WELLKNOWN ORGANIZERS LTD. AND THE DECISION OF HONB LE GUJARAT HIGH COURT GRANTED RELIEF TO THE ASSESSEE. BEFORE US LD. D.R. COULD NOT CONTROVERT THE FINDINGS OF CIT(A) AND THUS WE FIND NO REASON TO IN TERFERE WITH THE ORDER OF CIT(A) AND THUS THIS GROUND OF REVENUE IS DISMISSED . 2 ND GROUND IS WITH RESPECT TO DELETING THE DISALLOWANC E OF INTEREST OF RS. 3,96,000/-. ITA NO 972/AHD/2011 . A.Y. 2008- 09 4 8. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, A.O NOTICED THAT ASSESSEE HAS GIVEN RS. 33 LACS AS FURNITURE SECURITY DEPOSIT S TO THE PROPRIETORY CONCERN OF ONE OF THE PARTNERS AND ALSO TO THE PARTNERS OF THE FIRM. HE ALSO NOTICED THAT NO INTEREST WAS CHARGED ON THE FURNITURE DEPOSIT. A .O WAS OF THE VIEW THAT ON ONE HAND ASSESSEE HAD TAKEN SECURED LOAN ON WHICH I NTEREST WAS PAID BY THE ASSESSEE AND ON THE OTHER HAND ASSESSEE HAD GIVEN I NTEREST FREE FURNITURE DEPOSIT TO THE RELATED PARTIES. HE WAS THEREFORE O F THE VIEW THAT INTEREST TO THE EXTENT OF AMOUNT OF ADVANCES CALCULATED AT 12% OF T HE AMOUNTS ADVANCED WAS NOT ALLOWABLE. HE ACCORDINGLY CALCULATED THE AM OUNT OF RS. 3,96,000/- AND DISALLOWED THE SAME UNDER SECTION 36(1)(III) OF THE ACT. AGGRIEVED BY THE ORDER OF A.O, ASSESSEE CARRIED THE MATTER BEFORE CI T(A). CIT(A) AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE DECIDED THE ISSUE IN FAVOUR OF ASSESSEE BY HOLDING AS UNDER:- DECISION: THE SUBMISSION OF THE ASSESSEE IS CONSIDERED AND FR OM THE ASSESSMENT ORDER IT IS NOTICED THAT THIS DISALLOWANCE IS MADE BECAUSE ACCO RDING TO HIM INTEREST FREE FURNITURE DEPOSIT HAS BEEN GIVEN TO THE DIRECTORS, FROM THE F ACTS NARRATED BY THE ASSESSEE IT IS SEEN THAT THIS IS AN OLD FURNITURE DEPOSIT GIVEN TO M/S SALES INDIA AND M/S SANTOSH TRADING FOR USING THE EXISTING FURNITURE OF THESE CONCERNS WITH OUT PAYMENT OF RENT AND FURTHER IT IS ALSO SEEN THAT THE AMOUNT OF RS.39,26,520 FOR FURNITURE MENTIONED IN THE ASSESSMENT ORDER PERTAINS TO FURNITURE OF COMPANY IT SELF AND FOR TH IS FURNITURE NO SECURITY DEPOSIT HAS BEEN GIVEN. THE DEPOSIT HAS BEEN GIVEN FOR THE PURPO SE OF BUSINESS AND IT IS ALSO SEEN THAT NO SHOW-CAUSE NOTICE HAS BEEN ISSUED BEFORE MAKING ADD ITION. CONSIDERING THE FACTUAL ASPECTS OF THE DEPOSIT THE NOTIONAL ADDITION OF INTEREST OF RS.3,96,000 IS UNJUSTIFIED AND THEREFORE THE SAME IS DIRECTED TO BE DELETED, ALLOWING THIS GROUN D OF APPEAL OF THE ASSESSEE. 9. AGGRIEVED BY THE ORDER OF CIT(A), THE REVENUE IS NOW IN APPEAL BEFORE US. 10. BEFORE US LD. D.R. RELIED ON THE ORDER OF A.O. ON THE OTHER HAND LD. A.R. REITERATED THE SUBMISSIONS MADE BEFORE CIT(A) AND S UPPORTED HIS ORDER. 11. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. CIT(A) AFTER CONSIDERING THE SUBMISSIONS OF THE ASS ESSEE HAS NOTED THAT THE FURNITURE DEPOSIT WAS OLD AMOUNT GIVEN TO SALES IND IA AND M/S SANTOSH TRADING FOR USING THE EXISTING FURNITURE OF THESE C ONCERNS WITHOUT PAYMENT OF RENT. HE HAS FURTHER NOTED THAT THE DEPOSITS HAVE B EEN GIVEN FOR THE PURPOSE ITA NO 972/AHD/2011 . A.Y. 2008- 09 5 OF BUSINESS AND THERE WAS NO JUSTIFICATION OF DISAL LOWING THE NOTIONAL INTEREST. BEFORE US, LD. D.R. COULD NOT CONTROVERT THE FINDIN GS OF CIT(A) AND THEREFORE WE FIND NO REASON TO INTERFERE WITH THE ORDER OF CI T(A) AND THUS THIS GROUND OF REVENUE IS DISMISSED. GROUND NO. 3 IS WITH RESPECT TO DELETING THE ADDITI ON OF RS. 18,50,275/- UNDER SECTION 40A(2)(B) OF THE ACT. 12. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, A. O NOTICED THAT ASSESSEE HAD PAID RS. 1,23,35,170/- TO ARTS INDIA, WHICH IS A RELATED PARTY COVERED UNDER SECTION 40A(2)(B) OF THE ACT FOR ADVERTISEMEN T. A.O ALSO NOTED THAT SUBSTANTIAL ADVERTISEMENT EXPENSES WAS PAID TO ARTS INDIA. THE AMOUNT PAID TO ARTS INDIA WAS CONSIDERED UNREASONABLE AND EXCES SIVE BY THE A.O. HE ACCORDINGLY DISALLOWED 15% OF THE ADVERTISEMENT EXP ENSES. AGGRIEVED BY THE ORDER OF A.O, ASSESSEE CARRIED THE MATTER BEFORE CI T(A). CIT(A) AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE DELETED THE ADDITION MADE BY THE A.O BY HOLDING AS UNDER:- DECISION : THE SUBMISSION OF ASSESSEE IS CONSIDERED AND FROM PERUSAL OF ASSESSMENT ORDER IT IS SEEN THAT THE ASSESSING OFFICER HAS DISALLOWE D 15 % OF ADVERTISEMENT EXPENDITURE OF RS. 1,23,35,170 INCURRED THROUGH M/S ARTS INDIA. IT ALS O SEEN THAT THIS EXPENDITURE HAS BEEN ALLOWED IN THE PRECEDING YEARS FOR WHICH ASSESSMENT WAS ALSO FRAMED AFTER SCRUTINY. FROM THE ORDER OF THE C.I.T (APPEALS) FOR A.Y. 1990-01 P LACED AT PAPER BOOK PAGE NOS. 50 TO 53, IT IS NOTICED THAT DISALLOWANCE OF RS.25 % ADVERTISEME NT EXPENSES THROUGH M/S ARTS INDIA WAS DELETED BY RECORDING FINDING THAT BEFORE INVOKING P ROVISIONS OF SECTION 40A(2)(B), NO COMPARABLE CASE WAS GIVEN, WHERE SIMILAR WORK HAS B EEN GOT DONE AT LOWER RATES AND THEREFORE IT WAS INCORRECT TO ARBITRARILY DISALLOW 25% OF THE PAYMENT TO A ASSOCIATE CONCERN SIMPLY BECAUSE THE PAYMENT HAPPENS TO THE ASSOCIATE CONCERN. FROM THE FACTS NARRATED BY THE ASSESSEE IT IS SEEN THAT THE ASSESSING OFFICER HAS NOT PROPERLY APPRECIATED THE FACTS AND CONSIDERING THE FACTUAL ASPECT OF THE PAYMENT AND T HE FACT THAT NO SUCH DISALLOWANCE WAS MADE IN THE EARLIER YEARS EXCEPT IN A.Y. 1990-91 WH ICH WAS ALSO DELETED AND APPLYING THE PRINCIPLE OF CONSISTENCY TO THE SIMILAR FACTS THE A DDITION OF RS.18,50,275/- U/S. 40A(2)(B) IS DIRECTED TO BE DELETED AND THIS GROUND OF APPEAL IS ALLOWED. 13. AGGRIEVED BY THE ORDER OF A.O, REVENUE IS NOW I N APPEAL BEFORE US. 14. BEFORE US, LD. D.R. RELIED ON THE ORDER OF A.O. ON THE OTHER HAND LD. A.R. REITERATED THE SUBMISSIONS MADE BEFORE CIT(A) AND S UPPORTED HIS ORDER. ITA NO 972/AHD/2011 . A.Y. 2008- 09 6 15. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. CIT(A) WHILE GRANTING THE RELIEF HAS NOTED THAT THE SIMILAR EXPENDITURE PAID FOR ADVERTISEMENT TO ARTS INDIA HAS BEEN ALLOWED IN THE PRECEDING YEARS IN SCRUTINY ASSESSMENT EXCEPT IN A.Y. 90-91 WHERE DISA LLOWANCE OF 25% WAS MADE BY A.O BUT THE SAME WAS DELETED BY CIT(A). BEF ORE US NOTHING HAS BEEN BROUGHT ON RECORD TO DEMONSTRATE THAT AGAINST THE ORDER OF CIT(A) FOR A.Y. 90-91. REVENUE HAD PREFERRED APPEAL BEFORE TRI BUNAL MEANING THEREBY THAT THE ORDER OF CIT(A) HAS BEEN ACCEPTED BY REVEN UE AND HAS ATTAINED FINALITY. BEFORE US NO MATERIAL HAS BEEN BROUGHT TO DEMONSTRATE AS TO HOW THE PAYMENT MADE BY ASSESSEE TO ARTS INDIA WAS EXCESSIV E. BEFORE US, LD. D.R. HAS NOT BROUGHT ANY MATERIAL ON RECORD TO CONTROVER T THE FINDINGS OF CIT(A). IN VIEW OF THE AFORESAID FACTS, WE FIND NO REASON TO I NTERFERE WITH THE ORDER OF CIT(A) AND THUS THIS GROUND OF REVENUE IS DISMISSED . 4 TH GROUND IS WITH RESPECT TO DELETION OF ADDITION ON ACCOUNT OF UNEXPLAINED ADVERTISEMENT EXPENDITURE UNDER SECTI ON 69C. 16. A.O NOTICED THAT ASSESSEE HAD SHOWN RS. 1,25,87 ,697/- AS ADVERTISEMENT EXPENSES. HE ALSO NOTED THAT OUT OF THE TOTAL ADVER TISEMENT EXPENSES, ABOUT 98% WAS PAID TO ARTS INDIA WHICH WAS A RELATED PART Y OF THE ASSESSEE. TO VERIFY THE REASONABLENESS OF EXPENDITURE PAID BY AS SESSEE TO ARTS INDIA AND TO VERIFY THE ACTUAL AMOUNT PAID BY ARTS INDIA TO D IFFERENT ADVERTISING AGENCIES LETTER UNDER SECTION 133(6) WERE ISSUED TO SOME NEW SPAPERS/ADVERTISING AGENCIES WHICH ARE LISTED ON PAGE 7 OF THE ORDER. O N PERUSAL OF STATEMENTS GIVEN BY DIFFERENT ADVERTISEMENT AGENCY, A.O NOTICE D THAT ARTS INDIA ACTUALLY PAID A SUM OF RS. 1,58,96,525/- FOR ADVERTISEMENT O F THE ASSESSEE WHEREAS AS PER THE BOOKS OF ACCOUNTS, ASSESSEE HAD PAID A S UM OF RS. 1,23,35,170/-. A.O WAS THEREFORE OF THE VIEW THAT SINCE THE ASSESS EE HAS NOT GIVEN ANY JUSTIFICATION FOR INCURRING MORE EXPENDITURE ON ADV ERTISEMENT AND IN THE ABSENCE OF ANY JUSTIFICATION BY THE ASSESSEE AS TO WHY RELATED PARTY WOULD INCUR MORE EXPENDITURE ON ADVERTISEMENT THAN THAT O F THE EXPENDITURE ITA NO 972/AHD/2011 . A.Y. 2008- 09 7 RECEIVED BY IT AS PER THE BOOKS, HE CONCLUDED THAT THE ASSESSEE HAD GIVEN EXCESS PAYMENT OF ADVERTISEMENT AMOUNTING TO RS. 35 ,61,355/- OUT OF THE BOOKS WHICH ATTRACT PROVISIONS OF SECTION 69C OF TH E ACT. HE THEREFORE CONSIDERED THE AFORESAID EXCESS AMOUNT AS UNEXPLAIN ED EXPENDITURE AND ADDED TO THE INCOME. AGGRIEVED BY THE ORDER A.O, AS SESSEE CARRIED THE MATTER BEFORE CIT(A). CIT(A) AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE DECIDED THE ISSUE IN FAVOUR OF ASSESSEE BY HOLDING AS UNDER:- DECISION: THE SUBMISSIONS OF THE ASSESSEE HAS BEEN CONSIDERED AND I HAVE ALSO GONE THROUGH FINDING OF THE ASSESSING OFFICER MENTIONED IN PARA 6 OF THE ASSESSMENT ORDER FOR MAKING ADDITION OF RS. 35,61,355 U/S 69C OF THE I.T . ACT. THE ASSESSING OFFICER HAS MENTIONED THAT ASSESSEE HAS PAID TO M/S ARTS INDIA RS. 1,23,35, 170 AND AS PER THE DETAILS GATHERED U/S 133(6) M/S ARTS INDIA HAS MADE PAYMENT OF RS. 1,58,96,525 TO THE PRESS AND THE DIFFERENCE OF THESE TWO AMOUNTS WHICH CORNES TO RS,35,61,355 HAS BEEN CONSIDERED AS EXCESS PAYMENT OF ADVERTISEMENT OUT OF BOOKS TO M/S ARTS INDIA AND ADDITION U/S 69C HAS BEEN MADE. FROM THE SUBMISSION OF THE ASSESSEE IT I S SEEN THAT THE INFORMATION GATHERED U/S 133(6) FROM VARIOUS NEWS PAPERS MENTIONED IN THE AS SESSMENT ORDER ON THE BASIS OF WHICH ADDITION HAS BEEN MADE WAS NOT ALLOWED NOR ANY EXPL ANATION WAS SOUGHT FROM THE APPELLANT AND THEREFORE THE QUESTION OF GIVING ANY JUSTIFICAT ION BY THE ASSESSEE DOES NOT ARISE AND IT IS ALSO A SETTLED LAW THAT BEFORE DRAWING ANY ADVERSE INFERENCE THE ASSESSEE HAS TO BE ALLOWED OPPORTUNITY TO EXPLAIN THE SAME. AS CONTENDED BY TH E ASSESSEE NEITHER THE INFORMATION GATHERED U/S 133(6) WAS PROVIDED TO THE ASSESSEE NO R ANY SHOW-CAUSE NOTICE IN THIS REGARD WAS ISSUED. THE BOOKS OF ACCOUNTS OF THE ASSESSEE H AS BEEN ACCEPTED AND SO ALSO THE ADVERTISEMENT EXPENSES OF RS.1,23,35,170 INCURRED B Y THE ASSESSEE. FROM THE PERUSAL OF ACCOUNTS OF M/S ARTS INDIA FURNISHED IT IS SEEN THA T THERE IS OPENING CREDIT BALANCE OF RS.32,45,462 AND THE TOTAL OF CREDIT SIDE OF THE AC COUNT INCLUDING THE TRANSACTION DURING THE YEAR IS RS. 1,55,80,633 AND DURING THE YEAR THE PAY MENT MADE TO M/S ARTS INDIA IS RS.1,17,43,432 LEAVING CREDIT BALANCE OF RS.38,37,2 00 IN THE ACCOUNT OF M/S ARTS INDIA PAYABLE BY THE ASSESSEE. IN VIEW OF THESE FACTS IT IS ALSO POSSIBLE THAT M/S ARTS INDIA MIGHT HAVE MADE PAYMENT FOR THIS YEAR AS WELL AS TOWARDS OLD OUTSTANDING DUES. CONSIDERING ALL THESE FACTUAL ASPECTS IT IS SEEN THAT THE CONDITION S OF SECTION 69C ARE NOT FULFILLED AND IN ABSENCE OF ANY PROOF OF INCURRING EXPENDITURE OUT O F BOOKS BY THE ASSESSEE, NO CASE OF ANY ADDITION U/S 69C HAS BEEN MADE BY THE ASSESSING OFF ICER. THEREFORE THE ADDITION OF RS.35,61,355 U/S 69C IS HEREBY DIRECTED TO BE DELETED AND THE GROUND OF THE ASSESSEE IS ACCORDINGLY ALLOWED. 17. AGGRIEVED BY THE ORDER OF CIT(A), REVENUE IS NO W IN APPEAL BEFORE US. 18. BEFORE US, LD. D.R. RELIED ON THE ORDER OF A.O ON THE OTHER HAND LD. A.R. SUPPORTED THE ORDER OF CIT(A). 19. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. CIT(A) WHILE DELETING THE ADDITION HAS NOTED THAT T HE INFORMATION GATHERED BY THE A.O U/S. 133(6) FROM VARIOUS NEWSPAPERS WAS NOT MADE AVAILABLE TO THE ITA NO 972/AHD/2011 . A.Y. 2008- 09 8 ASSESSEE NOR ANY EXPLANATION WAS SOUGHT FROM ASSESS EE AND THEREFORE THE QUESTION OF GIVING ANY JUSTIFICATION BY THE ASSESSE E DOES NOT ARISE. HE HAS FURTHER NOTED ON PERUSING THE ACCOUNT OF ARTS INDIA THAT THE PAYMENTS RECEIVED BY ARTS INDIA COULD HAVE BEEN FOR THE YEAR UNDER CONSIDERATION AS WELL AS OLD OUTSTANDING DUES SINCE THERE WAS OPENIN G CREDIT BALANCE SHOWN AS PAYABLE BY THE ASSESSEE AND THERE WAS BALANCE OU TSTANDING AT THE CLOSE OF THE YEAR. HE HAS FURTHER NOTED THAT IN THE ABSE NCE OF PROOF OF INCURRING EXPENDITURE OUT OF THE BOOKS BY THE ASSESSEE, NO CA SE OF ADDITION U/S. 69C HAS BEEN MADE BY THE A.O. BEFORE US, REVENUE HAS NO T BROUGHT ANY MATERIAL ON RECORD TO CONTROVERT THE FINDINGS OF CIT(A). WE THEREFORE FIND NO REASON TO INTERFERE WITH THE ORDER OF CIT(A) AND THUS THIS GR OUND OF REVENUE IS DISMISSED. 20. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISMISS ED. ORDER PRONOUNCED IN OPEN COURT ON 13 - 06 - 2014. SD/- SD/- (D.K. TYAGI) (ANIL CHATURVEDI) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD. TRUE COPY RAJESH COPY OF THE ORDER FORWARDED TO: - 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT (APPEALS) 4. THE CIT CONCERNED. 5. THE DR., ITAT, AHMEDABAD. 6. GUARD FILE. BY ORDER DEPUTY/ASSTT.REGISTRAR ITAT,AH MEDABAD