PERNOD RICARD INDIA PVT.LTD.,NEW DELHI V. PR CIT, CENTRAL DELHI-3, DELHI

ITA 1973/DEL/2024

AI Insights

The case involves Permod Ricard India Pvt. Ltd., which appealed against the revision of its income tax assessments for three consecutive years by the PCIT. The revisions were based on the grounds that the AO had not adequately verified whether the payments made under the trade scheme to sales promoters were in the nature of reimbursements to retailers or commissions subject to TDS under section 194H of the Income-tax Act. The Tribunal found that the AO had not fulfilled the mandate to verify the nature of the payments and had merely accepted the documents submitted by the assessee without thorough examination.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 37211 (ITAT-DELHI)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-02-2025
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: F
• Assessment Year: 2014-2015
• Other Referred Cases: CIT vs. United Breweries Ltd.
• Laws Referred To: Income-tax Act, 1961
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: JAVED AKHTAR
• Assessee Lawyers: DEEPAK CHOPRA
• Keywords: Set aside; Transfer pricing; Corroborative evidences; TDS; Assessment record; Revision of order; Non-deduction of tax; Application of stay
• Section: 143(3); 263; 22; 13; 144C; 40(a)(ia)

Judgement Text

"IN THE INCOME TAXAPPELLATE TRIBUNAL DELHI BENCH ‘F’, NEW DELHI BEFORE SHRI S. RIFAUR RAHMAN, ACCOUNTANT MEMBER and SHRI ANUBHAV SHARMA, JUDICIAL MEMBER SA No.136/Del/2024 (in ITA No.1971/Del/2024) (Assessment Year : 2012-13) SA No.137/Del/2024 (in ITA No.1972/Del/2024) (Assessment Year : 2013-14) SA No.138/Del/2024 (in ITA No.1973/Del/2024) (Assessment Year : 2014-15) A N D ITA No.1971/Del/2024 (Assessment Year : 2012-13) ITA No.1972/Del/2024 (Assessment Year : 2013-14) ITA No.1973/Del/2024 (Assessment Year : 2014-15) Permod Ricard India Pvt. Ltd., vs. Pr.CIT, Central Delhi, Atelier No.10, Level 1, New Delhi. Worldmark 2, Aerocity Delhi, Delhi – 110 037. (PAN :AAACS4781P) ASSESSEE BY : Shri Deepak Chopra, Advocate Shri Anmol Ananad, Advocate Ms. Priya Tondon, Advocate Ms. Sheetal Kandpal, Advocate REVENUE BY : Shri Javed Akhtar, CIT DR 2 ITA Nos.1971 to 1973/Del/2024 Date of Hearing : 04.12.2024 Date of Order : 12.02.2025 O R D E R PER S. RIFAUR RAHMAN, AM : 1. These appeals have been filed by the assessee against the order of ld.Pr.Commissioner of Income-tax (Central), Delhi-3 (hereinafter referred to as ‘ld. PCIT’) dated 08.03.2024 for the Assessment Years 2012-13 to 2014-15. 2. Since the issues are common and the appeals are connected, therefore, the same are heard together and being disposed off by this common order.First we take up ITA No.1971/Del/2024 for AY 2012-13 as the lead case. 3. Brief facts of the case are, assessee filed its original return of income on 29.11.2012 declaring total income of Rs.8,72,20,37,142/-. The return was revised declaring income of Rs.8,57,14,19,260/- on 12.02.2014. The assessment was completed u/s 143(3) r.w.s. 144C of the Income-tax Act, 1961 (for short ‘the Act’) vide order dated 24.06.2016 after making disallowance/additions as under:- (i) Transfer Pricing addition : Rs.62,86,33,013/- (ii) Addition on account of provision for transit breakages : Rs. 6,32,58,960/- (iii) Disallowance on account of Brand Expenses : Rs.50,38,72,290/- (iv) Trade Scheme to sales promoters u/s 40(a)(ia) : Rs.63,24,54,323/- 4. The assessee preferred an appeal before the ld. CIT (A)-42, New Delhi and ld. CIT (A) deleted the additions relating to transfer pricing and disallowance on 3 ITA Nos.1971 to 1973/Del/2024 account of brand expenses and allowed part relief on the transactions of provision of transit brokerages. Aggrieved with the above order, both Revenue as well as assessee preferred appeal before the ITAT Delhi and the coordinate Bench vide order dated 15.05.2020 in ITA No.1365/Del/2018 and ITA No.1607/Del/2018 confirmed the findings of ld. CIT (A) except on the issue of trade scheme to sales promoters u/s 40(a)(ia) of the Act and remitted the issue back to the file of AO with a direction to decide the issue afresh and verify whether the impugned disbursements arereimbursements and if found so, the same be allowed as deduction after providing the assessee opportunity ofbeing heard. 5. The AO issued notice further about the set aside proceedings on 10.03.2020 to the assessee to provide the relevant information and accompanied documents with the following tables :- Kindly provide details of beneficiaries of trade discounts as follows :- Name, PAN, e- mail and address of beneficiary Quantity of bottles transferred to the beneficiary Purchase consideration (in Rs.) Discount offered to beneficiary in % Amount of discount transferred to beneficiary (in Rs.) 6. The AO observed that the assessee did not make any compliance with the abovesaid notice. Accordingly, another notice was issued dated 22.03.2022 as final opportunity fixing the date of compliance on 24.03.2022. In response, the assessee filed emails dated 25.03.2022, 26.03.2022 and 29.03.2022. 7. On receipt of above information, the AO observed that to establish that the 4 ITA Nos.1971 to 1973/Del/2024 disbursements from the assessee to promoters are in the nature of reimbursements, the minimum documentary evidence required is sales promoter agreement, debit note raised by the promoter specifying the trade discount, details of retailers to whom trade discounts are to be disbursed, bank statement of assessee showing transfer of trade scheme discount to promoters and bank account statement of retailers showing transfer of trade scheme discount to retailers. With the above observation, he noticed that assessee has claimed to have submitted all the requisite details/documents with respect to Ark Marketing Services only and on perusal of the debit notes alone, it was observed that the total debit notes against trade scheme submitted by the assessee with respect to Ark Marketing Services aggregate to Rs.26,59,82,276/-. Further he observed that debit notes of Rs.4,51,00,383/- from Ark Marketing Services have been received after 31.03.2012 i.e. expenses have not accrued for the relevant year. Therefore, he allowed only Rs.22,08,81,893/-. Accordingly, he allowed the debit notes submitted by the assessee relating to Ark Marketing Servicestothe extent of Rs.22,08,81,893/- and disallowed the balance of Rs.4,51,00,383/-. 8. Ld. PCIT (Central), Delhi-3 examined the assessment records and perused all the details along with assessment order passed in this case including the relevant questionnaires issued and the compliance made by the assessee. Ld. PCIT observed the facts in this case before completing the assessment order u/s 5 ITA Nos.1971 to 1973/Del/2024 254/250/143(3) of the Act and observed that the assessee did not file the reply against the notice issued on 10.03.2022. The assessee filed the reply against final opportunity given to the assessee vide notice dated 22.03.2022 and assessee has filed reply vide letters dated 25.03.2022, 26.03.2022 and 29.03.2022. Ld. PCIT observed that vide letter dated 25.03.2022, the assessee has filed paper book of trade scheme discounts for the current assessment year. Vide letter dated 26.03.2022, the assessee has submitted break up of trade discount paid through promoters in the major cities as under :- Date of the reply of assessee Brief of the reply filed by the assessee 25.03.2022 Paperbook of trade scheme documents for AY 2012-13 26.03.202 Break up of the trade scheme paid through promoters amount into major states :- Name of the state Amount (INR) Andhra Pradesh 28,72,35,556/- Karnataka 19,14,88,664/- AndmanNikobar 53,54,985/- Chhattisgarh 20,27,73,939/- Bihar 6,16,67,121/- Tamil Nadu 16,62,180/- Orissa 8,39,25,445/- 29.03.2022 Further to our submission dated 25th March 2022, as directed we have complied all the documents and details pertaining to various sales promoters for the subject AYs. Given that the data is voluminous and it would not be feasible to upload the same on Income Tax Portal or send to official mail ID due to limitation on the size of documents that may be uploaded/mailed, the assessee is submitting the annexures through pen drive to our good self (approx. Number of files 413 & size of 2.42 GB). 9. Further ld. PCIT observed that vide letter dated 29.03.2022, assessee has 6 ITA Nos.1971 to 1973/Del/2024 submitted Pen Drive containing 413 files and size of 2.42 GB with the prayer that the data is voluminous and it would not be feasible to upload the same on the income-tax portal or sent to official email ID due to limitation of the size of the document. 10. Ld. PCIT on perusal of the data provided in Pen Drive observed that the terms of services agreed with the sales promoters by the assessee do not show that the reimbursement to retailers/distributorshave to be made through sales promoters. Ld. PCIT has reproduced the terms of services entered with Ark Marketing Services at page 5 of the order and it is observed from the termsof service that the sales promotion to promoters are dependent upon the sales made by sales promoters. Further, in the agreement, the nature of sales promotion to promoters and its SOP for reimbursement are not available. Further he observed that there is no explicit mention of the operation of trade scheme by the sales promoters and the reimbursement of incentives passed on by them to the retailers. As sales promoter commission is based on the overall sales, it makes business sense for them to provide on some incentives to retailers form gross commission received by them to enhance the sales. However, he observed that it cannot partake the character of reimbursements. Further he observed that the terms of appointment of these sales promoters make it clear that there was agencycontract and remuneration was linked to the volume of sales. The relationship between the 7 ITA Nos.1971 to 1973/Del/2024 assessee and sales promoters is that of principal – agent, therefore, all the payment made to them is of the nature of commission within the purview of section 194H unless it is proved otherwise. Further he observed that the AO passed the order as per the above debit notes submitted by the assessee and he did not call for further explanation which could establish that the payments were in the nature of reimbursements to retailers/distributors which were warranted by the ITAT in its order while remanding the issue to the AO. Further he observed that the assessee sent most of the data in Pen Drive containing data of 413 files vide letter dated 29.03.2022. He observed that the AO passed the order u/s 254/250/143(3) of the Act on 31.03.2022 almost within next day of receiving major reply from the assessee. He observed that the hurried approach of the AO shows that the AO did not make any enquiry before granting part relief to the assessee without establishing the fact that trade scheme payments were ultimately paid to the retailers/distributors and were in the nature of pure reimbursements. 11. Further he observed that AO himself stated in his order that the minimum documentary evidence required was sales promoter agreement, debit note raised by the promoter specifying the trade scheme discount, details of retailers and bank account of the assessee showing the transfer of trade scheme discount to retailer’s bank account. He observed that AO has verified the details with respect to Ark Marketing Services and granted relief to the assessee considering the 8 ITA Nos.1971 to 1973/Del/2024 payment made to these entities as reimbursement of expenses to the tune of Rs.22.09 crores. However, he did not call for mapping of one to one transaction and supporting evidences establishing the relationship between sales promoters and retailers from the assessee which could establish the fact that payments were purely reimbursement which were ultimately paid to the retailers/distributors. He further observed that the assessee has provided the requisite details/documents with respect to the entity Ark Marketing Services and the data was not provided in full but the assessee provided the data as per its own choice which does not contain one-to-onemapping of payments made by the assessee to sales promoters were actually transferred to the retailers / distributors as reimbursement. The assessee has not furnished any supporting document/justification which could establish that the payments were in the nature of reimbursement. 12. Further ld. PCIT observed that in AYs 2009-10 and 2010-11, identical issue for non-deduction of TDS u/s 40(a)(ia) on account of expenses in the nature of trade scheme to sales promoters was remitted back to the AO by the ITAT. During the set aside proceedings, AO called for the evidences from the assessee in support of the payments relating to trade scheme. After considering the submissions of the assessee, the AO rejected the claim of the assessee by observing that the assessee hasnot filed evidence to ascertain whether trade scheme payments released to sales promoters in turn actually released to retailers/customers as mentioned in 9 ITA Nos.1971 to 1973/Del/2024 the debit note raised by the sales promoters. In the subsequent proceedings before the ld.CIT(A), ld. CIT (A) considered the submissions of the assessee and in the appellateproceedings, ld. AR of the assessee submitted steps and process of distributors to sales promoters under the trade scheme as under :- (i) Step 1 : Sales promoters estimate the amount of disbursement that has to be made to retailers in accordance with the prevailing scheme. (ii) Step 2 : Basis the estimate prepared by Sales Promoter, it raises a debit note on the Assessee Company along with the statement of disbursal that has to be made to retailers. (iii) Step 3 : Simultaneously the Sales Promoter issues cheque(s) to retailers. The Sales Promoters may inform retailers as regards late encashment of cheques. (iv) Step4 :The assessee company makes payment to Sales Promoter for trade scheme reimbursement. 13. Further he observed that in the appellate proceedings, it was further asked to submit documentary evidences to prove that disbursements were pure reimbursements as per the directions of the ITAT. Ld. AR expressed its inability to submit necessary documents. Ld. PCIT has reproduced order sheets dated 28.02.2023 in his order at pages 8, 9 & 10. Ld. PCIT observed that from the above note sheet it is clear that assessee failed to produce necessary documentary evidences to show that the payments made to the sales promoters were purely on account of reimbursements under its trade schemes for sales promoters. By 10 ITA Nos.1971 to 1973/Del/2024 considering the submissions of the assessee, ld. CIT(A) in AY 2009-10 has observed as under :- i) The appellant does not have any written/published trade scheme or any communication with retailers for the sales incentives. The appellant could not submit complete details of expenses (debit notes) in respect of all the sales promoters (States of operation). The appellant submitted appointments of below mentioned sales promoters in which terms and conditions of their appointments are mentioned : a. ARK Marketing Agencies for Andhra Pradesh b. Classic Alcobev for Karnataka. ii) The terms of appointment of these sales promoters make it clear that there was agency contract and remuneration was linked to the volume of sales. The relationship between the appellant and sales promoters is that of principal-agent therefore all the payment made to them is of the nature of commission within the purview of 194H unless it is proved otherwise. iii) To prove that trade scheme payment are reimbursements and are not in the character of commission, the appellant has produced some debit notes raised by ARK Marketing (month of October & November) with bank statement (January, February 2010) of ARK. The appellant could point out very few instances of subsequent payment to retailers / distributors. 95% of payments claimed in the debit notes are not relatable to payments to retailers! distributers which shows that there is no one to one mapping of payment by appellant to sales promoter with subsequent payment by sales promoter to retailers! distributors. Therefore, the theory of appellant that the disbursements under the trade scheme discounts are reimbursement fails miserably. It is also pertinent to note that the appellant submitted details only on sample basis as per its own choice. The appellant accepted that it does not have even the debit notes / invoices in respect of these expenses. iv) Further the appellant failed to submit any trade scheme, any back up calculation of debit notes, any invoice or demand notice raised by the retailers etc. In nutshell the appellant could not establish any relation of debit notes with incentives to retailers or any published trade scheme. 11 ITA Nos.1971 to 1973/Del/2024 v) Therefore, it is held that the disbursements made under the head of trade scheme have no correlation with trade scheme and are not reimbursements in nature. The sale promoters are making payments to retailers / distributors which are different from the amount mentioned in the debit notes. The sales promoters claim money from the appellant in substantial amount and part of it is paid to retailers. As the appellant failed to submit any agreement between sales promoters and retailers therefore it cannot be said in certainty what arrangements sales promoters and retailers had among them to promote sales and what portion of gross payments received by sales promoters were eventually passed on. Whatsoever be the proportion of subsequent payments but one thing is very clear that it is not reimbursements of incentive from any angle. vi) Further on perusal of appointment letter issued to sales promoter it is noted that there is no explicit mention of operation of trade scheme by the sales promoter and the reimbursement of incentives passed on by them to retailers. As sales promoter's commission is based on the overall sales, it makes business sense for them to provide on some incentive to retailers from gross commission received by them to enhance the sales. However, it cannot partake the character of reimbursements. vii) The appellant has apparently termed a substantial part of gross commission paid to sales promoters as reimbursements to evade service tax payable on such commissions and to avoid the trails of these transactions in hands of sales promoters by not deducting taxes on such payments. Therefore, it is held to be a colorable device with a design to evade taxes due to the Government. viii) I have also gone through the decision of Hon'ble High Court of Andhra Pradesh and Telangana in the case of CIT vs. United Breweries Ltd. 80 taxmann.com 123 which was heavily relied upon the appellant and found that the facts of the case are entirely different. In the case of United Breweries the remittance of incentive to the retailers was based on the incentive scheme of United Breweries in which the details of purchases made by each retailer was collected and the incentive payable was computed as per the scheme and transfer of incentive was made through the separate bank account of the agent and one to one trail of transactions was available on record. In the appellant's case no trade scheme has been produced. No working of the so-called trade scheme incentives are available with the appellant, neither there is one to one mapping of the 12 ITA Nos.1971 to 1973/Del/2024 payments (reimbursements). Accordingly, the case law relied upon by the appellant is not applicable in this case, 9.4 With above observations, it is held that the disbursements made by the appellant are not in the nature of reimbursements. Accordingly, provisions of section 40 (a)(ia) r.w.s. 194H are attracted on payments made by the appellant to the sales promoter. The appellant failed to deduct taxes on these payments therefore these expenses are not allowable as per the provisions of 40(a)(ia) of the Act. Therefore the disallowance made by the AO amounting to Rs,42,49,32,327/- is confirmed and these grounds of appeal are dismissed.\" 14. By relying on the above findings, ld. PCIT observed that ld. CIT (A) found that the assessee failed to prove that the payments were in the nature of pure reimbursements. With the above observations, ld. PCIT observed that the AO has passed the present impugned assessment order on 31.03.2022 wherein part of the trade scheme to sales promoters was held by the AO as reimbursement which is contrary to the findings by the ld. CIT (A) in AY 2009-10 and 2010-11. He rejected findings of the AO for partly allowing the payment made to sales promoters under the trade scheme to Ark Marketing Services and balance amounts were disallowed having no relevance. He wondered if the assessee had maintained the complete documents why the assessee could not produce complete chain of documents before the AO for the entire amount of Rs.63 crores. It clearly shows that AO has not conducted proper enquiry on the issue and given part relief for the amount of Rs.22.08 crores in hurried manner simply accepting the submissions of the assessee which was provided by the assessee as 13 ITA Nos.1971 to 1973/Del/2024 per its own choice. The AO has not sought mapping of transactions which could establish that the payment made to retailers/distributors from the sales promoters werein the nature of reimbursement and he also wondered if the assessee could produce all the relevant documents in AY 2012-13 why it failed to submit in AYs 2009-10 & 2010-11. With the above observation, ld. PCIT issued a notice u/s 263 dated 01.03.2024 to the assessee through ITBP portal asking it as to why assessment order so passed should not be revised as the same was erroneous and prejudicial to the interest of Revenue. In response to the show-cause notice, ld. AR of the assessee and SR. Manager (Tax) of the assessee attended the proceedings and furnished submissions vide letter dated 06.03.2024 along with Pen Drive having data of 6.85GB. Assessee was asked to submit supporting documents of reimbursements of trading scheme and one to one mapping of the payments made to the retailers/distributers through sales promoters of the assessee company. He observed that during proceedings, the ld. AR mapped the reimbursements of sales promotions on sample basis in respect of AYs 2012-13, 2013-14 & 2014-15. Further he was asked to map the reimbursement of sales promotion from promoters to retailers with bank statement in respect of three parties i.e. Parties appearing on page no.23 in respect of Depot : Guntur, Sl. No.16, 17, 18; on page no.25 in respect of Depot : Gudivada Sl. No.21, 22; and on page no.27 in respect of Depot : RajahMundry Sl.No.1, 2, 3. In response, ld. 14 ITA Nos.1971 to 1973/Del/2024 AR of the assessee could not verify the so called reimbursements of sales promoters in respect of the above parties with the bank statement of promoter for AY 2012-13. The analysis of the data with the AR’s continued for two hours. The ld. AR submitted that due to voluminous data for all the years under consideration i.e. AYs 2012-13, 2013-14 & 2014-15, it is not possible for mapping one to one transactions with bank statement and he needs at least 15 days’ time for mapping of the transactions from the bank statement and they also submitted that the details submitted before PCIT are same data which was submitted before the AO. Ld. PCIT reproduced the relevant note sheet at page 15 of the order. After considering the submissions of the assessee, ld. PCIT found the response to show-cause notice issued u/s 263 of the Act is not tenable for the reasons that the same data which was filed now was filed before the AO and as discussed in the note sheet, the ld. AR present before him could not explain during 263 proceedings and they asked for 15 days’ time for mapping of one to one transactions andhe observed that the AR’s – Sr. Manager (Taxation) and Assistant Manager (Taxation) could not map one to one payment made by the assessee to sales promoters with subsequent payment by the sales promoter to retailers/distributors. If that be the case, how it is possible for the AO to verify the payments made to retailers/distributors in one day during the set aside proceedings from the identical data filed during 263 proceedings. Therefore, it is 15 ITA Nos.1971 to 1973/Del/2024 evident that AO failed to conduct a comprehensive examination of the issue and given partial relief to the assessee without application of mind and incomplete verification. He observed that AO has allowed the claim of reimbursement of expenses amounting to Rs.22.09 crores in respect of Ark Marketing Services, however AO failed to verify the nature and characteristics of expenses incurred by the retailers in the promotion of the expenses of the assessee which were reimbursed by the sales promoters and claimed as reimbursement from the assessee. Therefore, AO failed to verify the nature of expenses before trading the same as reimbursement. Further ld. PCIT observed that treatment of service agreements with the sales promoters and passing of explicit trade scheme are reimbursement proceedings shows a principal and agent relationship rather than pure reimbursement. In the light of these findings, it is evident that AO’s order granting relief is erroneous and prejudicial to the interest of Revenue, especially given the lack of comprehensive documentation and failure to establish the reimbursement nature of the payment. By rejecting the submissions of the assessee, ld. PCIT invoked the provisions of clause (a) & (b) of Explanation 2 to section 263 and treated the order passed by the AO as erroneous and prejudicial to the interest of Revenue without making enquiries or verifications and allowed the relief without enquiring into the claim. By relying on the several case laws as discussed in his order, he set aside the order passed u/s 254/250/143(3) of the 16 ITA Nos.1971 to 1973/Del/2024 Act. 15. Aggrieved with the above order, assessee is in appeal before us raising following grounds of appeal :- “1. That the impugned order dated 08.03.2024 passed under section 263 of the Income-tax Act, 1961 (\"Act\") by the Principal Commissioner of Income-Tax (Central), Delhi - 3 (\"PCIT\") in the case of the Appellant for Assessment Year (\"AY\") 2012-13, by which order dated 31.03.2022 passed by the Assessing Officer (\"AO\"), has been sought to be revised, is bad in law and is liable to be quashed. 2. That since order dated 31.03.2022, is invalid and non-est in law, being in contravention of Circular No. 19/2019 issued by the Central Board of Direct Taxes, the same cannot be revised and therefore, exercise of jurisdiction by the PCIT under section 263 of the Act is bad in law. 3. That the impugned order dated 08.03.2024 is also bad in law and void ab initio given that the twin conditions for invoking jurisdiction under section 263 of the Act have not been satisfied in the present case. 4. That the PCIT grossly erred in ignoring that the order dated 31.03.2022 passed by the AO to the extent that it provided relief to the Appellant, may have been prejudicial to the interest of revenue but not erroneous in any manner. 5. That the PCIT grossly erred in failing to conduct verification of documentation on record itself, while assuming that the AO provided relief to the Appellant without adequate verification. 6. That the action of PCIT in invoking Explanation 2 to section 263 of the Act for AY 2012-13, while passing the impugned order is illegal, since Explanation 2 to section 263 of the Act can only be invoked for AY 2015- 16 onwards. 7. That without prejudice, the PCIT erred in invoking Explanation 2 to section 263 of the Act, given that the necessary ingredients for the 17 ITA Nos.1971 to 1973/Del/2024 attraction of said Explanation did not arise in the present case. 8. That the impugned order is also bad in law given that the entire genesis of holding the order of the AO to be erroneous and prejudicial is the hastiness with which such order was passed, which is not a parameter for deciding whether the order could be held to be erroneous. 9. The impugned order is also bad in law since it basis its entire conclusion on the hasty decision of the AO, which sin has been committed by the PCIT himself by passing of the impugned order within two days of filing of the reply by the Appellant. 10. That the order is also bad in law because the term \"erroneous\" has been judicially explained to mean something which is contrary to facts and contrary to law, which is not the case of PCIT in the present case under section 263 of the Act. 11. That the impugned order under section 263 is also bad in law since it is perverse and contrary to the facts on record. 12. That the impugned order is also bad in law since it is an overreach as far as the findings of this Tribunal are concerned on the issue of reimbursements and as such without impugning such findings, surreptitiously, the issue of payments being reimbursement has been questioned. 13. That the impugned order is bad in law as it fails to demonstrate any non-application of mind by the AO, since in respect of total expenditure of INR 63,24,54,323/-, the Appellant had submitted supporting documentation for INR 26,59,82,276/- on a sample basis, out of which, the AO disallowed INR 4,51,00,383/-, being debit notes relating to subsequent years which demonstrates the detailed examination done by the AO. 14. The PCIT also erred in exercising jurisdiction under section 263 of the Act, by over emphasising the findings of the CIT(A) for other assessment years, without appreciating that each year has to be seen independently and there is no estoppel in law. 18 ITA Nos.1971 to 1973/Del/2024 15. The PCIT also erred in exercising jurisdiction under section 263 of the Act without appreciating that all necessary supporting documentation to establish reimbursements to the tune of INR 22,08,81,893/- was submitted on a sample basis, thoroughly verified and accepted by the AO and for that reason only the relief was limited to INR 22,08,81,893/-. 16. That the exercise of jurisdiction under section 263 of the Act is also bad in law since it tantamounts to an overreach and dictates the adequacy of commercial arrangements entered into by the Appellant which is beyond the mandate of the law. 17. That the exercise of jurisdiction under section 263 of the Act is also bad in law since the PC IT completely failed to appreciate that the sales promoters were paid commission on the basis of sales affected by them, the quantification of which, has not been disputed. 18. That the impugned order is also bad in law since the recharacterization of reimbursements as commission is absurd given that treating the reimbursements as commission would be contrary to the rates at which such commission was to be paid to the sales promoters. 19. That the PCIT grossly erred in not appreciating that the payments made by the Appellant to the retailers in the Corporation Market were in the nature of post-sale discount, which were merely routed through the sales promoters and thus did not attract the provisions of section 194H of the Act, which warranted any disallowance under section 40(a)(ia) of the Act. 20. That the PCIT grossly erred in ignoring the confirmation letters issued by sales promoters acknowledging the nature of payments in question as reimbursements, which was enough evidence before the AO to substantiate such nature in terms of the remand directions of this Hon'ble Tribunal. 21. That the PCIT grossly erred in imposing a higher standard of proof on the Appellant such as one on one mapping of transactions as contained in third party documentation, which was not the mandate of this Hon'ble Tribunal while remanding the issue back to the file of the AO for verification.” 19 ITA Nos.1971 to 1973/Del/2024 16. At the time of hearing, even though assessee has raised several grounds of appeal, ld. AR of the assessee argued only on ground no.1 insisting that the order passed u/s 263 is bad in law and liable to be quashed. The ld. AR of the assessee submitted that the issue under consideration is exactly similar in AYs 2013-14 & 2014-15 and submitted that during assessment proceedings for AY 2012-13, the assessee has submitted the evidences in connection with Ark Marketing Services only, during AY 2013-14 the assessee has submitted the evidences in connection with Ark Marketing Services, Classic Alcobev, BG Enterprises and AOC Management Services and in AY 2014-15, he has submitted the evidences in connection with Ark Marketing Services, Classic Alcobev, BG Enterprises, AOC Management Services and Apex Liquor Pvt. Ltd. 17. At the time of hearing, ld. AR argued vehemently in detail and submitted as under : “1. The AO, pursuant to remand directions of this Hon'ble Tribunal vide order dated 15.05.2020 passed in ITA No. 1365/Del/2018 (please refer para 34 page 1233 of Paper Book Volume 3), was required to verify as to whether the amounts paid by the Appellant to Sales Promoters for onward disbursement of post-sales discounts to retailers were in the nature of reimbursement or not. Where such amounts were found to be in the nature of reimbursement, the AO was directed to allow the claim of such expense rather than disallowing the same under section 40(a)(ia) of the Act for non-deduction of tax at source thereon as per section 194H of the Act. 2. In light of such directions, the Appellant filed evidences on sample basis (some of which already formed part of record of the AO) to 20 ITA Nos.1971 to 1973/Del/2024 substantiate its claim that the amounts in question were in the nature of reimbursements and not commission. 3. After examining the evidences filed by the Appellant, the AO partly allowed the claim of the Appellant in the following manner (please refer page 3917 of Paper Book Volume 8), thereby demonstrating application of mind: AY Total claim Claim allowed Claim disallowed 2012-13 63,24,54,323/- 22,08,81,893/- 41,15,72,430/- 2013-14 134,86,21,901/- 58,85,35,292/- 76,00,86,609/- 2014-15 168,93,84,224/- 83,99,95,177/- 84,93,89,047/- It is against the relief allowed by the AO that the Respondent has passed the impugned order(s). The fundamental reason why the Respondent, in the present case, has exercised powers under section 263 of the Act is his belief that the AO passed orders in haste and without verifying the documentation submitted by the Appellant. Without prejudice to the arguments of the Appellant against such unwarranted exercise of jurisdiction by the Respondent under section 263 of the Act, the Appellant, by way of these submissions, seeks liberty to present a few illustrations to demonstrate that the amounts in question are in fact reimbursements, on which tax was not required to be withheld under section 194H of the Act. As a consequence, it would be clear that the orders passed by the AO were in line with the mandate of this Hon'ble Tribunal and therefore, not erroneous. Following are the examples: 1. Ark Marketing (\"Ark\") was appointed as a sales promoter in the state of Andhra Pradesh by the Appellant (please refer page 1369 & 1372 of Paper Book Volume 3). Ark raised debit note of INR 1,36,95,6401- dated 15.06.2011 on PRIPL for trade schemes floated by it during the month of April 2011 (please refer page 3149 of Paper Book Volume 7). Pursuant to this debit note, PRIPL issued cheque no. 1160 in favour of Ark on 06.07.2011 for INR 1,36,95,6401- (please refer page 1467 of Paper Book Volume 3). This cheque was credited in the bank account of Ark on 18.07.2011 (please refer page 1516 of Paper Book Volume 4). After receiving the said amount, Ark disbursed trade scheme payments to various retailers in the state of Andhra Pradesh (please refer page 3329 of Paper Book Volume 7). For example, on page 3329, at S.No. 23 it is stated 21 ITA Nos.1971 to 1973/Del/2024 by Ark that a cheque of INR 8,1601- dated 06.08.2011 was issued by it in favour of \"Sri Durga Wines\" as trade scheme payout for April 2011. This cheque was credited in the account of \"Sri Durga Wines\" on 20.09.2011 (please refer page 1864 of Paper Book Volume 4). 2. Ark raised a debit note of INR 1,55,13,598/- for the month of May 2011 (please refer page 3155 of Paper Book Volume 7). Pursuant to this debit note, PRIPL issued cheque no. 1 in favour of Ark on 02.08.2011 for INR 1,55,13,5981- (please refer page 1468 of Paper Book Volume 3). This cheque was credited in the bank account of Ark on 17.08.2011 (please refer page 1521 of Paper Book Volume 4). After receiving the said amount, Ark disbursed trade scheme payments to various retailers in the state of Andhra Pradesh (please refer page 3368 of Paper Book Volume 7). For example, on page 3368, at S.No. 1 it is stated by Ark that a cheque ofINR 8,0001- dated 09.09.2011 was issued by it in favour of \"KPHB Wines\" as trade scheme payout for May 2011. This cheque was credited in the account of \"KPHB Wines\" on 20.09.2011 (please refer page 2062 of Paper Book Volume 5). 3. Ark raised a debit note of INR 1,75,79,008/- for the month of June 2011 (please refer page 3160 of Paper Book Volume 7). Pursuant to this debit note, PRIPL issued cheque no. 3 in favour of Ark on 19.08.2011 for INR 1,75,79,008/- (please refer page 1468 of Paper Book Volume 3). This cheque was credited in the bank account of Ark on 06.09.2011 (please refer page 1525 of Paper Book Volume 4). After receiving the said amount, Ark disbursed trade scheme payments to various retailers in the state of Andhra Pradesh (please refer page 3411 of Paper Book Volume 7). For example, on page 3437, at S.No. 1 it is stated by Ark that a cheque ofINR 26,525/- dated 04.10.2011 was issued by it in favour of \"Sri Lakshmi Wines\" as trade scheme payout for June 2011. This cheque was credited in the account of \"Sri Lakshmi Wines\" on 08.11.2011 (please refer page 1938 of Paper Book Volume 4). 4. Ark raised a debit note of INR 2,13,70,2501- for the month of August 2011 (please refer page 3173 of Paper Book Volume 7). Pursuant to this debit note, PRIPL issued cheque no. 6 in favour of Ark on 08.11.2011 for INR 2,13,70,250/- (please refer page 1470 of Paper Book Volume 3). This cheque was credited in the bank account of Ark on 17.11.2011 (please refer page 1539 of Paper Book Volume 4). After receiving the said amount, 22 ITA Nos.1971 to 1973/Del/2024 Ark disbursed trade scheme payments to various retailers in the state of Andhra Pradesh (please refer page 3497 of Paper Book Volume 7). For example, on page 3497, at S.No. 1 it is stated by Ark that a cheque of INR 13,200/- dated 01.12.2011 was issued by it in favour of \"Bhagya Lakshmi Wines\" as trade scheme payout for August 2011. This cheque was credited in the account of \"Bhagya Lakshmi Wines\" on 23.02.2012 (please refer page 2176 of Paper Book Volume 5). 5. Ark raised a debit note of INR 2,07,40,1531- for the month of September 2011 (please refer page 3182 of Paper Book Volume 7). Pursuant to this debit note, PRIPL issued cheque no. 7 in favour of Ark on 28.11.2011 for INR 2,07,40,153/- (please refer page 1470 of Paper Book Volume 3). This cheque was credited in the bank account of Ark on 09.12.2011 (please refer page 1544 of Paper Book Volume 4). After receiving the said amount, Ark disbursed trade scheme payments to various retailers in the state of Andhra Pradesh (please refer page 3547 of Paper Book Volume 8). For example, on page 3557, at S.No. 2 it is stated by Ark that a cheque ofINR 17,8501- dated 22.12.2011 was issued by it in favour of \"Vaishnavi Wines\" as trade scheme payout for September 2011. This cheque was credited in the account of \"Vaishnavi Wines\" on 09.03.2012 (please refer page 2217 of Paper Book Volume 5). 6. Ark raised a debit note of INR 1,82,77,835/- for the month of October 2011 (please refer page 3189 of Paper Book Volume 7). Pursuant to this debit note, PRIPL issued cheque no. 13 in favour of Ark on 17.12.2011 for INR 1,82,77,835/- (please refer page 1472 of Paper Book Volume 3). This cheque was credited in the bank account of Ark on 26.12.2011 (please refer page 1548 of Paper Book Volume 4). After receiving the said' amount, Ark disbursed trade scheme payments to various retailers in the state of Andhra Pradesh (please refer page 3594 of Paper Book Volume 8). For example, on page 3600, at S.No. 1 it is stated by Ark that a cheque ofINR 8,885/- dated 19.01.2012 was issued by it in favour of \"v. Ashok\" as trade scheme payout for October 2011. This cheque was credited in the account of \"v. Ashok\" on 07.02.2012 (please refer page 2148 of Paper Book Volume 5). 7. Ark raised a debit note of INR 2,76,09,922/- for the month of November 2011 (please refer page 1375 of Paper Book Volume 3). Pursuant to this debit note, PRIPL issued cheque no. 19 in favour of Ark 23 ITA Nos.1971 to 1973/Del/2024 on 23.01.2012 for INR 2,76,09,922/- (please refer page 1473 of Paper Book Volume 3). This cheque was credited in the bank account of Ark on 27.01.2012 (please refer page 1556 of Paper Book Volume 4). After receiving the said amount, Ark disbursed trade scheme payments to various retailers in the state of Andhra Pradesh (please refer page 3635 of Paper Book Volume 8). For example, on page 1387, at S.No. 15 it is stated by Ark that a cheque of INR 14,650/- dated 28.01.2012 was issued by it in favour of \"OM Manish Wines\" as trade scheme payout for November 2011. This cheque was credited in the account of \"OM Manish Wines\" on 27.02.2012 (please refer page 2185 of Paper Book Volume 5). 8. Ark raised a debit note ofINR 3,55,15,5061- for the month of December 2011 (please refer page 3194 of Paper Book Volume 7). Pursuant to this debit note, PRIPL issued cheque no. 27 in favour of Ark on 16.02.2012 for INR 3,55,15,5061- (please refer page 1474 of Paper Book Volume 3). This cheque was credited in the bank account of Ark on 17.02.2012 (please refer page 1563 of Paper Book Volume 4). After receiving the said amount, Ark disbursed trade scheme payments to various retailers in the state of Andhra Pradesh (please refer page 3677 of Paper Book Volume 8). For example, on page 3679, at S.No. 1 it is stated by Ark that a cheque ofINR 13,080/- dated 22.02.2012 was issued by it in favour of \"Kama Wines\" as trade I scheme payout for December 2011. This cheque was credited in the account of \"Karna Wines\" on 11.04.2012 (please refer page 2284 of Paper Book Volume 5). 9. Ark raised a debit note of INR 2,56,45,6911- for the month of January 2012 (please refer page 1412 of Paper Book Volume 3). Pursuant to this debit note, PRIPL issued cheque no. 59 in favour of Ark on 20.03.2012 for INR 2,56,45,691/- (please refer page 1474 of Paper Book Volume 3). This cheque was credited in the bank account of Ark on 21.03.2012 (please refer page 1573 of Paper Book Volume 4). After receiving the said amount, Ark disbursed trade scheme payments to various retailers in the state of Andhra Pradesh (please refer page 3728 of Paper Book Volume 8). For example, on page 3740, at S.No. 22 it is stated by Ark that a cheque of INR 1,32,000/- dated 31.03.2012 was issued by it in favour of \"D. Narender Reddy\" as trade scheme payout for January 2012. This cheque was credited in the account of \"D. Narender Reddy\" on 14.03.2012 (please refer page 2226 of Paper Book Volume 5). 24 ITA Nos.1971 to 1973/Del/2024 10. Ark raised a debit note of INR 2,56,45,6911- for the month of January 2012 (please refer page 1412 of Paper Book Volume 3). Pursuant to this debit note, PRIPL issued cheque no. 59 in favour of Ark on 20.03.2012 for INR 2,56,45,6911- (please refer page 1474 of Paper Book Volume 3). This cheque was credited in the bank account of Ark on 21.03.2012 (please refer page 1573 of Paper Book volume 4). After receiving the said amount, Ark disbursed trade scheme payments to various retailers in the state of Andhra Pradesh (please refer page 3728 of Paper Book Volume 8). For example, on page 3734, at S.No. 36 it is stated by Ark that a cheque of INR 1,58,575/- dated 27.03.2012 was issued by it in favour of \"Ram Singh Aggarwal & Co.\" as trade scheme payout for January 2012. This cheque was credited in the account of \"Ram Singh Aggarwal & Co.\" on 30.03.2012 (please refer page 2265 of Paper Book Volume 5). Based on the above details, it is clear that there is a one-to-one mapping of payments made by Assessee to sales promoter, with subsequent payments by sales promoter to retailers/distributors. This mapping establishes that the payments made to retailers through the sales promoter are in the nature of reimbursement and therefore no tax withholding obligation on the same arises.” 18. On the other hand, ld. DR of the Revenue relied on the findings of ld. PCIT and submitted that the AO has passed the assessment order in complete hasteand it is not humanly possible to verify the documents submitted by the assessee in one day. It clearly shows that the AO has merely accepted documents submitted by the assessee and the findings of the AO is completely contradicting the findings of the CIT(A)/AO in AY 2009-10 and 2010-11. Accordingly, he objected to the submissions of the ld. AR of the assessee. 19. Considered the rival submissions and material placed on record. We observed from the various submissions and material placed on record. We observed that 25 ITA Nos.1971 to 1973/Del/2024 the issue under consideration was remitted back to the AO to verify the issue of trade scheme to sales promoters u/s 40(a)(ia) of the Act with a direction to decide the issue afresh and verify whether the impugned disbursements made by the assessee to the sales promoters in turn sales promoters disburse the same to the retailers/distributers in the relevant assessments years under consideration AY 2012-13, AY 2013-14 and AY 2014-15. We observed that the AO has considered the submissions made by the assessee during the assessment relating to the actual evidence and supporting documents in the form of soft copy by filing in the mode of pen drive on 29.03.2022 and other relevant details vide submissions on 25.03.2022 and 26.03.2022. The AO passed simple assessment order accepting the submission of the assessee and he was of the view that it is enough to prove the reimbursement in case the assessee submits the minimum documentary evidence like sales promoter agreement, debit note raised by the promoter specifying the trade scheme discount, details of retailers and bank account of the assessee showing the transfer of trade scheme discount to retailers bank account. We observed that based on the above bench mark devised by the AO, he proceeded to verify the information submitted by the assessee and allowed to the extent the assessee provided the disbursement to sales promoters and with regard to disbursement made by the sales promoters to the respective retailers. By verifying the above facts on record, Ld PCIT observed that the AO has merely 26 ITA Nos.1971 to 1973/Del/2024 passed the order without making proper verification on the one-to-one mapping of the disbursement made by the sales promoters and completed the assessment in haste. He also considered the finding of erstwhile AO in the AY 2009-10 and 2010-11wherein he has rejected the submissions of the assessee and brought on record the following issues, such as there is no written/published trade scheme or any communication with the retailers for the incentives, it merely submitted the appointments of sales promoters state wise, they were appointed for sales promotions and incentives are linked to the volume of sales, there exists principle-agent relationship and the assessee could point out very few instances of subsequent payment to retailers/distributors. Ld PCIT observed that the present AO has not asked for further information on the mapping of further payments to the retailers thru the sales promoters. Accordingly, he came to conclusion that the AO has merely accepted the submissions made by the assessee and assessee has submitted the information as per their convenience and without there proper verification, AO completed the assessment without proper verification and not adhered to the mandate given to him by the coordinate bench. 20. Before us, Ld AR submitted detailed submissions highlighting the trade schemes in the form of chart indicating the month wise brand wise/ discount range for each brands, debit notes, reconciliation of month wise purchases with trade scheme amount disbursed to the sales promoters. Further he filed a chart 27 ITA Nos.1971 to 1973/Del/2024 indicating the year wise total amount of trade scheme/discount disallowed, trade scheme allowed by the AO based on the documents submitted by the assessee. We observed that no doubt the AO has allowed Rs. 22.09 crores against the disallowance made in the original assessment to the extent of Rs. 67.70 crores, which is about 33% in the AY 2012-13, similarly, in AY 2013-14, the AO has allowed the trade discount to the extent of Rs.58.85 against the disallowed amount of Rs. 134.86 crores, which is about 43.64% and in AY 2014-15, he allowed Rs. 84 crores against the disallowed amount of Rs. 168.94 crores, which is about 50%. Ld AR argued that the AO has applied one of the possible view and allowed to the extent the assessee has submitted the evidences and after verification, he has allowed what is relevant for the respective AY. It is the not the case that the AO has not at all verified. He also demonstrated before us the relevant debit notes raised by the sales promoters particularly the ARK Marketing and relevant disbursement to them by the assessee, he also brought to our notice few onward disbursements to the retailers from the sales promoters. He made the similar submissions in the form of written submission which is reproduced in this order elsewhere. Even in the submissions, he has brought to our notice the disbursement from the assessee to the sales promoters but he submitted only few onward remittances from the sales promoters. 21. After careful consideration of various issues raised by the Ld PCIT and 28 ITA Nos.1971 to 1973/Del/2024 submissions made before us by Ld AR, we observed that no doubt the assessee has brought to our notice the agreement signed with the sales promoters, which are exactly similar to the agreements made with the different sales promoters in the different states. The terms of agreement are more or less same. From the agreement, it is clear that they are appointed to carry on the assignment of sales promotions and nowherein the agreement, the details of promotion scheme is discussed nor it is formally documented. It is submitted before us that the scheme is lucid and decided by the marketing team with the assistance of the sales promoters, in turn they raise the debit notes based on the month wise sales target. We also observed that the scheme/discounts are not same in each month, as observed from the chart submitted before us, for example considering the brand Blenders Pride, the range of discount from 202.28 to 278.77 from April 2011 to March 2012. Ld AR accepted that there is no fixed documented scheme for the above determination of discount. 22. We observed from the submissions that there is no documented scheme available and it is decided by the marketing team and sales promoters. We also observed that the assessee has maintained the debit notes month wise from the sales promoters and relevant disbursements to the sales promoters. With regard to disbursements to the retailers, they have demonstrated few payments from the sales promoters to the retailers by bringing on record the bank statements. In our 29 ITA Nos.1971 to 1973/Del/2024 view, no doubt the assessee has documented the trade scheme payments at the same time, the AO has not fulfilled the mandate given to him by the coordinate bench to verify whether this transaction falls within the ambit of reimbursement. He has not passed a speaking order and was of the view that certain documents aresuffice to demonstrate the scheme is reimbursement like, agreement, debit notes and disbursement by the assessee and further payments by the sales promoters to the retailers. He merely accepted the documents as submitted by the assessee and he has not made a case how the above documents are sufficient to grant the relief. No doubt he has allowed to the extent the assessee submitted the debit notes which are relevant to the respective assessment years. He has not made up a case how it is sufficient to give relief. 23. In our considered view, there are certain unanswered issues which are: a. It is not demonstrated how the sales promoters are compensated for their services. b. In case the scheme is devised by the marketing team with the concurrence of the sales promoters, the sales promoters no doubt raised the debit notes and collected the discount from the assessee month wise, in case the assessee intend to claim the same as reimbursement, redistributed by the sales promoters to the respective retailers, they have to submit the reconciliation statement month wise tallying with the debit notes and relevant disbursement to the retailers. No doubt there may be delay in distribution, but the assessee has to demonstrate the month wise 30 ITA Nos.1971 to 1973/Del/2024 disbursement by the sales promoters. Without the above reconciliation, it cannot be claimed as the reimbursement. Even before us, Ld AR has demonstrated only few disbursement from the sales promoters and not matched the one-to-one mapping. This is possible only by submitting the above stated reconciliation, if it is difficult to submit month wise, it can be submitted quarterly. 24. Mere verification on the basis of the documents before the AO, whichhe has, no doubt, allowed only 33% to 50% in the respective years, cannot it be called verification, he has only verified whether the relevant discount are relevant for the respective assessment year and accordingly he allowed the same. This is not the mandate given to him. He was directed to verify the payments to sales promoters are falling under the category of reimbursement or not. In case he is satisfied with the documentation he has to demonstrate by passing a speaking order. He has miserably failed in that aspect. He has given relief without proper verification and application of mind. 25. Since Ld. PCIT has rightly quashed the assessment order and directed the assessing officer to pass the proper speaking order, we do not see any reason to disturb the same and there will not be any prejudice caused to the assessee since the same documentation it has to file before the AO. Accordingly, we direct the AO to verify the disbursement by the sales promoters to retailers with the respective debit notes raised by them. May be in the form of reconciliation debit 31 ITA Nos.1971 to 1973/Del/2024 note wise. This direction is only a compliment to the directions given by the Ld PCIT. In the result, appeal filed by the assessee against the order passed u/s 263 is dismissed as discussed above. 26. In the result, the appeal filed by the assessee is dismissed. 27. The facts in other two appeals in the AY 2013-14 and AY 2014-15 are exactly similar to the facts in the appeal preferred by the assessee in AY 2012-13, the findings in AY 2012-13 are application to these two appeals mutatismutandis. In the result, both the appeals are dismissed. 28. In the summary, all the appeals preferred by the assessee are dismissed. 29. In view of the fact that appeals bearing ITA Nos.1971, 1972 & 1973/Del/2024, in which the present stay applications being SA Nos.136, 137 & 138/Del/2024 were filed, has since been disposed off vide this composite order, the present stay applications are hereby dismissed having been become infructuous. Order pronounced in the open court on this 12th day of February, 2025. Sd/- sd/- (ANUBHAV SHARMA) (S.RIFAUR RAHMAN) JUDICIAL MEMBER ACCOUNTANT MEMBER Dated: 12.02.2025 TS 32 ITA Nos.1971 to 1973/Del/2024 Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(Appeals) 5. DR: ITAT ASSISTANT REGISTRAR ITAT, NEW DELHI "