Income Tax Appellate Tribunal - Delhi
Cheil Communications India Pvt. Ltd., ... vs Assessee
IN THE INCOME TAX APPELLATE TRIBUNAL
(DELHI BENCH "C" DELHI)
BEFORE SHRI G.D. AGRAWAL, HON'BLE VICE PRESIDENT AND
SHRI A.D. JAIN, JUDICIAL MEMBER
ITA NOs. 5161 & 5162(Del)2011
Assessment years: 2006-07 & 2007-08
Cheil India Private Limited, Asstt.Commissioner of Income Tax,
(formerly known as Cheil v. Circle 3(1), New Delhi.
Communications India Private
Limited), Vipul Tech Square,
Sec. 43, Golf Course Road,
Gurgaon.
(Appellant) (Respondent)
Appellant by: Shri Salil Kapoor, Advocate
Respondent by: Shri R.I.S. Gill, CIT/DR
ORDER
PER A.D. JAIN, J.M.
ITA NO. 5161(Del)2011:
This is assessee's appeal for assessment year 2006-07 against the order of the Asstt.Commissioner of Income Tax, Circle 3(1), New Delhi, passed u/s 143(3) read with section 144 C of the I.T. Act. The following effective grounds have been taken:-2 ITA Nos. 5161&5162(Del)2011
"On the facts and circumstances of the case and in law, the Assistant Commissioner of Income-tax, Circle 3(1), New Delhi ('ld. AO') has erred in passing the assessment order u/s 143(3) read with section 144C of the Income-tax Act, 1961 ('Act') after considering the following:
Each of the ground is referred to separately, which may kindly be considered independent of each other:
1. That the ld. AO has grossly erred in initiating the reassessment proceedings u/s 147 of the Act which is bad in law and accordingly, the reassessment order issued u/s 143(3) read with section 144C of the Act is invalid and be liable to be quashed.
2. That the notice issued u/s 148 and the reassessment order passed are illegal, bad in law and without jurisdiction.
3. That in the absence of any addition of the alleged escaped income, on the basis of which notice u/s 148 was issued, the additions made and the reassessment order passed are illegal, bad in law and without jurisdiction.
4. That the ld. AO has grossly erred both on facts and in law in holding the difference between the receipts in the Profit and Loss account and the amount of income shown in the TDS certificate issued by the payer 3 ITA Nos. 5161&5162(Del)2011 of the income as the deemed income of the Appellant without appreciating the method of accounting used by the Appellant.
5. That the material collected by the ld. AO without any knowledge of the Appellant and used against the Appellant was never confronted and no opportunity was given to rebut the same. Hence, the addition/disallowance made are unlawful, unjust and are against the principles of natural justice and are also highly excessive.
6. That the ld. Transfer Pricing Officer (TPO)/AO has erred in making an adjustment u/s 92CA of the Act without returning a finding about existence of the circumstances specified in clauses (a) to (d) of sub- section (3) of sec. 92C case of the Appellant.
7. That the ld. TPO/AO has erred in rejecting the combined transaction approach undertaken by the appellant and in the process wrongly segregated the international transaction pertaining to the availing of intra-group services from the international transaction pertaining to provision of advertising services.
8. That the ld. TPO/AO has erred, in law and in fact, in determining the Comparable Uncontrolled Price ("CUP") method as the most appropriate method to benchmark the international transaction pertaining to availing of intra-group services and reimbursement of expenses.4 ITA Nos. 5161&5162(Del)2011
9. That the ld. TPO/AO has erred by assuming that 'no benefit' has been conferred on the appellant from availing of intra-group services from its AE and these services are duplicative in nature.
10.That the ld. TPO/AO has erred, in law and facts, by not considering that the adjustment to the ALP, if any, should be limited to the lower end of the 5% range as the appellant has the right to exercise this option under the proviso to section 92C of the Act.
11.That the ld. AO has erred, in law and facts, in holding that the appellant has furnished inaccurate particulars and has concealed the particulars of its income and has also erred in initiating the penalty proceedings u/s 271(1)(c) of the Act.
12.That the ld. AO, in law and facts, has erred in charging interest u/s 234B of the Act.
13.That the Hon'ble Dispute Resolution Panel has erred in confirming the additions proposed by the ld. AO and in rejecting the objections filed against the draft assessment order.
14.That the Hon'ble Dispute Resolution Panel has erred in not giving adequate opportunity of being heard to the appellant.
15.That the evidences placed and the material available on record has not been properly and judiciously considered and the additions have 5 ITA Nos. 5161&5162(Del)2011 been made ignoring the material on record and are against the principles of natural justice."
2. As per ground Nos. 1 to 3, the AO has erred in initiating reassessment proceedings, due to which, the reassessment order is invalid, as the notice u/s 148 was issued on alleged escaped income, no addition whereof was made.
3. In this regard, the learned counsel for the assessee has drawn our attention to page 178 of the Assessee's Paper Book ("APB" for short)-Vol-I which contains the reasons recorded by the AO for reopening of the completed assessment.
4. The issues involved therein are foreign exchange fluctuations and data usage charges. The learned counsel for the assessee has submitted that in the proposed order of the AO, no addition was made on foreign exchange fluctuations, whereas apropos the data usage charges of 25% amounting to ` 30,00,000/- was disallowed and other additions were also made. It has been contended that the DRP has directed deletion of the addition of data usage charges of ` 30,00,000/- also, and so, ultimately, no addition has been made. It is the assertion of the learned counsel that for reopening completed assessment, the addition originally made has to be there and there may be other additions also. Reliance in this regard has been placed on the decision 6 ITA Nos. 5161&5162(Del)2011 of Hon'ble Delhi High Court in the case of "Ranbaxy Laboratories Ltd. v.
CIT", 336 ITR 136.
5. The ld. DR, on the other hand, supporting the AO's as well as DRP's order dated 2.8.11, has contended that even if no addition has been made on the basis of the reopening, once a completed assessment is reopened, the entire matter is open and the AO is competent to make the additions.
6. We have heard the rival contentions and have perused the material on record. The reasons recorded for the completed assessment are as follows:-
"M/s Cheil Communications India Private Limited A.Y. 2006-07 Reasons for reopening the case u/s 147/148 of the I.T. Act, 1961 Return of income in this case was filed on 4/12/2006 declaring income of Rs. 31611079/-. The return was processed u/s 143(1) on 11/3/2008 at the return income.
On perusal of the assessment record of the assessee following discrepancies have come to the notice;
That during the year the assessee company has claimed the amount of Rs. 1182857/- as foreign exchange fluctuation loss. For the purpose of computation of taxable income, the provisions of income-tax Act are to be followed. Liability which will arise only on the happening of an event, in this case, on the remittance of sums payable, should be allowed only at the time of remittance and not before on a notional basis. On this issue, in the case of CIT vs. Woodward Governor (India) (P) Ltd. (2007) 162 Taxman 60, Department has filed SLP, which is pending in the court.7 ITA Nos. 5161&5162(Del)2011
That during year the assessee company has claimed expenses of Rs. 12126632/- in schedule 13 annexed with the return of income under the head Data Usage Charges. These expenses are incurred by the assessee for various research purposes, development projects, etc. Since all these expenses are providing enduring benefit to the assessee hence the same should be treated as of capital nature.
As per the form No. 3CEB filed along with the return the assessee during the year had international transactions with associated enterprises/concerns. Hence determination of Arm's Length Price in relation to international transactions is also required. In view of the facts narrated above, I have reason to believe that income of Rs. 13309489/- has escaped assessment for the assessment year 2006-07 and I am satisfied that it is a fit case for issue of notice u/s 148 of I.T. Act, 1961.
(Dr. Prashant Khambra) Asstt. Commissioner of Income Tax, Circle 3(1), New Delhi.
7. It is evident from the perusal of the above reasons for reopening the completed assessment, that the AO had reason to believe that income of ` 1,33,09,489/- had escaped assessment; that this income comprised of ` 11,82,857/- claimed by the assessee company as foreign exchange fluctuations loss and ` 1,21,26,632/-, claimed by the assessee as expenses under the head "data usage charges". In the proposed order of the AO, it is 8 ITA Nos. 5161&5162(Del)2011 seen, as rightly contended on behalf of the assessee, no addition was made on account of foreign exchange fluctuation loss. With regard to the data usage charges, however, 25%, amounting to ` 30,00,000/- was disallowed.
The DRP, however, has deleted this addition also. Therefore, it has correctly been contended on behalf of the assessee that no addition on the basis of the reasons recorded for reopening the completed assessment survives.
8. In ""Ranbaxy Laboratories Ltd. v. CIT"(supra), it has been observed, inter alia, as follows:-
18. "We are in complete agreement with the reasoning of the Division of Bombay High Court in the case of Jaganmohan Rao (supra). We may also note that the heading of Section 147 is "income escaping assessment" and that of Section 148 "issue of notice where income escaped assessment". Sections 148 is supplementary and complimentary to Section 148 "is supplementary and complimentary to Section 147. Sub-section (2) of Section 148 mandates reasons for issuance of notice by the Assessing Officer and sub-section (1) thereof mandates service of notice to the assessee before the Assessing Officer proceeds to assess, reassess or recomputed escaped income. Section 147 mandates recording of reasons to believe by the Assessing Officer that the income chargeable to tax has escaped assessment. All these conditions are required to be fulfilled to assess or reassess the escaped income chargeable to tax. As per explanation (3) if during the course of these proceedings the Assessing Officer comes to conclusion that some items have escaped assessment, then notwithstanding that those items were not included in the reasons to believe as recorded for initiation of the proceedings and the notice, he would be competent to make assessment of those items. However, the 9 ITA Nos. 5161&5162(Del)2011 legislature could not be presumed to have intended to give blanket powers to the Assessing Officer that on assuming jurisdiction under section 147 regarding assessment or reassessment of escaped income, he would keep on making roving inquiry and thereby including different items of income not connected or related with the reasons to believe on the basis on which he assumed jurisdiction. For every new issue coming before Assessing Officer during the course of proceedings of assessment or reassessment of escaped income, and which he intends to take into account, he would be required to issue a fresh notice under Section
148.
19. In the present case, as is noted above, the Assessing Officer was satisfied with the justifications given by the assessee regarding the items viz., club fees, gifts and presents and provision for leave encashment, but, however, during the assessment proceedings, he found the deduction under Section 80HH and 80-I as claimed by the assessee to be not admissible. He consequently while not making additions on those items of club fees, gifts and presents, etc. proceeded to make deductions under Section 80HH and 80-I and accordingly reduced the claim on these accounts.
20. The very basis of initiation of proceedings for which reasons to believe were recorded were income escaping assessment in respect of items of club fees, gifts and presents, etc. but the same having not been done, the Assessing Officer proceeded to reduce the claim of deduction under Section 80 HH and 80-I which as per our discussion was not permissible. Had the Assessing Officer proceeded not to make disallowance in respect of the items of club fees, gifts and presents, etc. then in view of our discussion as above, he would have been justified as per explanation 3 to reduce the claim of deduction under Section 80HH and 8-I as well.
21. In view of our discussions, the Tribunal was right in holding that the Assessing Officer had the jurisdiction to reassess issue other than the issues in respect of which proceedings are initiated but he was not so justified when the reason for the initiation of those proceedings ceased to survive. Consequently, we answer the first 10 ITA Nos. 5161&5162(Del)2011 part of question in affirmative in favour of Revenue and the second part of the question against the Revenue.
22. The present appeal is accordingly allowed."
9. Then "Ranbaxy Laboratories Ltd. v. CIT"(supra), has been followed, while also following "CIT v. M/s. Jet Airways (I)Pvt. Ltd.", rendered by the Hon'ble Bombay High Court on 12.4.2010 in ITA Nos. 1714/2009 and 1526/2008, the Hon'ble Delhi High Court, vide its order dated 28.7.2011 (copy filed on record, at pages 17 to 19 of the Case Laws Paper Book filed by the assessee), the Hon'ble Delhi High Court, in the case of "Ayudink Niryat Ltd.", has held, as follows:-
"Since the grounds for reopening the reassessment do not exist any longer and no additions were ultimately made on that account, the additions in respect of other items which were not part of "reasons to believe" cannot be made. This issue has been decided by the High Court of Judicature at Bombay in Commissioner of Income tax v M/s Jet Airways (I) Pvt. Ltd. vide judgment dated 12th April, 2010 in ITA Nos. 1714/2009 and 1526/2008. Recently, this Bench has also delivered the judgment in case of CIT v Ranbaxy decided on 3rd June, 2011 agreeing with the aforesaid view taken by High Court of Judicature at Bombay. We thus find that no substantial question of law arises in this appeal. Dismissed."
10. It is thus seen that no addition having been made on the basis of the reasons recorded by the AO for reopening the completed assessment and the remaining additions being not part of the said reasons to believe recorded by the AO, in keeping in "Ranbaxy Laboratories Ltd. v. CIT"(supra) and 11 ITA Nos. 5161&5162(Del)2011 "Ayudink Niryat Ltd."(supra), reopening of the completed assessment in the present case is bad in law. There is, as such, no merit in the stand taken by the Department that once the completed assessment stood reopened, the entire matter was open before the AO and the AO was competent to make the additions. In view of the above, ground Nos. 1 to 3 raised by the assessee are accepted and the reassessment proceedings including the reassessment order are cancelled.
11. Due to the cancellation of the reassessment order, as above, nothing else survives and the remaining grounds taken by the assessee need not be gone into and we are not doing so.
12. Consequently, the appeal of the assessee is allowed.
ITA NO. 5162(Del)2011:
13. This is assessee's appeal for assessment year 2007-08 against the order of the Asstt.Commissioner of Income Tax, Circle 3(1), New Delhi, passed u/s 143(3) read with section 144 C of the I.T. Act.
14. The assessee has taken the following effective grounds:-
1. "That the Ld. AO has grossly erred both on facts and in law in holding the difference between the receipts in the Profit and Loss account and amount of income shown in the TDS certificates issued by the payer of the income as the deemed income of the 12 ITA Nos. 5161&5162(Del)2011 Appellant without appreciating the method of accounting used by the Appellant.
2. That the material collected by the Ld. AO without any knowledge of the Appellant and used against the Appellant was never confronted and no opportunity was given to rebut the same. Hence, the addition / disallowance made are unlawful, unjust and are against the principles of natural justice and are also highly excessive.
3. That the Ld. Transfer Pricing Officer ("TPO") AO has erred in making an adjustment under section 92CA of the Act without returning a finding about existence of the circumstances specified in clauses (a) to (d) of sub-section (3) of section 92C case of the Appellant.
4. That the Ld. TPO/AO has erred, in law and in fact, in determining the Comparably Uncontrolled Price ("CUP") method as the most appropriate method to benchmark the international transaction pertaining to availing of infra-group services and reimbursement of expenses.
5. That the Ld. TPO /AO has erred by assuming that 'no benefit' has been conferred on the Appellant from availing of infra-group services from its AE and these services are duplicative in nature.
6. That the Ld. TPO/AO has erred, in law and facts, by not considering that the adjustment to the ALP, if any, should be limited to the lower end of the 5 percent range as the Appellant has the right to exercise this option under the proviso to section 92C of the Act.
7. That the Ld. AO has erred, in law and facts, in holding that the Appellant has furnished inaccurate particulars and has concealed the particulars of its income and has also erred in initiating the penalty proceedings under section 271(1) (c) of the Act.
8. That the Ld. AO in law and facts, has erred in charging interest under section 234B of the Act.13 ITA Nos. 5161&5162(Del)2011
9. That the Hon'ble Dispute Resolution Panel has erred in confirming the additions proposed by the Ld. AO and in rejecting the objections filed against the draft assessment order.
10. That the Hon'ble Dispute Resolution Panel has erred in not giving adequate opportunity of being heard to the Appellant."
15. As per ground No.2, the AO has erred in collecting material at the back of the assessee and in not confronting the same to the assessee or giving any opportunity to the assessee to rebut the same and so, the additions/disallowance made are unsustainable.
16. The learned counsel for the assessee has drawn our attention to page 6 of the DRP's order dated 2.8.11, wherein, dealing with ground No.2 raised by the assessee before the DRO, i.e., against the addition of ` 92,00,04,163/-
on account of deemed income, the DRP has observed as follows:-
"DRP's Observation The assessee has objected to the processed addition of Rs. 92,00,04,163/- on account of difference between the receipts disclosed in the amounts and the gross receipts as per TDS certificates. The assessee stated that the AO did not understand the method of accounting used by Cheil India. The AO did not accept that assessee had paid Rs. 89.34 crores to third parties as the PAN/addresses/confirmation were not provided.
During the DRP proceedings, the assessee produced the confirmation from 45 vendors representing 66% of the total value of amount paid to third parties. The same was forwarded to the AO for his verification but he requested more time to verify the confirmations. As the DRP proceedings have time limitations, and it would take time for the AO 14 ITA Nos. 5161&5162(Del)2011 to verify all the details, the DRP directs the AO to verify the evidence (confirmation) furnished and if satisfied will restrict disallowance. If any, to payments to third parties not verifiable. Thus, disallowance in any case cannot exceed Rs. 89,39,92,188/- (the total paid to third parties) even if all third parties payments are not accepted as genuine.
17. The learned counsel for the assessee has then drawn our attention to pages 113 to 118 under item 5 of APB Vol-I, wherein, the AO has observed as follows:-
"DEEMED INCOME ON ACCOUNT OF SHORT RECEIPTS DECLARED IN P/L ACCOUNT :-
During the year under consideration the assessee company shown receipt of Rs. 13,89,27,647/-. However as per the TDS reconciliation chart filed by the assessee the total receipt is Rs. 1,05,89,31,810/-. Thus the assessee has shown less receipt of Rs. 92,00,04,163/- (Rs. 1,05,89,31,810/- - 13,89,27,647/-) and it must be treated as deemed income of the assessee as per section 199. Accordingly the assessee company vide notesheet entry dated 25.11.2010 was requested to reconcile the receipts shown in P & L account with the TDS certificates. The assessee company vide letter dated 15/12/2010 and 12/11/2010 submitted as under :-
"The company recognizes the commission income in its books of account. The advance received from the parties and given to the vendors is recognized as asset/liability in the books of accounts. The reconciliation of the amount received from the parties is enclosed"
The submission of the assessee has been considered carefully and found not acceptable since the assessee not filed any copy of account of the vendor to whom the payment has been made nor any confirmation / identification number such as PAN number and address of the vendor has been filed. In the absence of the same the claim of the assessee is unverifiable. Hence the short receipt shown by 15 ITA Nos. 5161&5162(Del)2011 the assessee amounting to Rs. 92,00,04,163/- is treated the income of the assessee.
(Addition :- Rs. 92,00,04,163/-)"
18. The learned counsel has, then, drawn our attention to the copy of final assessment order dated 17.10.11 (APB 1, pages 6 to 18, under item 2), wherein, it has been observed at pages 9 to 13 at internal pages, with regard to this issue as follows:-
"DEEMED INCOME ON ACCOUNT OF SHORT RECEIPTS DECLARED IN P/L ACCOUNT:
During the year under consideration the assessee company shown receipt of Rs. 13,89,27,647/-. However, as per the TDS reconciliation chart filed by the assessee the total receipt is Rs. 1,05,89,31,810/-. Thus, the assessee has shown less receipt of Rs. 92,00,04,163/- (Rs. 1,05,89,31,810/- - 13,89,27,647/-) and it must be treated as deemed income of the assessee as per sec. 199. Accordingly the assessee company vide note sheet entry dated 25.11.2010 was requested to reconcile the receipts shown in P&L account with the TDS certificates. The assessee company vide letter dated 15/12/2010 and 12/11/2010 submitted as under: -
"The company recognizes the commission income in its books of accounts. The advance received from the parties and given to the vendors is recognized as asset/liability in the books of accounts. The reconciliation of the amount received from the parties is enclosed."16 ITA Nos. 5161&5162(Del)2011
The submission of the assessee has been considered carefully and found not acceptable since the assessee not filed any copy of account of the vendor to whom the payment has been made nor any confirmation/identification number such as PAN number and addresses of the vendor has been filed. In the absence of the same the claim of the assessee is unverifiable. Hence the short receipt shown by the assessee amounting to Rs. 92,00,04,163/- is treated the income of the assessee.
"During the DRP proceedings, the assessee produced the confirmation from 45 vendors representing 66% of the total value of amount paid to third parties. The same was forwarded to the AO for his verification but he requested more time to verify the confirmations. As the DRP proceedings have time limitations, and it would take time for the AO to verify all the details, the DRP directs the AO to verify the evidence (confirmation) furnished and if satisfied will restrict disallowance, if any, to payments to third parties not verifiable. Thus, disallowance in any case cannot exceed Rs. 893992188/- even if third parties payments are not accepted as genuine".
As per the direction of the DRP notices u/s 133(6) dated 28.9.2011 were issued to the following parties on the address provided by the asessee to submit the confirmation by 10.10.2011: -
1. ABV Pvt. Limited Rs. 28191207/-
2. Autumn Design Rs. 5109707/-
Consultants P. Ltd.
3. Benett, Coleman & Co. Rs. 56202376/-
Limited
4. Breakthrough Rs. 4610662/-
Communciations 17 ITA Nos. 5161&5162(Del)2011
5. Cityneon Dag (India) P. Rs. 20180419/-
Ltd.
6. Dainik Bhaskar Rs. 15522931/-
Publications
7. Dina Thanti Publications, Rs. 2278049/-
Madras
8. Divya Bhaskar Rs. 2089363/-
9. Entertainment Network Rs. 1786390/-
(India) Ltd.
10. Gingerwater Films Rs. 138728/-
11. Global Boradcast News Rs. 4587323/-
Ltd.
12. HT Media Limited Rs. 26901063/-
13. Jagran Prakashan (P) Rs. 13073750/-
Ltd., Kanpur
14. Jaya TV Rs. 130050/-
15. Kasturi & Sons Limited Rs. 34097391/-
16. Living Media (India) Rs. 22485156/-
Limited
17. Lok Prakash Limited Rs. 10683869/-
18. Lokmat Newspapers P. Rs. 5325505/-
Ltd., Nagpur
19. Lustra Print Process P. Rs. 24858341/-
Limited
20. Mathrubhumi Printing & Rs. 1257106/-
Publ. Co. Ltd.
21. NDTV Media Limited Rs. 93713/-
22. New Colour Screens P. Rs. 11091054/-
Ltd.
23. New Delhi Television Rs. 11719721/-
Limited
24. Outlook Publishing Rs. 2708100/-
(India) P. Ltd.
25. Portland India Outlook Rs. 41572900/-
Advertising P. Limited.
26. Posterscope India Private Rs. 86549343/-
Limited
27. Sakal Papers Limited Rs. 9807848/-
28. Shark Design Studio Rs. 40425044/-
18 ITA Nos. 5161&5162(Del)201129. Star India Private Rs. 1427301/-
Limited
30. Star India Private Ltd.- Rs.6076933/- Star News Hindi
31. Star India Private Ltd- Rs. 5024478/- Star Gold
32. Star India Private Ltd- Rs. 12502336/- Star Movies
33. Star India Private Ltd- Rs. 15593611/- Star one
34. Star India Private Ltd- Rs. 8543690/- Star Plus
35. Star India Private Ltd- Rs. 1399759/- Star Vijay
36. Star India Private Ltd- Rs. 1050383/- Star World
37. TDI International India Rs. 11959810/- Limited
38. The Big Picture Company Rs. 6000000/-
39. The Malayala Manorama Rs. 7733290/-
Co. Ltd.
40. Times Innovative Media Rs. 17822077/- Pvt. Ltd.
41. Vijayanand Printers Ltd. Rs. 1411340/-
42. Zee Telefilms Ltd. Rs. 13905686/-
Out of the above 42 parties notices u/s 133 (6) have been received back in the following cases :-
1. M/s. Zee Telefilm Limited Rs. 13905686/-
2. M/s. Breakthrough Communications Rs.4610662/-
3. M/s. Shark Design Studio Rs. 40425044/-
4. M/s. Gingerwater Films Rs. 138728/-
5. M/s Posterscope India Private Limited Rs. 86549343/-
6. M/s. Dainik Bhaskar Publications Rs. 15522931/-
7. M/s. Portland India Outlook Advertising Rs. 41572900/-
Pvt. Ltd.
19 ITA Nos. 5161&5162(Del)20118. M/s. Times Innovative Media Private Rs. 17822077/-
Pvt. Ltd.
9. M/s. StarIndia Private Ltd. - Star News Hindi Rs 6076933/-
10. M/s Jaya TV Rs. 130050/-
The confirmation has been received only from the following parties the crux of confirmation received is as under :-
(i)The Malayala Manorama Co. Limited M/s. Cheil Communications Private Limited shown payment to this company amounting to Rs.
7733290/- however the confirmation has been received for Rs. 7134840/-. Thus the payment shown by the assessee company is not maching with the confirmation received.
(ii)The Big Picture Company Limited M/s Cheil Communications private Limited shown payment to this company amounting to Rs. 6000000/- however the confirmation has been received for Rs. 10153062/-. Thus the payment shown by the assessee company is not matching with the confirmation received.
(iii) The Living Media(India)Limited M/s. Cheil Communications Private Limited shown payment to this company amounting to Rs. 22485156/- however the confirmation has been received for Rs. 22009157/-. Thus the payment shown by the assessee company is not Matching with the confirmation received.
(iv)The New Delhi Television Limited (NDTV) M/s Cheil Communications Private Limited shown payment to this company amounting to Rs. 11719721/- however the confirmation has been received for Rs. 46450911/-. Thus the payment shown by the assessee company is not Matching with the confirmation received
(v)The NDTV Media Limited M/s. Cheil Communications Private Limited shown payment to this company amounting to Rs. 93713/- however the confirmation has been received for Rs. 245688/-. Thus the payment shown by the assessee company is not Matching with the confirmation received..
20 ITA Nos. 5161&5162(Del)2011(vi)The Mathrubhumi Printing & Pub Co. Limited M/s Cheil Communications Private Limited shown payment to this company amounting to Rs. 1257106/- however the confirmation has been received for Rs. 1955604/-. Thus the payment shown by the assessee company is not Matching with the confirmation received.
(vii)The HT Media Limited M/s. Cheil Communications Private Limited shown payment to this company amounting to Rs. 26901063/- however HT Media Limited in response to Notice 133(6) submitted as under :-
"Reference to the above said letter, we hereby confirm that we have not entered any transaction with M/s Cheil India Private Limited during the Financial Year 2006-07".- Copy of this letter is annexed with the assessment order.
In respect of balance 25(42-10-7) parties to whom notices u/s 133(6) were issued no response has been received.
Apart from the above in the remand proceedings in order to cross verify the claim of the assessee notices u/s 133(6) on random basis issued to the following parties with the request to submit the requisite information by 7.9.2011 :-
Rs.
1. M/s Anupam Graphics India Pvt. Ltd. 3613335/-
2. M/s. Asianet Comminication Limited 2345457/-
3. M/s Bellset Entertainment Private Limited 4908169/-
4. M/s.Black Magic Motion Picture Limited 5296780/-
5. M/s. Craftpac Containers Pvt. Limited 6957148/-
6. M/s Interactive Television Pvt. Limited 3248878/-
7. M/s. Magnum Interiors Pvt. Limited 16281243/-
8. M/s. Nomad Films 10902780/-
The notices u/s 133 (6) were issued to the above parties as per the list provided by the assessee. The notices in respect of following parties as received back unserved with the remarks unclaimed. Copies of envelops are enclosed:-
Rs.
1. M/s Craftpac Containers Private Limited 6957148/-21 ITA Nos. 5161&5162(Del)2011
2. M/s. Interactive Television Private Limited 3248878/-
3. M/s. Black Magic Motion Picture Limited 5296780/-
In respect of other parties no response received by the stipulated time i.e. 7.9.2011. In the absence of cross verification the claim of the assessee is unverifiable.
It is a settled principal that it is one who wants benefits or claims something under the act has to prove. For instance, if the assessee wants claim of certain receipts, it is the assessee's duty to prove the same. Thus, the simple principal is that burden of proof is on that person who claims benefit from the provisions or wants provisions to work in his favour. This is also because of the fact that assessee is in a better position then the tax authorities who have no facts or evidence in their position.
As per the direction of the DRP notices u/s 133(6) were issued but no response has been received from 25 parties in 10 cases the notices received unserved in respect of parties who confirmed the transaction the amount is not matching with the payment shown by the assessee company. Further in one case the party to whom notice u/s 133 (6) was issued has informed that it had not entered any transactions with the assessee company to whom the assessee company has shown payment of Rs. 26901063/-. Thus the payment to third parties is not verifiable as per the direction of the DRP. Hence the short receipt shown by the assessee company amounting to Rs. 893992188/- (as restricted by DRP) is added back to the income of the assessee company.
(Addition :- Rs. 893992188/-)"
19. The learned counsel for the assessee has contended that the AO collected evidence at the back of the assessee and made the addition without affording any opportunity to the assessee to rebut such evidence; and that therefore, the matter needs to be remitted to the file of the AO to be decided 22 ITA Nos. 5161&5162(Del)2011 afresh in accordance with law on affording opportunity to the assessee to rebut the evidence collected by the AO.
20. The ld. DR, on the other hand, has strongly relied on the AO's order.
21. In this regard, it is seen that indeed, the AO collected evidence at the back of the assessee and never confronted the same to the assessee. The assessee was not allowed any opportunity to rebut the evidence. However, the AO went on to make the addition of ` 89,39,92,188/-, on account of the alleged short receipts declared in the profit and loss account. Now, this is entirely in violation of the natural justice principles of audi alterem partem.
Nobody can be condemned in hearing. Addition herein having been made 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. Accordingly, this issue is remitted to the file of the AO, to be decided afresh in accordance with law, on providing due and adequate opportunity to the assessee to rebut the evidence collected by the AO at the back of the assessee.
22. In this regard, a perusal of the relevant portion of the DRP's order, as reproduced herein above, shows that the assessee has produced confirmations from 45 vendors before the DRP, and the DRP had forwarded the same to the AO for verification. The AO had requested for more time to 23 ITA Nos. 5161&5162(Del)2011 make the verification. The DRP, however, directed the AO to verify the evidence and if the AO were satisfied, he was to restrict the disallowance, if any, which, in any case, as per the DRP, could not exceed ` 89,39,92,188/-, the payments made to third parties not verifiable. Since the matter is now being remitted to the file of the AO, as above, the assessee would get ample opportunity to prove its case.
23. The entire matter is, accordingly, remitted to the file of the AO to be decided afresh in accordance with law on affording adequate, due and proper opportunity of hearing to the assessee by confronting the entire evidence collected to the assessee.
24. In the result, for statistical purposes, the appeal of the assessee is treated as allowed.
Order pronounced in the open court on 31.01.2012.
Sd/- sd/-
(G.D. Agrawal) (A.D. Jain)
Vice President Judicial Member
Dated: 31.01.2012
*RM
Copy forwarded to:
1. Appellant
2. Respondent
24 ITA Nos. 5161&5162(Del)2011
3. CIT
4. CIT(A)
5. DR
True copy
By order
Assistant Registrar