Income Tax Appellate Tribunal - Mumbai
Mirum Digital Private Limited ... vs Pcit, Mumbai-6, Mumbai-6 on 12 March, 2024
IN THE INCOME TAX APPELLATE TRIBUNAL "B" BENCH, MUMBAI
BEFORE SHRI VIKAS AWASTHY, JM &
SHRI GAGAN GOYAL, AM
1. M.A. No. 564/Mum/2023
(Arising out of I.T.A. No. 1489/Mum/2022)
(Assessment Year: 2017-18)
Mirum Digital Pvt. Ltd., Pr. CIT-6,
Unit No. 101A/101AI, Raheja Plaza 1, Room No. 501, 5th floor, Aayakar
बनाम/
A-Wing, 1st floor, Ghatkopar (West), Bhavan, M. K. Road, Church gate,
Vs.
35, New Marine Line, Mumbai-400 020
Mumbai-400 086
स्थायीलेखासं ./ जीआइआरसं ./ PAN No. AANCS0273K
(अपीलाथी/Appellant) : (प्रत्यथी / Respondent)
अऩीराथी की ओय से / Appellant by : Shri Hiten K. Thakkar, Ld. AR
प्रत्मथी की ओय से/Respondent by : Shri Anil Sant, Ld. DR
सनु वाई की तायीख /
: 05/01/2024
Date of Hearing
घोषणा की तायीख /
: 12/03/2024
Date of Pronouncement
आदे श / O R D E R
Per Gagan Goyal, Accountant Member:
By way of this Miscellaneous Application (M.A.), the assessee is seeking recall/rectification of the order of the Tribunal dated 02.01.2023 passed in ITA No. 1489/Mum/2022 for assessment years 2017-18.
2. The Misc. Application filed by the assessee is reproduced hereunder:-
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1. The present Miscellaneous Application is filed under section 254(2) of the Income Tax Act, 1961 ('Act'), which is arising out of the order passed by the Hon'ble Tribunal for AY 2017-18 pronounced on 02 January 2023, received on 10 April 2023 ('ITAT order of AY 2017-18') concerning the appeal filed by Appellant vide ITA No. 1489/Mum/2022 . A copy of the impugned order is enclosed as Annexure 1.
Background
2. the Appellant is engaged in the business of digital marketing, social media management, media buy, creative services Sales Force Software Gold consulting partner. The modus operandi of the Appellant is to buy media space online from LinkedIn, Google, Times Internet and other online media channels and offers such media space to its various customers as medium to promote their goods/services. We have depicted below the above business model for ease of reference-
Payment by client Appellant Payment by Third party
Client to Appellant Appellant to
(Advertising Media Company media vendor
(Advertiser)
(AD)/Media
Agency
3. The advertisement cost paid to the vendors (namely LinkedIn, Twitter, Google, etc.) by the Appellant for buying the media space is recovered by the Appellant from its clients. Further, the Appellant charges fixed fees of 4% to 7% (called as campaign management fee) on the advertisement cost which is the actual revenue of the Appellant. As per the business model of the Appellant, it raises a consolidated invoice on its customer (say for INR 100) which includes entire media cost from LinkedIn, Twitter, Google, etc. (of say INR * 98 ) and balance (i.e., INR 2) pertains to campaign management fee, which in substance, is the gross revenue/ turnover of the company.
Recovery of Media cost INR 98
Add: Campaign Management Fee (Actual revenue) INR 2
Gross receipts INR 100
4. Accordingly, in the profit & loss account for the year under consideration, the Appellant recognized revenue without including the reimbursement of expenses received from the clients on account of media cost. The aforesaid method of accounting followed by the Appellant is revenue neutral and does not have any impact on the net profit because in the event the reimbursement of expenses is shown as revenue, the corresponding payment of expenses will also have to be shown on the expense side and accordingly, the same would not have any impact on the net profit.
5. For A.Y. 2017-18, the return of income was filed by the Appellant declaring total income of Rs. 3, 29, 30,260/-. The return of income filed for the year under consideration was selected for scrutiny assessment under section 143(2) of the Act. During the course of the assessment proceeding, the Assessing Officer issued a notice 3 M . A . No . 56 4 / M um /2 02 3 Mirum Digital Pvt. Ltd under section 142(1) of the Act, inter alia, requiring the Appellant to submit reconciliation of 26AS/CIB/AIR/OLTAS/Service Tax/STT/Sales-tax return with audited books of account and the return of income, reconciliation of income as per return of income and 26AS statement. A copy of the notice dated 21 October 2019 issued by the Assessing Officer under section 142(1) of the Act is enclosed as Annexure 2.
6. on 29 November 2019, the Petitioner submitted that reconciliation of 26AS/CIB/AIR/OLTAS/Service Tax/STT/Sales-tax return with audited books of account and the return of income. A copy of the letter dated 29 November 2019 along with relevant annexures filed by the Appellant with the Assessing Officer during the assessment proceeding is enclosed as Annexure 3.
7. On 7 December 2019, the Assessing Officer issued a show cause notice requiring the Appellant to submit as to why addition of Rs. 19,07,83,213/- should not be made to the total income being the difference between the revenue recognized in the profit & loss account vis-à-vis revenue reported in the services tax return. A copy of the show cause notice dated 7 December 2019 issued by the Assessing Officer during the original assessment proceeding is enclosed as Annexure 4.
8. on 14 December 2019, the Appellant submitted the reconciliation between the income as per Form 26AS and income as per return of income. Further, submitted the reconciliation of income recorded in the books account and the income to be reflected as per Accounting Standard -9 and pointed out that the reimbursement of expenses of Rs. 17,26,89,469/- which is billed to the client is not included in the turnover since, the same is not in the nature of income. A copy of the letter dated 14 December 2019 along with relevant annexures filed by the Appellant with the Assessing Officer during the assessment proceeding is enclosed as Annexure 5.
9. On 17 December 2019, the Appellant submitted the party wise details of reimbursement of expenses, which were not included in the turnover and also gave the details of the tax deducted at source on the amount that was deducted by the Appellant while reimbursing the media cost to the media companies. A copy of the letter dated 17 December 2019 along with relevant annexures filed by the Appellant during the original assessment is enclosed as Annexure 6.
10. On 23 December 2019, the Assessing Officer passed an order under section 143(3) of the Act making a small addition to the total income of the Appellant and accepted the explanation with regard to the difference in the revenue reported in the services tax return/26AS statement vis-à- vis the revenue recognised in the profit & loss account as per Accounting Standard - 9 and did not make any addition in this regard. A copy of the assessment order dated 23 December 2019 passed by the Assessing Officer under section 143(3) of the Act is enclosed as Annexure 7.
11. on 24 February 2022, a notice under section 263 of the Act was issued proposing to revise the assessment order dated 23 December 2019 because the Assessing Officer did not conduct proper enquiry during the course of original assessment on the issue of reimbursement of expenses.
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12. the Appellant could not file any submission against the notice dated 24 February 2022, because the Appellant took additional time to collate the information and also the consultant of the Appellant was occupied in other time barring assignments. When the consultant of the Appellant appeared before the principal commissioner of income tax on 24th March 2022 to explain the facts and file the submission, it was informed to him that the order under Section 263 has already been passed and it will be sent to the Appellant shortly.
13. On 27 March 2022, an order under Section 263 of the Act revising the assessment order dated 23 December 2019 was passed on the ground that the Assessing Officer had not conducted proper enquiries on the issue of reimbursement of expenses which have been received from the client and has been paid to media companies like Face book, Twitter, etc. Accordingly, PCIT, 6 set aside the assessment order and directed the Assessing Officer to pass a fresh assessment order after giving an opportunity to the Appellant. A copy of the order dated 27 March 2022 passed by the PCIT, 6 revising the assessment order passed under section 143(3) of the Act is enclosed as Annexure 8.
Submission
14. It is respectfully submitted that the following inadvertent errors have crept in the Tribunal order for AY 2017-18-
(i) The finding given by the Tribunal at para no 14 of its order that - "the matter of revenue reconciliation and reimbursement of expenses was not done at all to ascertain the income properly" is contrary to the material on record. It is submitted that the issue of reimbursement of expenses and revenue reconciliation was raised by the Assessing Officer vide notice dated 21 October 2019 and 7 December 2019. The Appellant vide letters dated 29 November 2019 and 14 December 2019 responded to the queries raised and submitted explanations with the Assessing Officer which was accepted by him. Therefore, the finding of the Tribunal that revenue reconciliation and reimbursement of expenses was not done at all is a mistake apparent from record.
(ii) The finding given by the Tribunal at Para 10 of its order that - But as we observed that assessee neither appeared/responded to the queries of the Ld. PCIT and the same were not furnished before us to explain the concern. It is submitted that the Appellant had filed notice dated 21 October 2019 and letter dated 29 November 2019, 14 December 2019 and other relevant documents before the Tribunal which clearly show that the aspect of revenue reconciliation and reimbursement of expenses was enquired by the Assessing Officer. Therefore, the finding of the Tribunal that the Appellant has not the documents is a mistake apparent from record.
(iii) The finding given by the Tribunal at Para 13 of its order that we found the decision of honourable jurisdictional high court in the case of CIT vs. Ballarpur Industries Ltd. (2017) 85 taxmann.com 10 relevant on this issue and ITAT Chennai Bench in the case of Sify Software Ltd. vs. ACIT (2017) 80 taxmann.com 273 also followed the case of Ballarpur Industries Ltd. It is submitted that the Judgment of Bombay High Court in 5 M . A . No . 56 4 / M um /2 02 3 Mirum Digital Pvt. Ltd case of Ballarpur Industries (supra) is not applicable to the present case because, in the case before the High Court the revision under section 263 of the Act was upheld since there was no query raised by the Assessing Officer. Therefore, the reliance placed by the High Court on the Judgment of Ballarpur Industries (supra) and Sify Software (supra) which follows the same is a mistake apparent from record.
(iv) The finding of the Tribunal at Para 11 & 12 distinguishing the orders of the Tribunal in case of Piramal Investment Opportunities Fund (ITA No. 700/M/2021) and Rediffusion Brand Solution Pvt. Ltd. (ITA No. 920/M/2021) is a mistake apparent from record because the Tribunal in those cases, involving similar facts, had quashed the revision under section 263 of the Act.
(v) The finding given by the Tribunal at Para 14 of its order that we sustain the order of Ld. PCIT as he has to rely upon the records of assessment proceedings only as assessee has not turned up to attend the hearing under section 263 on the subject matter. It is submitted that the order passed under section 263 of the Act is to be upheld only if the jurisdictional conditions (a) the assessment order being erroneous and (b) the assessment order being prejudicial to the interest of the revenue, are satisfied by the Commissioner of Income-tax. Therefore, the finding of the Tribunal that the revision is upheld because the assessee did not turn up before the Commissioner of Income-tax is a mistake apparent from record.
Prayer
15. the Appellant submits that the order of the Tribunal has proceeded on factually and legally erroneous basis, as explained above, to uphold the revision under section 263 of the Act. Since, the errors pointed out by the Appellant go to the root of the matter, the Appellant humbly prays that the order dated 2 January 2023 may be recalled and the appeal of the Appellant may be heard afresh.
3. We have carefully considered the application of the assessee filed u/s. 254(2) of the I. T. Act 1961 alongwith order of Bench dated 02.01.2023. On this issue, we have gone through the records available before us at the time of pronouncing the order and specifically the order of Ld. PCIT-6 passed u/s. 263 of the I.T. Act 1961 which categorically mentioned that during the hearing before him u/s. 263 of the I.T. Act, assessee failed to comply, hence the present order u/s. 263 of the Act was passed. This fact was never under challenge by assessee before us.
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4. Notwithstanding, the above facts even in the M.A. filed by the assessee vide page no. 3, para 14(II) assessee again submitted as under:-
"(ii) The finding given by the Tribunal at Para 10 of its order that - But as we observed that assessee neither appeared/responded to the queries of the Ld. PCIT and the same were not furnished before us to explain the concern. It is submitted that the Appellant had filed notice dated 21 October 2019 and letter dated 29 November 2019, 14 December 2019 and other relevant documents before the Tribunal which clearly show that the aspect of revenue reconciliation and reimbursement of expenses was enquired by the Assessing Officer. Therefore, the finding of the Tribunal that the Appellant has not the documents is a mistake apparent from record."
5. As discussed (supra), even in M.A. filed by the assessee, he accepted that no compliance during the proceedings before Ld. PCIT were made, may be on merits case of the assessee will not alter but assessee is duty bound to comply before the Ld. PCIT. As far as applying /distinguishing a particular judicial pronouncements relied upon by the assessee /revenue is a conscious evaluation by the Bench and can never be a subject matter of application filed u/s. 254(2) of the Act as the same will tantamount to review its own order.
6. Considering the above facts and discussion, we do not find the application of the assessee fit to be allowed as per the provisions of section 254(2) of the Act, hence dismissed.
7. In the result, the present M.A. filed by the assessee is dismissed.
Order pronounced in the open court on 12.03.2024.
Sd/- Sd/-
VIKAS AWASTHY GAGAN GOYAL
(Judicial Member) (Accountant Member)
Mumbai; ददनाांक Dated: 12.03.2024
Sr. PS Dhananjay
7
M . A . No . 56 4 / M um /2 02 3
Mirum Digital Pvt. Ltd
आदे श की प्रतिलऱपि अग्रेपिि/Copy of the Order forwarded to :
1. अऩीराथी / The Appellant
2. प्रत्मथी / The Respondent
3. आमकय आमक् ु त / CIT - concerned
4. ववबागीम प्रतततनधध, आमकय अऩीरीम अधधकयण, भुांफई / DR, ITAT, Mumbai
5. गार्ड पाईर / Guard File आदे शानुसार/ BY ORDER, उि/सहायक िंजीकार (Dy./Asstt. Registrar) आयकर अिीऱीय अधिकरण, भुांफई / ITAT, Mumbai