ITO-9(2)(1), MUMBAI vs. M/S 5 TH ELEMENT DIGITAL MEDIA SOLUTIONS PVT LTD, MUMBAI

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ITA 875/MUM/2023Status: DisposedITAT Mumbai10 July 2023AY 2017-184 pages

In favour of the assessee: the Revenue's appeal was dismissed. From the AI summary of this appeal.

AI SummaryDismissed

What did the Tribunal hold?

The CIT(A) deleted the protective addition, observing that disallowing both receipts and corresponding expenses would lead to double taxation. The Tribunal confirmed the CIT(A)'s order, finding no infirmity.

What were the facts?

The Assessing Officer (AO) disallowed expenses of Rs. 19,18,51,197/- on a protective basis, stating the assessee failed to provide evidence. The AO had already added the entire receipts shown in the profit and loss account.

What were the issues?

Whether disallowing expenses on a protective basis when entire receipts have already been added back leads to double taxation.

Which sections of the Income-tax Act were involved?

Section 143(3),Section 68

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, ‘E‘ BENCH

Before: SHRI AMIT SHUKLA & SHRI GAGAN GOYAL

For Respondent: Shri Biswanath Das
Hearing: 10/07/2023Pronounced: 10/07/2023

आदेश / O R D E R PER AMIT SHUKLA (J.M): The aforesaid appeal has been filed by the Revenue against the order dated 17/01/2023 passed by NFAC Delhi for the quantum of assessment passed u/s.143(3) for the A.Y.2017-18. 2. The only ground raised by the Revenue reads as under:-

1.

M/s. 5th Element Digital Media Solutions Pvt. Ltd 1. Ld. CIT(A) erred in deleting the addition amounting to Rs. 19,18,51,197/- being the entire expenses which has been added back on protective basis since the assessee has failed to provide explanation/documentary evidence with regard to the expenses claimed in the books of account?"

3.

Here the Revenue is aggrieved by deletion of protective addition. The brief facts qua this issue are that during the course of assessment proceedings AO observed that assessee has debited the following expenses in the profit and loss account:-

Particulars Amount Shooting Expenses 19,22,39,569 Bank Charges 1,05,632 Other Expenses 4,07,760 Audit Fee 25,000 Salary & Wages 4,82,000

4.

According to ld. AO these expenses have not been incurred wholly and exclusively for the purpose of assessee’s business and accordingly, he has disallowed sum of Rs.19,18,51,197/- on protective basis. The protective addition was made on the ground that AO has already made addition of Rs.19,35,39,366/- on account of entire receipts shown in profit and loss account and again he has disallowed the corresponding expenses also. The ld. CIT (A) has deleted the addition after observing as under:-

“[1.5.7.2] It is well known fact that expenses are made out of income. Here in this case, the AO has already made addition of M/s. 5th Element Digital Media Solutions Pvt. Ltd Rs.19,35,39,366/- u/s. 68 of the Act which is the total receipts of the assessee shown in its P&L A/c. Therefore, disallowing expense to tune of Rs. 19,18,51,197/- and adding back it to the income of the assessee leads to double taxation which is not justifiable with the assessee.

Keeping the above discussion in mind that the addition of entire receipts and corresponding payments cannot be brought to tax which result into double taxation, therefore, I hereby delete addition made in the para 10.10 of the impugned order to the tune of Rs.19,18,51,197/- is hereby deleted.

5.

From the aforesaid finding of the ld. CIT(A), we are unable to understand as to how such a protective addition can be sustained when at the same time ld. AO is disallowing the receipts and also disallowing the corresponding expenses incurred out of the said receipts and that to be 100%. Accordingly, we do not find any infirmity in the order of the ld. CIT (A) and the same is confirmed.

6.

In the result, appeal of the Revenue is dismissed.

Order pronounced on 10th July, 2023.

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