LIDO MALLS MANAGEMENT PRIVATE LIMITED,BANGALORE vs. ASSISTANT COMMISSIONER OF INCOME-TAX, CENTRAL CIRCLE 2(4), BANGALORE , BANGALORE

IN THE INCOME TAX APPELLATE TRIBUNAL ‘A’ BENCH, BANGALORE BEFORE SHRI WASEEM AHMED, ACCOUNTANT MEMBER AND SHRI SOUNDARARAJAN K, JUDICIAL MEMBER

ITA No.481-484-/Bang/2026 Assessment Year: 2018-19-2021-22

Lido Malls Management Pvt. Ltd., The Asst. Commissioner of Vs. Mall Office, B1, 1 MG Mall, Income Tax, ½ Swami Vivekananda Road, Central Circle – 2(4), Trinity Circle, Ulsoor, M.G Road, Bengaluru. Bengaluru – 560 008. PAN – AABCL 4578 Q APPELLANT RESPONDENT Assessee by : Shri Padam Chand Khinch, C.A Revenue by : Shri N Balusamy, JCIT (DR) Date of hearing : 06.05.2026 Date of Pronouncement : 25.05.2026 O R D E R PER WASEEM AHMED, ACCOUNTANT MEMBER:

These 4 appeals, filed by the assessee against the separate orders of the Ld. Commissioner of Income Tax (Appeal) (hereafter- Ld. CIT(A)) passed under the provision of section 250 of the Income Tax Act, 1961 (hereafter- the Act), were heard together.

First, we take up ITA No. 481/Bang/2026 pertaining to AY 2018-19

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said notice, the assessee filed its return of income declaring the very same income as originally returned u/s 139(1) of the Act.

6.1 During the course of search proceedings, the AO observed that Atria Energy Services Private Limited (AESPL) was supplying solar power to the assessee at a concessional rate. However, instead of reflecting the difference between the rate agreed under the Power Purchase Agreement and the actual rate charged as discount in the books, AESPL had allegedly routed the differential amount back to the assessee in the form of “facilitation charges” and “advertisement expenses”.

6.2 The AO further observed that for claiming such expenditure in the books of AESPL, separate agreements namely “Service Agreement” and “Advertising Space on Hire Agreement” were entered into between AESPL and the assessee. According to the AO, no real services were rendered by the assessee under the said agreements, and the entire arrangement was merely a device adopted to pass on the benefit of discounted power tariff in the guise of business expenditure. The AO, therefore, held that both the agreements were sham arrangements lacking commercial substance.

6.3 To verify the claim of the assessee, the AO issued notices u/s 142(1) of the Act. In response to the said notices the assessee by referring to the Solar Power Purchase Agreement (SPPA) and Advertisement Space on Hire Agreement (ASHA), submitted that it was engaged in the business of management and operation of malls and had substantial annual power consumption of around 5.6 million units for operation and maintenance of malls including lighting, air-conditioning and operation of equipment in common areas. The assessee submitted that apart from BESCOM, it also

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procured power from private vendors including AESPL, since private suppliers offered power at competitive tariff rates.

6.5 The assessee further submitted that under the SPPA dated 06.01.2017 entered with AESPL, power was agreed to be supplied at the rate of Rs. 8.15 per unit and AESPL intended to supply around 4.8 million units of power annually, out of which the assessee was required to purchase at least 80%, i.e., 38.40 lakh units. It was submitted that after commercial negotiations, the parties mutually agreed that the discount in tariff would be passed on in the form of advertisement revenue and accordingly an Advertisement Space on Hire Agreement was also entered into on the same date, whereby AESPL agreed to pay advertisement charges of Rs. 8,64,000 per month aggregating to Rs. 1,03,68,000 annually. According to the assessee, the said annual amount effectively translated into tariff discount of around Rs. 2.70 per unit of power supplied by AESPL.

6.6 However, the AO observed that AESPL was supplying power to various customers including the assessee and charging around Rs. 8.5 per unit whereas in the case of the assessee alone AESPL was also making separate payments in the guise of advertisement/facilitation charges at around Rs. 2 per unit, whereas no such payments were made to other customers. The AO referred to the statement of Shri Bala Venkata Subrahmanyam Chinni, wherein he admitted that there was no actual rendering of advertisement or marketing services by the assessee to AESPL and that the arrangement was entered into only because the customer wanted the effective tariff to be recorded without reducing the billing rate under the Power Purchase Agreement.

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6.7 The AO further observed that during post-search enquiries and proceedings u/s 131(1A) of the Act, the assessee admitted receipt of advertisement charges from AESPL but failed to furnish any evidence demonstrating actual rendering of advertisement services. The AO noted that AESPL was merely an intermediary engaged in managing third-party power sales and there was no apparent requirement for advertisement of such activity in the mall premises of the assessee. The AO also referred to the statements of Shri K. Nagaraju and Shri C.S. Sunder Raju, who were confronted with the statements recorded during search and could not offer any satisfactory explanation regarding the advertisement payments made by AESPL to the assessee.

6.8 Based on the above, the AO concluded that the Advertisement Space on Hire Agreement entered between the assessee and AESPL was merely a sham arrangement and that no real advertisement services were rendered by the assessee. However, since the assessee had booked certain expenditure against such advertisement revenue, the AO called upon the assessee to substantiate the same. According to the AO, the assessee failed to furnish supporting evidence regarding the expenditure allegedly incurred for earning advertisement revenue of Rs. 78,30,001/-. Accordingly, applying the gross profit ratio of 40.72% declared by the assessee, the AO estimated the expenditure attributable to such revenue at Rs. 31,88,376/- and disallowed the same by treating it as non-genuine expenditure.

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statements recorded from the officials of Atria group in fact supported the stand consistently taken by the assessee during the assessment proceedings, namely that the so-called advertisement revenue was nothing but discount on power tariff routed through a separate agreement structure. The assessee pointed out that Shri Bala Venkata Subrahmanyam Chinni, in his statement recorded u/s 132(4), had admitted that AESPL was supplying power to the assessee at around Rs. 8.5 per unit and simultaneously making payments of around Rs. 2 per unit in the form of advertisement/facilitation charges. He further admitted that no actual advertisement services were rendered by the assessee and that the advertisement agreement was entered into only because the assessee desired to retain higher margin while recovering power charges from tenants of the mall. The assessee submitted that the statements of Shri K. Nagaraju and Shri C.S. Sundar Raju also corroborated the same factual position.

8.1 With regard to the addition made by the AO, the assessee submitted that the entire amount of Rs. 66,35,593/- received from AESPL, excluding GST, had already been credited in the profit and loss account

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under the head “Promotional Income” and offered to tax. Therefore, according to the assessee, the AO had effectively subjected the same income to tax once again by making an estimated gross profit addition of Rs. 31,88,376/-, resulting in double taxation of the same receipt.

8.2 The assessee also contended that the AO had made the impugned addition without rejecting the books of account u/s 145(3) of the Act. It was argued that there was no finding in the assessment order regarding incorrectness or incompleteness of accounts, non-following of accounting standards, or any defect in the books maintained by the assessee. The assessee submitted that the AO merely presumed that certain expenditure must have been incurred for earning advertisement income, whereas in reality no expenditure was incurred since the advertisement revenue itself represented power tariff discount. According to the assessee, the disallowance was made purely on assumptions, surmises and conjectures without any supporting material on record.

8.3 However, the Ld. CIT(A) held that neither the Power Purchase Agreement nor the Advertisement Space on Hire Agreement contained any clause suggesting that the advertisement receipts were linked to or represented discount on power tariff. According to the Ld. CIT(A), the assessee’s contention that both agreements were interconnected was based only on post-search explanations and statements, without any contemporaneous documentary evidence supporting such claim.

8.4 The Ld. CIT(A) further observed that no evidence such as display proofs, campaign details, photographs, confirmations or deliverables was furnished by the assessee to establish rendering of actual advertisement

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services and therefore concluded that the Advertisement Agreement was a sham and colourable device lacking commercial substance.

8.5 The Ld. CIT(A) further held that once the transaction itself was found to be sham, the AO was not justified in merely disallowing a portion of estimated expenditure by applying the gross profit ratio. According to the Ld. CIT(A), if the receipt itself was non-genuine, the entire amount credited in the books could not be treated as business income and instead was liable to be assessed as unexplained cash credit u/s 68 of the Act. The Ld. CIT(A) observed that mere credit of the amount in the profit and loss account did not absolve the assessee from explaining the genuineness of the transaction giving rise to such receipt.

8.6 The Ld. CIT(A) rejected the assessee’s explanation that the advertisement receipts merely represented disguised power tariff discount intended to preserve higher recovery from tenants. According to the Ld. CIT(A), by itself admitting that no actual advertisement services were rendered, the assessee had failed to establish the genuineness of the transaction, which is one of the mandatory conditions required u/s 68 of the Act.

8.7 The Ld. CIT(A), placing reliance on the decisions of the Hon’ble Supreme Court in the cases of Durga Prasad More in 82 ITR 540, Sumati Dayal vs. CIT in 214 ITR 801 and McDowell and Co. Ltd. vs. CTO in 154 ITR 148, held that taxing authorities are entitled to look into surrounding circumstances and disregard colourable devices lacking commercial substance. Accordingly, invoking powers of enhancement u/s 251 of the Act, the Ld. CIT(A) held that the entire advertisement receipts received

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from AESPL were liable to be taxed as unexplained cash credits u/s 68 of the Act for the relevant assessment years, instead of sustaining the limited gross profit addition made by the AO.

10.1 Before us, the assessee assailing the order of the Ld. CIT(A) submitted that the enhancement made u/s 68 of the Act by treating the advertisement receipts of Rs. 78,30,001/- as unexplained cash credits were wholly unsustainable both on facts and in law. The assessee submitted that the provisions of section 68 could be invoked only where the assessee fails to explain the nature and source of the credit appearing in its books of account or where the explanation offered is found unsatisfactory. According to the assessee, in the present case the identity of AESPL, source of payment, mode of receipt, agreements between the parties and accounting treatment of the receipts were never in dispute and therefore invocation of section 68 of the Act was legally impermissible.

10.2 The assessee further submitted that the Ld. CIT(A) erred in treating the transaction as sham merely because the advertisement receipts

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effectively represented discount on power tariff structured through a separate commercial arrangement. It was argued that the assessee had consistently explained that the Solar Power Purchase Agreement and Advertisement Space on Hire Agreement were commercially interlinked arrangements and the same was also borne out from the conduct of parties as well as the clauses contained in the agreements. According to the assessee, the Ld. CIT(A) failed to appreciate the commercial rationale behind such arrangement, namely that the assessee desired to maintain higher outward recovery of power charges from tenants while separately receiving tariff discounts from AESPL.

10.3 The assessee further contended that even assuming the advertisement agreement lacked independent commercial substance, the receipts could not be brought to tax u/s 68 of the Act once the assessee had fully disclosed and credited the same in its profit and loss account and offered the same to tax as business income in the return of income. According to the assessee, the enhancement made by the Ld. CIT(A) would effectively result in double taxation of the same receipt, once as disclosed business income and again as unexplained cash credit u/s 68 of the Act.

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12.2 We further note that the consistent stand of the assessee from the assessment stage onwards has been that the so-called advertisement receipts were in substance nothing but discount/facilitation on power tariff structured through a separate agreement/ arrangement. Significantly, the statements relied upon by the Revenue authorities themselves support such factual position. Shri Bala Venkata Subrahmanyam Chinni in unequivocal terms admitted that AESPL had entered into the advertisement agreement because the customer desired effective reduction in power tariff without altering the billing rate under the Power Purchase Agreement. The statements of other officials also broadly support the same factual understanding. Therefore, in our considered opinion, the material brought on record by the Revenue itself establishes the real nature of the transaction as a commercial adjustment relating to

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power tariff and not introduction of any unexplained money by the assessee.

12.3 The learned CIT(A), in our considered view, erred in invoking the provisions of section 68 of the Act. The scope of section 68 is confined to cases where the assessee either fails to explain the nature and source of a credit appearing in its books of account or where the explanation offered is found unsatisfactory. In the present case, the payer, source, mode of receipt and underlying commercial arrangement are fully explained and identifiable. Merely because the Revenue authorities considered the Advertisement Agreement to be a colourable arrangement or sham contract, the receipts themselves do not automatically become unexplained cash credits. At best, the Revenue could examine the correct nature or head under which such receipts are taxable. However, once the receipt itself is accepted as an accounted receipt arising from identified parties through banking channels, invocation of section 68 becomes legally unsustainable.

12.4 We also find force in the contention of the assessee that the enhancement made by the learned CIT(A) effectively results in double taxation of the same receipt. The impugned amount already forms part of the business receipts credited in the profit and loss account and offered to tax in the return of income. The same amount again cannot be separately brought to tax in the absence of any finding that the earlier disclosure stood excluded from computation of taxable income. It is settled law that the same receipt cannot be taxed twice merely because the Revenue disputes the characterization or commercial substance of the underlying agreement.

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12.5 Since we have held that the transactions are genuine and properly explained, we do not find it necessary to further examine the applicability of section 68 of the Act and therefore the issue is left open.

12.6 Accordingly, considering the entirety of facts and circumstances of the case, we are unable to sustain the enhancement made by the learned CIT(A). The same is directed to be deleted. Consequently, the grounds raised by the assessee stand allowed.

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Order pronounced in court on 25th day of May, 2026 Sd/- Sd/- (SOUNDARARAJAN K) (WASEEM AHMED) Judicial Member Accountant Member Bangalore Dated, 25th May, 2026 / vms /

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Copy to: 1. The Applicant 2. The Respondent 3. The CIT 4. The CIT(A) 5. The DR, ITAT, Bangalore. 6. Guard file By order Asst. Registrar, ITAT, Bangalore