ZEE ENTERTAINMENT ENTERPRISES LIMITED ,MUMBAI vs. DCIT, CENTRAL CIRCLE 2(4), MUMBAI

PER PAWAN SINGH, JUDICIAL MEMBER: 1. This appeal by assesseeis directed against the separate orders of ld. CIT(A) / NFAC dated 25.07.2025 for Assessment Year (AY) 2014-15. The assessee has raised following grounds of appeal: 1.1 On the facts and circumstances of the case, the Learned Commissioner of Income-tax (Appeals)-48 (hereinafter referred to as the 'Ld. CIT(A)') erred in upholding the penalty order passed by the Learned Deputy Commissioner of Income-tax Central Circle -2(4) (herein referred to as 'Assessing officer' or 'AO') u/s section 270A of Income-tax Act, 1961 ('the Act') for under-reporting in consequence of misreporting on account of disallowance of commission expenses of Rs 6,00,00,000. The reasons provided for imposing such penalty are incorrect, contrary to the facts of the case and against the provision of the law. 1.2 On the facts and circumstances of the case, the Ld. CIT(A) erred in confirming the penalty for misreporting of income u/s 270A of the Act solely on the basis of the disallowances made in the assessment order without discharging the onus and proving misrepresentation of income by the appellant 1.3 On the facts and circumstance of the case, the Ld. CIT(A) failed to appreciate that there is neither 'misrepresentation or suppression of facts' nor 'any recording of false entry in the books of account' to warrant levy of penalty u/s section 270A (9) of the Act for under reporting in consequence of misreporting. 1.4 On the facts and circumstance of the case, the Ld. CIT(A) erred in upholding the action of the AO without appreciating the documentary evidence furnished by the appellant to discharge its onus that the transactions with M/s Zigtraka Media Solutions Pvt Ltd and M/s M&M Advisors and Consultants Pvt Ltd were genuine. 1.5 On the facts and circumstance of the case, CIT(A) overlooked the fact that the appellant to avoid prolonged litigation and peace of mind had suo moto offered for disallowance of commission expenses and therefore penalty is not leviable. 1.6 On the facts and in the circumstances of the case, the penalty notice issued did not specify the exact limb or clause of section 270A(9) that was attracted in the present case, rendering the penalty proceedings invalid and liable to be quashed. 2. The above grounds or sub grounds are without prejudice to each other. 3. The appellant craves the leave to add, amend or alter all or any of the grounds of appeal. 2. Brief facts of the case are that assessee company is engaged in the business of broadcasting television channels and providing other services. A survey action was carried out on 04.01.2021 at the premises of assessee by the Investigation Wing. During the survey proceedings, certain discrepancies were found with regard to commission paid to the parties, namely, Zigtraka Media Solutions Pvt. Ltd. and M & M Advisory Consultants Private Limited, to whom the assessee has paid commission aggregating to Rs. 6.00 crore. Subsequently, while filing return of income for AY 2020-21, the assessee filed 2 its return of income on 31.03.2021 declaring income of Rs. 22.25 crore. The return was revised on 29.06.2021, declaring income of Rs. 22.26 crore. The assessment was completed on 27.09.2022, assessing total income at Rs. 22.25 crore by making an addition of Rs. 6.00 crore on account of commission expenses to Zigtraka Media Solutions Pvt. Ltd. and M & M Advisory Consultants Private Limited, disallowance under section 14A and disallowance of education cess.The AO, while passing the assessment order on 27.09.2022, initiated penalty proceedings under Section 270A for under- reporting of income in consequence of misreporting, on account of disallowance of commission expenses of Rs. 6.00 crore. A show-cause notice under Section 270A read with section 274 was issued on 27.09.2022.In response to the show-cause notice, assessee filed its reply dated 24.03.2023. In the reply, assessee raised three objections, namely: first, that the case of assessee does not fall under the clause given in sub-section (9) of section 270A and, therefore, penalty for under-reporting in consequence of misreporting should not be levied; secondly, it had itself agreed to the disallowance of commission expenditure in respect of the transactions in question during the assessment proceedings and, thus, penalty should not be levied, as it had done so to avoid prolonged litigation; and thirdly, penalty should not be levied as assessee has given a bona fide explanation and disclosed all material facts.The reply of assessee was not accepted by the AO by taking the view that the case of assessee clearly falls under clauses (a)

and (d) of Section 270A(9). Sub-clause (a) of Section 270A(9) deals with misrepresentation or suppression of facts, and clause (d) deals with recording of any false entry in the books of account.The AO also recorded that during the survey action, in the case of assessee and its associate company, it was found that assessee and its associate company has undertaken transactions with certain six entities, which were not carrying out any actual business but were only providing entries at inflated or arbitrary prices, so that ZEE Group companies could claim expenses/depreciation/amortization at such inflated prices. Two of these entities were Zigtraka Media Solutions Pvt. Ltd. and M & M Advisory Consultants Private Limited. During the course of assessment proceedings, a show-cause notice was issued to the assessee regarding these two companies. Notice under Section 133(6) were sent to these entities during the assessment proceedings for enquiring into the details of transactions with ZEE Group and its associates, but no reply was received from either of the entities.The AO held that assessee took entries from bogus non-existent parties, which were not carrying out any actual business and were only adding layers to the transactions. The AO concluded that assessee misrepresented and suppressed facts insofar as it took entries from bogus parties, which were not carrying out any business and were only adding layers to the transactions. Thus, clauses (a) and (d) of sub-section (9) of Section 270A is squarely applicable to the case of assessee.The only explanation of assessee that they themselves offered to disallow the expenses in respect of the transactions with both the entities and, therefore, no penalty should be levied. The AO concluded that assessee offered the disallowance only after the survey operation and department found discrepancies / inconsistencies, in the transactions, and that assesseethereafter agreed to the disallowance during the assessment proceedings. Had the assessee not being subjected to the survey operation, it would have gone on to claim these expenses, as the same had already been claimed in the return of income.The claim of assessee that it had agreed to the disallowance to avoid litigation was held to be an afterthought and could not be given any credence. The AO levied the penalty @ 200% of the tax on under-reported income in consequence of misreporting, thereby levying a penalty of Rs. 3.02 crore vide order dated 29.03.2023. 3. Aggrieved by the action of the AO in levying the penalty the assessee filed an appeal before the learned CIT(A). Before the learned CIT(A), assessee filed a detailed statement of facts, as recorded in para 4 of the order of the learned CIT(A). In the statement of facts, apart from explaining its business activities, expenditure and survey action theassessee explained that a survey under section 133A was carried out on the premises of assessee on 04.01.2021.In the survey action, the Investigation Team identified certain discrepancies regarding commission payments to Zigtraka Media Solutions Pvt. Ltd. and M & M Advisory Consultants Private Limited. The Investigation Team formed an opinion that these entities were non-existent at their registered address and were not carrying out any business activities. The assessee filed its return of income on 15.02.2021, which was subsequently revised on 31.03.2021. During the assessment proceedings, the AO issued a show-cause notice regarding the transactions of commission with both the entities. The assesseeagreed to the disallowance of commission expenses amounting to Rs. 6.00 crore paid to both the entities.Consequently, the assessment was completed under Section 143(3) by adding back the said amount to the total income of the assessee. The assessee also filed detailed written submission in response to the show-cause notice issued by the learned CIT(A). The submissions of the assessee, as recorded in para 8 of the order of the learned CIT(A), stated that the addition made in the assessment cannot be the sole basis for levy of penalty under Section 270A. As per the language of Section 270A, the AO or learned CIT(A) or Principal Commissioner or Commissioner may, during the course of assessment proceedings, direct that any person who has under-reported income shall be liable to pay penalty, in addition to tax, if any, on such under-reported income. 4. As per the language of the section 270A, the word “may” in sub-section (1) indicates that the penalty is not automatic. Each and every case needs to be considered judicially by the authority before levying the penalty. The AO needs to independently evaluate and examine each case before levying penalty under Section 270A. The AO is required to consider various factors, such as the nature of the addition, quantum involved, correspondence with the assessee, evidence on record, and the intention of the assessee, to determine whether the penalty should be invoked or not. The levy of penalty is at the discretion of the AO, and the addition made in the assessment cannot be the sole ground to initiate or levy penalty under Section 270A. The discretion should be exercised with due care and complete responsibility. It should be supported by logical reasoning and evidence. All required details, documents and explanations were furnished in a timely manner. All details were furnished to support the claim. The assessee acted in a bona fide manner and there was no malafide motive or intention to suppress or misrepresent any fact. 5. In support of the transactions with Zigtraka Media Solutions Pvt. Ltd. and M & M Advisory Consultants Private Limited, the assessee stated that the transactions with both entities were genuine. During the relevant financial period, the assessee purchased rights of 44 movies for a total consideration of Rs. 68 crore from Zigtraka Media Solutions Pvt. Ltd. and rights of 18 movies for a total consideration of Rs. 204.90 crore from M & M Advisory Consultants Private Limited and paid commission of Rs. 1.70 crore to Zigtraka Media Solutions Pvt. Ltd. and Rs. 4.30 crore to M & M Advisory Consultants Private Limited respectively. In the return of income, the assessee suo motu disallowed the amortisation of the above content cost in the computation of income.During the survey proceedings, various inquiries were made in relation to the transactions made by the assessee with Zigtraka Media Solutions Pvt. Ltd. and M & M Advisory Consultants Private Limited, particularly with regard to the commission paid to these entities. In response to the inquiries, the assessee furnished complete details, documents and explanations. Copies of invoices, copies of purchase agreements and sample copies of telecast certificates evidencing the telecast of the contents on the assessee’s channel were also furnished.The assessee discharged its primary onus to prove the genuineness of the commission paid to both the entities. In the return of income, the assessee suo motu disallowed the amortization of content cost. However, the commission paid was inadvertently not disallowed, which was subsequently offered for disallowance vide submission dated 21.09.2022. Therefore, the assessee further stated that in the return of income for AY 2019-20, the assessee disallowed commission paid to the said parties of Rs. 6.00 crore/-. Therefore, the act of suo motu surrender of income by the assessee is to be taken in good faith as a part of bonafide intention. There was no conscious breach of law on the part of the assessee. To support such view, the assessee relied upon the decision of the Hon'ble Supreme Court in Hindustan Steel Ltd. vs. State of Orissa, (1972) 83 ITR 26 (SC). The assessee also stated that, in the absence of any misreporting of income, no penalty is leviable. The penalty for misreporting of income is leviable only when the limbs provided in sub-section (9) of Section 270A are satisfied. The penalty was levied under clauses (a) and (d) for misrepresentation or suppression of facts and recording of a false entry, respectively. The facts related to the commission paid to both the entities are available on record in the form of survey proceedings. The assessee suo motu offered disallowance of amortization of content cost purchased through the aforesaid entities. However, the commission paid inadvertently remained to be disallowed in the return of income, which was subsequently suo motu offered by the assessee. Mere non-acceptance of the submission of the assessee cannot be treated as misrepresentation of income. In a series of decisions, it has been held that when a bona fide explanation has been provided, there is no occasion to levy penalty. Although such cases are based on Section 271(1)(c), the same analogy can be applied to the penalty levied under Section 270A. The assessee paid commission in the ordinary course of business and, therefore, the same qualifies as revenue expenditure allowable under Section 37. On the observation of the AO regarding false entry in the books of account, the assessee submitted that the case of the assessee does not fall within the ambit of false entry in the books of account, as the assessee has provided all the documents and, having regard to the facts, the case of the assessee is not covered under any provision relating to recording of false entry. A false entry includes a forged or false document or invoice, where the actual supply of goods or services has not taken place, or supply of goods or services from a non-existent person. Thus, there is no false recording in the books of account.The assessee also took the plea that the AO has not specified the exact limb of Section 270A(9) under which the penalty was proposed. Recording of specific satisfaction about the specific limbs is mandatory. 6. The learned CIT(A), after considering the submission of the assessee, framed three issues for his consideration. (i) Whether the transactions were genuine and whether there was misrepresentation of income? (ii) Whether the suo motu surrender was made with bona fide intent? (iii) Whether, in the absence of specification of the specific limb by the AO, the notice was vague, and whether recording of satisfaction was necessary? On the first issue, the learned CIT(A) held that the AO had based his finding on the survey action, which revealed that the registered address of Zigtraka Media Solutions Pvt.Ltd. was the residential address of Tarak Trivedi, who stated that he sold the company years ago and that no business activity was being carried out. The Pune address was also found locked, i.e., the premises were shut. In the case of M & m Advisors and Consultants Pvt. Ltd., the survey team found that the premises were sealed by the DGGI. The former director confirmed the transfer of shares and stated that no business activities were carried out.The assessee heavily relied on documentary evidence in the form of invoices and agreements. However, in the real world of commercial business practice, mere existence of invoices or bank payment entries does not validate the transaction if the service provider itself is found to be non-existent or incapable of providing services at the material time. The assessee misrepresented the facts. Booking of expenses from bogus entities is not a legal claim. Thus, the action of the AO regarding misreporting was affirmed.On the issue of suo motu surrender with bona fide intention, the learned CIT(A) concluded that when the Department has already discovered the discrepancies, the same could not be termed voluntary or bona fide. If the survey had not taken place, the assessee would have continued to claim these expenses. The contention of the assessee that the commission was inadvertently left out was not convincing, particularly considering the magnitude of the amount, which was around Rs. 6.00 crore. Therefore, the argument was not bona fide.On the issue of vague notice, failure to specify the specific limb, the learned CIT(A) held that, in the penalty order, the AO had specifically discussed the facts and expressly referred to clauses (a) and (d) of Section 270A(9). The AO provided a clear nexus between the facts regarding the bogus entities and the legal provisions. The assessee was fully aware of the charges throughout the proceedings regarding the bogus commission.On recording of satisfaction about the penalty, the learned CIT(A) concluded that, while passing the assessment order, the AO has clearly recorded the initiation of penalty for under-reporting of income in consequence of misreporting. The conduct of the assessee constitutes recording of a false entry in the books of account and misrepresentation of facts. Thus, the provisions of Section 270A(9)(a)(d) and 270A(9)(d) are clearly attracted. The AO has correctly applied the law to the facts. The defence raised by the assessee regarding bona fide belief and voluntary surrender is devoid of merit, as the surrender was a conscious decision during the survey. On the basis of such finding, the learned CIT(A) dismissed the appeal of the assessee. Further aggrieved, the assessee has filed the present appeal before the Tribunal. 7. We have heard the submissions of the learned Authorised Representative (ld. AR) of the assessee and the learned Commissioner of Income Tax - Departmental Representative (ld. CIT-DR). The learned AR of the assessee submitted that the AO levied penalty under section 270A at the rate of 200% of the tax liability on the disputed receipt of commission expenses. The commission expenses were inadvertently left to be disallowed in the return of income, and when it was realised during assessment proceedings, the assessee suo motu agreed for disallowance of the same. Thus, there was a bona fide explanation on behalf of the assessee. The AO, while issuing the show-cause notice, has not specified the specific limb, i.e., whether the show- cause notice was issued for under-reporting of income or for misreporting of income. The AO, while passing the penalty order, referred to clauses (a) and (d) of sub-section (9) of section 270A. However, there was no such reference in the show-cause notice. By referring to clauses (a) and (d) of sub-section (9) of section 270A, the learned AR would submit that the case of the assessee does not fall in any of the categories. To support his submission, the learned AR relied upon the following decisions.  Wadhwa Group Holdings vs DCIT (ITA No. 324/Mum/2026)  Price Waterhouse Coopers (P) Ltd. vs CIT (2012) 25 taxmann.com 400 12  Jaypee Cement Corporation Ltd. vs ACIT (2023) 157 taxmann.com 757 (Delhi – Trib.) 8. On the other hand, the learned CIT(DR) for the Revenue supported the order of the AO and the learned CIT(A). The learned CIT(DR) submitted that survey action was carried out in the case of the assessee in January 2021. During the survey action, it was found that the assessee was booking fictitious expenses. The commission paid to both the entities was not genuine. On further investigation, both the entities were found to be fictitious. The AO, while passing the assessment order as well as in the penalty proceedings, recorded a clear-cut finding that the commission paid to both the entities was fictitious. Despite sufficient evidence, the assessee claimed the commission expenses in the return of income. When it was detected by the AO, the assessee has no option except to admit the same. On the objection of the learned AR of the assessee regarding the specific limbs in the show-cause notice, the learned CIT-DR submitted that the AO, while passing the assessment order, clearly recorded that there was under-reporting of income as a consequence of misreporting. The assessee was very well aware that the expenses were not genuine. No such objection was raised while filing the reply before the AO. The plea of voluntary disclosure will not give any benefit to the assessee when it was a conscious decision by the assessee while filing the return of income after the survey action. The assessee does not deserve any relief at this stage.