IMAGE BROADCASTING INDIA PRIVATE LIMITED,HYDERABAD vs. DEPUTY COMMISSIONER OF INCOME TAX 14(1), HYDERABAD

(Appellant) (Respondent) यनर्ााररती द्वारा/Assessee by: Shri Ravi Bhardwaj, AR राजस् व द्वारा/Revenue by: Ms. Reema Yadav, DR सुनवाई की तारीख/Date of Hearing: 01/05/2025 घोर्णा की तारीख/ 14/05/2025 Date of Pronouncement: आदेश / ORDER प्रयत रवीश सूद, जे.एम./PER RAVISH SOOD, J.M. The present appeal filed by the assessee company is directed against the order passed by the Commissioner of Income Tax (Appeals) [“CIT(A)”], National Faceless Appeal Centre, Delhi dated 29.09.2023, which in turn arises from the assessment order passed by the Assessing Officer (“the AO”) u/s 143(3) of the Income Tax Act, 1961 (“the Act”) dated 28.12.2019.

1) Based on the facts and circumstances of the case and in law, the order passed by the Ld. Commissioner Appeals (‘Ld CIT(A)’)is erroneous and bad in law 2) The Ld CIT(A) has grossly erred in disposing the appeal without providing sufficient opportunity to the appellant 3) The Ld CIT(A) erred in 10 percent adhoc disallowance of expenditure under the head Other expenses u/s 37 of Income tax act;1961without any basis which was incurred for the purpose of business amounting to Rs.6,79,29,682/- and making an addition of Rs.67,92,968/- as Income from Other sources. 4) The. Ld CIT(A) erred in concluding that the assessee has not discharged the onus of proving the cash deposits despite genuineness of the above expenses. 5) The Ld CIT(A) erred in disallowing an amount of Rs. 2,80,95,113/- debited under head Changes in inventories which was relating to the value of the content library 6) The Ld CIT(A) erred in concluding that the cash deposits of Rs. 2,75,89,500/-are unexplained cash credits u/s 68 of Income Tax Act,1961. 7) The Ld CIT(A) erred in concluding that the assessee failed to discharge the onus to prove the deposits as the Assessee have submitted that the cash deposits in the bank relates to magazine sales; 8) The Assessee craves leave to add to, alter, amend, modify, substitute, delete and /or rescind all or any one of the grounds of appeal on or before the final hearing.

3. Succinctly stated, the assessee company had e-filed its return of income for the A.Y.2017-18 on 20.10.2017, declaring a loss of Rs.10,39,13,505/-. Subsequently, the case of the assessee company was selected for scrutiny assessment u/s 143(2) of the Act. As the assessee company had failed to respond to the notices that were issued by the AO in the course of the assessment proceedings, therefore, the latter was constrained to frame the assessment based on the material available on record.

4. The A.O., observing that the assessee company had raised a claim for deduction of expenditure under the head “Other expenses” aggregating to Rs.6,79,29,682/-, but, had failed to substantiate the veracity of the said claim, thus, drawing support from the judgment of Hon’ble High Court of Andhra Pradesh in the case of Commissioner of Income Tax Vs. Transport Corporation of India [256 ITR 701] disallowed 10% of the expenditure u/s 37 of the Act and made a consequential addition of Rs.67,92,968/-.

5. The AO further observed that the assessee company had in its Profit & Loss account for the subject year debited an amount of Rs.2,80,95,113/- under the head “Changes in Inventories”. Elaborating on the nature of its said claim for deduction it was stated by the assessee company that the value of the content or programs that were already exploited/no longer generated any revenue was written off during the year under consideration. However, as the assessee company had neither placed on record any basis for valuation of the aforesaid content at Rs.2.80 crores (approx.) nor furnished the details and breakup of the content/program which were claimed to have been written off after preserving the stock for more than 8 years, the AO disallowed its entire claim for deduction u/s 37 of the Act.

6. The AO further observed that the assessee company had during the subject year made cash deposits of Rs.2,03,55,500/- in its two bank accounts viz., (i) Account No.3573443824 with Central Bank of India, Branch: Jubilee Hills: Rs.1,31,21,500/-; and (ii) Account No.3632002100055230 with Punjab National Bank, Branch: Somajiguda; Rs.72,34,000/-. It was observed by the AO that the assessee company had during the demonetization period i.e. from 09.11.2016 to 30.12.2016 made cash deposits of Rs.1,02,08,000/- in its aforementioned bank accounts. Also, the AO observed that the assessee company during the subject year had made cash deposits in its bank account No.3632002100056238 of Rs.72,34,000/-. As the assessee company despite being specifically queried had failed to come forth with any explanation as regards the source of the cash deposits in its bank accounts, therefore, the AO was constrained to treat the entire amount of Rs.2,75,89,500 (Rs.2,03,55,500+Rs.72,34,000) as unexplained cash deposits u/s 68 of the Act.

7. Accordingly, the AO vide his order passed u/s 143(3) of the Act dated 28.12.2019, after making the aforesaid additions/disallowances, scaled down the loss returned by the assessee company to an amount of Rs.6,90,25,404/-. Apart from that, the addition of unexplained cash credits u/s 68 of the Act of Rs.2.75 crores (approx.) was separately brought to tax u/s115BBE of the Act.

8. Aggrieved, the assessee company carried the matter in appeal before the CIT(A). As is discernible from the record, the assessee company, despite having been afforded three opportunities had failed to participate in the proceedings before the CIT(A). The CIT(A) though held a firm conviction that as the assessee company was not interested in pursuing the matter, therefore, the appeal on the said count itself deserved to be dismissed, but thereafter he proceeded with and disposed of the same on merits. Ostensibly, the CIT(A) after referring to the facts as were available on the record before him found no infirmity in the view taken by the AO and upheld the respective additions/disallowances and dismissed the appeal. For the sake of clarity, the observations of the CIT(A) are culled out as under:

“3. During the appellant proceedings,, notices u/s 250 of the Act was issued to the appellant on the email id imagehospitals@rediffmail.com on various dates as detailed below :

Sl.No. Date of Hearing Date of Remarks Compliance 1 25.12.2020 11.01.2021 No compliance was made 2 12.04.2022 27.04.2022 No compliance was made 3. 23.08.2023 07.08.2023 No compliance was made 3.1 In response to this notice, appellant has not filed written submission in the e-filing portal of the Department as well as by of e-mail, despite having issued notices u/s 250 of the I.T. Act as stated above. The appellant has neither responded to the notices issued nor submitted any written submission in support of the grounds of appeal

. 3.2. As has been stated in para 3.2 above, the appellant has not filed written submissions in response to notices issued u/s 250 of the Act. It is a matter of regret that the appellant has not chosen to avail the multiple opportunities of natural justice given. It appears that the appellant is not keen to pursue its appeal. 3.3 In the context of non-appearance and where the assessee does not want to pursue the appeal, the Hon'ble !TAT Hyderabad, "B" Bench in’ dt. 18.02.2015 in the case of M/s. Ganesh Rolling Shutters & Engg Works, Hyderabad dismissed the appeal due to repeated non-appearance by the appellant. Further, the Hon'ble !TAT Hyderabad, "A" Bench in dated 23.05.2014 in the case of KLN Textiles & Jewels P Ltd, Hyderabad had while dismissing the appeal of the assessee referred to the judgements of the Hon'ble Supreme Court in the case of CIT vs. B N Bhattacharjee & Another (118 !TR 461) (SC) and the decision of the Bombay High Court in the case of M/s Chemipo/ vs. Union of India in Central Excise Appeal No.62 of 2009 and in the case of CIT vs. Mu/tip/an India (P) Ltd., reported in 38. I'TD 320 (Del) and the decision of Hon'ble Madhya Pradesh High Courtin the case of Estate of Late Tukojirao Holkar vs. CWT., reported in 223 !TR 480 (MP). Further, the Hon'ble !TAT in the same decision had stated that in cases where assessee does not want to pursue the appeal, Court / Tribunal have inherent powers to dismiss the appeal (Hon'ble Bombay High Court decision in the case of M/s. Chemipo/ vs. Union of India in Central Excise Appeal No.62 of 2009). Considering the ratios of these decisions, the appeal is deserved to be dismissed. However, on merits the appeal is adjudicated considering the facts on records.

2) Disal lowed the amount of Rs.2,80,95,113/- debited in the profit and loss account under the head Changes in inventories. 3) Cash deposits of Rs.2,75,89,500/- made during the financial year 2016-17 considered as unexplained cash credits u/s 68 of Income Tax Act,1961. Accordingly, the Ld AO finalized the Assessment u/s 143(3) by adding an amount of Rs.6,24,77,581/- and raised a net demand of Rs.2,83,37,812/- .

Aggrieved by the above adjustments, the Company prefers an appeal before your goodself.”

8. Ground no.2 & 3 are relating to disallowance of Rs.67,92,968/- being 10% of other expenses claimed by the appellant totalling to Rs.6,79,29,682/-. According to the AO, during the assessment proceedings, appellant was asked to furnish the books of accounts and supporting vouchers for the claim of other expenses of Rs.6.79 crores. However, in spite of several reminders, the appellant failed to produce the books as well as any other details. The AO relied upon the decision of Hon’ble Jurisdictional High Court of Andhra Pradesh in the case CIT vs. Transport Corporation of India reported in 256 ITR 701 and held that the appellant had not discharged the onus to prove the genuineness of the expenses claimed that the said expenses were incurred wholly and exclusively for the purposes of business of the appellant. Accordingly, 10% of such expenses claimed were disallowed. During the appellate proceedings, no further details were furnished in support of the claim of the expenditure. Therefore, | am of the opinion that the action of the AO in disallowing 10% of the expenditure claimed is fully justified. The addition made by the AO of Rs.67,92,968/- is sustained. Ground no.2 & 3 are dismissed.

9. Ground no.4 is relating to disallowance of Rs.2,80,95,113/- towards the expenditure relating changes in inventory. During the assessment proceedings, the AO asked for the details of the said expenditure. It was submitted before the AO that the content or programs which no longer generate any revenue was charged off to revenue as expenditure. The stock of books/programs/contents which were more than 08 years old were returned off as no revenue from any advertisement or sponsors was forthcoming. As the appellant did not submit any details of valuation of content etc., the AO disallowed the entire expenditure claimed. During appellate proceedings, no details relating to the expenditure written off were produced. Hence, the addition made by the AO does not require any interference. Ground no.4 is dismissed.

7. The assessee company being aggrieved with the CIT(A) order, has carried the matter in appeal before us. Shri Ravi Bhardwaj, learned AR (“Ld.AR”) for the assessee company, at the threshold of hearing of the appeal, submitted that the failure of the assessee company to participate in the proceedings before the CIT(A) was for certain bonafide reasons which were beyond its control. Elaborating on his contention, the Ld.AR submitted that the assessee company had remained uncompliant of the notices that were issued by the CIT(A) intimating the fixation of the hearing of the appeal, on three occasions, for the reason that its accounts manager who was looking after the tax matters had left the organization in the month of July 2023. The Ld. AR submitted that it was only when the new accounts manager had joined the organization, the assessee company gathered about the dismissal of its appeal by an ex-parte order by the CIT(A). The Ld.AR submitted that as the failure on the part of the assessee company to participate in the proceedings before the CIT(A) had crept in for bonafide reasons, therefore, the matter in all fairness be restored to his file with a direction to re-adjudicate the appeal after affording a reasonable opportunity of being heard to the assessee appellant. The Ld.AR to buttress his aforesaid contention had placed on record a letter dated 30.04.2025 of the assessee company mentioning the aforesaid facts. The Ld. A.R had drawn our attention to the audited financial statements of the assessee company for the year under consideration i.e AY 2017-18. Elaborating on his contention, the Ld. AR submitted that as the additions/disallowances made by the A.O, viz. (i). ad-hoc disallowance of assessee’s claim for deduction of “Other expenses”; (ii). disallowance of the assessee’s claim for deduction of adjustment of inventories; and (iii). addition of the cash deposits made in the bank accounts of the assessee company, were duly accounted for in its audited books of accounts and supported by corroborative material, therefore, in all fairness matter be restored to the file of the AO so that the assessee company may support its respective claims qua the subject issues. The Ld. AR to fortify his contention had drawn our attention to the copy of the audited financial statement of the assessee company for the year under consideration.

10. Ostensibly, it is a matter of fact discernible from the record, that as the assessee company had failed to place on record supporting documentary evidence to substantiate its claim for deduction of expenses/source of cash deposits in its bank accounts, therefore, the AO was constrained to make the respective additions/disallowances in its case. Also, it was but for the failure on the part of the assessee company, to participate in the proceedings before the CIT(A), that had resulted to the dismissal of its appeal by an ex-parte order.

11. Although the explanation of the assessee company regarding the reason as to why it had remained uncompliant in the proceedings before the CIT(A) would only come to its rescue to justify the failure on its part to effect compliance to the notice dated 23.08.2023 intimating the fixation of the appeal on the last occasion, i.e., for 07.09.2023 (sic), but, the same cannot be stretched any further in so far the notices that were issued on the earlier two occasions i.e. notice dated 25.12.2020 and 12.04.2022. At the same time, we find some substance in the Ld. AR’s claim that as the respective additions/disallowances made by the A.O pertain to transactions that are accounted for in its audited books of accounts, therefore, in all fairness the assessee company be afforded an opportunity to substantiate the same based on corroborative material. We, thus, are of a firm conviction that in the totality of the facts involved in the present case, and considering the nature of additions/disallowances that have been made by the AO. in the absence of supporting material, which thereafter had been summarily approved by the CIT(A) based on a mere reference of the facts discernible from the record, the matter in all fairness and interest of justice requires to be restored to the file of the CIT(A) with a direction to re-decide the appeal. Needless to say, the CIT(A) shall in the course of the de- novo proceedings afford a reasonable opportunity of being heard to the assessee company which shall be at liberty to substantiate its claim for deduction of expenses/source of cash deposits in its bank accounts. We thus, in terms of our aforesaid deliberations restore the matter to the file of the CIT(A) for fresh adjudication. The Ground of appeal No.2 is allowed for statistical purposes in terms of our aforesaid observations.

12. As we have restored the matter to the file of the CIT(A) for fresh adjudication, therefore, we refrain from adverting to and adjudicating the other issues based on which the respective additions/disallowances made by the AO have been assailed before us which, thus, are left open.

Order pronounced in the Open Court on 14th May, 2025.