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(A) This appeal by Revenue is filed against the order of Learned Commissioner of Income Tax (Appeals)-XXXI, New Delhi, [“Ld. CIT(A)”, for short], dated 14.11.2014 for Assessment Year 2011-12. Grounds taken in this appeal of Revenue are as under:
“1. The order of Ld. CIT(A) is not correct in law and facts. 2. On the facts and circumstances of the case, the Ld. CIT(A) has erred in law in deleting the addition of Rs. 3,64,42,407/- made by the Assessing Officer on account of unexplained advertisement expenses. 3. The appellant craves leave to add, amend any/all grounds of appeal before or during the course of hearing of the appeal.”
ITA No.-865/Del/2015 M/s Varun Beverages Ltd. (B) Assessment Order dated 28/03/2014 was passed by the Assessing Officer (“AO”, for short) U/s 153A read with Section 143(3) of Income Tax Act, 1961 (“I.T.”, for short) wherein total income was assessed at Rs. 32,05,34,260/- (rounded off). In the aforesaid Assessment Order dated 28/03/2014 in additional amounting to Rs. 3,64,42,407/- was made U/s 69C of I.T. Act, (unexplained expenditure) by treating expenditure on advertisement amounting to aforesaid sum of Rs. 3,64,42,407/- has not genuine. The relevant portion of the Assessment Order dated 28/03/2014 is reproduced as under:
“Unexplained advertisement expenses: 4. During the search it was observed that the group has booked substantial expenses under the head of advertisement expenses. Some of the expenses do not appear to be genuine/justified.
In the proceeding of post search investigation, vide questionnaire dated 16.04.2012, the assessee was asked to provide the details of advertisement expenses. The assessee submitted the details of advertisement expenses of M/s Varun Beverages Ltd., vide its submission dated 20.06.2012. As per the details submitted, there are number of parties to whom advertisement expenses have been booked, but no addresses or PAN’s have been provided. The assessee vide questionnaire dated 29.06.2012 has been asked to explain as to why in the absence of any evidence to prove the identity of the parties, the advertisement expenses booked from such parties may not be treated as bogus. No reply was filed by the assessee, hence vide questionnaire dated 06.07.2012, the assessee was again asked to show cause as to why in the absence of any evidence to prove the identity of the parties, the advertisement expenses booked from such parties may not be treated as bogus. The assessee has not submitted any reply. During the assessment proceedings, once again the assessee was asked to furnish the details of the advertisement expenses made party wise alongwith their names, addresses & PAN, details nature of the advertisement expenses, and whether TDS has been made on such expenses as per the questionnaire dated 23.10.2013 The assessee was also requested to prove the Identity, genuineness and creditworthiness of parties along with their reconciliation in the books of accounts. In spite of hearing on various dates, the assessee could not furnish the said details. The assessee was requested to furnish the said details vide summon u/s 131 dated 10.02.2014. The statement of the assessee was recorded on 05.03.2014, but the assessee requested for further time to furnish the same shortly.
ITA No.-865/Del/2015 M/s Varun Beverages Ltd.
ITA No.-865/Del/2015 M/s Varun Beverages Ltd. In view of the discussion made above, it is evident that the assessee has no explanation on the above stated expenses inspite of getting ample opportunities. Hence, these expenditure on advertisement amounting to Rs. 3,64,42,407/- are not found genuine and added back to the total income of the assessee as unexplained expenditures u/s 69C. I am satisfied that the assessee has concealed and failed to furnish true particulars of its income in the return of income filed and furnished inaccurate particulars of his income, within the meaning of sub-clause (c) of sub-section (1) of section 271 of the Income tax Act, 1961. For the reasons discussed above, penalty proceedings U/s 271(l)(c) of the Act are being initiated separately. (Addition of Rs. 3,64,42,407/-)
(B.1) In short, the aforesaid addition on account of Advertisement Expenditure was made by the AO, taking unfavorable view of the fact that certain parties did not respond to inquiries made by the AO under Section 133(6) of I.T. Act. Aggrieved, the Assessee filed appeal before learned Commissioner of Income Tax (Appeals). Vide impugned appellate order dated 14/11/2014, the Ld. CIT(A) deleted the aforesaid additions amounting to Rs. 3,64,42,407/-. Revenue has filed this present appeal in Income Tax Appellate Tribunal (“ITAT”, for short) against the aforesaid impugned appellate order dated 14/11/2014 of the Ld. CIT(A). In the course of appellate proceedings in ITAT, the following particulars were filed from the assessee’s side:
• Content of the Paper Book
Assessment Order under Section 153A read with Section 143(3) of Income Tax Act, 1961 dated 28/03/2014 passed by the Assistant Commissioner of Income Tax, Central Circle-12, New Delhi.
Acknowledgement of Return of Income filed under section 139 and 153A of the Income Tax Act, 1961 of the assessee. 3. Questionnaire dated 23/10/2013 issued by the learned assessing officer during the course of assessment proceedings. 4. Reply submitted by the assessee in respect of advertisement expenses claimed in profit & loss account for the assessment year 2006-07 to 2012-13 Page 4 of 12
ITA No.-865/Del/2015 M/s Varun Beverages Ltd. 5. Additional evidence, if any. • Case laws compilation filed before Hon’ble Income Tax
Appellate Tribunal, ‘A’ Bench, New Delhi.
• Order dated 18.04.2019 of Co-ordinate Bench of ITAT, Delhi in the case of ACIT vs. Varun Beverages Ltd. in & 3834/Del/2015 for Assessment Years 2006-07 and 2007-08.
• Order dated 20.11.2018 of Co-ordinate of ITAT, Delhi in the case of ACIT vs. Varun Beverages Ltd. in 863 & 864/Del/2015 for Assessment Years 2008-09 to 2010-11.
ITA No.-865/Del/2015 M/s Varun Beverages Ltd. (C) The Central issue in this appeal is whether, in the facts and circumstances of the case, addition made on account of Advertisement Expenditure; based merely on the fact that certain parties did not respond to inquiries made by the AO under Section 133(6) of I.T. Act, is erroneous. At the time of hearing before us, at the outset, the Ld. Counsel for the Assessee submitted that the Assessee is part of Jaipuria Group of cases in which search and seizure operation was conducted U/s 132 of I.T. Act on 27/03/2012. The Ld. Counsel further submitted that in similar facts and circumstances, similar addition was made on account of Advertisement Expenditure in the case of M/s Devyani International Ltd. which is another company in the Jaipuria Group, to which the assessee belongs, in Assessment Year 2011-12 and Assessment Year 2007-08. He further submitted that in similar facts and circumstances of the case; vide order dated 06/04/2018 for Assessment Year 2011-12 by Co-ordinate Bench of ITAT, Delhi in the case of the aforesaid Devyani International Ltd., the addition on account of Advertisement Expenditure was deleted in appeal vide ITA No. 862/Del/2015. He drew our particular attention to paragraphs 23, 24, 25 and 26 of the aforesaid order dated 06/04/2018 of Co-ordinate Bench of ITAT, Delhi. He drew our further attention to another order dated 23.04.2018 by Co-ordinate Beech of ITAT, Delhi in the case of the aforesaid Devyani International Ltd. vs ACIT for Assessment Year 2007-08 in and submitted that in similar facts and circumstances of the case; Co-ordinate Bench of ITAT, Delhi has already deleted the addition on account of advertisement expenses in the case of Devyani International Ltd. for Assessment Year 2006-07. For this purpose, the Ld. Counsel for assessee drew our attention to paragraph 4 of the aforesaid order dated 23.04.2018. Page 6 of 12
ITA No.-865/Del/2015 M/s Varun Beverages Ltd. The Ld. Counsel for the Assessee contended that the issue in dispute in the present appeal is squarely covered in favour of the Assessee by the aforesaid orders dated 06/04/2018 and 23.04.2018 of Co-ordinate Benches of ITAT, Delhi.
(D) On the other side, the learned Commissioner of Income Tax (Departmental Representative) [“Ld. CIT(DR)”, for short] relied on the order of the Assessing Officer.
However, he did not dispute the contention of the Ld. Counsel for assessee that the issue in dispute in the present appeal is covered in favour of the assessee by aforesaid orders dated 06/04/2018 and 23/04/2018. The Ld. CIT(DR) also did not bring out any facts and circumstances to our attention to distinguish the present appeal before us from the facts and circumstances of the aforesaid appeals in which similar addition on account of Advertisement Expenses were deleted by Co-ordinate Benches of ITAT, Delhi vide aforesaid orders dated 06/04/2018 and 23/04/2018 in similar facts and circumstances.
(E) We have heard both sides. We have perused the materials available on record.
We have considered the judicial precedents brought to our attention or referred to in the records. It is not in dispute that the assessee in the present appeal before us, as well as M/s Devyani International are group companies of the same group, namely Jaipuria group of company. It is also not in dispute that facts and circumstances in which the aforesaid addition of Rs. 3,64,42,407/- have been made in the case of the ITA No.-865/Del/2015 M/s Varun Beverages Ltd. present appeal before us, are similar to facts and circumstances of M/s Devyani International Ltd. in Assessment Years 2011-12 and 2007-08. It is further not in dispute that in similar facts and circumstances the additions made in the case of Devyani International Ltd. for Assessment Years 2011-12 and 2007-08 on account of Advertisement Expenditure have already been deleted by aforesaid orders dated 06/04/2018 and 23/04/2018 of Co-ordinate Benches of ITAT, Delhi in the case of Devyani International Ltd. in similar facts and circumstances. Moreover, it is also not in dispute that the issue in present appeal before us is covered in favour of the assessee by the aforesaid orders dated 06/04/2018 and 32/04/2018 of Co-ordinate Bench of ITAT, Delhi. We may add that one of us (Judicial Member) was co-author of the aforesaid order dated 06/04/2018 in the case of Devyani International Ltd., for Assessment year 2011-12. We have already mentioned that no distinguishing facts and circumstances were brought to our attention to distinguish the present appeal before us from the facts and circumstances of the aforesaid appeals in which similar additions on account of Advertisement Expenditure were deleted by Co-ordinate Benches of ITAT, Delhi vide aforesaid orders dated 06/04/2018 and 23/04/2018 in similar facts and circumstances. For ease of reference, the relevant portion of the aforesaid orders dated 06/04/2018 and 23/04/2018 are as under:
Order dated 06/04/2018 (ITA No. 862/Del/2015)
”
The 3rd ground of appeal of the revenue is with respect to the deletion of addition of Rs. 19189959/- made by Ld. Assessing Officer on account of unexplained advertisement expenses. The assessee has claimed the advertisement and publicity expenses of Rs. 13,75,82,635/– under the head selling and distribution expenditure in its profit and loss account, during the financial year under consideration. The Ld. assessing officer asked the assessee to furnish the details of major expenses debited Page 8 of 12 ITA No.-865/Del/2015 M/s Varun Beverages Ltd. to the profit and loss account which also includes advertisement and publicity expenses and justification with documentary evidences for its allowability. The assessee submitted the party wise details of advertisement expenses claimed in the profit and loss account. However the ld Assessing Officer disallowed the expenditure of Rs. 19189959/– on the basis of non receipt of confirmation. According to assessee the conformation have been received only in respect of 2 parties amounting to Rs. 11,83,92,676/–. Further, according to the ld AO, the assessee did not file complete details in respect of those parties. Further in one of the cases the notice under section 133(6) was also not complied with. The assessee aggrieved with the order of the ld Assessing Officer preferred an appeal before the Ld. CIT (A). He deleted the disallowance relying on order for the Assessment Year 2010-11. He noted that the assessee submitted the complete details before the Ld. assessing officer however the Ld. AO allowed the expenditure which were confirmed by parties under section 133(6) of the Act and disallowed the balance sum where no confirmation was received.
The Ld. CIT DR vehemently supported the order of the Ld. assessing officer. She submitted that the assessee has failed to confirm the details of the advertisement and publicity expenditure incurred to that extent the Ld. assessing officer has disallowed the same.
The Ld. authorized representative vehemently supported the order of the Ld. CIT (A) and submitted that Ld. CIT (A) has allowed the claim of the assessee for this year relying on his own order for assessment year 2010- 11 as stated in paragraph number 3.1.1 of the order of the Ld. CIT (A). He further submitted that above order has been accepted by the revenue and no further appeal has been preferred. He therefore submitted that the facts of that case and the present case are identical.
We have carefully considered the rival contention and the orders of the lower authority with respect to disallowance of advertisement expenditure. The assessee has produced the relevant details before the assessing officer with respect to the above expenditure. The Ld. assessing officer has issued notices under section 133 (6) of the Income Tax Act and some of the parties have responded and some did not. Therefore the Ld. assessing officer has disallowed the amount of expenditure which has not been responded by the parties. In the present case the assessee has produced the complete details of the expenditure incurred by it in assessment and sales promotion expenditure. No fault can be found with the assessee if the parties do not respond to the notice under section 133 (6) of the income tax act. More so in the identical situation in case of assessee for years including assessment year 2010- 11 the Ld. CIT (A) has deleted the disallowance after considering the overall facts and circumstances of the case. The revenue has accepted that order and therefore there is no reason to challenge the same on identical issue before the coordinate bench in absence of any change in the facts and circumstances of the case. No such change in the facts and circumstances of the case was brought on record before us. In view of this we do not find any reason to interfere in the order of the Ld. CIT (A) deleting the above disallowance. In the result ground No. 3 of the appeal of the revenue is dismissed.
ITA No.-865/Del/2015 M/s Varun Beverages Ltd. Order Dated 23/04/2018 (ITA No. 857/Del/2015)
We have heard both the sides and perused the relevant material on record. It is seen that the Assessing Officer made an addition of Rs.3.67 crore in respect of ‘Advertisement expenses’ claimed to have been incurred in respect of two parties, namely, M/s Ramendra Enterprises and M/s Yum Restaurants Marketing Pvt. Ltd., to both of whom notices were issued u/s 133(6) but remained uncomplied with. Apart from issuing such notices, the Assessing Officer did not conduct any further inquiry. He simply proceeded to make the addition without ascertaining the genuineness or otherwise of these transactions. His inference of non-genuineness of the transactions was based simply on non-compliance by these two parties, whose complete particulars were with him. In case of non-compliance, the AO ought to have deputed Inspector or got the enquiry conducted by any other means before jumping to the conclusion of the non-genuineness of the transactions. It is further pertinent to note that additions were made in similar way in other years of the assessee company. Such an issue came up for consideration before the Tribunal in assessee’s own case for the assessment years 2009- 10 and 2011-12. Vide order dated 06.04.2018, the Tribunal, in and 862/Del/2015 and C.O. Nos.293 and 294/Del/2015, has upheld the deletion of similar additions made in respect of `Advertisement expenses’ incurred by the assessee for which notices were issued u/s 133(6) of the Act but no compliance was made. Since the facts and circumstances of the instant ground are mutatis mutandis similar, respectfully following the precedent, we uphold the impugned order in deleting this addition.”
(F) In view of the foregoing, and respectfully following the aforesaid precedents of Co-ordinate Benches of ITAT, vide aforesaid orders dated 06/04/2018 and 23/04/2018 for Assessment Years 2011-12 and 2007-08, [in which identical issue in similar facts and circumstances have already been decided in favour of the assessee and against Revenue] we decide the issue raised in the present appeal before us, against Revenue and in favour of the Assessee. The mere fact that certain parties did not respond to inquiries made by the Assessing Officer under Section 133(6) of I.T. Act; is not, by itself, sufficient to warrant addition of expenses in connection with which the inquiries were made U/s 133(6) of I.T. Act. For our aforesaid view, we take additional support from orders of Hon’ble Delhi High Page 10 of 12
ITA No.-865/Del/2015 M/s Varun Beverages Ltd. Court in the case of CIT vs. Continental Carbon India Ltd. 2012 (6) TMI 712-Delhi High Court; and order of Hon’ble High Court of Punjab & Haryana in the case of CIT vs. GP International Ltd. [2010] 186 Taxman 229 (Punjab & Haryana). In the case of CIT vs. GP International Ltd. (supra) it was held by Hon’ble High Court that merely because some of the persons did not respond to the notice issued by the Assessing officer U/s 133(6) of the I.T. Act, it cannot be taken that the said transaction was ingenuine. In the case of CIT vs. Continental Carbon Limited India Ltd. (supra), Hon’ble High Court declined to interfere with finding of ITAT giving relief to the assessee, even through there was no response / reply to notice U/s 133(6) of I.T. Act issued by the AO. Accordingly, we direct the AO to delete the aforesaid addition of Rs. 3,64,42,407.
(F.1) In the result, appeal filed by Revenue is dismissed. Order pronounced on 26/09/2019 in open court.