NUEVO CONSULTANCY SERVICES LTD ( FORMERLY KNOWN AS FORBES INFOTAINMENT LTD),MUMBAI vs. DCIT 3(1), MUMBAI

At the outset, the learned Counsel for the assessee drew our attention to the order of CIT(A) wherein the CIT(A) has confirmed the additions and assessee has challenged the additions which are narrated in the following ground: - “1. The Commissioner of Income Tax (Appeals)[CIT(A)] erred in making an addition of 40,06,911 under section 69C of the Income tax Act (‘the Act’) by treating purchases and commission as bogus expenses on account of (i) difference in balances of creditors amounting to 20,64,553 (ii) non receipt of reply from creditor parties amounting to 3,63,074 and (iii) unserved notice under section 133(6) of the Act by postal department for creditors amounting to 15,79,284.”

The learned Counsel for the assessee then took us through the CIT(A)’s order and we noticed from the order of CIT(A) that it is not at all a speaking order as to how the addition was made by the AO and what is the remand report submitted by the AO on the additional evidences filed by assessee as claimed by the learned Counsel for the assessee. The learned Counsel for the assessee stated that the Tribunal has set aside the issue back to the file of the AO in later assessment years i.e. AY 2009-10 in ITAs’ No 3843 & 4237/Mum/2012 vide order dated 18.01.2019, wherein vide Paras No. 8,9,10 & 11 read as under: - 3 “8. We have considered the rival submissions and perused the material on record. The appellant before us is engaged in the business of online sale of lotteries. In para 5.1 of the assessment order, the Assessing Officer has tabulated the name of parties and the nature and amount of transactions with such parties. Pertinently, there are five parties viz., Online Infotainment, Mega Infotainment, Net Magic Solutions Pvt. Ltd., PAN India Network Infravest Pvt. Ltd. And Microtek International P. Ltd. with whom the transactions have been viewed to be non-genuine by the Assessing Officer. With two of the parties, the transaction is by way of payment of distributors commission. With another concern the expenditure is by way of professional fee paid and with the fourth concern the payment is towards purchase of lotteries. With the fifth concern, viz., Microtech International P Ltd. the payment is towards purchase of computers. We are elaborating the aforesaid only to point out that incurrence of such-like expenditure is expected in the line of business being carried out by the assessee. Be that as it may, the Assessing Officer required the assessee to obtain confirmation from the said parties which the assessee failed to do. The Assessing Officer further notes that notices were issued under section 133(6) of the Act to 4 the above parties and except in the case of Pan India Network, no replies were received. As per the Assessing Officer even in the case of Pan India Network, the reply received depicted a difference between the amount of sale/purchase of lotteries shown by the assessee. For all the said reasons, the Assessing Officer treated the corresponding expenditure as nongenuine. The CIT(A) has also affirmed the stand of the Assessing Officer with respect to the aforesaid five parties for the same reasons.

Before us, the foremost plea of the assessee is for admission of additional evidence which were hitherto not filed with the lower authorities. We have already enumerated such evidences in the earlier part of this order and the same is not being repeated for the sake of brevity. It goes without saying that the Tribunal is competent to admit additional evidence either oral or documentary, which was not before the lower authorities provided it is for a substantial cause. In the present case, we find that the assessee has been consistently asserting before the lower authorities that the expenditure in question is incurred in the normal course of business and is appropriately supported by bills, credit notes, ledger accounts of the parties and the TDS certificates issued to them. Before us, learned representative pointed out that in the case of 5 one of the concerns, viz. Net Magic Solutions Pvt. Ltd. even a confirmation was furnished though it was unsigned. It has been explained that only due to passage of time it became difficult to locate parties as assessee has no further business dealings with them. It was only subsequent to the assessment proceedings, assessee could obtained necessary confirmations, which are the additional evidences now sought to be produced. Apart therefrom, we find that assessee seeks to rely on agreement with Pan India Network as also MOUs with other two concerns to justify incurrence of expenditure. All these are additional evidences, which were not before the lower authorities. In this context, the explanation of the assessee is to the effect that the aforesaid agreements were not specifically asked for by the lower authorities though assessee kept pleading that the expenditure has been appropriately documented and has been incurred in the normal course of business as evidenced by the bills, credit notes, ledger accounts and TDS certificates, wherever applicable. Learned Representative also explained that the expenditure has been incurred, inter- alia, through normal banking channels and wherever necessary, requisite tax has been deducted at source. Considering the 6 existing pleas of the assessee before the lower authorities as well as the documentary evidences already on record viz., bills, credit notes, copy of ledger accounts, TDS certificates etc., in our view, it was imperative for the Assessing Officer to make further investigations and seek independent material in order to establish that there was any nongenuinity. In any case, the aforesaid situation clearly suggests that there is a substantial cause in the instant case to allow admission of the additional evidences now sought to be produced by the assessee. The additional documents now sought to be produced are quite germane to decide the controversy and therefore, we consider it appropriate to admit the same for an appropriate and just adjudication.

At the time of hearing, the Ld. Representative for the assessee stated that in case the additional evidences are admitted, assessee would have no objection if the matter is remanded back to the file of the Assessing Officer for an adjudication afresh. Ostensibly, once the additional documents in question are taken on record it would be fair to give an opportunity to the Revenue to examine the same and then adjudicate the issue as per law. In this view of the matter, we set aside the order of the CIT(A) and restore the matter back to the 7 file of the Assessing Officer for adjudication afresh after taking into consideration the aforesaid additional material as well as other submissions that the assessee may put forth in support of its return of income qua the impugned expenditure. Needless to mention, the Assessing Officer shall provide adequate opportunity of being heard to the assessee, and only thereafter pass an order as per law.

In the result, without going into the merits of the dispute the appeal of the assessee is disposed of as above.”

The learned Sr. DR as well as learned counsel for the assessee both agree that the matter can be restored back to the file of the AO as is set aside by the Tribunal in later years as noted above, the AO can decide taking into consideration the directions of the Tribunal as cited above. Hence, the orders of the lower authorities are set aside and appeal of assessee is allowed for statistical purposes.

In the result, the appeal of assessee is allowed for statistical purposes.