INCOME-TAX OFFICER,BANGALORE vs. M/S.TRIPLE ESS ADVERTISING PVT LTD.,, BANGALORE

Per Shri Jason P Boaz, A.M. : This appeal by Revenue is directed against the order of Commissioner of Income Tax (Appeals)-7, Bangalore dt.12.04.2016 for the Assessment Year 2011-12. 2. Briefly stated, the facts relevant for disposal of this appeal are as under :-

2 ITA No.1294/Bang/2016 2.1 The assessee, a company engaged in business as an advertising agency, filed its return of income for Assessment Year 2011-12 on 28.9.2011 declaring income of Rs.7,94,660. The case was selected for scrutiny and the assessment was concluded under Section 143(3) of the Income Tax Act, 1961 (in short 'the Act') vide order dt.11.3.2014, wherein the income of the assessee was determined at Rs14,73,67,462. This was in view of disallowance of Rs.14,65,72,802 under Section 40(a)(ia) of the Act for non-deduction of tax at source in respect of media and production charges paid by the assessee to various parties for work carried out. 2.2 Aggrieved by the order of assessment dt.11.3.2014 for Assessment Year 2011-12, the assessee preferred an appeal before the CIT (Appeals) -7, Bangalore. The learned CIT (Appeals) disposed off the appeal allowing the assessee partial relief. 3.1 Aggrieved by the order of the CIT (Appeals) – 7, Bangalore dt.12.4.2016 for Assessment Year 2011-12, Revenue has filed this appeal, wherein it has raised the following grounds :-

3 ITA No.1294/Bang/2016

3.2 The learned Departmental Representative was heard in support of grounds raised and he placed strong reliance on the order of the Assessing Officer on the issue of applicability of the provisions under Section 40(a)(ia) of the Act for failure on the part of the assessee to deduct tax at source on payments to media in view of the provisions of Sec. 194C of the Act; which are applicable to the assessee on the case on hand. It was also pleaded that the learned CIT (Appeals) allowed the assessee relief based on fresh material taken on record as is evident from paras 5.5.1 and 5.5.2 of the impugned order and acting thereon without affording the Assessing Officer adequate opportunity of being heard in the matter as required under Rule 46A(3) of the IT Rules. Therefore the impugned order of the learned CIT (Appeals) is unsustainable. 3.3.1 Per contra, the learned Authorised Representative for the assessee submitted that there was no error in the finding of the learned CIT (Appeals) which is covered by the decisions of the co-ordinate bench of this Tribunal rendered on similar facts in the following cases :- (i) Sand Advertising Communications Pvt. Ltd. Vs. DCIT in ITA No.790 to 795/Bang/2009 dt.22.6.2010; and

4 ITA No.1294/Bang/2016 (ii) ITO Vs. Confident Projects (India) Ltd. in ITA No.183/Bang/2015 dt.27.5.2016. 3.3.2 In respect of the averment of Revenue that the learned CIT (Appeals) had admitted fresh evidence / material and acted thereon to give the assessee relief without giving the Assessing Officer an opportunity of being heard / giving rebuttal, the learned Authorised Representative submitted that the same material was before the Assessing Officer in assessment proceedings and there was no admission of fresh evidence / material by the learned CIT (Appeals). But, the learned Authorised Representative fairly conceded that there was no objection if the matter was remanded to the file of learned CIT (Appeals) for fresh adjudication. 3.4.1 We have heard the rival contentions, perused and carefully considered the material on record; including the judicial pronouncements cited. Admittedly, the assessee is an advertisement agency, and the fact that it had made payments to Media companies / entities both print / electronic was not disputed by the Assessing Officer. According to the assessee, since it made payments to the media, TDS provisions are not applicable thereon. The Assessing Officer, however, was of the view that the assessee was bound to make TDS on payments to Media entities and in view of the assessee's failure to do so, disallowed the aforesaid payments amounting to Rs.14,65,72,802 under Section 40(a)(ia) of the Act. 3.4.2 We have carefully perused the impugned order of the learned CIT (Appeals), in view of the short point raised in the contentions of learned

5 ITA No.1294/Bang/2016 Authorised Representative for Revenue that the learned CIT (Appeals) decided the issue before us and allowed relief to the assessee based on fresh material / evidence placed before him by the assessee in the course of appellate proceedings, without affording the Assessing Officer adequate opportunity of rebutting the same under Rule 46A of the Act. On a perusal of the impugned order, it is seen that therein the learned CIT (Appeals) at the paragraphs mentioned below has recorded as under :-

“ 5.5.1 The further break up of Media Charge was submitted by the appellant during the course of hearing before the undersigned also……” “ 5.5.2 The further break up of Production Charges was submitted by the appellant during the course of hearing before the undersigned also….” “5.5.3 The Production Charges paid amounting to Rs.38,17,837 was examined on the basis of ledger account submitted by the appellant…….”

3.4.3 After having heard both parties, we have perused the material on record carefully and are of the opinion that Revenue’s contention that the learned CIT (Appeals) had admitted fresh material / evidence on the basis of which he decided the issue in favour of the assessee without affording the Assessing Officer adequate opportunity as warranted u/R 46A(3) of the Rules, has merit. Therefore, Rule 46A of the Rules has a direct bearing on the controversy before us and it is a salutary upon us to take note of this rule. It reads as under :

6 ITA No.1294/Bang/2016 “46A. (1) The appellant shall not be entitled to produce Before the [Deputy Commissioner (Appeals)[ [or, as the case may be, the Commissioner (Appeals)], and evidence, whether oral or documentary, other than the evidence produced by him during the course of proceedings before the Assessing Officer, except in the following circumstances, namely – (a) Where the Assessing Officer has refused to admit evidence which ought to have been admitted; or (b) Where the appellant was prevented by sufficient cause from producing the evidence which he was called upon to produce by the Assessing Officer; or (c) Where the appellant was prevented by sufficient cause from producing before the Assessing Officer any evidence which is relevant to any ground of appeal; or (d) Where the Assessing Officer has made the order appealed against without giving sufficient opportunity to the appellant to adduce evidence relevant to any ground of appeal. (2) No evidence shall be admitted under sub-rule (1) unless the Deputy Commissioner (Appeals) or as the case may be, the Commissioner (Appeals) records in writing the reasons for its admission. (3) The Deputy Commissioner (Appeals) or as the case may be, the Commissioner (Appeals) shall not take into account any evidence produced under sub-rule (1) unless the Assessing Officer has been allowed a reasonable opportunity – (a) to examine the evidence or document or to cross examine the witness produced by the appellant, or (b) to produce any evidence or document or any witness in rebuttal of the additional evidence produced by the appellant.

(4) Nothing contained in this rule shall affect the power of the Dy. Commissioner (Appeals) or as the case may be, the Commissioner (Appeals) to direct the production of any document, or the examination

7 ITA No.1294/Bang/2016 of any witness, to enable him to dispose of the appeal, or for any other substantial cause including the enhancement of the assessment or penalty (whether on his own motion or on the request of the Assessing Officer under clause (a) of sub-section (1) of section 251 or the imposition of penalty under Section 271.” 3.4.4 A Perusal of this Rule 46A (Supra) would suggest that Sub Rule – 1 puts an embargo upon the assessee to seek permission for producing additional evidence either oral or documentary. Such evidence can only be permitted to be produced if conditions enumerated in sub clauses (a) to (d) are available. As per sub clause – 2, the ld Commissioner has to record in writing as to why he had admitted the additional evidence. Sub Rule-3 contemplates that if additional evidence is taken on record, then it cannot be considered on merit, unless an opportunity is afforded to the AO to examine and rebut the evidence or documents or to cross examine the witness produced by the assessee. Apart from that, the AO would be given an opportunity to produce any evidence or documents or any evidence in rebuttal of the additional evidence produced by the assessee. Sub Rule-4 is an exception to all other sub rules. This rule authorizes the CIT(A) to direct and part for production of any documents or examination of any witness to enable him to dispose of the appeal or for arriving at a just conclusions. In our view, a perusal of the impugned order confirms that the contentions of Revenue are correct, that the ld CIT(A) acted upon fresh material, details/evidences, etc. admittedly placed before him and acted upon them to grant the assessee relief without affording the AO opportunity

8 ITA No.1294/Bang/2016 of being heard. Such action on the part of the ld CIT(A) is in violation of the provisions of Rule 46A(3) of the Rules. 3.4.5 In the light of the above, we find that the ld CITA) failed to afford adequate opportunity to the AO to rebut the evidence/material placed before him by the assessee in appeal. The conditions enumerated in Sub Rule-3 of the Rule 46A.remaned uncomplied with, by the ld CIT(A). In this view of the matter we, set aside the impugned order of the ld CIT(A) and restore the same to his file for fresh examination and de novo adjudication of all the grounds raised in the appeal before him after affording the AO adequate opportunity of being heard and to file details/rebuttals, etc. required in the matter in respect of the fresh/additional evidence entertained by the ld CIT(A) as pointed out by the ld DR (Supra). The rebuttals of the AO in the matter shall be duly considered before deciding the issues in appeal. It is accordingly ordered. 4. Consequently, we deem it proper not to adjudicate on the merit of the grounds raised by Revenue before us. 5. In the result, the Revenue’s appeal for asst. year 2011-12 is treated as allowed for statistical purposes. Order pronounced in the open court on the 28th day of Feb. 2018.

Sd/- Sd/- (SUNIL KUMAR YADAV) (JASON P BOAZ) Accountant Member Judicial Member Bangalore, Dt.28.02.2018. *Reddy gp

9 ITA No.1294/Bang/2016 Copy to : 1 Appellant 4 CIT(A) 2 Respondent 5 DR. ITAT, Bangalore 3 CIT 6 Guard File

Senior Private Secretary Income Tax Appellate Tribunal Bangalore.