ITO, WARD-10(4), NEW DELHI vs. GYAN MARKETING ASSOCIATES P.LTD, NEW DELHI

We have heard both the parties and perused the relevant records. 5. At the time of hearing, Ld. DR relied upon the order passed by the AO. Per contra, Ld. Counsel of assessee submitted that Ld. CIT(A) has passed an elaborate and well reasoned order, which does not need any interference. 5.1 With regard to Ground No. 1 relating to addition of Rs. 1,23,87,897/- is concerned, AO observed that as per section 37 of the I.T. Act the assessee has to prove that the expenditure has been genuinely incurred and has been incurred wholly and exclusively for the purposes of the assessee’s business, which has not been proved before the AO, hence, AO treated Rs. 1,23,87,897/- on account of commission as bogus and added the same to the income of the assessee, 5.2 As regards, Ground No. 2 relating to addition of Rs. 4,69,31,575/- is concerned, AO observed that assessee has not deducted tax at source on interest of Rs. 4,69,31,575/- as shown in the balance sheet and to conceal these facts, the assessee has taken different stand at different point of time in order to escape from true transaction and assessee is squarely hit by the provisions of section 40(a)(ia) of the Act due to its manifest failure to comply with the mandate of the provisions of section 194A of the Act, therefore, AO disallowed the said expenditure and added back the same to the income of the assessee company, 5.3 As regards, Ground No. 3 relating to addition of Rs. 29,31,312/- is concerned, AO noted that during the assessment proceedings the assessee company has not produced any plausible reason and the cogent documentary evidence to substantiate its act of offering more assured return than earlier assured return of 12% on minimum investment of Rs. 27,50,000/- onwards through advertisement whereas it has also given assured return to the investor who have invested less than Rs. 27,50,000/- for which the assessee has failed to furnish/ produce any such documentary evidence and therefore, the AO disallowed the excess payment of Rs. 29,31,312/- on account of assured return and added back to the income of the assessee. 6. We find that Ld. CIT(A) has passed an elaborate and well reasoned order. As regards ground no. 1 is concerned, Ld. CIT(A) noted that the commission was paid in lieu of services of introducing the customers to the assessee and the commission has been paid only in the case of 56 customers out of 114 sold by the assessee. The payments were made through banking channel on which TDS was deducted and deposited to government account and the commission agents confirmed receipt of commission and services rendered. They had shown the commission income in their return of income filed for the relevant years. Commission was also paid in subsequent years which was accepted by the AO and in fact more commission paid in the subsequent year for which AO does not have any objection and the assessment was completed u/s. 143(3) of the Act. AO made enquiries from various persons by issuing notices u/s. 133(6) and obtained confirmations and documents without giving any basis of doing so, however in response to section133(6) some of the buyers have stated that the space was booked through broker but did not pay brokerage to broker. Hence, Ld. CIT(A) observed that AO’s conclusion that payment of commission to brokers bogus, is not correct appreciation of facts and drawing conclusion simply on the basis of solitary statement of Sh. Ravinder Yadav without conducting any further enquiry, is not sufficient to accept the finding of the AO. In view of above, in our considered opinion, the Ld. CIT(A) has rightly deleted the addition in dispute, which needs no interference on our part, hence, we uphold the same and dismiss the Ground No. 1 raised by the Revenue. 6.1 As regards Ground No. 2 is concerned, Ld. CIT(A) noted that the ledger account of fit out charges payable was submitted before the AO but the AO ignored the submission and only went on the basis of grouping in the balance sheet. It is further noted that Ld. CIT(A) after going through the Statutory Auditor’s Certificate which he reproduced at page no. 26 of the his order has observed that there appears to be a bonafide mistake by the Auditors and therefore, the addition cannot be sustained only on the basis of suspicion of the AO that the entire amount is interest payable. The finding of the AO is not backed by the other evidences which will lead to the conclusion of wrong doing of the assessee. Hence, Ld. CIT(A) has observed that the fit out charges cannot be treated as interest payable as sufficient material has been submitted before AO which is on records. On examination of the balance sheet of the assessee, Ld. CIT(A) agree with the AR that it is evident from the balance sheet of the assessee of current year and that of preceding year that no loans of any kind was appearing in the balance sheet. The interest payable of Rs. 1,06,984/- was the amount of interest payable after deductions of TDS of Rs. 11,887/- which is clear from the TDS certificate submitted at page no. 91 of the paper book before the Ld. CIT(A). It is observed that the challan for deposit of TDs was on record before AO but the AO did not examine this. Therefore, the Ld. CIT(A) was right observing that TDS on interest payable of Rs. 1,06,984/- was deducted on deposited by the assessee, hence, he rightly deleted the disallowance of Rs. 1,06,984/- and regarding fit out charges, it is noted that relevant ledger account at the name of the person from whom fit out charges were received, have been submitted before AO. In the remand proceeding also confirmation from the parties, address were submitted. The AO did not make any adverse observation about the liability on account of fit out charges. Hence, Ld. CIT(A) observed that fit out charges received is part of the agreement signed with the customers who opted for fit out by the assessee. Therefore, simply on the basis of inadvertent mistake by the auditor by grouping certain liability in a different head in the balance sheet, cannot be the basis for sustaining the addition, therefore, in our considered opinion, the Ld. CIT(A) has rightly deleted the addition in dispute, which needs no interference on our part, hence, we uphold the same and dismiss the Ground No. 2 raised by the Revenue. 6.2 As regards Ground No. 3 is concerned, Ld. CIT(A) observed that all the necessary details were filed before the AO, however, AO observed that no plausible reason/cogent documentary evidences were submitted offering more assured return. It is noted that AO has made enquiry on this issue but did not find these expenses either unverifiable or bogus. The only grievance of the AO