TIMES INFOTAINMENT MEDIA LTD,MUMBAI vs. ASST CIT 1(3), MUMBAI

सुनवाई की तायीख /Date of Hearing : 24.07.2017 घोषणा की तायीख /Date of Pronouncement : 25.09.2017 आदेश / O R D E R

PER RAMIT KOCHAR, Accountant Member

ITA 4096/Mum/2013 2

“1. Disallowance of Rs. 11,27,064/- being 10% of Venue Management expenses. 1.1 On the facts and in the circumstances of the case and in law, the learned CIT(Appeals) erred in upholding the learned AO's action of disallowing 10% of the expenditure incurred on Venue Management expenses for want of verification on an adhoc basis without giving any cogent reason. The Appellants pray that the adhoc disallowance made by the learned AO on this count be deleted. 1.2 Without prejudice to the above, it is submitted that the disallowance made by the learned AO is excessive and without basis.

2. Disallowance of Rs. 7,10,046/-being 5% o(Venue expenses. 2.1 On the facts and in the circumstances of the case and in law, the learned CIT(Appeals) erred holding the learned AO's action of disallowing 5% of the expenditure incurred on Venue expenses for want of verification on an adhoc basis without giving any cogent reason. The Appellants pray that the adhoc disallowance made by the learned AO on this count be deleted. 2.2 Without prejudice to the above, it is submitted that the disallowance made by the learned AO is excessive and without basis.

3. Disallowance of Rs. 11,14,055/- being 5% of Stage Decoration expenses 3.1 On the facts and in the circumstances of the case and in law, the learned CIT(Appeals) erred in upholding the learned AO's action of disallowing 5% of the expenditure incurred on Stage Decoration expenses for want of verification on an adhoc basis without giving any cogent reason.

ITA 4096/Mum/2013 3 The Appellants pray that the adhoc disallowance made by the learned AO on this count be deleted. 3.2. Without prejudice to the above, it is submitted that the disallowance made by the learned AO is excessive and without basis.

4. Disallowance of Rs. 4,13,237/- being 10% of Miscellaneous Event expenses. 4.1 On the facts and in the circumstances of the case and in law, the learned CIT(Appeals) erred in upholding the learned AO's action of disallowing 10% of the expenditure incurred on Miscellaneous Event expenses for want of verification, on an adhoc basis without any cogent reason. The Appellants pray that the adhoc disallowance made by the learned AO on this count be deleted. 4.2 Without prejudice to the above, it is submitted that the disallowance made by the learned AO is excessive and without basis.

5. Initiation of penalty proceedings under section 271(l)(c) of the Act. 5.1 On the facts and in the circumstances of the case and in law, the learned CIT (Appeals) erred in dismissing the ground of appeal without valid reasons in respect of the penalty proceedings initiated by the AO on the assumption that the Ground is pre- mature.”

The assessee has claimed expenditure of Rs. 1,12,70,643/- and Rs. 1,42,08,131/- under the head venue management expenses and venue expenses respectively. In the preceding year, 20% of the total venue management expenses and 10% of total venue expenses claimed in Profit and ITA 4096/Mum/2013 4 Loss Account were disallowed by Revenue. The assessee was show caused by the AO to submit details and explanations along with confirmation of two top parties under each head of expenses. In reply, the assessee furnished the details such as names, addresses of the parties along with confirmations of few parties only at the fag end of assessment. The A.O. disallowed 10% of venue management expenses and 5% of venue expenses on the ground that the assessee failed to submit the details in time and for want of verification, vide assessment order dated 24-12-2008 passed u/s 143(3).

Similarly, with respect to the stage decoration expenses incurred by the assessee, 10% of the expenses was disallowed in the preceding year. The assessee was asked to explain the same that why similar stand be not taken in this year and the AO proposed to disallow 10% of the expenses of Rs. 2,22,81,096/- claimed by the assessee as stage decoration expense in Profit and Loss Account .The assessee was asked by the AO to furnish complete details and explanations along with confirmation from two top parties under each head of expenses. It was submitted that in preceding year, no details were submitted and hence disallowance was made. The assessee furnished names and addresses of the parties along with confirmations of few parties only at fag end of the assessment, which could not be verified by the AO due to want of time keeping in view limitation for framing the assessment. The A.O. accordingly disallowed 5% of stage decoration expenses which comes to Rs. 11,14,055/- , vide assessment order dated 24-12-2008 passed u/s 143(3).

Further, the assessee has claimed an expenditure of Rs. 41,32,370/- under the head miscellaneous expenses. There was disallowance of Rs.22,50,000/- in preceding year out of a claim of Rs.1,33,29,862/- , which was disallowed. The assessee was asked by the AO to explain the same as to why similar stand should not be taken. The AO asked the assessee to furnish complete ITA 4096/Mum/2013 5 details and explanations along with confirmation from two top parties under each head of expenses. In response the assessee submitted the name, addresses of the parties along with confirmations of few parties only at the fag end of assessment. Since there was a failure on the part of the assessee to submit the details as asked for by the AO in time and also for want of verification as the details were submitted at fag end of assessment proceedings close to limitation period for framing an assessment , the disallowance to the extent of 10% was made by the A.O. for the subject assessment year , vide assessment order dated 24-12-2008 passed u/s 143(3).

“Ground no 2 regarding disallowance of expenditure on account of venue management, venue expenses, professional fee and stage decoration expenses.

6.1 The Assessing Officer has disallowed 10% of the venue expenses, professional fee; stage decoration expenses incurred on the ground of non production of satisfactory documentary evidence.

6.2 On appeal, the CIT(A) has restricted the disallowance to 3% of the said expenses after considering the facts that for Assessment Year 2006-07 the Assessing Officer disallowed only 1% of the similar expenses.

7. We have considered the rival contention and perused the relevant material on record. When the assessee has produced the name and other particulars of the parties along with the payments made to them and the Assessing Officer did not dispute the factum of payment made to the concerned parties and further when the assessing officer himself has restricted the disallowance only to 1% of the similar expenses for the for the Assessment Year 2006-07, then we do not see any reason to interfere with the order of the Id CIT(A) in restricting the disallowance to 3% of these expenses. Accordingly, this ground of the revenue is dismissed.”

ITA 4096/Mum/2013 7 The ld. counsel for the assessee submitted that similar view may be taken by upholding disallowance @3% of such expenses incurred by the assessee as the assessee is not in fault as complete details were filed before AO as well learned CIT(A). The adhoc disallowance made by the A.O. is not sustainable in the eyes of law. The learned counsel for the assessee relied upon large number of decisions which are placed in case law paper book filed before the tribunal. It is also submitted that in subsequent years i.e. assessment year 2007-08 , 2008-09 and 2009-10 , the cases of the assessee company were processed u/s 143(3) and no such adhoc disallowance on these heads of expenses were made. The said assessment orders are placed in paper book/page 84-94. Thus it was submitted that disallowances have been made on adhoc basis only for two years namely assessment year 2005-06 and 2006-07 by the Revenue. It is submitted that these adhoc disallowances are not sustainable in the eyes of law.

7. The ld. D.R. submitted that the details were submitted by the assessee only at the fag end of the assessment proceedings close to expiry of limitation period for framing an assessment preventing any verification of those details by the AO as no enquiry could be conducted by the AO , which led to disallowance of expenses. It was submitted that the assessee is at fault and he justified the additions made by the AO which was confirmed by learned CIT(A).

“Ground no 2 regarding disallowance of expenditure on account of venue management, venue expenses, professional fee and stage decoration expenses.

6.1 The Assessing Officer has disallowed 10% of the venue expenses, professional fee; stage decoration expenses incurred on the ground of non production of satisfactory documentary evidence.

6.2 On appeal, the CIT(A) has restricted the disallowance to 3% of the said expenses after considering the facts that for Assessment Year 2006-07 the Assessing Officer disallowed only 1 % of the similar expenses.

only to 1% of the similar expenses for the for the Assessment Year 2006-07, then we do not see any reason to interfere with the order of the Id CIT(A) in restricting the disallowance to 3% of these expenses. Accordingly, this ground of the revenue is dismissed.”

Thus, as could be seen that the tribunal vide its order dated 13-07-2011 for assessment year 2005-06 in has mainly affirmed the appellate order of learned CIT(A) for assessment year 2005-06 who has upheld the additions to the tune of 3% of expenses relying that for assessment year 2006-07 similar additions were made by the AO to the tune of only 1% of the said expenses and in context thereof 3% disallowance for assessment year 2005-06 was considered fair and reasonable. The appellate order of learned CIT(A)-XXI,Mumbai dated 23-04-2009 in appeal no CIT(A)XXI/ACIT-1(3)/IT-152/07-08 for assessment year 2005-06 is reproduced hereunder:

“8. Vide grounds no. 6,7 & 8 of appeal, the appellant has objected to the disallowance of Rs. 40,22,800/- being 20% of the venue management expenses and Rs. 23,11,665/- being 10% of venue expenses , Rs. 29,46,730/- being 10% of the profession fee incurred & Rs. 27,03,453/- being 10% of the stage decoration expenses incurred, all for non- production of satisfactory documentary evidences. 8.1. On the other hand, the ld. AR of the appellant has stated that the names of the parties along with the payments made to them were produced before the A.O. , but the appellant could not produce the addresses of the parties due to lack of time and the same have been produced during the appellate proceedings. 8.2 During the appellate proceedings, the ld. AR has stated that the business of the appellant company had been taken over by a new company namely Times Innovative Ltd. In the assessment for A.Y.2006- 07 , the A.O. has disallowed only 1% of the similar expenses. 8.3 I have considered the issue. Considering the above submission and considering the nature of expenses and the nature of activities of the appellant company, the disallowances made by the AO are on the higher ITA 4096/Mum/2013 10 side. The AO is, accordingly , directed to disallow 3% of the above expenses and allow the balance expenses as under:- Nature of Total expenditure Expenditure Expenditure expenses disallowed by the directed to be directed to be A.O. disallowed @ 3% allowed Venue 40,22,800/- 6,03,420/- 34,19,380/- Management expenses Venue expenses 23,11,665/- 6,93,500/- 16,18,165/- Professional fees 29,46,730/- 8,84,019/- 20,62,711/- Stage decoration 27,30,453/- 8,11,036/- 18,92,417/- expenses “ On being asked by the Bench from learned counsel for the assessee that to show from assessment order for assessment year 2006-07 that the disallowance was made @1% on similar expenses by the AO while framing assessment for assessment year 2006-07 as is referred to in by learned CIT(A) while granting relief to the assessee for assessment year 2005-06 by upholding disallowance @1% of expenses because the disallowances for assessment year 2006-07 are much higher of the expenses incurred being venue management expenses(10% of expenses disallowed under this head), venue expenses (5% of expenses disallowed under this head), , stage decoration expenses(5% of expenses disallowed under this head) and miscellaneous expenses (10% of expenses disallowed under this head) incurred by the assessee, the learned counsel for the assessee could not give satisfactory reply but stated that there was an error in the orders of tribunal and learned CIT(A) for assessment year 2005-06 and correct assessment year should be read as assessment year 2005-06 instead of assessment year 2006- 07 in their findings in the orders for assessment year 2005-06(para 8.2 of learned CIT(A) order and para 6.1 and 6.2 of the tribunal order for assessment year 2005-06). These findings in the order of learned CIT(A) for assessment year 2005-06 are perverse finding as the disallowance in assessment year 2006-07 are much higher than 1% as is suggested by ITA 4096/Mum/2013 11 learned CIT(A) in his orders for assessment year 2005-06. Relying upon the aforesaid erroneous factual findings by learned CIT(A) for the assessment year 2005-06 that the additions have been made by the AO of 1% of similar expenses in assessment year 2006-07 , tribunal also upheld the disallowance @3% while passing order for assessment year 2005-06, thus, on that erroneous finding both learned CITA(A) and tribunal held that disallowance of 3% is justified and reasonable for assessment year 2005-06. This error cannot be allowed to be perpetuated. In any case every year is a separate assessment year and principal of res judicate is not applicable to income-tax proceedings although consistency is to maintained.Merely because the expenses were allowed in subsequent year is also not sufficient to hold that these expenses are allowable in this year also, The assessee has to submit evidences and justifications for incurring of these expenses to fall with in mandate and provisions of the 1961 Act. The assessee has claimed these expenses in return of income filed with the Revenue and the onus is on the assessee to prove and substantiate its allowability within provisions and mandate of the 1961 Act. The issue of allowability of expenses is purely factual matter which requires investigation of facts at the first stage and thereafter it is to be allowed or disallowed by weighing in the context of provisions and mandate of the 1961 Act. The assessee filed details at the fag end of assessment proceedings when assessment proceedings were going to be barred by law of limitation preventing AO to conduct necessary verification and enquiry for want of time. Thus, keeping in view entire factual matrix of the case , this matter need to be restored back to the file of the AO for de-novo adjudication of all the issues on merits in accordance with law after making necessary verifications and enquiry as he deem fit in de-novo proceedings. Needless to say that the AO shall give proper and adequate opportunity of being heard to the assessee in accordance with principles of natural justice in accordance with law in denovo proceedings. The assessee shall be allowed by the AO to file all necessary and relevant ITA 4096/Mum/2013 12 evidences/explanations in support of its contentions and claims. We order accordingly.

Order pronounced in the open court on 25th September, 2017. आदेश की घोषणा खुरे न्मामारम भें ददनांकः 25.09.2017को की गई ।