A.C.I.T., CENTRAL CIRCLE-IV,KOLKATA, KOLKATA vs. M/S UTSAV RICE MILLS (P) LTD., KOLKATA

O R D E R

Per Dr. Arjun Lal Saini, AM:

“1. I have perused the relevant orders. I have also considered the rival submissions. It is a matter of record that the assessee filed his original return on 30.09.2008 declaring total income of Rs.29,29,345/-. The search u/s.132 was conducted on 16-09-2009 at the premises of the assessee. In this factual background, I find that the limitation for the service of the notice u/s.143(2) had not expired on the date of the search. The AO thus had jurisdiction u/s.143(3) for the relevant assessment year as on the date of initiation of the search. I am therefore unable to accept the argument that the AO had no jurisdiction u/s.153A to make additions in respect of the items of regular assessment which had already been declared by the assessee in his original return. Since the limitation for the service of the notice u/s.143(2) had not expired on the date of initiation of the search, the AO had jurisdiction u/s 143(3); and consequently, I am of the opinion that the AO retained regular as well as search jurisdiction while making the assessment u/s.153A. The AO was thus competent to make additions in respect of the items of regular assessment even though no incriminating material was found in the search. Ground No.1 is dismissed. However, I find that the additions made by the AO in his assessment order are not sustainable on merit. For, it was argued in course of the appellate proceedings that the expenses on advertisement were incurred in the normal course of the business which is duly recorded in the regular books of account. I find merit in the argument that the AO has not pointed out even a single instance of expense which was not genuine or not related to the business of the assessee. Also, there is no finding of the AO in his assessment order that the claim was excessive or unreasonable as compared to the preceding years. The AO has acknowledged in the assessment order that the payments were made to different TV channels. The AO has neither disputed the payments nor the genuineness of incurring of the expenses. The AO has noted in the assessment order that several books of account and documents were seized in search u/s.132 or impounded in survey u/s.133A which was obviously available before him at the assessment stage. The AO has also noted in the assessment order that various details, explanations & submissions as called for u/s.142(1) was submitted by the assessee. I am therefore, not impressed with the action of the AO in making the disallowance of such substantial amount in a casual and routine manner on the flimsy ground that relevant detail was not produced before him. For, mere absence of details cannot justify the disallowance when neither the payments nor the genuineness of incurring of the expenses was under dispute. Secondly, there was no basis or material on record for the AO to conclude that the expenses were not incurred wholly & exclusively for the purposes of the business. I find substance in the argument that the very fact that the payments were made to the TV channels rule out the possibility of the expenses being personal in nature. But even otherwise, the AO was at liberty to conduct necessary inquiry from the concerned TV channels. If the AO was suspicious about the nature or purpose of the expenses, it was obligatory on his part to bring positive material on record to show that the expenses were incurred otherwise than or the purposes of the business. But I find that the AO has made no efforts to ascertain the actual nature or purpose of incurring of the expenses. The AO has brought no positive material on record to show that the expense were made otherwise than for the purposes of the business. Moreover, no material was found even in the search which could be made the basis for drawing adverse inference in the case of the assessee. In this factual background, I am of the considered view that the action of the AO in summarily disallowing the claim of Rs.34,11,538/- on advertisement is neither sustainable in law nor on facts.”

(i) That, the ld. CIT(A) has erred in facts as well as in circumstances of the case in directing to delete the disallowance of Rs.34,19,538/- under the head Advertisement and Publicity.

4.1. Ld AR for the assesse has submitted before us that the AO has not pointed out even a single instance of expense which was not genuine or AO in his assessment order that the claim was excessive or unreasonable as compared to the preceding years. The AO has acknowledged in the assessment order that the payments were made to different TV channels.

The AO has neither disputed the payments nor the genuineness of incurring of the expenses. The AO has noted in the assessment order that several books of account and documents were seized in search u/s.132 or impounded in survey u/s.133A which was obviously available before him at the assessment stage. The AO has also noted in the assessment order that various details, explanations & submissions as called for u/s.142(1) was submitted by the assessee. For, mere absence of details cannot justify the disallowance when neither the payments nor the genuineness of incurring of the expenses was under dispute. Secondly, there was no basis or material on record for the AO to conclude that the expenses were not incurred wholly & exclusively for the purposes of the business. The payments were made to the TV channels and the same rule out the possibility of the expenses being personal in nature. But even otherwise, the AO was at liberty to conduct necessary inquiry from the concerned TV channels. If the AO was suspicious about the nature or purpose of the expenses, it was obligatory on his part of AO to bring positive material on record to show that the expenses were incurred otherwise than or the purposes of the business. the findings of the AO which we have already noted in our earlier para and is not being repeated for the sake of brevity.

4.3. Having heard the rival submissions, perused the material on record, we are of the view that there is merit in the submissions of the assessee, as the proposition canvassed by ld. AR for the assessee are supported by the facts narrated by him above. As Ld. AR for the assessee has pointed out that the AO has not pointed out even a single instance of expense which was not genuine or not related to the business of the assessee.

Also, there is no finding of the AO in his assessment order that the claim was excessive or unreasonable as compared to the preceding years. The AO has acknowledged in the assessment order that the payments were made to different TV channels. The AO has neither disputed the payments nor the genuineness of incurring of the expenses. Besides, there was no basis or material on record for the AO to conclude that the expenses were not incurred wholly & exclusively for the purposes of the business. The payments were made to the TV channels and the same rule out the possibility of the expenses being personal in nature. But even otherwise, the AO was at liberty to conduct necessary inquiry from the concerned TV channels. If the AO was suspicious about the nature or purpose of the expenses, it was obligatory on his part of AO to bring positive material on record to show that the expenses were incurred otherwise than or the purposes of the business. Considering the factual

6 M/s Utsav Rice Mills (P) Ltd. position, we do not find any infirmity in the order passed by the ld CIT(A). Therefore, we confirm the order passed by the ld CIT(A). 4.4. In the result, appeal filed by the Revenue, is dismissed. Order pronounced in the open court on this 15/03/2017.