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Asstt. Commissioner of Income Tax v/s M/s. Midday Multimedia Ltd.

    ITA No. 3221 of 2007

    Decided On, 11 December 2013

    At, Income Tax Appellate Tribunal Mumbai

    By, THE HONOURABLE MR. P.M. JAGTAP
    By, ACCOUNTANT MEMBER & THE HONOURABLE MR. AMIT SHUKLA
    By, JUDICIAL MEMBER

    For the Appellant: Ravi Prakash, Advocate. For the Respondent: None.



Judgment Text

Amit Shukla, J.M.

The present appeal has been preferred by the Revenue challenging the impugned order dated 15th February 2007, passed by the learned Commissioner (Appeals)-V, Mumbai, for the assessment year 2001-02. The sole issue raised by the Revenue is, whether or not the learned Commissioner (Appeals) was justified in cancelling the penalty of Rs. 24,12,560 imposed by the Assessing Officer under section 271(1)(c) of the Income Tax Act, 1961 (for short "the Act"), vide oder dated 26th July 2013. M/s. Midday Multimedia Ltd.

2. At the outset, it has been submitted before us that in the quantum proceedings, most of the issues in relation to which the penalty has been levied have been set aside to the file of the Assessing Officer or has been deleted by the Tribunal.

3. The subject matter of levy of penalty under section 271(1)(c) is mainly on account of following disallowances:-

i) Non-allowance of reduction claimed in respect of income of Rs. 26,25,860 wrongly accounted in excess;

ii) Disallowance of Rs. 13,02,100 out of payment to Mid-Day Outdoor Ltd;

iii) Disallowance of professional charges and travelling expenses of Rs. 9,75,125;

iv) Disallowance of "Notional Advertisement Credits" of Rs. 11,97,040;

4. After carefully considering the relevant findings of the Assessing Officer and the learned Commissioner (Appeals) as well as the order of the Tribunal dated 26th July 2013, we find that the Tribunal on the issues / additions given in serial number (i), (ii) and (iii) has set aside the issue to the file of the Assessing Officer and that given at serial number (iv) has deleted the same.

5. With regard to the issue of disallowance of deduction claimed in respect of income of Rs. 26,25,860 wrongly accounted, the Tribunal has set aside this issue to the file of the Assessing Officer after observing and holding as under:-

"10.4 We have perused the records and considered matter carefully. The dispute is regarding reduction of income by Rs. 26,25,860/- on the ground of double billing in the months of January-2001, February- 2001 and March-2001. The mistake had been explained due to defect in the new billing software. The assessee had, therefore, reduced the income in the revised return filed. The authorities below have not allowed the claim on the ground that the same was not substantiated by any documentary evidence by showing comparative rates. However we note that the assessee vide letter dated 3.7.2004 filed before CIT(A) had given comparative statement of billing done in the month M/s. Midday Multimedia Ltd. of December 2000, February 2001, March 2001 and April 2001 to demonstrate that billing in the months of January 2001 to March 2001 for similar advertisements had been made at double rate. These details which had been filed first time before the CIT(A) have not been examined. In our view, to arrive at a fair decision in the matter, these details are required to be examined at the level of AO. We, therefore, set aside the order of CIT (A) on this point and restore the issue to the file of AO for passing a fresh order after necessary examination and after allowing opportunity of hearing to the assessee. Thus the ground raised on this issue in assessment year 2001-02 and the additional ground for assessment year 2002-03 which is connected are restored to the file of AO."

6. In view of the aforesaid decision of the Tribunal, the penalty levied by the Assessing Officer on this score is set aside and the Assessing Officer will be at liberty to initiate the penalty proceedings afresh, if found so under the facts and in the provisions of law.

7. On the second issue of disallowance of Rs. 13,02,100, out of payments to Midday Outdoor, we find that the Tribunal has also set aside this issue to the file of the Assessing Officer after observing and holding as under:-

11.3 We have perused the records and considered matter carefully. The dispute is regarding disallowance of expenses on account of asset utilization which also included interest element. The claim of the assessee is that it had taken certain out door contracts for which it had no infrastructure of its own and had utilized the facilities of MOL for which the cost incurred by MOL had been reimbursed by the assessee. The claim of the assessee had been disallowed by the AO. CIT (A) in assessment year 2003-04 has held that the assessee had an agreement with MOL but there was nothing in the agreement to show that the assessee will utilize the services or make payment to MOL. However in assessment year 2001-2002 he has given a finding that the assessee had not filed any documentary evidence to prove that the assessee had used the facility of MOL, he has however admitted that agreement had been produced but the same was not on stamp paper. In assessment year 2002-03 CIT (A) has given a finding that there was an agreement which required the assessee to compensate the MOL in respect of use of fixed asset and the employees of MOL. But there was no clause for bearing the interest burden. He had therefore confirmed the disallowance of interest and the balance disallowance had been deleted. Thus we find discrepancies in the findings of CIT(A) in different years. The assessee has also claimed that it had not made any claim in assessment year 2002-03. We also note from page 78 of the paperbook for assessment year 2001-02, that the assessee has given details of expenses including details of assets. Whereas it is not clear whether these details were before CIT(A). We further note that AO himself has allowed 50% of expenses which means he has admitted the use of assets but has given no basis for disallowance of M/s. Midday Multimedia Ltd.

50%. Therefore, in our view, the issue requires fresh examination at the level of AO. We, therefore, set aside the orders of CIT(A) and restore the matter to the file of AO for passing a fresh order after necessary examination and after allowing opportunity of hearing to the assessee.

8. In view of the aforesaid decision of the Tribunal, the penalty levied by the Assessing Officer on this score is set aside and the Assessing Officer will be at liberty to initiate the penalty proceedings afresh if found so under the facts and in the provisions of law.

9. On the issue of disallowance of professional charges and travel expenditure of Rs. 9,25,125, the Tribunal has set aside this issue to the file of the Assessing Officer after observing and holding as under:-

"12.4 We have perused the records and considered matter carefully. The dispute is regarding allowability of claim of deduciton of Rs. 859225 on account of professional fees and Rs. 115900 on account of travelling expenses. These expenses had been included by the assessee in the share issue expenses. However later on the assessee claimed these expenses as revenue expenditure incurred for the purpose of business. The AO did not allow the claim on the ground that these expenses were already included in the share issue expenses. The assessee has however pointed out that share issue expenses had been deducted from share premium in the balance sheet which is clear from schedule B of the audited account placed at page 107 of the paper book. Therefore, it is cleare that share issue expenses had not been claimed as revenue expenditure in the PL Account. Thus apparently there is no double claim of deduciton. However CIT(A) has also given a finding that there was no evidence that these expenses were incurred wholly and exclusively for the purpose of business. This aspect has not been examined by the AO as he disallowed the claim on the ground that these were already included in the share issue expenses and claimed in the P&L account. We, therefore, restore the issue as to whether the expenses have been incurred wholly and exclusively for the purpose of business to the file of AO for passing a fresh order after necessary examination and after allowing opportunity of hearing to the assessee."

10. In view of the aforesaid decision of the Tribunal, the penalty levied by the Assessing Officer on this score is set aside and the Assessing Officer will be at liberty to initiate the penalty proceedings afresh if found so under the facts and provisions of law.

M/s. Midday Multimedia Ltd.

11. Lastly, on the disallowance of "Notional Advertisement Credits" of Rs. 11,97,040, the Tribunal has deleted the addition after observing as under: -

"14.2 We have perused the records and considered the rival contentions carefully. The dispute is regarding treating the notional credit of Rs. 1197040/- on account of advertisement issued in the assessee's own newspaper as income of the assessee. The assessee in connection with IPO had published advertisements in its own newspapers in respect of which the expenditure incurred had been claimed as revenue expenditure. The assessee had shown the income from such advertisement on notional basis in the accounts which were treated by the AO as income. CIT(A) has confirmed th

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e addition on the ground that the auditors had also not made any qualification regarding the notional entry. In our view order of CIT(A) cannot be upheld. There is no finding given either by AO or CIT(A) that the assessee had received any income. The claim of the assessee that no income had been actually received and it was only notional entry has not been controverted before us by producing any material. The assessee had published the advertisement for its own business and, therefore, the assessee could not earn income from itself. No income could, therefore, be assessed on account of notional intry. We are, therefore, unable to sustain the order of CIT(A) and the same is set aside and the addition made is deleted." 12. Thus, once the addition itself has been deleted, then the levy of penalty on this score has no legs to stand and, therefore, the same is hereby deleted. 13. 'HINDI' 14. In the result, Revenue's appeal is treated as partly allowed for statistical purposes.
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