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2019 (9) TMI 1673 - AT - Income TaxUnexplained advertisement expenses - Addition u/s 69C - Addition made as certain parties did not respond to inquiries made by the AO u/s 133(6) - HELD THAT - The mere fact that certain parties did not respond to inquiries made by the Assessing Officer under Section 133(6) of I.T. Act; is not, by itself, sufficient to warrant addition of expenses in connection with which the inquiries were made U/s 133(6) of I.T. Act. For our aforesaid view, we take additional support from orders of CIT vs. Continental Carbon India Ltd. 2012 (6) TMI 712 - DELHI HIGH COURT and CIT vs. GP International Ltd. 2009 (12) TMI 33 - PUNJAB AND HARYANA HIGH COURT as held by Hon ble High Court that merely because some of the persons did not respond to the notice issued by the Assessing officer U/s 133(6) of the I.T. Act, it cannot be taken that the said transaction was ingenuine - Decided in favour of assessee.
Issues Involved:
1. Legality and correctness of the deletion of addition made by the Assessing Officer on account of unexplained advertisement expenses amounting to ?3,64,42,407/-. Detailed Analysis: Issue 1: Legality and Correctness of Deletion of Addition on Account of Unexplained Advertisement Expenses Background and AO's Perspective: - The Assessing Officer (AO) passed an Assessment Order on 28/03/2014 under Section 153A read with Section 143(3) of the Income Tax Act, 1961, assessing the total income at ?32,05,34,260/-. An additional sum of ?3,64,42,407/- was added under Section 69C (unexplained expenditure) by treating the advertisement expenses as not genuine. - The AO noted that during the search, substantial expenses were booked under advertisement expenses, some of which appeared not genuine. Despite multiple requests, the assessee failed to provide complete details, including addresses and PANs of the parties involved in the advertisement expenses. - The AO concluded that the assessee had no explanation for the expenses and added the amount back to the total income as unexplained expenditures under Section 69C, initiating penalty proceedings under Section 271(1)(c) for concealing and furnishing inaccurate particulars of income. CIT(A)'s Decision: - The Learned Commissioner of Income Tax (Appeals) [Ld. CIT(A)] deleted the addition of ?3,64,42,407/- made by the AO. This decision was based on the fact that similar additions in the case of another group company, M/s Devyani International Ltd., were deleted by the ITAT in similar circumstances. ITAT's Analysis and Decision: - The central issue was whether the addition made on account of advertisement expenditure, based merely on the non-response of certain parties to inquiries under Section 133(6) of the I.T. Act, was erroneous. - The assessee's counsel argued that similar additions were deleted in the case of M/s Devyani International Ltd., another company in the same group, in Assessment Years 2011-12 and 2007-08. The ITAT had deleted these additions in its orders dated 06/04/2018 and 23/04/2018. - The Revenue's representative did not dispute that the issue was covered in favor of the assessee by the aforementioned orders and did not bring any distinguishing facts to the tribunal's attention. ITAT's Conclusion: - The ITAT noted that the facts and circumstances of the present case were similar to those of M/s Devyani International Ltd., where similar additions were deleted. - The ITAT emphasized that the non-response of certain parties to inquiries under Section 133(6) alone was insufficient to warrant the addition of expenses. This view was supported by judicial precedents from the Hon’ble Delhi High Court in CIT vs. Continental Carbon India Ltd. and the Hon’ble High Court of Punjab & Haryana in CIT vs. GP International Ltd., which held that non-response to notices under Section 133(6) does not automatically render the transactions ingenuine. - Consequently, the ITAT directed the AO to delete the addition of ?3,64,42,407/-. Final Judgment: - The appeal filed by the Revenue was dismissed, and the order of the Ld. CIT(A) deleting the addition of ?3,64,42,407/- was upheld. Order Pronouncement: - The order was pronounced on 26/09/2019 in open court.
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