2022 (1) TMI 1398 - AT - Income Tax

Revision u/s 263 - As pr CIT assessee has incurred advertisement and publicity expenses and AO allowed the expenses without appreciating the legal position - Pr.CIT initiated the revision proceedings with the view that the advertisement and publicity expenses incurred by the assessee in the television are not admissible due to the fact that these are illegal and contravenes the Cable Television Networks (Regulation) Act, 1995 - HELD THAT - Assessee is advertising in the same mode of advertisement in earlier years as well as continued to advertise in subsequent years, we also observe that no authority who approves the advertising in the television has initiated any proceedings under the Cable Television Networks (Regulation) Act, 1995 as per which assessee has contravened any of the Act of the Cable Television Networks (Regulation) Act or levied any fines/penalties. In absence of any proceedings against the assessee, it clearly indicates that the advertisement made by the assessee in the televisions are within the provisions of the above said Cable Television Networks (Regulation) Act, 1995. Therefore, in the absence of any such proceedings the Income-tax authorities have no jurisdiction to presume that assessee has contravened any provision of the Cable Television Networks (Regulation) Act merely because assessee has several products to market some of them may be prohibited to advertise and others are not. One cannot presume that the assessee is only promoting the products for which advertisements are prohibited as long as the advertisements are allowed to broadcast in the televisions which is approved by the proper authority, the assessee cannot be penalized by invoking the provisions of Cable Television Networks (Regulation) Act, 1995. Thus in the absence of any adverse remark or penalties levied by the broadcasting authorities the Assessing Officer need not go into verification of regular expenditure which assessee was regularly claiming over the years. We observe that Assessing Officer has also collected several information before allowing the expenses claimed by the assessee. Therefore Ld. Pr.CIT cannot invoke the provisions of section 263 of the Act to reassess the completed assessment merely on the basis of presumption or with the view that assessee may have contravened the Cable Television Networks (Regulation) Act, 1995. Decided in favour of assessee.

Summary

Issues Involved:
1. Validity of the revision proceedings under section 263 of the Income Tax Act.
2. Allowability of Advertisement and Publicity expenses under section 37 of the Income Tax Act.
3. Jurisdiction of Income Tax authorities in adjudicating contraventions under the Cable Television Networks (Regulation) Act, 1995.

Issue-wise Detailed Analysis:

1. Validity of the Revision Proceedings under Section 263:
The assessee argued that the revisionary proceedings under section 263 were invalid as the conditions of the assessment order being both erroneous and prejudicial to the interests of the revenue were not satisfied. The assessee submitted that the Assessing Officer (AO) had made sufficient inquiries and verifications during the original assessment proceedings. The Tribunal noted that the AO had issued notices and the assessee had provided detailed submissions, including a breakdown of advertisement and publicity expenses. The Tribunal emphasized that the AO had duly examined the records and applied his mind to the facts and circumstances of the case. It was held that the Principal Commissioner of Income Tax (Pr.CIT) could not initiate revisionary proceedings merely on the possibility of further enquiry or based on a different opinion. Citing various judicial precedents, the Tribunal concluded that the revisionary proceedings were not justified as the AO had made adequate inquiries and the order was not erroneous or prejudicial to the interests of the revenue.

2. Allowability of Advertisement and Publicity Expenses:
The Pr.CIT had observed that the AO allowed advertisement and publicity expenses amounting to ?107,07,17,247/- without appreciating the legal position that advertising alcoholic beverages is banned in India. The Pr.CIT held that the AO should have verified whether the expenses were incurred for purposes prohibited by law under section 37(1) of the Act. The assessee contended that the expenses were regular business expenditures, including sales promotion, branding activities, sponsorship, and market research, which were not prohibited under the Cable Television Networks (Regulation) Act, 1995. The Tribunal found that the assessee had incurred similar expenses in previous years without any disallowance and that no regulatory authority had taken adverse action against the assessee for contravening the Cable TV regulations. The Tribunal held that in the absence of any adverse findings by the broadcasting authorities, the AO's allowance of the expenses was justified. The Tribunal concluded that the Pr.CIT's initiation of revisionary proceedings based on the presumption that the expenses were prohibited was not warranted.

3. Jurisdiction of Income Tax Authorities in Adjudicating Contraventions under the Cable Television Networks (Regulation) Act, 1995:
The Tribunal observed that the Pr.CIT had initiated revisionary proceedings on the assumption that the assessee's advertisements contravened the Cable Television Networks (Regulation) Act, 1995. However, the Tribunal noted that no regulatory authority had taken any adverse action against the assessee for such contraventions. The Tribunal emphasized that the Income Tax authorities do not have the jurisdiction to adjudicate whether the assessee has violated the provisions of the Cable TV Act. The Tribunal cited judicial precedents to support the view that the AO cannot disallow expenses based on presumed violations of other laws unless there is a clear finding by the concerned regulatory authority. The Tribunal concluded that the Pr.CIT's assumption of jurisdiction to interpret the Cable TV Act and disallow expenses was not justified.

Conclusion:
The Tribunal quashed the Pr.CIT's order under section 263 for both assessment years under consideration, holding that the revisionary proceedings were invalid, the advertisement and publicity expenses were allowable, and the Income Tax authorities did not have the jurisdiction to adjudicate contraventions under the Cable TV Act. The appeals filed by the assessee were allowed.