2022 (10) TMI 400 - AT - Income Tax

Disallowance of proportionate interest on interest free advances - HELD THAT - The amount were given to players for endorsement of assessee s products/goods and there is advances given to an agent. The payment to an advocate is for attending to various legal matters concerning the assessee. Payments made to JVS Sporting and Sunridges Sporting are for the purpose of payment of taxes on their behalf as they are sister concerns of the assessee and have running accounts. As regards the advance to Shri Vinod Sareen it is observed he is an old and dependable employee of the assessee to whom advance is given at the time of need. As regards the alleged advance to Anisa Sareen after examining the reconciliation statement filed by the assessee Commissioner (Appeals) has given a factual finding that actually there was no such advance given to the concerned person. The aforesaid finding of fact recorded by Commissioner (Appeals) could not be controverted by the Revenue us. In view of the aforesaid we uphold the decision of Commissioner (Appeals) on the issue. Ground raised is dismissed. Addition u/s 68 - undisclosed sundry creditors - HELD THAT - Merely because these evidences were not produced in course of assessment proceedings AO has stated that such evidences should not be accepted and additions made should be confirmed. To say the least the observations of the AO are self-contradictory. On one hand he accepts that assessee s contention regarding genuineness of sundry creditors appears to be correct whereas on the other hand he terms assessee s claim to be afterthought. This in our view is unacceptable. When the assessing officer has not found anything adverse in the evidences furnished by the assessee and accepted assessee s claim to be correct he cannot again reject the claim of the assessee on flimsy ground. AO cannot blow hood and cold at the same time. Addition being expenditure incurred towards distribution of free samples to players - HELD THAT - As it may not be always possible for the assessee to keep supporting evidence considering the fact that at times assessee is providing free samples to national/international level players of repute and considered as celebrity. Therefore it may not be always possible to obtain receipt from such players qua the free samples. Assessee s claim that the expenditure cannot be fully substantiated through supporting evidence to some extent is acceptable. The possibility of inflation of expenditure to some extent cannot be ruled out altogether. That being the case to take care of such situation a part of the expenditure being not supported by proper evidence has to be disallowed. In the peculiar facts of the present case disallowance of 10% out of the expenditure claimed in our view is reasonable. Hence no interference is called for. Accordingly we uphold the decision of learned Commissioner (Appeals) we dismiss the ground raised. Unexplained unsecured loan - HELD THAT - In the remand report filed by the assessing officer in course of first appellate authority it is observed though he could not find anything adverse in the details or reconciliation filed by the assessee however he simply observed that this is an afterthought of the assessee. The aforesaid facts clearly indicate that in course of first appellate proceeding the assessee did furnish supporting evidence to reconcile the discrepancy pointed out by the assessing officer in the assessment order. It is further evident the assessing officer in course of remand has not found anything adverse in the evidences furnished by the assessee. Once the discrepancy pointed out by the assessing officer stands reconciled no addition can be made on account of unsecured loan. Accordingly we uphold the decision of Commissioner (Appeals) by dismissing the ground raised. Disallowance u/s 40(a)(ia) - non deduction of TDS on Commission to partners Commission to agents and Commission to Bank - HELD THAT - Commission to the agents AO has accepted that tax was duly deducted at source and paid to the government account within the prescribed time. Therefore this addition cannot survive. Commission to bank the assessing officer has accepted that TDS provisions are not applicable to commission paid to bank. Thus this addition was also rightly deleted. Commission to partners as rightly observed by Commissioner (Appeals) commission paid to partners is not covered under Section 194H of the Act as there is no employer and employee or principal agent relationship between the partners and the firm. Thus we do not find any reason to interfere with the decision of learned Commissioner (Appeals) on the issue. Ground raised is dismissed.

Summary

Issues Involved:
1. Deletion of addition of Rs.4,20,326 representing disallowance of proportionate interest on interest-free advances.
2. Deletion of addition of Rs.14,52,33,651 made under Section 68 of the Act.
3. Deletion of addition of Rs.68,12,500 representing expenditure incurred towards distribution of free samples to players.
4. Deletion of addition of Rs.34,26,614 representing unexplained unsecured loan.
5. Deletion of addition of Rs.7,68,305 representing disallowance made under Section 40(a)(ia) of the Act.

Issue-wise Detailed Analysis:

1. Deletion of addition of Rs.4,20,326 representing disallowance of proportionate interest on interest-free advances:
The Revenue challenged the deletion of Rs.4,20,326, which was disallowed by the assessing officer as proportionate interest on interest-free advances made by the assessee. The assessee explained to the Commissioner of Income-Tax (Appeals) that the advances were not interest-free loans but were for business purposes. The Commissioner (Appeals) found the assessee's explanation satisfactory and deleted the disallowance. The Tribunal upheld this decision, noting that the advances were for endorsements, legal matters, tax payments on behalf of sister concerns, and personal needs of an employee, and that there was no actual advance to Anisa Sareen.

2. Deletion of addition of Rs.14,52,33,651 made under Section 68 of the Act:
The Revenue contested the deletion of Rs.14,52,33,651, which was added by the assessing officer as unexplained cash credit under Section 68. The assessee provided documentary evidence to prove the genuineness of sundry creditors, which the Commissioner (Appeals) accepted. The Tribunal noted that the assessing officer's remand report did not find any inconsistency or suspicion in the evidence provided. The Tribunal found the assessing officer's contradictory stance unacceptable and upheld the Commissioner (Appeals)'s decision to delete the addition.

3. Deletion of addition of Rs.68,12,500 representing expenditure incurred towards distribution of free samples to players:
The Revenue challenged the deletion of Rs.68,12,500, which was disallowed by the assessing officer due to a lack of supporting evidence for the distribution of free samples to players. The Commissioner (Appeals) acknowledged the nature of the expenditure and limited the disallowance to 10% of the claimed amount, recognizing the difficulty in obtaining receipts from high-profile players. The Tribunal found this approach reasonable and upheld the Commissioner (Appeals)'s decision.

4. Deletion of addition of Rs.34,26,614 representing unexplained unsecured loan:
The Revenue contested the deletion of Rs.34,26,614, which was added by the assessing officer due to discrepancies in the unsecured loan account of Anisha Sareen. The assessee reconciled the discrepancies and provided supporting evidence, which the Commissioner (Appeals) accepted. The Tribunal noted that the assessing officer found no adverse evidence in the remand report and upheld the Commissioner (Appeals)'s decision to delete the addition.

5. Deletion of addition of Rs.7,68,305 representing disallowance made under Section 40(a)(ia) of the Act:
The Revenue challenged the deletion of Rs.7,68,305, which was disallowed by the assessing officer for non-deduction of tax at source on commission payments. The Commissioner (Appeals) found that tax was deducted and paid for commissions to agents, and TDS provisions did not apply to bank commissions. The only remaining issue was the commission to partners, which the Commissioner (Appeals) ruled was not covered under Section 194H. The Tribunal upheld this decision, dismissing the Revenue's ground.

Conclusion:
Both the appeal by the Revenue and the cross-objection by the assessee were dismissed. The Tribunal upheld the decisions of the Commissioner (Appeals) on all contested issues.