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TMI Blog1986 (9) TMI 124X X X X Extracts X X X X X X X X Extracts X X X X ..... the appeals is whether the expenditure of Rs. 60,000 shown as part of expenditure incurred for advertising and said to have been paid to Maud Advertising Services for the assessment year 1979-80 and Rs. 94,500 said to have been paid towards advertisement expenditure to Rita Advertising Agency, Bombay were in fact incurred as advertising expenditure and whether they are allowable as business expenditure in the two assessment years under consideration. Ground Nos. 2 to 8 in the grounds of appeal for 1979-80 and ground No. 6 in the grounds of appeal for 1980-81 relate to the common ground. Maud Advertising Services is a proprietary concern of Mr. J.D. Fernandes and the said proprietary concern is in existence since last 20 years. Rita Advertising Agency was a proprietary concern floated in the name of the daughter of Mr. J.D. Fernandes in about 1978. From the evidence on record, we gather that Mr. J.D. Fernandes was aged 53 years and was having 9 school-going children. He was paying an amount of Rs. 300 per month perhaps for his office premises comprising of only four table space. The rent is paid to one Shri Dhanji. He would be requiring Rs. 2,000 per month towards household expense ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he services are received and payments made to them. He admitted in answer to another question that he had been maintaining two registers, one for sale and another for the purchase and a statement of expenditure incurred by him for various purposes. He had not maintained separate accounts exclusively for his different claims. Question No. 30 and the answer given to it in the first examination of Mr. Fernandes on 14-4-1981 appears to us to be categorical and so they are given out verbatim as under : " So according to you all the receipts and payments made as per the bills and your bank account are correct and genuine, is it not ? Answer : Yes, they are all genuine." 3. Mr. Fernandes having thus examined in the morning hours on 14-4-1981 in the first instance was again examined on oath in the presence of Ashok Kockar, ADI from 8 p.m. to 11-30 p.m. In the second examination, he stated that when he started his business his income was Rs. 10,000 to Rs. 12,000 from business and it gradually rose to Rs. 20,000 per year. In about November and December 1976 he fell sick and it resulted in curtailment of his business as he could not move around much. In that period, his wife came to his ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e year. He did not show the commission earned by him on these havala bills in his income-tax returns and in order to cover up the said clandestine income earned by him he used to inflate his expenses and he would show that payments were made to four named bogus concerns. He also stated for one question as to what are obvious mistakes found in his accounts, he stated that in the total turnover declared by him the accommodation amounts received in the name of Rita Advertising Agency is not included. So also the bogus expenses shown as payments made to the four bogus concerns named by him are accounted only in the case of his proprietary business, namely, Maud Advertising Services and no expenses have been debited in the accounts of Rita Advertising Agency. He stated categorically that except his bare word of mouth there is no proof for his returning back 90 per cent of the amount by cash. He stated that he does not own any hoarding site. But yet, he had given bogus bills in which the period of display and the site of the address of the hoarding was given and it can be verified from the site-owners that such display was never made. When asked why he made contradictory statements earli ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at Mrs. Fernandes alone used to come in connection with advertisement dealings. He admitted to have given advertisement and publicity work to Maud Advertising Agency or Rita Advertising Agency during the years 1977 to 1981. He also stated that display of hoardings on highways at prominent places is the type of advertisement or publicity which were entrusted to them. Payments used to be made after, the execution of the work. Once or twice he got verified whether advertisement was done or not through his subordinates. Now he cannot say who was the employee and who made the verification. He also did not obtain any written report of getting verified the advertisement work done by Maud Advertising Agency and Rita Advertising Agency. Later, the payments were made on trust and no specific verification was done as to whether the hoardings were displayed or not. When the version of Mr. Fernandes that he was made to part with havala bills and in the modus operandi adopted, Mr. Fernandes used to get only 10 per cent commission and the rest of the bills amount used to draw and used to be handed over to him. Shri Jalan emphatically denied it and termed the statement of Mr. Fernandes as complete ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... blicity work done by Maud Advertising Services and Rita Advertising Agency to the assessee-company. To the question, how she knows Shri Jalan, she replied that she goes to the transport company for business and that is how she came to know of it. 7. On 10-1-1985, one Mr. L. Rego the manager of Art Advertising Bureau was examined. He deposed that Mrs. Kantabai P. Zaveri is the proprietrix of the said concern and he has been working since 20 years. They have taken lease rights of putting up two neon sign boards and one advertisement hoarding on the outer wall of the building known as ' Marina Mansion ' situated at Chowpatti, Bombay. The lease agreement is dated 14-11-1974. The lease rent fixed was Rs. 300 per month. According to him, from 1977 till date the neon sign board of the Transport Corporation of India was never exhibited on Marine Mansion building. To a question whether Maud Advertising Service did any publicity on Marine Mansion building at any time, he stated that 10 years ago there was an advertisement of ' Zeep Torch ' through Maud Advertising Service. It was only a board advertisement and not a neon sign and it was for about three months. Thereafter in 1982, there was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 60,000 and also added the same to the returned income. Following the elaborate discussion made by him in his assessment order for 1979-80, for the assessment year 1980-81 also he had disallowed and added Rs. 94,000 to the returned income disbelieving the payment made to Rita Advertising Agency. In appeal, the learned Commissioner (Appeals) found that the assessee had made the payments during the assessment year 1979-80 to Maud Advertising Services by account payee cheque. He stated that Mr. Fernandes earlier in the day gave a statement on 14-4-1981 stating that he had only done advertisement work for Transport Corporation of India Ltd. The fact that 90 per cent of the amount was withdrawn 2 or 3 days after the crossed cheque was remitted into the bank account of Maud Advertising Agency and Rita Advertising Agency can be explained away otherwise than on a reasonable hypothesis substantiating the complicity of the assessee-company in the alleged clandestine business. Mere withdrawal of 90 per cent of the amount paid by a crossed cheque does not point out the complicity of the assessee-company and it does not lead to the only conclusion that the withdrawal must again have come to th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... completed on 27-9-1982 on a total income of Rs. 91,16,320. The total turnover under all the units being run by the assessee-company worked out to Rs. 25,10,54,785. The assessee-company was having about 450 branches throughout India but the learned departmental representative submits that the hoardings were exhibited only in Bombay and nowhere else. Obviously this would not be correct because in the bills furnished by Rita Advertising Agency it is stated that neon sign boards were exhibited at Dapudi, Pune and also at Pune Road, Nasik. The particulars of bills issued by Maud Advertising Services for the accounting year relevant to the assessment year 1979-80 and Rita Advertising Agency for the accounting year relevant to the assessment year 1980-81 were furnished by the learned senior departmental representative in a paper. On 14-4-1981 Shri J.D. Fernandes gave two statements which are contrary to each other in material particulars. In the first of the statements, he stated that under the bills issued, inter alia, to the assessee-company he had rendered advertisement services, whereas, in the second statement given on the same day he had resiled from it and came with a story that ev ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... isplay the works and advertisements on behalf of its clients for which payments might have been made. Therefore, simply because Maud Advertising Services did not take any premises on lease for putting up advertisements or neon sign boards does not by itself establish that he was not capable of rendering advertisement services to his clients. According to us he can do so through others and in order to pay to others, 90 per cent of the amounts mentioned in the bill might also have been withdrawn. However, Mr. Fernandes in all probability might have been under the influence of threats or promises which made him give altogether a different twist and made the second statement on 14-4-1981. Otherwise, there is no rational explanation as to why he made almost volte-face in his version given on the same day. Further, the version of Mr. Fernandes that only with reference to four parties, he used to make havala bills and all other transactions which he had were genuine and real did not sound true and does not conform to the natural course of human conduct. Further except his bare word of mouth, there is nothing in evidence to show that 90 per cent of the bill money withdrawn was handed over ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rtising Bureau. When a specific question was put to Mr. Rego whether he had ever seen advertisement of Transport Corporation of India Ltd. on Marina Mansion, he replied that he has not seen on their site. That does not mean that the advertisement might not have been displayed on a side not taken on rent by Art Advertising Bureau. Therefore, we are satisfied that some advertising service was performed by Maud Advertising Agency in the accounting year relevant to the assessment year 1979-80 and we also hold that the story of havala transaction spoken of by Mr. Fernandes does not appear to be true or believable. Further, as regards Rita Advertising Agency is concerned, there is absolutely no evidence to show that the payment is not made by the assessee-company and Rita Advertising Agency did not do any advertising services to the assessee-company. It is no doubt true that letter dated 2-8-1985 addressed by Nasik Municipal Corporation to the ITO and the letter dated 3-10-1985 addressed by the Municipal Corporation of Greater Bombay to the ITO and also the letter dated 12-2-1985 addressed by the Municipal Corporation of Greater Bombay to the ITO were filed. They only show that Rita Adve ..... X X X X Extracts X X X X X X X X Extracts X X X X
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