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Income Tax Officer 9 (2) (2) , Mumbai Versus M/s Kanchan International Ltd

2016 (10) TMI 91 - ITAT MUMBAI

Addition on account of discrepancy in expenditure incurred by the assessee under the head purchase, advertisement & legal expenses - differences in account balance reflected in the books of accounts of the assessee vis-à-vis in the books of accounts of the two parties - information not forwarded/confronted to the assessee for comments and rebuttal - Held that:- The A.O. issued notices u/s 133(6) of the Act to the two parties i.e. M/s Carat Media Service Pvt. Ltd. and M/s Oglivy & Mather Pvt. Ltd .....

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efore the AO for verification. These books of accounts as well purchase invoices were not even produced by the assessee before the learned CIT(A). In our considered view and in the interest of justice, we are inclined to restore the matter to the file of the A.O. to de-novo decide the issue’s on merits and hence we set aside the order of learned CIT(A). The A.O. shall forward to the assessee all the information which was obtained by the AO in pursuance of notices issued u/s 133(6) to these two p .....

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-2016 - SHRI MAHAVIR SINGH, JUDICIAL MEMBER AND SHRI RAMIT KOCHAR, ACCOUNTANT MEMBER For The Revenue : Shri A. Ramachandran For The Assessee : Ms. Parvathy Ganesh ORDER PER RAMIT KOCHAR, Accountant Member This appeal, filed by the Revenue, being ITA No. 2541/Mum/2010, is directed against the appellate order dated 19th January, 2010 passed by learned Commissioner of Income Tax (Appeals)- 20, Mumbai (hereinafter called the CIT(A) ), for the assessment year 2006-07, the appellate proceedings before .....

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eleting the addition made by the Assessing Officer on account of discrepancy in expenditure incurred by the assessee under the head purchase, advertisement & legal expenses through M/s Carat Media Services India Pvt. Ltd. and M/s. Ogilvy & Mather P. Ltd., to the extent of ₹ 82,02,601/- and ₹ 71,67,764/-, respectively without appreciating the fact that the assessee failed to satisfactorily explain the same with supporting evidences. 2. The appellant prays that the order of the .....

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count of advertising, business promotion, legal expenses etc. paid to two concerns namely M/s Carat Media Services India Pvt. Ltd. and M/s Ogilvy & Mather Pvt. Ltd. It was observed by the A.O. that the assessee has debited various payments made to these two concerns under the head purchases, sales promotion expenses and administrative expenses etc. the details of which are as under:- 1. Carat Media Services India Pvt. Ltd. Purchases ₹ 1,20,53,345/- Advertisement expenses ₹ 1,06,5 .....

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1/. In response, the assessee simply filed the revised statement of purchases adjusting the amount accordingly. Further, the assessee has increased the miscellaneous purchases below ₹ 3 lacs to ₹ 3,05,24,989/- from ₹ 1,68,77,393/- without explaining or filing any supporting evidence thereof. It was observed by the AO that the assessee has still an amount of ₹ 24,77,891/- due to M/s Carat Media Services India Pvt. Ltd. under the head purchases. The assessee has also change .....

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hases to reduce the taxable income and therefore the A.O. added an amount of ₹ 82,02,601/- to the total income of the assessee, vide assessment order dated 30-12-2008 passed u/s. 143(3) of the Act. 4. Similarly, with respect to the M/s Ogilvy & Mather Pvt. Ltd ( O&M), notice was issued u/s 133(6) of the Act, asking for the details of services rendered , ledger account of the assessee in their books of accounts and other details. The details of the transactions as per assessee s boo .....

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received u/s 133(6) of the Act comes to ₹ 71,67,764/-. The assessee was asked to explain the same. The assessee has changed the items purchased from TV Commercial Advertisement to just purchases . Further to adjust the same the assessee has also increased the miscellaneous purchases. The said concern O & M has only confirmed payment for advertisement of the products of the assessee. The A.O. accordingly disallowed the difference of ₹ 71,67,764/- and added the same to the total i .....

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units and while preparing these details the total credits aggregating to ₹ 2,00,15,295/- comprising ₹ 1,20,53,345/- appearing in the ledger account of Carat Media Service Pvt. Ltd. and ₹ 79,61,950/- appearing in the ledger account of Oglivy & Mather Pvt. Ltd. were wrongly included in the details of purchases of Baddi Unit . Thus, in this process the intra-unit purchases amounting to ₹ 1,71,80,708/- made by Baddi unit from Unit-III, Daman was omitted from the figure o .....

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hases were made by the assessee from these two concerns and the credit in their accounts were wrongly included in the purchase details, the assessee corrected the same and had filed the corrected/revised details of purchases immediately on the next day. The AO ignored them and made the impugned additions vide assessment order dated 30-12-2008 passed u/s. 143(3) of the Act which should be deleted. The ld. CIT(A) considered the reply of the assessee. The ld. CIT(A) observed from the audited accoun .....

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observed that the details of these expenses were furnished to the A.O. vide letter dated 1st December, 2008 which shows that the assessee had incurred ₹ 1,07,50,844/- and ₹ 33,24,000/- towards advertisement expenses payable to Carat Media Service Pvt. Ltd. and Oglivy & Mather Pvt. Ltd. respectively. The details of expenses also show that the assessee had incurred additionally an amount of ₹ 22,39,000/- towards legal and professional expenses payable to Oglivy & Mather .....

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value of credits in the accounts of two concerns which was claimed wrongly while submitting details of purchases. Thus, the ld. CIT(A) found that these credits representing ₹ 1,20,53,345/- and ₹ 79,61,950/- in the accounts of Carat Media Service Pvt. Ltd. and Oglivy & Mather Pvt. Ltd. respectively. The A.O. had considered advertisement expenses once ₹ 1,20,53,345/- as total of credits shown initially as purchases and again ₹ 1,06,56,223/-(however as per ld CIT(A) the .....

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(A) observed that the AO observation in para 2 on page 4 of the assessment order that the assessee has submitted the revised statement of purchases adjusting the miscellaneous purchases below 3.00 lacs to ₹ 3,05,24,980 and still an amount of ₹ 24,77,981/- is shown as purchase from Carat Media Services Private Limited is not discernible from record. Further, it was observed by learned CIT(A) that the observation of the AO that the assessee has entered bogus entry under the head purcha .....

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hem as bogus entities or purchases in order to reduce taxable income . The ld. CIT(A) held that the A.O. has no basis to treat that these are bogus entries or purchases to reduce the taxable income of the assessee and accordingly the additions of ₹ 82,02,601 and ₹ 71,67,764/- were deleted by the learned CIT(A) vide appellate orders dated 19-01-2010. 7. Aggrieved by the appellate order dated 19-01-2010 of the ld. CIT(A), the Revenue is in appeal before the Tribunal. 8. The ld. D.R. su .....

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chase bills before the authorities below for verification. The ld. D.R. submitted that the ld. CIT(A) erred in allowing the appeal of the assessee without forwarding the matter to the AO for verification of the claim of the assessee and without asking assessee to produce books of accounts and purchase invoices for verification. For the purpose of verification, the matter may be sent back to the file of the A,O. 9. On the other hand, the ld. Counsel for the assessee submitted that notices u/s 133 .....

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id material against the assessee. The ld. Counsel submitted that if opportunity is given, the assessee will be able to reconcile the differences in the accounts of these two concerns. 10. We have considered the rival contentions and also perused the material available on record. We have observed that the issue in the appeal is in context of differences in account balance with respect to expenses incurred by the assessee on account of advertisement, legal and professional charges and purchases ma .....

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