TMI Blog2019 (11) TMI 205X X X X Extracts X X X X X X X X Extracts X X X X ..... ion from both the aforesaid parties along with bank statement. Furthermore, the assessee has duly deducted the TDS on these payments. So, in these circumstances, we are of the considered view that the ld. CIT (A) has erred in confirming the disallowance of claim of ₹ 12,24,329/- out of disallowance of ₹ 15,02,977/- made by the AO on account of expenditure of commission and brokerage, hence ordered to be deleted. Disallowance under the head commission and brokerage paid to six payees - non-compliance of notices issued u/s 133 (6) of the Act by the six of the payees and assessee has not submitted bills and vouchers for making such payment - Assessee has also not given the details as to qua which of the properties booking was made and commission was paid and what was the rate of commission and proof of rendering actual services - HELD THAT:- when the AO has categorically mentioned that all the payments made by the assessee are verifiable being duly recorded in the books of assessee, which have not been otherwise disputed and the same are duly corroborated with bank statement and ledger account. Moreover, out of 22 payees to whom the brokerage have been paid, only 6 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat, the Appellate Assistant Commissioner has no jurisdiction under section 31 (3) of the I.T. Act, 1922 which is pari-materia with section 251(1) of the Act to assess a source of income which is not disclosed either in the returns filed by the assessee or in the assessment order . Disallowance of the interest paid on loans - HELD THAT:- CIT (A) has thrashed the issue in entirety by perusing the closing balance of the assessee at ₹ 459.77 crores whereas interest free loan was of ₹ 229.4 crores and the assessee company was having share capital and reserves of ₹ 759.93 crores and when the loan was given for business expediency of subsidiaries duly explained by the assessee and appreciated by the ld. CIT (A) that the amount paid during the year under assessment was ₹ 275.16 crores from internal accruals, the ld. CIT (A) has rightly deleted the addition by relying upon the decision rendered by Hon ble Supreme Court in SA Builders [ 2006 (12) TMI 82 - SUPREME COURT] - AO in remand proceedings has not given any comments, for the reasons best known to him rather raised a bald objection that additional evidence sought to be led by assessee be not admitte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oss appeals filed by the assessee as well as by the revenue are being disposed off by way of composite order to avoid repetition of discussion. 2. Appellant, M/s. Vatika Limited (hereinafter referred to as the assessee ) by filing the present appeal sought to set aside the impugned order dated 27.03.2014 passed by the Commissioner of Income - tax (Appeals)-XXXI, New Delhi qua the assessment year 2009-10 on the grounds inter alia that :- 1. That the learned CIT(A) has erred both on facts and in law in not only partially confirming the order of assessment but has further erred in enhancing the income of the assessee company by ₹ 2,69,66,400/-. 2. That the learned CIT(A) has thus erred both on facts and in law in partially confirming the following disallowances made to the income returned by the learned DCIT, Central Circle -20, New Delhi: (i) ₹ 12,24,329/- out of a disallowance made of ₹ 15,02,9771- on account of expenditure incurred in respect of commission and brokerage. The aforesaid disallowance has been made without appreciating that admittedly the assessee had not been granted a valid and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... enhancing' the income of the assessee company of ₹ 2,69,66,400/. The aforesaid addition made and enhanced by the CIT(A) is without jurisdiction and is otherwise too untenable. The CIT(A) has overlooked the submissions of the assessee when making the aforesaid addition. 4. The CIT(A) in fact, without even appreciating that the learned A.O. has neither dealt the issue in the order of assessment nor even was the subject matter of appeal before him could not have any valid justification to enhance the addition since he had no jurisdiction to enhance the income which was neither the subject matter of appeal or even of assessment. 4.1 That the learned CIT(A) went into an error of law when he held that said sum was not new source of income. 5. That, even otherwise the learned CIT(A) has erred in enhancing the income by the aforesaid sum of ₹ 2,69,66,400/-, as the expenditure was allowable a business expenditure for the instant assessment year. 6. That the learned CIT(A) has erred in initiating proceedings u/s 271 (1 )(c) of the Act in respect of the aforesaid sum even after recording that the asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ifiable sundry creditors. 9. On the facts and circumstances of the case, the Ltd. CIT(A) has erred in deleting the addition of ₹ 19,12,47,485/- made by the AO on account of un-verifiable security deposits. 4. Briefly stated the facts necessary for adjudication of the issue at hand are : The assessee company is into real estate business and running several state and commercial projects. Assessing Officer (AO) noticed that the assessee has debited an amount of ₹ 1,77,28,000/- under the head commission and brokerage in the profit and loss account. On the Query No.36 of question dated 07.10.2011 raised by AO, assessee furnished the details which the AO found incomplete as to whom the commission and brokerage had been paid. AO reached the conclusion that assessee company had failed to furnish the addresses of ABC Real Estate, Real Estate Opportunities Investment and Rajiv and consequently made an addition of ₹ 15,02,977/-. AO also disallowed an amount of ₹ 1,19,94,194/- on the ground that 24 parties to whom assessee stated to have paid the commission and brokerage have not responded or denied the transaction i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 10. When we examine the impugned order passed by the ld. CIT(A) on this issue, the ld. CIT (A) disallowed these expenses on the premise that the assessee has failed to furnish copy of bills raised by the payees and that notices issued under section 133(6) have not been responded by the payees. During the appellate proceedings, comments of the AO were called on the submissions filed by the assessee company. AO, in his remand report, stated that out of the amount of ₹ 12,24,329/- disallowed by the ld. CIT (A), amount of ₹ 2,78,648/- is allowable. When we examine the findings returned by the ld. CIT (A) on this issue in para 4.9.1, it is categorically mentioned in the remand report that AO had not commented adversely on this submissions of the assessee. 11. In para 4.9.2, ld. CIT (A) recorded the findings that admittedly assessee had not provided the addresses of the two parties to whom brokerage and commission payments were made in the initial submission before the AO but the same was filed at the end of time barring month on 16.12.2011. It is also recorded that during the remand proceedings, the letter sent by AO u/s 133(6) has remained unanswe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d ground for making such disallowance. However, ld. AR for the assessee brought on record confirmation of the payees qua all the six parties, available at pages 377 to 384 of the paper book, and these facts have been brought on record before the AO during the remand proceedings. 15. Again, when the AO has categorically mentioned that all the payments made by the assessee are verifiable being duly recorded in the books of assessee, which have not been otherwise disputed and the same are duly corroborated with bank statement and ledger account. Moreover, out of 22 payees to whom the brokerage have been paid, only 6 payees did not respond. However, their confirmation is available on record. So, when there is no dispute as to the identity of the payees and genuineness of the expenditure has nowhere been disputed by the ld. CIT (A) and these expenditure made under the head commission and brokerage have not been disallowed in the preceding or succeeding year, the same cannot be disallowed. In these circumstances, we are of the considered view that the ld. CIT (A) has erred in making disallowance of ₹ 14,38,050/- out of disallowance of ₹ 1,19,94,194/- on accou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (A) reached the conclusion that the AO had considered and allowed the present claim of the assessee under section 35D of the Act and completed the assessment which was disallowable expenditure as per reasons given under order dated 15.10.2013 for AY 2008-09 in assessee s own appeal bearing No.396/12-13 and thereby made disallowance of ₹ 2,69,66,400/- being 1/5th of the expenditure claimed by the assessee. 20. Ld. AR for the assessee challenging the impugned enhancement made by the ld. CIT (A) contended inter alia that ld. CIT (A) has exceeded his jurisdiction under section 251(2) of the Act; that an amount of ₹ 269,66,400/- was not even the subject matter of the appeal before the ld. CIT(A) and as such, he was not empowered to enhance the income which is a different source of income and relied upon the decisions of CIT vs. Sardari Lal Co. (2001) 251 ITR 864 (Del.), CIT vs. Union Tyres 240 ITR 556 and CIT vs. Rai Bahadur Hardutroy Motilal Chamaria 66 ITR 443 . 21. However, on the other hand, ld. DR for the revenue in order to repel the arguments advanced by the ld. AR for the assessee contended that Ld. CIT (A) had got the statutory pow ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on ble Supreme Court in case of CIT vs. Rai Bahadur Hardutroy Motilal Chamaria (supra) by holding that, the Appellate Assistant Commissioner has no jurisdiction under section 31 (3) of the I.T. Act, 1922 which is pari-materia with section 251(1) of the Act to assess a source of income which is not disclosed either in the returns filed by the assessee or in the assessment order . Operative part of the findings returned by Hon ble Apex Court in the aforesaid case is extracted as under :- APPEAL TO APPELLATE ASSISTANT COMMISSIONERPOWER OF ENHANCEMENT-SCOPE OF-INDIAN INCOME-TAX ACT, 1922. s. 31(3). The Appellate Assistant Commissioner has no jurisdiction under section 31(3) of the Indian Income-tax Act. 1922, to assess a source of income which is not disclosed either in the returns filed by the assessee or in the assessment order. It is not therefore open to the Appellate Assistant Commissioner to travel outside the record, i.e., the return made by the assessee or the assessment order of the Income-lax Officer, with a view to finding out new sources of income and the power of enhancement under section 31(3) is restricted to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in CIT vs. Rai Bahadur Hardutroy Motilal Chamaria CIT vs. Sardari Lal Co. (supra) respectively, we are of the considered view that CIT (A) has erred in enhancing the income by travelling beyond his jurisdiction by making enhancement on the item which was not subject matter of the appeal rather enhanced the income on the new source of income because in this case when the AO has neither dealt with the issue in the assessment order nor this issue was raked up before the ld. CIT (A). Consequently, Grounds No.3, 4 and 5 are determined in favour of the assessee. GROUND NO.6 OF ASSESSEE S APPEAL (ITA NO.2489/DEL/2014) 27. Ground No.6 being premature needs no specific findings. GROUND NO.7 OF ASSESSEE S APPEAL (ITA NO.2489/DEL/2014) 28. Ground No.7 qua levy of interest u/s 234B and 234D of the Act need no specific finding being consequential in nature. 29. Resultantly, the appeal filed by the assessee is allowed. REVENUE S APPEAL (ITA NO.3426/DEL/2014) 30. Ld. CIT (A) has deleted the addition of ₹ 64,05,84,000/- made by the AO on account of disallowance of intere ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... GROUNDS NO.3, 4 5 34. AO noticed the steep increase in advertisement and publicity expenses by the assessee during the year under assessment from ₹ 6.32 crores to ₹ 26.02 crores (total increase ₹ 19.70 crores). AO proceeded to make the addition on the ground that the assessee has failed to furnish complete information in respect of some of the parties to whom the payment has been made qua advertisement and publicity expenses and given the details of 14 such parties and thereby made an addition of ₹ 19,89,044/-. Similarly, AO issued letter u/s 133 (6) of the Act for verification of advertisement and publicity expenses qua 33 parties for a total amount of ₹ 1,44,87,193/- but they have not responded and thereby made an addition of ₹ 1,44,87,193/-. 35. Likewise, the AO made further addition of ₹ 94,31,332/- on account of disallowance of advertisement and publicity expenses on the ground that in case of 8 parties, letter issued u/s 133 (6) has been received back unserved either with remarks incomplete address or the addressee had left the place of its last address . 36. Ho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... u/s 133 (6) afresh to the parties concerned and got confirmation of the parties and in the cases where no replies were received, AO has confronted the assessee during remand proceedings and submitted that :- The appellant submitted further evidences namely ledger account of the said parties form its books of accounts and the confirmations obtained by the party at the time of audit. The AO has reported that the submissions of the appellant were verifiable from the books of accounts. 39. Ld. CIT (A), after examining the remand report, rejoinder filed by the assessee thereto and after thrashing the facts in detail discussed in paras 4.15.1 to 4.15.24 of the impugned order, deleted the addition by returning following findings :- 4.15.23 From the above, it is noted that the discrepancy could be on account of cash system of accounting being followed by the said party. However, the appellant has not produced any confirmation from them, inspite of their denial obtained by the AO. In view of this it cannot be said that the said amount is outstanding as on the beginning of the year. Since, no further details have been submitted by the appel ..... X X X X Extracts X X X X X X X X Extracts X X X X
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