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06-03-2019, India Cable Net, Section 145(3), 131, 133(6), Tribunal Kolkata

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2 weeks 2 days ago #8740 by amit
Section - 145(3), 131, 133(6)
Order Date - 06-03-2019
Favouring - None
Court - Tribunal Kolkata
Appellant - ACIT
Respondent - India Cable Net Co. Ltd.
Justice - A.T.VARKEY, JM & DR. A.L.SAINI, AM
Citation - 219Taxpundit180
Appeal No. - ITA No.2525/Kol /2017
Asstt. Year - 2004-05

Order

PER : Dr. A. L. Saini

The captioned appeal filed by the Revenue and the Cross Objections filed by the Assessee, pertaining to assessment year 2004-05, are directed against an order
passed by the learned Commissioner of Income Tax (Appeals)-1, Kolkata [ (in short the ld. CIT(A)], which in turn arise out of an assessment order passed by the Assessing Officer u/s 143(3) of the Income Tax Act, 1961 ( in short the ‘Act’) dated 21/11/2006.

2. The grounds of appeal raised by the Revenue are as fo lows:

i) Whether on the facts and in the circumstances of the case and in law, the ld. CIT(A) was justified in deleting the addition of Rs. 14,99,135/-, ignoring the specific points in the argument between the assessee and M/s Set Discovery Pvt. Ltd. and the points raised in the Remand Report as well?

ii) Whether on the facts and in the circumstances of the case and in law, the ld. CIT(A) was justified in deleting the addition of Rs. 7,30,470/- disregarding the details reflected in the Remand Report?

iii) Whether on the facts and in the circumstances of the case and in law, the ld. CIT(A) was justified in deleting the addition of Rs. 2,38,60,000/- without considering the failure of the assessee in discharging the onus against the claim of business loss?

iv) That it is prayed to set aside the order passed by the ld. CIT(A)-1 and restore the assessment order passed by the Assessing Officer in this case.

v) Department craves leave to add, alter or modify any or all of the above grounds of appeal at or before the time of hearing of the appeal.

3. Ground No. 1 raised by the Revenue relates to addition of Rs. 14,99,135/- sustained by ld CIT(A) ignoring the specific points in the argument between the assessee and M/s Set Discovery Pvt. Ltd. and the points raised in the Remand Report as well.

4. The brief facts qua the issue are that during the assessment proceedings, the Assessing Officer noted that the assessee company entered into an agreement with M/s Set Discovery Pvt. Ltd, vide agreement dated 31.03.2004, for payment of distribution fees to M/s Set Discovery Pvt. Ltd. As per para 9 of the said agreement between assessee and M/s Set Discovery Pvt. Ltd, the assessee will get 5% distribution commission of monthly fees received by the M/s Set discovery Pvt Ltd. The total distribution fee paid to M/s Set Discovery Pvt. Ltd. for the financial year 2003-04 relevant to assessment year 2004 05 was to the tune of Rs. 8,62,42,695/-.As per the agreement, the distribution commission comes to Rs. 43,12,135/- (Rs.8,62,42,695 x 5%), but the assessee has shown distribution commission income from this party only to the tune of Rs. 28,13,000/-. Therefore the Assessing Officer noted that the assessee has suppressed income in form of distribution commission by Rs. 14,99,135/- (Rs. 43,12,135 - Rs. 28,13,000). Therefore the Assessing Officer made the addition to the tune of Rs. 14,99,135/-.

5. On appeal by the assessee, the ld. CIT(A) deleted the addition made by the Assessing Officer. Aggrieved the revenue is in appeal before us.

6. The ld. DR has primarily reiterated the stand taken by the Assessing Officer which we have already noted in our earlier para and is not being repeated for the sake of brevity. On the other hand, the ld. Counsel for the assessee has defended the order passed by the ld. CIT(A).

7. We have head both the parties and perused the material available on record. We note that the ld. CIT(A) had asked the Assessing Officer to examine the documents and submissions made by the assessee during the appellate proceedings. The assessing officer, in turn, having examined the documents and submissions of the assessee, submitted the remand report to the ld CIT(A). We note that in the remand report the Assessing Officer has not pointed out any specific mistake so far this addition is concerned. Whatever the submissions made by the assessee, the Assessing Officer in his remand report accepted. We note that the Assessing Officer on the basis of an agreement dated 31.01.2004, w.e.f. 01.09.2003, entered into by the assessee company with M/s Set Discovery Pvt. Ltd., for payment of distribution fees, the Assessing Officer came to conclusion that the assessee ought to have shown commission income of Rs. 43,12,135/- being 5% of Rs. 8,62,42,695/-,the amount paid / payable as distribution fees to M/s Set Discovery Pvt. Ltd. for the period from 01.09.2003 to 31.03.2004. We note that the commission was receivable only when the payment of monthly fee covered under the distribution agreement was made before the last date of following month and there were outstanding opening balance of Rs. 2,06,81,434/- as on 01.09.2003 on account of fee, the payment of which was not eligible for commission since the same was not covered under the agreement. The assessee further submitted the details of computation of commission actually received,however, the Assessing Officer added back the difference of commission receivable as per agreement over the amount of commission disclosed i.e. of Rs. 14,99,135/- (Rs.43,12,135- Rs.28,13,000).

8. We note that the distribution commission from M/s Set Discovery Pvt. Ltd contains both old dues and current fees and the distribution commission is available only on monthly distribution fees. This aspect has been ignored by the AO. We note that the commission was receivable only when payment of monthly fee covered under the distribution agreement was made before the last date of following month and there were outstanding (opening) balance of Rs. 2,06,81,434/- as on 01.09.2003, on account of fee, the payment of which was not eligible for commission, since the same was not covered under the agreement. However, we note that none of the payment during the financial year 2003-04 was made within the credit period as laid down by the clause ‘8’ of the referred agreement. We note that the assessee filed detailed computation of the commission, during the assessment stage, however, the Assessing Officer without making any cross-verification of actual receipt of commission or enquiry with M/s Set Discovery Pvt. Ltd. to ascertain whether the computation given by the

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