J.Harris Jayaraj, Bangalore V. ACIT, CHENNAI

CO 3/CHNY/2012

• Counselvise Citation: [2015] 123 COUNSELVISE.COM (IT) 1174 (ITAT-CHENNAI)
• Duration Of Justice: 3 year(s) 7 month(s) 16 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 26-08-2015
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 07-07-2015
• Assessment Year: 2005-2006
• Appeal Filed On: 09-01-2012
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: R CHANDRASHEKAR
• Assessee Lawyers: S SANKARALINGAM
• Section: 143(3); 145; 12

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL , C B ENCH, CHENNAI . , ! # , $ & BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SHRI CHALLA NAGENDRA PRASAD, JUDICIAL MEMBER I.T.A.NO . 1924/MDS/2011 & C.O.NO.3/MDS/2012 (IN ITA NO.1924/MDS/2011) (ASSESSMENT YEAR: 2005-06) ASSISTANT COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE-II(5) 46, MG.ROAD, CHENNAI-34. VS MR. J.HARRIS JAYARAJ, AP1277, 77 TH STREET, 12 TH SECTOR, K.K.NAGAR, CHENNAI-600 078. PAN: AACPJ8964H ( /APPELLANT) ( /RESPONDENT/CROSS OBJECTOR) / APPELLANT BY : MR. S.SANKARALINGAM, CIT /RESPONDENT BY : MR. R.CHANDRASHEKAR, ADVOCATE /DATE OF HEARING : 7 TH JULY, 2015 /DATE OF PRONOUNCEMENT : 26 TH AUGUST, 2015 / O R D E R PER CHALLA NAGENDRA PRASAD, JM: THE APPEAL AND CROSS OBJECTION ARE FILED BY THE REVENUE AND THE ASSESSEE RESPECTIVELY AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS)- II, CHENN AI DATED 23.08.2011 FOR THE ASSESSMENT YEAR 2005-06. THE ONLY ISSUE IN BOTH THE APPEAL AND CROSS OBJECTION I S THAT WHETHER THE ADVANCE RECEIVED BY THE ASSESSEE FOR HI S PROFESSIONAL WORK HAS TO BE ASSESSED IN THE YEAR O F RECEIPT OR IN THE YEAR OF PERFORMING THE CONTRACT. 2 ITA NO.1924/MDS/2011 & C.O. NO.3/MDS/2012 2. COUNSEL FOR THE ASSESSEE SUBMITS THAT THE ISSUE IN THE APPEAL HAS BEEN DECIDED BY THE CO-ORDINATE BENCH IN THE CASE OF R.S.SURIYA IN ITA NOS. 1944 TO 1946/MDS/201 4 DATED 30 TH JUNE, 2015, WHO IS A FILM ACTOR WHEREIN IT WAS HE LD THAT ADVANCE RECEIVED BY THE ASSESSEE FOR ACTING IN FILM S IS TO BE ASSESSED IN THE YEAR IN WHICH THE CONTRACT IS PERFO RMED AND NOT IN THE YEAR OF RECEIPT. COUNSEL FOR THE ASSESSE E SUBMITS THAT THE ASSESSEE IN THE PRESENT CASE IS A MUSIC DI RECTOR AND RECEIVED ADVANCES FROM SRI RAJALAKSHMI (P) LTD. AN D FILM WORKES, BOAT CLUB. SO FAR AS THE ADVANCE OF ` 9,50,000/- RECEIVED FROM SRI RAJALAKSHMI P.LTD., COUNSEL SUBMI TS THAT AS NO PROJECT MATERIALIZED , THE ADVANCE WAS SUBSEQUEN TLY REFUNDED IN JUNE/JULY, 2005 AND WITH REGARD TO ADVA NCE OF ` 3,00,000/- RECEIVED FROM FILM WORKES, COUNSEL SUBMI TS THAT THE AMOUNT IS STILL OUTSTANDING AS ON DATE, THEREFO RE PLACING RELIANCE ON THE ORDER OF THE CO-ORDINATE BENCH IN T HE CASE OF R.S.SURIYA (SUPRA), COUNSEL SUBMITS THAT ADVANCES R ECEIVED BY THE ASSESSEE ARE NOT TAXABLE IN THE ASSESSMENT Y EAR 2005-06. 3 ITA NO.1924/MDS/2011 & C.O. NO.3/MDS/2012 3. DEPARTMENTAL REPRESENTATIVE SUPPORTS THE ORDER O F ASSESSING OFFICER. 4. HEARD BOTH SIDES. PERUSED ORDERS OF LOWER AUTHOR ITIES AND THE DECISION RELIED ON. THE ASSESSING OFFICER B ROUGHT TO TAX A SUM OF ` 12,50,000/- RECEIVED BY THE ASSESSEE FROM TWO CONCERNS NAMELY SRI RAJALAKSHMI (P) LTD. AND FILM W ORKES, BOAT CLUB. THESE AMOUNTS WERE ASSESSED TO TAX REJEC TING THE CONTENTIONS OF THE ASSESSEE THAT IT WAS ONLY ADVANC E FOR THE PROJECTS TO BE PERFORMED PLACING RELIANCE ON THE DE CISION OF CO-ORDINATE BENCH IN THE CASE OF D.MEENA VS. DCIT I N ITA NO.1624 & 1625/MDS/2000. ON APPEAL, COMMISSIONER OF INCOME TAX (APPEALS) SUSTAINED THE ADDITION ONLY TO THE EXTENT OF ` 3,00,000/- AND DELETED THE ADDITION TO THE EXTENT OF ` 9,50,000/- IN RESPECT OF ADVANCES RECEIVED FROM SR I RAJALAKSHMI P.LTD. OBSERVING AS UNDER:- 12. I HAVE CONSIDERED THE FACTS AND THE SUBMISSIONS OF THE LD.A.R. AND THE ACIT. THE ISSUE IS RECOGNITION OF INCOME IN THE CASE OF A CINE ARTI STE WHO FOLLOWS CASH SYSTEM OF ACCOUNTING. IN THE TWO DECISIONS REFERRED TO BY THE A.O AND THE APPELLANT (D.MEENA AND R.S.SURIYA), THE HON'BLE ITAT, CHENNAI HAS WITH CLARITY ENUNCIATED THE CONDITIONS UNDER WHICH THE AMOUNT RECEIVED IN ADVANCE BY CINE ARTISTE CAN BE CONSIDERED AS INCOME IN THE YEAR OF RECEIPT. IN THE CASE OF 4 ITA NO.1924/MDS/2011 & C.O. NO.3/MDS/2012 D.MEENA IT WAS HELD THAT ADVANCE RECEIVED IN THE COURSE OF EXERCISE OF THE PROFESSION BY SIGNING A F ILM WOULD BE TREATED AS INCOME IN THE YEAR OF RECEIPT. IN THE CASE OF R.S.SURIYA , HON'BLE ITAT CONSIDERED THE FACTS THAT HE HAD RECEIVED ONLY TOKEN AMOUNTS FOR GIVING PREFERENCE TO THE PARTIES .FOR MAKING HIMSELF AVAILABLE FOR FUTURE ASSIGNMENTS IF FINALIZ ED AFTER DELIBERATIONS AND CONSIDERATION OF VARIOUS FACTORS AND CRITERIA AND HELD THAT SUCH ADVANCES RECEIVED AS TOKEN AMOUNTS FOR GIVING PRIORITY TO TH E PARTIES TO NEGOTIATE FUTURE ASSIGNMENTS WITHOUT FINALIZING THE TERMS AND CONDITIONS CANNOT BE TREAT ED AS INCOME ON RECEIPT BASIS. 13. FROM THE TWO DECISIONS OF THE HON'BLE ITAT, IT IS CLEAR THAT AN AMOUNT RECEIVED WOULD BE TREATED AS INCOME IF IT IS FOR A PROJECT WHICH IS KNOWN AT THE TIME OF THE RECEIPT OF THE AMOUNT AND AN AMOUNT RECEIVED SHOULD BE TREATED AS AN ADVANCE IF THE AMOUNT IS A TOKEN ADVANCE TO EXPLORE THE POSSIBILIT Y OF WORKING IN A PROJECT. 14. FROM THE DETAILS FURNISHED BY THE APPELLANT, TH E ADVANCE RECEIVED FROM MIS FILM WORKS IS FOR A PROJECT WHICH HAS NOT YET STARTED. THE ADVANCE, THEREFORE, WAS NOT RECEIVED AS ADVANCE FOR EXPLORATION OF POSSIBILITY FOR WORKING IN A PROJECT BUT WAS RECEIVED FOR A SPECIFIC AND CONCRETE PROJECT. EVEN IF THE PROJECT HAS NOT STARTED, FOR THE FACTS OF THIS ADVANCE THE DECISION OF HON'BLE ITAT, CHENNAI IN THE CASE OF D.MEENA IS SQUARELY APPLICABLE. FOR THE ADVANCES RECEIVED FROM MIS SRI RAJALAKSHMI (P) LTD , IT IS THE SUBMISSION OF THE LD.A.R. THAT THE ADVANCES WERE RECEIVED ONLY FOR EXPLORATION OF POSSIBILITY FOR WORKING IN A PROJECT AND AS NO PROJ ECT MATERIALISED, THE ADVANCES WERE SUBSEQUENTLY REFUNDED. THE DECISION OF THE HONBLE ITAT, CHENNAI IN THE CASE OF R.S.SURIYA IS THEREFORE APPLICABLE TO THE FACT OF THESE ADVANCES. 15. ACCORDINGLY, I HOLD THAT ADVANCE OF RS.3,00,000/ - FROM M/S FILM WORKS IS ASSESSABLE AS PROFESSIONAL INCOME OF THE APPELLANT ON RECEIPT BASIS AND ADVANCES OF RS. 9,50,000/ - RECEIVED FROM M/S SRI RAJALAKSHMI (P) LTD ARE NOT ASSESSABLE AS PROFESSIONAL INCOME OF THE APPELLANT IN ASSESSMENT YEAR 2005-06 . THE ADDITION OF RS.12,50,000/-MADE 5 ITA NO.1924/MDS/2011 & C.O. NO.3/MDS/2012 IN THE ASSESSMENT ORDER BY THE A.O IS, THEREFORE, SUSTAINED AT -RS.3,00,000/-. 5. THE CO-ORDINATE BENCH IN THE CASE OF R.S.SURIYA VS. ACIT IN ITA NOS.1944 TO 1946/MDS/2014 DATED 30 TH JUNE, 2015 HAS CONSIDERED AN IDENTICAL ISSUE AND HELD THA T ADVANCES RECEIVED CANNOT BE ASSESSED IN THE YEAR OF RECEIPT BUT HAS TO BE ASSESSED IN THE YEAR OF PERFORMING CO NTRACT. THE CO-ORDINATE BENCH CONSIDERED ITS EARLIER DECISI ONS WHILE DECIDING THE ISSUE AS UNDER:- 5. HEARD BOTH SIDES. PERUSED ORDERS OF LOWER AUTH ORITIES AND THE DECISIONS RELIED ON. IN THIS CASE, SEARCH W AS CONDUCTED IN THE PREMISES OF THE ASSESSEE ON 19.01. 2010 AND ASSESSMENTS WERE COMPLETED FOR THE ASSESSMENT Y EARS 2004-05 TO 2006-07 ON 30.12.2011 AND WHILE COMPLET ING ASSESSMENTS, THE ASSESSING OFFICER ASSESSED VARIOUS AMOUNTS RECEIVED BY THE ASSESSEE AS ADVANCES FROM PRODUCERS. ON GOING THROUGH THE ASSESSMENT ORDERS, WE FIND THAT NO INCRIMINATING MATERIALS WERE FOUND SO AS TO BRING THESE AMOUNTS TO TAX IN SEARCH ASSESSMENTS. WE ALSO FIND THAT SIMILAR ADVANCES WERE BROUGHT TO TAX WHILE COM PLETING ASSESSMENTS UNDER SECTION 143(3) OF THE ACT FOR ALL THESE THREE ASSESSMENT YEARS BY THE ASSESSING OFFICER AND WHEN THE MATTER CARRIED ON APPEAL, THE TRIBUNAL DELETED THE ADDITIONS FOR THESE ASSESSMENT YEARS IN ITA NOS. 59 6 & 597/MDS/2009 DATED 21.08.2009 FOR THE ASSESSMENT YE ARS 2004-05 & 2005-06 AND BY ITA NO.1329/MDS/2009 DATE D 19.01.2010 FOR THE ASSESSMENT YEAR 2006-07. WE ALSO FIND FROM THE ORDER OF THE COMMISSIONER OF INCOME TAX (A PPEALS) THAT THOUGH ASSESSEE PRODUCED THESE ORDERS OF THE T RIBUNAL, HE FAILED TO FOLLOW THESE ORDERS STATING THAT ASSES SEE HAS NOT PRODUCED THE WRITTEN AGREEMENTS AND THEREFORE, HE W AS OF THE VIEW THAT UNLESS WRITTEN AGREEMENTS ARE PRODUCE D, ORDERS CANNOT BE FOLLOWED AND HE TRIED TO DISTINGUI SH THE ORDERS PASSED BY THE TRIBUNAL. AUTHORIZED REPRESENT ATIVE 6 ITA NO.1924/MDS/2011 & C.O. NO.3/MDS/2012 FOR THE ASSESSEE REFERRING TO PAGE 18 OF THE PAPER BOOK, WHICH IS PARA 5 OF THE CO-ORDINATE BENCH OF THIS TR IBUNAL ORDER FOR THE ASSESSMENT YEARS 2004-05 AND 2005-06, BROUGHT TO OUR ATTENTION WHEREIN THERE IS A SPECIFI C FINDING BY THE CO-ORDINATE BENCH STATING THAT NO WRITTEN AGREE MENT BETWEEN THE ASSESSEE AND PRODUCERS OF FILMS WERE EN TERED INTO. THEREFORE, IN THE ABSENCE OF ANY WRITTEN AGR EEMENT THE COMMISSIONER OF INCOME TAX (APPEALS) SHOULD NOT HAV E TRIED TO DISTINGUISH THE ORDERS OF THE TRIBUNAL AND REFUSED TO FOLLOW THE SAME. ON GOING THROUGH THE ORDERS OF THE TRIBUNAL, WE FIND THAT THE ISSUE IN APPEAL IS ALREADY DECIDED IN THE PROCEEDINGS UNDER SECTION 143(3) OF THE ACT. 6. THE CO-ORDINATE BENCH IN ITA NOS. 596 & 597/MDS/2009 DATED 21.08.2009 WHILE ARRIVING AT THE CONCLUSION THAT TOKEN ADVANCES RECEIVED BY THE ASSE SSEE CANNOT BE ASSESSED AS INCOME OF THE ASSESSEE DURING THESE ASSESSMENT YEARS OBSERVED AS UNDER:- 5. AFTER CONSIDERING THE RIVAL CONTENTIONS AND THE MATERIALS ON RECORD, WE FIND THAT THE ADVANCES WERE RECEIVED BY THE ASSESSEE FOR TAKING UP THE ASSIGNMENT OF ACTING IN THE FILMS IN FUTURE. THERE IS NO WRITTEN AGREEMENT BETWEEN THE ASSESSEE AND THE PRODUCERS OF THE FILMS. THE ASSESSEE HAS SHOWN THESE ADVANCES AS LIABILITY IN THE BALANCE SHEETS AND IN VIEW OF THE PECULIAR FACT THAT IN THE SUBSEQUENT YEARS THESE ADVANCES WERE RETURNED BY THE ASSESSEE AS THE PROPOSED ASSIGNMENTS WERE NOT MATERIALIZED THE ADVANCE TOKEN RECEIPT CANNOT PARTAKE THE CHARACTER OF INCOME FOR THE ASSESSMENT YEAR UNDER CONSIDERATION. THE COMMISSIONER OF INCOME TAX (APPEALS) HAS RELIED UPON THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF LAKSHMINARAYANA FILMS VS. CIT (SUPRA), WHEREIN THE AMOUNTS WERE TO BE RECEIVED BY THE ASSESSEE AS PER THE WRITTEN AGREEMENT AND ON COMPLETION OF CERTAIN FORMALITIES IN FUTURE. THEREFORE, THE HONBLE HIGH COURT HAS HELD THAT THE AMOUNTS WOULD BE INCOME OF THE ASSESSEE IN THE YEAR IN WHICH THE SAID AMOUNTS WERE RECEIVED ON COMPLETION OF THE CONDITIONS AS PER THE AGREEMENT AND CANNOT BE SAID AS ACCRUED AT THE TIME OF EXECUTION OF AGREEMENT. IN OUR VIEW, THE FACTS OF THE CASE IN HAND ARE DISTINGUISHABLE AND THE DECISION OF THE HONBLE JURISDICTIONAL HIGH COURT RELIED UPON BY THE CIT(A) IS NOT DIRECTLY 7 ITA NO.1924/MDS/2011 & C.O. NO.3/MDS/2012 APPLICABLE BECAUSE IN THE PRESENT CASE THERE IS NO WRITTEN AGREEMENT AS WELL AS THERE IS NO DATES ON WHICH THE AMOUNTS TO BE PAID ON FULFILLMENT OF CERTAIN CONDITIONS. 6 . FROM THE FACTS OF THE PRESENT CASE, WE FIND THAT THESE TOKEN AMOUNTS WERE RECEIVED BY THE ASSESSEE FOR GIVING PREFERENCE TO THE PARTIES FOR MAKING HIMSELF AVAILABLE FOR FUTURE ASSIGNMENTS, IF FINALIZED AFTER DELIBERATIONS AND CONSIDERATION OF VARIOUS FACTORS AND CRITERIA. WHICH MEANS THAT BY RECEIVING THESE ADVANCES AS TOKEN AMOUNTS, THE ASSESSEE IS BINDING NOT TO TAKE UP ANY OTHER ASSIGNMENT PRIOR TO FINALIZING THE PROPOSED ASSIGNMENT? IT IS ALSO IMPORTANT TO NOTE THAT ON ACCEPTING THE AMOUNTS, T HE ASSIGNMENTS ITSELF IS NOT FINALIZED BUT THE FINALIZATION OF THE ASSIGNMEN T IS ALSO DEPENDANT ON ACCEPTANCE OF THE TERMS AND CONDITIONS MUTUALLY BY BOTH THE PARTIES. WHEN THE ASSESSEE HAS RETURNED THESE AMOUNTS IN THE SUBSEQUENT YEARS AS THE PROPOSED ASSIGNMENT WERE NOT MATERIALIZED THEN IT WOULD NOT BE PROPER AND APPROPRIATE TO TREAT THESE AMOUNTS AS INCOME OF THE ASSESSEE. IN THE CASE OF SHRI S.PRIYADARSAN VS. JCIT (SUPRA), THE TRIBUNAL HAS HELD IN PARA 5 AS UNDER:- '5. AFTER CAREFULLY CONSIDERING THE RECORD AVAILABLE WITH THE TRIBUNAL AND IN THE LIGHT OF THE ARGUMENTS ADVANCED ON BEHALF OF BOTH THE PARTIES, WE FIND THAT THE ASSESSEE HAD SHOWN THE DISPUTED AMOUNT OF RS.25 LAKHS IN THE LIST OF SUNDRY CREDITORS IN THE BALANCE SHEET FILED BY HIM FOR THE PERIOD ENDING 31 ST MARCH, H97. AS PER THE CONTENTION OF THE ASSESSEE ONLY THAT PART OF THE ADVANCE IS TREATED AS INCOME FOR WHICH HE RENDERED SERVICE TO THE GIVER OF THE ADVANCE AND THE BALANCE WAS SHOWN AS CREDIT IN THE ACCOUNTS. SO WHEN ONCE THE SAID ADVANCE IS SHOWN AS CREDIT THE SAME CANNOT BE TREATED AS INCOME OF THE ASSESSEE UNDER ANY STRETCH OF IMAGINATION. IT IS NOT THE CASE OF THE REVENUE THAT 8 ITA NO.1924/MDS/2011 & C.O. NO.3/MDS/2012 THE SAID ADVANCE GIVERS WERE EXAMINED AND THAT SERVICE WAS RENDERED BY THE ASSESSEE TO THEM DURING THE PERIOD. THEREFORE, IN OUR CONSIDERED OPINION AND IN THE LIGHT OF THE SUPREME COURT DECISION CITED SUPRA THERE IS NO PART OF THE SAID ADVANCE ACCRUED TO THE ASSESSEE TO CONSTITUTE INCOME TO BE CHARGEABLE TO TAX DURING THE PERIOD. THEREBY THE ADDITION OF ` 25 LAKNS TO THE RETURNED INCOME OF THE ASSESSEE IS UNSUSTAINABLE UNDER LAW AND IT IS TO BE SET ASIDE.' 7. SIMILARLY, IN THE CASE OF K.K. KHULLAR VS. DEPU TY COMMISSIONER OF INCOME TAX, THE DELHI BENCHES OF THIS TRIBUNAL HAS HELD IN PARAGRAPH 8 AND 9 AS UNDER: '8. WE HAVE CONSIDERED THE FACTS OF THE CASE AND RIVAL SUBMISSIONS. WE MAY REFER TO THE CHARGING SECTION 4 OF THE ACT TO THE EFFECT THAT INCOME TAX SHALL BE CHARGED FOR ANY ASSESSMENT YEAR (IT THE RATE OR RATES PROVIDED IN ANY CENTRAL ACTS IN RESPECT OF THE TOTAL INCOME OF THE PREVIOUS YEAR OF EVERY PERSON. SECTION 5 DEALS WITH THE 'SCOPE OF TOTAL INCOME', WHICH IS DEFINED IN RESPECT OF ANY PREVIOUS YEAR IN TERMS OF ACCRUAL, DEEMED ACCRUAL, RECEIPT AND DEEMED RECEIPT, ETC. SECTION 145 DEALS WITH THE METHOD OF ACCOUNTING IN RESPECT OF 'PROFITS AND GAINS OF BUSINESS OR PROFESSION' OR 'INCOME FROM OTHER SOURCES'. THUS, WHILE SECTIONS 4 AND 5 DEAL WITH THE SCOPE OF INCOME AND ITS CHARGE TO INCOME TAX, SECTION 1.45 IS A PROCEDURAL SECTION REGARDING THE METHOD TO BE FOLLOWED FOR RECORDING OF INCOME IN THE BOOKS OF ACCOUNT. IT IS NO DOUBT TRUE THAT FOR THE ASSESSMENT YEAR 1997-1998 AND ONWARDS, THE ASSESSEE CAN FOLLOW EITHER THE CASH OR THE MERCANTILE SYSTEM OF ACCOUNTING AND THE HYBRID SYSTEM OF ACCOUNTING IS PROHIBITED. HOWEVER, WHAT IS TO BE TAXED IS INCOME AND RECEIPT OF AN 9 ITA NO.1924/MDS/2011 & C.O. NO.3/MDS/2012 AMOUNT IS NOT BE THE BASIS FOR THE LEVY OF THE TAX. IN THE CASE OF MESSRS. SHOORJI VALLABHDAS AND COMPANY [1962] 46 ITR 144, THE HON'BLE SUPREME COURT POINTED OUT THAT THE INCOME TAX ACT TAKES INTO ACCOUNT TWO POINTS OF TIME ON WHICH THE LIABILITY TO TAX IS ATTRACTED NAMELY - (I) ACCRUAL OF INCOME OR (II) RECEIPT OF INCOME. IT IS FURTHER MENTIONED THAT THE SUBSTANCE OF THE MATTER IS 'INCOME'. IT MAY BE EMPHASIZED THAT IT IS ACCRUAL OF INCOME OR RECEIPT OF INCOME THAT CAN BECOME THE SUBJECT MATTER OF TAX AND IT IS THE INCOME WHICH HAS TO BE RECORDED AS PER THE SYSTEM OF ACCOUNTING FOLLOWED BY THE ASSESSEE IN VIEW OF SECTION 145 OF THE ACT, BECAUSE THE SUBSTANCE OF THE MATTER IS 'INCOME'. THEREFORE, THERE IS AN INFIRMITY IN THE ORDER OF THE LEARNED COMMISSION OF INOME TAX (APPEALS) IN PARAGRAPH 4.7 WHERE IT WAS STATED THAT THE ENTIRE AMOUNT RECEIVED WHETHER ARREARS OR ADVANCE IS TO BE SHOWN AS INCOME UNDER THE CASH SYSTEM OF ACCOUNTING. THE CORRECT POSITION WOULD BE THAT THE ENTIRE INCOME RECEIVED, WHETHER ARREAR OR ADVANCE OF INCOME HAS TO BE SHOWN AS INCOME UNDER THE CASH SYSTEM OF ACCOUNTING. COMING TO THE FACTS OF THIS CASE, THE ASSESSEE RECEIVED CERTAIN AMOUNTS FOR SERVICES TO BE PERFORMED OVER A PERIOD OF TIME, THE AMOUNT RELATABLE TO THE SERVICES RENDERED IN THE YEAR UNDER CONSIDERATION WAS SHOWN AS INCOME, THE REASON BEING THAT THE ASSESSEE BECAME ENTITLED TO RECEIVE THAT AMOUNT FROM THE CLIENT IN RESPECT OF THE SERVICES RENDERED. IN OTHER WORDS, DEBT TO THE EXTENT OF THE AMOUNT PERTAINING TO SERVICES RENDERED ONLY GOT VESTED IN THE ASSESSEE. THE REST OF THE AMOUNT WAS TAKEN AS LIABILITY TO BE ADJUSTED IN SUBSEQUENT YEARS AS AND WHEN THE SERVICE WAS RENDERED. IT IS BUT CLEAR THAT THE EXCESS AMOUNT 10 ITA NO.1924/MDS/2011 & C.O. NO.3/MDS/2012 WOULD HAVE TO BE RETURNED IN CASE THE SERVICE WAS NOT PERFORMED IN SUBSEQUENT YEAR AND THEREFORE, IN RESPECT OF SUCH AMOUNT NO DEBT CAME INTO EXISTENCE IN FAVOUR OF THE ASSESSEE. THEREFORE, THIS AMOUNT DID NOT BECOME THE INCOME. ACCORDINGLY, WE ARE OF THE VIEW THAT THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN FINDING THAT THE ASSESSEE WAS FOLLOWING THE HYBRID SYSTEM OF ACCOUNTING ON THE GROUND THAT THE WHOLE OF THE AMOUNT RECEIVED FROM THE CLIENTS AS RETAINERSHIP FEES WAS NOT DECLARED AS INCOME IN THE YEAR OF RECEIPT OF THE AMOUNT. 9. COMING TO THE ISSUE OF CONSISTENCY OF ASSESSMENTS, IT MAY BE MENTIONED THAT THE HON'BLE SUPREME COURT ITSELF MENTIONED IN THE CASE OF RADHASOAMI SATSANG [1992] 193 ITR 321{ THAT THEIR FINDINGS SHOULD NOT BE TAKEN AS A GENERAL PROPOSITION OF LAW TO BE FOLLOWED IN EVERY CASE AS IT WAS CONFIRMED TO THE FACTS OF THAT CASE. WE MAY ADD THAT IF A MANIFESTLY WRONG DECISION HAS BEEN TAKEN BY THE ASSESSING OFFICER IN ONE YEAR OR IN A NUMBER OF YEARS/ IT WILL NOT BIND THE ASSESSING OFFICER IN TILE ASSESSMENT OF A SUBSEQUENT YEAR BECAUSE THERE CANNOT BE ANY ESTOPPEL AGAINST THE LAW. HOWEVER, IN THIS CASE, WE FIND THE EARLIER AND SUBSEQUENT ASSESSMENT WERE MADE ON CORRECT APPRECIATION OF THE PRINCIPLE OF THE CASH SYSTEM OF ACCOUNTING. SINCE THE ASSESSEE SUCCEEDS ON MERITS ON THIS ASPECT, THERE IS NO NEED FOR US TO GIVE A FINDING THAT THE ASSESSING OFFICER WAS BOUND IN THIS YEAR TO FOLLOW THE PAST OR FUTURE ASSESSMENT 11 ITA NO.1924/MDS/2011 & C.O. NO.3/MDS/2012 8. SINCE, THE FACTS AND CIRCUMSTANCES OF THE CASE IN HAND ARE SIMILAR TO THE CASE RELIED UPON BY THE ASSESSEE . THEREFORE, FOLLOWING THE DECISION OF THIS TRIBUNAL AS WELL AS THE DELHI BENCHES OF THIS TRIBUNAL; WE HOLD THAT WH EN THE ASSESSEE HAS SHOWN AS THESE ADVANCE RECEIPT AS LIABILITY IN HIS BALANCE SHEET AND TILE ADVANCES WERE NOT ON THE FINALIZATION OF ANY AGREEMENT BUT WERE RECEIVED AS A TOKEN AMOUN T FOR GIVING A PRIORITY TO THE PARTIES TO NEGOTIATE FOR F UTURE ASSIGNMENT WITHOUT FINALIZING THE TERMS AND CONDITI ONS. WHEN THE FUTURE ASSIGNMENTS WERE NOT MATERIALIZED AND THE AMOUNTS WERE RETURNED, THEN THE SAID ADVANCES CANN OT BE TREATED AS INCOME OF THE ASSESSEE. ACCORDINGLY, WE ASIDE THE ORDERS OF LOWER AUTHORITIES, QUA THIS ISSUE AND DELETE THE ADDITION IN THIS RESPECT. 7. SIMILARLY, THE CO-ORDINATE BENCH FOR THE ASSESSM ENT YEAR 2006-07 IN ITA NO.1329/MDS/2009 BY ORDER DATED 19.01.2010 HELD AS UNDER:- 7. WE HAVE PERUSED THE ORDERS OF THE AUTHORITIES BELOW AND HEARD THE RIVAL CONTENTIONS. THERE IS NO DISPUTE THAT LD. CIT(A) HAD CONFIRMED THE ADVANCE PROFESSIONAL FEE OF RS.55 LAKHS AS INCOME FOR THE IMPUGNED ASSESSMENT YEAR RELYING ON HIS OWN DECISION IN ASSESSEE'S APPEALS FOR THE ASSESSMENT YEARS 2004-05 & 2005-06. IT IS CLEAR FROM THE ASSESSMENT ORDER ITSELF THA T THE AMOUNTS RECEIVED BY THE ASSESSEE FROM M/S. PHOTON FACTORY AND M/S.STUDIO GREEN WERE NOT AGAINST ANY PARTICULAR FILMS. ASSESSEE'S CONTENTION THAT INCOME COULD NOT BE RECOGNIZED TILL THE ARTIST HAD ACTED IN THE FILM , FOR WHICH THE ADVANCES WERE RECEIVED, CARRIES GREAT STRENGTH. STORYLINE WAS NOT FIXED, NEITHER WA S THE NAME, NOT EVEN THE CO-ARTISTS WERE KNOWN. JUST BECAUSE ASSESSEE WAS FOLLOWING THE CASH SYSTEM, IT WAS NOT OBLIGED TO CONSIDER ALL SUMS RECEIVED BY IT AS INCOME UNLESS SUCH RECEIPT COULD BE CATEGORIZED AS INCOME. WHETHER IT IS CASH SYSTEM OR MERCANTILE SYSTEM, A RECEIPT CAN BE TREATED AS INCOME ONLY IF SUCH INCOME CAN BE CONSIDERED AS RECOGNIZED. JUST BECAUSE ASSESSEE AD RECEIVED AN AMOUNT OF ADVANCE SUCH SUM CANNOT BE TREATED AS INCOME, ONLY FOR A REASONING THAT IT WAS FOLLOWING CASH SYSTEM OF ACCOUNT. IT IS ON ACCOUNT OF THIS REASON THAT IN ASSESSEE'S OWN 12 ITA NO.1924/MDS/2011 & C.O. NO.3/MDS/2012 CASE FOR EARLIER YEARS, THIS TRIBUNAL HAD HELD THA T IT WOULD NOT BE PROPER AND APPROPRIATE TO TREAT PROFESSIONAL ADVANCE RECEIVED AS INCOME, UNLESS UNTIL PROPOSED ASSIGNMENTS HAD MATERIALIZED. THOUGH THE LD. DR PUT GREAT EFFORTS TO SUBMIT THAT FACT SITUATION FOR THE IMPUGNED ASSESSMENT YEAR COULD HAVE BEEN DIFFERENT FROM THAT OF THE EARLIER YEARS, WHICH WAS DEALT WITH BY THE TRIBUNAL IN ITA NO. 596 / 597/MDS/2009 AS AFORESAID. WE FIND THAT LD. CIT(A) HAD CONFIRMED THE ORDER OF THE ASSESSING OFFICER FOR THE IMPUGNED ASSESSMENT YEAR BASED ON HIS OWN DECISION FOR THE EARLIER YEARS, WHICH WAS LATER REVERSED BY THE TRIBUNAL. AS FOR THE RELIANCE PLACED BY THE LD. COUNSEL FOR THE REVENUE ON THE DECISIONS OF A. RAMKI (SUPRA) AND D .MEENA; THE FORMER CASE WAS DECIDED RELYING ON THE LATTER DECISION. IF WE ADVERT TO THE DECISION OF D.MEENA'S CASE, THERE THE ASSESSEE WHO WAS ALSO A CINE ARTIST, HAD RECEIVED ADVANCE ON THE BASIS OF A CONTRACT FOR ACTING IN A FILM. IN OTHER WORDS, THERE WAS A SUBSISTENT CONTRACT FOR- ACTING IN A PARTICULAR- FILM, WHEREAS IN THE GIVEN CASE THE ADVANCES WERE RECEIVED FROM TWO PARTIES WITH NO CLEAR CRYSTALLIZATION OF FILM OR THE STORYLINE OR OTHER ASPENS OF THE PROPOSED FILM. HENCE, WE ARE OF THE OPINION THAT D. MEENA' S CASE (SUPRA) IS NOT APPLICABLE HERE ON FACTS. IN ANY EVENT, SINCE THIS TRIBUNAL HAD TAKEN A VIEW IN FAVOUR OF THE ASSESSEE IN ASSESSEES OWN CASE FOR EARLIER YEARS ON SIMILAR FACT SITUATION, WE FIND NO COMPELLING REASONS TO DEPART FROM THE VIEW TAKEN EARLIER. THEREFORE, WE FIND THAT AMOUNT OF ` 55 LAKHS RECEIVED BY THE ASSESSEE AS ADVANCE COULD NOT HAVE BEEN TREATED AS HIS INCOME FOR THE IMPUGNED ASSESSMENT YEAR. SUCH ADDITION STANDS DELETED. GROUNDS NUMBER 2 TO 9 OF THE ASSESSEE ARE ALLOWED. WE ALSO FIND THAT THE CO-ORDINATE BENCH HAS DISTING UISHED THE DECISIONS RELIED ON BY THE DEPARTMENTAL REPRESE NTATIVE IN THE CASE OF MS. D.MEENA (SUPRA) AND THE JURISDIC TIONAL HIGH COURT DECISION IN THE CASE OF LAKSHMINARAYANA FILMS VS. CIT (SUPRA),WHILE ARRIVING AT THE CONCLUSION TH AT ADVANCES RECEIVED BY THE ASSESSEE CANNOT BE TAXED A S INCOME OF THE ASSESSEE FOR THE RESPECTIVE ASSESSMEN T YEARS. 13 ITA NO.1924/MDS/2011 & C.O. NO.3/MDS/2012 8. IT IS ALSO FURTHER NOTICED THAT IN ASSESSEES OW N CASE, THE TRIBUNAL FOR THE ASSESSMENT YEAR 2009-10 IN ITA NO.1241/MDS/2013 BY ORDER DATED 8.4.2015 HAS TAKEN A SIMILAR VIEW HOLDING THAT INCOME HAS NOT CRYSTALLI ZED TO THE ASSESSEE. 9. RESPECTFULLY FOLLOWING THE SAID ORDERS, WE HOLD THAT THE AMOUNTS RECEIVED BY THE ASSESSEE FROM VARIOUS PRODUCERS TOWARDS ADVANCES CANNOT BE ASSESSED AS INCOME OF THE ASSESSEE. THEREFORE, WE SET ASIDE THE ORDERS OF THE LOWER AUTHORITIES AND DELETE THE ADDITIONS I N RESPECT OF THE ADVANCES TREATED AS INCOME OF THE ASSESSEE. 6. RESPECTFULLY FOLLOWING THE SAID DECISION, WE HOL D THAT NONE OF THE ADVANCES RECEIVED BY THE ASSESSEE ARE ASSESSABLE AS INCOME OF THE ASSESSEE IN THE ASSESSM ENT YEAR 2005-06 AS IT WAS RECEIVED ONLY AS ADVANCE FO R PERFORMING PROJECTS IN FUTURE. 7. IN THE RESULT, BOTH THE APPEAL OF THE REVENUE AN D CROSS OBJECTION OF THE ASSESSEE ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 26 TH AUGUST, 2015. SD/- SD/- ( ) ( ' $ ) ( CHANDRA POOJARI ) ( CHALLA NAGENDRA PRASAD ) & / ACCOUNTANT MEMBER $' & / JUDICIAL MEMBER $ /CHENNAI, ) /DATED 26 TH AUGUST, 2015 SOMU 14 ITA NO.1924/MDS/2011 & C.O. NO.3/MDS/2012 ',- .- /COPY TO: 1. ASSESSEE 2 ASSESSING OFFICER 3. / () /CIT(A) 4. / /CIT 5. - ''3 /DR 6. 6 /GF .