K.E.Gnanavel Raja, CHENNAI V. ACIT, CHENNAI

CO 99/CHNY/2013

• Counselvise Citation: [2013] 122 COUNSELVISE.COM (IT) 8899 (ITAT-CHENNAI)
• Duration Of Justice: 2 month(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 19-08-2013
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: C
• Assessment Year: 2006-2007
• Appeal Filed On: 19-06-2013
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Assessee Lawyers: N SANKARAN IRS
• Keywords: Unexplained cash credit

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, CHENNAI BEFORE DR. O.K.NARAYANAN, VICE-PRESIDENT AND SHRI VIKAS AWASTHY, JUDICIAL MEMBER ITA NO. 941/MDS/2013 ASSESSMENT YEAR : 2006-07 AND C.O.NO.99/MDS/2013 (IN ITA NO.941/MDS/2013) THE ASSISTANT COMMISSIONER OF INCOME-TAX, CENTRAL CIRCLE-II(5), CHENNAI. VS. SHRI K.E.GNANAVELRAJA, NO.1, GANPATH APARTMENTS, 17/8 KRISHNA STREET, T. NAGAR, CHENNAI 17. PAN AGAPG5673M (APPELLANT) (RESPO NDENT/CROSS-OBJECTOR) APPELLANT BY : SHRI N. SANKARAN, IRS, CIT RESPONDENT BY : MS. FARHA SU LTANA, CA DATE OF HEARING : 14 TH AUGUST, 2013 DATE OF PRONOUNCEMENT : 19 TH AUGUST, 2013 O R D E R PER DR.O.K.NARAYANAN, VICE PRESIDENT THE APPEAL IS FILED BY THE REVENUE AND THE CROSS- OBJECTION IS FILED BY THE ASSESSEE. THE RELEVANT ASSESSMENT YEAR IS 2006-07. THE APPEAL AND THE CROSS-OBJECTION ARE DIRECTED AGA INST THE ORDER OF THE COMMISSIONER OF INCOME-TAX(APPEALS)-I AT CHEN NAI DATED ITA 941 & CO 99/13 :- 2 -: 8.2.2013 AND ARISE OUT OF THE ASSESSMENT COMPLETED UNDER SEC.143(3), READ WITH SEC.153A OF THE INCOME-TAX AC T, 1961. 2. THE ASSESSEE IS CARRYING ON THE BUSINESS OF FIL M DISTRIBUTION. HE GIVES EXHIBITION RIGHTS TO SUB-DISTRIBUTORS AS W ELL. IN THE PREVIOUS YEAR RELEVANT TO THE ASSESSMENT YEAR UNDER APPEAL, THE ASSESSEE HAD RECEIVED A TOTAL SUM OF ` 50 LAKHS FROM SHRI O.G. KRISHNAM RAJU, WHO IS THE PROPRIETOR OF M/S. SRI VENKATESWARA PICTURES , ENGAGED IN THE BUSINESS OF FILM DISTRIBUTION. THE AMOUNT WAS RECE IVED IN FOUR INSTALMENTS. ACCORDING TO THE ASSESSEE, THE AMOUNT WAS IN THE NATURE OF ADVANCE AGAINST GRANTING OF EXHIBITION RIGHTS TO M/S. SRI VENKATESWARA PICTURES AND THEREFORE, THE AMOUNT OF ` 50 LAKHS HAS BEEN TREATED BY THE ASSESSEE AS LIABILITY AND SHOWN IN THE BALANCE SHEET OF THE ASSESSEE FOR THE PREVIOUS YEAR RELEVAN T TO THE ASSESSMENT YEAR UNDER APPEAL. THE ASSESSEE FOLLOWS MERCANTILE SYSTEM OF ACCOUNTING. ACCORDING TO THE ASSESSEE, T HE RELEASE OF THE PICTURE WAS NOT MADE DURING THE RELEVANT PREVIOUS Y EAR BUT THE RELEASE WAS MADE IN THE SUBSEQUENT PREVIOUS YEAR AND THEREF ORE, THE ADVANCE ATTAINED THE CHARACTER OF INCOME ONLY IN THE NEXT P REVIOUS YEAR AND AS SUCH, THE ASSESSEE HAS OFFERED THIS ADVANCE AS INCO ME FOR THE SUBSEQUENT ASSESSMENT YEAR 2007-08. THE ASSESSEE H AS ALSO PRODUCED CONFIRMATION LETTER FROM SHRI O.G. KRISHNA M RAJU TO SUPPORT ITA 941 & CO 99/13 :- 3 -: THE PAYMENT OF ADVANCE TO THE ASSESSEE. BUT THE AS SESSING OFFICER WAS OF THE VIEW THAT THE CONFIRMATION LETTER FILED BY SHRI O.G. KRISHNAM RAJU DOES NOT CONTAIN NECESSARY DETAILS AND THEREFO RE, THE GENUINENESS OF THE ADVANCE CANNOT BE ACCEPTED. HE ACCORDINGLY TREATED THE SUM OF ` 50 LAKHS AS UNEXPLAINED CASH CREDIT AND ADDED THE SAME TO THE INCOME OF THE ASSESSEE UNDER SEC.68 OF THE ACT. 3. IN FIRST APPEAL, THE COMMISSIONER OF INCOME-TAX (APPEALS) EXAMINED THE CASE. HE HELD THAT THE ASSESSEE IS CO NSISTENTLY FOLLOWING MERCANTILE SYSTEM OF ACCOUNTING, WHEREIN ADVANCES RECEIVED FOR DISTRIBUTION ARE TREATED AS LIABILITIES IN THE BALANCE SHEET IN THE YEAR OF RECEIPT AND THOSE ADVANCES ARE OFFERED AS INCOME IN THE YEAR OF DISTRIBUTION OF FILM RIGHTS. THE COMMISSIONER OF I NCOME-TAX(APPEALS) FOUND THAT THE EXPLANATIONS OFFERED BY THE ASSESSEE ARE IN ACCORDANCE WITH THE FACTS OF THE CASE AND THEREFORE, THERE IS NO REASON TO MAKE AN ADDITION OF ` 50 LAKHS AS UNEXPLAINED CASH CREDIT. THE ADDITION WAS ACCORDINGLY DELETED. 4. THE REVENUE IS AGGRIEVED BY THE ORDER OF THE COMMISSIONER OF INCOME-TAX(APPEALS) AND THEREFORE, THE SECOND APPEAL BEFORE THE TRIBUNAL. ITA 941 & CO 99/13 :- 4 -: 5. WE HEARD SHRI N.SANKARAN, THE LEARNED COMMISSIO NER OF INCOME-TAX APPEARING FOR THE REVENUE AND MS. FARHA SULTANA, CHARTERED ACCOUNTANT APPEARING FOR THE RESPONDENT-A SSESSEE. 6. THE SUM OF ` 50 LAKHS RECEIVED BY THE ASSESSEE FROM SHRI O.G.KRISHNAM RAJU HAS BEEN SHOWN AS ADVANCE IN THE ACCOUNTS OF THE ASSESSEE AND REFLECTED ON THE LIABILITY SIDE OF THE BALANCE SHEET. THE AMOUNT WAS KEPT AS ADVANCE FOR THE REASON THAT THE FILM WAS NOT RELEASED IN THE IMPUGNED PREVIOUS YEAR AND THEREFOR E, THE ASSESSEE COULD NOT GIVE THE EXHIBITION RIGHTS TO SHRI O.G.KR ISHNAM RAJU DURING THE PREVIOUS YEAR AND AS SUCH, NO INCOME AROSE TO T HE ASSESSEE DURING THE IMPUGNED PREVIOUS YEAR. THE FILM WAS RE LEASED IN THE SUCCEEDING PREVIOUS YEAR AND THE EXHIBITION RIGHTS WERE GIVEN IN FAVOUR OF SHRI O.G.KRISHNAM RAJU. AT THAT POINT O F TIME, THE ASSESSEE TRANSFERRED THIS ADVANCE TO INCOME ACCOUNT AND FINA LLY OFFERED THE SAME FOR TAXATION AS PART OF HIS INCOME FOR THE SUB SEQUENT ASSESSMENT YEAR 2007-08. THE COMMISSIONER OF INCOM E- TAX(APPEALS) HAS CLEARLY STATED THAT THE ASSESSEE H AS INCLUDED THIS INCOME IN THE COMPUTATION OF TAXABLE INCOME OF THE ASSESSEE FOR THE SUBSEQUENT ASSESSMENT YEAR. HE HAS ALSO MADE IT CL EAR THAT THE ASSESSEE IS FOLLOWING MERCANTILE SYSTEM OF ACCOUNTI NG, ON WHICH THE REVENUE HAS NO GRIEVANCE. ITA 941 & CO 99/13 :- 5 -: 7. IN THESE CIRCUMSTANCES, WE FIND THAT THE ASSESS ING OFFICER WAS NOT JUSTIFIED IN MAKING THE SAID ADDITION OF ` 50 LAKHS AND AS SUCH THE ORDER OF THE COMMISSIONER OF INCOME-TAX(APPEALS ) IN DELETING THE SAID ADDITION IS WITHIN LAW. THEREFORE, WE CONFIRM THE ORDER OF THE COMMISSIONER OF INCOME-TAX(APPEALS). 8. THE CROSS-OBJECTION FILED BY THE ASSESSEE, IN F ACT SUPPORTS THE ORDER OF THE COMMISSIONER OF INCOME-TAX(APPEALS ). AS THE ORDER OF THE COMMISSIONER OF INCOME-TAX(APPEALS) IS CONFI RMED BY THE TRIBUNAL, THE CROSS OBJECTION HAS BECOME INFRUCTUOU S. 9. IN RESULT, THE APPEAL FILED BY THE REVENUE AND THE CROSS OBJECTION FILED BY THE ASSESSEE ARE DISMISSED. ORDERS PRONOUNCED ON MONDAY, THE 19 TH OF AUGUST, 2013 AT CHENNAI. SD/- SD/- (VIKAS AWASTHY) (DR. O.K.NARAYANAN) JUDICIAL MEMBER VICE-PRESIDENT CHENNAI, DATED, THE 19 TH AUGUST, 2013. MPO* COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR 6. GF.