DCIT, NEW DELHI V. M/S SAHARA INDIA MASS COMMUNICATION LTD., MUMBAI

ITA 3130/DEL/2011

AI Insights

The case involves the Deputy Commissioner of Income Tax, Central Circle-6, New Delhi as the appellant and Sahara One Media & Entertainment Ltd. as the respondent. The dispute arose from the reassessment of the assessee's income for the Assessment Year 2003-04, where the Assessing Officer (AO) claimed that an excess payment of Rs. 50 crores made for actor rights was taxable. The CIT(A) found the reassessment invalid, leading to the revenue's appeal to the Tribunal. The Tribunal upheld the CIT(A)'s decision, noting that the AO did not meet the legal requirements for reopening the assessment, particularly the lack of new material evidence and failure to demonstrate income escapement.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 396483 (ITAT-DELHI)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-05-2025
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2003-2004
• Other Referred Cases: SA. Builders lid vs CTT: 288 ITR 1 (SC), Hero Cycles Pvt. Ltd. CIT: 379 ITR 347 (SC), CIT vs Dalmia Cement Pvt. Ltd: 254 ITR 377 (Del HC), Givaudan Flavours India (P) Ltd. in ITA No. 2672/Mum/2009, Kelvinator India Limited 320 ITR 561, ICICI Securities Primary Dealership Lid: 348 ITR 299 (SC), Usha International vs CIT: 348 ITR 485 (Del) (FB), Maruti Suzuki India Lad vs DCTT: 356 ITR 209 (Del), Satnam Overseas Limited vs ACTT: 129 ITR 237 (Del), CIT vs Batra Bhatta Co: 321 ITR 526 (Del), Deepak Kumar vs PCIT: 450 ITR 301 (Del), Jal Hotels Co Ltd. vs ADIT 184 Taxman 1 (Del), CIT vs Feather Foam Enterprises (P) Ltd: 296 ITR 342 (Del), ACTT vs. Dhariya Construction Co. 328 TER 515 (NC), Chhugamal Rajpal vs S.P. Chaliha: 79 ITR 603 (SC), Amsa India Pvt. Ltd. vs CTT: 393 ITR 157 (Del HC), ACIT vs. Dhariya Construction Company: 328 ITR 515, CIT v. SFIL Stock Broking Ltd.: 325 ITR 285, Signature Hotels P. Ltd. vs. ITO: 338 ITR 51 (Del. HC), Sarthak Securities vs. ITO: 329 ITR 110 (Del. HC), Girdhar Gopal Dalmia v. Uol and Ors: 451 ITR 320 (Cal HC), PCIT. GRD Commodities Ltd.: 149 taxmann.com 233 (Cal HC), Eveready Industries India Lad vs. JCIT 243 ITR 540 (Gauhati), CIT vs. Smt Paramjit Jaur: 168 Taxman 39 (P&H HC), Sterlite Industries (India) Lituted vs. ACIT: 305 ITR 339 (Mad), Intimate Jewels Pvt. Ltd. vs. ITO: ITA No. 4498/Del/2010 (Del)
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: JAVED AKHTAR
• Assessee Lawyers: AJAY VOHRA
• Keywords: Reassessment proceedings; Reopening of assessment; Tangible material
• Section: 147; 148; 143(3)

Judgement Text

" 1 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH ‘A’: NEW DELHI BEFORE SHRI VIKAS AWASTHY, JUDICIAL MEMBER AND SHRI AVDHESH KUMAR MISHRA, ACCOUNTANT MEMBER ITA No.3130/Del./2011, A.Y. 2003-04 Deputy Commissioner of Income Tax, Central Circle-6, ARA Centre, Jhandewalan Extn., New Delhi Vs. M/s. Sahara One Media & Entertainment Ltd. (Formerly known as Sahara India Mass Communication Ltd.), Sahara India Point, CST 40-44, S V Road, Goregaon, Mumbai. PAN: AAACP3047R (Appellant) (Respondent) Appellant by Mr. Javed Akhtar, CIT(DR) Respondent by Sh. Ajay Vohra, Sr. Advocate Sh. Kunal Pandey, CA Date of Hearing 04/03/2025 Date of Pronouncement 30/05/2025 ORDER PER AVDHESH KUMAR MISHRA, AM The appeal of the Revenue for the Assessment Year (AY) 2003-04 is directed against the order dated 31.03.2011 of the Commissioner of Income Tax (Appeals)-I, New Delhi [CIT(A)]. 2. The assessee has raised following grounds of appeal: - “On the facts and in the circumstances of the case the Ld. CIT(A) has erred in: - 1. The CIT(A) is not correct in law and facts. ITA No.3130 /Del/2011 Sahara One Media & Entertainment. Ltd. 2 2. On the facts and circumstances of the case, the CIT(A) has erred in holding that the re-assessment proceedings u/s 147 was void. 3. On the facts and circumstances of the case, the Ld. CIT(A) has erred in deleting the addition of Rs.50,00,00,000/- on account of inflated purchase of Actor Rights of Sh. Amitabh Bachchan. 4. The appellant craves leave to add, alter or amend any/all of the grounds of appeal before or during the course of the hearing of the appeal.” 3. The relevant facts giving rise to this appeal are that the assessee, a company, is engaged in the business of production of movies and serials/ TV programs. Originally, the assessment at loss (-) of Rs.3,27,50,903/- was completed under section 143(3) of the Income Tax Act, 1961 (Act) on 16.03.2006 by the Assessing Officer (AO) stationed at Mumbai. Subsequently, the case was reopened under section 148 of the Act by the AO, Central Circle, New Delhi on 30.03.2010. In response to the notice issued under section 148 of the Act, the assessee filed a letter to treat the original Income Tax Return (ITR) filed earlier as ITR in response to the said notice. The assessee challenged the reopening of the case on various reasoning. However, the AO did not drop the reopened assessment proceedings and completed the assessment vide order under section 143(3) r.ws 147 of the Act on 10.12.2010 taxing the excess payment of Rs.50 crores to Lahiri and AB Corp. Ltd. (ABCL). According to the AO, prior to entering into the agreement between assessee and Lahiri, an ITA No.3130 /Del/2011 Sahara One Media & Entertainment. Ltd. 3 arbitration award was passed by the arbitrator on 19.03.2003 in respect of the dispute between Lahiri and ABCL pertaining to an agreement entered into between them on 28.06.2000 under which the actor's rights was valued at Rs.10 Crores; whereas the assessee had paid Rs.60 Crores in the relevant year as per the agreement entered into between the assessee and Lahiri Productions Ltd. (Lahiri) under an agreement dated 22.03.2003 (page 41-44 of PB) under which Lahiri was to make Mr. Amitabh Bachchan act in certain series to be produced by the assessee and the consideration for the same was determined at Rs.60 crore which was paid by the assessee. However, the AO held that an excessive payment of Rs.50 Crores was made to Lahiri as the right of Mr. Amitabh Bacchan was only Rs.10 Crores. Hence, the AO disallowed the claim of Rs.50 Crores treating it as an excessive payment to Lahiri and taxed it accordingly. The AO also noted that this sum of Rs.50 Crores was subsequently transferred to Lahiri to an entity in Mauritius which in turn transferred the same to Pattchom International Engineering AG, belonging to one Mr. C K Pithawala. Aggrieved, the assessee filed appeal before the CIT(A), who, vide order dated 31.03.2011, held that the entire re-assessment proceedings as null and void apart from holding that the said alleged excess payment of Ra.50 Crores could not be taxed at all. Aggrieved, the Revenue is in appeal before the Tribunal. ITA No.3130 /Del/2011 Sahara One Media & Entertainment. Ltd. 4 4. The Ld. CIT-DR, placing reliance on the assessment order, argued vehemently and supported the case of the Revenue. 5. The Ld. Counsel argued that the consideration determined at Rs.60 Crores had been wrongly questioned by the AO merely because an arbitration award was granted just 3 days prior to the entering of the agreement determining the remuneration payable at Rs.10 Crores as the dispute relating to an agreement entered into between Lahiri and ABCL was dated 28.06.2000 i.e. almost 3 years prior to the entering into the agreement with the assessee. Therefore, he contended that the AO had wrongly taken the arbitration award as the base to question the consideration determined 22.03.2003. He further, submitted that the AO had drawn conclusion that the payment was excessive based on the agreement entered into by the assessee with Lahiri on 22.03.2003 which recorded the earlier dispute of Lahiri with ABCL and settlement made therein under the arbitration. However, the AO, before making the disallowance, neither provided the copy of the said arbitration award to the assessee nor did he enquire into the circumstances under which such award was passed. The Ld. Counsel drew our attention to the finding of the Ld. CIT(A) that Mr. Amitabh Bachchan was commanding price of Rs.1 Crore per episode for \"Kaun Banega Crorepati” around the time when the said agreement was entered into by the assessee. Accordingly, he contended that the payment made by the assessee was not excessive as ITA No.3130 /Del/2011 Sahara One Media & Entertainment. Ltd. 5 the actor’s right went very high during the relevant period due to success of \"Kaun Banega Crorepati”. 6.1 It was further contended that the AO had not disputed the genuineness of the payment nor of the parties. It was contended that the disallowance on the ground that the payments were excessive or unreasonable could only be made under section 40A(2)(a) of the Act, and under Chapter X of the Act. The above provisions apply only if the payments were made to the related parties. In the Instant case, the assessee and Lahiri were not related parties at all and therefore, no such disallowance on the ground that the payments were made at all. There is no provision in the statute which gives powers to the Department to disallow expenditure on the ground that it is excessive in nature except as stated above. Therefore, the action of the AG is completely unjustified. Reliance was placed upon the following decisions for the proposition that the AO could not step into the shoes of the businessman to determine the reasonableness of the expenditure:  SA. Builders lid vs CTT: 288 ITR 1 (SC)  Hero Cycles Pvt. Ltd. CIT: 379 ITR 347 (SC)  CIT vs Dalmia Cement Pvt. Ltd: 254 ITR 377 (Del HC) 6.2 To justify the payment of Rs.60 Crores to Lahiri during the relevant year, our attention was drawn to the fact that the said rights were ITA No.3130 /Del/2011 Sahara One Media & Entertainment. Ltd. 6 subsequently sold for a sum of Rs.65 Crores in the FY 2004-05 to SITV Network Mumbai and the same had been offered to tax (Clause (b) at Pg. 41 of the CTT(A) order) which had also been accepted by the Department. Alternatively, it was also argued that even assuming without admitting that the disallowance made had to be sustained, then, the said payment duly disclosed in the closing stock had to be reduced to avoid double taxation [page 68 of PB]. Under either scenario, it would not lead to any income chargeable to tax which had escaped assessment. Accordingly, in the absence of there being any income escaping assessment, the initiation of reassessment proceedings in the year under consideration was invalid and bad in law. Reliance was placed on the decision of the Mumbai Bench of the Tribunal in the case of Givaudan Flavours India (P) Ltd. in ITA No. 2672/Mum/2009 wherein the Tribunal held that the \"escapement of income\" is one of the fundamental conditions for initiation of reassessment proceedings. 6.3 The Ld. Counsel submitted that the reasons for reopening the assessment supplied to the assessee revealed that there was no allegation of failure on the part of the assessee to disclose truly and fully all material facts necessary for assessment. The reason for reopening the assessment was confined to escapement of income of Rs.50 Crores (payment made by the assessee to Lahiri). The reasons for reopening the assessment stated that certain materials were unearthed during the investigation in the case ITA No.3130 /Del/2011 Sahara One Media & Entertainment. Ltd. 7 of transactions between Mr. Amitabh Bachchan and Mr. C.K. Pithawala. However, the reopening was initiated without stating as to how the transactions between them had a bearing on the assessee and how the income chargeable to tax had escaped assessment in the hands of the assessee. 6.4 The Ld. Counsel submitted that the reassessment proceedings were without jurisdiction and thus the same was bad in law and illegal as the reason for reopening the assessment did not disclose the tangible material on the basis of which AO formed a belief that income of the assessee had escaped assessment. Further, there was no allegation in the said reason recorded by the AO that there was any failure on the part of the assessee to truly and fully disclose all material facts necessary for the assessment, which was a mandatory requirement under 1\" proviso to section 147 of the Act as the reopening had been initiated after expiry of four years. Reliance was placed on the following decisions:  PCTT v. DSC Ltd.: 153 taxmann.com 535 (Del)  Avtec Ltd vs DCIT: 395 ITR 434 (Del)  D. T. and T. D. C. Ltd: 324 ITR 234 (Del)  Haryana Acrylic Manufacturing Co Ltd vs CIT: 308 ITR 38 (Del)  CIT v. Indian Farmers Fertilizer Cooperative Ltd: 171 Taxman 379 (Del) ITA No.3130 /Del/2011 Sahara One Media & Entertainment. Ltd. 8  Wel Intertrade (P) Ltd v. ITO 308 ITR 22 (Del)  Atma Ram Properties (P) Ltd: 343 ITR 141 (Del)  CIT v. Shri Tirath Ram Ahuja (HUF): 306 ITR 173 (Del. HC) 6.5 Our attention was invited to the Profit & Loss Account of the assessee to demonstrate that the said transaction was, in fact, disclosed as a part of the closing stock [page 65 r.w. Pg 68 of PB]. In other words, the amount was debited as well as credited to the Profit & Loss Account and was therefore revenue neutral. Thus, it was submitted that there was no failure on the part of the assessee to disclose the primary fact required for the assessment. Reliance was placed on the decisions of the Hon’ble Supreme Court in the case of Kelvinator India Limited 320 ITR 561; wherein it was held that the reassessment must be based on fresh information/material coming to the possession of the AO subsequent to the completion of original assessment. It was submitted that in the case in hand the AO had not have any new material/information for initiating reassessment proceedings. Hence, the reopening was challenged in this case. Reliance was placed on the following decision:  ICICI Securities Primary Dealership Lid: 348 ITR 299 (SC).  Usha International vs CIT: 348 ITR 485 (Del) (FB)  Maruti Suzuki India Lad vs DCTT: 356 ITR 209 (Del)  Satnam Overseas Limited vs ACTT: 129 ITR 237 (Del) ITA No.3130 /Del/2011 Sahara One Media & Entertainment. Ltd. 9  CIT vs Batra Bhatta Co: 321 ITR 526 (Del)  Deepak Kumar vs PCIT: 450 ITR 301 (Del)  Jal Hotels Co Ltd. vs ADIT 184 Taxman 1 (Del)  CIT vs Feather Foam Enterprises (P) Ltd: 296 ITR 342 (Del) 6.6 The Ld. Counsel submitted that the reopening was initiated based on certain transactions between third parties which was subject matter of investigation by the Investigation wing. No evidence was unearthed against the assessee during such investigation to form a belief that an income chargeable to tax in the hands of the assessee had escaped assessment. Merely because the assessee made certain payments to Lahiri under Actor's agreement and subsequently Lahiri had transferred such payments to other parties could not be a reason to initiate reassessment proceedings in the hands of the assessee. The AO had failed to record the reason for reopening about the live nexus between escapement of income vis-à-vis the assessee’s failure to disclose the material facts necessary for the assessment. Hence, the Ld. Counsel argued that the reopening was bad in law. Reliance was placed upon the following decisions:  ACTT vs. Dhariya Construction Co. 328 TER 515 (NC)  Chhugamal Rajpal vs S.P. Chaliha: 79 ITR 603 (SC)  Amsa India Pvt. Ltd. vs CTT: 393 ITR 157 (Del HC) ITA No.3130 /Del/2011 Sahara One Media & Entertainment. Ltd. 10 6.7 The Ld. Counsel contended that the AO had not applied his mind to the information received from the Investigation wing before reopening the assessment as evident from the reason for reopening the assessment. Our attention was invited to the decision of the Hon’ble Supreme Court in the case of ACIT vs. Dhariya Construction Company: 328 ITR 515 and the decision of the Hon’ble Delhi High Court in the case of CIT v. SFIL Stock Broking Ltd.: 325 ITR 285 to submit that the reopening was bad in the eyes of the law. Further, reliance in this regard was placed on the following decisions wherein it had been held that the reopening done on the basis of report/information received from the investigation wing without application of mind or to undertake the roving and fishing enquiries by the AO was void-ab-initio:  Signature Hotels P. Ltd. vs. ITO: 338 ITR 51 (Del. HC)  Sarthak Securities vs. ITO: 329 ITR 110 (Del. HC)  Girdhar Gopal Dalmia v. Uol and Ors: 451 ITR 320 (Cal HC)  PCIT. GRD Commodities Ltd.: 149 taxmann.com 233 (Cal HC)  Eveready Industries India Lad vs. JCIT 243 ITR 540 (Gauhati)  CIT vs. Smt Paramjit Jaur: 168 Taxman 39 (P&H HC)  Sterlite Industries (India) Lituted vs. ACIT: 305 ITR 339 (Mad)  Intimate Jewels Pvt. Ltd. vs. ITO: ITA No. 4498/Del/2010 (Del) ITA No.3130 /Del/2011 Sahara One Media & Entertainment. Ltd. 11 7. We have heard both the parties at length and have perused the material available on the record. We have perused the reasons recorded by the AO for reopening the assessment beyond four years. The reason recorded by the AO for reopening the case, nowhere, mentions that there is any failure on the part of the assessee to truly and fully disclose all material facts necessary for the assessment though the case has been reopened after four years. Further, the AO has not demonstrated that how the income has escaped the assessment particularly when the said expenditure of Rs.60 Crores is found debited as expenditure as well as credited as the stock-in-trade in the Profit & Loss Account. Such contra entries are therefore revenue neutral. Thus, we find that the prime conditions for reopening of the case have not been met. The escapement of income has not been demonstrated having taken place by the AO and thus the issue of \"escapement of income\" is squarely covered by the decision of the Mumbai Bench of the Tribunal in the case of Givaudan Flavours India (P) Ltd. (supra). In order to justify the initiation of reassessment it is sine qua non that there must be some income which escaped assessment. The relevant part of the said decision reads as under: “7. Learned counsel submits that the above grounds of reopening the assessment are not good in law, and, therefore, a reopening of assessment, based on these grounds, cannot be sustained ……………….. As regards the second issue, i.e. adjustment on account of MODVAT /CENVAT in the valuation, it is submitted that the method followed by the assesses is tax neutral and, therefore, even if this ITA No.3130 /Del/2011 Sahara One Media & Entertainment. Ltd. 12 method is incorrect, that error per se cannot be a valid reason for reopening the assessment. It is also submitted that all the related facts were put before the Assessing Officer, by way of disclosure in the income tax computation and attachments to the income tax return, as note. It is submitted that there is no new material before the Assessing Officer, and it is a simply case of change of mind by the Assessing Officer on the same set of facts and without any new material coming to the light. We are thus urged to quash the impugned reassessment order itself. 9. Having regard to the rival submissions and having perused the material on record, we see merits in the plea of the assessee ……………….As for the second reason, we have noted that it is tax neutral and, unless the condition of satisfaction about income having escaped assessment is satisfied, there cannot be any reopening of assessment. The finding of income having escaped assessment is a precondition for reopening the assessment. Hon’ble Bombay High Court, in the case of Prashant & Joshi vs. ITO (230 CTR 232) has observed \"The AO must have reasons to believe that such is the case (i.e. any income chargeable to tax has escaped assessment for a particular year) before he proceeds to issue notice under s. 147\" and that \"the reasons which are recorded by the AO are the only reasons which can be considered when formation. Clearly this condition is not satisfied. In view of these discussions, both the grounds of reopening the assessment are not sustainable in law. We, therefore, quash the reassessment proceedings.” 8. Since two basic conditions; viz, failure on the part of the assessee to truly and fully disclose all material facts necessary for the assessment after the expiry of four years and quantification of escapement of income have not been clearly spelt out in the reasons recorded for reopening the assessment in this case. We therefore, do not find any infirmity in the order of the Ld. CIT(A) in quashing the reopening of the assessment on jurisdictional grounds. We therefore, decline to interfere with the finding of ITA No.3130 /Del/2011 Sahara One Media & Entertainment. Ltd. 13 the Ld. CIT(A) in this regard. Other arguments/contentions, after the above finding, become academic in nature; therefore, the same are not dealt herein. 9. In the result, the appeal of the revenue stands dismissed as above. Order pronounced in open Court on 30th May, 2025. Sd/- Sd/- (VIKAS AWASTHY) (AVDHESH KUMAR MISHRA) JUDICIAL MEMBER ACCOUNTANT MEMBER Dated: 30/05/2025 Binita, Sr. PS Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(Appeals) 5. Sr. DR: ITAT ASSISTANT REGISTRAR ITAT, NEW DELHI "