A.Chandrasekaran, Salem V. ITO, Salem

ITA 1036/CHNY/2013

• Counselvise Citation: [2017] 130 COUNSELVISE.COM (IT) 8033 (ITAT-CHENNAI)
• Duration Of Justice: 3 year(s) 8 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-01-2017
• Appeal Filed By: Assessee
• Bench Allotted: A
• Next Hearing Date: 10-11-2016
• Assessment Year: 2006-2007
• Appeal Filed On: 20-05-2013
• Court: TRIBUNAL
• Department Lawyers: SHIVA SRINIVAS
• Assessee Lawyers: G BASKAR
• Keywords: Capital asset; Condonation of delay
• Section: 44AD; 40A(3); 143(3); 142(1); 133A; 148; 139

Judgement Text

, , IN THE INCOME - TAX APPELLATE TRIBUNAL A BENCH, CHENNAI , . , BEFORE SHRI CHANDRA POOJARI , ACCOUNTANT MEMBER & SHRI DUVVURU RL REDDY , JUDICIAL MEMBER ./ I.T.A.NO. 1036/MDS/2013 / ASSESSMENT YEAR :20 0 6 - 0 7 SHRI A. CHANDRASEKARAN, NO. 65, APPASAMY STREET, SHEVAPET, SALEM 636 002. [PAN: A DDPC3898E ] VS. THE INCOME TAX OFFICER , WARD I ( 2 ) , SALEM . ( / APPEL LANT ) ( / RESPONDENT ) / APPELLANT BY : SHRI G. BASKAR, ADVOCATE / RESPONDENT BY : S HRI S HIVA SRINIVAS , J CIT / DATE OF HEARING : 1 0 . 1 1 .201 6 / DATE OF P RONOUNCEME NT : 20 . 01 .201 7 / O R D E R PER DUVVURU RL REDDY , JUDICIAL MEMBER : TH I S APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE LD. COMMIS SIONER OF INCOME TAX (APPEALS) , SALEM DATED 28 . 0 2 .201 3 RELEVANT TO THE ASSESSMENT YEAR 20 0 6 - 0 7 . THE ASSESSEE HAS RAISED FOLLOWING CONCISE GROUNDS: 1 . 1 THE COMMISS I ONER OF INCOME - TAX (APPEALS) ERRED D I SALLOWANCE OF RS . 84 , 98 , 000/ - INVOK I NG THE PROVISIONS OF SEC. 40(A)(IA) OF THE INCOME TAX ACT IN RESPECT OF PAYMENTS EFFECTED TO THE ARTISTS. I.T.A. NO . 1036 / M/ 1 3 2 1 . 2 T HE COMMISSIONER OF INCOME - TAX (APPEALS) FAILED TO NOTE THAT THE PROV I S I ONS OF SEC . 40(A)( I A) APPL I ES ONLY I N RESPECT OF AMOUNT ' PAYABLE ' . 2. THE COMMISSIONER OF INCOME - TAX (APPEALS) ERRED IN CONFIRMING THE DISALLOWANCE U/S 40A (3) OF THE ACT , WITHOUT NO TICING THE FACT THAT THESE AMOUNTS HAD NOT BEEN PAID BY THE ASSESSEE BUT PAID BY THE FILM DISTRIBUTORS DIRECTLY T O THE GEM I N I LAB ON BEHALF OF THE ASSESSEE . 3. THE COMMISSIONER OF INCOME - TAX (APPEALS) ERRED I N CONFIRMING THE DISALLOWANCE OF LOSS OF RS . 14 , 61 , 265/ - , I N RESPECT OF ABORTED FILM ' ASHOK MITHRAN ' . 2. THE APPEAL OF THE ASSESSEE IS FOUND TO HAVE BEEN FILED LATE BY EIGHT DAYS BEFORE THE TRIBUNAL . THE ASSESSEE FILED PETITION FOR CONDONATION OF DELAY IN FILING THE APPEAL IN SUPPORT OF MEDICAL CE RTIFICATE ISSUED BY THE GOVT. PRIMARY HEALTH CENTRE, EDAPADDI TALUK, SALEM . BY REFERRING TO THE MEDICAL CERTIFICATE AND THE PETITION, THE LD. COUNSEL FOR THE ASSESSEE HAS SUBMITTED THAT THE ASSESSEE WAS UNDER MEDICAL TREATMENT AND AFTER GETTING RECOVERED F ROM THE ILLNESS, THE APPEAL WAS FILED ON 20.05.2013. THEREFORE, HE PLEADED THAT THERE WAS NO WILLFUL DELAY IN FILING THE APPEAL AND PRAYED FOR CONDONATION OF DELAY IN FILING THE APPEAL. WE HAVE PERUSED THE RECORDS AND FOUND THAT THERE IS SUFFICIENT CAUSE F OR DELAY IN FILING THE APPEAL. THE LD. DR DID NOT OBJECT TO THE PLEA OF THE LD. COUNSEL FOR THE ASSESSEE. ACCORDINGLY, WE CONDONE THE DELAY AND ADMIT THE APPEAL FOR HEARING AND ADJUDICATION. 3. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS A FILM PROD UCER. A SURVEY UNDER SECTION 133A OF THE INCOME TAX ACT, 1961 [ ACT IN SHORT] WAS I.T.A. NO . 1036 / M/ 1 3 3 CONDUCTED ON 28.11.2005 IN THE BUSINESS PREMISES OF M/S. SRI SARAVANA CREATIONS, I FLOOR, NO. 11, SECOND CROSS STREET, LAKE AREA, NUNGAMBAKKAM, CHENNAI 34. CERTAIN BOOKS AND DOCUMENTS WERE IMPOUNDED DURING THE COURSE OF SURVEY. A SWORN STATEMENT WAS RECORDED ON 30.11.2005 SUBSEQUENT TO THE SURVEY. IN THE STATEMENT, THE ASSESSEE HAS ADMITTED AN INCOME OF .1 CRORE. HOWEVER, SINCE THE ASSESSEE DID NOT FILE ANY RETURN OF INCOME, A NOTICE UNDER SECTION 148 WAS ISSUED TO ASSESSEE ON 30.03.2009. A NOTICE UNDER SECTION 142(1) OF THE ACT WAS ALSO ISSUED ON 17.09.2009. THE ASSESSEE HAS FILED A RETURN OF INCOME ON 28.12.2010 DECLARING AN INCOME OF .5,18,300/ - . THEREAFTER, A NOTICE UNDE R SECTION 143(2) OF THE ACT WAS SERVED ON THE ASSESSEE. AFTER CONSIDERING THE MATERIALS AVAILABLE ON RECORD, EVIDENCES GATHERED AND RETURN OF INCOME FILED BY THE ASSESSEE, THE ASSESSING OFFICER HAS COMPLETED THE ASSESSMENT UNDER SECTION 143(3) R.W.S. 147 O F THE ACT ON 31.12.2010 ASSESSING TOTAL INCOME OF THE ASSESSEE AT .1,15,00,305/ - BY MAKING VARIOUS DISALLOWANCES. 4. THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE LD. CIT(A). AFTER CONSIDERING VARIOUS SUBMISSIONS, BUT NOT ACCEPTING THE SAME, THE LD. CIT(A) DISMISSED THE APPEAL FILED BY THE ASSESSEE. 5. ON B EING AGGRIEVED, THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL. THE LD. COUNSEL FOR THE ASSESSEE HAS SUBMITTED THAT THE PROVISIONS OF SECTION 40(A)(IA) OF THE ACT APPLIES ONLY IN RESPECT OF AMOUNTS PAYABLE AND I.T.A. NO . 1036 / M/ 1 3 4 THEREFORE, HE HAS PLEADED THAT THE LD. CIT(A) HAS ERRED IN CONFIRMING THE DISALLOWANCE OF .84,98,000/ - MADE BY INVOKING THE PROVISIONS OF SECTION 40(A)(IA) OF THE ACT SINCE THE ASSESSEE HAS EFFECTED THE PAYMENTS TO THE ARTISTS AND NOTHING WAS OUTSTANDING. WITH REGARD TO THE DISALLOWANCE OF .6,65,740/ - UNDER SECTION 40A(3) OF THE ACT, THE LD. COUNSEL FOR THE ASSESSEE VEHEMENTLY ARGUED THAT THE AMOUNT WAS NOT PAID BY THE ASSESSEE, BUT PAID BY THE FILM DISTRIBUTORS DIRECTLY TO THE GEMINI LAB ON BEHALF OF THE ASSESSEE AND THEREFORE, THE LD. CIT(A) WENT IN WRONG TO CONFIRM THE DISALLOWANCE MADE BY THE ASSESSING OFFICER. MOREOVER, THE LD. COUNSEL FOR THE ASSESSEE HAS SUBMITTED THE ASSESSEE HAS RETURNED A LOSS OF .14,61,265/ - TOWARDS FILM PRODUCTION EXPENSES OF THE FILM ASHOKA MITHRAN BUT THE ASSESSING OFFICER HAS DISALLOWED THE SAME AND WITHOUT GIVING ANY VALID REASON, THE LD. CIT(A) HAS CONFIRMED THE SAME. BEFORE US, BY RELYING ON THE DECISION IN THE CASE OF R GV FILM FACTORY LTD. V. DCIT [2015] 43 ITR (TRIB) 385 (HYD), THE LD. COUNSEL FOR THE ASSESSEE HAS SUBMITTED THAT THE ISSUE IS SQUARELY APPLICABLE TO ASSESSEE S CASE. THEREFORE, THE LD. COUNSEL FOR THE ASSESSEE HAS PLEADED THE ORDER PASSED BY THE LD. CIT(A ) SHOULD BE SET ASIDE AND THE DISALLOWANCES MADE BY THE ASSESSING OFFICER SHOULD BE DELETED. 6. ON THE OTHER HAND, THE LD. DR STRONGLY SUPPORTED THE ORDERS OF AUTHORITIES BELOW. I.T.A. NO . 1036 / M/ 1 3 5 7. WE HAVE HEARD BOTH SIDES, PERUSED THE MATERIALS AVAILABLE ON RECORD A ND GONE THROUGH THE ORDERS OF AUTHORITIES BELOW. WITH REGARD TO THE CONFIRMATION OF DISALLOWANCE OF .84,98,000/ - UNDER SECTION 40(A)(IA) OF THE ACT, DURING THE YEAR ENDED 31.03.2006, THE ASSESSEE HAS DEBITED VARIOUS EXPENSES INCURRED TOWARDS PAYMENTS MADE TO ARTISTS AND TECHNICIANS FOR PRODUCTION OF FILM FEBRUARY 14 AND GHAJINI OF .8,14,500/ - AND .76,83,500/ - RESPECTIVELY WITHOUT DEDUCTING TDS ON THE ABOVE PAYMENTS. SINCE PAYMENTS MADE TO SERVICES OF PERSONALS UTILIZED FOR CREATION OF CAPITAL ASSETS SHALL ATTRACT TAX DEDUCTIBILITY AND IN THIS CASE, THE ASSESSEE HAS NOT DEDUCTED TDS UNDER SECTION 194 OF THE ACT TO THE PAYMENTS MADE THE ARTISTS AND TECHNICIANS, THE ASSESSING OFFICER HAS DISALLOWED THE ABOVE AMOUNTS TOTALLING TO .84,98,000/ - UNDER SECTI ON 40(A)(IA) OF THE ACT. 8. WITH REGARD TO THE DISALLOWANCE UNDER SECTION 40A(3) OF THE ACT, FROM THE INFORMATION COLLECTED FROM GEMINI LABORATORIES DURING THE POST SURVEY OPERATIONS, THE ASSESSING OFFICER HAS OBSERVED THAT A SUM OF .10,88,000/ - AND . 22,40,700/ - TOTALLING TO .33,28,700/ - WERE PAID TO GEMINI LABORATORIES BY WAY OF CASH. WHEN QUESTIONED, THE ASSESSEE HAS REPLIED THAT THESE WERE AMOUNTS PAID BY THE DISTRIBUTORS DIRECTLY TO THE GEMINI LABORATORIES. THESE AMOUNTS WERE REDUCED FROM THE AMO UNT DUE FROM THE DISTRIBUTORS FROM THE ACCOUNT OF THE ASSESSEE. BY WAY OF WRITTEN SUBMISSIONS DATED 30.12.2010 AND RELYING ON THE DECISION IN THE CASE OF K.R. FILM PVT. LTD. V. ITO 31 ITD I.T.A. NO . 1036 / M/ 1 3 6 482 (MUM) , THE ASSESSEE HAS INFORMED THAT SECTION 40A(3) DISALLOWANC E WILL NOT BE APPLICABLE TO WHERE INCOME IS COMPUTED AS PER RULE 9A AS RULE 9A WILL OVER RIDE SECTIONS 29 TO 44AD OF THE ACT. HOWEVER, THE ASSESSING OFFICER HAS NOT ACCEPTED THE SUBMISSIONS OF THE ASSESSEE AND DISALLOWED 20% OF .33,28,700/ - BEING .6,65,740/ - UNDER SECTION 40A(3) OF THE ACT. 9. AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE, THE LD. CIT(A) HAS OBSERVED AS UNDER: 5. AS PER THE GROUNDS OF APPEAL, THE APPELLANT IS DISPUTING THREE ISSUES ONLY. THEY ARE, NAMEL Y: I) THE ADDITION OF RS.84,98,000/ - ON ACCOUNT OF DISALLOWANCE U/S.40(A)(IA) FOR NON DEDUCTION OF TAX. II) THE ADDITION ON ACCOUNT OF DISALLOWANCE OF CASH PAYMENTS U/S.40A(3); AND III) THE DISALLOWANCE OF LOSS OF THE PRODUCTION FOR MOVIE' ASHOKA MI TRAN'. 5.1 THE APPELLANT IS ACCEPTING THE OTHER ADDITIONS. 5.2 THE APPEAL IS FILED BELATEDLY BY 29 DAYS. THE SAME IS CONDONED AND THE APPEAL IS ADMITTED. 5.3 THE CASE WAS POSTED FOR HEARING ON VARIOUS OCCASIONS, THE FINAL HEARING BEEN FOR 20.02.20 13. 5.4 THE APPELLANT VIDE HIS LETTER DATED NIL, RECEIVED ON 05.09.2012, SOUGHT TIME TILL NOVEMBER 2012. AS PER HIS REQUEST THE CASE WAS REPOSTED TO 22.11.2012. THE APPELLANT VIDE HIS LETTER DATED 19.11.2012, ASKED FOR THREE MONTHS TIME. THE EXTRACT OF THE LETTER IS AS BELOW: AS I HAVE TO COLLECT TAX PAID CERTIFICATE FROM ARTIST WITH REGARD TO THEIR I. T. PAYMENT, PLEASE GRANT 3 MONTHS TIME. 5.5 THE CASE WAS REPOSTED FOR 03.01.2013 AND THE APPELLANT VIDE HIS LETTER DATED NIL RECEIVED ON 02.01.2013 STATED AS UNDER: I.T.A. NO . 1036 / M/ 1 3 7 THE MAIN POINT IN THE APPEAL IS DISALLOWANCE OF PAYMENT MADE TO ARTIST BY THE ASSESSING OFFICER, SINCE NO MS WAS DEDUCTED UNDER 194J OF THE INCOME TAX ACT. THE ARTISTS SURIYA, NAYANDHARA, ASIN, BRINDHA AND DI RECTOR MURUGADOSS ARE PROMPT TAX PAYERS. THEY HAVE PAID THEIR TAXES. DUE TO THEIR BUSY SCHEDULE I COULD NOT GET CERTIFICATE FROM THEM. KINDLY GRANT THREE MONTHS TIME SO THAT I CAN GET A CERTIFICATE FROM THEM. AS PER NOTIFICATION NO.37/2012 [F.NO.142/18/201 2 - SO(TPL)] DATED 12.09.2012 IF PAYEE HAS FURNISHED HIS RETURN OF INCOME UNDER SECTION 139 THEN NO DISALLOWANCE CAN BE MADE IN MY CASE. HENCE I REQUEST YOUR GOOD SELF TO ADJOURN THE HEARING TO APRIL 2013. 5.6 THE APPELLANT WAS GIVEN ONE MORE OPPORTU NITY ON 20.02.2013. FOR THIS ALSO THE APPELLANT FILED A LETTER DATED 19.02.2013, STATING AS UNDER: THE MAIN POINT IN THE APPEAL IS DISALLOWANCE OF PAYMENT MADE TO ARTIST BY THE ASSESSING OFFICER, SINCE NO MS WAS DEDUCTED UNDER 194J OF THE INCOME TAX ACT . THE ARTISTS SURIYA, NAYANDHARA, ASIN, BRINDHA AND DIRECTOR MURUGADOSS ARE PROMPT TAX PAYERS. THEY HAVE PAID THEIR TAXES. DUE TO THEIR BUSY SCHEDULE I COULD NOT GET CERTIFICATE FROM THEM. KINDLY GRANT THREE MONTHS TIME SO THAT I CAN GET A CERTIFICATE FR OM THEM. AS PER NOTIFICATION NO.37/2012 [F.NO.142/18/2012 - SO(TPL)] DATED 12.09.2012 IF PAYEE HAS FURNISHED HIS RETURN OF INCOME UNDER SECTION 139 THEN NO DISALLOWANCE CAN BE MADE IN MY CASE. HENCE I REQUEST YOUR GOOD SELF TO ADJOURN THE HEARING TO APRI L 2013. 6. IT IS SEEN THAT THE APPELLANT IS NOT SERIOUS IN PROSECUTING THE APPEAL AND HE IS ONLY ADOPTING DELAYING TACTICS. ALSO, THE LETTERS ARE STEREOTYPED AND ARE SILENT ON TWO OF THE THREE GROUNDS, IE., THE LOSS ON ACCOUNT OF 'ASHOKA MITHRAN' AND D ISALLOWANCE ON ACCOUNT OF SECTION 40A(3). I.T.A. NO . 1036 / M/ 1 3 8 7. IN VIEW OF THE ABOVE, AND THE FACT THAT THE APPELLANT IS NOT INTERESTED IN PROSECUTING THE APPEAL, THE APPELLANTS' GROUNDS ARE REJECTED. FROM THE ABOVE FINDINGS OF THE LD. CIT(A), IT IS AMPLY CLEAR THAT HE HAS GIVEN ANY DECISION IN ANY OF THE ISSUES ON MERITS . ON PERUSAL OF THE APPELLATE ORDER, WE FIND THAT BEFORE THE LD. CIT(A) THE ASSESSEE VIDE HIS LETTER SOUGHT FOR TIME TILL NOVEMBER, 2012 AND ACCORDINGLY, THE CASE WAS POSTED FOR HEARING ON 22.11.2012. AG AIN THE ASSESSEE VIDE HIS LETTER DATED 19.11.2012 ASKED FOR THREE MONTHS TIME. WHEN THE CASE WAS AGAIN POSTED FOR HEARING, THE ASSESSEE ONCE AGAIN ASKED FOR THREE MONTHS. DESPITE SUFFICIENT OPPORTUNITIES WERE GIVEN TO THE ASSESSEE, THE ASSESSEE HAS NOT FUR NISHED ANY PARTICULARS IN SUPPORT OF HIS CLAIM. HOWEVER, THE LD. CIT(A) HAS NOT DECIDED THE ISSUE ON MERITS. UNDER THE ABOVE FACTS AND CIRCUMSTANCES, WE DIRECT THE LD. CIT(A) TO DECIDE THE ISSUE OF DISALLOWANCE MADE UNDER SECTION 40(A)(IA) OF THE ACT ON ME RITS IN ACCORDANCE WITH LAW . 9.1 WITH REGARD TO DISALLOWANCE UNDER SECTION 40A(3) OF THE ACT, NO DETAILS ARE EMANATING FROM THE ASSESSMENT ORDER AS TO ON WHAT PURPOSE THE DISTRIBUTORS HAVE DIRECTLY PAID THE AMOUNTS TO THE GEMINI LABORATORIES. MOREOVER, T HE ASSESSING OFFICER HAS NOT DISTINGUISHED OR GIVEN ANY VALID REASON AS TO WHY THE CASE LAW RELIED ON BY THE ASSESSEE IN THE CASE OF K.R. FILM PVT. LTD. V. ITO (SUPRA) IS NOT APPLICABLE. FOR THIS ISSUE ALSO, THE LD. CIT(A) HAS NOT GIVEN ANY I.T.A. NO . 1036 / M/ 1 3 9 FINDINGS. AFTER OBTAINING NECESSARY DETAILS, THE LD. CIT(A) IS DIRECTED TO DECIDE THE ISSUE ON MERITS IN ACCORDANCE WITH LAW . 9.2 WITH REGARD TO THE DISALLOWANCE OF LOSS OF THE PRODUCTION FOR MOVIE ASHOKA MITRAN ALSO THE LD. CIT(A) HAS NOT DECIDED THE ISSUE ON MERITS . ACCORDINGLY, WE DIRECT THE LD. CIT(A) TO DECIDE THE ISSUE ON MERITS IN ACCORDANCE WITH LAW BY KEEPING IN VIEW OF THE DECISION OF HYDERABAD BENCHES OF THE TRIBUNAL IN THE CASE OF RGV FILM FACTORY LTD. V. DCIT (SUPRA). 10 . IN THE RESULT, THE APPEAL FILE D BY THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES . ORDER PRONOUNCED ON THE 20 TH JANUARY , 201 7 AT CHENNAI. SD/ - SD/ - (CHANDRA POOJARI) ACCOUNTANT MEMBER ( DUVVURU RL REDDY ) JUDICIAL MEMBER CHENNAI, DATED, THE 20 . 0 1 .201 7 VM/ - / COPY TO: 1. / APPELLANT , 2. / RESPONDENT , 3. ( ) / CIT(A) , 4. / CIT , 5. / DR & 6. / GF.