ITO 11(1)(2), MUMBAI V. KARMA ENTERTAINMENT, MUMBAI

ITA 1090/MUM/2011

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 70870 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 6 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-08-2013
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: I
• Assessment Year: 2005-2006
• Appeal Filed On: 07-02-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: O P SINGH
• Keywords: Reason to believe
• Section: 147; 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL I BENCH, M UMBAI ! ! ! ! !' !'!' !' . . $%& $%& $%& $%& , ' ' ' ' ( ( ( ( BEFORE SHRI VIJAY PAL RAO, JM, AND SHRI N. K. BILLA IYA, AM /. I.T.A. NO. 1090/MUM/2011 ( ' ) ' ) ' ) ' ) *) *) *) *) / ASSESSMENT YEAR: 2004-05) INCOME TAX OFFICER-11(1)(2), ROOM NO. 436A, AAYKAR BHAWN, M.K. MARG MUMBAI -400020 ' ' ' ' / VS. M/S. KARMA ENTERTAINMENT LENS VIEW BUILDING, 6 TH FLOOR, NEAR PRATHEMESH PARK, VEERA DESAI EXT. ANDHERI (WEST), MUMBAI-53. + ' /. , /.PAN/GIR NO. AAFFK9157R ( +- /APPELLANT ) : ( ./+- / RESPONDENT ) +- 0 / APPELLANT BY : SHRI O.P. SINGH ./+- 1 0 / RESPONDENT BY : SHRI JITENDRA SANGHAVI ' 1 2' / DATE OF HEARING : 29 .08. 2013 34* 1 2' /DATE OF PRONOUNCEMENT : 29 .08. 2013 5 5 5 5 / O R D E R PER : N.K. BILLAIYA (AM) THIS APPEAL BY THE REVENUE IS PREFERRED AGA INST THE ORDER OF THE CIT(A)-3, MUMBAI, DATED 19.11.2010, PERTAINING TO ASSESSMENT YEARS 2004-05. 2. THE GRIEVANCE OF THE REVENUE RELATES TO THE QUAS HING OF THE RE-OPENING PROCEEDINGS U/S 147 OF THE ACT BY THE CIT(A). IN TH IS CASE THE ORIGINAL RETURN OF INCOME WAS FILED ON 30.10.2004 DECLARING TOTAL INCOME AT R S.1,140/-. THE RETURN WAS PROCESSED U/S 143(1) OF THE ACT BY ACCEPTING THE ASSESSEE TOT AL INCOME. SUBSEQUENTLY, THE CASE WAS REOPENED U/S 147 AND ACCORDINGLY NOTICE U/S 148 WAS ISSUED AND SERVED UPON THE ASSESSEE. THE REASONS FOR RE-OPENING THE ASSESSMENT ARE AS UNDER. 2 ITA 1090(AY-2005 TO 2006) ITO V/S. MS. K ARMA ENTERTAINMENT THAT THE FIRM HAD PRODUCED MOVIE AS W ELL AS DISTRIBUTED THE MOVIE IN BOMBAY TERRITORY. ALL EXPENSES OF THE YAR ARE DEBITED IN THE COP OF RUDHAKSHA, WHERE AS A SUBSTANTIAL PART OF THE EXPENSES RELATED TO DISTR IBUTION AND POST PRODUCTION AND DO NOT GET ATTRACTED U/S. 9A. THE APPLICABILITY OF RULE 9A AND APPORTIONMENT OF EXPENSES TOWARDS BOMBAY TERRITORY DISTRIBUTION LIKE PRINTS (RS. 31.27 LACS) AND PUBLICITY (RS. 67.08 LACS) THE LOSS DECLARED BY THE ASSESSEE WILL SUBSTANTIALLY IN CREASE. WITH PROPER ASSESSMENT OF M/S. KARMA ENTERTAINMENT FOR ASSESSMENT YEAR 2004- 05, SHRI NITIN PANCHAMIYA WILL BE ENTITLED TO CARRY FORWARD A MUCH REDUCED AMOUNT OF UNRECOUPED COST OF PRODUCTION OF RUDRAK SH UNDER RULE 9A AND SET OFF THE SAME AGAINST THE INCOME OF ASSESSMENT YEAR 2005 -06 IN HIS INDIVIDUAL HANDS. IN TOTALITY, THE ASSESSMENT OF PROPER LOSS IN THE H ANDS OF M/S. KARMA ENTERTAINMENT WILL RESULT IN DETECTION OF TAX EVADE D ON INCOME OF MORE THAN RS. ONE CRORE IN THE HANDS OF SHRI NITIN PANCHAMIYA FOR A.Y. 2005-06. 3. THE ASSESSEE OBJECTED TO THE RE-OPENING OF THE A SSESSMENT STATING THAT ALL THE DETAILS IN RESPECT OF THE MOVIE TITLE RUDRAKSHA WER E FILED ALONG WITH THE RETURN INCLUDING AUDITED BALANCE SHEET AND OTHER DETAILS. THE ASSESS EE FURTHER SUBMITTED THAT ONCE THE INTIMATION U/S 143(1) HAS BEEN ISSUED AND THE AO HA S CHOSEN NOT TO SERVE THE NOTICE U/S 143 (2) WITHIN PRESCRIBED TIME LIMITED, HE CANNOT R EOPEN THE ASSESSMENT. 4. THE CONTENTIONS OF THE ASSESSEE WERE REJECTED BY THE AO, WHO WENT ON TO APPLY RULE 9A. HOWEVER, ACCORDING TO THE AO RULE 9A DOES NOT APPLY TO THE PUBLICITY EXPENSES AND PRINT COSTS EXPENSES. THEREFORE, ACCOR DING TO THE AO THESE TWO EXPENSES CANNOT FORM PART OF THE COSTS OF PRODUCTION AND ACC ORDINGLY DISALLOWED THE EXPENSES. THE ORIGINAL INCOME WAS CONVERTED INTO A LOSS OF RS. 98 ,34,061/- IN THE REASSESSMENT. 5. THE ASSESSEE STRONGLY OBJECTED THIS ISSUE BEFORE THE CIT(A) AND QUESTIONED THE VALIDITY OF THE RE-OPENING OF THE ASSESSMENT. 6. AFTER CONSIDERING THE FACTS AND SUBMISSIONS OF T HE ASSESSEE THE CIT(A) CAME TO THE FOLLOWING CONCLUSION: 2.2.1 THE FOLLOWING MATERIAL FACTS EMERGE OUT OF TH E REASONS RECORDED. 3 ITA 1090(AY-2005 TO 2006) ITO V/S. MS. K ARMA ENTERTAINMENT I) THAT BY INVOKING SECTION 148 AND REOPENING THE A PPELLANTS CASE TO APPLY RULE 9A, AO HAS RECORDED SATISFACTION THAT LOSS DEC LARED BY THE APPELLANT WOULD SUBSTANTIALLY INCREASE. II) THAT BY REOPENING IMPUGNED ASSESSMENT YEAR IN A PPELLANTS CASE BENEFIT WOULD BE DERIVED IN ANOTHER ASSESSEES CASE VIZ. SH RI NITIN PANCHAMIA. 2.2.2 THE PROVISIONS OF SEC. 147 ARE CLEAR IN THE M ATTER, REOPENING U/S. 147 IS POSSIBLE WHEN THERE WAS REASON TO BELIEVE IN AN ASS ESSEES CASE THAT INCOME HAD ESCAPED ASSESSMENT OR THE RESULT WOULD BE REDUC TION OF LOSS. IN IMPUGNED MATTER, NEITHER IS THE CASE. BY AOS OWN SATISFACTI ON APPELLANTS LOSS WOULD ACTUALLY INCREASE. PROVISIONS OF SEC. 147 ALSO DO N OT PERMIT RE-OPENING OF ONE ASSESSEES CASE TO DERIVE INCREASE IN INCOME IN ANO THER APPELLANTS CASE. IN THE IMPUGNED MATTER, IT CANNOT BE HELD THAT THERE WAS R EASON TO BELIEVE THAT INCOME HAD ESCAPED ASSESSMENT IN APPELLANTS CASE. ISSUE OF NOTICE U/S. 148 IN THE IMPUGNED MATTER IS, THEREFORE, NOT WITHIN THE P ARAMETERS OF SECTION 147 AND, THEREFORE, ILLEGAL. ASSESSMENT MADE IN PURSUAN CE OF THIS NOTICE IS, THEREFORE, HELD TO BE NULL AND VOID. 7. THE REVENUE IS AGGRIEVED BY THIS FINDING OF THE CIT(A) BEFORE US. 8. THE LEARNED DR STRONGLY SUPPORTED THE ASSESSMEN T ORDER. THE COUNSEL FOR THE ASSESSEE SUBMITTED THAT BY RE-OPENING THE INCOME OF RS. 1140/- IS ASSESSED AT A LOSS OF RS. 9834061/-. THE AO IN FACT PASSED ON BENEFIT TO THE ASSESSEE WHICH IS AGAINST HE CANNONS OF SECTION 147 OF THE ACT. THE AO HAS INCRE ASED LOSS OF THE ASSESSEE. 9. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PE RUSED THE ORDERS OF THE LOWER AUTHORITIES. WE FIND FORCE IN THE CONTENTIONS OF TH E LEARNED COUNSEL, THE ASSESSING OFFICER HAS IN FACT INCREASED THE LOSS OF THE ASSES SEE BY INVOKING PROVISIONS OF SECTION 147 OF THE ACT. WE FURTHER FIND THE REASONS FOR RE- OPENING THE ASSESSMENT IS TO DEPRIVE THE OTHER PARTY SET OFF OF LOSS OF THE ASSESSEE. TH E CIT(A) HAS GIVEN A VERY CATEGORICAL FINDING FOR HOLDING THE ASSESSMENT NULL AND VOID. 4 ITA 1090(AY-2005 TO 2006) ITO V/S. MS. K ARMA ENTERTAINMENT 10. WE THEREFORE, DO NOT FIND ANY, REASON TO INTER FERE WITH THE FINDING OF THE CIT(A). 6 27 1 '61 2 8% 11. IN THE RESULT, APPEAL FILED BY THE REVENUE IS D ISMISSED. 5 1 34* ' 9'7 29.08.2013 4 1 : ORDER PRONOUNCED IN THE OPEN COURT ON 29 TH DAY OF AUGUST , 2013 SD/- SD/- ( VIJAY PAL RAO ) ( N. K. BILLAIYA ) / JUDICIAL MEMBER ' / ACCOUNTANT MEMBER MUMBAI: 9' DATED : 29.08.2013 ' . /.PRAMOD KUMAR, PS 5 5 5 5 1 11 1 .2; .2; .2; .2; <*2 <*2 <*2 <*2 / COPY OF THE ORDER FORWARDED TO : 1. +- / THE APPELLANT 2. ./+- / THE RESPONDENT 3. = ) (/ THE CIT(A); 4. = / THE CIT CONCERNED; 5. >: .2' , , / DR, ITAT, MUMBAI; 6. :?) @ / GUARD FILE 5' 5' 5' 5' / BY ORDER, A AA A / 8 8 8 8 (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI