ASSISTANT COMMISSIONER OF INCOME TAX CENTRAL CIRCLE-1, JALANDHAR V. SHRI KAPIL BATRA, JALANDHAR

ITA 114/ASR/2022

• Counselvise Citation: [2024] 101 COUNSELVISE.COM (IT) 4982 (ITAT-AMRITSAR)
• Duration Of Justice: 2 year(s) 2 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-08-2024
• Appeal Filed By: Department
• Order Result: PartlyAllowed
• Bench Allotted: DB
• Next Hearing Date: 24-06-2024
• Assessment Year: 2012-2013
• Appeal Filed On: 26-05-2022
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Business income; Document seized; Corroborative evidences; Assessment record; Documents seized; Set aside
• Section: 153A; 250; 142(2A)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AMRITSAR BENCH, AMRITSAR. BEFORE DR. M. L. MEENA, ACCOUNTANT MEMBER AND SH. UDAYAN DAS GUPTA, JUDICIAL MEMBER I.T.A. No.114/Asr/2022 Assessment Year: 2012-13 ACIT, Central Circle-1, Jalandhar. (Appellant) Vs. Sh. Kapil Batra, H. NO. 46, Chotti Baradari, Part- 1, Jalandhar, [PAN:AEVPB4153J] (Respondent) Appellant by None Respondent by Sh. Sunil Gautam, CIT. DR Date of Hearing 25.06.2024 Date of Pronouncement 14.08.2024 ORDER Per: Udayan Das Gupta, JM This appeal is filed by the revenue against the order of the Ld. CIT (A) dated 30/03/2022, passed u/s 250 of the Act 61, for the assessment year 2012-13, which has emanated from the order of the DCIT, Central Circle – II, Jalandhar, dated 05/11/2015, passed u/s 153A/143(3) of the Act 61. 2. The grounds of appeal taken by the revenue as per memorandum of appeal in Form 36 are as follows: I.T.A. No.114/Asr/2022 Assessment Year: 2012-13 2 “1. Whether on the facts and in the circumstances of the case, the Ld. CIT(A) has erred in deleting the addition of Rs.9,59,126/-on account of unsubstantiated business losses when the assessee has failed to furnish any evidence in support of his claim in the return. 2. Whether on the facts and in the circumstances of the case, the Ld. CIT(A) has erred in deleting the addition of Rs.4,80,000/- on account of withdrawals for household expenses in the absence of any plausible explanation by the assessee. 3. Whether on the facts and in the circumstances of the case, the Ld. CIT(A) has erred in restricting the addition of Rs.2,48,03,693/- on account of Unaccounted receipts from the release of the Movies Yaar Anmulle’ & ‘Pure Punjabi’ to Rs.91,62,459/-, in the absence of any evidence in support of Profit and Loss A/c. 4. The appellant craves leave to add, amend, modify, vary, omit or substitute any of the aforesaid grounds of appeal at any time before or at the time of hearing of the appeal.” 3. As per order sheet entries, it is seen that the case was fixed for the first time on 01/03/2023, where written adjournment was sought by the assessee. Case was fixed for the second time on 21 st March, 2023, where Mr A. Sarna (FCA) appeared to seek further adjournment. On the next date of hearing on 30 th May, 2023, there was no appearance. Next date of hearing on 13 th July, 2023, no appearance by the I.T.A. No.114/Asr/2022 Assessment Year: 2012-13 3 assessee. Next date of hearing on 21 st September, 2023, again no representation by the assessee. Subsequent notice issued by registered post fixing date of hearing on 18 th October, 2023, but bench did not function. Next date of hearing fixed on 8 th November, 2023, and no representation by assessee. Again notice issued vide registered post. Subsequent date of hearing on 16 th April, 2024, again no representation by the assessee. Notice issued through DR refixing case on 29 th May, 2024. No appearance by assessee. Again notice issued through DR and registered post fixing case on 25 th June, 2024. There is no appearance by assessee or his AR and no adjournments filed. The Ld. DR is present and we proceed to hear the Ld. DR and dispose of the case on merits. 4. The brief facts are that there has been a search u/s 132(1) of the Act 61, at the premises of the assessee on 5 th December, 2012, and documents were seized. In response to notice u/s 153A of the Act, return was filed by the assessee disclosing total income at NIL and loss of Rs.10,04,398 /- (Loss). 5. During assessment proceedings, questions were raised by the AO and replies were filed by the assessee, which are discussed at length in the body of the assessment order. However, it is seen from the findings of the AO contained in the assessment order and also from the observations of the Ld. CIT (A) in the appellate order, that regular books of accounts consisting of cash book and ledger, has never been produced before the AO in spite of repeated requests. The assessee has filed a copy of the profit and loss account and balance sheet and a cash flow statement, I.T.A. No.114/Asr/2022 Assessment Year: 2012-13 4 before the AO, which are not supported by any bills, vouchers, or any other supporting documents. In the instant case special audit was conducted u/s 142(2A) and audit report dated 14/09/2015, is also considered by the AO, but the AO has observed that books are also not produced before the special auditor. 6. Assessment has been completed on the basis of seized documents and after considering submissions of the assessee, additions has been made under various heads on various accounts as discussed in the assessment order. Eventually the total income has been determined at Rs.4,83,50,274/-, vide order passed u/s 153A/143(3) of the Act. 7. The matter was carried in appeal by the assessee before the Ld. CIT (A), and the first appellate authority, has allowed part relief to the assessee, by deleting the additions of Rs. 9,59,126/- on account of unsubstantiated business loss, Rs.4,80,000/- on account of household expenses and restricting the addition of Rs.2,48,03,693/- on account of unaccounted receipts to Rs.91,62,459/- , against which the revenue is in appeal before the tribunal , challenging the said deletion. 8. The assessee has not appeared before the tribunal even after number of opportunities allowed, as evident from order sheet notes, nor has he filed any written submissions, in support of his defense nor has he filed any paper book in connection with this appeal case. The revenue also has not filed any paper book or any written submissions in support of the grounds of appeal, but the Ld. DR was present before us to argue the case. I.T.A. No.114/Asr/2022 Assessment Year: 2012-13 5 9. We also record, that no copies of profit and loss account and balance sheet or the cash flow statement, as noted by the AO in the assessment order (pages 6 and 7), has been filed before us, by any of the parties and the copy of the special audit report u/s 142(2A) dated 14/09/2015, are also not available before us. 9.1 Under such circumstances, we proceed to decide the appeal on the basis of findings recorded by the AO in the assessment order, taking into consideration the observation of the Ld. CIT (A) contained in the appellate order. 10. The first ground of appeal of the revenue relates to the deletion of Rs. 9,59,126/- by the first appellate authority. The Ld. DR argued that the assessee has filed a profit and loss account statement for the year, before the AO, in course of assessment proceedings, by virtue of which he has claimed a LOSS of Rs.9,59,126/-, but the assessee has failed to substantiate the loss by furnishing documentary evidences in support of his claim. By referring to paragraph 4.2 of the assessment order, he submitted that the assessee has not furnished any bills, vouchers, documents, absolutely nothing to substantiate the expenses claimed in the profit and loss account so as to arrive at the ultimate loss of Rs.9,59,126/-, as claimed in the return. Even no books of accounts, comprising of cash book, ledger, has been produced before the AO for examination, and in course of search, no invoices or vouchers relating to expenses has been found. As such he submitted that the AO was absolutely right in rejecting the said profit and loss account figures of the assessee, which are just imaginary figures without any basis, and I.T.A. No.114/Asr/2022 Assessment Year: 2012-13 6 without any supporting invoices and the AO was fully justified in disallowing the loss claimed by the assessee. 11. The Ld. CIT (A) in paragraph 4.4 of the appeal order has deleted the addition, by observing as follows: “The facts of the case, the basis of addition/disallowance made by the AO and the arguments of the AR during the course of appellate proceedings have been considered. The AR has not submitted anything on this issue during the appellate proceedings. However, a perusal of the assessment record shows that the assessee had filed before the AO during the assessment proceedings the profit & loss account relating to M/s. Kapil Batra Production Prop. Sh. Rajan Batra showing total loss of Rs. 12,97,631/- during the year which has been taken into profit & loss account of the assessee Sh. Kapil Batra for the period 01.04.2011 to 31.03.2012 in which the professional receipts & other incomes are reflected/ accounted for. Since, the existence of the concern M/s. Kapil Batra Production or any of the entries in the profit & loss account of M/s. Kapil Batra Production had not been adversely commented by the AO, there was no justification to.deny the loss of Rs. 9,59,126/- as calculated by the assessee in its profit & loss account and duly reflected in the computation/return of income. Hence, the addition/ disallowance of Rs. 9,59,126/- is not found sustainable and therefore deleted.” I.T.A. No.114/Asr/2022 Assessment Year: 2012-13 7 12. We fail to understand the conclusion drawn by the Ld. CIT (A), as to how the loss on account of M/s Kapil Batra Production (whose proprietor is Mr. Rajan Batra , the brother of the assessee ) can be incorporated into the profit and loss account of the assessee , Sri Kapil Batra, by any stretch of accounting principle, because both are separate persons and income and expenditure of both has to be dealt with separately. Moreover, the AO has given a specific finding that in absence of any supporting evidences regarding the claim of expenses in such profit and loss account, filed by the assessee, the veracity of such expenses claimed are doubted and the said expenses cannot be allowed without any basis. In absence of any materials placed before us, we are not in a position to ascertain the contents of the said profit and loss account (a copy of which is also not before us) and judge the claim of the assessee. Moreover, we are also of the opinion that the Ld CIT (A) has not discussed the contents of the profit and loss account and the claim of the assessee on various heads of expenditure which according to him might result in loss. As such in the interest of justice we set aside this ground to the files of the AO to consider the claim of the assessee on basis of materials on record or on the basis of fresh documents that might be filed by the assessee to establish his claim, including his books of accounts. This ground of the revenue is allowed for statistical purpose. 13. The second ground of the revenue relates to the deletion of Rs. 4,80,000/- by the CIT(A) on account of house hold expenses. The Ld. DR argues that this is an I.T.A. No.114/Asr/2022 Assessment Year: 2012-13 8 estimated addition made by the AO considering the standard of living of the assessee, maintenance of a big house and lavish lifestyle, electricity, and other household necessity, the personal family expenses of the assessee has been determined at Rs.4,80,000/- (at the rate of Rs. 40,000/- pm). Since no withdrawals is reflected in the cash flow statement furnished by the assessee, the Ld. DR submitted that the addition is practically justified and the deletion of the same by the Ld. CIT (A) is not proper on the facts of the case and the addition should be sustained. 14. The Ld CIT(A) has deleted the addition by observing as follows: “The facts of the case, the basis of addition made by the AO and the arguments of the AR during the course of appellate proceedings have been considered. The AR has not submitted anything on this issue during the appellate proceedings. A perusal of the assessment record shows that the assessee had given details of the professional receipts and filed the Profit & Loss account which shows receipts in cash, the benefit of which has not been allowed anywhere else. The total professional receipts declared by the assessee during the year as per the. Profit & Loss account are Rs. 6,85,050/- and in the balance sheet, the assessee has “J shown drawing of Rs. 6,59,232/-. It is also observed that the AO has arrived at the annual household expenses without reference to any document found & seized during the course of search and purely on an estimation basis. The income returned and drawings shown by the assessee is I.T.A. No.114/Asr/2022 Assessment Year: 2012-13 9 sufficient to cover the household expenses. Therefore, the ad- hoc addition made by the AO by estimating the monthly household expense without any supporting document is not found sustainable and hence deleted.” 15. On this issue we are in agreement with the finding of the Ld. CIT(A) that he has rightly observed that the drawings of Rs.6,59,232/- disclosed by the assessee is good enough to cover the estimated family expenses of Rs.4,80,000/-. This ground of appeal of the revenue is rejected. 16. The third ground of the revenue is on account of restricting the addition of unaccounted receipts of Rs.2,48,03,693/- to Rs.91,62,459/-, from business of film production and distribution by the assessee. The case of the AO is that, on the basis of seized documents, (Annexure - A1, A 10, A-11, Annexure - A-2, A-10, A-11 and A - 12) and BR-1, including loose sheets and other papers, the gross receipts from production of movies (feature films, Yaar Anmulle and Pure Punjabi), was arrived at Rs. 3,49,33,693/- (as per calculations contained in page 25 and 26 of assessment order). Similarly, the total expenditure relating to the production of the above films are found from seized documents A-6, BR-1 (details contained in assessment order page - 23) which totals to Rs. 1,01,30,000/- (Rs.76,15,000/- plus Rs.25,15,000/- (as per details in page 26 of assessment order). The net amount of the gross receipts minus total expenditure (both determined on the basis of seized I.T.A. No.114/Asr/2022 Assessment Year: 2012-13 10 documents) i.e. Rs. 2,48,03,693/- is determined as profits from movie business, by the AO and added to total income. 17. The Ld. CIT(A) as per observation contained in paragraph 4.16 of the appeal order (page -26 and 27 of the order), restricted the addition on account of receipts from two movies (Pure Punjabi and Yaar Annmulle) to Rs.91,62,459/- being the undisclosed portion considering the fact that Rs.2,57,71,234/- was already disclosed by the assessee in his profit and loss account. 18. There is no dispute regarding the same, but the point of dispute lies elsewhere. The fact remains that the so called profit and loss account filed by the assessee is not supported by any documentary evidences and the same has not been relied upon by the AO for determination of business profits. 19. The gross receipts from the business of film production as per seized documents are Rs. 3,49,33,693/-. This figure is accepted by the revenue and also by the assessee and also accepted by the Ld. CIT (A). Now the only question that arises is what is the expenditure allowable from such receipts, to arrive at the business profits. As per the AO, the expenditure which is directly connected and related to the business receipts are also laid out in seized documents itself, which totals to Rs. 1,01,30,000/- (Rs. 76,15,000/- plus Rs. 25,15,000/-) (page -26 of assessment order). I.T.A. No.114/Asr/2022 Assessment Year: 2012-13 11 As per AO : Gross receipts as per seized documents 3,49,33,693.00 Exp as per seized documents 76,15,000.00 Investment / Expenses as per seized doc 25,15,000.00 1,01,30,000.00 Business Profits as per AO from films 2,48,03,693.00 20. The Ld. CIT, has accepted the contents of the profit and loss account, submitted by the assessee as correct and that is why he has remarked that addition to the balance amount of Rs.91.62 lakhs is sustained and the appellant gets relief of the amount equal to receipts shown in profit and loss account of kapil batra Film Production. We do not agree to the conclusion drawn by the Ld. CIT(A), because the case of the AO is different, there is no dispute regarding gross Receipts, the dispute is relating to expenses claimed in Profit and loss A/c, by the assessee, which is without evidence and needs to be verified by the AO. The AO has allowed the expenses on the basis of seized documents, but the claim of expenses by the assessee is on the basis of expenditure claimed in Profit and Loss Account, which needs to be supported by documents, which in this case needs verification. 20.1 As such, since there is no dispute regarding the gross receipts figure, in the interest of justice, we set aside this ground to the files of the AO to examine the I.T.A. No.114/Asr/2022 Assessment Year: 2012-13 12 claims made by the assessee in the profit and loss account, as per provisions of law vis a vis the expenses contained in the seized documents, and thereafter determine the profits from the business of film productions, after allowing full opportunity to the assessee to make submissions and file evidences, in order to substantiate its claim as per his profit and loss account. 21. This ground of the revenue is allowed for statistical purpose. 22. In the result, the appeal of the revenue bearing ITA No. 114/Asr/2022 is partly allowed for statistical purpose. Order pronounced in the open court on 14.08.2024 Sd/- Sd/- (Dr. M. L. Meena) (UDAYAN DAS GUPTA) Accountant Member Judicial Member AKV Copy of the order forwarded to: (1)The Appellant (2) The Respondent (3) The CIT (4) The CIT (Appeals) (5) The DR, I.T.A.T. True Copy By order