Kalaignar TV Pvt Ltd., CHENNAI V. DCIT, CHENNAI

ITA 1245/CHNY/2015

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 7793 (ITAT-CHENNAI)
• Duration Of Justice: 1 year(s) 6 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-12-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 15-12-2016
• Assessment Year: 2009-2010
• Appeal Filed On: 25-05-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: T RAVIKUMAR SR; HEMA MUR
• Assessee Lawyers: N SHIVAKUMARAN S
• Keywords: Unexplained cash credit; Depreciation; Principle of natural justice; Valuation report; Onus to prove
• Section: 68

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH : CHENNAI . , . , BEFORE SHRI ABRAHAM P. GEORGE , ACCOUNTANT MEMBER AND SHRI G. PAVAN KUMAR, JUDICIAL MEMBER ./I.T.A. NOS.1245 & 1246/MDS/2015 / ASSESSMENT YEARS : 2009-2010 & 2010-2011 M/S. KALAIGNAR TV PRIVATE LIMITED, NO.367/369, ANNA SALAI, TEYNAMPET, CHENNAI 18. VS. THE DEPUTY COMMISSIONER OF INCOME TAX, NON CORPORATE CIRCLE -20, CHENNAI [PAN AADCK 0898E] ( / APPELLANT) ( /RESPONDENT) ! ' # / APPELLANT BY : SHRI. ARVIND P. DATTAR, SHRI. S. SENDAMARAI KANNAN, SHRI. SANDEEP BAGMAR AND SHRI. N. SHIVAKUMARAN, ADVOCATES $% ! ' # /RESPONDENT BY : SHRI. T. RAVIKUMAR, SR. STANDING COUNSEL AND MS. HEMA MURALI KRISHNAN, STANDING COUNSEL. & ' '( /DATE OF HEARING : 15-12-2016 )* ' '( /DATE OF PRONOUNCEMENT : 23-12-2016 ! / O R D E R SHRI ABRAHAM P. GEORGE, ACCOUNTANT MEMBER: THESE ARE APPEALS FILED BY THE ASSESSEE DIRECTED AGAINST AN ORDER DATED 31.03.2015 OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS)-14, CHENNAI, FOR THE IMPUGNED ASSESSMENT YEARS. ITA NOS.1245 & 1246/2015 :- 2 -: 2. ADDITIONS WHICH ARE ASSAILED BY THE ASSESSEE FOR B OTH YEARS WERE MADE UNDER SECTION 68 OF THE INCOME TAX ACT, 1961 (HEREIN AFTER REFERRED TO AS THE ACT). APART FROM ASSAILI NG MERITS OF THE ADDITIONS, ASSESSEE HAS ALSO RAISED GROUNDS IN WHI CH IT PLEADS DENIAL OF NATURAL JUSTICE, AND ISSUES RELATING TO LIMITAT ION AND JURISDICTION FOR ASSESSMENT YEAR 2009-2010. FOR ASSESSMENT YEAR 2010 -2011 ASSESSEE HAS ALSO RAISED A GROUND ASSAILING DISALLOWANCE OF INTEREST PAID ON INTER CORPORATE DEPOSITS. 3. LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE AD DITIONS UNDER SECTION 68 OF THE ACT WERE B25 CRORES FOR ASS ESSMENT YEAR 2009-2010 AND B175 CRORES FOR ASSESSMENT YEAR 2010- 2011, AGGREGATING TO B200 CRORES. AS PER THE LD. AUTHORIS ED REPRESENTATIVE THESE AMOUNTS WERE RECEIVED BY THE ASSESSEE FROM ON E M/S. CINEYUG MEDIA & ENTERTAINMENT PRIVATE LIMITED. SUBMISSION WAS THAT B25 CRORES RECEIVED DURING PREVIOUS YEAR RELEVANT TO AS SESSMENT YEAR 2009-2010 WAS SHARE APPLICATION MONEY PURSUANT TO A N AGREEMENT ENTERED BY THE ASSESSEE ON 19.12.2008 WITH M/S. CI NEYUG MEDIA & ENTERTAINMENT PRIVATE LIMITED. ACCORDING TO LD. AU THORISED REPRESENTATIVE COPY OF THIS AGREEMENT CALLED SHAR E SUBSCRIPTION AND SHARE HOLDERS AGREEMENT WAS FOUND BY THE DEPARTME NT DURING A SEARCH CONDUCTED IN THE PREMISES OF M/S. CINEYUG ME DIA & ITA NOS.1245 & 1246/2015 :- 3 -: ENTERTAINMENT PRIVATE LIMITED ON 26.11.2009. AS PER LD. AUTHORISED REPRESENTATIVE LOWER AUTHORITIES HAD DOUBTED THE GE NUINENESS OF THE AGREEMENT FOR EXTRANEOUS REASONS. RELYING ON A COP Y OF THE AGREEMENT PLACED AT PAGE 4 TO 25 OF PAPER BOOK (VOL UME III), LD. AUTHORISED REPRESENTATIVE SUBMITTED THAT COPY OF TH E AGREEMENT HAVING BEEN FOUND DURING THE COURSE OF SEARCH, CONC LUSION OF THE LOWER AUTHORITIES THAT IT WAS A MADE-UP DOCUMENT WAS UNFO UNDED. AS PER LD. AUTHORISED REPRESENTATIVE SUBSEQUENT RECEIPT OF B17 5 CRORES WHICH HAPPENED IN PREVIOUS YEAR RELEVANT TO ASSESSMENT YE AR 2010-2011 FROM THE VERY SAME CONCERN WERE INTER CORPORATE DEP OSITS (ICD IN SHORT). CONTENTION OF THE LD. AUTHORISED REPRESENT ATIVE WAS THAT THESE ICDS WERE BASED ON AGREEMENTS DATED 06.04.2009 FOR B25 CRORES, 15.7.2009 FOR B100 CRORES AND 7.8.2009 FOR B50 CROR ES. FURTHER, CONTENTION OF THE LD. AUTHORISED REPRESENTATIVE WAS THAT THE LOWER AUTHORITIES HAD ERRONEOUSLY RELIED ON A CHARGE SHEE T FILED BY THE CENTRAL BUREAU OF INVESTIGATION (CBI) IN RELATION T O 2G SPECTRUM CASE FOR DISBELIEVING THE CREDITS. AS PER LD. AUTHORIS ED REPRESENTATIVE NEITHER THE ASSESSEE NOR ITS DIRECTORS HAD RECEIVE D ANY ILLEGAL GRATIFICATION. LD. AUTHORISED REPRESENTATIVE SUBMI TTED THAT ASSESSEE HAD RECEIVED THE AMOUNTS FROM M/S. CINEYUG MEDIA & ENTERTAINMENT PRIVATE LIMITED BASED ON AGREEMENTS AND THAT TOO TH ROUGH CHEQUES AND DEMAND DRAFTS. CONTENTION OF THE LD. AUTHORISE D REPRESENTATIVE ITA NOS.1245 & 1246/2015 :- 4 -: WAS THAT SHRI. RAJA, FORMER TELECOM MINISTER, WAS INTERROGATED IN CONNECTION WITH 2G SPECTRUM CASE ON 23.12.2010 AND ALL THE IMPUGNED TRANSACTIONS HAPPENED PRIOR TO THAT. LD. AUTHORISE D REPRESENTATIVE SUBMITTED THAT FUND FLOW FURNISHED BY THE ASSESSEE WAS ANALYZED BY THE LD. ASSESSING OFFICER AND LD. ASSESSING OFFICER HIMSELF HAD FOUND THAT THE SUM OF B 200 CRORES WAS GIVEN BY M/S. CINE YUG MEDIA & ENTERTAINMENT PRIVATE LIMITED TO THE ASSESSEE. AS PER THE LD. AUTHORISED REPRESENTATIVE, IT WAS AN UNDISPUTED FAC T THAT M/S. CINEYUG MEDIA & ENTERTAINMENT PRIVATE LIMITED HAD I N TURN RECEIVED SUCH AMOUNT FROM ONE M/S. KUSEGAON FRUITS & VEGETAB LES P. LTD. CONTENTION OF THE LD. AUTHORISED REPRESENTATIVE WAS THAT LD. ASSESSING OFFICER HAD CLEARLY FOUND THE SOURCE FOR M/S. KUS EGAON FRUITS & VEGETABLES P. LTD. TO BE RECEIPTS FROM M/S. DYNAM IX REALTY AND DB REALTY PRIVATE LTD. FUND FLOW OF THE ASSESSEE CLEA RLY DEPICTED TRAIL OF MONEY FROM DYNAMIX REALTY TO KUSEGAON FRUITS & VEGE TABLES P. LTD AND FROM THEM TO M/S. CINEYUG MEDIA & ENTERTAINMENT PRIVATE LIMITED AND THEN TO THE ASSESSEE. LD. AUTHORISED REPRESENT ATIVE SUBMITTED THAT CBI CHARGE SHEET RELIED ON BY THE LOWER AUTHOR ITIES FOR FASTENING A TAX LIABILITY ON THE ASSESSEE FOR A GENUINE TRANSAC TION HAD ITSELF MENTIONED THE AMOUNT TO HAVE COME FROM ONE M/S. S WAN TELECOM P. LTD TO DYNAMIX REALTY. AS PER LD. AUTHORISED REPRE SENTATIVE EVEN IF CBI CHARGE SHEET WAS PRESUMED TO BE CORRECT, AND T HE AMOUNTS ITA NOS.1245 & 1246/2015 :- 5 -: RECEIVED BY M/S. SWAN TELECOM P. LTD FROM M/S. ETIS ALAT MAURITIUS LIMITED AND GENEX EXIM VENTURES P. LTD, WERE CONSID ERED PART OF ILLEGAL GRATIFICATION FOR ISSUING UAS LICENCES, ASS ESSEE WAS NO WAY CONNECTED WITH THIS. FURTHER, AS PER LD. AUTHORISE D REPRESENTATIVE ONUS ON THE ASSESSEE WAS ONLY TO SHOW THE SOURCE O F THE CREDIT, GENUINENESS OF THE TRANSACTION AND CREDIT WORTHINES S OF THE GIVER. LD. AUTHORISED REPRESENTATIVE SUBMITTED THAT IN THE ASS ESSMENTS DONE ON M/S. KUSEGAON FRUITES & VEGETABLES P. LTD AND M/S. CINEYUG MEDIA & ENTERTAINMENT PRIVATE LIMITED THERE WERE NO ADDIT IONS FOR ANY CREDITS RECEIVED FROM DYNAMIX REALITY. ACCORDING TO HIM, A SSESSEE HAD FULLY DISCHARGED ITS ONUS TO PROVE THE CREDITS SHOWN AS SHARE APPLICATION MONEY FOR ASSESSMENT YEAR 2009-2010 AND INTER CORPO RATE DEPOSITS FOR ASSESSMENT YEAR 2010-2011. 4. CONTINUING HIS SUBMISSIONS, LD. AUTHORISED REPRESEN TATIVE STATED THAT THE AGGREGATE SUM B200 CRORES RECEIVED BY THE ASSESSEE WAS UTILIZED BY IT FOR LIQUIDATING HIGH COST LOANS OF B118 CRORES EARLIER RAISED FROM INDIAN BANK AND FOR ACQUIRING RIGHTS F OR MORE THAN 100 FILMS FOR A SUM OF B82 CRORES. LD. AUTHORISED REPR ESENTATIVE ALSO RELIED ON A VALUATION REPORT GIVEN BY M/S. GRAND TH ORNTON WHICH AS PER LD. AUTHORISED REPRESENTATIVE WAS ENTRUSTED WIT H THE TASK OF VALUING THE ASSESSEE COMPANY SO THAT NUMBER OF SHAR ES THAT WERE TO ITA NOS.1245 & 1246/2015 :- 6 -: BE ISSUED TO M/S. CINEYUG MEDIA & ENTERTAINMENT PRI VATE LIMITED COULD BE DETERMINED. ACCORDING TO LD. AUTHORISED REPRESEN TATIVE, THE LD. ASSESSING OFFICER HAD PLACED EXTENSIVE RELIANCE ON CBI CHARGE SHEET WHICH CONSISTED OF UNPROVED ALLEGATIONS. AS PER L D. AUTHORISED REPRESENTATIVE SHOW CAUSE NOTICE WHEREIN LD. ASSESS ING OFFICER PROPOSED TO USE VARIOUS DOCUMENTS LIKE THE CBI CHA RGE SHEET WAS ISSUED ON 11.03.2013 AND RECEIVED BY THE ASSESSEE ON 13.03.2013. REPLY AS PER LD. AUTHORISED REPRESENTATIVE WAS GIVE N BY THE ASSESSEE ON 22.03.2013 AND THE ASSESSMENT ORDER WAS COMPLETE D IN A HURRIED MANNER ON 28.03.2013. AS PER LD. AUTHORISED REPRESE NTATIVE ASSESSEE WAS NOT GIVEN A FAIR CHANCE TO EXPLAIN ITS STAND. FURTHER, AS PER LD. AUTHORISED REPRESENTATIVE LD. COMMISSIONER OF INCOM E TAX (APPEALS) HAD EXTENSIVELY RELIED ON THE REPORT OF ENFORCEMENT DIRECTORATE WHICH CAME AFTER THE COMPLETION OF ASSESSMENT. LD. AUTHO RISED REPRESENTATIVE SUBMITTED THAT LD. ASSESSING OFFICER HAD NEVER EXAMINED THE SIGNATORIES OF M/S. CINEYUG MEDIA & EN TERTAINMENT PRIVATE LIMITED WHO HAD SIGNED THE SHARE AGREEMENT AND THE INTER CORPORATE DEPOSITS AGREEMENTS. THEY HAD DISBELIEVED THESE AGREEMENTS WITHOUT EXAMINING ANY AUTHORIZED PERSON OF M/S. CINEYUG MEDIA & ENTERTAINMENT PRIVATE LIMITED. AS PER LD. AUTHORISED REPRESENTATIVE ASSESSEE HAVING PROVED THE IDENTI TY OF THE CREDITOR, ITS CREDIT WORTHINESS AND GENUINENESS OF THE TRANS ACTION, THE ADDITION ITA NOS.1245 & 1246/2015 :- 7 -: MADE PURELY ON SURMISE HAD TO BE DELETED. FURTHER A S PER LD. AUTHORISED REPRESENTATIVE SIMPLE COMMERCIAL TRANSA CTIONS WERE TOOK AS UNEXPLAINED CREDITS. SUBMISSION OF THE LD. AUTH ORISED REPRESENTATIVE WAS THAT EVEN IF THE ORIGINAL AMOU NTS RECEIVED FROM M/S. DYNAMIX REALITY OR ANY PARTIES RELATED TO THE M WERE TAINTED DUE TO ILLEGALITY, ASSESSEE COULD NOT BE PUT TO PER IL. 5. STRONGLY OBJECTING TO THE LIFTING OF CORPORATE VE IL BY THE LD. COMMISSIONER OF INCOME TAX (APPEALS), LD. AUTHORISE D REPRESENTATIVE SUBMITTED THAT ASSESSEE WAS NOT A SHAM ORGANIZATION . IT WAS RUNNING A TV CHANNEL. SIMILARLY ACCORDING TO HIM, M/S. CIN EYUG MEDIA & ENTERTAINMENT PRIVATE LIMITED WAS A COMPANY FORMED IN 1983 AND BOTH THE COMPANIES HAD NO COMMON DIRECTORS NOR ANY COMMON SHAREHOLDERS. LIFTING OF CORPORATE VEIL AS PER LD. AUTHORISED REPRESENTATIVE COULD BE DONE ONLY WHERE PROMOTERS O R SHAREHOLDERS OF THE COMPANY WAS USING THE COMPANY AS A SMOKE SCREEN FOR EVADING TAX. 6. PER CONTRA, LD. DEPARTMENTAL REPRESENTATIVE SUBMIT TED THAT AN INDEPENDENT APPRAISAL OF THE FACTS WAS DONE BY T HE LD. ASSESSING OFFICER BEFORE MAKING THE ADDITIONS U/S.68 OF THE ACT. AS PER LD. DEPARTMENTAL REPRESENTATIVE LD. ASSESSING OFFICER HAD ISSUED A DETAILED QUESTIONNAIRE TO THE ASSESSEE AS EARLY AS 04.09.2012. THE ITA NOS.1245 & 1246/2015 :- 8 -: SUM OF B25 CRORES THOUGH SHOWN BY THE ASSESSEE IN I TS BOOKS AS SHARE APPLICATION MONEY FORMED A PART OF THE SUNDRY CREDI TORS IN ITS BALANCE SHEET AS ON 31.03.2009. ACCORDING TO HIM, ASSESSEE HAD NOT PASSED ANY BOARD RESOLUTION FOR ACCEPTING INTER CORPORATE DEPOSITS OF 175 CRORES FROM M/S. CINEYUG MEDIA & ENTERTAINMENT PRI VATE LIMITED. ASSESSEE HAD CONVERTED THE SHARE APPLICATION MONEY ALSO TO INTER CORPORATE DEPOSITS DURING THE YEAR ENDING 31.03.201 0. AS PER LD. DEPARTMENTAL REPRESENTATIVE ASSESSEE COULD NOT DEM ONSTRATE THE CREDIT WORTHINESS OF M/S. CINEYUG MEDIA & ENTERTAIN MENT PRIVATE LIMITED. RELYING ON THE ASSESSMENT ORDERS OF M/S. CINEYUG MEDIA & ENTERTAINMENT PRIVATE LIMITED, FOR ASSESSMENT YEAR S 2009-2010 AND 2010-2011 PLACED AT PAPER BOOK (VOL III) OF THE AS SESSEE PAGE 101 TO 181, LD. DEPARTMENTAL REPRESENTATIVE SUBMITTED THAT THE SAID COMPANY HAD NO MONEY IN ITS BANK ACCOUNT WHEN DEMAN D DRAFTS WERE ISSUED TO THE ASSESSEE. SUBMISSION OF THE LD. DEPA RTMENTAL REPRESENTATIVE WAS THAT SUCH DEMAND DRAFTS WERE IS SUED BY THE BANK IN COLLUSION WITH THE DIRECTORS OF DB REALTY GROU P OF COMPANIES. APART FROM ABSENCE OF CREDIT WORTHINESS AS PER LD. DEPARTMENTAL REPRESENTATIVE GENUINENESS OF THE TRANSACTION ITS ELF WAS ALSO NOT DEMONSTRATED. ASSESSEE COULD NEVER PRODUCE ORIGINAL OF THE AGREEMENT DATED 19.12.2008 WHICH WAS RELIED IN SUPPORT OF THE SHARE APPLICATION MONEY OF 25 CRORES RECEIVED DURING THE PREVIOUS YEA R RELEVANT TO ITA NOS.1245 & 1246/2015 :- 9 -: ASSESSMENT YEAR 2009-2010. AS PER LD. DEPARTMENTAL REPRESENTATIVE RESOLUTION FOR INCREASING AUTHORIZED SHARE CAPITAL OF THE ASSESSEE WAS PASSED ONLY ON 13.7.2009 WELL AFTER THE AGREEMENT D ATED 19.12.2008. EVEN THE INTER CORPORATE DEPOSITS AGREEMENTS FOUND AT THE TIME OF SEARCH OF M/S. CINEYUG MEDIA & ENTERTAINMENT PRIVAT E LIMITED WAS UNSIGNED. RESOLUTIONS AUTHORIZING ACCEPTANCE OF IN TER CORPORATE DEPOSITS WAS PASSED AFTER RECEIPT OF SUCH DEPOSITS. FURTHER AS PER LD. DEPARTMENTAL REPRESENTATIVE ASSESSEE WAS A CLOSELY HELD PRIVATE COMPANY AND FOR ANY ISSUE OF SHARE CAPITAL, AN OPTI ON SHOULD HAVE BEEN FIRST GIVEN TO EXISTING SHARE HOLDERS. THUS, ACCORDING TO LD. DEPARTMENTAL REPRESENTATIVE DOCUMENTS RELIED BY T HE ASSESSEE IN SUPPORT OF ITS CREDIT WERE NOT GENUINE. THOUGH ASS ESSEE STATED THAT THE AMOUNTS WERE REPAID IN SUBSEQUENT YEARS, SUCH REPAYMENTS ITSELF WAS THROUGH DUBIOUS MEANS. LD. DEPARTMENTAL REPRES ENTATIVE SUBMITTED THAT ASSESSEE HAD USED CALCUTTA COMPANIES ENGAGED IN ROUND TRIPPING OF FUNDS FOR FUNDING THE REPAYMENTS . 7. IN SO FAR AS CONTENTION OF THE ASSESSEE THAT IT WA S NOT GIVEN A PROPER OPPORTUNITY, LD. DEPARTMENTAL REPRESENTA TIVE SUBMITTED THAT CHARGE REPORT OF CBI WAS WELL WITHIN THE KNOWL EDGE OF THE ASSESSEE SINCE ONE OF ITS DIRECTORS NAMELY SHIR. SH ARAD KUMAR WAS AN ACCUSED. SIMILARLY, ACCORDING TO HIM, SMT. K. KA NIMOZHI WHO WAS A ITA NOS.1245 & 1246/2015 :- 10 -: MAJOR SHAREHOLDER WAS ALSO AN ACCUSED. WITH REGARD TO THE REPORT OF ENFORCEMENT DIRECTORATE, LD. DEPARTMENTAL REPRESENT ATIVE SUBMITTED THAT ASSESSEE ITSELF WAS AN ACCUSED AND THUS IT CO ULD NOT SAY THAT IT WAS NOT HAVING ACCESS TO SUCH REPORT. COMING TO THE ASPECT OF CAG REPORT, LD. DEPARTMENTAL REPRESENTATIVE SUBMITTED THAT NO RELIANCE WAS PLACED BY THE LOWER AUTHORITIES ON SUCH REPORT. ACCORDING TO HIM, ORDERS OF THE LOWER AUTHORITIES HAD TO BE SUSTAINED . 8. WE HAVE CONSIDERED THE RIVAL CONTENTIONS AND PERUSE D THE ORDERS OF THE AUTHORITIES BELOW. AS ALREADY MENTIO NED BY US, ASSESSEE HAS, APART FROM ASSAILING MERITS OF THE ADDITIONS M ADE U/S.68 OF THE ACT, ALSO RAISED GROUNDS WITH REGARD TO DENIAL OF N ATURAL JUSTICE FOR BOTH THE YEARS. FOR ASSESSMENT YEAR 2009-2010 ASS ESSEE HAS ALSO RAISED GROUNDS ON LIMITATION AND JURISDICTION ASPE CTS ALSO. CONTENTION OF THE ASSESSEE IS THAT THE ADDITION OF B25 CRORES DISBELIEVING THE RECEIPT OF SHARE APPLICATION MONEY FROM M/S. CINEYU G MEDIA & ENTERTAINMENT PRIVATE LIMITED DURING THE PREVIOUS Y EAR RELEVANT TO ASSESSMENT YEAR 2009-2010 AND ADDITION OF B175 CROR ES DISBELIEVING THE RECEIPT OF INTER CORPORATE DEPOSITS FROM THE V ERY SAME CONCERN DURING THE PREVIOUS YEAR RELEVANT TO ASSESSMENT YEA R 2010-2010 WERE MADE DESPITE VALID DOCUMENTS BEING PRODUCED IN SUPP ORT. AS PER THE ASSESSEE LIABILITY U/S. 68 OF THE ACT WAS FASTENED ON IT BASED ON AN ITA NOS.1245 & 1246/2015 :- 11 -: INVESTIGATION REPORT OF CBI AND A REPORT OF THE EN FORCEMENT DIRECTORATE (ED) WHICH WERE NEVER BEFORE IT. NO DO UBT, AS MENTIONED BY THE LD. DEPARTMENTAL REPRESENTATIVE ASSESSEE OR ATLEAST ONE OF ITS DIRECTORS WERE ACCUSED BOTH IN SUCH REPORTS AND TH EREFORE IT CANNOT SAY THAT THESE REPORTS AND RECORDS WERE NEVER SEEN BY THEM. HOWEVER, FOR ASCERTAINING WHETHER ASSESSEE WAS GIV EN A FAIR CHANCE TO REPRESENT ITS CASE BEFORE THE ASSESSING OFFICER, IT IS NECESSARY TO HAVE A LOOK AT THE GIST OF CORRESPONDENCE BETWEEN T HE ASSESSEE AND LD. ASSESSING OFFICER, DURING THE COURSE OF ASSESSM ENT PROCEEDING WHICH HAS BEEN PLACED BY THE ASSESSEE IN ITS AT P APER BOOK VOLUME I. NOTICE U/S.142(1) OF THE ACT WAS ISSUED TO THE ASS ESSEE ON 24.08.2011 FOR WHICH ASSESSEE FILED A REPLY DATED 1 3.09.2010 SEEKING TIME THEREUPON. LD. ASSESSING OFFICER VIDE HIS LET TER DATED 19.09.2011 POSTED THE CASE FOR HEARING ON 26.09.2011. ASSESSE E HAD FILED A LETTER DATED 23.09.2011 GIVING THE INFORMATION CALLED FO R BY THE LD. ASSESSING OFFICER IN THE NOTICE U/S.142(1) OF THE ACT. THIS INCLUDED NATURE OF ITS BUSINESS, COPY OF ITS ANNUAL REPORT, COPY OF THE BANK ACCOUNT STATEMENTS, DETAILS OF FIXED ASSETS, DETAI LS OF SUBSIDIARY COMPANIES, DETAILS OF DIRECTORS AND OTHER RELATED I NFORMATION. NOTHING SPECIFIC WAS ASKED BY THE LD. ASSESSING OFFICER ON THE CREDIT RECEIVED FROM M/S. CINEYUG MEDIA & ENTERTAINMENT PRIVATE LIM ITED. ASSESSEE ITA NOS.1245 & 1246/2015 :- 12 -: HAD ALSO FILED A LETTER DATED 06.10.2011 WHEREIN TH E FOLLOWING PARTICULARS WERE FURNISHED. AS REQUESTED BY YOU AT THE TIME OF HEARING OUR CA SE ON 26.09.2011, WE ARE FURNISHING THE FOLLOWING FURTHER PARTICULARS : 1. MOVIE AGREEMENT COPIES ARE ENCLOSED. 2. ADDITION TO FIXED ASSETS - BILL COPIES ARE ENCLO SED 3. SUNDRY CREDITORS - NATURE OF TRANSACTION AND EVI DENCE FOR AMOUNT RECEIVED FROM CINEYUG FILMS PVT LTD IS ENCLOSED. 4. INDIAN BANK - LOAN SANCTION LETTER COPY IS ENCLO SED 5. A NOTE ON DELETION TO FIXED ASSETS IS ENCLOSED 6. PROOF OF SALARY AND WAGES IS ENCLOSED. 7. NATURE OF TRANSACTION OF TRADE ADVANCES IS ENCLO SED. 8. A NOTE ON AMORTIZATION OF FILMS RIGHTS IS ENCLOS ED 9. NOTE ON WRITING OFF OF PROGRAMME PRODUCTION EXPE NSES IS ENCLOSED 10. FOREIGN INWARD REMITTANCES - AGREEMENT COPIES A RE ENCLOSED 11. AGREEMENT COPIES FOR TELECAST EXPENSES ARE ENCL OSED 12. A NOTE ON INTEREST CAPITALIZATION IS ENCLOSED. IT IS OBVIOUS FROM THE ABOVE REPLY THAT AT LEAST TI LL 06.10.2011 NOTHING WITH REGARD TO THE CREDIT FROM M/S. CINEYUG MEDIA & ENTERTAINMENT PRIVATE LIMITED WAS ENQUIRED BY THE LD. ASSESSING O FFICER. THE FIRST QUESTION REGARDING B 25 CRORES RECEIVED AS SHARE AP PLICATION MONEY CAME FROM THE LD. ASSESSING OFFICER THROUGH HIS LET TER DATED 31.10.2011. WHAT WAS REQUIRED BY HIM IN THE SAID LETTER IS REPRODUCED HERE UNDER:- IN CONNECTION WITH THE ASSESSMENT PROCEEDINGS, YOU ARE REQUESTED TO FURNISH THE FOLLOWING DETAILS / EVIDEN CES IN RESPECT OF THE SHARE APPLICATION MONEY RECEIVED AT RS.25 CRORES FROM M/S. CINEYUG MEDIA ENTERTANMENT PRIVATE LIMITED, MUMBAI. 1. WHAT IS THE AUTHORISED SHARE CAPITAL OF THE ASSESSE E. ITA NOS.1245 & 1246/2015 :- 13 -: 2. WHAT IS THE SUBSCRIBED AND PAID UP CAPITAL OF THE ASSESSEE 3. IS THE SHARE APPLICATION MONEY FALLING WITHIN THE L IMITS OF AUTHORISED SHARE CAPITAL 4. PLEASE PRODUCE THE ROC FORMS FOR ALLOTMENT OF SHARE , IF ANY 5. WHETHER THERE IS ANY ROC FORM FOR INCREASE IN SHARE CAPITAL, IF ANY 6. COPY OF THE BALANCE SHEET OF THE SHARE APPLICANT, I F ANY AVAILABLE WITH YOU 7. RESOLUTION FOR RECEIPT OF SHARE APPLICATION MONEY A ND THE COPY OF SHARE APPLICATION FORMS SUBMITTED BY TH E APPLICANT COMPANY AND THE MODE OF RECEIPT . ASSESSEE HAD GIVEN A REPLY TO THE SAID LETTER ON 0 4.11.2011 WHICH INTER ALIA STATED AS UNDER:- 1. THE AUTHORISED SHARE CAPITAL OF THE COMPANY IS 1.5 CRORES AS ON DATE I.E. 1,50,00,000 SHARES @ RS.10 EACH. 2. THE SUBSCRIBED AND PAID UP SHARE CAPITAL OF THE COM PANY IS RS.10,01,00,000/- I.E 1,00,10,000 SHARES OF RS.10 E ACH. 3 SHARE APPLICATION MONEY RECEIVED FROM M/S CINEYUG MEDIA & ENTERTAINMENT PRIVATE LIMITED INCLUDING THE SHARE P REMIUM IS WITHIN THE LIMITS OF AUTHORISED CAPITAL. THE COMPAN Y'S VALUE AS PER THE VALUATION OF AN OUTSIDE AGENCY IS 1I029 CRORES. HENCE THE VALUE PER SHARE IS RS.1028 I.E. RS.10 SH ARE WITH A PREMIUM OF RS.1018/- . HENCE 243191 SHARES OF RS.10 EACH WITH PREMIUM OF RS.1018/- WILL BE ABOUT RS.25 CRORE S. EXISTING SHARES OF 1,00,10,000 +2,43,191 SHARES IS WITHIN THE AUTHORISED CAPITAL OF THE COMPANY. AT THAT TIME VALUE WAS NOT FINALISED. PLEASE SEE SE PARATE NOTE ATTACHED. 4. SINCE SHARES WERE NOT ALLOTTED FOR RS.25 CRORES ROC FORMS ARE NOT FILED. 5. ROC FORMS FOR INCREASE IN AUTHORISED CAPITAL IS ENC LOSED FOR YOUR REFERENCE. ITA NOS.1245 & 1246/2015 :- 14 -: 6. BALANCE SHEET OF THE SHARE APPLICANT IS NOT AVAILAB LE . 7. RESOLUTION FOR RECEIPT OF SHARE APPLICATION MONEY I S ENCLOSED FOR YOUR REFERENCE. SINCE OUR COMPANY AS WELL AS TH E APPLICANT COMPANY ARE PRIVATE LIMITED COMPANIES LETTER . 8. A NOTE ON THE TRANSACTION WITH CINEYUG IS ENCLOSED FOR YOUR REFERENCE. 9. ALSO PLEASE FIND ENCLOSED VALUATION REPORT GIVEN BY M/S. GRANT THORNTON. ON 29.11.2011, LD. ASSESSING OFFICER REQUIRED ASSES SEE TO FURNISH DETAILS FOR THE FUNDING OF B 25 CRORES AND B175 CRO RES RECEIVED DURING THE IMPUGNED PREVIOUS YEARS AND THIS WAS ALSO DULY REPLIED BY THE ASSESSEE THROUGH A DETAILED LETTER DATED 01.12.2011 . ASSESSEE IN THE SAID LETTER MENTIONED THAT THE SHARE APPLICATION M ONEY OF B25 CRORES WAS RETURNED BY IT SINCE M/S. CINEYUG MEDIA & ENTER TAINMENT PRIVATE LIMITED HAD NOT AGREED TO THE VALUATION FOR THE ASS ESSEE COMPANY MADE BY THE M/S. GRAND THORNTON. VIZ-A-VIZ B175 CR ORES RECEIVED DURING PREVIOUS YEAR 2010-2011, ASSESSEE HAD EXPLAI NED WHY THE DEPOSITS WERE TAKEN AND FOR WHAT PURPOSE IT WAS USE D. REGULAR ASSESSMENT PROCEEDINGS FOR THE ASSESSMENT YEAR 2009 -2010 WAS ABATED PURSUANT TO SEARCH CONDUCTED ON M/S. CINEYU G MEDIA & ENTERTAINMENT PRIVATE LIMITED ON 26.11.2009 WHEN PR OCEEDINGS UNDER SECTION 153C OF THE ACT WAS INITIATED ON THE ASSESS EE. ON 04.09.2012 A FRESH NOTICE ISSUED U/S.142(1) OF THE ACT WAS ISS UED TO THE ASSESSEE FOR WHICH ASSESSEE FILED A DETAILED REPLY ON 15.10 .2012. THEREAFTER ON ITA NOS.1245 & 1246/2015 :- 15 -: 28.12.2012, LD. ASSESSING OFFICER REQUIRED ASSESSEE TO FURNISH THE FOLLOWING DETAILS. FURTHER, TO THE SUBMISSIONS MADE BY YOU ON VARIOU S DATES WITH CONNECTION WITH THE ASSESSMENT FOR THE AY 2009 -10, YOU ARE REQUIRED TO PRODUCE THE FOLLOWING DETAILS. BANK RECONCILIATION STATEMENT FOR RS. 3 CRORES APPEARING AGAINST ADDITIONAL SHARE CAPITAL ALONG WI TH DETAILS OF SOURCE. RECONCILIATION OF CASH CREDIT AND TERM LOAN WITH TH E FIGURES IN THE BALANCE SHEET DETAILS OF INTANGIBLE ASSETS ACQUIRED AND CLAIM OF DEPRECIATION THEREOF; PLEASE RECONCILE THE FIGURES AND ALSO EXPLAIN THE NATURE AND BASIS OF CLAIM-. DETAILS OF MOVIE RIGHTS ACQUIRED DURING THE YEAR - MOVIE-WISE WITH COST. DETAILS OF LOANS AND ADVANCES - TRADE ADVANCES 14.5 CRORES ALONG WITH SUPPORTING DOCUMENTS. CONFIRMATION FOR SECURED AND UNSECURED LOAN LONG WITH WITH SOURCE DETAILS OF FILING OF FORM 52A; IF ANY, MOVIE-WISE THE ABOVE DETAILS SHOULD REACH THE UNDERSIGNED ON O R BEFORE 15.01.2013. NO FURTHER ADJOURNMENT SHALL BE GRANTED AND IN CASE OF FAILURE, ASSESSMENT PROCEEDINGS WILL BE FINALIZED AS PER MATERIAL AVAILABLE ON RECORD AS PER LAW. THE ABOVE QUERY WAS REPLIED BY THE ASSESSEE THRO UGH A LETTER DATED 14.02.2013. 9 . THE FIRST LETTER IN WHICH SEARCH OPERATION DONE B Y THE CBI WAS REFERRED BY THE LD. ASSESSING OFFICER WAS ISSUE D TO THE ASSESSEE ITA NOS.1245 & 1246/2015 :- 16 -: ON 21.02.2013 AND THE QUESTIONS RAISED BY THE ASSES SING OFFICER IN THE SAID LETTER ARE REPRODUCED HEREUNDER:- 1. FURNISH THE ORIGINAL OF SHARE APPLICATION FORM DU LY SIGNED IN AND GIVEN TO YOU BY M/SCINEYUG MEDIA & ENTERTAINMEN T P LTD FOR ALLOTMENT OF SHARES IN M/S. KALAIGNAR TV PVT . LTD. IN CASE THE ORIGINAL FORM IS NOT AVAILABLE, YOU SHALL STATE AS TO WHY THE ORIGINALS ARE NOT AVAILABLE. 2. IF THE ORIGINALS ARE AVAILABLE, THEN YOU MAY STATE WHY THE SAME WERE NOT FOUND DURING THE SEARCH OPERATIONS-BY CBI. IF A COPY OF THE SHARE SUBSCRIPTION IS AVAILABLE WITH YO U, THEN FURNISH THE SAME ALONG WITH A NOTE AS TO HOW .AND W HY THE SAME SHOULD BE TREATED AS THE TRUE COPY OF THE ORI GINALS. 3. FURNISH THE ORIGINAL COPIES OF THE LETTERS/FORMS OF THE PROMOTERS RELINQUISHING THEIR RIGHTS FOR NOT SUBSCR IBING TO THE ADDITIONAL SHARES OF THE COMPANY OR AUTHORISING THE BOARD OF DIRECTORS TO ALLOW PRIVATE PLACEMENTS AS AVAILABLE ON OR AFTER 1 ST SEPTEMBER 2008. 4. IF YOU CLAIM THAT IN THE EXTRA-ORDINARY GENERAL BOD Y MEETING HELD ON 6.07.2007 THE SHAREHOLDERS HAVE APPROVED TH E PRIVATE PLACEMENT OF SHARES, THEN SUBSTANTIATE YOUR CLAIM I N RESPECT OF THE FOLLOWING:- I YOUR COMPANY HAD IN MIDDLE OF 2008 HAD ALLOTTED SHARES TO THE SHAREHOLDERS ON THE SAME PROPORTION O F THEIR ORIGINAL SHARE CAPITAL AND FURTHER AS PER YOU R BOARD MINUTES AT THAT POINT OF TIME, THERE WAS NO OTHER APPLICATION PENDING FOR ALLOTMENT OF SHARES RECEIVE D FROM ANY THIRD PARTIES . THEN EXPLAIN HOW THE DECIS ION OF THE PROMOTERS, IF ANY, DATED 6.7.2007 WAS STILL VAL ID AFTER ALLOTMENT OF FRESH SHARES TO THE PROMOTERS. WAS ANY FRESH APPROVAL TAKEN? II. DID YOU PLEDGE THE SHARES OF THE COMPANY TO M/S. CINEYUG MEDIA & ENTERTAINMENT PVT LTD FOR THE PURPORTED FUNDS RECEIVED FROM THEM? IF SO, FURNISH A COPY OF THE PLEDGE? ILL. FURTHER, EXPLAIN HOW THE COMPANY CAN PLEDGE ITS OWN EQUITY? THE EQUITY WAS WITH THE PROMOTERS ONLY AND WHETHER ANY EXPRESS CONSENT FROM EACH OF THE ITA NOS.1245 & 1246/2015 :- 17 -: PROMOTERS WERE TAKEN FOR PLEDGING THE EQUITY? FURNI SH RELEVANT EVIDENCE IN THIS REGARD. 5. FURNISH COPIES OF ALL THE RESOLUTIONS PASSED IN THE COMPANY AND ALSO COPIES OF THE AGENDA AND MINUTES OF THE GE NERAL BODY MEETING AND EXTRA-ORDINARY GENERAL BODY MEETIN G HELD DURING THE PERIOD FROM JUNE 2007 TO MARCH, 2012. 6. WHY IS THERE NO MENTION ABOUT THIS GENERAL BODY MEE TING SUPPOSEDLY HELD ON 6.7.2007 IN THE SUBSEQUENT BOARD 'S MINUTES? 7. WHY THERE IS NO MENTION ABOUT THE GENERAL BODY MEET ING SUPPOSEDLY HELD ON 31 ST JULY 2008 IN THE SUBSEQUENT BOARD'S MINUTES? 8. FURNISH A CHRONOLOGY OF EVENTS STARTING FROM THE AP PROVAL OF THE SHAREHOLDERS FOR PRIVATE PLACEMENT OF SHARES TO REPAYMENT OF PURPORTED LOANS FROM M/S. CIHEYUG MEDI A & ENTERTAINMENT P LTD. ALSO FURNISH RELEVANT EVIDENCE ADJACENT TO EACH EVENT. THE EVIDENCES MAY BE GIVEN IN A SEPA RATE ANNEXURE DULY SERIALISED. IF A DOCUMENT WAS ALREADY GIVEN TO THIS OFFICE, THEN THE RELEVANT REFERENCE NUMBER MAY BE GIVEN. AS THE ABOVE INFORMATION AND THE DOCUMENTS SHOULD B E READILY AVAILABLE ON YOUR RECORD, YOU ARE REQUESTED TO FURN ISH THE SAME URGENTLY AND PREFERABLY BY 25.02.2013. LD. ASSESSING OFFICER GAVE ONLY FOUR DAYS TO THE A SSESSEE FOR GIVING A REPLY TO THE ABOVE. ASSESSEE DID GIVE A REPLY DATE D 25.02.2013 WHICH INTERALIA STATED AS UNDER:- SUB: INCOME TAX AY 2008-09,2009-10 & 2010-11 REF: YOUR LETTERS DT 1.2.2013 AND 21.02.2013 THE COMPANY HAS BEEN ASKED TO FURNISH VARIOUS DETAILS FOR THE ABOVE ASST YEAR VIDE YOUR ABOVE LETTER DT 21.02.2013. WE HAVE BEEN ASKED TO FURNISH THE DETAILS, PREFERABLY BY 25.02.2013. ITA NOS.1245 & 1246/2015 :- 18 -: IN ADDITION TO THIS THE COMPANY HAS BEEN ASKED TO FURNISH VARIOUS OTHER DETAILS FOR THE SAME ASST YEARS BY 26.02.2013. WE WISH TO STATE THAT THE COMPANY HAS BEEN FILING ALL THE DETAILS WHENEVER ASKED FOR FROM SEPTEMBER 2011 ONWARDS. VOLUMINOUS BUNDLES OF ANNEXURES WERE ALSO SUBMITTED. NUMBER OF DETAILS ASKED FOR BY YOU HAVE ALREADY BEEN SUBMITTED. AS WE HAVE TO GO THROUGH THE BOOKS AND THE DETAILS SUBMITTED ONCE AGAIN, IT TAKES TIME TO GIVE THE REPLY. WE ARE FURNISHING THE REPLY FOR THE ASST YEAR 2008- 09 WITH REGARD TO YOUR LETTER DT 1.2.2013. WITH REGARD TO THE ASST YEARS 2009-10 AND 2010-11, WE REQUEST YOU TO KINDLY GIVE US A COUPLE .OF DAYS TIME. SIMILARLY FOR YOUR LETTER DATED 21.02.2013 WE REQUEST YOU TO GIVE US SOME MORE TIME TO FURNISH THE REPLY. FINALLY ON 11.03.2013, LD. ASSESSING OFFICER ISSUED A DETAILED LETTER TO THE ASSESSEE WHERE HE REFERRED TO VARIOUS PROCEEDIN GS IN CONNECTION WITH CBI INVESTIGATION IN WHAT IS KNOWN AS 2G SPEC TRUM CASE. ASSESSEE HAD GIVEN A REPLY TO THE SAID LETTER DATED 22.03.2013. THUS EVEN WE PRESUME THAT ASSESSEE WAS HAVING WITH IT TH E INVESTIGATION REPORT FILED BY THE CBI, THE TIME GIVEN TO IT FOR M AKING A REPLY TO VARIOUS QUERIES RAISED BY THE LD. ASSESSING OFFICER , RUNNING INTO NINETEEN PAGES WAS VERY LIMITED. ASSESSMENT WAS CO MPLETED ON 28.03.2013. IT IS ALSO AN ADMITTED POSITION THAT L D. COMMISSIONER OF INCOME TAX (APPEALS) HAD RELIED ON A REPORT OF THE ENFORCEMENT DIRECTORATE. NONE OF THE LOWER AUTHORITIES HAD EXA MINED ANY OF THE OFFICIALS OF M/S. CINEYUG MEDIA & ENTERTAINMENT PRI VATE LIMITED AND THE ITA NOS.1245 & 1246/2015 :- 19 -: SIGNATORIES TO THE SHARE APPLICATION AGREEMENT DAT ED 19.12.2008 AND INTER CORPORATE DEPOSITS AGREEMENT DATED 06.04.2009 , 15.07.2009 AND 07.08.2009. THOUGH ONE OF THE CONTENTIONS OF THE REVENUE IS THAT M/S. CINEYUG MEDIA & ENTERTAINMENT PRIVATE LIM ITED WHEN IT GAVE THE MONEY TO THE ASSESSEE, HAD NO FUNDS WITH IT, THE BANK STATEMENTS OF M/S. CINEYUG MEDIA & ENTERTAINMENT PR IVATE LIMITED WAS NEVER EXAMINED BY THE LD. ASSESSING OFFICER, DESPIT E ASSESSEES CLAIM THAT IT HAD RECEIVED THE MONEY THROUGH CHEQUES/ DE MAND DRAFTS. LD. ASSESSING OFFICER HAD RELIED ON THE ASSESSMENT DON E ON M/S. CINEYUG MEDIA & ENTERTAINMENT PRIVATE LIMITED FOR COMING TO A CONCLUSION THAT THEY HAD NO SUFFICIENT FUNDS FOR GIVING THE THE CRE DITS OF THE ASSESSEE. 10 . NO DOUBT AN ASSESSEE CAN ALWAYS SAY THAT IT NEED NOT PROVE SOURCE OF THE SOURCE. BUT THIS CANNOT BE SO EXTRAP OLATED TO MEAN THAT SOURCE CAN BE A FARCE. ONUS IS ALWAYS ON THE ASSES SEE TO SHOW THE GENUINENESS OF THE TRANSACTIONS AND ASSESSING OFFIC ER CAN ALWAYS GO INTO THE TRAIL OF THE TRANSACTIONS FOR REJECTING O R ACCEPTING THE CLAIM OF GENUINENESS. CONSIDERING ALL THE ABOVE ASPECTS, WE ARE OF THE OPINION THAT QUESTION WHETHER MONEY RECEIVED BY THE ASSESS EE DURING THE IMPUGNED ASSESSMENT YEARS COULD BE CONSIDERED AS UN EXPLAINED CASH CREDITS REQUIRE A FRESH LOOK BY THE LD. ASSESSING O FFICER. ASSESSEE HAS TO BE GIVEN SUFFICIENT OPPORTUNITY TO EXPLAIN ITS C ASE AND SHALL MAKE A ITA NOS.1245 & 1246/2015 :- 20 -: REPLY TO EACH OF THE POINT TAKEN BY THE ASSESSING OFFICER FROM THE INVESTIGATION REPORT OF CBI AND REPORT OF ENFORCEME NT DIRECTORATE. ASSESSING OFFICER SHALL THEREAFTER PROCEED IN ACCOR DANCE WITH LAW. WE THEREFORE SET ASIDE THE ORDERS OF THE AUTHORITIES BELOW AND REMIT THE ISSUE BACK TO THE FILE OF THE LD. ASSESSING OFFICER FOR CONSIDERATION AFRESH IN ACCORDANCE WITH LAW FOR BOTH THE YEARS. S INCE THE MATTER IS REMITTED BACK, QUESTION REGARDING JURISDICTION AND LIMITATION ARE KEPT OPEN FOR ADJUDICATION AT A LATER STAGE IF FOUND NEC ESSARY. 11. IN THE RESULT, THE APPEALS OF THE ASSESSEE FOR BOTH THE YEARS ARE ALLOWED FOR STATISTICAL PURPOSE. ORDER PRONOUNCED ON FRIDAY, THE 23 RD DAY OF DECEMBER, 2016, AT CHENNAI. SD/- ( . ) (G. PAVAN KUMAR) $ % / JUDICIAL MEMBER SD/- ( . ) (ABRAHAM P. GEORGE) & % / ACCOUNTANT MEMBER +& / CHENNAI , / DATED:23RD DECEMBER, 2016 KV - ' $'./ 0/' / COPY TO: 1 . ! / APPELLANT 3. 1' () / CIT(A) 5. /45 $'6 / DR 2. $% ! / RESPONDENT 4. 1' / CIT 6. 57 8& / GF