KSS LTD, MUMBAI V. DCIIT CC 38, MUMBAI

ITA 1287/MUM/2014

• Counselvise Citation: [2017] 126 COUNSELVISE.COM (IT) 8749 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 8 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-10-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 10-10-2016
• Assessment Year: 2005-2006
• Appeal Filed On: 26-02-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: R P MEENARAJESH KUMAR YADAV
• Section: 43B; 143(3); 153A; 37(1)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH A, MUMBAI BEFORE SHRI G.S.PANNU, ACCOUNTANT MEMBER AND SHRI RAM LAL NEGI, JUDICIAL MEMBER ITA NO. 5055/MUM/2011,(A.Y.2005-06) ITA NO. 1287/MUM/2014,(A.Y.2005-06) K.SERA SERA PRODUCTIONS LIMITED, 18, 4 TH FLOOR, MOHID HEIGHTS, ABOVE MASALA MANTRA RESTAURANT, LOKHANDWALA ROAD, ANDHERI (W), MUMBAI 400 053 PAN:AAACG 5103D ...... APPELLANT VS. THE DCIT, C.C-38, ROOM NO.32(1) GROUND FLOOR, AAYKAR BHAVAN,M.K.ROAD, MUMBAI 400 020 .... RESPONDENT ASSESSEE BY : SHRI SATISH MODY REVENUE BY : S/SHRI R.P.MEENA/RAJESH KUMAR YADAV DATE OF HEARING : 26/10/2017 DATE OF PRONOUNCEMENT : 31/10/2017 ORDER PER G.S.PANNU,A.M: THE CAPTIONED APPEALS RELATES TO THE SAME ASSESSE E PERTAINING TO ASSESSMENT YEAR 2005-06, THEREFORE, THEY HAVE BEEN CLUBBED TOGETHER AND A CONSOLIDATED ORDER IS BEING PASSED FOR THE SA KE OF CONVENIENCE AND BREVITY. 2 ITA NO. 5055/MUM/2011,(A.Y.2005-06) ITA NO. 1287/MUM/2014,(A.Y.2005-06) 2. FIRST, WE MAY TAKE UP THE APPEAL IN ITA NO.5055/ MUM/2011 WHICH IS DIRECTED AGAINST THE ORDER PASSED BY THE C IT(A)- 41, MUMBAI PERTAINING TO THE ASSESSMENT YEAR 2005-06, WHICH IN TURN HAS ARISEN FROM AN ORDER PASSED BY THE ASSESSING OFFICER DATED 31/12/2009 UNDER SECTION 143(3) R.W.S. 153A OF THE ACT. 3. THE GENESIS OF THIS APPEAL ARISES FROM AN ASSESS MENT MADE BY THE ASSESSING OFFICER UNDER SECTION 143(3) R.W.S. 153A OF THE ACT FOLLOWING A SEARCH ACTION CARRIED OUT AT THE BUSINESS PREMISES OF THE ASSESSEE AND ITS OTHER GROUP CONCERNS ON 12/09/2007. THE ASSESS MENT HAS BEEN FINALIZED AT RS.7,85,86,225/- AS AGAINST THE RETURN ED INCOME OF RS.4,80,06,298/-. THE CIT(A) HAS ALLOWED PART RELI EF TO THE ASSESSEE AND THE ASSESSEE IS IN APPEAL CHALLENGING THE ADDITION SUSTAINED BY THE CIT(A) OF RS.19,65,690/- ON ACCOUNT OF PRIOR PERIOD EXPENSES. HOWEVER, SUBSEQUENT TO THE FILING OF APPEAL BEFORE THE TRIBU NAL, ASSESSEE HAS RAISED AN ADDITIONAL GROUND OF APPEAL, WHICH READS AS UNDER:- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW THE ADDITIONS MADE BY THE ASSESSING OFFICER UNDER SECTION 143(3) R.W.S. 153A ARE BAD IN LAW AS THE ADDITIONS ARE NOT BASED ON ANY INCRIMINATING MATERIAL FOUND DURING THE COURSE OF SEARCH. 4. IN TERMS OF THE ADDITIONAL GROUND OF APPEAL, IT IS SOUGHT TO BE CANVASSED THAT THE ADDITION IS NOT BASED ON ANY IN CRIMINATING MATERIAL FOUND IN THE COURSE OF SEARCH AND, THEREFORE, IT IS OUTSIDE THE SCOPE OF THE IMPUGNED ASSESSMENT WHICH HAS BEEN FINALIZED UN DER SECTION 143(3) R.W.S. 153A OF THE ACT. IT HAS BEEN CANVASS ED BEFORE US THAT THE POINT RAISED BY THE ASSESSEE IS BASED ON THE LAW LA ID DOWN BY THE HON'BLE BOMBAY HIGH COURT IN THE CASE OF ALL CARGO GLOBAL LOGISTICS LTD.,374 ITR 645 (BOM) AND SINCE NECESSARY FACTS AR E AVAILABLE ON 3 ITA NO. 5055/MUM/2011,(A.Y.2005-06) ITA NO. 1287/MUM/2014,(A.Y.2005-06) RECORD, THE ADDITIONAL GROUND BE ADMITTED FOR ADJUD ICATION FOLLOWING THE RATIO OF THE JUDGMENT OF THE HON'BLE SUPREME CO URT IN THE CASE OF NATIONAL THERMAL POWER CO.LTD.,229 ITR 383(SC). 5. ON THE OTHER HAND, THE LD. DEPARTMENTAL REPRESEN TATIVE REITERATED THAT THE PLEA NOW SOUGHT TO BE RAISED WA S NOT RAISED BEFORE THE LOWER AUTHORITIES AND FURTHER THAT A PART OF TH E DISALLOWANCE MADE BY THE ASSESSING OFFICER UNDER SECTION 37(1) OF THE ACT HAS ALSO BEEN ADMITTED BEFORE THE CIT(A) AND, THEREFORE, NO RELIE F SHOULD BE EXTENDED ON THAT SCORE. 6. HAVING CONSIDERED THE RIVAL STANDS, IN OUR VIEW , THE ADDITIONAL GROUND OF APPEAL SOUGHT TO BE RAISED BY THE ASSESSE E DESERVES TO BE ADMITTED SINCE IT INVOLVES A PURE POINT OF LAW AND THE NECESSARY FACTS REQUIRED TO ADJUDICATE THE SAME ARE ALREADY BEEN O N RECORD. THUS, FOLLOWING THE RATIO OF THE JUDGMENT OF THE HON'BLE SUPREME COURT IN THE CASE OF NATIONAL THERMAL CO. LTD.(SUPRA), WE HEREBY ADMIT THE ADDITIONAL GROUNDS OF APPEAL FOR ADJUDICATION. 7. AT THE TIME OF HEARING THE RIVAL COUNSELS WERE H EARD ON THE MERITS OF THE ADDITIONAL GROUND OF APPEAL. IN ORD ER TO APPRECIATE THE PLEA OF THE ASSESSEE, THE FOLLOWING FACTS ARE RELEV ANT. ORIGINALLY, ASSESSEE FILED A RETURN OF INCOME UNDER SECTION 13 9(1) OF THE ACT ON 31/10/2005 DECLARING A TOTAL INCOME OF RS.4,80,06,3 00/-. CONSEQUENT TO THE SEARCH ACTION UNDER SECTION 132(1) OF THE AC T ON 12/09/2007, A NOTICE UNDER SECTION 153A OF THE ACT WAS ISSUED CAL LING FOR THE RETURN OF INCOME AND IN RESPONSE ASSESSEE FILED A RETURN OF INCOME ON 10/09/2009 DECLARING THE TOTAL INCOME AT RS.4,80,06 ,300/-, WHICH THE SAME AS DECLARED IN THE RETURN OF INCOME ORIGINALLY FIELD FOR THE INSTANT 4 ITA NO. 5055/MUM/2011,(A.Y.2005-06) ITA NO. 1287/MUM/2014,(A.Y.2005-06) ASSESSMENT YEAR UNDER SECTION 139(1) OF THE ACT. NOTABLY, ON THE DATE OF THE SEARCH I.E. ON 12/09/2007, THE TIME LIMIT FO R ISSUANCE OF NOTICE UNDER SECTION 143(2) OF THE ACT WITH RESPECT TO THE RETURN OF INCOME ORIGINALLY FILED ON 31/10/2005 UNDER SECTION 139(1) OF THE ACT HAD LAPSED AND THUS IT COULD NOT BE SAID THAT ANY ASSES SMENT ON THE DATE OF SEARCH WAS PENDING. THUS, IN TERMS OF THE SECOND P ROVISO TO SECTION 153A(1) OF THE ACT THE ORIGINAL RETURN HAD BECOME F INAL AND THE ASSESSMENT DID NOT ABATE. AS A CONSEQUENCE, FOLLOW ING THE RATIO OF THE HON'BLE BOMBAY HIGH COURT IN THE CASE OF ALL CARGO GLOBAL LOGISTICS LTD. (SUPRA) IN THE ENSUING ASSESSMENT FINALIZED UNDER SECTION 143(3) R.W.S. 153A OF THE ACT, NO ADDITION COULD BE MADE IN THE A BSENCE OF ANY INCRIMINATING MATERIAL FOUND IN THE COURSE OF SEARC H. THE PLEA OF THE ASSESSEE IS THAT THE ADDITIONS MADE BY THE ASSESSIN G OFFICER IN THE IMPUGNED ASSESSMENT ARE WITHOUT RECOURSE TO ANY INC RIMINATING MATERIAL FOUND IN THE COURSE OF SEARCH AND ARE THU S, OUTSIDE THE SCOPE OF THE IMPUGNED ASSESSMENT, AS PER THE PROPOSITION LAID DOWN BY THE HON'BLE BOMBAY HIGH COURT IN THE CASE OF ALL CARGO GLOBAL LOGISTICS LTD. (SUPRA). 8. IN THIS CONTEXT, WE HAVE PERUSED THE ASSESSMENT ORDER AND FIND THAT THREE ADDITIONS HAVE BEEN MADE TO THE INCOME R ETURNED. FIRSTLY, A DISALLOWANCE UNDER SECTION 43B OF THE ACT OF RS.1,7 8,911/-, WHICH HAS SINCE BEEN DELETED BY THE CIT(A) AND IN THE ABSENCE OF ANY APPEAL BY THE REVENUE THE SAID DELETION HAS BECOME FINAL. TH US, AS OF NOW THE SAID ADDITION HAS NO RELEVANCE. SECONDLY, A DISALL OWANCE OF RS.19,65,690/- HAS BEEN MADE ON ACCOUNT OF PRIOR PE RIOD EXPENSES AND RELEVANT DISCUSSION IS CONTAINED IN PARA-6 OF THE A SSESSMENT ORDER. THE 5 ITA NO. 5055/MUM/2011,(A.Y.2005-06) ITA NO. 1287/MUM/2014,(A.Y.2005-06) SAID ADDITION HAS SINCE BEEN AFFIRMED BY THE CIT(A) ALSO, AND IT HAS BEEN FURTHER CHALLENGED BY THE ASSESSEE IN APPEAL BEFORE US. THE DISCUSSION IN THE ASSESSMENT ORDER REVEALS THAT IT IS PURELY B ASED ON THE TAX AUDIT REPORT AND, THERE IS NO REFERENCE TO ANY INCRIMINAT ING MATERIAL FOUND IN THE COURSE OF SEARCH IN ORDER SUPPORT THE SAID ADDI TION. THIRDLY, A DISALLOWANCE HAS BEEN MADE UNDER SECTION 37(1) OF T HE ACT OF RS.2,84,35,326/- BY NOTICING THAT THERE WAS A DIFFE RENCE BETWEEN THE COST OF PRODUCTION CLAIMED BY THE ASSESSEE FOR VARI OUS MOVIES AS PER RULE 9A OF THE INCOME TAX RULES, 1962( IN SHORT T HE RULES) VIS--VIS THE COST OF PRODUCTION DEBITED TO THE PROFIT & LOS S ACCOUNT. THE DIFFERENCE BETWEEN THE TWO HAS BEEN DISALLOWED. F ACTUALLY, ON THIS ASPECT, WE FIND THAT CIT(A) HAS SUSTAINED AN ADDI TION OF ONLY RS.24,84,694/- AND THE BALANCE HAS BEEN DELETED. TH ERE IS NO APPEAL BY THE REVENUE AGAINST THE RELIEF ALLOWED BY THE CIT(A ), AS WAS STATED IN THE HEARING BEFORE US. IN SO FAR AS THE ADDITION SUSTAINED, THE CIT(A) HAS RECORDED A FINDING THAT ASSESSEE HAS ADMITTED T HE DISALLOWANCE TO THE TUNE OF RS.24,84,694/-. THUS, ON THIS ASPECT A LSO WE FIND NO NECESSITY TO MAKE FURTHER DISCUSSION, AS THE CIT(A) HAS ALLOWED PART RELIEF AND THE BALANCE OF RS.24,84,694/- HAS BEEN A DMITTED BY THE ASSESSEE ITSELF AND THERE CANNOT BE ANY FURTHER GRI EVANCE OF THE ASSESSEE . 9. BE THAT AS IT MAY, THE ONLY DISALLOWANCE WHICH I S CHALLENGED BY THE ASSESSEE BEFORE US IS THE PRIOR PERIOD EXPENSES AND RELEVANT DISCUSSION IN THE ASSESSMENT ORDER DOES NOT SHOW TH AT IT IS BASED ON ANY INCRIMINATING MATERIAL FOUND IN THE COURSE OF S EARCH. THUS, THE RATIO OF THE JUDGMENT OF THE HON'BLE BOMBAY HIGH COURT IN THE CASE ALL CARGO 6 ITA NO. 5055/MUM/2011,(A.Y.2005-06) ITA NO. 1287/MUM/2014,(A.Y.2005-06) GLOBAL LOGISTICS LTD. (SUPRA) IS CLEARLY ATTRACTED AND THE SAME IS OUTSIDE THE PURVIEW OF THE IMPUGNED ASSESSMENT FINALIZED UN DER SECTION 143(3) R.W.S. 153A OF THE ACT. THUS, ON THIS ASPECT ITSEL F, WE SET ASIDE THE ORDER OF CIT(A) AND DIRECT THE ASSESSING OFFICER TO DELET E THE ADDITION OF RS19,65,690/-. WE MAY CLARIFY HERE THAT WE ARE NOT EXAMINING THE AFORESAID PROPOSITION WITH RESPECT TO THE ADDITION OF RS.24,84,964/- UNDER RULE 9A OF THE RULES, SINCE THE SAME HAS BEEN ADMITTED BY THE ASSESSEE BEFORE THE CIT(A), AND THERE IS NO NEGATIO N OF THE SAID ASPECT BEFORE US. 10. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWED, AS ABOVE. 11. IN SO FAR AS THE APPEAL OF THE ASSESSEE IN ITA NO.1287/M/2014 IS CONCERNED, THE SAME IS DIRECTED AGAINST THE ORDER P ASSED BY THE CIT(A)- 41, MUMBAI DATED 29/11/2013, PERTAINING TO THE ASSE SSMENT YEAR 2005- 06, WHEREBY THE PENALTY LEVIED UNDER SECTION 271(1) (C) OF THE ACT WITH RESPECT TO THE ADDITION OF RS.24,84,964/- HAS B EEN SUSTAINED. 12. NOTABLY, THE PENALTY HAS BEEN LEVIED BY THE ASS ESSING OFFICER ON AN AMOUNT OF RS. 19,65,507/- REPRESENTING DISALLOWA NCE OF PRIOR PERIOD EXPENSES AND UNDER SECTION 37(1) OF THE ACT OF RS.24,84,964/-, WHICH WAS CONFIRMED BY THE CIT(A) ON ACCOUNT OF DIF FERENCE BETWEEN THE EXPENDITURE ON PRODUCTION OF MOVIES CLAIMED IN TERMS OF RULE 9A OF THE RULES VIS--VIS THE EXPENDITURE DEBITED IN T HE PROFIT & LOSS ACCOUNT. THE CIT(A) HAS SUSTAINED THE PENALTY WITH REGARD TO THE DISALLOWANCE OF COST OF PRODUCTION OF RS.24,84,964/ - WHEREAS WITH RESPECT TO THE DISALLOWANCE OF PRIOR PERIOD EXPENDI TURE OF RS.19,65,690/-, HE HAS DELETED THE PENALTY. NOT BE ING SATISFIED WITH THE ORDER OF CIT(A), ASSESSEE IS IN FURTHER APPEAL BEFO RE US. 7 ITA NO. 5055/MUM/2011,(A.Y.2005-06) ITA NO. 1287/MUM/2014,(A.Y.2005-06) 13. AT THE TIME OF HEARING, LD. REPRESENTATIVE FOR THE ASSESSEE POINTED OUT THAT EVEN THOUGH ASSESSEE HAD ADMITTED THE DISALLOWANCE OF RS.24,84,694/- IN TERMS OF RULES 9A OF THE RULES BEFORE THE CIT(A) IN THE QUANTUM PROCEEDINGS, YET IN THE PENALTY PROCEED INGS ASSESSEE WOULD BE WITHIN ITS RIGHT TO CONTEND THAT SUCH A DISALLOWANCE IS NOT PERMISSIBLE IN AN ASSESSMENT MADE UNDER SECTION 143 (3) R.W.S. 153A(1) OF THE ACT, HAVING REGARD TO THE RATIO OF THE JUDGM ENT OF THE HON'BLE BOMBAY HIGH COURT IN THE CASE OF ALL CARGO GLOBAL L OGISTICS LTD. (SUPRA). 14. ON THE OTHER HAND, THE LD. DEPARTMENTAL REPRESE NTATIVE PRIMARILY CONTENDED THAT SINCE ADDITION HAS BEEN AC CEPTED BY THE ASSESSEE, THE PENALTY UNDER SECTION 271(1)(C) OF TH E ACT IS QUITE JUSTIFIED. 15. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSI ONS. NO DOUBT IN THE QUANTUM PROCEEDINGS, ASSESSEE AGREED TO THE ADD ITION OF RS.24,84,694/- IN TERMS OF RULE 9A OF THE RULES BEF ORE THE CIT(A) HOWEVER, THE PENALTY PROCEEDINGS UNDER SECTION 271( 1)(C) OF THE ACT ARE INDEPENDENT PROCEEDINGS AND THE FINDINGS IN THE ASS ESSMENT PROCEEDINGS CANNOT BE CONCLUSIVE TO TEST THE EFFICA CY OF PENALTY UNDER SECTION 271(1)(C) OF THE ACT. AS PER THE HON'BLE SU PREME COURT IN THE CASE OF ANANTHARAM VEERASINGHAIAH & CO. VS. CIT, 12 3 ITR 457 (SC) THE PENALTY PROCEEDINGS AND ASSESSMENT PROCEEDINGS ARE INDEPENDENT PROCEEDINGS AND THOUGH THE FINDINGS IN THE ASSESSME NT PROCEEDINGS MAY BE RELEVANT, BUT THEY ARE NOT CONCLUSIVE TO DET ERMINE THE EFFICACY OF THE PENALTY LEVIABLE UNDER SECTION 271(1)(C) OF THE ACT. THEREFORE, IN THE PENALTY PROCEEDINGS IT IS OPEN THE ASSESSEE T O DEMONSTRATE THAT THE ADDITION, WHICH HAS RESULTED IN THE LEVY OF PEN ALTY IS ITSELF NOT 8 ITA NO. 5055/MUM/2011,(A.Y.2005-06) ITA NO. 1287/MUM/2014,(A.Y.2005-06) TENABLE IN LAW. SUCH A PLEA HAS BEEN RAISED BY THE ASSESSEE BEFORE US AND, IN OUR VIEW, THE SAME DESERVES TO BE ADMITTED . WE ARE CONSCIOUS THAT, PRESENTLY WE ARE NOT DEALING WITH THE QUANTUM PROCEEDINGS, BUT WE ARE EXAMINING THE EFFICACY OF THE ADDITION ONLY FOR THE PURPOSE OF EXAMINING THE EXIGIBILITY OF PENALTY UNDER SECTION 271(1)(C) OF THE ACT. CONSIDERING THE SAME, WE FIND THAT THE DISCUSSION I N THE ASSESSMENT ORDER OR EVEN IN THE ORDER OF THE CIT(A) IN THE QUA NTUM PROCEEDINGS DOES NOT SHOW THAT THE ADDITION OF RS.24,84,964/- IN TERMS OF RULES 9A OF THE RULES IS BASED ON ANY INCRIMINATING MATERIAL FOUND IN THE COURSE OF SEARCH AND, THEREFORE, THE SAME IS NOT MAINTAINA BLE IN VIEW OF THE JUDGMENT OF THE HON'BLE BOMBAY HIGH COURT IN THE CA SE OF ALL CARGO GLOBAL LOGISTICS LTD. (SUPRA). THUS, WHERE THE ADD ITION ITSELF IS OTHERWISE UNSUSTAINABLE, THE PENALTY UNDER SECTIO N 271(1)(C) OF THE ACT IS, THEREFORE, NOT EXIGIBLE. ACCORDINGLY, WE SET-ASIDE THE ORDER OF CIT(A) AND DIRECT THE ASSESSING OFFICER TO DELETE T HE PENALTY LEVIABLE WITH RESPECT TO THE ADDITION OF RS.24,84,964/- MADE IN TERMS OF RULE 9A OF THE RULES. THUS, ASSESSEE SUCCEEDS IN THIS APPEA L ALSO. 16. RESULTANTLY, THE CAPTIONED APPEALS OF THE ASSES SEE ARE ALLOWED, AS ABOVE. ORDER PRONOUNCED IN THE OPEN COURT ON 31/10/2017. SD/- SD/- (RAM LAL NEGI) (G.S. PANNU) JUDICIAL MEMBER ACCOCUNTANT MEMBER MUMBAI, DATED 31/10/2017 VM , SR. PS 9 ITA NO. 5055/MUM/2011,(A.Y.2005-06) ITA NO. 1287/MUM/2014,(A.Y.2005-06) COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT , 2. THE RESPONDENT. 3. THE CIT(A)- 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. BY ORDER, //TRUE COPY// (DY./ASSTT. REGISTRAR) ITAT, MUMBAI