Siri Media Pvt.Ltd., Hyd, Hyderabad V. Addl. CIT, Range-13(1), Hyd, Hyderabad

ITA 1443/HYD/2015

• Counselvise Citation: [2018] 119 COUNSELVISE.COM (IT) 2873 (ITAT-HYDERABAD)
• Duration Of Justice: 2 year(s) 10 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-11-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2011-2012
• Appeal Filed On: 29-12-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: K J RAO
• Assessee Lawyers: V RAGHAVENDRA RAO
• Keywords: Cost of acquisition
• Section: 143(3); 68

Judgement Text

ITA NO 1443 OF 2015 SIRI MEDIA P LTD HYDERABAD. PAGE 1 OF 9 IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD A BENCH, HYDERABAD BEFORE SMT. P. MADHAVI DEVI, JUDICIAL MEMBER AND SHRI S.RIFAUR RAHMAN, ACCOUNTANT MEMBER ITA NO.1443/HYD/2015 (ASSESSMENT YEAR: 2011-12) M/S. SIRI MEDIA PVT LTD HYDERABAD PAN: AAACD7097H VS JT. COMMISSIONER OF INCOME TAX, RANGE 14 HYDERABAD (APPELLANT) (RESPONDENT) FOR ASSESSEE : SHRI V.RAGHAVENDRA RAO FOR REVENUE : SRI K.J. RAO, DR O R D E R PER SMT. P. MADHAVI DEVI, J.M. THIS IS ASSESSEES APPEAL FOR THE A.Y 2011-12 AGAIN ST THE ORDER OF THE CIT (A)-6, HYDERABAD, DATED 16.10. 20145. 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE CO MPANY ENGAGED IN THE BUSINESS OF ENTERTAINMENT INDUSTRY A ND FILM DISTRIBUTION, FILED ITS RETURN OF INCOME ON 30.08.2 012 FOR THE A.Y 2011-12 ADMITTING TOTAL INCOME OF RS.53,96,970. DUR ING THE ASSESSMENT PROCEEDINGS U/S 143(3) OF THE ACT, THE A O OBSERVED THAT THE ASSESSEE HAD DEBITED A SUM OF RS.1,50,00,0 00 IN THE P&L A/C TOWARDS LEASE RIGHTS OF A FILM. THE ASSESSEE WA S ASKED TO PRODUCE THE COPY OF THE AGREEMENT IN SUPPORT OF ITS CLAIM. THE ASSESSEE SUBMITTED A NOTE STATING THAT THE ASSESSEE HAD DATE OF HEARING : 04.10.2018 DATE OF PRONOUNCEMENT: 02.11.2018 ITA NO 1443 OF 2015 SIRI MEDIA P LTD HYDERABAD. PAGE 2 OF 9 PURCHASED LEASE RIGHTS RELATING TO KRISHNAARJUNA MOVIE DURING THE FINANCIAL YEAR 2007-08 ON OUTRIGHT BASIS EXCLUD ING THE COST OF PRINTS AND PUBLICITY EXPENSES FOR A CONSIDERATION O F RS.1,75,00,000 FROM SRI LAKSHMI PRASANNA PICTURES F OR THE AREA OF NIZAM AS KNOWN IN THE FILM TRADE FOR A PERIOD OF FIVE YEARS FROM THE DATE OF ITS FIRST RELEASE AND THAT THE MOVIE WA S RELEASED ON 1.2.2008 AND EXHIBITED THE SAME IN THEATRES. IT WAS SUBMITTED THAT SINCE THE REALIZATION FROM THE MOVIE WERE LESS THAN THE COST OF ACQUISITION AND ALSO SINCE THE EXHIBITION OF THE MO VIE ON COMMERCIAL BASIS WAS 90 DAYS BEFORE THE END OF THE FINANCIAL YEAR, THE EXPENDITURE IN CONNECTION WITH THE EXHIBITION O F THE MOVE AND REALIZATION ARE CREDITED TO THE PRODUCERS A/C AND CARRIED FORWARD TO THE NEXT YEAR AS PER RULE 9(3)B OF THE I.T. ACT. IT WAS SUBMITTED THAT IN THE FINANCIAL YEAR 2008-09, THE COMPANY HAS CLAIMED AN AMOUNT OF RS.1,50,00,000 TOWARDS LEASE RIGHTS INSTE AD OF CLAIMING OF RS.1,15,57,182 AND ALSO THE REALIZATIONS WERE NO T OFFERED TO TAX DUE TO THE OVERSIGHT OF THE ACCOUNTING STAFF AND DU RING THE FINANCIAL YEAR 2010-11, THE ASSESSEE HAS CLAIMED AN AMOUNT OF RS.1,50,00,000 TOWARDS LEASE RIGHTS INSTEAD OF CLAI M OF RS.1,15,57,182. THE AO THEREFORE, ASKED THE ASSESSE E TO PRODUCE THE COPY OF THE AGREEMENT WITH M/S. SRI LAKSHMI PRA SANNA PICTURES FOR VERIFICATION. HOWEVER, THE ASSESSEE CO ULD NOT PRODUCE COPY OF THE AGREEMENT INSPITE OF NUMBER OF OPPORTUN ITIES GIVEN TO THE ASSESSEE. SINCE THE ASSESSEE COULD NOT FURNISH THE RELEVANT COPIES, THE AR OF THE ASSESSEE AGREED FOR ADDITION OF RS.1,50,00,000 AND THE AO ACCORDINGLY ADDED IT TO T HE INCOME RETURNED BY THE ASSESSEE. ITA NO 1443 OF 2015 SIRI MEDIA P LTD HYDERABAD. PAGE 3 OF 9 3. THE AO FURTHER OBSERVED THAT THE ASSESSEE HAS SH OWN HUGE AMOUNT AS SUNDRY CREDITORS IN THE BALANCE SHEE T. THE ASSESSEE WAS THEREFORE, ASKED TO SUBMIT THE LIST OF CREDITORS ALONG WITH THE CONFIRMATIONS AND PAN OF THE CREDITORS. TH E ASSESSEE COULD NOT SUBMIT THE CONFIRMATION FROM THE FOLLOWIN G THREE CREDITORS AND STATED THAT THEY ARE NOT TRACEABLE: I) SRI S. PANDURANGA RAO - RS.50,00,000 II)M/S.LARSCO ENTERTAINMENT P.LTD RS.51,50,60 1 III)M/S.VIZAG FILM DIST.ASSOC. RS.63, 05,000 TOTAL: RS.1,64,55,601 4. FURTHER, THE ASSESSEE ALSO SUBMITTED A LETTER DA TED 26.03.2014 STATING THAT THE ASSESSEE IS NOT ABLE TO OBTAIN THE LETTERS OF CONFIRMATION OF BALANCES FROM THE FOLLOW ING CREDITORS: S.NO NAME OF THE PARTY BALANCE AS AT 31.3.2011 1 K RAJENDRA MEHBUBNAGAR 42,27,824 2 K.VIDYA SAGAR 15,98,600 3 MANJITH SINGH SECUNDERABAD 18,58,918 4 MIRYALGUDA LALITHA MAHAL 16,00,000 5 DURGA DEVI ENTERPRISES- SECUNDERABAD 21,00,000 6 HARITHA ENTERPRISES KARIMNAGAR 20,70,365 7 RAJA RAJESWARI ENTERPRISES SECUNDERABAD 25,00,000 8 SRI AAVULA SUNDARA RAO 13,11,648 9 SURAPETA RDR CINEMAS 12,77,542 10 WARANGAL M/S. RAM THEATRE 30,00,000 11 VYJAYANTHI ENTERTAINMENT & PROPERTIES P LTD 10,50,021 TOTAL 2,25,94,918 5. THE AO OBSERVED THAT AS PER SECTION 68, WHERE AN Y SUM IS FOUND CREDITED IN THE BOOKS OF AN ASSESSEE M AINTAINED FOR ANY PREVIOUS YEAR AND THE ASSESSEE OFFERS NO EXPLAN ATION ABOUT THE NATURE AND SOURCE THEREOF OR THE EXPLANATION OF FERED BY HIM IS NOT, IN THE OPINION OF THE AO, SATISFACTORY, THE SU M SO CREDITED MAY BE CHARGED TO INCOME-TAX AS THE INCOME OF THE A SSESSEE OF ITA NO 1443 OF 2015 SIRI MEDIA P LTD HYDERABAD. PAGE 4 OF 9 THAT PREVIOUS YEAR. HE THEREFORE, OBSERVED THAT SIN CE THE ASSESSEE HAS NOT BEEN ABLE TO DISCHARGE THE ONUS OF PROVING THE IDENTITY OF THE CREDITORS, THE CAPACITY OF THE CREDITORS TO ADV ANCE MONEY AND THE GENUINENESS OF THE TRANSACTIONS, THE TOTAL SUM OF RS.3,90,50,519 HAS TO BE ADDED U/S 68 OF THE ACT. H E ACCORDINGLY BROUGHT IT TO TAX. 6. THE AO ALSO FOUND THAT THE ASSESSEE HAS SUBMITTE D THE CONFIRMATION OF THE CREDITOR SRI KEERTHI CREATI ON FOR RS.11,00,000 AND THAT THIS AMOUNT IS PENDING SINCE 29.03.2008. SINCE THE LIABILITY IS PENDING BEYOND THREE YEARS A ND THE ASSESSEE HAD NOT SETTLED THIS LIABILITY EVEN TILL THE RELEVA NT FINANCIAL YEAR, THE AO WAS OF THE OPINION THAT IT NEEDS TO BE ADDED AS A CESSATION OF LIABILITY U/S 41(1) OF THE I.T. ACT. 7. THE AO ALSO OBSERVED THAT THE ASSESSEE COULD NOT SUBMIT CONFIRMATIONS FROM THE CREDITORS TO THE EXTE NT OF RS.1,64,55,601 AND SINCE THE LIABILITY HAS NOT BEEN SETTLED TILL THE LAST DATE OF FINANCIAL YEAR, THE ASSESSEE WAS ASKED TO SHOW-CAUSE AS TO WHY THIS AMOUNT SHOULD NOT BE ADDED U/S 41 OF THE ACT. THE AR OF THE ASSESSEE AGREED FOR SUCH DISALLOWANCE AND THEREFORE, THE AO BROUGHT IT TO TAX. 8. THE AO ALSO OBSERVED THAT THE CREDITORS TO EXTEN T OF RS.1,64,55,601 HAVE ALREADY BEEN ADDED AND THEREFOR E, NO SEPARATE ADDITION IS CALLED FOR ON THESE AMOUNTS. T HEREFORE, HE MADE AN ADDITION OF RS.11,00,000 ONLY AS CESSATION OF LIABILITY AND BROUGHT IT TO TAX. ITA NO 1443 OF 2015 SIRI MEDIA P LTD HYDERABAD. PAGE 5 OF 9 9. AGGRIEVED, THE ASSESSEE PREFERRED AN APPEAL BEFO RE THE CIT (A) WHO GRANTED PARTIAL RELIEF TO THE ASSESSEE. THE CIT (A) DELETED THE ADDITION U/S 68 ON THE GROUND THAT THES E ARE OLD BALANCES AND ARE NOT PERTAINING TO THE RELEVANT PRE VIOUS YEAR. THEREAFTER, SHE ALSO CONSIDERED THE CASE OF THE CRE DITORS AMOUNTING TO RS.1,64,55,601 WHERE THE ASSESSEE HAS NOT DISCHARGED THE ONUS OF PROVING THE GENUINENESS OF T HE TRANSACTION AND IDENTITY OF THE CREDITORS AND THEIR CREDITWORTH INESS AND OBSERVING THAT THE ASSESSEE ITSELF HAD AGREED FOR T HE ADDITION U/S 41(1) OF THE ACT, SHE CONFIRMED THE ADDITION. SHE H OWEVER, DELETED THE ADDITION OF RS.11.00 LAKHS LYING TO THE CREDIT OF KEERTHI CREATIONS ON THE GROUND THAT THERE IS NOTHING ON RE CORD THAT THE CREDITORS HAD WAIVED THE LIABILITY OR THAT THE ASSE SSEE HAS UNILATERALLY WRITTEN IT OFF IN ITS BOOKS OF ACCOUNT U/S 68 OF THE ACT. AS REGARDS THE ADDITION OF RS.2,25,94,918 U/S 68 OF THE ACT, THE CIT (A) DIRECTED THE AO TO EXAMINE THE ASSESSEES R ECORD AND DELETE THE ADDITION WHEREVER THE ASSESSEE HAS SUBMI TTED CONFIRMATION LETTERS, AS THERE IS NO POSITIVE FINDI NG BY THE AO THAT THE CREDITS ARE UNEXPLAINED. IN SO FAR AS THE DELET ION OF ADDITIONS WHERE THERE IS NO CONFIRMATION LETTERS, THE CIT (A) HELD THAT THE QUANTUM THEREOF SHOULD THE NET OF OPENING BALANCES. THUS, THE CIT (A) PARTLY ALLOWED THE APPEAL AND THE ASSESSEE IS IN SECOND APPEAL BEFORE US. 10. INITIALLY ALONG WITH FORM NO.36, THE ASSESSEE H AD RAISED ITS GROUND OF APPEAL. THEREAFTER, IT FILED T HE REVISED GROUNDS OF APPEAL WHICH ARE AS FOLLOWS: 1. THE LEARNED CIT (A) -6 HYDERABAD HAS ERRED ON FACTS AND IN LAW WHILE PASSING THE APPELLANT ORDER. ITA NO 1443 OF 2015 SIRI MEDIA P LTD HYDERABAD. PAGE 6 OF 9 2. (A) THE LEARNED CIT (A) IS NOT JUSTIFIED IN SUSTAINING ADDITIONS AMOUNTING TO RS.1,64,55,601 U/S 41(1) OF THE I.T. ACT, 1961 MADE IN THE ASSESSMENT ORDER. (B) THE LEARNED CIT (A) HAS FAILED TO APPRECIATE TH AT SECTION 41(1) APPLIES ONLY IN CASE OF TRADING LIABI LITY IN THE COURSE OF BUSINESS OR PROFESSION ALLOWED IN AN EARLIER YEAR AND SUCH LIABILITY CEASED IN THE CURRENT YEAR. NONE OF THE CREDITS ITEMS FORMING PAR T OF RS.1,64,55,601 WAS TRADING LIABILITY. 3. CIT (A) HAS ERRED IN SUSTAINING THE ADDITIONS TO THE EXTENT OF ADVANCES RECEIVED IN THE YEAR IGNORIN G THE TRADE AGREEMENTS/CONFIRMATIONS UNDER WHICH ADVANCES WERE RECEIVED. CIT (A) ALSO IGNORED THE ADJUSTMENT OF TRADE LIABILITIES BY WAY OF TRADE DEBITS/REPAYMENTS. 4. FOR ALL THE GROUNDS OF APPEAL AND ANY OTHER GROUND(S) APPEAL THAT MAY RAISED AT OR BEFORE AT TH E TIME OF HEARING, IT IS PRAYED THAT THE TWO DISPUTED ADDITIONS BE DELETED. 11. FURTHER, VIDE LETTER DATED 13.8.2018 FILED ON 23.8.2018, THE ASSESSEE HAS RAISED THE FOLLOWING AD DITIONAL GROUNDS OF APPEAL: 1. THE LEARNED CIT (A) IS NOT JUSTIFIED IN SUSTAINI NG THE THREE ADDITIONS AMOUNTING TO RS.1,64,55,601/- (50,00,000 + 51,50,601 + 63,05,000) ON THE GROUND T HAT THE ASSESSEE HAD AGREED TO THE ADDITION. SIGNATURE OF A.R IN THE ORDER SHEET IN TOKEN OF ATTENDANCE DURIN G PROCEEDINGS CANNOT BE CONSTRUED AS AFFIRMATION OF A LL THE CONTENTS IN THE ORDER SHEET. 2. AT ANY RATE, THE AR HAS NOT BEEN GIVEN POWER OR MANDATE BY THE ASSESSEE COMPANY IN ITS POWER OF ATTORNEY TO MAKE ANY STATEMENT OR AGREEMENT. BOTH LEARNED CIT (A) & A.O FAILED TO NOTICE THIS FACT. T HE ALLEGED AGREEMENT CANNOT BIND THE ASSESSEE. 3. (A) LEARNED CIT (A) FAILED TO NOTICE THAT THERE COULD BE NO AGREEMENT AGAINST THE PROVISIONS OF SECTION 41(1 ) OF I.T. ACT. ARS AGREEMENT IN THE LETTER OF 26-3-2014 ON CONDITION OF THAT LIABILITY OF RS.63,05,000 AGREED TO BE DISALLOWED WILL BE CLAIMED WHEN IT IS DISCHARGED, I S AGAINST PROVISIONS OF I.T. ACT. ITA NO 1443 OF 2015 SIRI MEDIA P LTD HYDERABAD. PAGE 7 OF 9 (B) LEARNED CIT (A) HAS GRANTED RELIED IN RESPECT O F RS.11,00,000 FOR WHICH ALSO THE AR AGREED FOR ADDIT ION. HER STAND IN REGARD TO RS.63,05,000 IS INCONSISTENT . 4. (A) SECTION 41(1) IS NOT APPLICABLE TO THE LIABI LITY OF RS.50,00,000. RS. 50,00,000 IS NOT A TRADING LIABIL ITY IN RESPECT OF WHICH A DEDUCTION HAD BEEN ALLOWED IN AN Y PAST ASSESSMENT. (B) RS.51,50,601 THOUGH A TRADING LIABILITY, NO BEN EFIT BEEN OBTAINED IN THE PREVIOUS YEAR BY WAY OF ITS CESSATION. PROVISIONS OF SECTION 41(1) ARE NOT APPL ICABLE. (C) THE ASSESSEE COMPANY DID NOT UNILATERALLY WRIT E OFF ANY OF THE ABOVE LIABILITIES IN ITS ACCOUNTS. 5. THERE COULD BE NO AGREEMENT AGAINST THE PROVISI ONS OF LAW, THAT IS SECTION 41(1) OF THE I.T. ACT. 12. THE LEARNED COUNSEL FOR THE ASSESSEE REITERATED THE SUBMISSIONS MADE BY THE ASSESSEE BEFORE THE AUTHORI TIES BELOW, WHILE THE LEARNED DR OBJECTED TO THE ADMISSION OF A DDITIONAL GROUNDS OF APPEAL. THE LEARNED DR ALSO FILED THE CO PY OF THE DOCKET SHEET ORDER WHEREIN IT IS RECORDED THAT THE REPRESENTATIVE OF THE ASSESSEE HAD AGREED FOR THE ADDITIONS, TAKIN G THE SAME INTO CONSIDERATION AND ALSO THE ASSESSEES REPRESENTATIV ES WRITTEN SUBMISSIONS BEFORE THE CIT (A) ON 16.07.2015, CHALL ENGING THE ADMISSIONS MADE BY THE A.R OF THE ASSESSEE BEFORE T HE AO, WE FIND THAT IT IS A SETTLED POSITION THAT THE REPRESE NTATIVE OF THE ASSESSEE CAN ONLY REPRESENT THE ASSESSEE AS PER THE INSTRUCTIONS OF THE ASSESSEE AND CANNOT, ON HIS OWN, ADMIT TO AN Y INCOME, MUCH LESS, IF IT IS NOT EXIGIBLE TO TAX. THE LEARNE D COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE AMOUNTS CREDITED TO THE ACCOUNT OF THE ASSESSEE WERE TRADE LIABILITIES AND THEREFORE, THEY COULD NOT HAVE BEEN CONSIDERED AS CREDITORS AND TREATED AS CE SSATION OF LIABILITIES U/S 41(1) OF THE ACT. ITA NO 1443 OF 2015 SIRI MEDIA P LTD HYDERABAD. PAGE 8 OF 9 13. WE FIND THAT THESE ADDITIONAL GROUNDS NEED TO B E ADMITTED AND SENT BACK TO THE FILE OF THE AO FOR VE RIFICATION. IT IS TRUE THAT BY AGREEING TO THE ADDITION DURING THE CO URSE OF ASSESSMENT PROCEEDINGS, THE ASSESSEE HAS PREVENTED THE AO FROM FURTHER INQUIRIES ON THE ISSUE. HOWEVER, SINCE THE ASSESSEE HAS CHALLENGED THE ADMISSION IN THE WRITTEN SUBMISSIONS FILED BEFORE THE CIT (A), THE CIT (A) OUGHT TO HAVE CONSIDERED T HE ADMISSIBILITY OR OTHERWISE OF SUCH GROUNDS AND IF THE GROUNDS ARE ADMITTED, THEN THE ALLOWABILITY OF SUCH GROUNDS. ON THE BASIS OF MATERIAL ON RECORD, WE DEEM IT FIT AND PROPER TO REMAND THE SAM E TO THE FILE OF THE AO FOR RECONSIDERATION IN ACCORDANCE WITH LAW. WE HAVE GONE THROUGH THE CONSEQUENTIAL ORDER PASSED TO GIVE EFFE CT TO THE ORDER OF THE CIT (A) AND WE FIND THAT THERE ARE COMPUTATI ONAL ERRORS IN THE SAID ORDER. FURTHER, WITH REGARD TO CERTAIN PAR TIES, THE ADDITION OF WHICH IS CONFIRMED BY THE CIT (A), THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THEY ARE OUTSTANDIN G LIABILITIES A/C AND THAT THE ASSESSEE HAS DISCHARGED ITS LIABIL ITIES IN THE SUBSEQUENT A.Y. COPIES OF THE RELEVANT ACCOUNTS HAV E BEEN FILED BEFORE US. TAKING THE SAME INTO CONSIDERATION, WE D EEM IT FIT AND PROPER TO REMAND THE ISSUE OF THE ADDITION U/S 68 W HICH HAS BEEN CONFIRMED BY THE CIT (A) ALSO TO THE FILE OF THE AO FOR RECONSIDERATION IN ACCORDANCE WITH LAW. THE AO SHAL L PERMIT THE ASSESSEE TO SUBMIT THE RELEVANT EVIDENCE, IF ANY, W ITHIN A SPECIFIED PERIOD AND THEREAFTER DISPOSE OF THE APPEAL IN ACCO RDANCE WITH LAW AFTER GIVING THE ASSESSEE A FAIR OPPORTUNITY OF HEA RING. 14. IN THE RESULT, BOTH THE ISSUES ARE SET ASIDE TO THE FILE OF THE AO FOR DE NOVO CONSIDERATION ONLY TO THE EXTENT OF ADDITIONS CONFIRMED BY THE CIT (A). ITA NO 1443 OF 2015 SIRI MEDIA P LTD HYDERABAD. PAGE 9 OF 9 15. IN THE RESULT, ASSESSEES APPEAL IS TREATED AS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 2 ND NOVEMBER, 2018. SD/- SD/- (S.RIFAUR RAHMAN) ACCOUNTANT MEMBER (P. MADHAVI DEVI) JUDICIAL MEMBER HYDERABAD, DATED 2 ND NOVEMBER, 2018. VINODAN/SPS COPY TO: 1 M/S. SIRI MEDIA PVT. LTD, PLOT NO.854E, ROAD NO.4 4, JUBILEE HILLS, HYDERABAD 500033 2 JT. COMMISSIONER OF INCOME TAX, RANGE-14, 6 TH FLOOR, IT TOWERS, HYDERABAD 3 CIT (A)-6, HYDERABAD 4 PR. CIT 6, HYDERABAD 5 THE DR, ITAT HYDERABAD 6 GUARD FILE BY ORDER