ITO 25(3)(2), MUMBAI V. JAIN ASSOCIATES, MUMBAI

ITA 1690/MUM/2014

• Counselvise Citation: [2015] 121 COUNSELVISE.COM (IT) 2134 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 7 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-10-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: J
• Assessment Year: 2006-2007
• Appeal Filed On: 11-03-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: N PADNABHAN
• Assessee Lawyers: BEHARILAL
• Keywords: Difference of opinion
• Section: 143(3)

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL J BENCH, MUMBAI . , , BEFORE SHRI D.KARUNAKARA RAO, ACCOUNTANT MEMBER AND SHRI SANDEEP GOSAIN, JUDICIAL MEMBER ./ I.T.A. NO. 1690/MUM/2014 ( / ASSESSMENT YEAR : 2006 - 07 ) INCOME TAX OFFICER - 25(3)(2), C - 11, 306, PRATYAKSHAKAR BHAVAN, BANDRA - KURLA COMPLEX,BANDRA (E), MUMBAI - 400051. / VS. M/S JAIN ASSOCIATES, 7B, VICE ROY PARK TOWER - D, THAKUR VILLAGE, KANDIVALI (E), MUMBAI - 400101 ./ PAN : AAFFJ2914F ( / APPELLANT ) .. ( / RESPONDENT ) / APPELLANT BY : SHRI N PADNABHAN / RESPONDENT BY : SH RI BEHARILAL / DATE OF HEARING : 30.9.2015 / DATE OF PRONOUNCEMENT : 13. 10.2015 O R D E R PER SANDEEP GOSAIN, JM : TH E PRESENT APPEALS IS DIRECTED AGAINST THE ORDER OF LD. THE CIT (A) - 25, MUMBAI DATED 20.12.2013 FOR THE ASSESSMENT YEAR 200 6 - 07 WHEREBY ALLOWING THE APPEAL FILED BY THE ASSESSEE AGAINST THE PENALTY ORDER PASSED BY THE AO DATED 29.3.2011 U/S 271 (1)( C ) OF THE INCOME TAX ACT, 1961 (THE ACT). 2. THE REVENUE HAS RAISE D TWO ISSUES IN THIS APPEAL WHICH ARE AS UNDER : A) DELETION OF PENALTY OF RS.3,61,845/ - LEVIED BY THE AO U/S 271(1)( C ) AND; B) VALUATION OF FILMS RIGHTS PURCHASED AND VALUATION OF CLOSING STOCK OF RIGHTS OF FILMS PURCHASED FROM DIFFERENT PARTIES. ITA NO. 1690 / MUM/20 14 2 3. BRIEFLY STATED RELEVANT FACTS OF THE CASE ARE THAT THE ASSESSEE IS ENGAGED IN THE BUSINESS OF DEALING IN RIGHTS AND COPY RIGHTS OF MOTION PICTURES. THE ASSESSEE FILED ITS RETURN OF INCOME ON 20.10.2006 DECLARING TOTAL INCOME OF RS.1,12,700 . THE AO COMPL ETED THE ASSESSMENT UNDER SECTION 143(3) OF THE ACT AND ADDED FOLLOWING ADDITIONS : I ) AMOUNT RECEIVED FROM MUKTA ARTS LTD : RS.35,00,000/ - ; II ) AMOUNT RECEIVED FROM TIPS INDUSTRIES LTD : RS.37,50,000/ - ; III ) CLOSING STOCK: RS.13,25,000/ - IV ) OUT OF EXPENSES: RS.52,060/ - ACCORDINGLY, THE AO MADE AN ASSESSMENT TO THE TOTAL INCOME OF RS.87,40,024/ - 4 . DURING THE COURSE OF ASSESSMENT PROCEEDINGS , THE AO NOTICED THAT THE ASSESSEE HAS SHOWN SUNDRY CREDITORS OF RS.31,11,111/ - AND RS.31,00,000/ - IN THE NAME OF M/S MUKTA ARTS LTD AND M/S TIPS INDUSTRIES LTD RESPECTIVELY . AS PER THE AGREEMENTS WITH THESE PARTIES, THE ASSESSEE WAS TO RECEIVE THE AMOUNT DURING THE YEAR UNDER CONSIDERATION. THEREFORE, THE AMOUNT OF RS.35,00,000/ - AND RS.37,50,000/ - RECEIVED FROM M/S MUKTA ARTS LTD AND M/S TIPS INDUSTRIES LTD. R ESPECTIVELY ARE TREATED BY THE AO AS INCOME OF THE ASSESSEE FOR THE YEAR UNDER CONSID ERATION AND ADDED THE SAME TO THE INCOME OF THE ASSESSEE. 5 . DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE AO ALSO NOTICED THAT THE ASSESSEE HAS SHOWN CLOSING STOCK OF RS.17,75,000/ - AND MADE PURCHASES OF RS.7,50,000/ - RS.21,00,000/ - AND RS.40, 00,000/ - FROM FILM DHARA, RDB ENTERPRISES AND HIRAVAT JAIN AND CO, RESPECTIVELY. THE AO , AFTER TAKING INTO ITA NO. 1690 / MUM/20 14 3 CONSIDERATION AVERAGE COST OF RIGHTS OF THE MOVIE AT RS.2,50,000/ - MADE AN ADDITION OF RS.13,25,000/ - . 6 . AGGRIEVED BY THIS ORDER, THE ASSESS EE HAD PREFERRED AN APPEAL BEFORE THE LD. CIT(A) CHALLENGING THE ADDITION MADE BY THE AO ON ABOVE SAID ACCOUNT AND THE LD.CIT(A) IN THE QUANTUM APPEAL DELETED THE ADDITION OF AMOUNT RECEIVED FROM OF M/S MUKTA ARTS LTD AND M/S TIPS INDUSTRIES LTD. 7 . I N RESPECT OF ADDITION ON ACCOUNT OF CLOSING STOCK OF RS.13,25,000/ - , THE LD. CIT(A) IN QUANTUM APPEAL HAS GIVEN RELIEF OF RS.2,50,000/ - AND SUSTAINED THE BALANCE AMOUNT OF RS.10,75,000/ - . THE AO WAS OF THE VIEW THAT SINCE THE LD.CIT(A) SUSTAINED THE ADDI TION OF RS.10,75,000/ - , THE ASSESSEE HAS CONCEALED THE PARTICULARS OF INCOME AND FURNISHED INACCURATE PARTICULARS OF INCOME. ACCORDINGLY, THE AO PROCEEDED TO INVOKE THE PROVISIONS OF SECTION 271(1)(C) OF THE ACT AND IMPOSED THE PENALTY OF RS.3,61,845/ - 100% OF THE TAX SOUGHT TO BE EVADED. AGGRIEVED BY THIS, THE ASSESSEE HAS FILED THE APPEAL BEFORE THE LD. CIT(A) . THE LD.CIT(A) DIRECTED THE AO TO DELETE THE PENALTY BY HOLDING THAT THERE WAS NO CASE OF CONCEALMENT OF INCOME OR FURNISHING INACCURA TE PARTICULARS OF INCOME SINCE THE VALUATION OF CLOSING STOCK WAS DISCLOSED THOUGH OPINION MAY VARY IN TERMS OF METHOD OF VALUATION. HOWEVER, IT CANNOT BE THE CASE THAT THE ASSESSEE HAS NOT REVEALED ALL THE PARTICULAR DURING TH E COUR S E OF FILING OF RETU RN OR DURING THE COURSE OF ASSESSMENT PROCEEDINGS . ACCORDINGLY, THE LD. CIT(A) ALLOWED THE APPEAL OF THE ASSESSEE AND DIRECTED THE AO TO DELETE THE ITA NO. 1690 / MUM/20 14 4 PENALTY . AGGRIEVED BY THIS THE REVENUE HAS PREFERRED THIS APPEAL BEFORE THIS T RIBUNAL. 8 . THE LD.DR REPR ESENTED THE CASE OF THE REVENUE AND REITERATED THE FACT. HE SUBMITTED THAT THE ASSESSEE HAS FURNISHED INACCURATE PARTICULARS OF CLOSING STOCK AND CONCEALED INCOME BY WAY OF NOT INCLUDING THE CLOSING S T OCK RIGHTS OF FILMS IN THE CASE OF ASSESSEE IS A DEB ATABLE ISSUE AS THE AO HAS ALREADY GIVEN CLEAR CUT FINDING WITH REASONING IN THE ASSESSMENT ORDER WHICH WAS LATER ON CONFIRMED BY THE LD. CIT(A). T HE LD. DR ALSO SUBMITTED THAT THE LD.CIT(A) HAS SUSTAINED THE ADDITION OF RS.10,75,000/ - ON THE GROUND THA T ASSESSEE HAS TAKEN THE VALUATION OF CLOSING STOCK AT MARKET COST AND THE AO HAS TAKEN IT AT COST. THEREFORE, THE ORDER PASSED BY THE LD.CIT(A) BE SET ASIDE AND THE ORDER OF THE AO BE UPHELD. 9 . THE LD. AR SUBMITTED THAT MERELY BECAUSE CERTAIN DISALL OWANCE MADE IN THE ASSESSMENT ORDER AND ALSO UPHELD BY THE LD. CIT(A) DOES NOT AUTOMATICALLY LEAD TO A CONCLUSION THAT THE ASSESSEE HAD CONCEALED ITS INCOME OR FURNISHED INACCURATE PARTICULARS IN RESPECT OF SUCH INCOME. HE SUBMITTED THAT THERE IS NO F INDING BY THE AO THAT THE ALLEGED UNDERVALUATION OF CLOSING STOCK WAS DETECTED FROM SOME DOCUMENTS WHICH WERE NOT PART OF THE BOOKS OF ACCOUNT OR RETURN OF INCOME. THE LD. AR SUBMITTED THAT VALUATION OF RIGHT OF FILMS IS ALWAYS MATTER OF DISPUTE AND DEBA TE AND THERE MAY BE DIFFERENCE OF OPINION ABOUT THE VALUATION OF THE SAME. IN SUPPORT OF THIS SUBMISSIONS THE LD. AR HAS PLACED RELIANCE ON THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF CIT VS . RELIANCE ITA NO. 1690 / MUM/20 14 5 PETROPRODUCTS ( SUPREME COURT ). (2010) 322 IT R 158 ( SC ) AND SUBMITTED THAT THE ORDER OF THE LD.CIT(A) BE UPHELD. 10. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE ORDERS OF THE REVENUE AUTHORITIES AS WELL AS THE CITED JUDGMENTS OF THE HIGHER JUDICIARY. ON HEARING BOTH THE PARTIES, WE FIND THAT TH ERE IS NO INCRIMINATING MATERIAL BROUGHT IN BY THE AO TO DEMONSTRATE THAT THE EXPLANATION GIVEN BY THE ASSESSEE IS WRONG AND MALA FIDE. ON FINDING THAT THERE IS NO MATERIAL TO DEMONSTRATE THE CONCEALMENT OF INCOME OR FURNISHING OF INACCURATE PARTICULARS, W E ARE OF THE OPINION THAT THIS IS NOT A FIT CASE FOR LEVY OF PENALTY U/S 271(1)(C) OF THE ACT. WE DRAW THE SUPPORT OF THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF CIT V/S RELIANCE PETROPRODUCTS PVT LTD (SUPRA) IN WHICH IT HAS BEEN HELD PENA LTY FOR CONCEALMENT OF PARTICULARS OF INCOME, AND NO INFORMATION GIVEN IN THE RETURN FOUND TO BE INCORRECT, MAKING INCORRECT CLAIM, DOES NOT AMOUNT TO CONCEALMENT OF PARTICULARS AND DOES NOT ATTRACT THE PROVISIONS OF SECTION 271 (1)( C ) OF THE ACT. AC CORDINGLY, WE DISMISS THE APPEAL FILED BY THE REVENUE. 10 . IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT O N 13 TH OCT, 2015 SD SD ( . / D. KARUNAKAR RAO) ( / SANDEEP GOSAIN ) / ACCOUNTANT MEMBER / JUDICIAL MEMBER MUMBAI ; DATED 13TH / OCT /2015 . . ./ SRL , SR. PS ITA NO. 1690 / MUM/20 14 6 / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ) / THE CIT(A) - CONCERNED 4. / CIT CONCERNED 5. , , / DR, ITAT, MUMBAI CONCERNED 6. / GUARD FILE. / BY ORDER, TRUE COPY (ASSTT. REGISTRAR) , /ITAT, MUMBAI