SANJAY M. GADHVI, MUMBAI V. ACIT 11(1), MUMBAI

ITA 1847/MUM/2013

• Counselvise Citation: [2015] 134 COUNSELVISE.COM (IT) 1783 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 9 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-12-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: E
• Next Hearing Date: 17-06-2015
• Assessment Year: 2009-2010
• Appeal Filed On: 07-03-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: K L KANAK
• Assessee Lawyers: SANJAY R PARIKH
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH E, MUMBAI BEFORE SHRI N.K. BILLAIYA, ACCOUNTANT MEMBER AND SHRI SANJAY GARG, JUDICIAL MEMBER ITA NO.1847/M/2013 ASSESSMENT YEAR: 2009-10 MR. SANJAY M. GADHVI, 1704, 17 TH FLOOR, GREEN ACRES, LOKHANDWALA COMPLEX, ANDHERI (WEST), MUMBAI 400 058 PAN: AADPG 0010H VS. ASST. COMMISSIONER OF INCOME TAX-11(1), AAYAKAR BHAVAN, M.K. MARG, NEW MARINE LINES, MUMBAI - 400020 (APPELLANT) (RESPONDENT) PRESENT FOR: ASSESSEE BY : SHRI SANJAY R. PARIKH, A.R. REVENUE BY : SHRI K.L. KANAK, D.R. DATE OF HEARING : 28.09.2015 DATE OF PRONOUNCEMENT : 31.12.2015 O R D E R PER SANJAY GARG, JUDICIAL MEMBER: THE PRESENT APPEAL HAS BEEN PREFERRED BY THE ASSES SEE AGAINST THE ORDER DATED 21.01.2013 OF THE COMMISSIONER OF INCOME TAX (APPEALS) [HEREINAFTER REFERRED TO AS THE CIT(A)] RELEVANT TO ASSESSMENT Y EAR 2009-10. 2. THE ASSESSEE IN THE PRESENT APPEAL HAS AGITATED THE CONFIRMATION OF ADDITION MADE BY THE ASSESSING OFFICER (HEREINAFTER REFERRED TO AS THE AO) ON ACCOUNT OF ADVANCE RECEIVED OF RS.1,00,00,000/- TRE ATING THE SAME AS INCOME OF THE ASSESSEE FOR THE YEAR UNDER CONSIDERATION. 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E IS AN INDIVIDUAL AND IS IN THE PROFESSION OF DIRECTING THE FILMS. THE ASSESSE E HAS BEEN FOLLOWING THE CASH METHOD OF ACCOUNTING. DURING THE YEAR, THE ASSESSE E ENTERED INTO AN AGREEMENT WITH INDIAN FILM COMPANY (CYPRUS) LTD. AS PER THE SAID AGREEMENT THE ITA NO.1847/M/2013 MR. SANJAY M. GADHVI 2 ASSESSEE RECEIVED RS.4,80,00,000/- FOR TWO FILMS, O UT OF WHICH THE AMOUNT OF RS.3,80,00,000/- WAS OFFERED FOR TAX AND RS.1,00,00 ,000/- WAS SHOWN AS ADVANCE RECEIPT. ON BEING ASKED TO EXPLAIN BY THE AO, THE ASSESSEE EXPLAINED THAT THE SIGNING AMOUNT OF RS.2,00,00,000/- WAS REC EIVED FOR FILM-1 AND FURTHER AN AMOUNT OF RS. RS.80,00,000/- WAS RECEIVE D ON ACCEPTANCE OF CONCEPT. HENCE, THE ENTIRE RECEIPT OF RS.2.80 CROR ES WAS OFFERED TO TAX IN RESPECT OF FILM-1. HOWEVER, IN RESPECT OF FILM-2, THE SIGNING AMOUNT OF RS.2,00,00,000/- WAS RECEIVED. HOWEVER, AS PER CLA USE 4.12 OF THE AGREEMENT, IF THE CONCEPT OF THE FILM IS NOT APPROVED, THE ASS ESSEE HAS TO RETURN THE 50% OF THE SIGNING AMOUNT. THEREFORE, RS.1,00,00,000/- I. E. 50% OF THE SIGNING AMOUNT IN RESPECT OF FILM-2 WAS SHOWN AS ADVANCE. THEREAFTER, THE CONCEPT OF THE FILM-2 WAS NOT APPROVED AND THE MATTER WENT INT O THE LITIGATION AND THE PRODUCER FILED CIVIL AND CRIMINAL CASES AGAINST THE ASSESSEE. SINCE THE AMOUNT RECEIVED WAS NOT CRYSTALLIZED AS INCOME, HENCE THE ASSESSEE DID NOT OFFER THE SAID AMOUNT OF RS.1,00,00,000/- FOR TAXATION. HOWE VER, THE AO DID NOT ACCEPT THE CONTENTION OF THE ASSESSEE AND HELD THAT SINCE THE ASSESSEE WAS FOLLOWING CASH METHOD OF ACCOUNTING, HENCE THE ENTIRE SIGNING AMOUNT OF RS.2,00,00,000/- IN RESPECT OF FILM-2 WAS INCOME OF THE ASSESSEE. HE ACCORDINGLY TAXED THE REMAINING AMOUNT OF RS.1,00,0 0,000/- ALSO AS INCOME OF THE ASSESSEE FOR THE YEAR UNDER CONSIDERATION. BEI NG AGGRIEVED, THE ASSESSEE PREFERRED APPEAL BEFORE THE LD. CIT(A). 4. IT WAS CONTENDED BEFORE THE LD. CIT(A) THAT EVEN THOUGH THE ASSESSEE WAS FOLLOWING THE CASH METHOD OF ACCOUNTING BUT EVE RY RECEIPT CANNOT BE TREATED AS INCOME OF THE YEAR. THE ASSESSEE IN THI S RESPECT RELIED UPON VARIOUS CASE LAWS. HOWEVER, THE LD. CIT(A) DID NOT AGREE W ITH THE CONTENTION OF THE ASSESSEE AND UPHELD THE ADDITIONS SO MADE BY THE AO . 5. BEFORE US, THE LD. A.R. OF THE ASSESSEE HAS BROU GHT OUR ATTENTION TO AN APPLICATION MOVED ON BEHALF OF THE ASSESSEE UNDER R ULE 29 OF THE INCOME TAX APPELLATE TRIBUNAL RULES FOR FILING ADDITIONAL EVID ENCE. IT HAS BEEN PLEADED IN ITA NO.1847/M/2013 MR. SANJAY M. GADHVI 3 THE SAID APPLICATION THAT IT WAS VERY MUCH POINTED OUT DURING THE ASSESSMENT PROCEEDINGS AS WELL AS APPELLATE PROCEEDINGS BEFORE THE LD. CIT(A) THAT THERE WAS A LITIGATION GOING ON BETWEEN THE ASSESSEE AND THE PRODUCER FILM COMPANY AND EVEN CRIMINAL COMPLAINTS WERE ALSO FILED BY THE SAID FILM COMPANY AGAINST THE ASSESSEE. IT HAS BEEN FURTHER POINTED OUT THAT SUBSEQUENT TO THE ORDER OF THE COMMISSIONER (APPEALS) ON 21.01.13, A CONSENT DECRE E HAS BEEN PASSED BY THE HONBLE BOMBAY HIGH COURT ON 25.03.13. AS PER THE SAID CONSENT DECREE, THE ASSESSEE HAS TO PAY A SUM OF RS.1,75,00,000/- TO VI ACOM 18 MEDIA PVT. LTD. WHICH IS A SUCCESSOR COMPANY TO INDIAN FILM COMPANY (CYPRUS LTD.) AND OUT OF WHICH RS.1,00,00,000/- WAS THE ADVANCE RECEIVED BY THE ASSESSEE AND FURTHER RS.75 LAKHS AS COMPENSATION. THE ASSESSEE HAS SUBMITTED THAT FROM THE SAID CONSENT DECREE, IT IS PROVED BEYOND DOUBT THAT THE SAID AMOUNT HAS NEVER CRYSTALLIZED AS INCOME OF THE ASSESSEE AS THE CONCE PT OF THE FILM WAS NEVER APPROVED AND THE ASSIGNMENT WAS NOT COMPLETED AND F URTHER THAT THE SAID AMOUNT HAS ALWAYS BEEN TREATED BY THE ASSESSEE IN I TS BOOKS OF ACCOUNT AS AN ADVANCE AND NOT INCOME. THE ASSESSEE IN THIS RESPE CT HAS RELIED UPON THE DECISION OF THE MUMBAI TRIBUNAL IN THE CASE OF ROB IN NANA BHAI BHATT VS. ACIT (2014) 29 ITR (TRIB.) 531 (MUMBAI) WHEREIN IT HAS BEEN HELD THAT THE TOKEN ADVANCE RECEIVED DURING THE EARLIER YEAR IS T O BE CONSIDERED AS INCOME IN THE YEAR OF PERFORMANCE OF WORK. THE ASSESSEE HAS ALSO RELIED IN THIS RESPECT ON THE DECISION OF THE CHENNAI TRIBUNAL IN THE CASE OF R.S. SURIYA VS. ACIT (2015) 41 ITR (TRIB.) 282 (CHENNAI). THE LD. A.R. OF THE ASSESSEE HAS FURTHER STATED THAT EVEN IN THE ACCOUNTS FOR ASSESSMENT YEA R 2011-12, THE ASSESSEE IN ITS BALANCE SHEET HAS SHOWN RS.1,00,00,000/- AS ADVANCE IN THE COLUMN OF LIABILITIES WHICH HAS BEEN ACCEPTED BY THE AO IN TH E ASSESSMENT ORDER PASSED UNDER SECTION 143(3) OF THE ACT FOR THE ASSESSMENT YEAR 2011-12. THE LD. A.R. HAS FURTHER SUBMITTED THAT THE DECREE PASSED BY THE HONBLE BOMBAY HIGH COURT AS PER THE CONSENT TERMS ARRIVED AT BETWEEN T HE ASSESSEE AND THE PRODUCER COMPANY HAS COME INTO EXISTENCE AFTER THE PASSING O F THE IMPUGNED ORDER OF ITA NO.1847/M/2013 MR. SANJAY M. GADHVI 4 THE LD. CIT(A) AND THAT THE SAME WAS NOT AVAILABLE AT THE TIME OF PASSING OF THE ASSESSMENT ORDER OR THE IMPUGNED ORDER OF THE L D. CIT(A). 6. CONSIDERING THE ABOVE SUBMISSIONS OF THE ASSESSE E AND ALSO CONSIDERING THE RELEVANT CASE LAWS, WE ARE OF THE VIEW THAT THE FACT OF LITIGATION AS WELL AS CONSENT DECREE VIDE WHICH THE ASSESSEE HAS AGREED T O REFUND THE AMOUNT OF RS.1,00,00,000/- AND FURTHER RS.75,00,000/- TO THE PRODUCER REQUIRE VERIFICATION AT THE HANDS OF THE AO. WE THEREFORE RESTORE THE M ATTER TO THE FILE OF THE AO TO VERIFY THE ABOVE CONTENTION OF THE ASSESSEE AND IF FOUND CORRECT, THEN NOT TO TAX THE ADVANCE RECEIVED BY THE ASSESSEE AS INCOME OF T HE ASSESSEE FOR THE YEAR UNDER CONSIDERATION. 7. IN VIEW OF OUR ABOVE OBSERVATIONS, THE APPEAL OF THE ASSESSEE IS TREATED AS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 31.12.2015. SD/- SD/- (N.K. BILLAIYA) (SANJAY GARG) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATED: 31.12.2015. * KISHORE, SR. P.S. COPY TO: THE APPELLANT THE RESPONDENT THE CIT, CONCERNED, MUMBAI THE CIT (A) CONCERNED, MUMBAI THE DR CONCERNED BENCH //TRUE COPY// [ BY ORD ER DY/ASSTT. REGISTRAR, ITAT, MUMBAI.