M/s Sootradhaar Telefilms Pvt. Ltd., New Delhi V. ACIT, New Delhi

ITA 2444/DEL/2011

• Counselvise Citation: 244420114 RSA 2011
• Duration Of Justice: 2 year(s) 7 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-01-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: G
• Next Hearing Date: 10-12-2013
• Assessment Year: 2003-2004
• Appeal Filed On: 12-05-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RENUKA JAIN GUPTA
• Assessee Lawyers: B B BHAGAT
• Keywords: Wrong claim; Difference of opinion; Commercial expediency
• Section: 133(6)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH G: NEW DELHI BEFORE SHRI R.P. TOLANI, JUDICIAL MEMBER AND SHRI S.V. MEHROTRA, ACCOUNTANT MEMBER ITA NO. 2444/DEL/2011 ASSESSMENT YEAR: 2003-04 SOOTRADHAAR TELEFILMS PVT. LTD., 511/2/1, RAJOKRI, NEW DELHI. PAN NO. AAECS3108A VS. ACIT, CIRCLE 9(1), NEW DELHI. (APPELLANT) (RESPONDENT) APPELLANT BY: SH. B.B. BHAGAT, ADV. RESPONDENT BY: SMT. RENUKA JAIN GUPTA , SR. DR O R D E R PER S.V. MEHROTRA, A.M. THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAI NST THE ORDER OF LD. CIT(A)-XII, NEW DELHI DATED 25/02/2011 FOR A.Y. 200 3-04. 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE CO MPANY, IN THE RELEVANT ASSESSMENT YEAR, WAS CARRYING OUT THE PRODUCTION RE LATED ACTIVITIES OF SERIALS AT MUMBAI. AFTER PRODUCING THE SERIALS THE COMPANY WAS SELLING THE CASSETTES TO THE ASSOCIATE CONCERN. THE COMPANY WA S ALSO REFURBISHING CERTAIN OLD BUT POPULAR SERIALS AND EARNING INCOME ON THE SAME. THE ASSESSEE WAS HIRING THE SETS AND DOING ALL THE PROD UCTION RELATED ACTIVITIES WITH RESPECT OF PRODUCING SERIALS. THE ASSESSEE FI LED ITS RETURN OF INCOME ITA NO. 2444/D/ 2011 M/S SOOTRA DHAAR TE LEFILMS PVT. LTD. 2 DECLARING LOSS OF RS. 2,40,52,080/-. THE ASSESSMEN T WAS COMPLETED AT A LOSS OF RS. 1,96,99,611/- AFTER DISALLOWING FOLLOWI NG EXPENSES: 1. OUT OF HIRE CHARGES 14,69,175 2. OUT OF SALE OF SERIALS 2,50,000 3. OUT OF PAYMENTS MADE TO ARTISTS 18,46,338 4. OUT OF FOOD EXPENSES 1,46,610 5. OUT OF EDITING TRANSFER CHARGES 6,36,374 43,48,497 TAXABLE INCOME (-) 196,99,611 3. THE ASSESSEE PREFERRED APPEAL BEFORE LD. CIT(A) WHICH WAS DISMISSED. THE AO INITIATED PENALTY PROCEEDINGS U/S 271(1)(C). THE ASSESSEE FILED ITS REPLY DATED 16/03/2009. THE AO AFTER CONSIDERING T HE FACTS IN REGARD TO VARIOUS EXPENSES CLAIMED BY ASSESSEE HELD THAT ASSE SSEE HAD CLAIMED EXCESS EXPENDITURE TO THE TUNE OF RS. 43,48,497/- A ND, THEREFORE, LEVIED A PENALTY OF RS. 15,98,073/- BEING 100% OF TAX SOUGHT TO BE EVADED. 4. LD. CIT(A) DISMISSED THE ASSESSEES APPEAL, INTE R-ALIA, OBSERVING THAT ASSESSEE HAD CLAIMED WRONG EXPENSES AND HAD, THEREF ORE, FURNISHED INACCURATE PARTICULARS OF INCOME. LD. CIT(A) RELIE D ON VARIOUS DECISIONS FOR HOLDING THAT PENALTY CAN BE IMPOSED U/S 271(1)(C) E VEN WHEN DISALLOWANCES ARE MADE ON ESTIMATE BASIS. HE ALSO REFERRED TO TH E DECISION OF ITAT AHMEDABAD BENCH IN THE CASE OF PATEL CHEMICAL WORKS VS. ITO, WHEREIN IT HAS BEEN HELD THAT PENALTY IS LEVIABLE WHERE PAYMEN TS MADE TO SISTER CONCERNS ARE NOT GENUINE. 4.1 BEING AGGRIEVED WITH THE ORDER OF LD. CIT(A) TH E ASSESSEE IS IN APPEAL BEFORE US AND HAS TAKEN FOLLOWING GROUNDS OF APPEAL : ITA NO. 2444/D/ 2011 M/S SOOTRA DHAAR TE LEFILMS PVT. LTD. 3 1. THE LD. CIT(A) HAS ERRED IN UPHOLDING PENALTY OF RS. 15,98,078/- IMPOSED UNDER SECTION 271(1)(C). 5. LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT NO A PPEAL WAS FILED BY ASSESSEE AGAINST THE CIT(A)S ORDER DISMISSING THE ASSESSEES APPEAL IN QUANTUM PROCEEDINGS. LD. COUNSEL SUBMITTED THAT DU RING THE COURSE OF ASSESSMENT COMPLETE DETAILS OF ALL THE EXPENSES INC URRED WERE DULY FURNISHED. BESIDES, THE DETAILS COMPLETE BOOKS OF ACCOUNT ALONG WITH SUPPORTING DOCUMENTS WERE ALSO FURNISHED. FURTHER, CONFIRMATION FROM M/S ADVANCED NETWORK TECHNOLOGIES LTD. TO WHOM PAYMENTS WERE MADE WAS ALSO DULY FURNISHED. NO DEFECT OR ANY INACCURACY W AS FOUND IN THE DOCUMENTS. LD. COUNSEL FURTHER SUBMITTED THAT THE ADDITION HAS BEEN MADE ON ESTIMATE BASIS BECAUSE THE PAYMENTS WERE TO ASSO CIATE CONCERNS AND NOT BECAUSE OF ANY SPECIFIC DEFECT IN ACCOUNTS. HE FURTHER POINTED OUT THAT EVEN AFTER THE ADDITIONS THERE WAS ASSESSED LOSS OF RS. 1,96,99,611/- AND, THEREFORE, THERE WAS NO MONITORY ADVANTAGE IN MAKIN G AN EXCESSIVE CLAIM. LD. COUNSEL FURTHER POINTED OUT THAT PAYMENTS MADE TO VARIOUS ARTISTS WERE SUBJECTED TO TDS AND THE LAST KNOWN ADDRESSES WERE ALSO PROVIDED. LD. COUNSEL RELIED ON 230 CTR 320 IN THE CASE OF CIT VS . RELIANCE PETROPRODUCTS PVT. LTD. (SC) [2010] & 317 ITR 278 ( AT) IN THE CASE OF JHAVAR PROPERTIES PVT. LTD. VS. ACIT (MUM.) [2009], WHEREI N IT WAS HELD THAT SINCE NO SPECIFIC FORM OF DISCLOSURE HAS BEEN CONTEMPLATE D BY THE INCOME TAX ACT, 1961 OF THE RULES THERE UNDER AND THE FORM OF RETURN PRESCRIBED, ITA NO. 2444/D/ 2011 M/S SOOTRA DHAAR TE LEFILMS PVT. LTD. 4 ASSESSEE CANNOT BE HELD GUILTY OF NON-DISCLOSURE OF INCOME WHICH WAS DETERMINED BY APPLYING THE PROVISIONS OF SECTION 40 A(2)(B). 6. LD. DR REFERRED TO PAGE 28 OF PAPER BOOK, WHEREI N THE DETAILS OF TDS DEDUCTED AND DEPOSITED IS CONTAINED. SHE POINTED O UT THAT PAN NUMBER WAS NOT AVAILABLE IN RESPECT OF MOST OF THE ARTISTS . SHE SUBMITTED THAT AO ISSUED NOTICES U/S 133(6) BUT THEY REMAINED UN-REPL IED. IN THIS REGARD LD. DR REFERRED TO PAGE 2 OF ASSESSMENT ORDER, WHEREIN AO HAS OBSERVED THAT ENQUIRIES WERE MADE U/S 133(6) OF THE ACT REGARDING PAYMENT TO NUMBER OF ARTISTS, WHO DID NOT HAVE PAN NUMBER AND WERE NOT A SSESSED TO TAX. ONLY TWO REPLIES HAVE BEEN RECEIVED AND NO REPLY WAS REC EIVED FROM 8 PERSONS TO WHOM AGGREGATE PAYMENT OF RS. 18,46,338/- WAS ALLEG EDLY MADE. HE, THEREFORE, SUBMITTED THAT THE EXPENSES WERE NOT VER IFIABLE AND SINCE THE ASSESSEE FAILED TO DISCHARGE ITS BURDEN OF ESTABLIS HING THE GENUINENESS OF EXPENSES, THE ADDITION WAS RIGHTLY MADE. 6.1 LD. DR FURTHER REFERRED TO PAGE 2 OF PENALTY OR DER AND POINTED OUT THAT IN PARA 3.2 THE AO HAS, INTER-ALIA, OBSERVED AS UND ER: 3.2 ON PERUSAL OF THE DETAILS OF SALE OF SOFTWARE (SERIALS) IN THE CASE OF ARECHA KAMAL AHE, A MARATHI SERIAL THE ASSE SSEE HAD SHOWN RECEIVED RS. 76,40,000/- FOR 131 EPISODES. IT WAS NOTICED BY THE AO THAT THE ASSESSEE HAD SOLD THE 6 EPISODES OF THIS S ERIAL AT RS. 65,000/- PER EPISODE AND RS. 58,000/- PER EPISODE FOR 125 EP ISODES. WHEN CONFRONTED THE ASSESSEE HAD GIVEN NO JUSTIFICATION FOR DUAL RATES APPLIED FOR SALE OF SOFTWARE AND THAT TO THE ASSOCI ATE CONCERN OF THE ASSESSEE COMPANY, M/S ADVANCE ENTERTAINMENT LTD. WH ERE THE SHAREHOLDERS WERE OF ASSOCIATES COMPANY. ITA NO. 2444/D/ 2011 M/S SOOTRA DHAAR TE LEFILMS PVT. LTD. 5 WITH REFERENCE TO ABOVE OBSERVATIONS LD. DR SUBMITT ED THAT ONUS WAS NOT ON AO BUT OF ASSESSEE TO SUBSTANTIATE THE GENUINENESS OF DUAL RATES. LD. DR, THEREFORE, SUBMITTED THAT PENALTY HAS RIGHTLY BEEN SUSTAINED BY LD. CIT(A). 7. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND HAV E PERUSED THE RECORD OF THE CASE. 7.1 THE PENALTY HAS BEEN LEVIED APROPOS FIVE ADDITI ONS NOTED EARLIER. THE PENALTY HAS BEEN LEVIED BY AO ON THE GROUND THAT AS SESEE HAD FURNISHED INACCURATE PARTICULARS OF INCOME TO THE EXTENT OF R S. 43,48,497/-. LD. CIT(A) HAS HELD THAT ASSESSEE HAD CLAIMED WRONG EXPENSES A ND, THEREFORE, FURNISHED INACCURATE PARTICULARS OF INCOME. THEREF ORE, WE WILL CONSIDER PENALTY APROPOS EACH ADDITION SEPARATELY. BRIEF BA CKGROUND THAT PROMPTED THE AO TO MAKE DETAILED ENQUIRY WAS LIKE THIS. FRO M THE DETAILS FURNISHED BY ASSESSEE, THE AO OBSERVED THAT ASSESSEE COMPANY HAD PRODUCED 298 EPISODES OF 5 SERIALS AND HAD DEBITED EXPENDITURE T O THE TUNE OF RS. 4,06,36,742/- AS PER THE PROFIT AND LOSS ACCOUNT. THEREFORE, HE OBSERVED THAT AVERAGE COST PER EPISODE FOR THE SERIAL WAS RS . 1,36,365/-. WHILE THE AVERAGE SALE OF ONE EPISODE OF SERIAL WAS TO THE TU NE OF RS. 55,775/- ONLY. THUS, ON EVERY EPISODE THE ASSESSEE WAS INCURRING L OSS TO THE TUNE OF ABOUT 80,000/- WHICH NO PRUDENT BUSINESS MAN COULD AFFORD . HE NOTICED THAT THE EXPENSES HAD BEEN PAID TO ASSOCIATE CONCERN AND SAL E OF EPISODE HAD ALSO BEEN MADE TO ASSOCIATE CONCERN. IN THE BACKGROUND OF THESE FACTS AO HAD MADE VARIOUS DISALLOWANCES. ITA NO. 2444/D/ 2011 M/S SOOTRA DHAAR TE LEFILMS PVT. LTD. 6 8. BEFORE WE PROCEED TO FURTHER CONSIDER THE ISSUE, WE MAY REFER TO THE DECISION OF ITAT, MUMBAI BENCH IN THE CASE OF JHAVA R PROPERTIES PVT. LTD. (SUPRA) ON WHICH ASSESSEE HAS HEAVILY RELIED. IN T HIS CASE THE BRIEF FACTS WERE THAT THE ASSESSEE COMPANY WAS ENGAGED IN THE B USINESS OF REAL ESTATE DEVELOPMENT & CONSTRUCTION. IN COURSE OF AS SESSMENT, THE AO FOUND THAT THE ASSESSEE HAD CLAIMED A SUM OF RS. 63 LAKHS AS DEDUCTION ON ACCOUNT OF PAYMENT MADE FOR JOB WORK DONE. IT WAS FURTHER FOUND THAT THIS PAYMENT WAS MADE TO SISTER CONCERN NAMELY MAURYA PR OPERTIES AND INVESTMENT PVT. LTD. THE AO EXAMINED THE RECORDS O F THE SISTER CONCERN MPIC AND IT WAS FOUND THAT THE GROSS RECEIPT OF RS. 99,81,100/- SHOWN BY THE SAID SISTER CONCERN ON ACCOUNT OF INTERIOR DECO RATION AND JOB WORK INCLUDED THE IMPUGNED RECEIPT OF RS. 63 LAKHS FROM ASSESSEE AND THE EXPENDITURE DEBITED IN THE BOOKS WAS ONLY RS. 25,03 ,060/-. ON THE BASIS OF THIS ENQUIRY IT WAS HELD THAT THE PAYMENT OF RS. 63 LAKHS WAS FAR IN EXCESS OF THE ACTUAL EXPENDITURE INCURRED BY THE SISTER CONCE RN FOR THE JOB WORK DONE FOR THE ASSESSEE. AFTER EXAMINATION OF THE DETAILS , THE AO FOUND THAT THE VALUE OF THE JOB WHICH WAS ENTRUSTED TO THE SISTER CONCERN WAS OF ONLY RS. 32,09,974/- FOR WHICH THE ASSESSEE HAD MADE A PAYME NT OF RS. 63 LAKHS. AS THE MPIC FILED A LOSS RETURN IT WAS HELD BY THE AO THAT THE ASSESSEE MADE EXCESSIVE PAYMENT WITH A VIEW TO REDUCE ITS OW N TAX LIABILITY. HE, THEREFORE, DISALLOWED AN AMOUNT OF RS. 30,82,026/- AS EXCESSIVE PAYMENT U/S 40A(2)(B) OF THE I.T. ACT. LD. CIT(A) HAD CONF IRMED THE DISALLOWANCE. IN THE BACKDROP OF THESE FACTS, PENALTY PROCEEDINGS U/ S 271(1)(C) WERE INITIATED. ITA NO. 2444/D/ 2011 M/S SOOTRA DHAAR TE LEFILMS PVT. LTD. 7 ON THE GROUND THAT EXPLANATION OF THE ASSESSEE WAS NOT BONAFIDE. TRIBUNAL HELD THAT IN THE ABSENCE OF ANY PARTICULAR FORM OF DISCLOSURE OF THE TRANSACTION IN QUESTION, THE DISCLOSURE OF THE SAME IN ITS BOOKS OF ACCOUNT AS DONE BY THE ASSESSEE WAS SUFFICIENT IN LAW. IT WAS HELD AS UNDER: WE THEREFORE HOLD THAT IN THE ABSENCE OF ANY PROV ISION OF PARTICULAR DISCLOSURE OF THE TRANSACTION IN QUESTIO N, THE DISCLOSURE OF THE SAME IN ITS BOOKS OF ACCOUNT AS DONE BY THE ASSESSEE WAS SUFFICIENT IN LAW. THERE CANNOT BE ANY CHARGE OF FURNISHING INACCURAT E PARTICULARS AS WELL. THIS IS BECAUSE, THE ASSESSEE HAD FURNISHED ALL THE DETAILS AND THE DETAILS ADMITTEDLY WERE CORRECT . BY APPLYING DEEMING PROVISIONS OF LAW THE DISALLOWANCE HAS BEEN MADE BY THE ASSESSING OFFICER. BUT FOR THESE DEEMING PROVISION S THE AO COULD NOT HAVE MADE ANY DISALLOWANCE, AS ADMITTEDLY THE G ENUINENESS AS WELL AS THE INCURRING OF THE EXPENDITURE, HAVE NOT BEEN DOUBTED OR DISPUTED BY THE ASSESSING OFFICER.. IN THE PRESENT CASE THE DISALLOWANCE U/S 40A(2)(B) CANNOT BE CONSIDERED AS CONCEALMENT OF INCOME OR FURNISHING O F INACCURATE PARTICULARS. CONSEQUENTLY WE ARE OF THE OPINION TH AT THE FACTS OF THE CASE DOES NOT WARRANT PENALTY U/S 271(1)(C). T HEREFORE, THE ORDER OF THE COMMISSIONER OF INCOME-TAX (APPEALS) I S SET ASIDE. PENALTY CANCELLED. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED. 8.1 NOW WE WILL CONSIDER THE PENALTY APROPOS VARIOU S ADDITIONS. THE FIRST ADDITION HAS BEEN OF RS. 14,69,175/-. IN THIS REGA RD BRIEF FACTS ARE THAT ASSESSEE HAD DEBITED AN AMOUNT OF RS. 1,46,91,773/- AS HIRING CHARGES. FURTHER BREAK UP OF THESE EXPENSES WAS AS UNDER: CAMERA HIRE CHARGES 38,79,250 ITA NO. 2444/D/ 2011 M/S SOOTRA DHAAR TE LEFILMS PVT. LTD. 8 LIGHT HIRE CHARGES 21,22,400 LIGHTMAN HIRE CHARGES 17,47,250 EQUIPMENT HIRE CHARGES 47,459 LOCATION HIRE CHARGES 65,67,250 VEHICLE HIRE CHARGES 3,28,164 TOTAL 146,91,773 8.2 THESE EXPENSES WERE PAID TO M/S ADVANCE NETWORK TECHNOLOGIES LTD. (NOW KNOWN AS ADVANCE STUDIO LTD.), WHICH IS RELATE D TO THE ASSESSEE AS SHRI RAJESH JAIN IS ALSO DIRECTOR OF THE COMPANY AN D HAVING REGISTERED OFFICE WITH THE SAME ADDRESS AS OF THE ASSESSEE COMPANY. THE AO AFTER POINTING OUT VARIOUS DISCREPANCIES POINTED OUT THAT THERE WA S NO COMMERCIAL EXPEDIENCY AND REASONABLENESS REGARDING INCURRING O F THESE EXPENSES TO THE ASSOCIATE CONCERN AND, THEREFORE, MADE A DISALL OWANCE OF 10% OF THE TOTAL EXPENDITURE. THUS, THE AO DID NOT PRIMARILY DISPUTE THE INCURRING OF THESE EXPENSES BUT ABOUT THE REASONABLENESS OF THES E EXPENSES WHICH DECISION PRIMARILY LIES WITHIN THE DOMAIN OF ASSESS EES BUSINESS DECISION. THUS, THE DISALLOWANCE WAS PRIMARILY U/S 40A(2)(B) AND, THEREFORE, THE DECISION OF TRIBUNAL IN THE CASE OF JHAWAR PROPERTI ES PVT. LTD. IS SQUARELY APPLICABLE TO THE FACTS OF THE CASE. RESPECTFULLY FOLLOWING THE SAID DECISION WE DELETE THE PENALTY LEVIED APROPOS THIS ADDITION. 8.3 THE SECOND ADDITION IS OF RS. 2,50,000/- THE FA CTS APROPOS WHICH ARE THAT ON PERUSAL OF DETAILS OF SALE OF SOFTWARE (SER IALS) IN THE CASE OF ARECHA KAMAL AHE, A MARATHI SERIAL, THE AO NOTICED THAT AS SESSEE HAD RECEIVED RS. 76,40,000/- FOR 131 SERIALS. HE FURTHER NOTICED TH AT ASSESSEE HAD SOLD SIX EPISODES OF THE SERIAL AT RS. 65,000/- PER EPISODE AND RS. 58,000/- PER ITA NO. 2444/D/ 2011 M/S SOOTRA DHAAR TE LEFILMS PVT. LTD. 9 EPISODE FOR 125 EPISODES. THIS SALE WAS MADE TO TH E ASSOCIATE CONCERN OF THE ASSESSEE COMPANY, M/S ADVANCE ENTERTAINMENT LTD . IN THE BACKDROP OF THESE FACTS, THE AO CONSIDERED THE SALE OF 125 EPIS ODES @ 60,000/- PER EPISODE INSTEAD OF RS. 58,000/- PER EPISODE DECLARE D BY ASSESSEE. ADMITTEDLY, THERE WAS NO MATERIAL ON THE BASIS OF W HICH THIS ADDITION WAS MADE. MERELY ON THE GROUND OF DUAL RATES BEING CHA RGED BY ASSESSEE FOR THE SAME EPISODE THE ADDITION WAS MADE. NO DISCREP ANCY HAD BEEN FOUND IN THE DISCLOSURES MADE BY THE ASSESSEE. THEREFORE, THE PENALTY IS NOT SUSTAINABLE. FURTHER IN OUR OPINION, THIS ISSUE IS ALSO FULLY COVERED BY THE DECISION OF TRIBUNAL IN THE CASE OF JHAWAR PROPERTI ES PVT. LTD. IN VIEW OF THE DISCUSSION, WE DELETE THE PENALTY APROPOS THIS ADDI TION. 8.4 THE THIRD ADDITION WAS OF RS. 18,46,338/- IN RE GARD TO PAYMENTS MADE TO ARTISTS. THE AO HAD ISSUED NOTICES U/S 133(6) T O VARIOUS ARTISTS WHO HAD NO PAN NUMBER. HE HAS POINTED OUT THAT ONLY TWO RE PLIES WERE RECEIVED BUT IN CASE OF EIGHT PERSONS, AS DETAILED HEREUNDER, NO REPLIES WERE RECEIVED: MS. USHA MISHRA, HAIR DRESSER 114,200 MR. TARUN AHUJA 173,952 MR.SHYAMOL WALVEKAR 109,500 MS. KAMALA BHATTACHARYA 126,000 MR. AZIZ KHAN PATHAN 450,000 MR. DILIP DEV 327,886 MR. ANUP BHATTACHARYA 420,000 MR. ANUP BHATT 124,800 TOTAL 1846,338 8.4.1 THE AO REQUIRED THE ASSESSEE TO FILE THE CON FIRMATIONS ALSO FROM THESE PERSONS BUT THE SAME WERE ALSO NOT FURNISHED. THE QUESTION TO BE ITA NO. 2444/D/ 2011 M/S SOOTRA DHAAR TE LEFILMS PVT. LTD. 10 CONSIDERED IN THE BACKDROP OF THESE FACTS IS WHETHE R THE ASSESSEES CLAIM CAN BE SAID TO BE A WRONG CLAIM BECAUSE ASSESSEE FA ILED TO SUBSTANTIATE THE SAME. THE ASSESSEES EXPLANATION IS THAT TDS WAS M ADE FROM THE PAYMENTS MADE TO THESE ARTISTS AND AS PER THE CHART CONTAINED AT PAGES 28 ONWARDS OF PAPER BOOK ARTISTS HAD APPLIED FOR THE P AN NUMBER. 8.4.2 ADMITTEDLY, THE ASSESSEE WAS UNDERTAKING PROD UCTION OF SERIALS AND, THEREFORE, IT CANNOT BE HELD THAT THE PAYMENTS TO H AIR DRESSERS, VARIOUS ARTISTS WERE NOT REQUIRED. THE ASSESSEES EXPLANATION WAS THAT SINCE ARTISTS WORK FOR THE COMPANY DURING THE SERIALS MOST OF THEM WOR KED FOR A SHORT PERIOD OR JUST FOR ONE PARTICULAR SERIAL AND SUBSEQUENTLY LEF T. THE AO MADE ENQUIRIES U/S 133(6) IN THE MONTH OF MARCH, 2006, WHEREAS ART ISTS HAD WORKED WITH THE COMPANY FROM 01/04/2002 TO 31/03/2003. OUT OF THE NOTICES SENT, REPLY IN RESPECT OF EIGHT ARTISTS WAS NOT RECEIVED. IN OUR OPINION SINCE TDS WAS MADE FROM THE PAYMENTS MADE TO THE ARTISTS AND AMOU NT WAS DULY DEPOSITED WITH THE DEPARTMENT, MERELY ON THE GROUND OF NON-RE CEIPT OF ANY REPLY FROM THE SAID ARTISTS, FOR WHICH THERE COULD BE SEVERAL REASONS, IT CANNOT BE INFERRED THAT ASSESSEE HAD ADVANCED WRONG CLAIM. I T IS TRUE THAT THE ONUS LIES ON THE ASSESSEE TO SUBSTANTIATE ITS CLAIM BUT FOR THE PURPOSES OF LEVYING PENALTY U/S 271(1)(C) OF THE I.T. ACT, THIS IS NOT SUFFICIENT. AS PER EXPLANATION (B) TO SECTION 271(1)(C), ASSESSEE SHOULD HAVE FURT HER FAILED TO PROVE THAT SUCH EXPLANATION WAS BONAFIDE AND THAT ALL THE FACT S RELATING TO THE SAME AND MATERIAL TO THE COMPUTATION OF HIS TOTAL INCOME HAD NOT BEEN DISCLOSED BY HIM. THUS, WHERE THE ASSESSEES EXPLANATION IS NOT MALAFIDE AND HE HAS NOT ITA NO. 2444/D/ 2011 M/S SOOTRA DHAAR TE LEFILMS PVT. LTD. 11 FAILED TO DISCLOSE MATERIAL IN THAT REGARD, PENALTY CANNOT BE LEVIED. HERE IS A CASE WHERE ASSESSEE HAD GIVEN DETAILS REGARDING VAR IOUS ARTISTS OUT OF WHICH ONLY EIGHT DID NOT RESPOND AND THE REASON FOR THE S AME WAS THE TIME GAP BETWEEN THE PAYMENT MADE TO THE ARTISTS AND THE ENQ UIRIES INITIATED BY AO. MOREOVER, THE ARTISTS WERE ENGAGED FOR SHORT PERIOD S. IN OUR OPINION THE ASSESSEES EXPLANATION CANNOT BE BRANDED AS MALAFID E. WE, THEREFORE, DO NOT FIND ANY JUSTIFICATION IN SUSTAINING THE PENALT Y APROPOS THIS ADDITION. 8.5 THE NEXT DISALLOWANCE IS ON ACCOUNT OF EXCESS F OOD EXPENDITURE OF RS. 1,46,610/-. IN THIS REGARD THE FACTS ARE ASSESSEE HAD DEBITED AN AMOUNT OF RS. 14,66,120/-IN THE PROFIT AND LOSS ACCOUNT AS FO OD EXPENSES. THE AO OBSERVED IN ASSESSMENT PROCEEDINGS THAT A PERUSAL O F THE DETAILS OF EXPENSES REVEALED THAT THESE EXPENSES WERE NOT FULL Y SUPPORTED BY THE SUPPORTING VOUCHERS. HE, THEREFORE, MADE A DISALLO WANCE OF RS. 1,46,610/- BEING 10% OF THE TOTAL FOOD EXPENSES. 8.5.1 ADMITTEDLY, AO HAD NOT POINTED OUT EVEN A SIN GLE VOUCHER IN HIS ORDER WHICH WAS NOT VERIFIABLE. THIS BY NO STRETCH OF RE ASONING CAN BE HELD TO BE A WRONG CLAIM MADE BY ASSESSEE. THE NATURE OF EXPEND ITURE WAS SUCH FOR WHICH INFALLIBLE EVIDENCE COULD NOT BE EXPECTED. U NDER SUCH CIRCUMSTANCES, THERE WAS NO BASIS FOR LEVYING PENALTY. WE, ACCORD INGLY, DELETE PENALTY APROPOS THIS ADDITION. 8.6 THE LAST ADDITION WAS OF RS. 6,36,374/-. IN TH IS REGARD THE FACTS ARE THAT ASSESSEE HAD DEBITED EDITING TRANSFER CHARGES AMOUN TING TO RS. 43,32,374/- IN THE PROFIT AND LOSS ACCOUNT. THE AO EXAMINED TH E DETAILS AND FOUND THAT ITA NO. 2444/D/ 2011 M/S SOOTRA DHAAR TE LEFILMS PVT. LTD. 12 THESE EXPENSES WERE RANGING FROM RS. 8,000/- TO RS. 15,000/- PER EPISODE. HE FURTHER OBSERVED THAT ALL THE PAYMENTS HAD BEEN MADE TO AN ASSOCIATE CONCERN M/S ADVANCE NETWORK TECHNOLOGIES LTD. TAKI NG THE AVERAGE RATE OF RS. 11,000/- PER EPISODE AS COMPARED TO AVERAGE RAT E OF RS. 12,893/- TAKEN BY THE ASSESSEE, THE AO MADE AN ADDITION OF RS. 6,3 6,374/- FOR 336 EPISODES. ADMITTEDLY, THE AO HAD NOT POINTED OUT A NY DISCREPANCY IN THE DISCLOSURES MADE BY ASSESSEE ON THIS COUNT IN ITS B OOKS OF ACCOUNT. THE DISALLOWANCE HAS BEEN MADE PRIMARILY U/S 40A(2)(B) ON ACCOUNT OF REASONABLENESS OF EXPENSES. THE ASSESSEES EXPLANA TION HAS NOT BEEN FOUND TO BE FALSE BUT ONLY BECAUSE OF DIFFERENCE OF OPINION HELD BY AO. THEREFORE, IN OUR OPINION PENALTY APROPOS THIS DISA LLOWANCE IS NOT SUSTAINABLE IN VIEW OF THE DECISION OF HONBLE MUMB AI TRIBUNAL IN THE CASE OF JHAWAR PROPERTIES PVT. LTD. ACCORDINGLY, PENALTY A PROPOS THIS ADDITION IS DELETED. 9. IN THE RESULT, THE ASSESSEES APPEAL IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 10/01/2014 SD/- SD/- (R.P. TOLANI) JUDICIAL MEMBER (S.V. MEHROTRA) ACCOUNTANT MEMBER DATED: 10/01/2014 *KAVITA COPY TO: ITA NO. 2444/D/ 2011 M/S SOOTRA DHAAR TE LEFILMS PVT. LTD. 13 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT, NEW DELHI. TRUE COPY BY ORDER ASSISTANT REGISTRAR