MONICA G. KHATRI, MUMBAI V. ITO 19(3)(3), MUMBAI

ITA 252/MUM/2014

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 3943 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 3 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-05-2016
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Assessment Year: 2009-2010
• Appeal Filed On: 09-01-2014
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: NAVEEN GUPTA
• Keywords: Capital asset; Business income; Revised return; Bonafide mistake

Judgement Text

ITA NO. 252/M/2014 MONIKA KHATRI IN THE INCOME TAX APPELLATE TRIBUNAL, BENCH B, MU MBAI BEFORE SH.B.R. BASKARAN, ACCOUNTANT MEMBER AND SH. PAWAN SINGH, JUDICIAL MEMBER ITA NO.252/MUM/2014 ASSESSMENT YEAR: 2009-10 MONIKA G KHATRI 6A, GIRNAR APARTMENTS, 55, PALI HILLS,, BANDRA MUMBAI-400050 PAN NO. AHZPK5922D VS. I.T.O WARD NO. 19(3)3 MUMBAI (APPELLANT) (RESPONDENT) REPRESENTATION OF PARTIES ASSESSEE BY : SH.VIJAY MEHTA REVENUE BY : SH.NAVEEN GUPTA DR DATE OF HEARING : 18.01.2016 DATE OF ORDER : 03.05.2016 ORDER PER PAWAN SINGH JM 1. THE PRESENT APPEAL IS FILED BY THE ASSESSEE AGAI NST THE ORDER OF COMMISSIONER OF APPEALS-18 DATED 28 TH OF OCTOBER 2013, IN RESPECT OF AY- 2009-10, RAISING THE FOLLOWING GROUNDS OF APPEA L: (1) THE LD. CIT(A) ERRED IN TREATING AN AMOUNT OF R S.11,90,000/- AS SALE CONSIDERATION ON ACCRUAL BASIS FROM SALE OF MOVIE R IGHTS WITHOUT ITA NO. 252/M/2014 MONIKA KHATRI APPRECIATING THAT THE SALE IS NOT COMPLETED AND CON CLUDED AND THE AMOUNT IS NOT RECEIVED BY THE APPELLANT. (2) THE LD. CIT(A) ERRED IN TREATING ADVANCE RECEIV ED TOWARDS SALE OF MOVIE RIGHT AS SALE CONSIDERATION AND MADE ADDITION IS TO THE BUSINESS INCOME OF THE APPELLANT WITHOUT APPRECIATING THE FACT THAT TH E SALE AGREEMENT COULD NOT BE COMPLETED AND CONCLUDED, AND WAS SUBSEQUENTLY CA NCELLED ON NON FULFILLMENT OF CONDITIONS MENTIONED THEREIN. (3) THE LD. CIT(A) ERRED IN STATING THAT THEY RECE IVED FROM SALE OF MOVIE RIGHTS HAS BEEN OFFERED TO TAX AS BUSINESS INCOME AND EARL IER YEARS WITHOUT APPRECIATING THAT THE ROYALTY RECEIVES ON USE OF MO VIE RIGHT FOR THE LIMITED PERIOD WAS OFFERED TO TAX AS BUSINESS INCOME IN EAR LIER YEARS AND NOT RECEIVED FROM SALE OF MOVIE RIGHTS. (4) THE LD. CIT(A) ERRED IN DISALLOWING SHORT TERM CAP ITAL LOSS OF RS. 18,910/- UNDER SECTION 94 (7) OF THE INCOME TAX ACT . 2. THE BRIEF FACTS OF THE CASE ARE THAT ASSESSEE FI LED HER RETURN OF INCOME FOR RELEVANT AY DECLARING TOTAL INCOME OF RS. 2,97, 460/-. THE CASE WAS SELECTED FOR SCRUTINY. DURING THE ASSESSMENT PROCEE DING AO OBSERVED THAT ASSESSEE HAD SHOWN SALE OF MOVIE RIGHTS/ROYALT IES AMOUNTING TO RS. 3,55,935/-. THE ASSESSEE CLAIMED EXPENDITURE OF RS. 1, 04,361/-AND NET INCOME OF RS. 2,51,574/- HAS BEEN OFFERED FOR TAX. THE AO FURTHER OBSERVED THAT ASSESSEE ENTERED INTO AN AGREEMENT DA TED 6 JUNE 2008 FOR SALE OF NEGATIVE RIGHTS OF HINDI FILM MEERA SA YA WITH M/S EROS MULTIMEDIA PRIVATE LIMITED. SHE INHERITED INTANGIBL E RIGHT FROM HER FATHER. HER FATHER LATE SHRI PREMNATH, JOINTLY PRODUCED THE SAID FILM WITH M/S DH UDANI &CO. AS PER AGREEMENT THE ASSESSEE HAD TO REC EIVE 34% OF HER SHARE, OUT OF TOTAL SALE CONSIDERATION OF RS. 35 LA KHS. THE ASSESSEES SHARE WAS WORKED OUT TO RS. 11,90,000 /-. THE ASSESSEE VIDE LETTER DATED 10 AUGUST 2011 CLAIMED THAT THIS INCOME HAS BEEN ER RONEOUSLY OFFERED AND IS NOT TAXABLE INCOME. AS THE SAID AGREEMENT W AS SUBSEQUENTLY CANCELLED AND SHE REFUNDED THE MONEY AND THEREFORE REQUESTED TO TREAT ITA NO. 252/M/2014 MONIKA KHATRI THE AMOUNT AS ADVANCE AND NOT A REVENUE RECEIPT. AN D IN ALTERNATIVE CONTENDED THAT IF AT ALL IT IS TAXABLE, IT IS A CAP ITAL RECEIPT AND SINCE TRANSFER HAS NOT TAKEN WITHIN MEANING OF SECTION 2( 47) OF THE ACT, NO CAPITAL GAINS ACCRUE TO THE ASSESSEE DURING THE YEA R UNDER CONSIDERATION. THE CONTENTION OF ASSESSEE WAS NOT ACCEPTED BY THE AO AND ADDED THE ENTIRE AMOUNT OF RS.11,90,000/- UNDER THE HEAD BUSINESS INCOME AS A TAXABLE INCOME. 3. AGGRIEVED BY THE ORDER OF AO ASSESSEE FILED APPE AL BEFORE COMMISSIONER OF INCOME TAX APPEALS BUT WITHOUT ANY SUCCESS. HENCE, THIS PRESENT APPEAL IS FILED BEFORE US. 4. WE HAVE HEARD LD AR OF THE PARTIES AND GONE THRO UGH THE MATERIAL AVAILABLE ON RECORD. FIRST WE SHALL TAKE UP GROUND NO. 1 TO 3 RAISED IN THE PRESENT APPEAL, WHICH ARE INTERLINKED. AR OF AS SESSEE ARGUED THAT ASSESSEE WRONGLY DECLARED THE ADVANCE RECEIVED FROM THE SALE OF MOVIES RIGHT AS BUSINESS INCOME. THE SAID MISTAKE WAS REALIZED DURING THE COURSE OF ASSESSMENT PROCEEDING AND THEREAFTER ASSESSEE VIDE HER LETTER DATED 10 AUGUST 2011, REQUESTED THE AO TO RE CTIFY (CORRECT) THE SAID MISTAKE AND REDUCE THE INCOME ACCORDINGLY. AR FOR ASSESSEE FURTHER ARGUED THAT THE SAID AGREEMENT /ASSIGNMENT OF RIGHT OF FILM WAS SUBJECT TO FULFILLMENT OF CERTAIN CONDITIONS MENTIO NED THEREIN. ON EXECUTION OF THE SAID AGREEMENT THE PURCHASER PAID IN ADVANCE OF RS. 13 LAKHS TO M/S DH UDANI & CO, THE ASSESSEE RECEIVED O NLY 23.08% SHARE IN THE ADVANCE. THE PURCHASER DID NOT PAY THE BALAN CE AMOUNT UNTIL 23 RD MARCH 2011, AND FINALLY THE AGREEMENT WAS CANCELLED . THE ASSESSEE IS LIABLE TO REFUND THE AMOUNT OF ADVANCE MONEY RECEIV ED AT THE TIME OF EXECUTION OF THE AGREEMENT. ACCORDINGLY, THE ASSESS EE HAS RETURNED THE ENTIRE ADVANCE MONEY OF HER SHARE RECEIVED BY HER T O M/S EROS INTERNATIONAL MEDIA LTD ON 23 MARCH 2011. AT THE TI ME OF FILING OF RETURN IN THE YEAR UNDER CONSIDERATION AND WITH ASSESSEE RECE IVED ADVANCE THE ITA NO. 252/M/2014 MONIKA KHATRI AMOUNT OF ADVANCE MONEY RECEIVED WAS WRONGLY OFFERE D TO TAX AS BUSINESS INCOME. CONSIDERING IT TO BE IN THE NATURE OF ROYALTY. THE CORRECT TAXABILITY OF THE SAID TRANSACTION WOULD BE CHARGEABLE UNDER THE HEAD CAPITAL GAINS, AS THE RIGHTS THAT WERE TO BE T RANSFERRED WERE CAPITAL ASSETS OF THE ASSESSEE. AR FURTHER ARGUED THAT CBDT HAS ISSUED A CIRCULAR NO. 14 DATED 11 TH APRIL 1955, WHICH CAST A DUTY UPON THE DEPARTMENT ( AO) NOT TO TAKE ADVANTAGE OF THE IGNO RANCE OF AN ASSESSEE ABOUT THEIR RIGHTS. (PLACED ON RECORD THE EXTRACT OF THE CIRCULAR IN HIS WRITTEN SUBMISSION). AR OF ASSESSEE FURTHER RELIED UPON THE JUDGMENT OF HONORABLE JURISDICTIONAL HIGH COURT IN CASE OF CIT VERSUS PRUTHVI BROKERS AND SHAREHOLDERS (2012) 23 TAXMANN. COM 23(BOM) ON THE POINT OF ALLOWING THE CLAIM IN ASSESSMENT, W HICH WAS NOT CLAIMED ORIGINALLY WHILE FILING OF THE CLAIM, AND JUDGMENT OF APEX COURT IN GODHRA ELECTRICITY CO. LTD VS CIT (225 ITR 747 SC) ON THE POINT OF ACCRUAL OF INCOME OR ITS RECEIPT. ON THE CONTRARY, LD DR FOR REVENUE SUPPORTED THE ORDER OF AUTHORITIES BELOW AND VEHEMENTLY ARGUED TH AT THE ASSESSEE CANNOT BE ALLOWED TO WITHDRAW THE INCOME OFFERED FO R TAX. DR FURTHER ARGUED THAT ASSESSEE HAS NOT PLACED ON RECORD AS TO WHEN THE SAID AMOUNT WAS RETURNED TO THE PURCHASER OF FILM. THE A SSESSEE HAS NOT PLACED ON RECORD THE COGENT DOCUMENT WHICH MAY SHOW THAT ACTUALLY THE AMOUNT WAS RETURNED. NO DOCUMENT IN THE FORM OF CAN CELLATION DEED WAS PLACED, THE ALLEGED DOCUMENT WHICH WAS PURPORTEDLY A CANCELLATION DEED CANNOT BE TAKEN INTO CONSIDERATION. 5. WE HAVE CONSIDERED THE RIVAL CONTENTION OF THE P ARTIES AND CAREFULLY GONE THROUGH THE RECORD OF THE CASE INCLUDING THE DOCUME NTS FILED IN THE FORM OF PAPER BOOKS, WHICH INCLUDES THE AGREEMENT DATED 6 JUNE 2008, EXECUTED BETWEEN THE ASSESSEE, D H UDANI & CO AND M /S EROS MULTIMEDIA PRIVATE LIMITED, COPY OF CANCELLED AGREE MENT, DEBTOR CONFIRMATION LETTER (FROM M/S EROS INTERNATIONAL ME DIA LTD) DATED ITA NO. 252/M/2014 MONIKA KHATRI 31/01/2011, LEDGER ACCOUNT OF ASSESSEE FROM THE BOO KS OF EROS INTERNATIONAL MEDIA. LTD AND THE WRITTEN SUBMISSION S FILED BEFORE COMMISSIONER OF APPEAL. WE HAVE NOTICED THAT ASSESS EE VIDE LETTER DATED 10 AUGUST 2011, CLAIMED THAT INCOME HAS BEEN ERRONEOUSLY OFFERED IS NOT TAXABLE INCOME. AS THE SAID AGREEMEN T WAS SUBSEQUENTLY CANCELLED AND SHE REFUNDED THE MONEY AND THEREFORE REQUESTED TO TREAT THE AMOUNT AS ADVANCE AND NOT A REVENUE RECEIPT. HO WEVER THE CONTENTION OF ASSESSEE WAS NOT ACCEPTED BY AO ON TH E PRETEXT THAT THE ASSESSEE IS FOLLOWING MERCANTILE SYSTEM OF ACCOUNTI NG AND THE AMOUNT OF HER SHARE RECEIVED/ RECEIVABLE HAS TO BE ACCOUNTED AS REVENUE RECEIPT, IN THE PAST SIMILAR RECEIPT WAS SHOWN AS BUSINESS I NCOME, SHE IS HIDING SOMETHING AND IF THE AGREEMENT IS SUBSEQUENTLY CANC ELLED IT CAN BE CLAIMED AS BED DEBT AS PER THE PROVISIONS OF THE AC T, AND ADDED THE ENTIRE AMOUNT OF RS.11,90,000/- UNDER THE HEAD BUS INESS INCOME. LD. CIT(A) WHILE CONSIDERING THE APPEAL OF ASSESSEE ON THESE GROUNDS CONCLUDED THAT THE AGREEMENT WAS CANCELLED THREE YE AR LATER, ON 23.11.2011, THE INCOME WAS ACCRUED TO THE ASSESSEE IN THE YEAR UNDER CONSIDERATION THEREFORE THE AO RIGHTLY TAXED THE IN COME AFTER ALLOWING THE EXPENDITURE. HERE WE MAY NOTE THAT LD CIT(A) HAS NO T TAKEN THE NOTE OF THE FACT THAT BEFORE THE COMPLETION OF THE ASSESSME NT OF INCOME THE AGREEMENT WAS CANCELLED AND THE ASSESSEE MADE REQUE ST VIDE HER LETTER DATED 10 AUGUST 2011, THAT INCOME HAS BEEN E RRONEOUSLY OFFERED TO TAX. NEITHER THE AO NOR CIT (A) CONSIDERED THE F ACT THAT IN FACT THE SALE OF THE FILM WAS NOT MATERIALIZED AND NO FINDING WAS GIVEN ON THE CONTENTION OF THE ASSESSEE. THE DOCUMENTS FILED BE FORE THE AUTHORITY BELOW CLEARLY PROVED THAT THE AGREEMENT FOR SALE OF RIGHTS OF THE FILM WAS CANCELLED. EVEN THIS FACT IS NOT EXPRESSLY DISPUTED BY THE AO AND CIT (A). ITA NO. 252/M/2014 MONIKA KHATRI 6. HONBLE APEX COURT IN GODHRA ELECTRICITY CO. LTD VE RSUS CIT (225 ITR 746) WHILE DEALING WITH THE ISSUE OF ACCRUAL OF INC OME, AND THE PRINCIPLE OF REAL INCOME HELD AS UNDER: NO DOUBT, THE INCOME TAX ACT TAKES INTO ACCOUNT TWO POINTS OF TIME AT WHICH THE LIABILITY TO TAX IS ATTRACTED, VIZ, THE A CCRUAL OF THE INCOME OR ITS RECEIPT, BUT THE SUBSTANCE OF THE MATTER IS THE IN COME. IF INCOME DOES NOT RESULT AT ALL, THERE CANNOT BE A TAX, EVEN THOU GH IN BOOK-KEEPING, AND ENTRIES MADE ABOUT HYPOTHETICAL INCOME WHICH DO ES NOT MATERIALIZE . FURTHER, THE HONBLE BOMBAY HIGH COURT IN CASE OF P RUTHVI BROKERS AND SHAREHOLDERS PRIVATE LIMITED VS CIT HELD AS UNDER: EVEN IF A CLAIM IS NOT MADE BEFORE THE AO, IT CAN BE MADE BEFORE APPELLATE AUTHORITIES. THE JURISDICTION OF THE APPE LLATE AUTHORITIES TO ENTERTAIN SUCH A CLAIM IS NOT BARRED. THE HONBLE HIGH COURT HAS FURTHER OBSERVED THAT THE DECISION OF THE HONBLE SUPREME C OURT IN CASE OF GOETEZ (INDIA) VERSUS CIT(2006) 157 TAXMAN 1, RELAT ING TO THE RESTRICTION OF MAKING THE CLAIM THROUGH A REVISED RETURN WAS LI MITED TO THE POWERS OF THE ASSESSING AUTHORITY AND THE SAID JUDGMENT DO ES NOT IMPOSE ON THE POWER TO NEGATE THE POWERS OF THE APPELLATE AUT HORITY TO ENTERTAIN SUCH CLAIM BY WAY OF ADDITIONAL GROUND. EVEN OTHERW ISE, THE LEARNED CIT(A) OUGHT TO HAVE CONSIDERED THE CLAIM OF THE AS SESSEE IN EXERCISE OF HIS APPELLATE JURISDICTION UNDER SECTION 250 OF THE ACT. MOREOVER, IF THE ASSESSEE IS OTHERWISE ENTITLED TO A CLAIM OF DEDUCT ION BUT DUE TO HIS OF IGNORANCE OR FOR SOME OTHER REASONS COULD NOT CLAIM THE SAME IN THE RETURN OF INCOME, BUT HAS RAISED HIS CLAIM BEFORE T HE APPELLATE AUTHORITY, THE APPELLATE AUTHORITY SHOULD HAVE LOOKED INTO THE SAME. THE ASSESSEE CANNOT BE BURDENED THE TAXES WHICH HE OTHERWISE IS NOT LIABLE TO PAY UNDER THE LAW. EVEN A DUTY HAS ALSO BEEN CAST UPON THE INCOME TAX AUTHORITIES TO CHARGE THE LEGITIMATE TAX FROM THE T AXPAYERS. THEY ARE NOT THERE TO PUNISH THE TAXPAYER FOR THEIR BONAFIDE MIS TAKES. ITA NO. 252/M/2014 MONIKA KHATRI FURTHER, CBDT INSTRUCTION NO. 448 IN CIRCULAR NO. 1 4(XL-35) DATED 11 APRIL 1955 PRESCRIBED THE FOLLOWING GUIDELINES: ( 1)------ (2)----- (3) OFFICERS OF THE DEPARTMENT MUST NOT TAKE ADVANT AGE OF IGNORANCE OF AN ASSESSEE AS TO HIS RIGHTS. IT IS ONE OF THEIR DU TIES TO ASSISTED TAXPAYER IN EVERY REASONABLE WAY, PARTICULARLY IN THE MATT ERS OF CLAIMING AND SECURING RELIEF AND IN THIS REGARD, THE OFFICERS SH OULD TAKE THE INITIATIVE IN RIDING A TAXPAYER WHERE PROCEEDINGS OR OTHER PARTIC ULARS BEFORE THEM INDICATE THAT SOME REFUND OR RELIEF IS DUE TO HIM. THIS ATTITUDE WOULD, IN THE LONG RUN, BENEFIT THE DEPARTMENT FOR IT WOULD I NSPIRE CONFIDENCE IN HIM THAT HE MAY BE SURE OF GETTING A SQUIRE DEAL FR OM THE DEPARTMENTS. ALTHOUGH, THEREFORE, THE RESPONSIBILITY FOR CLAIMIN G REFUNDS AND RELIEF RESTS WITH THE ASSESSEE ON WHOM IT IS IMPOSED BY L AW, OFFICERS SHOULD- (A) DRAW THEIR ATTENTION TO ANY REFUNDS OR RELIEF T O WHICH THEY APPEAR TO BE CLEARLY AND TITLE BUT WHICH THEY HAVE OMITTED TO CLAIM FOR SOME REGION OR OTHER, (B) FREELY ADVISE THEM.WHEN APPROACHED BY THEM AS T O THEIR RIGHTS AND LIABILITIES AND AS TO THE PROCEDURE TO BE ADOPTED F OR CLAIMING REFUNDS AND REBATES.( EMPHASIS SUPPLIED) 7. NOW COMING TO THE FACTS OF THE PRESENT APPEAL, A S WE HAVE ALREADY CONCLUDED THAT THE SALE WAS NOT MATERIALIZED. THIS FACT WAS NOT CONSIDERED BY THE COMMISSIONER OF APPEAL IN ITS COR RECT PERSPECTIVE. THE ASSESSEE PLACED ON RECORD THE DOCUMENTS WHICH CLEAR LY ESTABLISHED THAT SALE AGREEMENT WAS CANCELLED. THE CONSIDERATION WAS RETURNED TO THE PURCHASER. IN THE CIRCUMSTANCES, THE REVENUE AUTHOR ITIES WERE NOT CORRECT TO FIX TAX LIABILITY IN RESPECT OF THE TRANSACTION IN THE HANDS OF ASSESSEE. IT IS A CASE OF BONAFIDE MISTAKE ON THE PART OF ASSESS EE, FOR WHICH ASSESSEE FILED APPLICATION FOR CORRECTION OF HER MI STAKE. HENCE IN VIEW OF THE ABOVE LEGAL DISCUSSION, AND CONSIDERING THE FAC T OF THE PRESENT CASE, ITA NO. 252/M/2014 MONIKA KHATRI THE ASSESSEE WAS ENTITLED TO CORRECT THE TAXABILITY OF INCOME WHICH DOES NOT ARISE DUE TO RECESSION OF CONTRACT OF SALE OF H INDI FEATURE FILM MEERA SAYA. THE ACTION OF AO FOR NOT ALLOWING TO CORRECT THE CLAIM OF INCOME WHICH DO NOT ARISE DUE TO RECESSION OF CONTRACT OF SALE OF FILM IS UNCALLED FOR, THUS THE ADDITION MADE BY AO AND CONFIRMED BY COMMISSIONER OF APPEAL IN RESPECT OF SALE OF RIGHTS IN RESPECT OF H INDI FILM MEERA SAYA IS DELETED. THUS, THE GROUND NUMBER 1 TO 3 RAISED IN T HE PRESENT APPEAL ARE ALLOWED. 8. NEXT GROUND FOR OUR CONSIDERATION IS DISALLOWANC E OF SHORT TERM CAPITAL LOSS. AT THE STARTING OF MAKING SUBMISSION LD AR OF ASSESSEE WOULD SUBMIT THAT ASSESSEE DOES NOT PRESS GROUND NO. 4, R AISED IN THE PRESENT APPEAL, HENCE, GROUND NO. 4 RAISED IN THE PRESENT A PPEAL IS DISMISSED AS NOT PRESSED. 9. IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. ANNOUNCED IN THE OPEN COURT ON 3 RD DAY OF MAY 2 016. SD/- SD/- B.R.BASHKARAN PAWAN SINGH (ACCOUNTANT MEMBER) (JUDICIAL MEMBER) MUMBAI 03/05/2016 COPY OF THE ORDER FORWARDED TO : BY ORDER (ASSTT.REGISTRAR) ITAT, MUMBAI 1. APPELLANT 2. THE RESPONDENT. 3. THE CIT(A), MUMBAI. 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. //TRUE COPY/