Manju Devi Dhanuka, Kolkata V. Commissioner of Income-Tax-XX, Kolkata, Kolkata

ITA 2781/KOL/2013

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 4572 (ITAT-KOLKATA)
• Duration Of Justice: 2 year(s) 6 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-07-2016
• Appeal Filed By: Assessee
• Bench Allotted: B
• Assessment Year: 2005-2006
• Appeal Filed On: 16-12-2013
• Court: TRIBUNAL
• Department Lawyers: K K TRIPATHI
• Assessee Lawyers: P K HIMATSINGKA
• Section: 143(3); 133A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH: KOL KATA [BEFORE SHRI N. V. VASUDEVAN, JM & SHRI M. BALAGAN ESH, AM] I.T.A NO.2781/KOL/2013 ASSESSMENT YEAR: 2005-06 MANJU DEVI DHANUKA VS. COMMISSIONER OF INCOME-T AX, (PAN: ADOPD8120P) KOL-XX, KOLKATA. ( APPELLANT ) ( RESPONDENT ) DATE OF HEARING: 10.06.2016 DATE OF PRONOUNCEMENT: 08.07.2016 FOR THE APPELLANT: SHRI P. K. HIMATSINGKA, AR FOR THE RESPONDENT: SHRI K. K. TRIPATHI, JCIT, S R. DR ORDER PER SHRI M. BALAGANESH, AM: THIS APPEAL BY ASSESSEE IS ARISING OUT OF ORDER OF CIT(A)-XXXVI, KOLKATA VIDE APPEAL NO. 56/CIT(A)-XXXVI/KOL/09-10/183 DATED 16. 04.2013. ASSESSMENT WAS FRAMED BY DCIT, CIR-55, KOLKATA U/S. 143(3) OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT) FOR AY 2005-06 VIDE HIS O RDER DATED 27.12.2007. PENALTY WAS IMPOSED BY LD. DCIT, CIR-55, KOLKATA U/S. 271(1)(C) OF THE ACT VIDE HIS ORDER DATED 30.06.2008. 2. THE ONLY ISSUE TO BE DECIDED IN THIS APPEAL IS AS TO WHETHER PENALTY U/S. 271(1)(C) OF THE ACT COULD BE LEVIED IN THE FACTS AND CIRCUMS TANCES OF THE CASE. 2.1. THE BRIEF FACTS OF THIS ISSUE ARE THAT THE AS SESSEE RUNS FILM PRODUCTION HOUSE UNDER THE NAME AND STYLE OF VENUS PRODUCTIONS. THE ASS ESSEE VENTURED INTO THE SAID BUSINESS FOR THE FIRST TIME DURING THE ASSESSMENT YEAR UNDER APPEAL. TWO OF THE FILMS PRODUCED BY THE ASSESSEE RELEASED DURING THE YEAR I.E. (I) A NNAYA ATTACHAR AND (II) CHEETA. THE ASSESSEE DISCLOSED PROFIT OF RS.3,10,480/- OUT OF R ELEASE OF THE FILM ANNAYA ATTACHAR. THE ASSESSEE STATED THAT THE TOTAL COST OF PRODUCTI ON OF THE SAID FILM INCLUDING PRINTING AND PUBLICITY COST WAS ARRIVED AT 71,79,478/- AND A GAINST THAT, THE FILM DID BUSINESS TO THE TUNE OF RS.74,89,958/- AND ACCORDINGLY, PROFIT OF RS.3,10,480/- WAS MADE BY THE ASSESSEE WHICH WAS DISCLOSED IN THE P&L ACCOUNT OF THE ASSESSEE. THERE WAS A SURVEY U/S. 133A OF THE ACT CARRIED OUT ON THE PREMISES OF THE ASSESSEE ON 10.02.2005 WHEREIN CERTAIN BOOKS AND DOCUMENTS WERE IMPOUNDED. BASED ON THE SAID BOOKS THE ASSESSEE 2 ITA NO.2781/K/2013 MANJU DEVI DHANUKA AY 2005-06 WAS ASKED TO PREPARE TRIAL BALANCE FOR THE PERIOD 0 1.04.2004 TO 10.02.2005 I.E. UP TO THE DATE OF SURVEY. THE LD. AO CONSIDERING THE SAID TR IAL BALANCE AND TOOK THE TOTAL OF THE CREDIT SIDE OF THE TRIAL BALANCE OF RS.1,01,07,088/ - AS REVENUE RECEIPTS OF THE ASSESSEE AND APPLIED PROFIT PERCENTAGE OF 4.15% THEREON AND ARRIVED AT A PROFIT OF RS.4,19,444/- AS INCOME EARNED BY ASSESSEE FROM THE MOVIE ANNAYA ATTACHAR. THIS WAS COMPARED WITH THE DISCLOSED PROFIT BY THE ASSESSEE IN THE SU M OF RS.3,10,480/- AND ACCORDINGLY, THE LD. AO BROUGHT THE DIFFERENCE OF RS.1,08,964/- TO TAX AS UNDISCLOSED INCOME OF THE ASSESSEE FROM THE PRODUCTION OF FILM ANNAYA ATTACHA R. 2.2. WITH REGARD TO THE RELEASE OF ANOTHER MOVIE C HEETA ON 21.01.2005, THE ASSESSEE INCURRED TOTAL COST OF PRODUCTION INCLUDING PRINTIN G AND PUBLICITY COST OF RS.1,06,63,714/-. THE FILM DID BUSINESS TO THE TUN E OF RS.88,85,212/- UP TO 31.03.2005. THE ASSESSEE INCURRED A LOSS OF RS.17,78,502/- AND CHOSE NOT TO DEBIT THE SAME IN THE P&L ACCOUNT AS THE ASSESSEE THOUGHT THAT THE FILM W OULD GENERATE MORE REVENUE IN THE NEXT YEAR PURSUANT TO ADVERTISEMENT COST ALREADY IN CURRED AND ACCORDINGLY, DECIDED TO TREAT THE LOSS AS DEFICIENCIES RECOVERABLE AND RE FLECTED THE SAME IN THE ASSET SIDE OF BALANCE SHEET. IN OTHER WORDS, NO EXPENDITURE WAS INDEED CLAIMED BY THE ASSESSEE IN RESPECT OF THIS FILM CHEETA IN THE RETURN OF INCO ME. THE LD. AO STATED THAT THE ENTRIES IN THE IMPOUNDED BOOKS OF ACCOUNT HAS BEEN RECORDED IN A ROUGH MANNER AND IN THE ABSENCE OF BOOKS AND COGENT REPLY, HE PROCEEDED TO ADD A SUM OF RS.75,000/- AS UNDISCLOSED INCOME ON ACCOUNT OF FILM CHEETA. 2.3. DURING THE COURSE OF SURVEY A SUM OF RS.8720/- WAS FOUND IN CASH. THE LD. AO BROUGHT THE SAME TO TAX AS UNACCOUNTED CASH IN THE ABSENCE OF REGULAR CASH BOOK. ALL THE THREE ADDITIONS MADE BY THE AO IN THE ASSESSMEN T WERE NOT CONTESTED BY THE ASSESSEE BY WAY OF FIRST APPEAL IN VIEW OF SMALLNESS OF THE AMOUNT INVOLVED AND LACK OF PROPER INFORMATION OF COUNSEL TO ARGUE THE SAME. THE LD. AO LATER LEVIED PENALTY U/S. 271(1)(C) OF THE ACT IN RESPECT OF THREE ADDITIONS, WHICH WAS CONFIRMED BY THE LD. CITA IN FIRST APPEAL ON THE GROUND THAT NO EXPLANATION W AS GIVEN BY THE ASSESSEE BEFORE THE AO DURING PENALTY PROCEEDINGS WITH RESPECT TO THE A DDITIONS MADE. AGGRIEVED, THE ASSESSEE IS IN APPEAL BEFORE US ON THE FOLLOWING GR OUNDS: 1. THAT UNDER THE FACTS & CIRCUMSTANCES OF THE CA SE THE LD CIT(A) ERRED IN CONFIRMING 271(1)(C) PENALTY BEING IMPOSED BY AO DESPITE FULL BONAFIDE & COMPLETE DETAILS WERE DISCLOSED IN SUBMITTING THE RETURN. 3 ITA NO.2781/K/2013 MANJU DEVI DHANUKA AY 2005-06 2. THAT THE LD CIT(A) WAS WRONG IN CONFIRMING THE P ENALTY U/S 271(L)(C) UPON DETERMINING RS. 1,08,964 CONCEALED INCOME ARBITRARI LY, WHIMSICALLY ON THE BASIS OF ENTIRE CREDIT SUMMATION OF TRIAL BALANCE. THUS IMPOSITION OF PENALTY ON SUCH ARBITRARILY & VAGUE AMOUNT OF INCOME IS BASELESS AND BEYOND THE PROVISI ON OF LAW. 3. THAT THE LD CIT(A) WAS WRONG IN CONFIRMING THE P ENALTY U/S 271(1)(C) BASED ON QUANTUM ADDITION OF RS. 75000/- BRING MADE IN GENER AL AND ON ESTIMATE BASIS WITHOUT BRINGING ANY ADVERSE MATERIAL ON RECORD. 4. THAT UNDER THE OVERALL FACTUAL POSITION OF BUSIN ESS, THE LD CIT(A) ERRED IN SUSTAINING THE CONCEALMENT PENALTY BASED ON QUANTUM ADDITION O F RS.8720/- BEING CASH FOUND DURING SURVEY. 5) THAT THE ORDER OF CIT (A) IS PATENTLY WRONG & FA LSE UPON MENTIONING SOME UNTRUE REMARKS. 6) THAT THE APPELLANT CRAVES TO ADD OR AMEND ANY GR OUNDS OF APPEAL ON OR BEFORE THE DATE OF HEARING. 2.4. THE LEARNED AR REITERATED THE ARGUMENTS AS MA DE BEFORE THE LD. AO AND STATED THAT THE LD. AO HAD MERELY ERRED IN TAKING THE TOTA L OF THE CREDIT SIDE OF THE TRIAL BALANCE PREPARED UP TO THE DATE OF SURVEY IN THE SU M OF RS.1,01,07,088/- AS REVENUE RECEIPTS OF THE ASSESSEE. HE BROUGHT TO THE ATTENT ION OF THE BENCH THAT THE SAID TRIAL BALANCE ADMITTEDLY INCLUDED A SUM OF RS.36,87,490/- TOWARDS SUNDRY CREDITORS, A SUM OF RS.31,23,728/- TOWARDS ADVANCE RECEIVED FROM SUNDRY DEBTORS WHICH IN ANY CASE, WOULD NOT CONSTITUTE REVENUE RECEIPT. THE REAL REVENUE R ECEIPT REFLECTED IN THE SAID TRIAL BALANCE WAS ONLY RS.12,90,770/- TOWARDS REALIZATION OF SALES AND RS.5,100/- TOWARDS RENTAL RECEIPTS. ACCORDINGLY, HE ARGUED THAT ADOPT ION OF THE TOTAL CREDIT SIDE OF THE BALANCE SHEET AS REVENUE RECEIPT AND APPLYING PROFI T PERCENTAGE AT 4.15% THEREON AND MAKING ADDITION OF RS.1,08,964/- IS HIGHLY UNWARRAN TED. HENCE NO PENALTY COULD BE LEVIED ON THE SAME. HE ARGUED THAT THE EXPENDITURE CLAIMED BY THE ASSESSEE IN RESPECT OF THE MOVIE ANNAYA ATTACHAR WAS NOT DISPUTED BY THE A SSESSEE. IT HAS BEEN ACCEPTED AS SUCH. HE ARGUED THAT THERE IS NO CONCEALMENT OF IN COME OR FURNISHING OF INACCURATE PARTICULARS OF INCOME ON THE PART OF THE ASSESSEE W ARRANTING LEVY OF PENALTY INASMUCH AS THAT THE LD. AO HIMSELF HAD STATED THAT UPTO THE DA TE OF SURVEY THE BOOKS OF ACCOUNTS WERE NOT PROPERLY UP TO DATE AND THE TRIAL BALANCE PREPARED BASED ON IMPOUNDED BOOKS WHICH WERE NOT PROPERLY UPDATED CANNOT BE THE BASIS FOR FRAMING ANY ADDITION. IN RESPECT OF FILM CHEETA HE ARGUED THAT NO EXPENDIT URE ADMITTEDLY WERE CLAIMED BY THE ASSESSEE IN THE P&L ACCOUNT AND THE LOSS ARISING FR OM THE RELEASE OF THE FILM UP TO 4 ITA NO.2781/K/2013 MANJU DEVI DHANUKA AY 2005-06 31.03.2005 WAS ACTUALLY SHOWN AS DEFICIENCY RECOVE RABLE IN THE ASSET SIDE OF THE BALANCE SHEET BY THE ASSESSEE. IN ANY CASE, THE LD . AO HAD ONLY MADE AN ESTIMATED ADDITION OF RS.75,000/- IN RESPECT THIS FILM WITHOU T ANY BASIS. HENCE, NO PENALTY WOULD LIE ON THE SAME. IN RESPECT OF CASH FOUND ON THE D ATE OF SURVEY, HE ARGUED THAT THE BOOKS OF ACCOUNT AS DRAWN UP TO THE DATE OF SURVEY WAS NO T PROPERLY UPDATED AND HENCE, THE ADDITION WAS MADE BY THE LD. AO BY IGNORING THE FIN AL BALANCE SHEET AS ON 31.3.2005 PRESENTED TO HIM ALONG WITH THE RETURN OF INCOME. HE ARGUED THAT FOR IMPROPER MAINTENANCE OF BOOKS OF ACCOUNT AS FOUND BY THE LD. AO DURING THE COURSE OF SURVEY, THE ASSESSEE HAD ALREADY BEEN INVITED WITH THE PENALTY U/S. 271A OF THE ACT AND ALL THE ADDITIONS MADE BY THE AO WERE ONLY BASED ON THE ACC OUNTS UPTO THE DATE OF SURVEY COMPLETELY IGNORING THE BALANCE SHEET FILED FOR THE WHOLE FY 2004-05 AND ACCORDINGLY, NO PENALTY WOULD LIE ON ANY OF THE ADDITIONS MADE. HE ARGUED FURTHER JUST BECAUSE NO EXPLANATION WAS GIVEN BY THE ASSESSEE IN THE PENALT Y PROCEEDINGS AND JUST BECAUSE NO APPEAL WAS FILED BEFORE THE LD. CIT(A) AGAINST THE QUANTUM ASSESSMENT, PENALTY U/S. 271(1)(C) OF THE ACT CANNOT BE LEVIED AUTOMATICALLY BY THE AO. 2.5. IN RESPONSE TO THIS, LD. DR STATED THAT NO EXP LANATION WAS OFFERED BY THE ASSESSEE DURING PENALTY PROCEEDINGS AND HENCE, THE ASSESSEE HAD NOT DISCHARGED HIS PRIMARY ONUS TO COMPLY WITH THE MANDATE OF THE LAW AND HENCE, VE HEMENTLY RELIED ON THE ORDERS OF THE LOWER AUTHORITIES. 2.6. WE HAVE HEARD RIVAL SUBMISSIONS AND GONE THROU GH FACTS AND CIRCUMSTANCES OF THE CASE. THE FACTS STATED HEREINABOVE REMAIN UNDISPUT ED AND HENCE, THE SAME ARE NOT REITERATED FOR THE SAKE OF BREVITY. WE ARE IN COMP LETE AGREEMENT WITH THE ARGUMENTS ADVANCED BY THE ASSESSEE WITH REGARD TO THE PENALTY LEVIED ON THE ADDITION MADE IN THE SUM OF RS.1,08,964/- TOWARDS THE FILM ANNAYA ATTACH AR. WE FIND THAT THE TRIAL BALANCE PREPARED UP TO 10.02.2005 ADMITTEDLY CONTAINED SUBS TANTIAL BALANCE TOWARDS SUNDRY CREDITORS ADVANCE RECEIVED FROM SUNDRY DEBTORS WHIC H ARE ADMITTEDLY NOT REVENUE RECEIPTS UNLESS PROVED OTHERWISE. IT IS NOT THE CA SE OF THE LD. AO THAT THE SUNDRY CREDITORS REFLECTED THEREON AND ADVANCE RECEIVED FR OM THE CUSTOMERS (SUNDRY DEBTORS) ARE NON-EXISTENT LIABILITIES AND BOGUS IN NATURE. THIS CAN BE PROVED FROM THE VERY FACT THAT THE LD. AO HAD NOT MADE ANY SEPARATE ADDITION THEREON IN RESPECT OF THOSE TWO ITEMS. MOREOVER, WE FIND THAT THE BALANCE SHEET HA S BEEN PREPARED UP TO 31.03.2005 5 ITA NO.2781/K/2013 MANJU DEVI DHANUKA AY 2005-06 WHICH HAS BEEN COMPLETELY IGNORED BY THE LD. AO AND ALSO BY THE LD. CIT(A) WHEREIN ALL THE DEFICIENCIES POINTED OUT BY THE LD. AO HAVE BEEN PROPERLY RECTIFIED AND THERE IS NO NEED TO MAKE ANY ADDITION TOWARDS FILM OF ANNAYA ATTACHAR IN THE ASSESSMENT. HOWEVER, THE ASSESSEE IS NOT IN APPEAL BEFORE US ON THE QUANTUM ADDITION. WE ALSO FIND THAT THE TOTAL COST OF PRODUCTION INCLUDING THE PRI NTING COST AND PUBLICITY COST OF THE FILM ANNAYA ATTACHAR HAS BEEN ACCEPTED BY THE LD. AO WIT HOUT MAKING ANY ADDITION THEREON. WE ARE ALSO IN AGREEMENT WITH THE ARGUMEN T OF LD. AR THAT JUST BECAUSE NO EXPLANATION HAS BEEN OFFERED BY THE ASSESSEE DURING THE PENALTY PROCEEDINGS THE LD. AO CANNOT AUTOMATICALLY PROCEED TO LEVY PENALTY AS ADM ITTEDLY PENALTY PROCEEDING IS INDEPENDENT OF ASSESSMENT PROCEEDINGS. UNDER THESE CIRCUMSTANCES, WE HAVE NO HESITATION IN DIRECTING THE LD. AO TO CANCEL THE PE NALTY LEVIED IN RESPECT OF THE ADDITION OF RS.1,08,964/- TOWARDS THE FILM ANNAYA ATTACHAR. 2.7. APROPOS THE FILM CHEETA, WE FIND THAT AN ADDIT ION OF RS.75,000/- HAS BEEN MADE ONLY ON ESTIMATE BASIS. HENCE, WE HAVE NO HESITATIO N IN CANCELLING THE PENALTY LEVIED ON THE SAME AND WE DIRECT THE AO ACCORDINGLY. 2.8. WITH REGARD TO THE PENALTY LEVIED ON THE ADDIT ION MADE TOWARDS CASH BALANCE, WE FIND THAT THE ASSESSEE HAS FILED BALANCE SHEET UP T O 31.03.2005 WHICH HAS NOT BEEN PROPERLY CONSIDERED BY THE LD. AO AND THE CASH BALA NCE FOUND ON THE DATE OF SURVEY HAVE BEEN DULY EXPLAINED IN THE SAID BALANCE SHEET FILED BEFORE THE LD. AO UP TO 31.03.2005. HENCE, THERE IS NO CASE OF ANY CONCEAL MENT OF INCOME OR FURNISHING OF INACCURATE PARTICULARS OF INCOME ON THE PART OF THE ASSESSEE. ACCORDINGLY, WE HAVE NO HESITATION IN DELETING THE PENALTY LEVIED IN RESPEC T OF THE SAID ADDITION. ACCORDINGLY, THE GROUNDS RAISED BY THE ASSESSEE ARE ALLOWED. 3. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS AL LOWED. ORDER IS PRONOUNCED IN THE OPEN COURT ON 08.07.201 6 SD/- SD/- (N. V. VASUDEVAN) (M. BALAGANESH) JUDICIAL MEMBER ACCOUNTAN T MEMBER DATED : 8 TH JULY, 2016 JD.(SR.P.S.) 6 ITA NO.2781/K/2013 MANJU DEVI DHANUKA AY 2005-06 COPY OF THE ORDER FORWARDED TO: 1 . APPELLANT SMT. MANJU DEVI DHANUKA, C/O, P. K. HI MMATSINGHKA, AA-4, SALT LAKE, KOLKATA-64 2 RESPONDENT CIT,KOL-XX, KOLKATA. 3 . THE CIT(A), KOLKATA 4. 5. ACIT , KOLKATA DR, KOLKATA BENCHES, KOLKATA / TRUE COPY, BY ORDER, ASSTT. REGISTRAR .