M/s. Kosmic Studios (Firm), CHENNAI V. ITO, CHENNAI

ITA 3014/CHNY/2016

• Counselvise Citation: [2017] 130 COUNSELVISE.COM (IT) 8181 (ITAT-CHENNAI)
• Duration Of Justice: 2 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-01-2017
• Appeal Filed By: Assessee
• Bench Allotted: D
• Next Hearing Date: 03-01-2017
• Assessment Year: 2007-2008
• Appeal Filed On: 25-10-2016
• Court: TRIBUNAL
• Department Lawyers: B SAHADEVAN
• Assessee Lawyers: T VASUDEVAN
• Keywords: Rejection of books of accounts; Unexplained investment; Business income; Depreciation; Assessment record
• Section: 133A; 68; 69

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, CHENNAI . . . , . . , BEFORE SHRI N.R.S. GANESAN, JUDICIAL MEMBER AND SHRI D.S. SUNDER SINGH, ACCOUNTANT MEMBER ./ ITA NO. 3014/MDS/2016 / ASSESSMENT YEAR : 2007-08 M/S. KOSMIC STUDIOS (FIRM), RUTLAND TOWERS, 4 TH FLOOR, NO.33, SHAFEE MOHAMMED ROAD, CHENNAI 600 006. [PAN: AAEFK 9852 C] V. THE INCOME TAX OFFICER, NON-CORPORATE WARD-3 (4), CHENNAI. ( /APPELLANT) ( !' /RESPONDENT) # / APPELLANT BY : SHRI T. VASUDEVAN, ADVOCATE !' # /RESPONDENT BY : SHRI B. SAHADEVAN, JCIT # /DATE OF HEARING : 03.01.2017 # /DATE OF PRONOUNCEMENT : 13.01.2017 / O R D E R PER D.S. SUNDER SINGH, ACCOUNTANT MEMBER : THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST TH E ORDER DATED 24.08.2016 OF COMMISSIONER OF INCOME TAX (APPEALS)- 4, CHENNAI, IN ITA NO.94/2013-14/2007-08/CIT(A)-4 FOR THE AY 2007-08. :- 2 -: I.T.A. NO.3014/MDS/2016 2.0 ALL THE GROUNDS OF APPEAL ARE RELATED TO THE ADDIT ION MADE BY THE ASSESSING OFFICER (HEREINAFTER REFERRED TO AS AO) ON ACCOUNT OF UNEXPLAINED INVESTMENT U/S 69 OF INCOME TAX ACT, AM OUNTING TO 11,68,420/-. THE ASSESSEE IS ENGAGED IN THE BUSINES S OF MEDIA SERVICES AND FILED THE RETURN OF INCOME DECLARING TOTAL INCO ME OF 8,20,984/- ON 31/07/2007. THE ASSESSEE HAS ADMITTED THE GROSS RE CEIPTS OF RS.18,63,430/- FOR THE A.Y. UNDER CONSIDERATION. A SURVEY UNDER SECTION 133A OF THE INCOME TAX ACT, 1961 (IN SHORT THE ACT ) WAS CONDUCTED IN THE BUSINESS PREMISES OF THE ASSESSEE ON 07.02.2007 AND DURING THE COURSE OF SURVEY, IT WAS FOUND BY THE SURVEY TEAM T HAT THE ASSESSEE IS NOT MAINTAINING THE BOOKS OF ACCOUNTS. ONLY BILLS AND VOUCHERS ARE MAINTAINED BY THE ASSESSEE. THE ASSESSING OFFICER T REATED THE ENTIRE RECEIPTS AS INCOME UNDER SECTION 69 OF THE ACT, WIT HOUT ALLOWING ANY EXPENDITURE. THE ASSESSEE WENT ON APPEAL BEFORE T HE CIT (APPEALS) AND THE CIT (APPEALS) CONFIRMED THE ADDITION MADE BY TH E ASSESSING OFFICER. FOR READY REFERENCE WE EXTRACT PARA NO.9 OF THE CIT (APPEALS) ORDER AS UNDER: I HAVE GONE THROUGH THE FACTS OF THE CASE AND THE OBSERVATIONS OF THE AO ON THE BASIS OF WHICH HE HAS TREATED THE JOB WORK R ECEIPTS AS UNEXPLAINED RECEIPTS. I HAVE ALSO CONSIDERED THE SUBMISSIONS O F THE APPELLANT WHICH WERE DEVOID OF ANY CONCRETE MATERIAL EVIDENCE. THE PRIMARY AND THE INITIAL ONUS WAS ON THE ASSESSEE TO PROVE THE GENUINENESS O F THE JOB WORK RECEIPTS AND ALSO THE GENUINENESS OF EXPENSES INCUR RED TOWARDS EARNING JOB WORK RECEIPTS. HOWEVER, IT HAS BEEN NOTICED THAT N EITHER THE BOOKS OF ACCOUNTS NOR WERE THE RELEVANT BILLS AND VOUCHERS O F JOB WORK RECEIPTS OR THE RELEVANT EXPENSES EVER PRODUCED BY THE ASSESSEE BEFORE THE AO. :- 3 -: I.T.A. NO.3014/MDS/2016 MOREOVER, IT IS INTERESTING TO NOTE THAT NOT EVEN A SINGLE PENNY WAS RECEIVED BY WAY OF ACCOUNT PAYEE CHEQUE OR DD UNDER THE HEAD OF JOB WORK RECEIPTS. SIMILARLY, THE ENTIRE EXPENSES PERT AINING TO THE JOB WORK WERE PAID IN CASH ONLY. THE ASSESSEE HAD FAILED TO DISCHARGE THE PRIMARY ONUS CAST UPON IT TO SUBSTANTIATE THE GENUINENESS A ND AUTHENTICITY OF THE JOB WORK RECEIPTS AND THE RELEVANT EXPENSES INCURRE D TOWARDS EARNING THE JOB WORK RECEIPTS. EVEN DURING THE COURSE OF THE A PPELLATE PROCEEDINGS ALSO, THE ASSESSEE HAS FAILED TO PRODUCE EVEN A SIN GLE PIECE OF EVIDENCE WHICH COULD HAVE SUBSTANTIATED THE ASSESSEES CONTE NTIONS. THEREFORE, IN THE ABSENCE OF THE BOOKS OF ACCOUNTS, THE RELEVANT BILLS AND VOUCHERS AND OTHER COGENT MATERIAL EVIDENCES TO SUB STANTIATE ITS CLAIMS, THE ASSESSEE FAILS TO SUCCEED IN ITS APPEAL. HENCE , THE ACTION OF THE AO IS CONFIRMED. 3.0 SHRI T. VASUDEVAN, LD.COUNSEL APPEARED FOR THE ASS ESSEE. THE LD. COUNSEL OF THE ASSESSEE ARGUED THAT THE ASSESSING O FFICER HAS BROUGHT THE ENTIRE RECEIPTS AS INCOME WITHOUT ALLOWING ANY EXPE NDITURE DEBITED TO THE PROFIT & LOSS ACCOUNT WHICH IS UNJUSTIFIED. THE AS SESSEE IS RENDERING MEDIA SERVICES USING THE PLANT AND MACHINERY AND R ECEIVED THE JOB WORK CHARGES FOR WHICH ASSESSEE INCURS EXPENDITURE AND T HE ASSESSING OFFICER WITHOUT CONSIDERING THE NATURE OF JOB AND THE EXPEN SES INVOLVED, DISALLOWED THE ENTIRE EXPENDITURE IN THE P&L ACCOUN T AMOUNTING TO 11,68,420/-. THE AR CONTENTED THAT THE ENTIRE ADDI TION MADE BY THE ASSESSING OFFICER IS BASED ON SURMISES AND MUST BE DELETED. 4.0 ON THE OTHER HAND, THE LD. DEPARTMENTAL REPRESENTA TIVE ARGUED THAT THE ASSESSEE IS INTRODUCING THE LOANS BY THE P ARTNERS AND CREATING :- 4 -: I.T.A. NO.3014/MDS/2016 INVESTMENTS IN PLANT AND MACHINERY AND ADVANCING LO ANS WITHOUT RETURNING ANY BUSINESS INCOME. THE ASSESSEE HAS NO T INCURRED ANY EXPENDITURE AND NO EVIDENCE HAS BEEN PRODUCED BY TH E ASSESSEE WITH REGARD TO THE EXPENDITURES. THE ASSESSEE FIRM IS INTRODUCING INVESTMENTS AND CLAIMING EXPENSES ON THE SAME WHICH WAS NOT SUP PORTED BY EVIDENCE. THEREFORE, THE LD, DR ARGUED THAT THE A SSESSING OFFICER HAS RIGHTLY ASSESSED THE ENTIRE JOB WORK RECEIPTS AS IN COME. 5.0 WE HEARD THE RIVAL SUBMISSIONS, PERUSED THE MATERI AL AVAILABLE ON RECORD. THE GROSS RECEIPTS OF THE ASSESSEE WAS 19,89,404/- AND THE ASSESSEE CLAIMED THE EXPENDITURE OF 11,68,420/- INCLUSIVE OF DEPRECIATION OF 5,68,697/- AND ADMITTED THE INCOME OF RS.820984/. THE ASSESSING OFFICER DISALLOWED THE ENTIRE EXPENDI TURE FOR NON- PRODUCTION OF BILLS, VOUCHERS ETC. IN SUPPORT OF TH E EXPENSES CLAIMED BY THE ASSESSEE. THOUGH THE ASSESSING OFFICER STATED IN THE ASSESSMENT ORDER THAT THE ASSESSEE IS INTRODUCING THE UNSECURE D LOANS IN THE NAMES OF THE PARTNERS AND CREATING ASSETS, NO INSTANCES B ROUGHT ON THE ASSESSMENT RECORD REGARDING THE UNSECURED LOANS OF THE PARTNERS. SIMILARLY, THE ASSESSING OFFICER HAS STATED THAT TH E ASSESSEE FIRM IS INTRODUCING INVESTMENTS AND CLAIMING EXPENSES. NO SUCH INSTANCES ARE ALSO BROUGHT ON THE ASSESSMENT PROCEEDINGS. IN CAS E, THE ASSESSING OFFICER FOUND INTRODUCTION OF UNSECURED LOANS FOR W HICH NO EXPLANATION IS OFFERED BY THE ASSESSEE, SUCH UNSECURED LOANS SHOUL D BE BROUGHT TO TAX :- 5 -: I.T.A. NO.3014/MDS/2016 AS PER THE PROVISIONS OF SECTION 68 OF THE ACT ON T HE SPECIFIC AMOUNT OF THE UNSECURED LOANS IN THE YEAR IN WHICH IT WAS INT RODUCED. SIMILARLY, IF ANY INVESTMENT IS MADE, THE ASSESSING OFFICER IS FR EE TO TAX SUCH UNEXPLAINED INVESTMENT UNDER SECTION 69 OF THE ACT WITH A SPECIFIC AMOUNT WITH A PARTICULAR REFERENCE TO THE SPECIFIC INVESTMENT AND THE YEAR IN WHICH SUCH INVESTMENT IS MADE. THE ASSESSING O FFICER IS NOT ALLOWED TO TAX THE ENTIRE RECEIPTS BY GENERAL BOGIE ON PRES UMPTION AND ASSUMPTION. THEREFORE, WE ARE UNABLE TO APPRECIATE THE ACTION OF THE ASSESSING OFFICER TAXING THE ENTIRE RECEIPTS AS INC OME UNDER SECTION 69 OF THE ACT WITHOUT DISPROVING THE CLAIM MADE BY THE AS SESSEE IN THE P&L ACCOUNT. THE ASSESSEE IS DOING A BUSINESS OF MEDIA SERVICES AND RECEIVING THE JOB WORK CHARGES. THE ASSESSING OFF ICER HAS NOT DENIED THE FACTS. THEREFORE IT IS AN UNDISPUTED FACT THAT THE ASSESSEE IS INCURRING EXPENDITURE FOR THE PURPOSE OF EARNING THE INCOME. IN CASE, THE ASSESSING OFFICER DO NOT BELIEVE THE BOOKS OF ACCOU NTS, THE ASSESSING OFFICER SHOULD HAVE REJECTED THE BOOKS OF ACCOUNTS AND ESTIMATED THE INCOME ON REASONABLE BASIS. THE ASSESSEE HAS ADMIT TED INCOME OF 8,20,984/- ON GROSS RECEIPTS OF 19,89,404/- WHICH WORKED OUT TO 41.29% OF THE GROSS RECEIPTS. IN THE ABSENCE OF AN Y EVIDENCE TO SHOW THAT THE ASSESSEE HAS UNDERSTATED THE INCOME WE ARE OF THE CONSIDERED OPINION THAT THE INCOME DECLARED BY THE ASSESSEE IS REASONABLE AND THE ADDITION MADE BY THE AO IS DELETED. :- 6 -: I.T.A. NO.3014/MDS/2016 6.0 IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWED . ORDER PRONOUNCED IN THE OPEN COURT ON 13 TH JANUARY, 2017 AT CHENNAI. SD/- SD/- ( . . . ) (N.R.S. GANESAN) /JUDICIAL MEMBER ( . . ) (D.S.SUNDER SINGH) /ACCOUNTANT MEMBER /CHENNAI, /DATED: 13 TH JANUARY, 2017. TLN !' #$!% /COPY TO: 1. #'&'( /APPELLANT 4. ) /CIT 2. * '( /RESPONDENT 5. !+,& -. /DR 3. ) ( #'& ) /CIT(A) 6. 1 2 /GF