ACIT CIRCLE-16 (1), MUMBAI V. SHRI. PRAKASH JHA, MUMBAI

ITA 6607/MUM/2019

• Counselvise Citation: [2021] 108 COUNSELVISE.COM (IT) 3629 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 6 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-05-2021
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Assessment Year: 2011-2012
• Appeal Filed On: 22-10-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MANPREET DUGGAL
• Keywords: Depreciation; Set aside
• Section: 271(1)(c); 143(3); 142(1); 143(1); 250; 143(2); 22; 68; 6

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, MUMBAI BEFORE SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER & SHRI PAVAN KUMAR GADALE, JUDICIAL MEMBER ITA NO. 6607/MUM/2019 (A.Y: 2011-12) ACIT, CIRCLE 16(1) R.NO. 439, 4 TH FLOOR, AAYAKAR BHAVAN, MK ROAD, MUMBAI. VS. SHRI PRAKASH JHA 201, ABCK ABHISHEK, NEW LINKING ROAD, MUMBAI 400053. PAN/GIR NO. : AAJPJ3208L APPELLANT .. RESPONDENT APPELLANT BY : SHRI MANPREET DUGGAL, DR RESPONDENT BY : NONE DATE OF HEARING 05 .0 5 .2021 DATE OF PRONOUNCEMENT 11 .0 5 .2021 / O R D E R PER PAVAN KUMAR GADALE, JM: THE APPEAL IS FILED BY THE REVENUE AGAINST THE ORDE R OF THE COMMISSIONER OF INCOME TAX (APPEALS) -4 MUMB AI, PASSED U/S.271(1)(C) AND 250 OF THE INCOME TAX ACT, 1961. THE REVENUE HAS RAISED THE SOLE GROUND OF AP PEAL: 1. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE AND IN LAW, THE LD. CIT(A) HAS ERRED IN DELETING THE PE NALTY OF RS. 57,30,000/- LEVIED ON THE ADDITIONS MADE ON ACCOUNT OF (A) ADVANCE RECEIVED FROM NOPANY & SONS PVT LTD., U/S 6 8 OF THE ACT AMOUNTING TO RS. 1,50,00,000/-; (B) ADDITION ON ACCOUNT OF CESSATION OF LIABILITY AMOUNTING TO RS. 13,33,365/- ; & (C) ADDITION ON ACCOUNT OF DEBIT BALANCES WRITTEN OFF A MOUNTING TO ITA NO. 6607/MUM/2019 SHRI PRAKASH JHA., MUMBAI - 2 - RS. 22,02,150/- 2. THE APPELLANT PRAYS THAT THE ORDER OF CIT(A) ON THE ABOVE GROUNDS BE SET ASIDE AND THAT OF THE AO BE RESTORED . 3. THE APPELLANT CRAVES LEAVE TO AMEND OR ALTER ANY GR OUND OR ADD A NEW GROUND WHICH MAY BE NECESSARY. 2.THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS AN INDIVIDUAL AND IS ENGAGED IN THE BUSINESS OF FILM D IRECTION AND FEATURE FILMS PRODUCTION AND FILED THE RETURN O F INCOME FOR THE A.Y 2011-12 ON 23.09.2011 DISCLOSING A TOTAL INCOME OF RS.11,71,20,662/- AND THE RETURN WA S PROCESSED U/S 143(1) OF THE ACT. SUBSEQUENTLY, THE CASE WAS SELECTED FOR SCRUTINY AND NOTICE U/S 143(2) AND 142(1) OF THE ACT WERE ISSUED. IN COMPLIANCE, THE LD. AR OF THE ASSESSEE APPEARED FROM TIME TO TIME AND FURN ISHED THE DETAILS. THE A.O HAS DEALT ON THE FINANCIAL STA TEMENTS AND MADE ADDITION OF (I) INCOME FROM HOUSE PROPERTY IN RESPECT TO EXCESS CLAIM OF DEPRECIATION AND MAINTEN ANCE CHARGES(II) CESSATION OF LIABILITY (III) DEBIT BALA NCES WRITTEN OFF AND (IV) ADVANCES RECEIVED FROM NOPANY & SONS P VT LTD KOLKAT AND ASSESSED THE TOTAL INCOME OF RS. 13,79,56,300/-AND PASSED ORDER U/S 143(3) OF THE AC T ON 30-03-2014.SUBSEQUENTLY, THE A.O. HAS INITIATED PEN ALTY PROCEEDINGS AND CONSIDERED THE FINDINGS IN THE ASSESSMENT ORDER AND THE EXPLANATIONS FILED BY THE ASSESSEE. SINCE THE EXPLANATIONS ARE NOT SATISFACTO RY, THE ITA NO. 6607/MUM/2019 SHRI PRAKASH JHA., MUMBAI - 3 - A.O. HAS OBSERVED THAT THE ASSESSEE HAS FURNISHED T HE INACCURATE PARTICULARS INCOME AND APPLIED THE PROVI SIONS OF SEC. 271(1)(C) EXPLANATION (1) OF THE ACT AND LE VIED THE PENALTY OF RS.57,30,000/-AND PASSED THE ORDER U/S 271(1)(C) OF THE ACT. 3. AGGRIEVED BY THE PENALTY ORDER, THE ASSESSEE HAS FILED AN APPEAL BEFORE THE CIT(A). WHEREAS, CIT(A) CONSID ERED THE GROUNDS OF APPEAL, SUBMISSIONS OF THE ASSESSEE AND FINDINGS OF THE A.O HAS DEALT ON THE DISPUTED ISSU E AND FIND THAT IN RESPECT OF ADDITIONS MADE BY THE A.O.T HE HONBLE TRIBUNAL HAS GRANTED RELIEF TO THE ASSESSEE. THE CIT(A) OBSERVED THAT WHEN THE ADDITIONS HAVE BEEN DELETED BY THE HONBLE TRIBUNAL, HENCE NO PENALTY C AN BE SUSTAINED AND DELETED THE PENALTY AND ALLOWED THE ASSESSEE APPEAL. AGGRIEVED BY THE ORDER, THE REVENU E HAS FILED AN APPEAL WITH THE HONBLE TRIBUNAL. 4. AT THE TIME OF HEARING NONE APPEARED ON BEHALF O F THE ASSESSEE. THE LD.DR RELIED ON THE A.O. ORDER. 5. WE HEARD THE LD.DR AND PERUSED THE MATERIAL ON RECORD. THE LD.DR ACCEPTS THAT THE HONBLE TRIBUNAL IN QUANTUM APPEAL HAS DELETED THE ADDITIONS. WE FIND T HAT THE CIT(A) RELIED ON THE ORDER OF THE HONBLE TRIBU NAL AT PAGE -3 PAR 7.1 WHICH IS READ AS UNDER; ITA NO. 6607/MUM/2019 SHRI PRAKASH JHA., MUMBAI - 4 - 7.1 ACCORDING TO THE APPELLANT, ALL THE ADDITIONS ON WHICH PENALTY WAS IMPOSED BY THE AO HAS BEEN DELETED BY T HE ITAT. THE RELEVANT PART OF THE ORDER IS REPRODUCED AS BEL OW; 17. FROM THE ABOVE FACTS, WE HAVE ALSO NOTED THAT M EMORANDUM OF UNDERSTANDING HAS CREATED DOUBT IN THE MINDS OF REV ENUE AUTHORITIES I.E. AO AND THE CIT(A) AND THEY COULD NOT UNDERSTAN D THE COMMERCIAL TRANSACTIONS ENTERED INTO BETWEEN THESE TWO PARTIES . WE ALSO NOTED THAT THE ASSESSEE VIDE CLAUSE 4 ABOVE OF THE MOU AG REED THAT PURCHASE PRICE TO BE PAID AND TRANSFERRED OF SHARES SHALL TAKE PLACE IN THE MANNER PRESCRIBED THEREIN AND HOW PAYMENTS IS T O BE USED. WE HAVE GONE THROUGH 4 TH COLUMN OF THE TABLE AS PROVI DED IN THE CLAUSE 4 OF THE MOU, WHEREBY THE REPAYMENTS OF UNSECURED LOA N OF 2,37,87,155/- IS TO BE REPAID. FURTHER ANOTHER SUM OF 12,62,12,845/- IS TO BE UTILIZED FOR ACQUISITION OF SHARES IN TERM OF THESE AGREEMENT ENTERED INTO BETWEEN AND ACCORDINGLY, SHRI HANUMAN SUGAR AND INDUSTRIES LTD DIRECTED THE NOPANY INVESTMENT PVT. LTD AND NOPANY AND SONS PVT. LTD TO PAY A SUM OF 1.5 CRORES TO ASSESSEE I.E. PRAKASH JHA AS ADVANCED AGAINST PURCHASE OF SHARES. HENCE, WE FIND THAT THE ENTIRE TRUNCATION OF ADVANCE OF 1.50 CRORES IS EXPLAINED AND CANNOT BE ADDED UNDER SECTION 68 OF THE ACT. ACCORDINGLY, WE DELETE THE ADDITION AND ALLOW THIS ISSUE OF ASSESSEE APPEAL. 22. WE HAVE HEARD RIVAL CONTENTIONS AND GONE THROUG H THE FACTS AND IN CUR STANCES OF THE CASE. WE FIND THAT THE AO NOTED FROM THE ACCOUNTS OF THE ASSESSEE THAT THERE IS LIABILITY OUTSTANDING IN THE BOOKS OF THE ASSESSEE FOR AN AMOUNT OF 10,47,914/- IN THE NAME OF FILMKRAFT PVT. LTD. AND ANOTHER AMOUNT OF 2,85,444/- IN THE NAME OF ENTERTAINMENT ONE. THE AO REQUIRE THE ASSESSEE TO CONFIRM THESE L IABILITIES FROM THESE PARTIES BUT THE ASSESSEE ONLY ENCLOSED THE LEDGER A CCOUNT OF THE OLD BALANCES CARRIED FORWARD FROM PREVIOUS YEAR. ACCORD INGLY, THE AO ISSUED NOTICE TO BOTH THE PARTIES AND IN RESPONSE T O FILMKRAFT PVT. LTD. DENIED ANY SUCH LIABILITY OUTSTANDING IN THEIR BOOK S AND THE OTHER PARTY ENTERTAINMENT ONE, NOTICE RETURNED UNSERVED. THE AS SESSEE EXPLAINED THAT DURING THE FY 2011-12 RELEVANT TO AY 2012-13, THE BALANCES OF THESE PARTIES HAS BEEN WRITTEN OFF BY THE ASSESSEE AND INCLUDED IN THE INCOME OF THE ASSESSEE. BUT THE AO ADDED THE SAME I N AY 2011-12 BY HOLDING THAT THESE LIABILITIES HAVE CEASED TO EXIST . AGGRIEVED, ASSESSEE PREFERRED THE APPEAL BEFORE CIT(A). THE CIT(A) ALSO CONFIRMED THE ACTION ITA NO. 6607/MUM/2019 SHRI PRAKASH JHA., MUMBAI - 5 - OF THE ASSESSING OFFICER. AGGRIEVED, ASSESSEE IS IN APPEAL BEFORE TRIBUNAL. 23. AFTER HEARING BOTH THE SIDES AND GOING THROUGH THE FACTS OF THE CASE IT IS ADMITTED FACT THAT THESE LIABILITIES ARE OUTS TANDING IN THE BALANCE SHEET OF THE ASSESSEE BUT WRITE OFF IS MADE IN AY 2 012-13 AND DISCLOSED THIS AS INCOME ACCORDINGLY. WHEN THESE FA CTS WERE CONFRONTED TO THE LEARNED SR. DEPARTMENTAL REPRESEN TATIVE, HE COULD NOT CONTROVERT THE SAME. AS THE ASSESSEE HAS DISCLOSED THE INCOME IN AY 2012-13 AND IT IS NOT CLEAR THAT IN WHICH YEAR THES E LIABILITIES HAVE CEASED TO EXIST BECAUSE THE ASSESSEE HAS CONTINUOUS LY ACKNOWLEDGING THIS LIABILITY, THE LIABILITY CAN BE TREATED AS CEA SED IN AY 2012-13 ONLY. HENCE, WE ARE OF THE VIEW THAT THIS ADDITION CANNOT BE MADE IN AY 2011-12 AND WE DIRECT THE AO TO DELETE THE SAME. 27 . WE HAVE HEARD RIVAL CONTENTIONS AND GONE THROUGH THE FACTS AND CI RCUMSTANCES OF THE CASE. NOW, DURING THE COURSE OF HEARING BEFORE US, THE LEARNED COUNSEL FOR THE ASSESSEE DREW OUR ATTENTION TO THE ASSESSEE S PAPER BOOK AT PAGES 22 TO 24, WHEREIN THE DETAILS OF SUNDRY BALAN CES WRITTEN OFF IS ENCLOSED. THE LEARNED COUNSEL FOR THE ASSESSEE EXPL AINED THAT THE ASSESSEE IS A MAJOR FILM PRODUCER AND DIRECTOR. HE EXPLAINED THAT IN THE COURSE OF HIS BUSINESS, VARIOUS DEBIT AND CREDIT BA LANCES REMAIN IN THE ACCOUNTS. THE SAME ARE PERIODICALLY WRITTEN OFF. IN THE ACCOUNTS FOR THE AY 2011-12 UNDER APPEAL, DEBIT BALANCES OF 22,02,150/- AND CREDIT BALANCES OF 18,05,204/- WERE WRITTEN OFF RESULTING IN THE WRIT E OFF OF NET DEBIT BALANCES OF 3,96,946/-. THE DETAILS THEREOF WERE FILLED BEFORE THE AO AND ARE CONTAINED AT PAGES 22 TO 24 O F ASSESSEES PAPER BOOK. ALL THESE GIVEN THE ITEM-WISE DETAILS OF THE DEBIT AND CREDIT BALANCES WRITTEN OFF RESULTING IN THE WRITE OFF OF THE NET DEBIT BALANCES OF 3,96,946/-. WE FIND FROM THE FACTS OF THE CASE THA T THE AO HAS TAXED THE CREDIT BALANCES WRITTEN OFF BUT UNFORTUNA TELY, HE HAS DISALLOWED THE DEBIT BALANCES WRITTEN OFF. THIS, TO SAY THE LEAST, IS GROSSLY UNFAIR AND UNREASONABLE. THE ASSESSEE HAD E XPLAINED THAT THESE BALANCES WERE DUE IN THE NORMAL COURSE OF THE BUSINESS. THE AO NEVER ASKED THE ASSESSEE TO PROVE THAT THESE WERE F OR BUSINESS PURPOSES AND IT IS THEREFORE CLEARLY UNFAIR ON HIS PART TO DISALLOW THE SAME ON THE GROUND THAT BUSINESS PURPOSES WAS NOT P ROVED. THE SAME LOGIC WOULD APPLY TO THE CREDIT BALANCES WRITTEN OF F WHICH HE HAS NO HESITATION IN TAXING. HENCE, ACCORDING TO US, THE D ISALLOWANCE OF ONLY THE DEBIT BALANCES WRITTEN OFF IS UNJUSTIFIED AND D ESERVES TO BE DELETED. ITA NO. 6607/MUM/2019 SHRI PRAKASH JHA., MUMBAI - 6 - SINCE THE VERY ADDITIONS ON WHICH PENALTY U/S 271(1 )(C) HAS BEEN INITIATED AND HAVE BEEN IMPOSED, HAS BEEN DELETED B Y THE HONBLE ITAT, HENCE PENALTY CANNOT BE SUSTAINED. IN VIEW O F THE ABOVE, THE PENALTY IMPOSED IS DELETED AND APPEAL OF THE ASSESS EE IS ALLOWED. 8. IN THE RESULT THE APPEAL IS ALLOWED. 6. WE FIND THAT LD.CIT(A) HAS RELIED ON THE FINDING S AND OBSERVATIONS OF THE HONBLE TRIBUNAL AND DELETED TH E PENALTY. CONSIDERING THE FACTS, CIRCUMSTANCES AND DECISIONS, WE DO NOT FIND ANY INFIRMITY IN THE ORDE R OF THE CIT(A) AND UPHOLD THE SAME AND DISMISS THE GROUNDS OF APPEAL OF THE REVENUE. 7. IN THE RESULT, THE APPEAL FILED BY THE REVENUE I S DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 11.05.2021 SD/- SD/- (SHAMIM YAHYA) (PAVAN KUMAR GAD ALE) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATED 11.05.2021 KRK, PS ITA NO. 6607/MUM/2019 SHRI PRAKASH JHA., MUMBAI - 7 - / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. / THE CIT(A) 4. ( ) / CONCERNED CIT 5. !!' , $ % , / DR, ITAT, MUMBAI 6. () * + / GUARD FILE. / BY ORDER, ! //TRUE COPY// 1. ( ASST. REGISTRAR) ITAT, MUMBA I