SURESH VIRENDRA BHAGAT, MUMBAI V. ITO WD 11(1)(4), MUMBAI

ITA 7632/MUM/2012

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 3790 (ITAT-MUMBAI)
• Duration Of Justice: 4 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-05-2013
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Assessment Year: 2009-2010
• Appeal Filed On: 26-12-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Business income; Income from undisclosed sources; Opportunity of being heard; Capital receipt
• Section: 145

Judgement Text

D IN THE INCOME TAX APPELLATE TRIBUNAL D BENC H, MUMBAI ! . '# , % &'( & BEFORE SHRI D. MANMOHAN, VICE PRESIDENT AND SHRI D. KARUNAKARA RAO, AM & ./I.T.A. NO.7632/M/2012 ( ) * +* / ASSESSMENT YEAR: 2009-2010) SHRI SURESH VIRENDRA BHAGAT, BANGLOW NO.5, MADHUSAGAR, PANCHMARG, OFF YARI ROAD, VARSOVA, ANDHERI (W), MUMBAI-400 061. / VS. ITO, WARD-11(1)(4), MUMBAI. (, % & ./PAN : AEKPB 5259 G ( ,- /APPELLANT) .. ( ./,- / RESPONDENT) ,- 0 1 & / APPELLANT BY : SHRI PRAMOD KUMAR PARIDA ./,- 0 1 & / RESPONDENT BY : SHRI MANOJ KUMAR, CIT-DR & 0 2% /DATE OF HEARING :10.4.2013 3+ 0 2% /DATE OF PRONOUNCEMENT :15.5.2013 '4 '4 '4 '4 / O R D E R PER D. KARUNAKARA RAO, AM: THIS APPEAL FILED BY THE ASSESSEE ON 26.12.2012 IS AGAINST THE ORDER OF CIT (A)-3, MUMBAI DATED 30.11.2012 FOR THE ASSESSMENT Y EAR 2009-2010. 2. IN THIS APPEAL, ASSESSEE RAISED THE FOLLOWING GRO UNDS WHICH READ AS UNDER: 1. ADDITION ON ACCOUNT OF ALLEGED OVERSEAS ADVANCES RS.1,13,26,818/- A. THE LD CIT (A) ERRED IN CONFIRMING THE ADDITION OF RS. 1,13,26,818/- AS INCOME FROM OTHER SOURCES INSTEAD OF ALLEGED BUSINESS INCO ME RECEIPTS AND WITHOUT APPRECIATING THAT THERE WAS NO OVERSEAS ADVANCES PERTAINING TO FILM RELEASE AS THE SAME WAS MERELY AN ADVANCE FROM AN IDENTIFIE D PARTY. THEREFORE, ADDITION MADE MAY BE DELETED SINCE LOAN AMOUNT CANNOT BE TREATED AS REVENUE RECEIPTS. B. THE LD CIT (A) FAILED TO APPRECIATE THAT NO DOUBLE ADDITION OF SAME CREDIT UNDER TAX LAW IS PERMITTED AS ADMITTEDLY THE APPELL ATE AUTHORITY RECORDS HAS FINDING THAT THE SAME VERY LOAN HAVE BEEN ADDED AS OVERSEAS ADVANCES. THEREFORE, NO ADDITION IS JUSTIFIED. 2 C.WITHOUT PREJUDICE TO ABOVE, THE LD CIT (A) OUGHT TO HAVE CONSIDERED THE PRAYER TO PUT AN END TO THE LITIGATION BY APPLYING THE ESTIMATED RATE OF PROFIT (@7%) WITHIN THE MEANING OF SECTION 145 ON THE AMOUNT OF RS. 1,13,26,818/-. 2. DISALLOWANCE OF SHORT TERM CAPITAL LOSS (STCL) RS . 2,20,237/- THE LD CIT (A) ERRED IN CONFIRMING THE DISALLOWANCE OF GENUINE SHORT TERM CAPITAL LOSS OF RS. 2,20,237/- WITHOUT CONSIDERING THE BONA FIDES AND MERITS OF CLAIM. 3. LEVY OF PENAL INTERESTS: THE APPELLANT, ON MERITS, DENIES HIS LIABILITY TO PENAL INTEREST. 3. BRIEFLY STATED RELEVANT FACTS OF THE CASE ARE TH AT THE ASSESSEE IS A FILM- PRODUCER AND PRODUCED A FILM NAMED EK SE BHURE DO USING OWN AS WELL AS BORROWED FUNDS. THE FILM IS NOT SUCCESSFUL FINANCIA LLY. ASSESSEE FILED THE RETURN OF INCOME AND REFLECTED THE GROSS RECEIPTS AT RS. 2,87 ,26,819/- AND THE DETAILS ARE AS UNDER: S.NO. PARTICULARS OF INCOME AMOUNT CREDITED TO 1 AND EXP. AC. 1. B4U TELEVISION NETWORK (I) PVT. LTD ( ON ACCOUNT OF SALE OF FEATURE FILM RS. 1,65,00,000/ - 2. OVERSEAS ADVANCES RS.1,06,78,781/ - 3. DHL CREATION RS. 9,00,000/ - 4. OTHER ADVANCES RS. 6,48,037/ - 5. TOTAL RS. 2,87,26,819/ - THERE IS NO DISPUTE ABOUT THE INCOME OF RS. 1.65 CR AS WELL AS RS. 9 LACS. THE RECEIPTS AT SL NO 2 AND 4 OF THE ABOVE TABLE ARE TH E BONE OF CONTENTION. AO MADE THE ADDITION OF RS. 1,13,26,818/- (RS. 1,06,78,781 + RS. 6,48,037) IN THE ASSESSMENT CONSIDERING THE ABSENCE OF DETAILS ABOUT THESE ADVANCES. AO HELD THEM AS UNACCOUNTED INCOME OF THE ASSESSEE AND PARA 7 OF THE ASSESSMENT ORDER REFLECTS THE CONCLUSIONS OF THE AO IN THIS REGARD. HOWEVER, THE SAID ASSESSMENT ORDER DOES NOT CONTAIN THE DETAILS OF THE PROVISIONS OF THE AC T THESE AMOUNTS ARE ADDED BY THE AO. ASSESSMENT ORDER DOES NOT CONTAIN THE REASONS FOR TREATING THE SAME AS BUSINESS OR PROFESSION TOO. EVENTUALLY, THE DISPUTE S TRAVELLED TO THE FIRST APPELLATE AUTHORITY. 4. DURING THE PROCEEDINGS BEFORE THE FIRST APPELLAT E AUTHORITY, IT WAS REQUESTED THAT THE SAID AMOUNTS / ADVANCES MAY BE TREATED AS REVENUE RECEIPTS AND ESTIMATE TAXABLE PROFITS ON THE SAID ADDITIONS OF RS 1,13,26 ,818/- ON PAR WITH THE OTHER UNDISPUTED BUSINESS RECEIPTS OF RS. 1.65 CR + RS 9 LAKHS. WITHOUT PREJUDICE, THE ASSESSEE CLAIMED THAT THE SAID RECEIPTS ARE LOANS A ND NOT THE BUSINESS RECEIPTS / 3 ADVANCES. CIT (A) DID NOT APPRECIATE THE ARGUMENTS OF THE ASSESSEE AND CONFIRMED THE VIEWS OF THE SAME. PARA 3.3 OF THE CIT (A)S OR DER IS RELEVANT IN THIS REGARD AND SAME READS AS UNDER: 3.3. I HAVE CONSIDERED THE FACTS AND PERUSED THE MA TERIAL ON RECORD. I FIND THAT THE APPELLANT HAS HIMSELF CREDITED THESE RECEIPTS IN PROFIT AND LOSS ACCOUNT AS OVERSEAS ADVANCES AND OTHER ADVANCE SHOWING THIS HI S INCOME. HOWEVER, DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE APPELLANT HAS FAILED TO FURNISH ONLY DOCUMENTARY EVIDENCE TO SUBSTANTIATE HIS CLAIM THAT THESE ARE LOAN AND ADVANCES AND NOT PART OF OTHER RECEIPT OR PART OF R ECEIPT OF FEATURE FILMS. DURING APPELLATE PROCEEDINGS ALSO, NO SUBSTANTIAL EVIDENCE IS FILED TO PROVE THAT ABOVE ARE ADVANCES OR PART OF REVENUE OF RELEASE OF FILM THE CLAIM OF THE APPELLANT THAT THESE MAYBE CONSIDERED AS PART OF THE REVENUE RECEIPT IS ALSO NOT SUPPORTED BY ANY DOCUMENTARY EVIDENCE. THEREFORE, IN ABSENCE OF ANY PROOF AGAINST THE FINDING OF THE AO, THE OVERSEAS ADVANCE TREATED AS INCOME FROM OTHER SOURC E IS THEREFORE UPHELD. ACCORDINGLY, GROUND NO.5 OF APPEAL TREATED AS DISMISSED. 4.1. AGGRIEVED WITH THE DECISION OF THE CIT (A), AS SESSEE FILED AN APPEAL BEFORE THE TRIBUNAL BY RAISING THE ABOVE MENTIONED GROUNDS . 5. DURING THE PROCEEDINGS BEFORE US, SHRI PRAMOD KU MAR PARIDA, LD COUNSEL FOR THE ASSESSEE MENTIONED THAT THE SAID AMOUNTS ARE AD VANCES, WHICH ARE RECEIVED FROM HIS WIFE, WHO LIVES ABROAD. AS PER THE ASSESSE E, THESE ARE CAPITAL RECEIPTS. THEY ARE ERRONEOUSLY INCLUDED AS TRADING RECEIPTS B Y THE ACCOUNTANT. THEREFORE, THESE AMOUNTS ARE NOT THE BUSINESS RECEIPTS OF THE ASSESSEE. OF COURSE, NO EVIDENCE EXISTS ON FILE TO SUPPORT THE CLAIM OF THE ASSESSEE . LD COUNSEL REASONED THAT THESE AMOUNTS BEING RECEIPTS RECEIVED FROM WIFE, CANNOT B E THE BUSINESS RECEIPTS, AS THE FILM WAS NEVER TRADED IN THAT COUNTRY. AS PER THE C OUNSEL, IT IS THE MISTAKE OF THE ACCOUNTANT, WHO ERRONEOUSLY TREATED THE SAID TRANSA CTION OF LOAN IN BOOKS, AS TRADING RECEIPTS. THEREFORE, RELYING ON THE GROUNDS, LD CO UNSEL ARGUED THAT THE SAID AMOUNT IS MERELY A CAPITAL RECEIPT, WHICH IS NOT TA XABLE. WITHOUT PREJUDICE, LD COUNSEL PRAYS FOR TAXING ONLY THE PROFIT PORTION OU T OF RS. 1,13,26,818/- AFTER ADOPTING THE RATE OF 7% AS APPLIED TO THE OTHER REC EIPTS OF THE ASSESSEE. AS PER LD COUNSEL, WHOLE OF THE AMOUNT CANNOT BE ADDED AS THE INCOME OF THE ASSESSEE. 6. ON THE OTHER HAND, LD DR COULD NOT DEMONSTRATE H OW THE ADVANCES CAN BE ASSESSED AS PROFESSIONAL INCOME OF THE ASSESSEE AND HOW THE SUM OF RS. 1,13,26,818/- SHOULD BE DIFFERENTLY TAXED, IF THE S AME CONSTITUTES BUSINESS RECEIPTS. 4 LD DR RELIED ON THE ORDER OF THE AO. DURING THE RE BUTTAL TIME, BOTH THE PARTIES CONCURRED IN MENTIONING THAT THIS ISSUE CAN BE SET ASIDE TO THE FILES OF THE AO FOR ADJUDICATION OF THE ISSUE AFRESH AFTER DELVING INTO THE TRUE NATURE OF THE TRANSACTION OF IMPUGNED ADVANCES. 7. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE O RDERS OF THE REVENUE AUTHORITIES AS WELL AS THE MATERIAL PLACED BEFORE U S. IT IS AN UDISPUTED FACT THAT THE RS 1,13,26,818/- CONSTITUTES ADVANCES IN THE BOOKS AS THEY ARE DESCRIBED AS ADVANCES BUT OFFERED AS TRADING RECEIPTS IN THE BOOKS. BOTH OF THESE TREATMENTS CANNOT BE CORRECT SIMULTANEOUSLY. WHAT IS THE REAL NATURE OF THESE ADVANCES OR SO CALLED ADVANCES?. THERE IS NO CLARITY ON THEIR REAL NATURE. IT IS ALSO NOT CLEAR IF THEY ARE TRADE ADVANCES OR MERELY UNSECURED LOANS. THE A SSESSEE CANNOT CLAIM THEM AS ADVANCES/LOANS, WHICH FALL INTO THE CAPITAL FIELD, AND AT THE SAME TIME, REQUEST THE REVENUE TO TAX ONLY THE PORTION. IT IS UNACCEPTABLE LEGALLY. ONUS IS ON THE ASSESSEE TO DEMONSTRATE THE REAL NATURE OF THE TRANSACTION. IF THEY CONSTITUTES TRADING ADVANCES, WHICH CANNOT BE THE CASE AS THE FILM WAS NOT TRADED TO THE ALLEGED LOAN CREDITOR, THE PROFIT ESTIMATIONS AT THE RATE 7% CAN NOT APPLIED. THEREFORE, AO HAS TO GO DEEP INTO THE REAL NATURE OF TRANSACTION BY COLL ECTING RELEVANT DOCUMENTS FROM THE ASSESSEE AND ANALYZING THE REAL NATURE. CONSIDE RING THE CONCURRENCE OF LD REPRESENTATIVES OF BOTH THE PARTIES TO REMAND THE I SSUE TO THE FILES OF THE AO FOR ADJUDICATING THE ISSUE AFRESH, WE ARE OF THE OPINIO N THAT ALL THESE GROUNDS MUST BE REMANDED TO THE FILES OF THE AO FOR FRESH ADJUDICAT ION OF THE MATTER AFTER GRANTING A REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESS EE. ACCORDINGLY, GROUND NO.1 WITH ITS SUB-GROUNDS IS SET ASIDE. 8. GROUND NO.2 RELATES TO THE DISALLOWANCE OF SHORT TERM CAPITAL LOSS OF RS. 2,20,237/-. AT THE OUTSET, LD COUNSEL PRAYED THAT THIS GROUND NEEDS TO RE-VISIT THE FILES OF THE AO FOR FRESH CONSIDERATION. OTHERWISE, THE ISSUE WAS DECIDED BY THE AO FOR WANT OF DETAILS WITH REGARD TO THE IMPUGNED CAP ITAL LOSS. CONSIDERING THE PRAYER OF THE ASSESSEE, WE ARE OF THE OPINION THAT THIS IS SUE SHOULD ALSO BE REMANDED TO THE FILES OF THE AO FOR FRESH ADJUDICATION. ACCORDINGL Y, GROUND NO.2 IS SET ASIDE. 5 9. GROUND NO.3 AND 4 ARE CONSEQUENTIAL IN NATURE AN D THEREFORE, THESE GROUNDS ARE DISMISSED. 10. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. 5 26 ) *52 0 &70 89 : ( ; 2 0 <2 = ORDER PRONOUNCED IN THE OPEN COURT ON 15/5/2013. . '4 0 3+ % >'6 15/5/2013 0 ? SD/- SD/- (D. MANMOHAN) (D. KARUNAKARA RAO) /VICE PRESIDENT % &'( / ACCOUNTANT MEMBER MUMBAI; >' 15/5/2013 . ) . & ./ OKK , SR. PS '4 0 .)2:@ A@+2 /COPY OF THE ORDER FORWARDED TO : 1. ,- / THE APPELLANT 2. ./,- / THE RESPONDENT. 3. B ( ) / THE CIT(A)- 4. B / CIT 5. @ C? .)2) , , / DR, ITAT, MUMBAI 6. ?!* D / GUARD FILE. &/@2 .)2 //TRUE COPY// '4 & '4 & '4 & '4 & / BY ORDER, / & < (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI