JACKIE SHROFF, MUMBAI V. ASST CIT 12(1), MUMBAI

ITA 7843/MUM/2010

• Counselvise Citation: [2012] 119 COUNSELVISE.COM (IT) 9396 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-11-2012
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: I
• Next Hearing Date: 12-09-2012
• Assessment Year: misc
• Appeal Filed On: 12-11-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: NAVEEN GUPTA
• Assessee Lawyers: PANKAJ JAIN
• Keywords: Unexplained cash credit
• Section: 40A(3); 68; 145

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL I BENCH, MUMBAI . . , , ! '#$% , & ' BEFORE S/SHRI DINESH KUMAR AGARW AL AND N.K. BILLAIYA, AM ./I.T.A. NO.7843/MUM/2010 ( ( ( ( ( / ASSESSMENT YEAR: 2006-07 MR. JACKIE SHROFF, 101, 1 ST FLOOR, RITU APARTMENTS, BANDSTAND ROAD, BANDRA(W), MUMBAI-400 050 / VS. THE ITO-11(1)(2), AAYAKAR BHAVAN, MUMBAI-400 020 ) & ./ *+ ./PAN/GIR NO. : AAJPS 6596A ( ), /APPELLANT ) .. ( -.), / RESPONDENT ) ), / / APPELLANT BY: SHRI PANKAJ JAIN -.), 0 / / RESPONDENT BY : SHRI NAVEEN GUPTA 0 1& / DATE OF HEARING : 08.11.2012 23( 0 1& / DATE OF PRONOUNCEMENT : 21.11.2012 4 / O R D E R PER N.K. BILLAIYA, AM: WITH THIS APPEAL THE ASSESSEE HAS CHALLENGED THE CO RRECTNESS OF THE ORDER OF THE LD. CIT(A)-3, MUMBAI DT. 03.09.2010 PE RTAINING TO A.Y. 2006-07. 2. THE ASSESSEE HAS RAISED 8 GROUNDS OF APPEAL. AT THE VERY OUTSET, IT WAS POINTED OUT THAT GROUND NO. 1 WITH ITS 5 SUB-GR OUNDS HAS BEEN DECIDED BY THE TRIBUNAL IN ASSESSEES OWN CASE FOR A.Y. 200 5-06 IN ITA NO. 6457/MUM/2008. 3. THE ISSUE INVOLVED IN THIS GROUND RELATES TO THE TAXABILITY OF ADVANCES RECEIVED DURING THE YEAR BY THE ASSESSEE. THIS ISS UE WAS DECIDED BY THE TRIBUNAL IN ITA NO. 6457/MUM/2008 AT PARA-8 PAGE-3 WHICH IS AS UNDER: ITA NO.7843/M/10 2 WE HAVE CONSIDERED THE ARGUMENTS OF BOTH THE COUNS ELS AND ALSO PERUSED THE ORDERS OF LOWER AUTHORITIES AND TH E PAPER BOOK SUBMITTED BY THE ASSESSEE. WE FIND THAT FOR THE Y EAR UNDER CONSIDERATION, THE ASSESSEE HAS OFFERED INCOME FOR THE YEAR WHICH INCLUDES AN AMOUNT OF RS. 28,48,000/- OUT OF OPENIN G ADVANCES TO WHICH AN AMOUNT OF RS. 53,52,000/- HAS BEEN ADDED OUT OF CURRENT YEARS ADVANCE TOTALING TO RS. 82,00,000/-. THE TO TAL ADVANCES RECEIVED DURING THE YEAR UNDER CONSIDERATION ARE AT RS. 1,10,10,062/-. WE DO NOT AGREE WITH THE SUBMISSION OF THE COUNSEL THAT SIMILAR PRACTICE HAS BEEN ACCEPTED IN THE PAST BY THE DEPAR TMENT AS IN OUR CONSIDERED VIEW THE PROVISIONS OF SEC 145 OF THE AC T HAVE BEEN AMENDED W.E.F 01.04.1997 WHERE IN IT HAS BEEN PROVI DED THAT FOR THE PURPOSES OF COMPUTING THE INCOME UNDER THE HEAD P ROFITS & GAINS OF BUSINESS OR PROFESSION THE ASSESSEE CAN FOLLOW EIT HER CASH SYSTEM OR MERCANTILE SYSTEM OF ACCOUNTING THEREBY PROHIBITING THE HYBRID SYSTEM OF ACCOUNTING, WHICH THE ASSESSEE WAS FOLLOWING IN EARLIER YEARS. THE CIT[A] WHILE GIVING RELIEF TO THE ASSESSEE IN EARLI ER YEARS HAS FAILED TO CONSIDER THE AMENDMENT BROUGHT UNDER SECTION 145 OF THE ACT . WE CANNOT FOLLOW THE DECISIONS OF THE REVENUE AUTHORIT IES WHICH ARE INCONSISTENT WITH THE PROVISIONS OF SEC. 145 OF THE ACT. IN OUR CONSIDERATE VIEW, THE METHOD OF COMPUTING THE INCOM E BY THE ASSESSEE, IS FAULTY. IT IS THE CASE OF THE ASSESSEE THAT THE ADVANCES ARE TAKEN AS INCOME IN THE YEAR OF THE RELEASE OF THE F ILMS WHICH IN ITSELF IS A FAULTY PRACTICE AS THE RELEASE OF THE FILMS ARE N OT IN THE HANDS OF THE ASSESSEE AS IT IS THE SOLE PREROGATIVE OF THE PRODU CERS OF THE FILMS, WHERE AS THE ASSESSEE IS ENJOYING THE FRUITS OF THE ADVANCES FROM THE DAY HE GETS THEM. IN THE FILM LINE, PRODUCERS SIGN ACTORS AND PAY FOR THEIR SERVICES AS PER THEIR BOX OFFICE REPUTATION, THEREFORE ANY PAYMENT RECEIVED BY THE ACTOR IS ACCORDING TO HIS USP AT TH E BOX OFFICE WHICH IS DETERMINED AT THE TIME OF THE SIGNING OF THE AGREEM ENTS. WE FIND THAT DURING THE YEAR UNDER CONSIDERATION THE ASSESSEE HA S RECEIVED RS.1,10,10,062.00 OUT OF WHICH HE HAS ALREADY OFFER ED RS.53,52,000.00 IN THE COMPUTATION OF INCOME . THE COUNSEL POINTED OUT THAT THE ASSESSEE HAS ALSO OFFERED RS 27,58,062.00 IN A.Y 20 06-07 AND RS.2,50,000.00 IN A.Y 2007-08 OUT OF THE ADVANCE OF RS. 1,10,10,062.00 . IN OUR HUMBLE OPINION THIS ISSUE NE EDS FURTHER VERIFICATION AT THE ASSESSMENT STAGE, WE THEREFORE RESTORE THIS ISSUE BACK TO THE FILES OF THE AO. THE AO IS DIRECTED TO VERIFY THE CLAIM OF THE ASSESSEE THAT HE HAS OFFERED OUT OF THE TOTAL ADVA NCE OF RS. 1,10,10,062.00, RS 27,58,062.00 IN A.Y 2006 -07 AND RS.2,50,000.00 IN A.Y 2007-08 AND IF FOUND CORRECT ONLY THE BALANC E AMOUNT SHOULD BE TAXED IN THE YEAR UNDER CONSIDERATION, TO AVOID DOU BLE TAXATION OF THE SAME INCOME . THIS WILL ALSO COVER THE DECISION OF THE DELHI BENCH IN THE CASE OF ACIT VS FOX MONDAL & CO., IN ITA 3377 / DEL / 2006 RELIED UPON BY THE ASSESSEE. ITA NO.7843/M/10 3 FOLLOWING OUR OWN FINDINGS, WE DIRECT THE AO VERIFY THE CLAIM OF THE ASSESSEE THAT HE HAS OFFERED OUT OF THE TOTAL ADVAN CE OF RS.17931626.00, RS.9758062.00 IN AY 06-07, AND IF FOUND CORRECT ONL Y THE BALANCE AMOUNT SHOULD BE TAXED IN THE YEAR UNDER CONSIDERATION. GR OUND NO.1 WITH ITS SUB- GROUNDS ARE ALLOWED FOR STATISTICAL PURPOSES. 4. BEFORE PARTING, WE WOULD LIKE TO MAKE IT CLEAR T HAT IF ANY ADVANCE WHICH PERTAINS TO EARLIER YEARS REMAINS UNTAXED, TH E AO IS FREE TO REOPEN THE RESPECTIVE ASSESSMENT YEARS TO TAX THE SAME. 5. GROUND NO. 2 WITH ITS SUB GROUNDS RELATE TO THE DISALLOWANCE OF INTEREST OF RS. 18,99,577/- ON THE GROUND THAT THE LOANS TAKEN BY THE APPELLANT HAS NOT BEEN UTILIZED FOR THE PURPOSE OF HIS PROFESSION. 6. THE LD. COUNSEL FOR THE ASSESSEE POINTED OUT THA T NO FRESH LOAN WAS TAKEN DURING THE YEAR UNDER CONSIDERATION. THE LIA BILITY PERTAINS TO EARLIER YEARS ON WHICH INTEREST HAS BEEN PAID. 7. THIS ISSUE CAME UP FOR HEARING IN EARLIER YEAR A LSO WHICH HAS BEEN DECIDED BY THE TRIBUNAL IN ITA NO. 6457/MUM/2008. 8. WE HAVE PERUSED THE ORDER OF THE TRIBUNAL. WE F IND THAT AT PAGE-8 PARA-23, THE TRIBUNAL HAS HELD AS UNDER: WE HAVE CONSIDERED THE ARGUMENTS FROM BOTH PARTIES . WE FIND THAT THE MONEY HAS BEEN BORROWED IN EARLIER YEARS. ALTHOUGH THE AO HAS MENTIONED THAT THE AMOUNT HAS BEEN BORROWED FOR PERSONAL USAGE BUT HAS NOT BROUGHT ANY MATERIAL ON RECORD TO SUBST ANTIATE HIS CLAIM. FURTHER, THE ASSESSEE BEING A FILM STAR HAS TO MAIN TAIN A CERTAIN SET OF STANDARD OF LIVING FOR WHICH HE MAY REQUIRE MONEY F ROM TIME TO TIME. EVEN IF ASSUMING THAT THE ASSESSEE HAS BORROWED MON EY TO PURCHASE LUXURIOUS CAR, THAT WOULD JUSTIFY LOOKING TO THE NA TURE OF PROFESSION OF ASSESSEE. CONSIDERING ALL THESE FACTS INTO TOTALIT Y, WE DO NOT FIND ANY MERIT IN THE SUBMISSIONS OF THE DR, FINDINGS OF THE LD. CIT(A) ARE ACCORDINGLY CONFIRMED. GROUND NO. 2 OF REVENUES A PPEAL IS DISMISSED. ITA NO.7843/M/10 4 FOLLOWING OUR OWN FINDING IN ITA NO. 6457/M/08, GR OUND NO. 2 WITH ITS SUB-GROUNDS ARE ALLOWED. 9. GROUND NO. 3 TO 7 RELATE TO ADHOC DISALLOWANCE M ADE BY THE AO UNDER THE FOLLOWING HEADS: 1) CAR EXPENSES - RS. 1,23,774/- 2) FURNITURE & FIXTURE - RS. 61,517/- 3) TRAVELLING EXPENSES - RS. 1,99,996/- 4) ENTERTAINMENT EXPENSES- RS. 93,615/- 5) OTHER EXPENSES - RS. 12,844/- -------------------- TOTAL .. RS. 4,91,746/- ========== 10. A PERUSAL OF THE ASSESSMENT ORDER SHOW THAT THE AO HAS DISCUSSED THE AFORESAID ADHOC DISALLOWANCES AT PAGE 5 & 6 OF THE ASSESSMENT ORDER. THE AO HAS DISALLOWED 20% OF THE EXPENSES CLAIMED UNDER THE AFOREMENTIONED HEADS EXCEPT EXPENSES INCURRED UNDER THE HEAD OTHER EXPENSES WHERE THE DISALLOWANCE IS MADE AT THE RATE OF 10%. 11. THE LD. COUNSEL FOR THE ASSESSEE DREW OUR ATTEN TION TO PAGE-8 OF THE PAPER BOOK WHICH IS COMPUTATION OF INCOME FOR THE Y EAR UNDER CONSIDERATION. WE FIND THAT THE ASSESSEE HAS HIMSELF DISALLOWED A SUM OF RS. 2,58,942/- BEING EXPENSES ON PERSONAL NATURE AND HAS FURTHER D ISALLOWED RS. 95,661/- U/S. 40A(3) OF THE ACT. CONSIDERING THE NATURE OF PROFESSION OF THE ASSESSEE, BEING AN ACTOR IN SHOW BUSINESS, WE DO NOT FIND ANY REASON FOR FURTHER DISALLOWANCES OF EXPENSES MORE SO WHEN THE ASSESSEE HIMSELF HAS DISALLOWED RS. 2,58,942/-+RS. 95,661/- SUO MOTU IN ITS COMPUTATION OF INCOME. THEREFORE, ADHOC DISALLOWANCES AS QUESTIONED IN GRO UND NOS. 3 TO 7 ARE DIRECTED TO BE ALLOWED AS DEDUCTION FOR THE YEAR UN DER CONSIDERATION. GROUND NOS 3 TO 7 ARE ACCORDINGLY ALLOWED. ITA NO.7843/M/10 5 12. GROUND NO. 8 RELATE TO THE ADDITION OF RS. 16,4 4,426/- AS UNEXPLAINED CASH CREDIT U/S. 68 OF THE ACT. 13. A PERUSAL OF THE ASSESSMENT ORDER SHOWS THAT TH E ASSESSEE HAS CLAIMED THAT THE SCHOOL FEES OF HIS CHILDREN AMOUNT ING TO RS. 16,44,426/- WAS PAID BY HIS MOTHER-IN-LAW. WE FIND THAT SIMILAR IS SUE HAD COME UP FOR HEARING BEFORE US IN ITA NO. 6457/M/08 PERTAINING TO A.Y. 2 005-06 WHEREIN WE HAVE HELD AT PARAS 15 & 16 IN PAGES 5,6&7 AS UNDER: WE HAVE CONSIDERED THE SUBMISSIONS. WE FIND THAT ON THE BASIS OF THE INFORMATION RECEIVED FROM THE OFFICE O F THE ADDL. COMMISSIONER OF INCOME TAX (CIB)-II, THE NOTICES ARE EXHIBITED AT PAGES 39 & 40 OF THE PAPER BOOK, THE AO CONFRONTED THE INFORMATION RECEIVED FROM THE CIB TO THE ASSESSEE AND GAVE REASO NABLE OPPORTUNITY TO EXPLAIN THE SOURCES OF PAYMENT OF FE ES OF RS. 7,83,313/- +8,22,213/- TO AMERICAN SCHOOL OF BOMBAY. WE ALSO FIND THAT THE ASSESSEE HAS FILED A SIMPLE CONFIRMATION AND COPY O F THE PASSPORT EXHIBITED AT PAGES 42 & 43 OF THE PAPER BOOK . THE CONFIRMATION RECEIVED IS AS UNDER: TO WHOM IT MAY CONCERN I, MRS CLPAUDE M. GROUT, A REGIAN NATIONAL HOLDING P ASSPORT NUMBER EE788193 AND RESIDING AT 163 BARON DE GIEYLA AN, DE PINTE, BELGIUM, HEREBY DO CONFIRM THAT I HAVE ARRANGE TO PA Y THE SCHOOL FEES OF MY GRAND CHILDREN, JAI SHROFF AND KRISHNA SHROFF FOR THE YEAR 2004- 05. YOURS TRULY, MRS. CLAUDE M. GROUT 16. ON A CAREFUL CONSIDERATION OF THE ABOVE CONFIR MATION, WE FIND THAT IT DOES NOT EVEN MENTION THE AMOUNT WHICH HAS BEEN PAID BY MRS. CLAUDE M. GROUT NOR SHE HAS GIVEN ANY DETAILS OF HER BANK ACCOUNT , FURTHER , THE MODE OF PAYMENTS HAS ALSO N OT BEEN MENTIONED . EVEN THE ASSESSEE HAS NOT FILED ANY OTHER CORROB ORATIVE EVIDENCE TO SUBSTANTIATE HIS CLAIM THAT THE PAYMENT OF SCHOOL F EES HAS BEEN MADE BY HIS MOTHER-IN-LAW. EVEN BEFORE US THE ASSESSEE COULD NOT SUPPLY THE COPY OF THE BANK STATEMENTS FROM WHICH T HE AMOUNT HAS BEEN TRANSMITTED TO INDIA. BUT THE FACT IS THAT PAYM ENT OF ITA NO.7843/M/10 6 RS.1644426.00 HAS BEEN MADE TO THE SCHOOL THEREFORE IT IS ON THE ASSESSEE TO EXPLAIN THE SOURCES FROM WHICH THE PAYM ENTS HAVE BEEN MADE. CONSIDERING THE FACTS IN TOTALITY, IN OUR HUM BLE OPINION, THE ASSESSEE HAS FAILED TO DISCHARGE THE ONUS CAST UPON HIM. WE DO NOT FIND ANY REASON TO INTERFERE WITH THE FINDINGS OF T HE LD. CIT(A) THEREFORE ADDITION OF RS. 16,44,426/- IS CONFIRMED. THIS GROUND OF THE ASSESSEE IS DISMISSED. AS THE PERSON IS THE SAME FROM WHOM THE SCHOOL FEE S HAVE BEEN CLAIMED TO HAVE BEEN PAID AND THE SOURCE AND THE GE NUINENESS OF THE TRANSACTION HAS NOT BEEN ACCEPTED BY US IN THE EARL IER YEAR, FOLLOWING OUR OWN FINDINGS, GROUND NO.8 IS DISMISSED. 14. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. 5 16 51 0 7 80 9:; 4 <1 0 *1 =$ ORDER PRONOUNCED IN THE OPEN COURT ON 21 ST NOVEMBER, 2012 . 4 0 3( & 7 > 6 21.11.2012 3 0 ? SD/- SD/- (DINESH KUMAR AGARWAL) (N.K. B ILLAIYA) / JUDICIAL MEMBER & / ACCOUNTANT MEMBER MUMBAI; > DATED 21.11.2012 . . ./ RJ , SR. PS ITA NO.7843/M/10 7 4 4 4 4 0 00 0 -1' -1' -1' -1' '(1 '(1 '(1 '(1 / COPY OF THE ORDER FORWARDED TO : 1. ), / THE APPELLANT 2. -.), / THE RESPONDENT. 3. @ ( ) / THE CIT(A)- 4. @ / CIT 5. 'A? -1 , , / DR, ITAT, MUMBAI 6. ? B / GUARD FILE. 4 4 4 4 / BY ORDER, .'1 -1 //TRUE COPY// 9 99 9 / = = = = * * * * (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI