Subham Filsm (P) Ltd, Bhubaneswar V. DCIT, Bhubaneswar

ITSSA 129/CTK/2011

• Counselvise Citation: [2012] 124 COUNSELVISE.COM (IT) 7519 (ITAT-CUTTACK)
• Duration Of Justice: 6 month(s) 18 day(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 11-05-2012
• Appeal Filed By: Assessee
• Bench Allotted: DB
• Next Hearing Date: 23-04-2012
• Assessment Year: 2008-2009
• Appeal Filed On: 24-10-2011
• Court: TRIBUNAL
• Department Lawyers: PARAMITA TRIPATHY
• Assessee Lawyers: S C BHADRA
• Keywords: Search and seizure
• Section: 153A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, CUTTACK BENCH, CUTTACK BEFORE : SHRI K.K.GUPTA, AM, AND SHRI K.S.S.PRASAD RAO, JM IT (SS) A NO. 129 AND 130/CTK/2011 (ASSESSMENT YEAR 2008 - 09 AND 2009 - 10) SUBHAM FILMS (P) LTD., HIG - B/128,BDA DUPLEX, BARAMUNDA, BHUB ANESWAR 751 003 PAN: AALCS 1742 F VERSUS DEPUTY COMMISSIONER OF INCOME - TAX, CIRCLE 2(2), BHUBANESWAR. (APPELLANT) (RESPONDENT) FOR THE APPELLANT: SHRI S.C.BHADRA, AR FOR THE RESPONDENT SMT. PARAMITA TRIPATHY, CIT - DR DATE OF HEARING : 2 3.04.2012 DATE OF PRONOUNCEMENT : 11.05.20 12 ORDER PER BENCH : THESE APPEALS FOR THE ASSESSMENT YEARS 2008 - 09 AND 2009 - 10 HAVE BEEN FILED BY THE ASSESSEE ON THE LEARNED COMMISSIONER OF INCOME - TAX (APPEALS) HAVING CONFIRMED THE PURPORTED ADDITION BROUGHT ON REC ORD UNDER THE PROVISIONS OF SECTION 153A OF THE INCOME - TAX ACT,1961. 2. THE ASSESSEE - COMPANY IS ENGAGED IN THE BUSINESS OF FILM PRODUCTION. A SEARCH & SEIZURE OPERATION WAS CONDUCTED INDIFFERENT PREMISES OF THE ASSESSEE ON 24.7.2008. IN THE ASSESSMENT MADE U/S.153A(B)/144 OF THE I.T.ACT,1961, THE ASSESSING OFFICER MADE ADDITION OF 8,00,000 ON ACCOUNT OF UNSUBSTANTIATED CAPITAL IN THE FIRST YEAR AND ESTIMATED THE PROFIT AT 3,46,892 @10% ON THE TURNOVER OF 34,68,920 IN THE ASSESSMENT YEAR 2008 - 09. IN THE A SSESSMENT YEAR 2009 - 10, THE ASSESSING OFFICER ESTIMATED THE PROFIT AT 5,18,293 @10% OF THE TURNOVER OF 51,92,930 BESIDES MAKING ADDITIONS OF 10,29,025 TOWARDS ADVANCE FROM DIFFERENT PARTIES AS PER HSEPL - 25 NOT REFLECTED IN BALANCE SHEET AND 11,19,000 T OWARDS ADVANCE RECEIVED FROM DIFFERENT DISTRIBUTORS ETC., AS PER HSEPL - 46. AGGRIEVED, THE ASSESSEE APPEALED BEFORE THE FIRST APPELLATE AUTHORITY, WHO UPHELD THE ADDITIONS AS MADE BY THE ASSESSING OFFICER IN BOTH THE AYS UNDER CONSIDERATION. ITA NO.129 ANDN 130/CTK/2011 2 3. AGGRIEVED, T HE ASSESSEE HAS FILED THESE APPEALS BEFORE THE TRIBUNAL. 4. AS REGARDS THE ADDITION OF 8,00,000 MADE IN THE ASSESSMENT YEAR 2008 - 09, THE LEARNED AR OF THE ASSESSEE SUBMITTED THAT THIS IS THE FIRST YEAR OF BUSINESS AND THE AMOUNT IN QUESTION WAS THE SHARE CAPITAL OF SARADA PRASANNA PANDA, PRASANTA KUMAR MARTHA, RANJAN KUMAR PALAR, SANJAY NAYAK. IN SUPPORT OF THE SAME, HE FURNISHED THE CERTIFICATE OF INCORPORATION, MEMORANDUM OF ASSOCIATION AND ARTICLES OF ASSOCIATION (PB 29), INCOME - TAX RETURNS WITH STATEME NT OF AFFAIRS OF SHARE HOLDERS (PB 49,72,95), BALANCE SHEET DISCLOSING SHARE CAPITAL WITH SCHEDULES (PB 145 & 148). SINCE THE ASSESSEE HAS RECEIVED THE SHARE CAPITAL FROM THE ABOVE PERSONS AS IS EVIDENT FROM THE DOCUMENTS/PAPERS FILED IN THE PAPER BOOK, T HE LEARNED ASSESSING OFFICER CONTENDED THAT THE SAME CANNOT BE BROUGHT TO TAX IN THE HANDS OF THE ASSESSEE. IN SUPPORT, HE PLACED RELIANCE ON THE DECISIONS IN THE CASE OF CIT V.,, STELLAR INVESTMENT LTD [192 ITR 287)(DEL)], CIT V. SOPHIA FINANCE LTD [205 I TR 98 (DEL)(FB)], CIT V. STELLER INVESTMENT LTD , [115 TAXMAN 99 (SC)]. THE LEARNED AR OF THE ASSESSEE FURTHER CONTENDED THAT THE AMOUNT RECEIVED BEFORE THE BEGINNING OF THE PREVIOUS YEAR CANNOT BE BROUGHT TO TAX AND IN SUPPORT HE PLACED RELIANCE ON THE FO LLOWING DECISIONS . 1 . CIT VS. BHARAT ENGINEERING & CONSTRUCTION 83 ITR 187 (SC) 2 . INDIAN RICE MILLS VS. CIT 218 ITR 508, 511 (ALL.) 3 . SURENDER MOHAN SETH VS. CIT 221 ITR 239 (ALL.) 4 . JANTA COAL DEPOT VS. ITO 19 TTJ 445 (ALL.) 5 . BHUPINDER FOOD & MALT INDUSTRIES VS. CI T 229 ITR 496 (HP) 6 . MITESH ROLLING MILLS (P) LTD. VS. CIT 258 ITR 278 (GUJ.) 7 . BABA RUPADAS SPINNING MILLS LTD, ITA NO. 1543/98. 8 . ESTEEM TOWER, 99 TTJ 472 (DEL.) AS REGARDS THE ADDITIONS OF 10,29,025 AND 11,19,000, THE LEARNED AR OF THE ASSESSEE SUBMITTED THAT THIS AMOUNT REPRESENTS THE AMOUNT OF ADVANCE RECEIVED FROM DIFFERENT PARTIES AS BUSINESS ADVANCES AND THE SAME HAS BEEN ITA NO.129 ANDN 130/CTK/2011 3 TAKEN AND INCLUDED IN THE INCOME OF 51,82,930 FOR THE FINANCIAL YEAR 2008 - 09 RELEVANT TO THE ASSESSMENT YEAR 2009 - 10 IN SCHEDULE OF THE PROFIT & LOSS ACCOUNT. THE AUDITED BALANCE SHEET WITH PROFIT & LOSS ACCOUNT ARE PLACED ON PAGES 40,45, 42 AND 46 OF THE PB. THE SAID AMOUNT OF ADVANCE HAS BEEN TRANSFERRED BY WAY OF JOURNAL VOUCHER BY DEBITING THE ADVANCE & CREDITING THE INCOME ACC OUNT OF THE ASSESSEE AND THUS NO BALANCE IS PENDING IN THE ADVANCE ACCOUNT ON THESE HEAD FOR WHICH THE ADVANCE FROM DIFFERENT PARTIES/DISTRIBUTORS OF 10,29,025 AND 11,19,000 ARE NOT APPEARING IN THE BALANCE SHEET. SINCE THE AMOUNT OF ADVANCE RECEIVED FRO M DIFFERENT PARTIES HAS BEEN DISCLOSED, ACCOUNTED AND DEALT AS ABOVE, THE IMPUGNED ADDITION AS MADE BY THE ASSESSING OFFICER AND CONFIRMED BY THE LEARNED CIT(A) IS NOT ALL JUSTIFIED. AS REGARDS THE ADDITIONS MADE IN BOTH THE AYS UNDER CONSIDERATION ON ESTI MATION OF PROFIT @10% OF THE TURNOVER, THE LEARNED AR OF THE ASSESSEE SUBMITTED THAT AS ALL INCOME AND EXPENSES HAVE BEEN DULY REFLECTED IN T HE AUDITED BOOS OF THE ASSESSEE, THE ADDITION ON ACCOUNT OF ESTIMATION OF PROFIT IS NOT JUSTIFIED. 5. THE LEARNED C IT - DR, ON THE OTHER HAND, SUPPORTED THE IMPUGNED ORDERS OF THE AUTHORITIES BELOW. 6. WE HAVE HEARD THE RIVAL CONTENTIONS OF THE PARTIES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. CONSIDERING THE FACTS AND CIRCUMSTANCES OF THE CASE, WE ARE INCLINED TO HO LD THAT THE LEARNED CIT(A) MISDIRECTED HIMSELF TO HOLD THE EXPLANATION OF THE ASSESSEE APPELLANT BEFORE HIM IMMATERIAL INSOFAR AS THE ASSESSMENTS HAVE BEEN MADE U/S.144 AND THE REGULAR RETURNS FILED BY THE ASSESSEE HAVE NOT BEEN TAKEN INTO ACCOUNT WHEN THE EFFORT OF THE ASSESSING OFFICER HAS BEEN TO DISALLOW THE ORIGINAL SHARE CAPITAL AS INCOME OF THE ASSESSEE AND ESTIMATE ON PERCENTAGE OF INCOME FROM FILM BUSINESS. A NEWLY STARTED COMPANY CANNOT GENERATE INCOME AS PURPORTED TO BE HELD BY ITA NO.129 ANDN 130/CTK/2011 4 THE ASSESSING OFF ICER @10% WHEN THE ASSESSEE IS STILL IN ITS YOUTH. FILM PRODUCTION AND DISTRIBUTION IS A HIGH RIS K BUSINESS AND THE AMOUNTS RECEIVED FROM THE PARENT COMPANY NAMELY SEPL COULD NOT BE CONVERTED INTO INCOME @10 %. WE HAVE ADJUDICATED THIS ISSUE IN THE CASE OF SEPL WHICH WAS THE CORE GROUP COMPANY SUBJECTED TO SEARCH AND SEIZURE AND PROCEEDING U/S.132(4), THE MANAGING DIRECTOR HAD DEPOSED ON OATH THAT THE AM OUNTS OF INCOME DECLARED FOR THE IMPUGNED AYS WAS DIVERTED FOR THE PURPOSE OF FILM BUSINESS OF THE ASSESSEE. THEREFORE, THE ASSESSING OFFICER FURTHER COMPUTED 10% THEREOF AS INCOME OF ASSESSEE HOLDING THE SAME AS TURNOVER OF THE ASSESSEE. BEING THE ADVANCE RECEIVED FROM SEPL HAS ALSO BEEN BROUGHT TO TAX BY THE ASSESSING OFFICER FOR THE ASSESSMENT YEAR 2009 - 10 WHICH SEPL HAS ALREADY BEEN DECLARED AS PART OF THEIR REGULAR INCOME ON THE PREMISE THAT THE UNDISCLOSED INCOME UP TO THE DATE OF SEARCH HAD BEEN UTIL IZED FOR THE PURPOSE OF GRANTING ADVANCE TO THIS ASSESSEE. THE LEARNED ASSESSING OFFICER AND THE LEARNED CIT(A) MISDIRECTED THEMSELVES TO HOLD WHEN THE CASE WAS SCRUTINIZED IN THE CENTRAL CIRCLE TO ISOLATE THIS AS INCOME FOR IDENTIFYING FROM THE SEARCHED M ATERIAL AS INCOME OF THE ASSESSEE. THE INCOME ALREADY RENDERED TO TAX CANNOT BE TAXED AGAIN SPECIALLY ON ASSUMPTIONS AND PRESUMPTIONS AS RIGHTLY POINTED OUT BY THE LEARNED AR OF THE ASSESSEE AND ADVANCE IN THE REGULAR BOOKS OF ACCOUNT CANNOT BE TERMED AS I NCOME ON THE WHIMS AND FANCY OF THE ASSESSING AUTHORITIES. THE SEARCH MATERIAL THEREFORE OUGHT TO HAVE RELATED TO THE ACTUAL ENTRIES THEREOF IN THE BOOKS OF ACCOUNT WHICH WOULD LEAD TO THE FINDING THAT THE INCOMES PURPORTED TO BE TAXED IN THE HANDS OF THE ASSESSEE CANNOT BE TAXED INSOFAR AS THE ADVANCES AND TURNOVER HAVE ALREADY BEEN RENDERED TO TAX BY WAY OF REGULAR RETURNS OF THE RESPECTIVE ASSESSEES. IN THIS VIEW OF THE MATER, ALL THE ADDITIONS SUSTAINED BY THE LEARNED CIT(A) FOR THE IMPUGNED AYS ARE DIR ECTED TO DELETED. ITA NO.129 ANDN 130/CTK/2011 5 7. IN THE RESULT, BOTH THE APPEALS OF THE ASSESSEE ARE ALLOWED. S D / - S D/ - (K.S.S.PRASAD RAO) JUDICIAL MEMBER (K.K.GUPTA) ACCOUNTANT MEMBER DATE: 11.05.20 12 H.K.PADHEE, SENIOR PRIVATE SECRETARY. COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT: SUBHAM FILMS (P) LTD., HIG - B/128,BDA DUPLEX, BARAMUNDA, BHUBANESWAR 751 003 2. THE RESPONDENT: DEPUTY COMMISSIONER OF INCOME - TAX, CIRCLE 2(2), BHUBANESWAR. 3. THE CIT, 4. THE CIT(A), 5. THE DR, CUTTACK 6. GUAR D FILE (IN DUPLICATE) TRUE COPY, BY ORDER, SENIOR PRIVATE SECRETARY.