DCIT, Tirupathi V. M/s SRS & Sri Sai Ganesh Productions, Hyderabad

ITSSA 20/HYD/2008

• Counselvise Citation: [2013] 121 COUNSELVISE.COM (IT) 8864 (ITAT-HYDERABAD)
• Duration Of Justice: 4 year(s) 9 month(s) 16 day(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 22-03-2013
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 27-08-2015
• Assessment Year: misc
• Appeal Filed On: 05-06-2008
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: GNANA PRAKASH
• Assessee Lawyers: S RAMA RAO
• Keywords: Unexplained investment; Unexplained expenditure; Salary income; Deemed to accrue or arise in india; Additional evidence; Reasonable cause
• Section: 69C; 131; 68; 132

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH B', HYDERABAD BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SMT. ASHA VIJAYARAGHAVAN, JUDICIAL MEMBER IT(SS)A NO. 19/HYD/2008 BLOCK PERIOD A.YS. 1997-98 TO 2003-04 (TILL 21.2.20 03) M/S. SRS & SRI SAI GANESH PRODUCTIONS, HYDERABAD PAN: ABHFS5953J VS. THE ACIT CENTRAL CIRCLE TIRUPATI APPELLANT RESPONDENT IT(SS)A NO. 20/HYD/2008 BLOCK PERIOD A.YS. 1997-98 TO 2003-04 (TILL 21.2.20 03) THE DCIT CENTRAL CIRCLE TIRUPATI VS. M/S. SRS & SRI SAI GANESH PRODUCTIONS, HYDERABAD PAN: ABHFS5953J APPELLANT RESPONDENT ASSESSEE BY: SRI S. RAMA RAO REVENUE BY: SRI GNANA PRAKASH DATE OF HEARING: 10.12.2012 DATE OF PRONOUNCEMENT: 22.02.2012 O R D E R O R D E R O R D E R O R D E R PER CHANDRA POOJARI, AM: PER CHANDRA POOJARI, AM: PER CHANDRA POOJARI, AM: PER CHANDRA POOJARI, AM: THESE ARE CROSS APPEALS DIRECTED AGAINST THE ORDER OF THE CIT(A)-I, HYDERABAD DATED 24 TH MARCH, 2008 FOR THE BLOCK PERIOD A.YS. 1997-98 TO 2003-04 (TILL 21.2.2003). 2. THE GRIEVANCES OF THE ASSESSEE ARE CRYSTALLISED AS FOLLOWS: (I) THE CIT(A) ERRED IN SUSTAINING ADDITION OF RS. 1.15 CRORES U/S. 68 OF THE ACT. (II) THE CIT(A) ERRED IN RESTRICTING THE ALLOWABLE EXPEN DITURE AT RS. 4,48,84,521 AS AGAINST THE ACTUAL EXPENDITUR E OF RS. 4,88,87,784. IT(SS) A NOS. 19 & 20/HYD/2008 M/S. SRS & SRI SAI GANESH PRODUCTIONS ============================= 2 (III) THE CIT(A) ERRED IN HOLDING THAT THE AMOUNT RECEIVE D FROM CD/DVD/SATELLITE/OVERSEAS RIGHTS IS TO BE AT R S. 31.5 LAKHS AS AGAINST RS. 25 LAKHS FOUND IN THE SEI ZED DOCUMENT. (IV) THE LEARNED CIT(A) ERRED IN CONFIRMING THE ACTION O F THE ASSESSING OFFICER WITH REGARD TO ADDITION OF RS. 3 LAKHS RECEIVED TOWARDS 16MM RIGHTS. (V) THE CIT(A) ERRED IN SUSTAINING ADDITION OF RS. 6,17 ,678 AS UNEXPLAINED EXPENDITURE THOUGH IT WAS ALREADY INCLU DED IN THE AMOUNT OF EXPENDITURE CONSIDERED BY THE CIT( A). 3. THE REVENUES GRIEVANCES ARE AS UNDER: (I) REDUCTION IN RECEIPT OF RS. 5,27,19,500 AS AGAINST THE COMPUTATION OF THE ASSESSING OFFICER AT RS. 5,42,46 ,500. (II) THE CIT(A) ERRED IN RE-COMPUTATION OF EXPENDITURE A ND THEREBY REDUCING THE ADDITION TOWARDS UNEXPLAINED EXPENDITURE. (III) THE CIT(A) ERRED IN DELETING THE ADDITION TOWARDS UNEXPLAINED INVESTMENT MADE IN THE FILM RAA UNDER THE BANNER SRI SAI MOVIES AS THERE IS NEXUS OF THE REGULAR BUSINESS OF THE ASSESSEE BY CHANGING THE NOMENCLATURE BY CASH CREDITS U/S. 68 OF THE IT ACT. (IV) THE CIT(A) OUGHT TO HAVE UPHELD THE UNEXPLAINED EXPENDITURE WITHOUT ALLOWING THE DEDUCTION TOWARDS CAPITALS AND CREDITORS ON THE BASIS OF FIGURES AVAI LABLE ON THE TRIAL BALANCES. 4. THE ASSESSEE ALSO RAISED AN ADDITIONAL GROUND WHICH READS AS FOLLOWS: (I) THE COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN DETERMINING THE RECEIPTS AT RS. 5,27,19,500/- AND EXPENDITURE AT RS. 4,48,84,521/-. THE CIT (A) OUGHT HAVE ACCEPTED THE LOSS ADMITTED INSTEAD OF DETERMINING T HE PROFIT. 5. SINCE THE ISSUES IN BOTH THE APPEALS ARE INTERRELAT ED, WE ARE ADJUDICATING THE SAME TOGETHER. IT(SS) A NOS. 19 & 20/HYD/2008 M/S. SRS & SRI SAI GANESH PRODUCTIONS ============================= 3 6. BRIEF FACTS OF THE CASE ARE THAT THERE WAS A SEARCH ACTION IN THE CASE OF SRI SINGANAMALA RAMESHBABU AND HIS FATHER S RI S. SATYARAMA MURTHY ON 21.2.2003. CONSEQUENT TO THIS, NOTICE U/ S. 158BD WAS ISSUED TO THE ASSESSEE ON 23.11.2004. IN RESPONSE T O WHICH THE ASSESSEE FILED A RETURN OF INCOME ON 12.2.2007 DECL ARING LOSS AT RS. 1,00,38,808. THE ASSESSING OFFICER ON EXAMINATION OF THE SEIZED MATERIAL, DETERMINED THE TOTAL RECEIPT, TOTAL EXPEN DITURE FOR THE BLOCK PERIOD IN THE ASSESSMENT ORDER AS FOLLOWS: AREA AMOUNT (RS.) SEIZED MATERIAL VIZAG 55,00,000 AA/SRB/5/32 EAST 37,66,500 A/SRB/44/87 WEST 26,90,000 A/SRB/1/13 KRISHNA 38,00,000 A/SRB/44/131 - 130 GUNTUR 54,00,000 A/SRB/44/129 NELLORE 27,00,000 AA/5/31 CEDED 90,00,000 AA/SRB/5/29 ORISSA 3,40,000 A/SRB/44/87 NIZAM 1,40,00,000 A/SRB/44/87 KARNATAKA 18,00,000 AA/SRB/5/42 & A/SRB/44/125 ADITYA 16,00,000 A/SRB/44/128 CD/DVD/SATELLITE/O VERSEAS RIGHTS 31,50,000 AA/SRB/1/33 - 35 SAFFIRE PRINTERS 2,00,000 A/SRB/44/87 16 MM 3,00,000 A/SRB/44/8 TO 9 TOTAL 5,42,46,500 7. ON APPEAL, THE CIT(A) OBSERVED THAT THERE WAS A DIF FERENCE IN COMPUTATION OF THE RECEIPTS AS FOLLOWS: DISTRIBUTION RIGHT FOR AREA/OTHER RIGHTS AMOUNT RECEIVABLE AS PER AO (RS.) AMOUNT RECEIVED AS PER ASSESSEE (RS.) DIFFERENCE ADDED BY THE AO (RS.) VIZAG AREA 55,00,000 54,00,000 1,00,000 NELLORE AREA 27,00,000 26,98,000 2,000 CEDED AREA 90,00,000 85,00,000 5,00,000 KARNATAKA AREA 18,00,000 8,75,000 9,25,000 CD/DVD/CIRCULATE RIGHTS 31,50,000 25,00,000 6,50,000 16MM RIGHTS 3,00,000 NIL 3,00,000 TOTAL DIFFERENCE 24,77,000 IT(SS) A NOS. 19 & 20/HYD/2008 M/S. SRS & SRI SAI GANESH PRODUCTIONS ============================= 4 8. THUS, ACCORDING TO CIT(A) THERE IS A VARIATION RELA TING TO THE RECEIPTS AS COMPARED TO THE SEIZED MATERIAL AND AMO UNT CONSIDERED BY THE ASSESSING OFFICER AS FOLLOWS: VIZAG AREA - RS. 1,00,000 NELLORE - RS. 2,000 CEDED AREA - RS. 5,00,000 KARNATAKA AREA - RS. 9,25,000 ----------------- TOTAL DIFFERENCE RS. 15,27,000 =========== 9. THUS, HE HAS REDUCED RS. 15,27,000 FROM THE GROSS R ECEIPTS CONSIDERED BY THE ASSESSING OFFICER AND ARRIVED AT RS. 5,27,19,500 (RS. 5,42,46,500 RS. 15,27,000). AGAINST THIS CO MPUTATION, THE DEPARTMENT IS HAVING GRIEVANCE. 10. THE ASSESSING OFFICER COMPUTED THE EXPENDITURE RELA TING TO BLOCK PERIOD AT RS. 4,88,87,784/- AS FOLLOWS: SL. NO. HEAD OF EXPENDITURE SEIZED MATERIAL NO. AND RELEVANT PAGE NO. AMOUNT (RS.) 1. ARTISTS REMUNERATION A/SRB/44 PAGE NO. 78 1,83 ,84,972 2. BATTAS A/SRB/44 PAGE NO. 88 7,87,100 3. OTHER EXPENDITURE A/SRB/44 PAGE NO. 85 2,13,73 ,834 4. TECHNICIANS REMUNERATION A/SRB/44 PAGE NO. 80 78,87,438 5. RENT PAID TO JAYABHERI GUEST HOUSE AA/SRB/5 PA GE NO.76 60,000 6. EXPENDITURE INCURRED DURING THE PERIOD 22.3.2000 TO 24.5.2000 A/SRB/27 3,20,440 7. EXPENDITURE INCURRED ON DIRECTION DEPARTMENT DURING THE PERIOD 1.2.2000 TO 29.5.2000 A/SRB/40 PAGE NO.47 74,000 TOTAL EXPENDITURE DETERMINED 4,88,87,784 11. THE CIT(A) CONSIDERED THE EXPENDITURE AT RS. 4,48,8 4,521. THIS IS FOR THE PERIOD 4.7.2000 TO 25.11.2000 AS THE COR RESPONDING ORECEIPT CONSIDERED BY THE ASSESSING OFFICER IS FOR THE PERIOD 4.7.2000 TO 25.11.2000. IN OTHER WORDS, THE CIT(A) WAS OF THE OPINION THAT THE ASSESSING OFFICER COMMITTED AN ERROR IN CO MPARING THE RECEIPTS AND EXPENDITURE OF DIFFERENT PERIOD. HE H AS CONSIDERED THE RECEIPTS AND EXPENDITURE COVERING THE SAME PERIOD. AGAINST THIS RE- COMPUTATION OF EXPENDITURE, THE ASSESSEE IS AGGRIEV ED. IT(SS) A NOS. 19 & 20/HYD/2008 M/S. SRS & SRI SAI GANESH PRODUCTIONS ============================= 5 12. ACCORDING TO THE ASSESSING OFFICER TO MEET THE TOTA L EXPENDITURE OF RS. 4,88,87,784 THE FOLLOWING SOURCE S ARE AVAILABLE: (A) ADVANCES FROM DISTRIBUTORS OF DIFFERENT AREAS - RS. 1,43,13,000 (B) CAPITAL AND LOANS OF THE FIRM AS DISCUSSED IN PAGE 22 OF THE ASSESSMENT ORDER - RS. 1,03,25,000 -------------------- TOTAL RS. 2,46,38,000 ============== 13. THUS, ACCORDING TO THE ASSESSING OFFICER THE BALANC E EXPENDITURE OF RS. 2,42,49,784 (RS. 4,88,87,784 R S. 2,46,38,000) IS UNEXPLAINED EXPENDITURE AND ADDED THE SAME TO THE I NCOME OF THE ASSESSEE. 14. ON APPEAL, THE CIT(A) WAS OF THE OPINION THAT THERE WAS A DOUBLE ADDITION ON THIS COUNT. ONCE IN THE FORM OF NON-DEDUCTION OF EXPENDITURE FROM THE GROSS RECEIPTS TO THE TUNE OF RS. 2,42,49,784 AND FURTHER ADDITION OF RS. 2,42,49,784 TOWARDS UNE XPLAINED EXPENDITURE. ACCORDINGLY, HE DIRECTED THE ASSESSIN G OFFICER TO DELETE ONE PORTION OF THIS EXPENDITURE AT RS. 2,42,49,784. AGAINST THIS, THE DEPARTMENT IS AGGRIEVED. 15. FURTHER THE ASSESSEE STATED BEFORE THE CIT(A) THAT THE ASSESSEE HAS RECEIVED RS. 1,53,60,000 FROM VARIOUS PARTIES I NCLUDING RS. 1,22,00,000/-FROM A.M. & GROUP. THE ASSESSING OFFI CER CONSIDERED ONLY RS. 7 LAKHS OUT OF THIS AND HE HAS NOT GIVEN C REDIT TO THE BALANCE AMOUNT OF RS. 1.15 CRORES. ACCORDING TO THE ASSESSE E THE RECEIPT OF ENTIRE AMOUNT OF RS. 1.22 CRORES IS REFLECTED IN TH E SEIZED MATERIAL AND PLEADED BEFORE THE CIT(A) ACCORDINGLY. IT WAS PLEADED BEFORE THE CIT(A) THAT AS PER THE ASSESSEE THE OUTSTANDING AMO UNT IS RS. 1,22,00,000 IN RESPECT OF A. MALLIKARJUNA. IT WAS R EFLECTED IN THE SEIZED MATERIAL AS FOLLOWS: IT(SS) A NOS. 19 & 20/HYD/2008 M/S. SRS & SRI SAI GANESH PRODUCTIONS ============================= 6 (1) SRB - RS. 19,00,000 (2) JEEVITHA - RS. 3,60,000 (3) PRINCIPAL - RS. 1,27,00,000 (4) INTEREST - RS. 4,00,000 ------------------- TOTAL RS. 1,53,60,000 ============= ` 16. THE ASSESSING OFFICER MADE ENQUIRY WITH SRI A. MALL IKARJUNA WHO HAS CONFIRMED IT AT RS. 7 LAKHS. FURTHER HE ST ATED THAT HE HIMSELF HAS GIVEN RS. 2 LAKHS AND RS. 5 LAKHS HAS BEEN GIVE N FROM M/S. KRISHNA FINANCIER, ANANTAPUR WHERE HIS WIFE IS A PARTNER. T HE ASSESSING OFFICER VERIFIED HIS BOOKS OF ACCOUNT AND FOUND THA T NO OTHER TRANSACTION IS RELATING TO THE ASSESSEE. THE ASSES SING OFFICER ALSO VERIFIED SRI SUNKU RAMESH BABU WHO STATED THAT HIS INITIAL CAPITAL WAS RS. 50,000 AND THERE WAS NO FURTHER INVESTMENT. TH US THE ASSESSING OFFICER CONSIDERED THE LOANS AND CAPITAL AT RS. 1,0 3,25,000 AND ADVANCES RECEIVED FROM DISTRIBUTORS AS PER THE SEIZ ED MATERIAL AT RS. 1,43,13,000. BEFORE THE CIT(A) THE ASSESSEE STATED THAT THE AMOUNT TAKEN FROM SRI A. MALLIKARJUNA IS AT RS. 1,22,00,00 0 AND NOT RS. 7 LAKHS AND DUE CREDIT IS TO BE GIVEN TO RS. 1,15,00,000. THE CIT(A) NOT GIVEN CREDIT TOWARDS THIS CLAIM OF THE ASSESSEE. AGAINST THIS THE ASSESSEE IS IN APPEAL BEFORE US. 17. FURTHER BEFORE THE CIT(A) THE ASSESSEE PLEADED THAT SUNKU RAMESH BABU HAS INTRODUCED CAPITAL OF RS. 37,00,770 AS AGAINST RS. 50,000 CONSIDERED BY THE ASSESSING OFFICER. ACCORD INGLY, THE CIT(A) GIVEN CREDIT AT RS. 36,50,770 ON THIS COUNT. AGAIN ST THIS THE DEPARTMENT IS HAVING GRIEVANCE. 18. REGARDING B. SURESH, THE ASSESSEE PLEADED THAT THE CAPITAL CONTRIBUTION WAS RS. 12,28,508 AS AGAINST RS. 50,00 0 CONSIDERED BY THE ASSESSING OFFICER. HEREIN ALSO THE CIT(A) CONS IDERED IT AT RS. 12,28,508 AND DIRECTED THE ASSESSING OFFICER TO GIV E FURTHER CREDIT, AS IT(SS) A NOS. 19 & 20/HYD/2008 M/S. SRS & SRI SAI GANESH PRODUCTIONS ============================= 7 SOURCE IS AVAILABLE, AT RS. 11,78,508 ON THIS COUNT . FURTHER, THE CIT(A) DIRECTED THE ASSESSING OFFICER TO GIVE CREDIT AT RS . 16 LAKHS TOWARDS AUDIO RIGHTS RECEIVED FROM ADITYA MUSIC AS SOURCE I S AVAILABLE FOR THE EXPENDITURE. AGAINST THESE ISSUES, THE DEPARTMENT IS HAVING GRIEVANCE. 19. SIMILARLY, THE CIT(A) HAS GIVEN DIRECTION TO CONSID ER RS. 10 LAKHS RECEIVED FROM SRI V. SRINIVASA RAO AND RS. 6,99,565 RECEIVED FROM CHANDANA RAMESH AS SOURCES AVAILABLE FOR EXPENDITUR E. AGAINST THIS THE DEPARTMENT IS AGGRIEVED. 20. FURTHER THE CIT(A) SUSTAINED THE AMOUNT RECEIVED TO WARDS SATELLITE RIGHTS AT RS. 31.5 LAKHS THOUGH THE SEIZE D MATERIAL REPRESENTS RS. 25 LAKHS. AGAINST THIS, THE ASSESSEE IS IN APP EAL BEFORE US. 21. THE ASSESSEE ALSO HAS GRIEVANCE REGARDING SUSTAININ G OF RS. 3 LAKHS ADDITION RELATING TO 16MM RIGHTS. 22. BEFORE US THE ASSESSEE FILED ADDITIONAL EVIDENCE AS BELOW: 1. COPY OF THE LETTER OF THE APPELLANT HEREIN ADDRESSE D TO PRASAD FILM LABORATORIES DATED 1.4.2000 DULY CONFIRMED BY SRI A MALLIKARJUNA. 2. LETTER DATED 3.5.2000 OF PRASAD FILM LABORATORIES L TD., ADDRESSED TO SRI SATYA RAMA MURTHY AND SRI A. MALLIKARJUNA. 3. LETTER DATED 15.10.2000 OF THE APPELLANT HEREIN ADD RESSED TO PRASAD FILM LABORATORIES LTD. 4. LETTER DATED 30.11.2000 OF SRI SATYA RAMA MURTHY AD DRESSED TO PRASAD FILM LABORATORIES LTD. 5. LETTER DATED 30.11.2000 OF SRI A MALLIKARJUNA ADDRE SSED TO PRASAD FILM LABORATORIES LTD. 6. LETTER DATED 8.5.2000 OF THE APPELLANT HEREIN ADDRE SSED TO PRASAD FILM LABORATORIES DULY ACCEPTED BY SRI A MALLIKARJU NA AND SRI SATYA RAMA MURTHY. 7. LETTER DATED 12.12.2001 OF SRI A SATYA RAMA MURTHY ADDRESSED TO PRASAD LABORATORIES LTD. 8. LETTER DATED 14.12.2001 OF SRI A MALLIKARJUNA ADDRE SSED TO PRASAD LABORATORIES LTD. 9. LETTER DATED 'NIL' OF SHRI A. MALLIKARJUNA AND LETT ER DATED IT(SS) A NOS. 19 & 20/HYD/2008 M/S. SRS & SRI SAI GANESH PRODUCTIONS ============================= 8 12.12.2001 OF SRI SATYA RAMA MURTHY ADDRESSED TO PR ASAD LABORATORIES LTD., HYDERABAD. 10. AFFIDAVIT OF SRI A MALLIKARJUNA SON OF SRI A SEENAI AH EXECUTED ON 30.7.2008. 11. LETTER DATED 30.3.2002 OF PRASAD FILM LABORATORIES LTD, ADDRESSED TO M/S. GEMINI TELEVISION LTD. 12. LETTER DATED 2.12.2000 OF THE APPELLANT HEREIN ADDR ESSED TO M/S. PRASAD FILM LABORATORIES, HYDERABAD/ MADRAS. 13. LETTER DATED 30.7.2008 OF PRASAD FILM LABORATORIES PVT. LTD., ADDRESSED TO THE APPELLANT HEREIN. 14. LETTER DATED 30.7.2008 OF THE APPELLANT ADDRESSED T O M/S. PRASAD FILM LABORATORIES PVT. LTD. 23. AT THE OUTSET, WE WOULD LIKE TO ADJUDICATE THE ISSU E RELATING TO ADMISSION OF ADDITIONAL EVIDENCE. THE LEARNED AR F ILED A PETITION SEEKING ADMISSION OF ADDITIONAL EVIDENCE AND SUBMIT TED THAT THE ASSESSING OFFICER NOT CARRIED ON ENQUIRY IN PROPER PERSPECTIVE THOUGH VARIOUS NAMES APPEAR IN THE SEIZED MATERIAL. HE SU BMITTED THAT FOR THE PURPOSE OF PROPER ADMINISTRATION OF JUSTICE ADD ITIONAL EVIDENCES ARE TO BE ADMITTED AND THE MATTER MAY BE REMITTED B ACK TO THE ASSESSING OFFICER FOR FRESH CONSIDERATION. HE SUBM ITTED THAT THESE EVIDENCES ARE NOT FILED ON EARLIER OCCASION AS THE ASSESSEE WAS NOT PROVIDED WITH A COPY OF THE STATEMENT RECORDED FROM SRI A. MALLIKARJUNA. FURTHER THE ASSESSEE COULD NOT FILE THE ABOVE DETAILS AS THE BUSINESS OF THE ASSESSEE FIRM WAS CLOSED IN THE YEAR 2000 ITSELF AND THE ASSESSEE COULD NOT CONTACT THE FINANCIER IM MEDIATELY. THERE WERE ALSO DIFFERENCES BETWEEN THE PARTNERS AND THEY GOT SEPARATED. ACCORDING TO HIM, THE ASSESSEE WAS PREVENTED BY SUF FICIENT CAUSE IN NOT FILING THESE EVIDENCES ON EARLIER OCCASION. 24. THE DR. STRONGLY OPPOSED THE ADMISSION OF ADDITIONA L EVIDENCE. 25. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATE RIAL ON RECORD. IN THIS CASE THERE WAS A SEARCH AND SEIZUR E ACTION TOOK PLACE U/S. 132 OF THE ACT ON 21.2.2003 IN THE CASE OF SRI SINGANAMALA IT(SS) A NOS. 19 & 20/HYD/2008 M/S. SRS & SRI SAI GANESH PRODUCTIONS ============================= 9 RAMESH BABU AND HIS FATHER SRI SATYA RAMA MURTHY ON 21.2.2003. CONSEQUENTLY, NOTICE U/S. 158BD WAS ISSUED TO THE A SSESSEE ON 23.11.2004. THE ASSESSMENT WAS COMPLETED ON 28.2.2 007. THE ASSESSEE FILED APPEAL AGAINST THE ASSESSMENT ORDER BEFORE THE CIT(A) ON 16.3.2007. THE CIT(A) PASSED THE ORDER ON 24.3. 2008. AGAINST THIS, THE ASSESSEE FILED APPEAL BEFORE THE TRIBUNAL ON 15.5.2008. THE DEPARTMENT FILED APPEAL ON 16.6.2008. THE ASSESSEE FILED PETITION FOR ADMISSION OF ADDITIONAL EVIDENCES VIDE TRIBUNAL INW ARD NO. 932 DATED 3.11.2008. AS SEEN FROM THE ADDITIONAL EVIDENCES F ILED BY THE ASSESSEE, THESE ARE NOT SEIZED MATERIALS. IN OTHER WORDS, CERTAIN EVIDENCES WERE DATED AFTER THE ASSESSMENT ORDER. S PECIFICALLY SL. NOS. 13 AND 14. THESE ARE NOT ADDITIONAL EVIDENCES . ON THE OTHER HAND, THESE ARE FRESH EVIDENCES. AS PER RULE NO. 2 9 OF ITAT RULES, 1963 THE PARTIES TO THE APPEAL SHALL NOT BE ENTITLE D TO PRODUCE ADDITIONAL EVIDENCE EITHER ORAL OR DOCUMENTARY TO B E PRODUCED OR ANY WITNESS TO BE EXAMINED OR ANY AFFIDAVIT TO BE FILED TO ENABLE IT TO PASS ORDERS OR FOR ANY OTHER SUBSTANTIAL CAUSE, OR IF TH E INCOME-TAX OFFICER HAS DECIDED THE CASE WITHOUT GIVING SUFFICIENT OPPO RTUNITY TO THE ASSESSEE TO ADDUCE EVIDENCE EITHER ON POINTS SPECIF IED BY HIM OR NOT SPECIFIED BY HIM, THE TRIBUNAL MAY ALLOW SUCH DOCUM ENT TO BE PRODUCED OR WITNESS TO BE EXAMINED OR AFFIDAVIT TO BE FILED OR MAY ALLOW SUCH EVIDENCE TO BE ADDUCED. 26. IN THE PRESENT CASE, THE ASSESSING OFFICER ALSO EXA MINED SRI A. MALLIKARJUNA AND ALSO SRI S. RAMESH BABU AND B. SUR ESH. THE ASSESSEE WAS ALSO GIVEN AMPLE OPPORTUNITY TO PUT ITS CASE. IT IS NOT AN EX-PARTE ORDER. THE CIT(A) ALSO GIVEN AMPLE OPPORTUNITY OF HEARING TO THE ASSESSEE. THE ADDITIONAL EVIDENCES FILED BY THE AS SESSEE ARE NOT PART OF THE SEIZED MATERIAL BUT ARE FRESH EVIDENCES AND NOT THE EVIDENCES AVAILABLE AT THE TIME OF SEARCH ACTION. FURTHER IT IS ALSO NOT A CASE WHERE THE TRIBUNAL REQUIRED ANY DOCUMENT TO ENABLE IT TO DETERMINE THE QUESTION OF INCOME. IT IS PURELY DISCRETION OF THE TRIBUNAL TO IT(SS) A NOS. 19 & 20/HYD/2008 M/S. SRS & SRI SAI GANESH PRODUCTIONS ============================= 10 PERMIT ADDITIONAL EVIDENCES TO BE ADDUCED TO ENABLE IT TO PASS ORDER OR, IN ITS OPINION, IF THERE IS ANY SUBSTANTIAL CAU SE FOR ADDITIONAL EVIDENCES. THE DISCRETION TO RECEIVE ADDITIONAL EVI DENCE IS TO BE EXERCISED ONLY WHEN ANY POINT IS REQUIRED TO BE CLE ARED UP IN THE INTEREST OF JUSTICE. THIS POWER IS GIVEN TO THE TR IBUNAL HAS TO BE EXERCISED CAUTIOUSLY AND SPARINGLY IN ORDER TO ADVA NCE THE INTEREST OF JUSTICE. RULE 29 OF ITAT RULES, 1963 IS NOT INTEND ED TO ALLOW THE ASSESSEE WHO HAS BEEN UNSUCCESSFUL THROUGHOUT APPEA L PROCEEDINGS AND TO PATCH ALL THE WEAK PARTS OF HIS CASE OR TO FILL UP OMISSIONS. IT IS WELL SETTLED THAT A PARTY GUILTY OF REMISSNESS A ND GROSS NEGLIGENCE, AS IN THIS CASE, IS NOT ENTITLED TO INDULGENCE BEIN G SHOWN TO ADDUCE ADDITIONAL EVIDENCE. THE ASSESSEE IN THIS CASE HAD AMPLE OPPORTUNITIES AND YEAR AFTER YEAR HE WAS GIVEN OPPO RTUNITIES BY THE AUTHORITIES BELOW TO PRODUCE MATERIAL SO THAT ASSES SMENT COULD BE MADE ON CONSIDERATION OF THE MATERIAL PLACED BY HIM . TO ADMIT THE ADDITIONAL EVIDENCE, WE MUST BE SATISFIED OURSELVES THAT IT IS NECESSARY FOR THE DISPOSAL OF THE CASE THAT THE DOC UMENT SOUGHT TO BE ADMITTED MUST BE RECEIVED IN EVIDENCE OR IN THE ALT ERNATIVE THERE MUST BE SUFFICIENT CAUSE FOR NOT PRODUCING THE SAME BEFORE THE LOWER AUTHORITIES. THE ASSESSEE COUNSEL TRIED TO MAKE A CASE THAT THE ASSESSEE WAS PREVENTED BY SUFFICIENT CAUSE IN PRODU CING THESE EVIDENCES BEFORE THE LOWER AUTHORITIES. WE ALSO NO TICED THAT THE ASSESSEE MADE A BALD STATEMENT IN ITS PETITION WITH OUT ACCOMPANIMENT OF ANY CORROBORATIVE MATERIAL. THE RE ASONS ADVANCED BY THE ASSESSEE CANNOT BE CONSIDERED AS GOOD AND SU FFICIENT REASONS THAT THE ASSESSEE WAS PREVENTED BY GOOD AND SUFFICI ENT CAUSE TO PRODUCE THE SAME BEFORE THE LOWER AUTHORITIES. WE PLACE RELIANCE ON THE JUDGEMENT OF JURISDICTIONAL HIGH COURT IN THE C ASE OF A.K. BABU KHAN VS. CWT, AP (102 ITR 757). WE ALSO GONE THROU GH THE JUDGEMENT OF SUPREME COURT IN THE CASE OF NATIONAL THERMAL POWER CO. LTD. VS. CIT (229 ITR 383) (SC). IT WAS CLEARLY OBSERVED BY THE APEX COURT THAT THERE MAY BE SEVERAL FACTORS JUSTIFYING THE RAISING OF NEW IT(SS) A NOS. 19 & 20/HYD/2008 M/S. SRS & SRI SAI GANESH PRODUCTIONS ============================= 11 PLEA IN AN APPEAL AND EACH CASE HAS TO BE CONSIDERE D ON ITS OWN FACTS. THE APPELLATE AUTHORITIES MUST BE SATISFIED THAT TH E GROUND RAISED WAS BONA-FIDE AND THAT THE SAME COULD NOT HAVE BEEN RAI SED EARLIER FOR GOOD REASONS. THE APPELLATE AUTHORITIES SHOULD EXE RCISE THEIR DISCRETION IN PERMITTING OR NOT PERMITTING THE ASSE SSEE TO RAISE AN ADDITIONAL GROUND/ADDITIONAL EVIDENCE IN ACCORDANCE WITH LAW AND REASONS. THERE IS NO BLANKET PERMISSION TO THE ASS ESSEE TO RAISE THE ADDITIONAL GROUND OR FILING OF ADDITIONAL EVIDENCE ACCORDING TO HIS OWN WHIMS AND FANCIES. THERE SHOULD BE REASONABLE CAUS E FOR FURNISHING ADDITIONAL EVIDENCE BELATEDLY. IN THE PRESENT CASE , WE FIND NO REASONABLE CAUSE FOR RAISING THE ADDITIONAL GROUNDS /EVIDENCES SO BELATEDLY. CONSIDERING THE FACTS OF THE PRESENT CAS E, WE HAVE NO HESITATION IN DECLINING TO ADMIT THE ADDITIONAL EVI DENCES FILED BY THE ASSESSEE BEFORE US AND ACCORDINGLY THE ADDITIONAL E VIDENCE IS REJECTED. 27. NOW COMING TO THE FIRST GROUND IN ASSESSEES APPEAL WITH REGARD TO SUSTAINING ADDITION OF RS. 1,15,00,000 U/ S. 68 OF THE ACT. WE HAVE HEARD BOTH THE PARTIES ON THIS ISSUE. ACCO RDING TO THE AR THIS AMOUNT OF RS. 1,15,00,000 IS TO BE CONSIDERED AS SOURCE FOR EXPENDITURE INCURRED DURING THE BLOCK PERIOD AS THI S AMOUNT IS AVAILABLE TO THE ASSESSEE AS RECEIVED FROM SRI A. M ALLIKARJUNA. BUT THE FACTS BROUGHT ON RECORD SHOW THAT HE HAS CATEGORICA LLY STATED BEFORE THE ASSESSING OFFICER THAT HE HAS ADVANCED ONLY RS. 2,00,000 AS LOAN AND THE FIRM M/S. KRISHNA FINANCIERS, ANANTAPUR WH ERE HIS WIFE IS A PARTNER, ADVANCED RS. 5 LAKHS. THE STATEMENT RECOR DED FORM HIM WAS U/S. 131 OF THE ACT. THE ASSESSING OFFICER ALSO VE RIFIED THE BOOKS OF ACCOUNT AND FOUND THAT THE ADVANCE OF RS. 7 LAKHS I S CORRECT. ON THE BASIS OF THIS, DUE CREDIT WAS GIVEN TO THAT EXTENT. BEFORE US THE ASSESSEE TRIED TO MAKE A CASE BY FILING ADDITIONAL EVIDENCES. AS WE HAVE REJECTED THE ADDITIONAL EVIDENCES ITSELF, IN O UR OPINION, WHATEVER THE ASSESSEE STATED BEFORE US CANNOT BE CONSIDERED. ON THE OTHER IT(SS) A NOS. 19 & 20/HYD/2008 M/S. SRS & SRI SAI GANESH PRODUCTIONS ============================= 12 HAND, THE PLEA OF THE ASSESSEE THAT DUE CREDIT IS T O BE GIVEN TO THE TUNE OF RS. 115 LAKHS AS INVESTMENT BY SRI A. MALLI KARJUNA COULD BE CONSIDERED ONLY IN THE EVENT OF ASSESSMENT OF THIS AMOUNT IN THE HANDS OF SRI A. MALLIKARJUNA AND REACHING ITS FINAL ITY. IN OTHER WORDS, IF THIS AMOUNT IS DULY ASSESSED IN THE HANDS OF SRI A. MALLIKARJUNA AS HIS INCOME, THEN TAXING THE SAME IN THE HANDS OF TH E ASSESSEE WOULD AMOUNT TO DOUBLE ADDITION OF THE SAME AMOUNT. IT C ANNOT BE PERMITTED. ACCORDINGLY WE DIRECT THE ASSESSING OFF ICER TO VERIFY WHETHER THIS AMOUNT TAXED IN THE HANDS OF SRI A. MA LLIKARJUNA AND IF HE HAS NOT FILED ANY APPEAL AGAINST THIS ADDITION I N HIS HAND OR IT REACHES THE FINALITY BY THE DECISION OF A SUPERIOR JUDICIAL FORUM, THEN IT SHOULD NOT BE ASSESSED ONCE AGAIN IN THE HANDS O F THE PRESENT ASSESSEE. THIS GROUND IS ALLOWED FOR STATISTICAL P URPOSES. 28. THE NEXT GROUND IS WITH REGARD TO QUANTIFICATION OF EXPENDITURE. ACCORDING TO THE ASSESSEES COUNSEL TH E TOTAL EXPENDITURE IS TO BE CONSIDERED AT RS. 4,88,87,784 AS COMPUTED BY THE ASSESSING OFFICER INSTEAD OF RS. 4,48,84,521 AS COMPUTED BY THE CIT(A). ON THE OTHER HAND, THE DR SUBMITTED THAT T HE ASSESSING OFFICER COMMITTED AN ERROR IN COMPARING RECEIPTS AN D EXPENDITURE FOR DIFFERENT PERIODS AND HE SUBMITTED THAT THE RECEIPT S AND PAYMENTS RELATING TO SAME PERIOD ARE TO BE COMPARED AS OBSER VED BY THE CIT(A) IN HIS ORDER THAT RECEIPTS AND PAYMENTS FROM 4.7.20 00 TO 25.11.2000 ARE TO BE COMPARED. BEING SO, THE CIT(A) ORDER IS TO BE CONFIRMED ON THIS COUNT. 29. WE HAVE CAREFULLY GONE THROUGH THE SEIZED MATERIAL. AS PER THE TRIAL BALANCE (4.7.2000 TO 25.1.2000) THE EXPENDITU RE IS AS FOLLOWS: PARTICULARS AMOUNT (RS.) EXPENDITURE ACCOUNT 4,05,82,328 SUNDRY DEBTORS, CASH IN HAND AND CASH AT BANK 38,47 ,753 TOTAL 4,44,30,081 FURTHER EXPENDITURE AS PER THE SEIZED MATERIAL 4,54 ,440 TOTAL EXPENDITURE 4,48,84,521 IT(SS) A NOS. 19 & 20/HYD/2008 M/S. SRS & SRI SAI GANESH PRODUCTIONS ============================= 13 30. THE ASSESSING OFFICER ADDED RS. 4,54,440 TOWARDS FU RTHER EXPENDITURE ON THE BASIS OF SEIZED MATERIAL AS FOLL OWS: PARTICULARS AMOUNT (RS.) RENT PAID TO JAYABHERI GUESTHOUSE BASED ON SEIZED M ATERIAL AA/SRB/5 PAGE 76 60,000 EXPENDITURE INCURRED DURING THE PERIOD 22.3.2000 TO 24.5.2000 SUPPORTED BY SEIZED MATERIAL A/SRB/27 3,20,440 EXPENDITURE INCURRED ON DIRECTION DURING THE PERIOD 1.2.2000 TO 29.5.2000 SUPPORTED BY SEIZED MATERIAL A/SRB/SRB/40 PAGE 47 74,000 4,54,440 31. BEING SO, IF WE CONSIDER THE EXPENDITURE COVERING T HE PERIOD FROM 4.7.2000 TO 25.11.2000 WORKS OUT AT RS. 4,48,8 4,521 WHICH IS AS PER THE SEIZED MATERIAL AND THE ASSESSING OFFICER C OMMITTED AN ERROR WHILE COMPUTING THE TOTAL EXPENDITURE FROM 4.7.2000 TO 4.12.2000 INSTEAD OF CONSIDERING THE EXPENDITURE FOR THE PERI OD AS HE CONSIDERED FOR QUANTIFICATION OF RECEIPTS. THE AS SESSING OFFICER CONSIDERED THE RECEIPTS FOR THE PERIOD 4.7.2000 TO 25.11.2000, CORRESPONDING EXPENDITURE IS TO BE CONSIDERED FOR T HIS PERIOD ONLY. ACCORDINGLY, THE TOTAL EXPENDITURE FOR THIS PERIOD IS TO BE CONSIDERED AT RS. 4,48,84,521 AND THIS IS SUPPORTED BY THE SEI ZED MATERIAL. ACCORDINGLY, WE DO NOT FIND ANY INFIRMITY IN THE OR DER OF THE CIT(A) AND THE SAME IS CONFIRMED. THIS GROUND IS REJECTED . 32. REGARDING THE CONFIRMATION ADDITION OF RS. 31.5 LAK HS TOWARDS CD/DVD/SATELLITE/OVERSEAS RIGHTS AS AGAINST RS. 25 LAKHS, THE AR SUBMITTED THAT THE ASSESSEE HAS RECEIVED ONLY RS. 2 5 LAKHS AS PER THE SEIZED MATERIAL AND THERE IS NO OTHER EVIDENCE TOWA RDS THIS ADDITION. HE ALSO DREW OUR ATTENTION TO THE AGREEMENT BETWEEN THE ASSESSEE AND GEMINI TELEVISION. HE SHOWED THE TOTAL CONSIDE RATION AT RS.31.5 LAKHS AND OUT OF WHICH THE ASSESSEE RECEIVED ONLY R S. 25 LAKHS AND THE BALANCE IS TO BE PAID ON THE DATE OF SIGNING THE AG REEMENT. HOWEVER, THE BALANCE AMOUNT WAS NOT PAID AS THE PICTURE WAS A FAILURE. THE DR SUBMITTED THAT THE AGREEMENT AMOUNT OF RS. 31.5 LAK HS IS TOWARDS IT(SS) A NOS. 19 & 20/HYD/2008 M/S. SRS & SRI SAI GANESH PRODUCTIONS ============================= 14 CD/DVD/SATELLITE/OVERSEAS RIGHTS IN RELATION TO THE FILM MAA ANNAIAH. ACCORDING TO THE DR THE ASSESSEE WRONG LY SHOWN IT AT RS. 25 LAKHS IN HIS BOOKS OF ACCOUNT AS RECEIVED FROM O NE MR. G. HARINATH, CHENNAI. ON THIS ISSUE THERE IS NO MATERIAL SHOWING RECEIPT OF RS. 25 LAKHS FROM G. HARINATH. HOWEVER, THE AGREEMENT ENT ERED INTO BY THE ASSESSEE WITH GEMINI TELEVISION LTD., SHOWS THE AGR EEMENT FOR RS. 31.5 LAKHS. THE ASSESSING OFFICER MADE ENQUIRIES W ITH TELUGU FILM PRODUCERS COUNCIL AND FOUND THAT THERE WERE TWO MOR E AGREEMENTS EXECUTED BY THE ASSESSEE WITH SRI K. VENKATAKESAVA MURTHY AND D. SURESH. HOWEVER, THESE PARTIES DENIED ANY TRANSACT ION HAVING WITH THE ASSESSEE AND STATED THAT THE AGREEMENT COPIES A RE BOGUS AND THE FILMS CD/DVD/SATELLITE/ OVERSEAS RIGHTS WERE ACTUA LLY SOLD TO M/S. GEMINI TELEVISION LTD., CHENNAI FOR RS. 31.5 LAKHS. THIS WAS ALSO EVIDENCED BY THE LETTERS DATED 30.3.2002 AND 27.2.2 007 OF M/S. PRASAD FILM LABORATORIES LTD., HYDERABAD AND AGREEM ENT COPY DATED 2.12.2000 ENTERED WITH M/S. GEMINI TELEVISION, CHEN NAI. AS THE AGREEMENT ENTERED WITH G. HARINATH WAS FOUND TO BE FALSE, THE CLAIM OF AMOUNT RECEIVED FROM HIM AT RS. 25 LAKHS IS TOTA LLY CONTRARY TO THE FACTS ON RECORD. BEING SO, THE CIT(A) IS JUSTIFIED IN SUSTAINING THE ADDITION OF RS. 31.5 LAKHS ON THIS COUNT. THIS GROU ND OF THE ASSESSEE IS REJECTED. 33. THE NEXT GRIEVANCE OF THE ASSESSEE IS WITH REGARD T O SUSTAINING ADDITION OF RS. 3 LAKHS TOWARDS 16MM RIGHTS. THE LE ARNED AR SUBMITTED THAT THE TRANSACTION RELATING TO THIS WAS NOT MATERIALISED AND ALSO THERE IS SEIZED MATERIAL AND THE ADDITION CANNOT BE SUSTAINED. THE DR RELIED ON THE ORDER OF THE CIT(A ). 34. WE HAVE HEARD BOTH THE PARTIES ON THIS ISSUE. THER E WAS A SEIZED DOCUMENT A/SRB/44 PAGE NOS. 8 AND 9 WHICH IS A XEROX COPY OF AGREEMENT DATED 16.10.2011 FOR SALE OF SOLE AND EXC LUSIVE EXPLOITATION OF 16MM RIGHTS OF THE FILM MAA ANNAIA H FOR A PERIOD OF IT(SS) A NOS. 19 & 20/HYD/2008 M/S. SRS & SRI SAI GANESH PRODUCTIONS ============================= 15 5 YEARS FROM 25.12.2001. THE LESSOR AND THE LESSEE ARE THE ASSESSEE FIRM AND SRI MVVS PRASAD SON OF VENKATESWARA RAO RE SIDENT OF KOVVUR, WEST GODAVARI. BEING SO, WE DO NOT FIND AN Y INFIRMITY IN THE ORDER OF THE CIT(A) AS THE ADDITION IS BASED ON THE SEIZED MATERIAL AND THE SAME IS CONFIRMED. THIS GROUND OF THE ASSESSEE IS REJECTED. 35. THE LAST GROUND IN ASSESSEES APPEAL IS WITH REGARD TO ADDITION OF RS. 6,17,678 TOWARDS UNEXPLAINED EXPENDITURE. T HE LEARNED AR SUBMITTED THAT IF DUE CREDIT IS GIVEN TO THE AMOUNT RECEIVED FROM A. MALLIKARJUNA AT RS. 1.15 CRORES, THERE IS NO QUESTI ON OF ADDITION ON THIS COUNT. THE LEARNED DR TOTALLY OPPOSED THE ARG UMENT OF THE ASSESSEES COUNSEL. AS WE HAVE ALREADY OBSERVED TH AT THERE IS NO QUESTION OF GIVING ANY CREDIT TOWARDS THE IMPUGNED RECEIPT FROM A. MALLIKARJUNA AT RS. 1.15 CRORES UNLESS IT WAS TAXED IN THE HANDS OF A. MALLIKARJUNA. ACCORDINGLY, THE ASSESSING OFFICER I S REQUIRED TO DECIDE THIS ISSUE WITH REFERENCE TO TAXABILITY OF RS. 1.15 CRORES IN THE HANDS OF A. MALLIKARJUNA. THIS GROUND OF THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. 36. THE ADDITIONAL GROUND IS DISMISSED IN THE SAME LINE S AS WE HAVE DISMISSED THE GROUND RELATING TO ADMISSION OF ADDIT IONAL EVIDENCE IN EARLIER PARAS. 37. COMING TO THE GRIEVANCES OF THE DEPARTMENT WITH REG ARD TO ALLOWING DEDUCTION TOWARDS CAPITAL AND CREDITORS ON THE BASIS OF FIGURES AVAILABLE IN THE TRIAL BALANCE. THE CRUX OF THIS GROUND IS WITH REGARD TO GIVING CREDIT TOWARDS THE FOLLOWING AS SO URCES FOR EXPENDITURE: A) CAPITAL OF S. RAMESH, PARTNER - RS. 36,50,770 B) B. SURESH - RS. 11,78,508 C) ADITYA MOVIES - RS. 16,00,000 D) CHADANA RAMESH - RS. 6,99,565 E) V. SRINIVASA RAO - RS. 10,00,000 IT(SS) A NOS. 19 & 20/HYD/2008 M/S. SRS & SRI SAI GANESH PRODUCTIONS ============================= 16 38. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATE RIAL ON RECORD. REGARDING CAPITAL CONTRIBUTION OF S. RAMES H THE TRIAL BALANCE SHOWS AN AMOUNT OF RS. 20 LAKHS IN HIS NAME. THE A SSESSING OFFICER COMPUTED THE INCOME AS PER THE SEIZED DOCUMENT. ON THE OTHER HAND, HE HAS NOT FOLLOWED THE SAME WHILE COMPUTING THE SOURCE OF EXPENDITURE. THE SEIZED DOCUMENT, HIS SUMMARY ACCO UNT FOR 4.7.2000 TO 26.11.2000 SHOWS CREDIT OF RS. 17,00,77 0. IF THESE AMOUNTS ARE DULY REFLECTED IN HIS INCOME-TAX ASSESS MENT DUE CREDIT HAS TO BE GIVEN TO THE ASSESSEE. ACCORDINGLY, WE D IRECT THE ASSESSING OFFICER TO VERIFY THE INCOME-TAX ASSESSMENT OF SRI S. RAMESH BABU AND DECIDE ACCORDINGLY. SIMILAR IS THE POSITION IN THE CASE OF B. SURESH AND SAME TO BE VERIFIED WITH REFERENCE TO HIS INCOM E-TAX ASSESSMENT BY THE ASSESSING OFFICER AND DECIDE THEREUPON. 39. REGARDING RECEIPT OF RS. 16 LAKHS FROM ADITYA MUSIC FOR AUDIO RIGHTS, THE ASSESSEE CONSIDERED THE RECEIPTS AS INC OME. HOWEVER, HE HAS NOT GIVEN THE SAME RECEIPTS AS SOURCES FOR EXPE NDITURE. ACCORDINGLY, WE DO NOT FIND ANY INFIRMITY IN THE OR DER OF THE CIT(A) IN GIVING CREDIT TOWARDS THIS AMOUNT AS A SOURCES FOR EXPENDITURE. THIS GROUND OF REVENUE IS REJECTED. 40. WITH REGARD TO CHANDANA RAMESH AND V. SRINIVASA RAO , THE AMOUNTS RECEIVED FROM THEM TO BE INCLUDED AS SOURCE S AS THE EXPENDITURE INCLUDING SUNDRY DEBTORS HAVE BEEN CONS IDERED BY THE ASSESSING OFFICER WHILE COMPUTING THE EXPENDITURE. BEING SO, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE CIT(A) A ND THE SAME IS CONFIRMED. THIS GROUND OF THE REVENUE IS REJECTED. 41. THE NEXT GROUND OF THE REVENUE IS WITH REGARD TO DE LETION OF ADDITION TOWARDS UNEXPLAINED EXPENDITURE OF RS. 2,4 2,49,784 AS DOUBLE ADDITION. THE ASSESSING OFFICER COMPUTED TH E TOTAL EXPENDITURE AT RS. 4,88,87,784 AND SOURCES FOR THIS EXPENDITURE ARE RS. 2,46,38,000 (ADVANCE FROM DISTRIBUTORS RS. 1,43 ,13,000 + CAPITAL IT(SS) A NOS. 19 & 20/HYD/2008 M/S. SRS & SRI SAI GANESH PRODUCTIONS ============================= 17 AND LOANS AT RS. 1,03,25,000) AND MADE ADDITION TOW ARDS UNEXPLAINED EXPENDITURE OF RS. 2,42,49,784. THE CIT(A) DELETED THIS ADDITION ON THE REASON THAT THE EXPENDITURE WAS ALREADY CONSIDE RED FOR ADDITION. 42. WE HAVE HEARD BOTH THE PARTIES ON THIS ISSUE. THE FINDINGS OF THE CIT(A) ARE ENTIRELY CONTRARY TO THE PROVISIONS OF SECTION 69C OF THE ACT. THE PROVISO TO SECTION 69C READS AS FOLLOWS: [PROVIDED THAT NOTWITHSTANDING ANYTHING CONTAINED IN ANY OTHER PROVISION OF THIS ACT, SUCH UNEXPLAINED EXPENDITURE WHICH IS DEEMED TO BE THE INCOME OF THE ASSESSEE SHALL NOT BE ALLOWED AS A DEDUCTION UNDER ANY HEAD OF INCOME.] 43. THIS PROVISO WAS INSERTED WITH EFFECT FROM 1.4.1999 BY FINANCE (NO. 2) ACT, 1998 AND THIS PROVISO IS APPLICABLE TO THE PRESENT ASSESSMENT YEAR UNDER CONSIDERATION COVERING THE BL OCK PERIOD. THIS PROVISO PROHIBITS ANY DEDUCTION TOWARDS UNEXPLAINED EXPENDITURE WHICH IS DEEMED AS INCOME U/S. 69C OF THE IT ACT. UNDER SECTION 4, THE INCOME IS TO BE CHARGED IN ACCORDANCE WITH THE PROVISIONS OF THE ACT IN RESPECT OF TOTAL INCOME OF THE PREVIOUS YEAR OF EVERY PERSON. AS PROVIDED BY SECTION 5, THE TOTAL INCOME OF ANY P REVIOUS YEAR OF A PERSON WOULD, INTER ALIA, INCLUDE ALL INCOME FROM W HATEVER SOURCES DERIVED WHICH IS RECEIVED OR IS DEEMED TO BE RECEIV ED BY SUCH PERSON, SUBJECT TO THE PROVISIONS OF THE ACT. IT WILL BE S EEN FROM SECTION 69C OF THE IT ACT THAT WHERE IN ANY FINANCIAL YEAR THE ASSESSEE INCURS ANY EXPENDITURE THEREOF AND THE ASSESSEE FAILS TO OFFER SATISFACTORY EXPLANATION TO THE ASSESSING OFFICER, THE AMOUNT CO VERED BY SUCH EXPENDITURE MAY BE TREATED AS DEEMED INCOME OF THE ASSESSEE FOR SUCH FINANCIAL YEAR. THE SCHEME OF SECTION 69C WOU LD SHOW THAT IN CASES WHERE THE NATURE AND SOURCE OF INVESTMENT MAD E BY THE ASSESSEE OR THE NATURE AND SOURCES OF ACQUISITION O F ANY ASSET OWNED BY THE ASSESSEE OR THE SOURCE OF EXPENDITURE INCURR ED BY THE ASSESSEE ARE NOT EXPLAINED AT ALL OR NOT SATISFACTORILY EXPL AINED, THEN, THE VALUE OF SUCH INVESTMENT AND MONEY OR THE VALUE OF ARTICL ES NOT RECORDED IN IT(SS) A NOS. 19 & 20/HYD/2008 M/S. SRS & SRI SAI GANESH PRODUCTIONS ============================= 18 THE BOOKS OF ACCOUNT OR UNEXPLAINED EXPENDITURE MAY BE DEEMED TO BE THE INCOME OF THE ASSESSEE. IT FOLLOWS THAT THE MOMENT A SATISFACTORY EXPLANATION IS GIVEN ABOUT SUCH NATURE AND SOURCE BY THE ASSESSEE, THEN THE SOURCE WOULD STAND DISCLOSED AND WILL, THEREFORE, BE KNOWN AND THE INCOME WOULD BE TREATED UNDER THE APPROPRIATE HEAD OF INCOME FOR ASSESSMENT AS PER THE PROVISIONS OF THE ACT. HOWEVER, WHEN THESE PROVISIONS APPLY BECAUSE NO SOU RCE IS DISCLOSED AT ALL ON THE BASIS OF WHICH THE INCOME CAN BE CLAS SIFIED UNDER ONE OF THE HEADS OF INCOME UNDER SECTION 14, IT WOULD NOT BE POSSIBLE TO CLASSIFY SUCH DEEMED INCOME UNDER ANY OF THESE HEAD S INCLUDING INCOME FROM OTHER SOURCES WHICH HAVE TO BE SOURCES KNOWN OR EXPLAINED. WHEN THE INCOME CANNOT BE SO CLASSIFIED UNDER ANY ONE OF THE HEADS OF INCOME UNDER SECTION 14, IT FOLLOWS TH AT THE QUESTION OF GIVING ANY DEDUCTIONS UNDER THE PROVISIONS WHICH CO RRESPOND TO SUCH HEADS OF INCOME WILL NOT ARISE. IF IT IS POSSIBLE TO PEG THE INCOME UNDER ANY ONE OF THOSE HEADS BY VIRTUE OF A SATISFA CTORY EXPLANATION BEING GIVEN, THEN THESE PROVISIONS OF SECTIONS 69,6 9A, 69B AND 69C WILL NOT APPLY, IN WHICH EVENT, THE PROVISIONS REGA RDING DEDUCTIONS, ETC., APPLICABLE TO THE RELEVANT HEAD OF INCOME UND ER WHICH SUCH INCOME FALLS WILL AUTOMATICALLY BE ATTRACTED. 44. THE OPENING WORDS OF SECTION 14 SAVE AS OTHERWISE PROVIDED BY THIS ACT CLEARLY LEAVE SCOPE OF DEEMED INCOME OF THE NATURE COVERED UNDER THE SCHEME OF SECTIONS 69,69A, 69B AN D 69C BEING TREATED SEPARATELY BECAUSE SUCH DEEMED INCOME IS NO T INCOME FROM SALARY, HOUSE PROPERTY, PROFITS AND GAINS OF BUSINE SS OF PROFESSION, OR CAPITAL GAINS, NOR IS IT INCOME FROM OTHER SOURCES BECAUSE THE PROVISIONS OF SECTIONS 69,69A, 69B AND 69C TREAT UN EXPLAINED INVESTMENTS, UNEXPLAINED MONEY, BULLION, ETC., AND UNEXPLAINED EXPENDITURE AS DEEMED INCOME WHERE THE NATURE AND S OURCE OF INVESTMENT ACQUISITION OR EXPENDITURE, AS THE CASE MAY BE, HAVE NOT BEEN EXPLAINED OR SATISFACTORILY EXPLAINED. THEREF ORE, IN THESE CASES, IT(SS) A NOS. 19 & 20/HYD/2008 M/S. SRS & SRI SAI GANESH PRODUCTIONS ============================= 19 THE SOURCE NOT BEING KNOWN, SUCH DEEMED INCOME WILL NOT FALL EVEN UNDER THE HEAD INCOME FROM OTHER SOURCES. THE CO RRESPONDING DEDUCTIONS WHICH ARE APPLICABLE TO THE INCOMES UNDE R ANY OF THESE VARIOUS HEADS WILL NOT BE ATTRACTED IN THE CASE OF DEEMED INCOMES WHICH ARE COVERED UNDER THE PROVISIONS OF SECTIONS 69, 69A, 69B AND 69C IN VIEW OF THE SCHEME OF THOSE PROVISIONS. 45. IT WAS, THEREFORE, CLEAR THAT WHEN THE EXPENDITURE WAS NOT RECORDED IN THE BOOKS OF ACCOUNT AND THE ASSESSEE F AILED TO OFFER SATISFACTORY EXPLANATION ABOUT THE NATURE AND SOURC E OF SUCH EXPENDITURE, THERE COULD ARISE NO QUESTION OF TREAT ING THE VALUE OF SUCH EXPENDITURE, WHICH WAS DEEMED TO BE THE INCOME OF THE ASSESSEE, AS DEDUCTIBLE EXPENDITURE IN THE FINANCIA L YEAR, AND HENCE, SUCH DEEMED INCOME DID NOT FALL UNDER THE HEAD PRO FITS AND GAINS OF BUSINESS OR PROFESSION. THE COMMISSIONER (APPEALS ) WAS NOT JUSTIFIED IN HOLDING THAT THE VALUE OF SUCH UNEXPLA INED EXPENDITURE WAS TO BE IN INCLUDED AS EXPENDITURE AND TO GIVE DE DUCTION TOWARDS IT. BEING SO, THE FINDING OF THE CIT(A) IS UNJUST IFIED AND WE RESTORE ORDER OF THE ASSESSING OFFICER ON THIS ISSUE. THIS GROUND OF THE REVENUE IS ALLOWED. 46. THE LAST GROUND IN REVENUE APPEAL IS WITH REGARD TO DELETION OF UNEXPLAINED INVESTMENT MADE IN THE FILM RAA UNDER THE BANNER SRI SAI MOVIES AS THERE IS NO NEXUS WITH THE REGULAR BU SINESS OF THE ASSESSEE. THE ASSESSING OFFICER HAS ADDED AN AMOUN T OF RS. 32,20,689 AS UNDISCLOSED INVESTMENT IN THIS MOVIE. HE HAS OBSERVED THAT THE AMOUNT WAS INVESTED UNDER THE BANNER M/S. SRI SAI MOVIES. HOWEVER, AS PER THE TRIAL BALANCE, AN AMOUNT OF RS. 31,76,969 APPEARING IN THE NAME OF SRI SAI MOVIES AS SUNDRY D EBTORS. WHILE CONSIDERING THE TOTAL EXPENDITURE AS PER THE TRIAL BALANCE AND DISCUSSING THE SOURCES FOR THE SAME, TOTAL SUNDRY D EBTORS WERE CONSIDERED AS PART OF THE EXPENDITURE. ACCORDINGLY , THE AMOUNT IN IT(SS) A NOS. 19 & 20/HYD/2008 M/S. SRS & SRI SAI GANESH PRODUCTIONS ============================= 20 THE NAME OF SRI SAI MOVIES HAS ALREADY BEEN CONSIDE RED AS PART OF THE INVESTMENT FOR WHICH NO SEPARATE ADDITION IS WARRAN TED. BEING SO, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE CIT(A ) ON THIS ISSUE AND THE SAME IS CONFIRMED. 47. IN THE RESULT, REVENUE AS WELL AS ASSESSEES APPEAL IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 22 ND FEBRUARY, 2013. SD/ SD/ SD/ SD/- -- - (ASHA VIJAYARAGHAVAN) (ASHA VIJAYARAGHAVAN) (ASHA VIJAYARAGHAVAN) (ASHA VIJAYARAGHAVAN) JUDICIAL MEMBER JUDICIAL MEMBER JUDICIAL MEMBER JUDICIAL MEMBER SD/ SD/ SD/ SD/- -- - (CHANDRA POOJARI) (CHANDRA POOJARI) (CHANDRA POOJARI) (CHANDRA POOJARI) ACCOUNTANT MEMBER ACCOUNTANT MEMBER ACCOUNTANT MEMBER ACCOUNTANT MEMBER HYDERABAD, DATED 22 ND FEBRUARY, 2013 TPRAO COPY FORWARDED TO: 1. M/S. SRS & SRI SAI GANESH PRODUCTIONS, C/O. SRI S. RAMA RAO, ADVOCATE, FLAT NO. 103, H. NO. 3-6-542/4, INDIRADEV I NILAYAM, ST. NO. 7, HIMAYATHNAGAR, HYDERABAD-500 029. 2. THE DEPUTY CIT, CENTRAL CIRCLE, AAYAKAR BHAVAN, 3 RD FLOOR, KT ROAD, TIRUPATI. 3. THE ASST. CIT, CENTRAL CIRCLE, AAYAKAR BHAVAN, 3 RD FLOOR, KT ROAD, TIRUPATI. 4. THE CIT(A)-I, HYDERABAD. 5. THE CIT (CENTRAL), HYDERABAD. 6. THE DR B BENCH, ITAT, HYDERABAD.