2013 (9) TMI 272 - AT - Income Tax

Admission of additional evidence - Held that - The appellate authorities should exercise their discretion in permitting or not permitting the assessee to raise an additional ground/additional evidence in accordance with law and reasons. There is no blanket permission to the assessee to raise the additional ground or filing of additional evidence according to his own whims and fancies. There should be reasonable cause 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 case, we have no hesitation in declining to admit the additional evidences filed by the assessee before us and accordingly the additional evidence is rejected. - Decided against the assessee. Addition u/s 68 of the Income Tax Act if this amount is duly assessed in the hands of Sri A. Mallikarjuna as his income, then taxing the same in the hands of the assessee would amount to double addition of the same amount. It cannot be permitted. Accordingly we direct the Assessing Officer to verify whether this amount taxed in the hands of Sri A. Mallikarjuna and if he has not filed any appeal against this addition in 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 of the present assessee. - Decided in favor of assessee. Addition of Rs. 31.5 lakhs towards CD/DVD/satellite/overseas rights as against Rs. 25 lakhs Held that - As per the agreement between the assessee and Gemini Television total consideration is of Rs.31.5 lakhs and out of which the assessee received only Rs. 25 lakhs and the balance is to be paid on the date of signing the agreement - As the agreement entered with G. Harinath was found to be false, the claim of amount received from him at Rs. 25 lakhs is totally 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. Addition of Rs. 3 lakhs towards 16MM rights Held that - There was a seized document A/SRB/44 which was a xerox copy of agreement dated 16.10.2011 for sale of sole and exclusive exploitation of 16MM rights of the film Maa Annaiah for a period of 5 years from 25.12.2001 - The lessor and the lessee are the assessee firm and Sri MVVS Prasad son of Venkateswara Rao resident of Kovvur, West Godavari. Being so, no any infirmity in the order of the CIT(A) as the addition is based on the seized material and the same is confirmed. Unexplained expenditure u/s 69C of the Income Tax Act Held 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 covered by such expenditure may be treated as deemed income of the assessee for such financial year. The scheme of section 69C would show that in cases where the nature and source of investment made by the assessee or the nature and sources of acquisition of any asset owned by the assessee or the source of expenditure incurred by the assessee are not explained at all or not satisfactorily explained, then, the value of such investment and money or the value of articles not recorded in the books of account or unexplained expenditure may be deemed to be the income of the assessee. Deduction to be allowed in respect of unexplained expenditure included as deemed income in the hands of Assessee Held that - Because no source is disclosed at all on the basis of which the income can be classified under one of the heads of income under section 14, it would not be possible to classify such deemed income under any of these heads 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 that the question of giving any deductions under the provisions which correspond 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 satisfactory explanation being given, then these provisions of sections 69,69A, 69B and 69C will not apply, in which event, the provisions regarding deductions, etc., applicable to the relevant head of income under which such income falls will automatically be attracted - When the expenditure was not recorded in the books of account and the assessee failed to offer satisfactory explanation about the nature and source of such expenditure, there could arise no question of treating the value of such expenditure, which was deemed to be the income of the assessee, as deductible expenditure in the financial year, and hence, such deemed income did not fall under the head Profits and gains of business or profession Hence, no deduction is allowed in this resect Decided in favor of Revenue.

Summary

Issues Involved:

1. Sustaining addition of Rs. 1.15 crores under section 68 of the Income Tax Act.
2. Restriction of allowable expenditure by the CIT(A).
3. Determination of the amount received from CD/DVD/satellite/overseas rights.
4. Confirmation of addition of Rs. 3 lakhs received towards 16MM rights.
5. Sustaining addition of Rs. 6,17,678 as unexplained expenditure.
6. Reduction in receipt of Rs. 5,27,19,500 by the CIT(A).
7. Re-computation of expenditure by the CIT(A).
8. Deletion of addition towards unexplained investment in the film "RAA".
9. Allowing deduction towards capital and creditors based on trial balances.
10. Determination of receipts and expenditure by the CIT(A).

Detailed Analysis:

1. Sustaining Addition of Rs. 1.15 Crores under Section 68:
The assessee contended that Rs. 1.15 crores received from Sri A. Mallikarjuna should be considered as a source for expenditure. The Assessing Officer (AO) verified and found only Rs. 7 lakhs as a valid transaction. The Tribunal directed the AO to verify if this amount was taxed in the hands of Sri A. Mallikarjuna and if it reached finality, it should not be taxed again in the hands of the assessee. This issue was allowed for statistical purposes.

2. Restriction of Allowable Expenditure:
The CIT(A) restricted the allowable expenditure to Rs. 4,48,84,521, while the AO had computed it at Rs. 4,88,87,784. The Tribunal found that the AO erred in comparing receipts and expenditures for different periods. The CIT(A) was correct in considering the expenditure for the same period as the receipts, and the Tribunal confirmed this computation.

3. Determination of Amount Received from CD/DVD/Satellite/Overseas Rights:
The CIT(A) sustained the amount received from CD/DVD/satellite/overseas rights at Rs. 31.5 lakhs, based on the agreement with Gemini Television Ltd., despite the seized material showing Rs. 25 lakhs. The Tribunal upheld this addition as the agreement showed Rs. 31.5 lakhs, and the claim of Rs. 25 lakhs was found to be false.

4. Confirmation of Addition of Rs. 3 Lakhs for 16MM Rights:
The CIT(A) confirmed the addition of Rs. 3 lakhs based on a seized document showing an agreement for 16MM rights. The Tribunal upheld this addition as it was based on seized material.

5. Sustaining Addition of Rs. 6,17,678 as Unexplained Expenditure:
The assessee argued that if Rs. 1.15 crores received from A. Mallikarjuna was credited, there would be no unexplained expenditure. The Tribunal directed the AO to decide this issue based on the taxability of Rs. 1.15 crores in the hands of A. Mallikarjuna. This issue was allowed for statistical purposes.

6. Reduction in Receipt by the CIT(A):
The CIT(A) reduced the gross receipts by Rs. 15,27,000 due to discrepancies in the seized material and the AO's computation. The Tribunal found no infirmity in the CIT(A)'s decision and confirmed it.

7. Re-computation of Expenditure by the CIT(A):
The AO computed total expenditure at Rs. 4,88,87,784, while the CIT(A) considered it at Rs. 4,48,84,521. The Tribunal confirmed the CIT(A)'s computation, agreeing that the AO had erred in comparing receipts and expenditures for different periods.

8. Deletion of Addition towards Unexplained Investment in the Film "RAA":
The AO added Rs. 32,20,689 as undisclosed investment in the film "RAA". The CIT(A) found that this amount was already considered as part of the expenditure. The Tribunal confirmed the CIT(A)'s decision, finding no infirmity.

9. Allowing Deduction towards Capital and Creditors:
The CIT(A) allowed deductions towards capital and creditors based on figures in the trial balance. The Tribunal directed the AO to verify the income-tax assessments of the partners and decide accordingly. The Tribunal found no infirmity in the CIT(A)'s decision regarding Aditya Movies, Chandana Ramesh, and V. Srinivasa Rao.

10. Determination of Receipts and Expenditure by the CIT(A):
The CIT(A) was found to have correctly determined the receipts and expenditure by considering the same period for both. The Tribunal confirmed the CIT(A)'s decision.

Conclusion:
The Tribunal partly allowed the appeals of both the Revenue and the assessee, confirming the CIT(A)'s decisions on several issues and directing further verification on others. The order was pronounced in the open court on 22.2.2013.