2014 (7) TMI 954 - AT - Income Tax

Unexplained expenditures - additions u/s 69C - unproved liabilities books maintained on mercantile basis - Admission of additional ground Addition made on cash found at premises Held that - It has nowhere explained the basis of the payment in such an odd sum, much below the amount that was required to be paid as per the agreement itself - the assessee could rightly claim the expenditure qua payment for the current year, there is no basis for booking expenditure on the basis of accrual, and which has thus been claimed in excess - there is further no question of liability ceasing during the current year in-as-much as no liability in its respect had accrued in the first place - the disallowance/addition in respect of the unproved expense/liability for ₹ 17.50 lacs outstanding in the name of Ab as on 31.03.2001 is confirmed - where the assessee accepts the assessment of this income for the current year, he shall, on moving the Revenue, be allowed, upon verification, consequential relief for A.Y. 2004-05 - even in the case of non-acceptance by the assessee, the Revenue cannot, impending the resolution of the dispute, collect tax twice, so that the demand for one year shall have to be kept in abeyance. AB may have never agreed for being paid any compensation for the Asthma campaign for which his pictures were being sought - there is as such no basis to hold that a liability to AB had ever accrued during the year, and ceased to do so at a later point in time - There is no merit in the charge of the income having been subject to tax on cash basis who admittedly was not paid any amount - the payment having been made, source of which is unexplained - the addition u/s 69C would also arise - The argument, though valid, would yet give rise to a single adjustment and not two in-as-much as there has been a single payment against a single liability - the liability is reflected in the accounts, its stands discharged prior to March, 2001, so that the source of payment remained unexplained - irrespective of the response from RM, there shall arise only a single adjustment to the assessee s returned income on account of liability toward and payment to RM, for the current year Decided against Assessee.

Summary

Issues Involved:
1. Liability to Abhishek Bachchan (Ab) - Rs. 17.50 lacs.
2. Liability to Amitabh Bachchan (AB) - Rs. 4.50 lacs.
3. Liability to Rani Mukherjee (RM) - Rs. 6 lacs.

Detailed Analysis:

Liability to Abhishek Bachchan (Ab) - Rs. 17.50 lacs:
The assessee claimed a liability of Rs. 17.50 lacs to Abhishek Bachchan based on agreements with M/s. Pepsi Foods Ltd. (PFL) and Ab. The Assessing Officer (A.O.) found this liability non-existent and camouflaged to reduce tax. The CIT(A) confirmed this finding. The assessee argued that the liability arose due to the extension of the performance period, but no supporting material was provided. The payee, Ab, confirmed receiving Rs. 31.25 lacs and Rs. 4.725 lacs in the relevant years, with no further amount due. The Tribunal observed that the liability did not accrue as claimed by the assessee and confirmed the disallowance of Rs. 17.50 lacs. The Tribunal also noted that the same amount should not be taxed twice, allowing for consequential relief for A.Y. 2004-05 if the assessee accepts the current year's assessment.

Liability to Amitabh Bachchan (AB) - Rs. 4.50 lacs:
The assessee claimed a liability of Rs. 4.50 lacs to Amitabh Bachchan for releasing stock pictures to M/s. Glaxo India, retaining Rs. 50,000 as commission. The A.O. and CIT(A) found no evidence of an agreement or confirmation from AB, and thus, no liability was established. The Tribunal agreed, noting the lack of evidence and confirming the disallowance. The Tribunal also reiterated that the same amount should not be taxed twice, similar to the case with Abhishek Bachchan.

Liability to Rani Mukherjee (RM) - Rs. 6 lacs:
The assessee claimed a liability of Rs. 6 lacs to Rani Mukherjee, which was paid in cash on 31.03.2002 and disallowed 20% u/s.40A(3) for A.Y. 2002-03. However, during a search on 08.10.2000, Rs. 7.50 lacs was found in RM's locker, with Rs. 6 lacs claimed to be from the assessee. The A.O. and CIT(A) disallowed the liability, finding the explanation unsatisfactory and the source of cash unexplained. The Tribunal noted the intertwined nature of the payments and found that the liability did not subsist as on 31.03.2001. The Tribunal confirmed the addition of Rs. 6 lacs for A.Y. 2001-02, noting that the source of payment in September 2000 remained unexplained.

Conclusion:
The Tribunal dismissed the assessee's appeal, confirming the disallowance/addition of the liabilities claimed to Abhishek Bachchan, Amitabh Bachchan, and Rani Mukherjee, with provisions to avoid double taxation of the same amounts. The order was pronounced in the open court on July 16, 2014.