2019 (9) TMI 460 - AT - Income Tax

Addition on un-vouched expenses and expenses of personal in nature - HELD THAT - Assessee has already paid the relevant taxes on the amount under consideration and therefore, double addition cannot be made and the assessee cannot be subjected to double taxation. We realized that the said addition has already been made by the AO while framing the assessment order dated 04.12.2009 u/s 143(2). Though the assessee did not disclose the said addition in the return filed u/s 153A of the Act, however, it is a fact that the assessee has already paid the taxes on the said addition, which is not refuted by the Revenue Department, hence the instant addition of ₹ 1,06,000/- is not warranted because if allowed, then the same would amount to double taxation hence, we are inclined to delete the same, consequently, the same stands deleted. Addition of sum alleged to have been paid to Sh Sardool Sikander, a singer pursuant to an agreement - rejecting the assessee s contention that the same had been cancelled - re-assessment proceedings 147 have been initiated on dated 26.03.2015 against the singer who made the agreement with the assessee - HELD THAT - CIT(A) in the instant case though have taken into consideration, the conclusion drawn by the said AO in the assessment proceedings initiated against the singer u/s 147 of the Act, however observed that the Assessing Officer has passed a cryptic one line order dropping proceedings u/s 147/148 without in any manner confirming that Sr. Sardul Sikander (singer) was never paid any money by him. However, as it reflects from the note of the said assessment order wherein the Assessing Officer while dropping the proceedings specifically noted about receiving of the part payment of ₹ 2,00,000/- only during the assessment year relevant to the instant case - the agreement in question was never materialized fully and consideration amount was not paid in full, due to the reason that the said singer did not record the solo music album which resulted into verbal cancellation of the agreement in question, hence, the addition made and sustained by the authority below is liable to be deleted, therefore we do not have any hesitation to delete the same.

Issues Involved:
1. Validity of re-assessment proceedings when no incriminating documents were found during the search.
2. Sustaining of ad hoc addition based on disallowance of expenses.
3. Addition of ?5,00,000 alleged to have been paid pursuant to an agreement.
4. Double taxation due to previously paid taxes on certain disallowed expenses.

Detailed Analysis of Judgment:

Issue 1: Validity of Re-assessment Proceedings
The assessee argued that no re-assessment could be made as no incriminating documents were found during the search. However, this ground was not specifically raised, and therefore, it did not require adjudication.

Issue 2: Sustaining of Ad Hoc Addition
The assessee did not specifically raise the issue of the ad hoc addition of ?2,02,809 based on the disallowance of 10% of the aggregate expenses under the head 'audio & video making charge + publicity expenses'. Hence, this issue did not require adjudication.

Issue 3: Double Taxation on Disallowed Expenses
The Assessing Officer made an addition of ?1,06,000 during the assessment proceedings for the Asst. Year: 2007-08. This was based on the assessee's voluntary agreement to add ?56,000 for un-vouched expenses and ?50,000 for personal expenses. The Ld. CIT(A) affirmed this addition because the assessee did not reflect these additions in the return filed u/s 153A. The Tribunal considered the facts and submissions, noting that the assessee had already paid taxes on the amount under consideration. The Tribunal concluded that allowing the addition would result in double taxation, which is not warranted. Consequently, the addition of ?1,06,000 was deleted.

Issue 4: Addition of ?5,00,000 Alleged to Have Been Paid Pursuant to an Agreement
The Assessing Officer observed that during a search, an agreement was found indicating that ?5,00,000 was to be paid in cash to an artist within 10 days of signing the agreement. The assessee claimed that the agreement was not fully materialized, and only ?4,00,000 was paid for a "duet" album, as the "solo" album was not provided by the artist. The Ld. CIT(A) affirmed the addition, but the Tribunal noted that in re-assessment proceedings against the artist, it was verified that no other income of ?34,00,000 was received by the artist from the assessee. The Tribunal found that the agreement was verbally canceled, and the addition made and sustained by the authorities below was not justified. Therefore, the addition of ?5,00,000 was deleted.

Conclusion:
The appeals filed by the assessee for both Asst. Years 2007-08 and 2008-09 were partly allowed. The Tribunal deleted the additions related to double taxation and the alleged payment of ?5,00,000, concluding that the authorities below had erred in their judgment. The decision was pronounced in open court on 03.09.2019.

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