2022 (1) TMI 533 - AT - Income Tax

Disallowance of expenditure claimed on account of cost production of feature films - CIT-A retained 50% disallowance - HELD THAT - Substantial amount of expense to the tune of ₹ 4.77 crores was also stated to have been claimed by M/s. Eagle Films (P) Ltd., in production of the same film (Office Office), the duplicacy of certain expenses cannot be ruled out. Accordingly, it is considered fair and reasonable to disallow 50% of the expenses claimed, since the same had not been subjected to verification by the AO as has also been stated in the remand report. Thus, the addition to the extent is hereby confirmed on account of disallowance of 50% of expenses claimed to have been incurred on cost of production of the film - appeal of the assessee is dismissed.

Summary

Issues:
Appeal against order of Ld. CIT(A) - Adequate opportunity of hearing not granted - Void ab initio assessment order - Disallowance of expenditure - Disallowance of interest - Claim of expenditure not allowed - Disallowance sustained - Disallowance confirmed - Disallowance of 50% of expenses claimed - Appeal dismissed.

Analysis:

1. The appeal was filed by the assessee against the order of the Ld. CIT(A) pertaining to the Assessment Year 2012-13. The assessee raised multiple grounds of appeal, including the lack of adequate opportunity of hearing, the void ab initio assessment order, and the disallowance of expenditure claimed on account of cost production of feature films. The appellant did not appear during the hearing, and the appeal proceeded in their absence.

2. The assessment under section 143(3) of the Income Tax Act disallowed a significant amount of expenditure claimed by the assessee, resulting in a computed taxable income much lower than the declared loss. The Ld. CIT(A) partially allowed the appeal, sustaining some disallowances while deleting others, leading to the present appeal before the Tribunal.

3. The main issue in the appeal was the sustenance of the addition of a specific amount out of the total disallowed expenditure. The Ld. Sr. Departmental Representative supported the Assessing Officer's decision, emphasizing the justification for the disallowance.

4. The Tribunal reviewed the orders of the authorities below and the arguments presented. The Ld. CIT(A) considered the peculiar facts and circumstances of the case, particularly regarding the revenue from the feature film and the expenses claimed. The appellant's case was found not to be covered by certain rules, and the disallowance was upheld due to insufficient justification and potential duplicacy of expenses.

5. The Tribunal noted that the assessee failed to provide material to counter the findings of the Ld. CIT(A). Consequently, the grounds raised in the appeal were rejected, and the appeal was dismissed. The decision was pronounced after a Virtual Hearing in the presence of both parties on 6th January 2022.