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TMI Blog1988 (2) TMI 128X X X X Extracts X X X X X X X X Extracts X X X X ..... ection of the remuneration. The ITO then goes on to observe that from the second year onwards the assessee was entitled to one half of the gross receipts of Rs. 50,000 whichever was higher. In the first year of the agreement, the assessee was entitled to 75 per cent of the gross receipts though this is not mentioned in this year's order. The first year of the agreement ended on 31st day of March, 1979 relating to the asst. yr. 1979-80. 3. The assessee had shown an amount of Rs. 8 lakhs as professional receipts representing his share of 50 per cent of the realisation of Rs. 16 lakhs by M/s Haazan Bros. To put in the words of the ITO, the amount of Rs. 8 lakhs was arrived at "by taking the full remuneration in respect of the pictures completed during the year, leaving out the advances and subsequent receipts from other pictures which are still under production." The assessment order goes on to state that in the case of the firm, in computing its income only the entire remuneration in respect of the completed pictures alone were taken into account in the year in which the picture was released and this method of accounting had been accepted by the Department. 4. In the case of the as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hile the ITO there proposed an addition for the asst. yr. 1980-81, the IAC did not agree to the proposed addition of Rs. 5,62,612 and eventually the assessment for 1980-81 was completed in the case of that firm excluding the proposed addition which had been suggested on a similar basis. The CIT(A) considered that there was force in this contention and that the assessee would be entitled only to the income as determined as payable to him in the firm's case, and in the firm's case since the method of accounting was accepted, the CIT(A) as a consequence, held that the am of Rs. 2,00,501 was to be deleted. 6. The Revenue is aggrieved. The learned Departmental Representative took us through the agreement of the 15th March, 1978 and in particular he placed considerable reliance on cl. 3 thereof which reads as under: "3. The party of the 1st part shall be entitled to enter into contract with third parties for hiring out the services party of the 2nd part and the party of the 1st part shall be to receive the entire consideration for such services so hire out and out of which party of the 2nd part shall be entitled to three fourths of the gross receipts upto 31st day of March, 1979 and th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was considered that the agreement between M/s Haazan Bros. and the producers required examination to determine when the entire consideration was received, the proper course for us would be to set aside the findings of the authorities below if we were unable to accept the contention of the Department straightway and direct a fresh investigation with reference to each agreement between M/s Haazan Bros. and the producers etc. separately qua the services rendered by the assesses. 9. We have considered the rival submissions. The provisions of s. 145 read as under : "145 (1). Income chargeable under the head "Profits and gains of business or profession" or "Income from other sources" shall be computed in accordance with the method of accounting regularly employed by the assessee : Provided that in any case where the accounts are correct and complete to the satisfaction of the ITO but the method employed is such that, in the opinion of the ITO, the income cannot properly be deduced therefrom, then the computation shall be made upon such basis and in such manner as the ITO may determine. Where the ITO is not satisfied about the correctness or the completeness of the accounts of the as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -84 which includes the advances aggregating to Rs. 2,15,000. In respect of the remaining advance of Rs. 1 lakh, which we have adverted to of "Sattam En Keyeil", Rs. 3,50,000 has been shown in relation to the asst. yr. 1984-85. Thus, out of the unadjusted advances considered by the ITO of Rs. 4,00,002, with the available records we have physically verified that advances of Rs. 3,15,000 were duly accounted for either in the immediately succeeding year or in the year thereafter on completion of the respective pictures by showing the gross receipts therefrom. As a matter of fact, for the asst. yr. 1983-84, as the assessment, as stands at present the method followed by the assessee was not disturbed and the result is that in 1983-84, while the receipts from "Simla Special" and "Sanama Teri Kasam" have been brought to tax aggregating to Rs. 3,16,000 no deduction has been given for Rs. 2,15,000 which was added this year. We need not dwell on this aspect further. We are concerned with the aspect of whether the receipts as shown by the assessee this year requires disturbance or not. At the cost of repetition, we set out cl. 3 of the agreement which was heavily relied on by the learned Depar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rked out only on completion of the picture and the assessee's share worked out at that stage. This method does not conflict with the language of cl. 3 of the agreement. Factually also our test verification has shown that the receipts were duly accounted for in the subsequent years. As a matter of fact, by invoking the first proviso to s. 145, as we have already stated, there was a presumption even on the part of the assessing officer that the accounts were correct and complete. Viewed in this background, we do not consider that any case has been made out for holding that on the basis followed by the assessee the income cannot properly be deduced and a different basis had to be evolved by the ITO. We would, therefore, agree with the CIT(A) that the addition of Rs. 2,05,001 would fall to be deleted. 10. Before parting with this aspect, we have to mention that the Department has taken two specific grounds. One is that the CIT(A) failed to note that the gross receipts accounted for by the firm included a sum of Rs. 1 lakh in respect of a picture which was released in 1980. This fact does not find any mention in the assessment order or in the appellate order. But we ascertained that t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .e., Rs. 3,015 as a deduction. 13. The ITO had made an addition of Rs. 45,000. This was for low drawings, purchase of jewellery for which the source was not shown and a trip to Singapore. The CIT(A) has sustained an addition of Rs. 16,000 for low drawings and Rs.7,500 towards sources of funds for purchase of jewellery which could not be linked. He however, deleted the balance of Rs. 21,537. There is no discussion in the order of the CIT(A) about the trip to Singapore. According to the ITO, since the assessee and his wife received large gifts in Singapore, they must have spent, apart from the ticket money, considerable amount in taking gifts to friends in Singapore. It is only an inference that the assessee should have spent money on taking gifts to Singapore. We do not consider any addition on mere surmises could be made. But the assessee did pay for the to and fro ticket for himself and his wife since the contrary is not alleged. We are informed that the fare at that time to and for Singapore by the economy class was only Rs. 2,000 and the assessee at that time used to travel in economy class. Since the learned counsel for the assessee could not link any source of income with the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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