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TMI Blog2012 (5) TMI 72X X X X Extracts X X X X X X X X Extracts X X X X ..... appearing for the Revenue, and Shri.Dale P.Kurian, learned counsel appearing for the assessee. We have also gone through the argument notes filed by assessee's counsel and the several decisions cited by him. The facts leading to the block assessments made under Chapter XIV B are briefly stated hereunder. 3. The assessee is a leading producer and distributor of motion pictures in Kerala. A search was made by the Intelligence Wing of the Income Tax Department under Section 132 of the Act in the residential and business premises of the assessee on 24/07/1997, which led to recovery of various incriminating documents and books of accounts and details of investments made by the assessee in acquisition of agricultural lands, construction of residential house etc. Pursuant to search, notice was issued to the assessee under Section 158BC of the Act requesting to file return of undisclosed income. The assessee filed return in Form No.2B on 27/02/1998 declaring an undisclosed income of Rs.43 lakhs for the entire block period. However, dissatisfied with the quantum of undisclosed income declared by the assessee, the Assessing Officer issued notice proposing assessment. Since accounts ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s.40,48,950/-. Even though first appellate authority sustained the penalty, the Tribunal on 2nd appeal filed by the assessee cancelled the penalty completely. Revenue's appeal is for restoring the penalty that was sustained in first appeal. 5. We first proceed to consider the assessment appeal (ITA No.323/2002) filed by the Revenue and Cross Objection filed by the assessee. 6. Before proceeding to consider the various questions raised in the appeal, we have to consider the preliminary objection raised by the learned counsel for the respondent that no substantial question of law arises for consideration by this court with regard to the concurrent findings on fact recorded by the first appellate authority and confirmed by the Tribunal. Senior counsel appearing for the Revenue on the other hand contended that the appeal has to be considered by keeping in mind the special provisions of the Act contained in Chapter XIVB of the Act which specifically provide in Section 158BB that a block assessment has to be completed on the basis of evidence found as a result of search or requisition of books of account or other documents and such other materials or information as are available with t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s not disproved by the assessee. Keeping this in mind we proceed to consider the appeal on the various grounds raised and the questions raised with reference to specific additions. 7. The first item of addition is of Rs.1.09 crores, which is the sum total of unaccounted payments made by the assessee to film directors Shri. Siddique & Lal and Shri. Fazil and also to the film producer, M/s.Kumudavally Pictures. The reason for the addition is that all the three film directors denied receipt of payments from the assessee, and M/s.Kumudavally Pictures did not confirm receipt of the amount from the assessee, to the Department. Consequent upon non confirmation of payments as claimed by the assessee, an amount of Rs.1.09 crores and odd was assessed as undisclosed income of the assessee. The first appellate authority as well as the Tribunal accepted the explanation of the assessee that the details of unaccounted payments along with unaccounted receipts were available in the seized records and when entries in the seized books pertaining to unaccounted receipts are accepted by the Assessing Officer, he has no justification to reject unaccounted expenditure also seen recorded in the books of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r than "undisclosed income" which has to be arrived at after allowing expenditure incurred by the assessee whether it be accounted in the regular books or not. What is clear from the clandestine records seized from the assessee is that both the film producer and the film directors were engaged in collections and payments outside the regular books of accounts and that is the only reason why there is no written agreement between them in regard to profit sharing and the payments are consciously not made through cheques or demand drafts. The Assessing Officer has also stated that the purpose of payments is not seen recorded in the seized records. We do not think this unrealistic stand is justified in the context of the business carried on by the assessee because between the film producer and the film directors income seen recorded and payments seen made should be taken as relating to business and nothing else. The mere fact that film directors have not confirmed receipt of payment in cash from the assessee also is not a ground for treating the payments as bogus or not genuine. In our view, there is nothing to doubt the genuineness of the payments because assessee himself explained that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s to the case in hand. We, therefore, do not find any ground to interfere with the orders of the Tribunal with regard to the deletion of total addition of Rs.1.09 crores and odd to three film directors and one film producing Company towards unaccounted payments made by the assessee to them. The first question raised in Revenue's appeal is therefore answered against the Revenue and in favour of the assessee. 11. Second and third questions in the Revenue's appeal pertain to the deletion of Rs.44.62 lakhs by the Tribunal by accepting the explanation from the assessee that the said amount represents advances received from theatre owners. In fact in the cash flow statement, the assessee tried to explain the source for the investments by stating that Rs.50 lakhs was received from theatre owners during the years 1991-92, 1992-93 and 1993-1994 towards advances for production and making available two films for distribution. On the facts it is seen that the two films for which advances were taken were produced only in the year 1996-97 whereas the advances were stated to have been taken by the assessee during the period 1991-92 to 1993-94 i.e. 3 to 6 years prior to the production of the movi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the business and for the investments seen made by the assessee. 12. On going through the Tribunal's order, we notice that the Tribunal's findings do not justify the ultimate conclusion arrived at by them. The assessee in the sworn statement stated that advances from theatre owners were received for exhibiting just two films, Aniyathipravu and Chandralekha. However, admittedly, these films were produced and released in the year 1996-97, whereas the advances were stated to have been received during the period 1991-92 to 1993-94. The assessee has no explanation as to why advance payments received, which were stated to be accounted by theatre owners, were not accounted by the assessee. There is also no explanation as to why the payments were not received in cheques or demand drafts. Further, the assessee has a specific case that Rs.35 lakhs were returned to the theatre owners during 1995-96 and 1996-97. Normally, advances received from theatre owners only get adjusted against payments due to the Distributor and the assessee does not explain as to why and when repayments were made in cash by him. Neither the assessee nor the theatre owners in their confirmation letters gave the dates o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dated amount as having been advanced to the assessee and taken back by the theatre owners. In our view, the confirmation letters on the face of it are not genuine and no reasonable man can accept it as proof of cash transactions running into lakhs of rupees. Going by the assessee's financial position and investments revealed by seized records, it is difficult to accept the theory of advance from theatre owners put forward by the assessee later. The Tribunal has without any material assumed that in the film industry there is a practice of taking advances by film producers from theatre owners which may or may not be true, and may be true with some producers or a set of theatre owners but is certainly not a presumption available to be acted upon without acceptable evidence. Further it is difficult to believe that theatre owners advanced funds and waited for 3 to 6 years for films to be produced and supplied. It is also to be noticed that the Tribunal itself disallowed Rs.5.38 lakhs as the assessee could not prove any such advance having been taken by him from theatre owners. The only reasoning for the Tribunal to allow the balance amount of Rs.44.62 lakhs is confirmation letters, whic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... evenue's counsel heavily relied on the findings of the Assessing Officer particularly with reference to the requirement of audit report in Form 10CCB, the assessee's counsel contended that at any time the assessee is entitled to claim deduction under Section 80-IA of the Act. 14. After hearing both sides, we are of the view that in order to consider claim of deduction under Section 80-IA a statutory audit report in form No.10CCB is mandatory as required under the above provision of the Act. Admittedly, the assessee has not made any claim in the regular returns filed up to the assessment year 1998-99. The requirement of an audit report in form 10CCB is for the Department to verify the factual position with reference to the data contained therein, which has contemporary relevance. The block assessment happened to be completed 6 to 7 years after the relevant years to which the assessee's claim for deduction under Section 80- IA relates. Standing Counsel submitted that the Department cannot verify the genuineness of the claim with reference to Form 10CCB, if the same is furnished for the years 1991-92 & 1992-93, 10 years after the closure of those years, pursuant to remand order issue ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ined as to why the amount was not paid or repaid through cheque or demand draft. We do not find any question of law arising from the findings of the Tribunal in this behalf. In our view, the Tribunal's findings and conclusions are well founded. We, therefore, dismiss the Cross Objection on this issue which is an after thought as is filed after 8 years of filing of appeal by the Department. The disallowance of the other two items raised in the Cross Objection are also based on evidence and no question of law arises from the findings of the Tribunal for consideration by us. 16. In so far as the penalty appeal, i.e. ITA No.177/2008 is concerned, it may be noticed that there was difference of opinion between the Accountant Member and the Judicial Member of the Tribunal who had heard the penalty appeal. While the Accountant Member cancelled the penalty in toto, the Judicial Member through a detailed order examined the scope of the provisions of Section 158BFA(2) and considered penalty with reference to each and every item of undisclosed income sustained by the first appellate authority. The judicial member held that penalty was rightly levied in respect of four items specificall ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... C(a) assessee files return, remits tax and does not proceed to contest the undisclosed income returned based on which assessment is made, there is no scope for any penalty. However, the second proviso is an exception to the first proviso which makes it clear that if any undisclosed income is assessed over and above the undisclosed income returned by the assessee in the return filed pursuant to notice issued under Section 158BC(a), penalty is to be levied on such excess income assessed. The main provision gives a limited discretion to the Assessing Officer to levy penalty ranging from a minimum amount, which is equal to the amount of tax payable in respect of undisclosed income and the maximum is three times of such tax. In other words, unlike under Section 271(1)(c), which provides for penalty for concealment of income, Section 158BFA(2) provides for mandatory penalty in respect of tax assessed on undisclosed income other than undisclosed income admitted without further contest and on which tax is paid based on return filed by the assessee against notice issued under Section 158BC(a) of the Act. Applying the above provision, what we notice is that in this case, the assessee returne ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d pursuant to notice issued under Section 158BC(a) of the Act even after recovery of details of undisclosed income during the search by the Department. Here we feel two items deserve to be considered, one the claim of borrowal claimed by the assessee from his sister-in-law, Dr.Mary Singh to off-set undisclosed income found in search, and the other is income from real estate business, which was found to be at Rs.10 lakhs. 19. So far as the borrowal claimed by the assessee from his sister-in-law is concerned, it is seen from the order that the assessee on the date of search gave sworn statement declaring that the only loan he had was Rs.10 lakhs availed from the Bank by himself, his wife and son. However, later in the course of assessment, the assessee gave a confirmation letter from his sister-in-law, Dr.Mary Singh stating that she has given an advance of Rs.20 lakhs and later another Rs.5 lakhs to the assessee. The case advanced by the assessee's sister-in-law was that she is a medical practitioner and she gave the loan to the assessee from her own savings, which was disclosed under the VDIS, 1997. However, when the Departmental Officials questioned her, she stated that the amount ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... statement of the assessee and based on assessee's sworn statement income conceded by him at Rs.10 lakhs from real estate business was assessed as undisclosed income. There is no justification for the assessee to suppress the same in return and to contest it in appeal up to the Tribunal. Assessee's sworn statement is an admissible evidence under Section 132(4) of the Act and the document received, namely the cheque, is admissible evidence under Section 132(4A) of the Act, unless the assessee established that the transaction representing the document did not bring any undisclosed income to the assessee. Here again we are of the view that the conduct of the assessee justifies maximum penalty. But the Assessing Officer was considerate and limited the penalty covering this amount also at the minimum. We therefore allow the appeal on this issue by reversing the order of the Tribunal, and by restoring the minimum penalty confirmed by the first appellate authority. In the result, the appeal is allowed in part sustaining the penalty only on the above two items of undisclosed income of total amount of Rs.30 lakhs. 21. Before parting with the matter, we are constrained to observe abo ..... X X X X Extracts X X X X X X X X Extracts X X X X
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