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TMI Blog2015 (11) TMI 339X X X X Extracts X X X X X X X X Extracts X X X X ..... returned these amounts in the subsequent years as the proposed assignment were not materialised then it would not be proper and appropriate to treat these amounts as income of the assessee.See S. Priyadarsan. Versus Joint Commissioner Of Income-tax [2001 (7) TMI 298 - ITAT MADRAS-B] - Decided in favour of assessee. - I. T. A. Nos. 1944, 1945, 1946 /Mds/ 2014 - - - Dated:- 30-6-2015 - CHANDRA POOJARI (Accountant Member) and CHALLA NAGENDRA PRASAD (Judicial Member) Mrs. Jharna B. Harilal, Chartered Accountant, for the appellant. U. Anjaneyalu, for the respondent. ORDER The order of the Bench was delivered by 1. Challa Nagendra Prasad (Judicial Member).-These three appeals are filed by the assessee against the common order of the Commissioner of Income-tax (Appeals) (C)-II, Chennai dated March 25, 2014 for the assessment years 2004-05 to 2006-07. The only issue in all these appeals is that the advances received by the assessee from various producers is assessable as income for the respective assessment years or not. 2. Brief facts of the case are that there was a search in the case of the assessee on January 19, 2010. In response to the notice under sect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lowing the said decisions of this Tribunal. 4. The Departmental representative vehemently supports the orders of the lower authorities and he places reliance on the decision of the Tribunal in the case of Ms. D. Meena v. Deputy CIT in I. T. A. Nos. 1624 and 1625/ Mds/2000 dated July 19, 2005 and the decision of the jurisdictional High Court in the case of Lakshminarayana Films v. CIT [2000] 244 ITR 344 (Mad) in support of his submission that advances shall have to be treated as income of the assessee. 5. Heard both sides. Perused the orders of the lower authorities and the decisions relied on. In this case, search was conducted in the premises of the assessee on January 19, 2010 and assessments were completed for the assessment years 2004-05 to 2006-07 on December 30, 2011 and while completing the assessments, the Assessing Officer assessed various amounts received by the assessee as advances from the producers. On going through the assessment orders, we find that no incriminating materials were found so as to bring these amounts to tax in search assessments. We also find that similar advances were brought to tax while completing assessments under section 143(3) of the Act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssment year under consideration. The Commissioner of Income-tax (Appeals) has relied upon the hon'ble jurisdictional High Court in the case of Lakshmi narayana Films v. CIT [2000] 244 ITR 344 (Mad), wherein the amounts were to be received by the assessee as per the written agreement and on completion of certain formalities in future. Therefore, the hon'ble High Court has held that the amounts would be income of the asses see in the year in which the said amounts were received on comple tion of the conditions as per the agreement and cannot be said as accrued at the time of execution of the agreement. In our view, the facts of the case in hand are distinguishable and the decision of the hon'ble jurisdictional High Court relied upon by the Commissioner of Income-tax (Appeals) is not directly applicable because in the present case there is no written agreement as well as there are no dates on which the amounts to be paid on fulfilment of certain conditions. 6. From the facts of the present case, we find that these token amounts were received by the assessee for giving preference to the parties for making himself available for future assignments, if finalised after delib ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... otal income of the previous year of every person. Section 5 deals with the 'scope of total income', which is defined in respect of any previous year in terms of accrual, deemed accrual, receipt and deemed receipt, etc. Section 145 deals with the method of accounting in respect of 'profits and gains of business or profession' or 'income from other sources'. Thus, while sections 4 and 5 deal with the scope of income and its charge to Income-tax, section 145 is a procedural section regarding the method to be followed for recording of income in the books of account. It is no doubt true that for the assessment year 1997-98 and onwards, the assessee can follow either the cash or the mercantile system of accounting and the hybrid system of accounting is prohib ited. However, what is to be taxed is income and receipt of an amount is not to be the basis for the levy of the tax. In the case of CIT v. Shoo rji Vallabhdas and Co. [1962] 46 ITR 144 (SC), the hon'ble Supreme Court pointed out that the Income-tax Act takes into account two points of time on which the liability to tax is attracted namely-(i) accrual of income or (ii) receipt of income. It is further men ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r or in a number of years, it will not bind the Assessing Officer in the assessment of a subsequent year because there cannot be any estoppel against the law. However, in this case, we find the earlier and subsequent assessments were made on correct appreciation of the principle of the cash system of accounting. Since the assessee succeeds on merits on this aspect, there is no need for us to give a finding that the Assessing Officer was bound in this year to follow the past or future assessment.' 8. Since, the facts and circumstances of the case in hand are similar to the case relied upon by the assessee. Therefore, following the decision of this Tribunal as well as the Delhi Benches of this Tribunal, we hold that when the assessee has shown as these advance receipt as liability in his balance-sheet and the advances were not on the finalisation of any agreement but were received as a token amount for giving a priority to the parties to negotiate for future assignment without finalising the terms and conditions. When the future assign ments were not materialised and the amounts were returned, then the said advances cannot be treated as income of the assessee. Accordingly, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aced by learned counsel for the Revenue on the decisions of A. Ramki and D. Meena; the former case was decided relying on the latter decision. If we advert to the decision of D. Meena's case, there the assessee who was also a cine artist, had received advance on the basis of a contract for acting in a film. In other words, there was a subsistent contract for acting in a particular film, whereas in the given case the advances were received from two parties with no clear crystallisation of film or the storyline or other aspects of the proposed film. Hence, we are of the opinion that D. Meena's case (supra) is not applicable here on facts. In any event, since this Tribunal had taken a view in favour of the assessee in the assessee's own case for the earlier years, on similar fact situation, we find no compelling reasons to depart from the view taken earlier. Therefore, we find that amount of ₹ 55 lakhs received by the assessee as advance could not have been treated as his income for the impugned assessment year. Such addition stands deleted. Grounds Nos. 2 to 9 of the assessee are allowed. 8. We also find that the co-ordinate Bench has distinguished the decisions ..... X X X X Extracts X X X X X X X X Extracts X X X X
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