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TMI Blog2022 (1) TMI 845X X X X Extracts X X X X X X X X Extracts X X X X ..... vides a default clause that in case of default in payment, the appellant is at liberty to proceed against the defaulter. Whereas, it was stated before the lower authorities that the appellant did not proceed to recover the balance amount and that, they waived the same. Tribunal, on examination of the ledger account pertaining to G.V. Films, which was seized during the search, has concluded that the amount of ₹ 35,00,000/- were received by the assessee on various dates between 23.08.1995 and 11.01.1996 and the same were duly accounted. In view of the same, the Tribunal has come to a definite conclusion that the appellant already received the entire amount from the distributors much before the release of the film and therefore the question of waiver would not arise. Such a factual finding arrived at by the Tribunal, based on the material evidence, cannot be found fault with, in the opinion of this court. Assessee filed their returns only after the conduct of inspection by the Enforcement wing officials and the materials seized disclosed the unaccounted income of ₹ 34.25 lakhs and the appellant did not pinpoint anything by supportive material to rebut the same, we fi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed. Sworn statements under section 132(4) were also recorded from the said V.Natarajan and his brothers. On the basis of search report, proceedings under Section 158BC read with Section 158BD were initiated against the assessee firm and they were called upon to file their return for the block period in question. In response, the assessee filed their return in Form 2B on 17.05.1998 indicating income as 'Nil'. 2.3 Thereafter, the assessment was finalised, based on the sworn statement of the said Natarajan, one of the partners of the assessee, recorded on 09.04.1997 under Section 131 of the Act. According to his statement, all the areas were sold and the consideration for the same were received, in terms of the agreements entered into between the parties. However, it was noticed that in the agreement dated 25.11.1995, the consideration agreed upon by the assessee was ₹ 35 lakhs, whereas, in the books of account for the year 1995-96 (seized material - S22), they mentioned as if they received only ₹ 25 lakhs. During enquiry, the assessee stated that ₹ 10 lakhs was waived as the cheque given for the same at the time of release of the movie, was not honoured ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e statement of the said Natarajan, the Assessing Officer found that the assessee said to have incurred the expenditure for the production of the film Ettupatti Raasa to the tune of ₹ 72,90,000/- and it was debited to the account of the firm Kasturi Manga Creations . The Assessing Officer thus, concluded that the breakup details of the expenses incurred to the tune of ₹ 72,90,000/- received by Kasthoori Manga Creations had not been furnished. Further, as on the date of search namely 17.03.1997, the expenses incurred by M/s. Kasturi Manga Creations had not been recorded in the books of accounts of the assessee. Above all, the expenses said to have incurred through M/s. Kasturi Manga Creations had not been entered into the books and documents before the date of search and therefore, the Assessing Officer disallowed the alleged expenditure said to have been incurred by the Assessee through M/s. Kasturi Manga Creations and added the amount of ₹ 72,90,000/- as well under Section 158BB(1) of the Act. In effect, the Assessing Officer disallowed the claim of the assessee and determined the total undisclosed income at ₹ 107,15,000/-, vide assessment order dated 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mount by initiating appropriate legal proceedings and ultimately, concluded that the Assessing Officer was right in bringing to tax the entire amount covered in the agreements entered into between the parties. Accordingly, it was held by the Appellate authority that the addition of ₹ 34.25 lakhs was proper. 2.8 Being dissatisfied with the order so passed by the Commissioner of Income Tax (Appeals), the appellant / assessee preferred further appeal before the Income Tax Appellate Tribunal, Chennai 'A' Bench by contending that the Appellate Authority ought to have allowed the appeal in entirety by deleting the addition of ₹ 34.25 lakhs determined by the Assessing Officer. It was the main contention on the side of the appellant before the Tribunal that the amounts, which were not received from the assignees, were treated by the assessee as bad debts, but the Appellate Authority refused to believe the same. The appellant/ assessee further contended that a debt turned to bad debt consequent to dishonour of cheques and reversal of entries in the books of accounts are sufficient enough to allow the deduction. When the appellant decided to waive the amounts and tre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... difficult for this Court to determine the issue. 6. In view of the foregoing reasons, in the interest of justice, we set aside the order of the Tribunal, with a direction to rehear the matter and consider the scope of Chapter XIVB as well as the impact of the regular assessment made by the Assessing Officer in the assessee's own case for the assessment year 1996-1997, for the purpose of determining as to whether the said impugned amount would come under undisclosed income as contemplated under Chapter XIVB of the Act, or not, and pass orders in accordance with law, after giving opportunity to the assessee. 2.11 Pursuant to the order of remand passed by this Court, mentioned supra, the Tribunal passed the order dated 15.07.2008 rejecting the appeal filed by the assessee, however, set aside the order passed by the Appellate Authority insofar as it relates to imposition of penalty and remanded the matter back to the Assessing Officer with a direction to re-consider and decide the question of penalty afresh after giving due notice to the assessee. Challenging the said order of the Tribunal insofar as it relates to confirmation of the order of the Appellate Authority rel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Act is improper and unsustainable in law. On the other hand, the Tribunal erred in concurring with the findings of the Appellate Authority as also the original authority, without regard to the parameters laid down under Chapter XIVB as to what constitute the 'undisclosed income'. Therefore, the learned counsel prayed for setting aside the order of the Tribunal, confirming the addition of ₹ 34,25,000/- as undisclosed income. 6. Per contra, the learned Senior Standing Counsel appearing for the respondent would contend that the undisclosed income determined by the Assessing Officer is based on the materials seized during the course of search. The addition determined by the Assessing Officer has a direct nexus to the documents seized and therefore, it cannot be said to be perverse. This was appreciated by the Tribunal in Para No.12 of the order, which is impugned in this appeal. In this context, the learned counsel relied on the decision of the Honourable Supreme Court in the case of Assistant Commissioner of Income Tax, Chennai vs. A.R. Enterprises reported in (2013) 350 ITR 489 . In that case, a search was conducted in the premises of another concern in which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e order passed by the Appellate Authority setting aside the addition of ₹ 72,90,000/-, the Assessing Officer has not filed any appeal and it has become final. 9. In this appeal, the only question remains to be answered is as to whether the plea of waiver raised by the appellant with respect to the amount of ₹ 34,25,000/- is justified or it has to be added by treating it as undisclosed income, as contemplated under Section 158 BC of the Income Tax Act, 1961. In this context, it is necessary to look into the relevant provisions of the Act and they are as follows:- Computation of undisclosed income of the block period. 158 BB. (1) The undisclosed income of the block period shall be the aggregate of the total income of the previous years falling within the block period computed in accordance with the provisions of this Act, 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 the Assessing Officer and relatable to such evidence, as reduced by the aggregate of the total income, or as the case may be, as increased by the aggregate of the losses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of proving to the satisfaction of the Assessing Officer that any undisclosed income had already been disclosed in any return of income filed by the assessee before the commencement of search or of the requisition, as the case may be, shall be on the assessee. (4) For the purpose of assessment under this Chapter, losses, brought forward from the previous year under Chapter VI or unabsorbed depreciation under sub-section (2) of section 32 shall not be set off against the undisclosed income determined in the block assessment under this Chapter, but may be carried forward for being set off in the regular assessments. Procedure for block assessment. 158BC. Where any search has been conducted under Section 132 or books of account, other documents or assets are requisitioned under section 132A, in the case of any person, then,---- (a) the Assessing officer shall---- (i) in respect of search initiated or books of accounts or other documents or any assets requisitioned after the 30th day of June, 1995, but before the 1st day of January, 1997, serve a notice to such person requiring him to furnish within such time not being less than fifteen days, (ii) in res ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t day of January, 1997, as required by a notice under clause (a)of section 158BC is furnished after the expiry of the period specified in such notice, or is not furnished, the assessee shall be liable to pay simple interest at the rate of one per cent of the tax on undisclosed income, determined under clause (c) of section 158BC, for every month or part of a month comprised in the period commencing on the day immediately following the expiry of the time specified in the notice, and---- (a) where the return is furnished after the expiry of the time aforesaid, ending on the date of furnishing the return; or (b) where no return has been furnished, on the date of completion of assessment under clause (c) of section 158BC (2) The Assessing Officer or the Commissioner (Appeals) in the course of any proceedings under this Chapter, may direct that a person shall pay by way of penalty a sum which shall not be less than the amount of tax leviable, but which shall not exceed three times the amount of tax so leviable in respect of the undisclosed income determined by the Assessing Officer under clause (c) of section 158BC Provided that no order imposing penalty shall be mad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which action for imposition of penalty is initiated, whichever period expires later; (f) in respect of search initiated under section 132 or books of account, other documents or any assets requisitioned under section 132A, after the 30th day of June, 1995 but before the 1st day of January, 1997. Explanation.-- In computing the period of limitation for the purpose of this section,-- (i) the time taken in giving an opportunity to the assessee to be reheard under the proviso to section 129; (ii) the period during which the immunity granted under section 245H remained in force; and (iii) the period during which the proceedings under subsection (2) are stayed by an order or injunction of any court shall be excluded (4) An income tax authority on making an order under sub-section (2) imposing a penalty, unless he is himself an Assessing Officer, shall forthwith send a copy of such order to the Assessing Officer. 10. It is the main contention on the side of the appellant / assessee that pursuant to the three agreements entered into with the film distributors/assignees, the appellant received only a portion of the amounts mentioned in the agreements an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tarajan was examined under Section 131 on 30.095.1997 and asked to explain why only ₹ 25 lakhs were account for in his books. He stated that G.V. Films had given a cheque for ₹ 10 lakhs at the time of release of the film and that this was not honoured and further steps were not taken by him as the picture failed. During the course of assessment proceedings, the assessee stated that the above balance amount of ₹ 10 lakhs was waived and he filed a copy of the confirmation letter dated 22.11.199 received from M/s. GV Films certifying that due to very poor collection they were unable to pay the balance amount of ₹ 10 lakhs. The representative stated that the above sum of ₹ 10 lakhs should not be treated as concealed income as the assessee did not receive the above money. 13. The contention of the assessee was not accepted in view of his earlier deposition that all the areas were sold as per agreement and the consideration was also received as per the agreement. The letter arrangement dated 25.11.1995 makes it clear the agreement was on minimum guarantee basis for a consideration of ₹ 35 lakhs. Shri. Natarajan himself had explained the nature and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncluded that the amount of ₹ 35,00,000/- were received by the assessee on various dates between 23.08.1995 and 11.01.1996 and the same were duly accounted. In view of the same, the Tribunal has come to a definite conclusion that the appellant already received the entire amount from the distributors much before the release of the film and therefore the question of waiver would not arise. Such a factual finding arrived at by the Tribunal, based on the material evidence, cannot be found fault with, in the opinion of this court. 12. In the decision in A.R.Enterprises case , referred to above on the side of the respondent, it was held by the supreme court as follows: 39.Thus, for the purposes of computation of undisclosed income under Chapter XIVB, an assessee can rebut the Assessing Officer's finding of undisclosed income by showing that such income was disclosed in the return of income filed by him before the commencement of search or the requisition. In other words, when section 158BB(3) is read with section 158B(b), which defines undisclosed income, we reach the conclusion that for income to be considered as disclosed income, the same should have been disclosed ..... X X X X Extracts X X X X X X X X Extracts X X X X
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