9911796707
TMI Blog2022 (1) TMI 845X X X X Extracts X X X X X X X X Extracts X X X X ..... ated 10.03.1995 with M/s.Nirmala Arts, represented by its Proprietrix Nirmala Raju for grant of Telugu dubbing and distribution, exhibition and exploitation rights of the Tamil movie titled "Love Birds" produced by the appellant, for a total consideration of Rs. 60,01,000/-. Subsequently, on 25.11.1995, the appellant assigned the rights of the said movie to M/s.GV Films Limited for a total sum of Rs. 35,00,000/- in respect of Salem and Dharmapuri areas and for a total consideration of Rs. 15,00,000/- in respect of Tirunelveli and Kanyakumari areas, on royalty minimum guarantee basis. 2.2 While so, on 17.03.1997, a search was conducted as contemplated under Section 132 of The Income Tax Act, 1961 (in short, 'the Act'), in the business and residential premises of the said V. Natarajan. During the course of the same, several incriminating materials including books of account of the assessee firm were recovered. 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... film, the same should atleast be allowed to be written off as a bad debt. However, the Assessing Officer held that when the assessee did not take any legal steps, such as initiation of arbitration proceedings etc., for recovery of the so-called waiver amount, the question of treating it as bad debt would not arise. Accordingly, the Assessing Officer treated the said sum of Rs. 10 lakhs each for Salem and Tirunelveli and Kanyakumari areas, as unaccounted items of receipt and therefore, added to the undisclosed income under section 158BB(1) for the assessment year 1996-1997. On the same reasoning, the Assessing officer added the unaccounted income of Rs. 14,25,000/- representing the differential amount in respect of the agreement dated 10.03.1995 entered into between the appellant and M/s.Nirmala Arts. 2.5 During the course of the same assessment proceedings, based on the 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 Rs. 72,90,000/- and it was debited to the account of the firm "Kasturi Manga Creations". The Assessing Officer thus, concluded that th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ned thereof was not received as the film did not click at the box office and therefore, they received only Rs. 30 lakhs from M/s.GV Films as against Rs. 50 lakhs and therefore, they waived Rs. 20 lakhs. Similarly, M/s. Nirmala Arts paid only Rs. 45,76,000/- as against the agreed amount of Rs. 60,01,000/- and hence, there was a waiver of Rs. 14,25,000/-. However, the Appellate authority refused to accept the plea of waiver on the ground that the payments agreed to be made to the appellant / assessee were on minimum guarantee basis, which has nothing to do with the film becoming a hit or flop in the box office. Therefore, the appellate authority agreed with the findings of the Assessing Officer that there was a failure on the part of the appellant-assessee in not making any attempt to recover the balance amount 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 Rs. 34.25 lakhs was proper. 2.8 Being dissatisfied with the order so passed by the Commissioner of In ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t received as per the agreements, it was not shown and offered for assessment. Later, the block assessment was made in consequence of the search and while marking the block assessment, the Assessing Officer noticed that the balance amount of Rs. 34.25 lakhs was not offered for tax and hence he was of the view that it was an undisclosed income for the block period. No details were available on the record in respect of the same. The Tribunal which is the highest fact finding authority ought to have considered the same as to how the impugned amount could be considered as undisclosed income under Chapter XIVB of the Act, or not. Unfortunately, we lack the precious finding on the crucial factor related to answering the above questions of law. Without the precious finding, it is very 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Tribunal, as also the appellate Authority and the Assessing Officer, have failed to consider the letters issued by the assignees confirming the waiver of the amounts. 5. The learned counsel for the appellant also submitted that the question of any addition to the block assessment would arise only if there are materials seized during the search pointing out the failure of the assessee to disclose certain income. In other words, to attract Section 158BC of the Act, it must be shown that there is a direct nexus emanated from the documents seized during the search and the undisclosed income said to have been suppressed by the assessee. In the absence of any material seized during the search, invocation of Section 158BC of the 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 Rs. 34,25,000/- as undisclosed income. 6. Per contra, the learne ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ded to disclose the lawful income earned during the course of their business. Consequently, proceedings under section 158 BC r/w section 158 BD were initiated and notice was issued to the appellant calling upon them to submit their response as to why the undisclosed income for the block period namely 01.04.1987 to 17.03.1997 should not be assessed. In response, the assessee submitted a Nil return for the block period. Thereafter, the Assessing Officer proceeded to determine the undisclosed income at Rs. 1,07,15,000/-. On appeal, the Commissioner of Income Tax (Appeals) set aside the additions to the extent of Rs. 72,90,000/- and upheld the addition to the tune of Rs. 34,25,000/-. As against the order passed by the Appellate Authority setting aside the addition of Rs. 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 Rs. 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 necessar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (e) where any order of settlement has been made under sub-section (4) of section 245D, on the basis of such order; (f) where an assessment of undisclosed income had been made earlier under clause (c) of section 158BC, on the basis of such assessments (2) In computing the undisclosed income of the block period, the provisions of sections 68, 69, 69A, 69B and 69C shall, so far as may be, apply and references to 'financial year' in those sections shall be construed as references to the relevant previous year falling in the block period including the previous year ending with the date of search or of the requisition (3) The burden 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, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ocuments or assets seized or requisitioned shall be handed over to the Assessing Officer having jurisdiction over such person and that Assessing Officer shall proceed (under section 158BC) against such other person and the provisions of this Chapter shall apply accordingly. ..................... Levy of interest and penalty in certain cases. 158BFA. (1) Where the return of total income including undisclosed income for the block period, in respect of search initiated under section 132 or books of account, other documents or any assets requisitioned under section 132A on or after 1st 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 ret ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... missioner or the Principal Commissioner or Commissioner, whichever period expires later; (d) in a case where the assessment is the subject-matter of revision under section 263, after the expiry of six months from the end of the month in which such order of revision is passed; (e) in any case other than those mentioned in clauses (c) and (d), after the expiry of the financial year in which the proceedings, in the course of which action for the imposition of penalty has been initiated, are completed, or six months from the end of the month in 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 su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... /S1). As per the general ledger for F.Yr.95-96 (seized material No. ANN/GSD/B&D/S22) at page No.9 account of G.V. Films for Salem area, Rs. 25 lakhs is shown as total consideration received for this area. Shri. Natarajan was examined under Section 131 on 30.095.1997 and asked to explain why only Rs. 25 lakhs were account for in his books. He stated that G.V. Films had given a cheque for Rs. 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 Rs. 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 Rs. 10 lakhs. The representative stated that the above sum of Rs. 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... balance amount and that, they waived the same. The Tribunal, on examination of the ledger account pertaining to G.V. Films, which was seized during the search, has concluded that the amount of Rs. 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 158 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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