Commissioner Of Income-Tax-Iv, Chennai v. P.vasu

IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED : 13.06.2007 Coram : THE HONOURABLE MR.JUSTICE P.D.DINAKARAN AND THE HONOURABLE MR.JUSTICE P.P.S.JANARTHANA RAJA Tax Case (Appeal) Nos.591 and 592 of 2007 Commissioner of Income-tax-IV,Chennai...Appellant in both the T.C.(A)s. Vs.P.Vasu..Respondent in both the T.C.(A)s. Appeals under Section 260A of the Income-tax Act, 1961against the order of the Income-tax Appellate Tribunal, ChennaiBench 'B', Chennai in I.T.A. Nos.486(Mds)/97 and 706(Mds)/97dated 24.11.2004, for the assessment year 1993-94.Against ITA36/96-97 dated 21.1.97 on the file of the Commissioner ofIncome Tax (Appeals) -IV Chennai dated 21.1.97 against PAN/GIRNo.270J-V on the file of the Assistant Commissioner of IncomeTax, City Circle V (Inv) (2) Madras-6. For Appellant :Mr.J.Narayanaswamy,Standing Counsel forIncome-tax DepartmentJUDGMENT (Judgment of the Court was delivered by P.P.S.Janarthana Raja, J.) These appeals are filed by the Revenue against the orderof the Income-tax Appellate Tribunal, Chennai Bench 'B',Chennai in I.T.A. Nos.486(Mds)/97 and 706(Mds)/97 dated24.11.2004, raising the following common substantial questionsof law:- "1. Whether in the facts and circumstancesof the case, the Tribunal was right indeleting the addition made on account ofcash credits without verifying thecreditworthiness of the creditors?2. Whether in the facts and circumstancesof the case, the Tribunal was right in https://hcservices.ecourts.gov.in/hcservices/ deleting the addition on account of excesscash balance by telescoping the additioninto Rs.15 lacs that was disclosed by theassessee?3. Whether in the facts and circumstancesof the case, the Tribunal was right indeleting the addition on account ofsuppression of sale of distribution rightsof the film on the ground that the assesseehad offered to disclose Rs.15 lacs underthe head 'profession' and not 'business'? 2.The facts leading to the above substantial questionsof law are as under: The assessee is a Film Director and has also been aProducer under the banner "Kamalam Movies". The relevantassessment year is 1993-94 and the corresponding accountingyear ended on 31.03.1993. During the year, the assesseedirected and produced the film "Walter Vetrivel" which a boxoffice movie. There was a raid at the premises of the assesseeon 14.07.1993 and in the course of search, there was a seizureof cash of Rs.1.70 lakhs. The assessee filed Return of incomeon 27.10.1993 declaring a total income of Rs.33,54,310/-. TheReturn was processed under Section 143(1)(a) of the Income-taxAct ("Act" in short) and determined a total income ofRs.72,04,310/-. While completing the assessment, the AssessingOfficer made the following additions:- (1) Cash credits for which proper explanation was not available.. Rs.4,00,000/- (2) Suppression of income relating to distribution of rights of the film of Madurai-Ramanathapuram area .. Rs.11,50,000/- (3) Suppression of income relating to distribution of rights of the film for Chingalpattu area.. Rs. 7,60,000/-(4) Suppression of income relating to distribution of rights of the film for Salem area.. Rs. 8,60,000/- (5) Excess cash balance in the books of Kamalam Movies.. Rs. 6,25,000/- (6) Other disallowances .. Rs. 55,000/- -------------------.. Rs.38,50,000/- ------------------- Total https://hcservices.ecourts.gov.in/hcservices/ Aggrieved by the order, the assessee filed an appeal to theCommissioner of Income-tax (Appeals). C.I.T.(A) confirmed theaddition of Rs.4 lakhs as stated in (1) above. In respect ofother additions, the C.I.T.(A) deleted the additions.Aggrieved, both the assessee as well as the Revenue filedappeals to the Income-tax Appellate Tribunal ("Tribunal" inshort). The Tribunal allowed the assessee's appeal anddismissed the Revenue's appeal. Hence the present tax cases bythe Revenue. (5) Excess cash balance in the books of Kamalam Movies.. Rs. 6,25,000/- (6) Other disallowances .. Rs. 55,000/- -------------------.. Rs.38,50,000/- ------------------- Total https://hcservices.ecourts.gov.in/hcservices/ Aggrieved by the order, the assessee filed an appeal to theCommissioner of Income-tax (Appeals). C.I.T.(A) confirmed theaddition of Rs.4 lakhs as stated in (1) above. In respect ofother additions, the C.I.T.(A) deleted the additions.Aggrieved, both the assessee as well as the Revenue filedappeals to the Income-tax Appellate Tribunal ("Tribunal" inshort). The Tribunal allowed the assessee's appeal anddismissed the Revenue's appeal. Hence the present tax cases bythe Revenue. 3.Learned Standing Counsel appearing for the Revenuesubmitted that the assessee had not discharged his burden ofproof either by producing the creditors before the AssessingOfficer or by getting the confirmation letters from therespective creditors. He further submitted that the creditorsdid not produce any financial statement from the bank, etc. toshow their capacity to lend such monies. Further, he submittedthat the Tribunal is wrong in deleting the other additions onthe ground that the assessee had made disclosure of income ofRs.15 lakhs. 4.Heard the counsel. The facts relating to QuestionNo.1 are that the assessee apparently received from fourpersons, Rs.1,00,000/-, Rs.1,50,000/-, Rs.1,00,000/- andRs.50,000/-. Three creditors were produced before the Officerand the fourth creditor who had advanced a sum of Rs.1,00,000/-was not produced. The three creditors apparently confirmedthat they have advanced money, before the Assessing Officer.The creditors apparently were persons having agricultural landsand they had stated that they were deriving huge income fromthe said agricultural lands and out of that income, money waslent to the assessee. The said facts have not been found to befalse by the authorities below. In view of the same, theTribunal accepted the explanation offered by the assessee.Further the Tribunal had given a categorical finding inParagraph 4 of the order and held as follows:- "4. On the above facts after consideringthe rival submissions and considering thestatements of three persons that they haveagricultural lands and income fromagricultural activities, which have notbeen found to be incorrect except that itwas not accepted, in our opinion theassessee had discharged the onus that wason him. The alternative submission of theassessee was that even assuming that theamounts have not been proved, then to theextent of additions already made of Rs.15lakhs the assessee should be given the https://hcservices.ecourts.gov.in/hcservices/ benefit of telescoping. On the abovementioned facts in our opinion the claim ofthe assessee can be accepted and we deletethe addition on account of cash credits." The explanation offered by the assessee was accepted by theTribunal. Further, because of the additions made by theAssessing Officer to the extent of Rs.15 lakhs, the Tribunalhad correctly given the benefit of telescoping, to theassessee. Hence we are of the view that the order of theTribunal is in accordance with law. In view of the same, nosubstantial question of law arises for consideration of thisCourt in respect of Question No.1. 5.In respect of Question Nos.2 and 3, a factual findinghas been given by both the authorities that the assesseehimself come forward for the addition of Rs.15 lakhs. Hence itis not a fit case for any separate addition on account ofsuppression of sale of distribution rights. The Tribunal, inparagraph 6, held as follows:- The explanation offered by the assessee was accepted by theTribunal. Further, because of the additions made by theAssessing Officer to the extent of Rs.15 lakhs, the Tribunalhad correctly given the benefit of telescoping, to theassessee. Hence we are of the view that the order of theTribunal is in accordance with law. In view of the same, nosubstantial question of law arises for consideration of thisCourt in respect of Question No.1. 5.In respect of Question Nos.2 and 3, a factual findinghas been given by both the authorities that the assesseehimself come forward for the addition of Rs.15 lakhs. Hence itis not a fit case for any separate addition on account ofsuppression of sale of distribution rights. The Tribunal, inparagraph 6, held as follows:- "Appeal by the Department - The issue iswith regard to the order of the CIT(A)wherein he had held that the income fromsale of distribution rights of films wereassessed on mere suspicion. The CIT(A)considering that the assessee had comeforward for an addition of Rs.15 lakhs, hecame to the conclusion that separateaddition was not called for in thisconnection. It is not the case of theDepartment that amount could not cover thesuppression of income. In our opinion no interference is called for. In the result,the appeal by the assessee is allowed and that of the Department dismissed." In view of the above reasoning of the Tribunal, we find noerror or legal infirmity in the order of the Tribunal so as towarrant interference. Hence, no substantial questions of lawarise for consideration of this Court in respect of QuestionNos.2 and 3 also. 6.Under these circumstances, the order passed by theTribunal is in accordance with law and the same does notrequire interference. Hence no substantial questions of law arise for consideration of this Court and accordingly, the taxcases are dismissed. Consequently, M.P.No.1 of 2007 in T.C.(A)No.592 of 2007 is closed. No costs. Sd/Asst.Registrar /true copy/ Sub Asst.RegistrarkmTo1. The Assistant Registrar, Income-tax Appellate Tribunal, Chennai Bench 'B', Rajaji Bhavan, Besant Nagar, Chennai.2. The Commissioner of Income-tax (Appeals) IV, Chennai.3. The Assistant Commissioner of Income-tax, City Circle V (Inv)(2), Madras-6.+1cc to Mrs.Pushya Sitaraman, Advocate Sr 34590SMV (CO)km/22.6. T.C.(A) Nos.591 and 592 of 2007