Itxa/1320/2018 Of Pr. Commissioner Of Income Tax -2 v. Radan Multimedia Ltd

Priya Soparkar IN THE HIGH COURT OF JUDICATURE AT BOMBAY ORDINARY ORIGINAL CIVIL JURISDICTION INCOME TAX APPEAL NO.1320 OF 2018 Pr.Commissioner of Income-Tax-2 … Appellant V/s. Radan Multimedia Ltd. … Respondent --- Mr.Suresh Kumar with Ms.Mohinee Chougule for theAppellant. Mr.D.K.Seth i/by Mr.Mehul Rathod for the Respondent. --- CORAM : AKIL KURESHI AND S.J.KATHAWALLA, JJ. DATE : JUNE 10, 2019. P.C.:- 1. Revenue has filed this appeal against the judgmentof the Income Tax Appellate Tribunal (“Tribunal” for short).Following questions are presented for our consideration:- “1. (a) Whether on the facts andcircumstances of case and in law, the ITATwas right in restricting the disallowance onpurchase of films to 20% even afterobserving that the purchases were bogus andwithout recording any perverse findingsagainst the order of CIT (A)?(b)Whether on the facts and circumstancesof case and in law, the ITAT was right inrestricting the disallowance on purchases to Priya Soparkar 20%, wherein assessee has first claimed100% depreciation in the original return,revised the claim as purchases of films in theappellate proceedings?” 2.Whether on the facts and circumstances of the case and in law, the ITAT was right insetting aside the matter of claim of financialcharges pertaining to Hire purchase ofmachineries, to the file of AO, by assumingthe finance charges to be loans, withoutrecording any perverse finding against theorder of CIT (A)?” 3. In so far as question No.1 (a and b both) isconcerned, the same pertains to a sum of Rs.1.04 croresadded by the Assessing Officer holding that the purchaseof films claimed by the assessee was bogus. TheTribunal restricted the additional to 20% of such sum by making following observations:- “12. However, we notice that the assesseehas claimed that it has declared the sales offilms picturised by using the films of Rs.1.04crores referred above. There should not be anydoubt that the pictures could not be producedwithout the use of films and if the sale ofpictures is assessed, then the correspondingexpenditure should be allowed. Even thoughthe assessing officer has considered the salesalso as bogus, he did not exclude the value ofsales from the income of the assessee. Sincethe purchase of films have not been provedby the assessee, we are of the view that thisissue should be settled by disallowing some Priya Soparkar portion of the purchases in order to take careof the deficiencies in the purchase claim.Accordingly, we direct the assessing officer todisallow 20% of the film cost of Rs.1.04 crores,since the assessing officer has assessed thesale of pictures. We order accordingly.” 3. It can thus be seen that the Tribunal noticed that Assessing Officer while holding that purchasing the filmswas bogus and therefore, consequential sale of filmswas non existent, had not excluded the value of the salefrom income of the assessee. It was on this backgroundthe Tribunal restricted the addition to 20% of the entireamount. No question of law arises. 4.Question No.2 pertains to the finance charges onlease finance paid by the assessee to the financialinstitutions. The Assessing Officer held that the claim ofpurchase of machinery with the aid of such financeswas not genuine. The Tribunal however was of the opinionthat even if such finances were not used for purchase ofmachinery as previously claimed by the assessee, if itwas used for the purpose of his business the finance Priya Soparkar43 itxa 1320-18-o Assessing Officer while holding that purchasing the filmswas bogus and therefore, consequential sale of filmswas non existent, had not excluded the value of the salefrom income of the assessee. It was on this backgroundthe Tribunal restricted the addition to 20% of the entireamount. No question of law arises. 4.Question No.2 pertains to the finance charges onlease finance paid by the assessee to the financialinstitutions. The Assessing Officer held that the claim ofpurchase of machinery with the aid of such financeswas not genuine. The Tribunal however was of the opinionthat even if such finances were not used for purchase ofmachinery as previously claimed by the assessee, if itwas used for the purpose of his business the finance Priya Soparkar43 itxa 1320-18-o charges would be allowable business expenditure.However, the entire issue was placed before theAssessing Officer for examination in the light of suchobservations. We do not find any error in view of theTribunal. The issue in any case has been placed backbefore the Assessing Officer for carrying out fullinquiry. In the result, the appeal is dismissed. (S.J.KATHAWALLA, J.) (AKIL KURESHI, J.) ….