Shri. D.pandian v. The Deputy Commissioner Of Income Tax, Media Circle -I, Chennai – 34

IN THE HIGH COURT OF JUDICATURE AT MADRAS CORAM: THE HONOURABLE MR.JUSTICE T.S.SIVAGNANAMAND THE HONOURABLE MRS.JUSTICE V.BHAVANI SUBBAROYAN Shri. D.Pandian, Proprietor,M/s.Sivasakthi Movie Makers ...Appellant in both appealsVs The Deputy Commissioner of Income Tax, Media Circle -I,Chennai – 34. ...Respondent in both appeals Tax Case Appeals filed under Section 260-A of the Income TaxAct, 1961, against the orders of Income Tax Appellate Tribunal'A' Bench, Chennai (i) dated 11.04.2008 in IT(SS)A.No.148/Mds/2005 and (ii) dated 23.08.2007 in IT(SS)A.No.38/Mds/2005 respectively, for Block Period from 01.04.1988to 13.10.1998.TCA NO.850 OF 2009: against the Order of the Commissioner ofIncome Tax (Appeals-VI), Chennai -34, dated:30/12/2004 in ITANO.177/2004-2005 preferred against the order of DeputyCommissioner of Income Tax City Circle V(INV)(2), Chennai-6dated 31.01.2001 (PAN.GIR NO.2707-P)TCA NO.440 OF 2009: against the Order of the Commissioner ofIncome Tax (Appeals-VI), Chennai -34, dated:04.01.2005 in ITANO.178/2004-2005 against the Order of Deputy Commissioner ofIncome Tax, City Circle V(INV)(2), Chennai-6, dated 26.07.2001(PAN GIR NO.2707-P) [Judgment was delivered by T.S.SIVAGNANAM, J] These appeals are filed by the assessee under Section 260-Aof the Income Tax Act, 1961 (hereinafter referred to as ‘theAct’) challenging the orders (i) dated 11.04.2008 in IT(SS) https://hcservices.ecourts.gov.in/hcservices/ A.No.148/Mds/2005 and (ii) dated 23.08.2007 in IT(SS)A.No.38/Mds/2005, both passed by the Income Tax AppellateTribunal 'A' Bench, Chennai (hereinafter referred to as'Tribunal') for Block Period from 01.04.1988 to 13.10.1998. 2. The appeals were admitted on 20.10.2009 on the followingsubstantial questions of law:“TCA.No.440 of 2009:Whether on the facts an in thecircumstances of the case, the Income TaxAppellate Tribunal was right in law insustaining the penalty under Section 158BFA(2)of Income Tax Act?” TCA.No.850 of 2009:1. Whether on the facts and in thecircumstances of the case, the Income TaxAppellate Tribunal was right in law in notadmitting the additional evidence filed beforeit without considering the affidavits filed bythe authorized representative stating thecircumstances in which the grounds were notpressed? 2. Whether on the facts and in thecircumstances of the case, the Income TaxAppellate Tribunal was right in law in notconsidering the affidavits filed by theAuthorized Representative who appeared beforethe CIT(A), stating that the reason for raisingthe grounds before the Tribunal with additionalevidence, which were not pressed before the CIT(A)? and 3. Whether on the facts and in thecircumstances of the case, the Income TaxAppellate Tribunal was right in law inupholding the additions of Rs.20,00,000/- beingpayment made to producers & Rs.28,50,000/-under the head “Own Finance?” 3. First, we take up for consideration TCA.No.850 of 2009. 4. The assessee is engaged in the production anddistribution of films under the name and style “Sivasakthi MovieMakers”. A search was conducted in the business and residentialpremises of the assessee on 13.10.1998, pursuant to which, anotice under Section 158BC of the Act was issued and theassessee filed his block return on 13.07.2000 declaring a totalundisclosed income of Rs.31,74,474/-. The Assessing Officercompleted the assessment under Section 158BC(c) of the Act on31.01.2001 arriving at a total undisclosed income ofRs.2,12,83,164/- and made an addition of Rs.20 Lakhs beingpayment made by the assessee to the producers at the time of executing the agreements and another addition of Rs.28,50,000/-under the head 'Own Finance'. 4. The assessee is engaged in the production anddistribution of films under the name and style “Sivasakthi MovieMakers”. A search was conducted in the business and residentialpremises of the assessee on 13.10.1998, pursuant to which, anotice under Section 158BC of the Act was issued and theassessee filed his block return on 13.07.2000 declaring a totalundisclosed income of Rs.31,74,474/-. The Assessing Officercompleted the assessment under Section 158BC(c) of the Act on31.01.2001 arriving at a total undisclosed income ofRs.2,12,83,164/- and made an addition of Rs.20 Lakhs beingpayment made by the assessee to the producers at the time of executing the agreements and another addition of Rs.28,50,000/-under the head 'Own Finance'. 5. Aggrieved by such order, the assessee preferred an appealbefore the Commissioner of Income Tax, Appeals -VI [hereinafterreferred to as the CIT(A)] in ITA.No.177/04-05. By order30.12.2004, the appeal filed by the assessee was partly allowedand as against the disallowed portion, the assessee filed anappeal before the Tribunal in IT(SS)A.No.38/Mds/2005. Vide orderdated 23.8.2007, the Tribunal partly allowed the appeal filed bythe assessee. 6. In the meantime, the Assessing Officer initiated penaltyproceedings under Section 158BFA(2) of the Act and levied apenalty of Rs.1,08,65,214/- vide order dated 26.07.2001. Againstsuch order, the assessee filed an appeal before the CIT(A) inITA.No.178/2004-05. This appeal was partly allowed by orderdated 11.01.2005 and the penalty to the extent of Rs.93,75,092/-was confirmed. As against the said order dated 11.1.2005, theassessee filed an appeal before the Tribunal in IT(SS))A.No.148/Mds/2005 and it was partly allowed by order dated11.04.2008. Thus, aggrieved by both the orders passed by theTribunal, the assessee is before us by way of these appealsraising the aforementioned substantial questions of law. 7. We find from the order passed by the Tribunal dated23.08.2007, which is impugned in TCA.No.850 of 2009, that theTribunal remanded the matter to the Assessing Officer to give anopportunity to the assessee to explain the source of Rs.80Lakhs, which was received from Siva Sakthi Theatre. However,with regard to the plea raised by the assessee pertaining to theadditions of Rs.20,00,000/- and Rs.28,50,000/-, the Tribunalrejected the assessee's plea stating that the said ground raisedby the assessee did not arise out of the impugned order passedby the CIT(A) dated 30.12.2004. The reason being that the CIT(A), in paragraph 5.2.1 of his order dated 30.12.2004, whilerecording that though the assessee had produced a list ofproducers, who had given advances for taking distributionrights, they failed to produce confirmation letter before theCIT(A) and that the said ground was not pressed by theauthorized representative/Chartered accountant of the assessee,confirmed the additions and dismissed the appeal in respect ofthat ground. 8. Therefore, the Tribunal stated that the ground canvassedby the appellant/assessee before the Tribunal did not arise outof the impugned order passed by the CIT(A). Therefore, we findfrom the grounds raised by the appellant/assessee before theTribunal, that the assessee specifically contended that thoughthey produced the names and addresses of the theatre owners, from whom, they received the advances, the confirmation letterscould not be produced by the assessee due to paucity of time,that however, the appellant had not pressed the ground on theassumption that CIT(A) would consider this addition for futuretelescopic purposes and that having not done so by merelydismissing the appeal, the assessee was aggrieved. 8. Therefore, the Tribunal stated that the ground canvassedby the appellant/assessee before the Tribunal did not arise outof the impugned order passed by the CIT(A). Therefore, we findfrom the grounds raised by the appellant/assessee before theTribunal, that the assessee specifically contended that thoughthey produced the names and addresses of the theatre owners, from whom, they received the advances, the confirmation letterscould not be produced by the assessee due to paucity of time,that however, the appellant had not pressed the ground on theassumption that CIT(A) would consider this addition for futuretelescopic purposes and that having not done so by merelydismissing the appeal, the assessee was aggrieved. 9. This specific plea was raised by the assessee in groundNos.2, 3 and 3.1 before the Tribunal. In addition to that, theassessee further contended that the Chartered accountant of theassessee filed an affidavit duly notarized dated 20.08.2007stating that he did not press for the allowance amount ofRs.20,00,000/- being the addition made on account of payment toproducers, as, at that time, the assessee was not able to getany confirmation letters with regard to the source for thepayments, that the CIT(A) had agreed to consider the assessee'sclaim for the set off against other additions, that however, theCIT(A) merely stated that the grounds on this issue weredismissed as not pressed and had not considered the prayer fortelescoping and that the assessee got confirmation letters fromsome of the parties and the Chartered accountant submitted thesame before the Tribunal by filing his affidavit in support ofthe same. 10. It was further submitted in the said affidavit dated20.8.2007 that the assessee was aggrieved by the order passed bythe CITA(A) and prayed for an opportunity to substantiate hiscase with evidence. Further, it was prayed that as theconfirmation letters filed along with the affidavit of Charteredaccountant being fresh evidence, he requested the same to beadmitted and taken on record for being considered in accordancewith law. 11. The affidavit dated 20.8.2007 clearly stated that it hadbeen filed by the Chartered Accountant to explain the reason forthe stand taken by him before the CIT(A). The Tribunal, thoughreferred to the affidavit filed by the Chartered Accountant inparagraph 4 of the order dated 23.08.2007, did not advert to itsefficacy or to the stand taken by the Chartered Accountant ofthe assessee, but merely stated that the said ground did notarise out of the order passed by the CIT(A) dated 30.12.2004.Further, with regard to other additions of Rs.28,50,000/-, asimilar stand had been taken by the assessee before theTribunal. 12. In our considered view, when the veracity of theaffidavit filed by the Chartered Accountant was not doubted bythe Tribunal, an appropriate approach would have been to remitthe said issue for a fresh consideration and afford anopportunity to the assessee to establish the correctness of the https://hcservices.ecourts.gov.in/hcservices/ confirmation letters issued by various parties. In such asituation, it is well open to the Assessing Officer to exercisepower under the Act and even summon the parties, who had issuedthe confirmation letters, to examine the correctness of thestand taken by the assessee. In our view, had such appropriateapproach been adopted, in all probabilities, the matter wouldhave concluded by this time and there would have been nonecessity for filing this appeal. Thus, we are of the view thatthe matter should be remanded to the Assessing Officer for afresh consideration. https://hcservices.ecourts.gov.in/hcservices/ confirmation letters issued by various parties. In such asituation, it is well open to the Assessing Officer to exercisepower under the Act and even summon the parties, who had issuedthe confirmation letters, to examine the correctness of thestand taken by the assessee. In our view, had such appropriateapproach been adopted, in all probabilities, the matter wouldhave concluded by this time and there would have been nonecessity for filing this appeal. Thus, we are of the view thatthe matter should be remanded to the Assessing Officer for afresh consideration. 13. With regard to TCA.No.440 of 2009, the stand taken bythe Revenue was that penalty under Section 158BFA(2) of the Actis automatic. This is being contested by the assessee by arguingthat the Tribunal ought to have considered the matter as aseparate proceedings and merely because in the quantum, theassessee was unsuccessful, the Tribunal should not have rejectedthe appeal against the levy of penalty under Section 158BFA(2)of the Act. The Revenue, on the other hand, seeks to sustain theorder passed by the Tribunal by contending that the penalty isautomatic. 14. The quantum appeal, which is the subject matter ofTCA.No.850 of 2009 was considered by us and we have held thatthe matter has to be remanded to the Assessing Officer toconsider the confirmation letters, which have been filed by theassessee before the Tribunal along with affidavit filed by theChartered Accountant. Therefore, in our view, what the assesseewould have contended before the Tribunal was that the CIT(A)failed to consider the request of the assessee for telescoping. 15. Learned counsel for the appellant/assessee has contendedthat there are several decisions to show that penalty is notautomatic and in support of such contention, he has relied uponthe decision of a Division Bench of the Rajasthan High Court inthe case of CIT Vs. Satyendra Kumar Dosi [reported in (2009) 315ITR 0172] and a Division Bench of the Delhi High Court in thecase of CIT Vs. Harkaran Das Ved Pal [reported in (2011) 336 ITR8]. 16. In our view, since we are remanding the issue regardingthe two additions made by the Assessing Officer for a freshdecision, we refrain from expressing any opinion with regard tolevy of penalty as to whether it is automatic or not. Since thematter is remanded, then obviously the issue regarding levy ofpenalty can very well be reconsidered by the Assessing Officer. 17. For the above reasons, TCA.No.850 of 2009 is allowed,the finding rendered by the Tribunal recorded in paragraph 6 ofthe order dated 30.12.2004 is set aside and matter is remanded https://hcservices.ecourts.gov.in/hcservices/ to the Assessing Officer for a fresh consideration. TheAssessing Officer is directed to consider the confirmationletters furnished by the assessee along with an affidavit filedby the Chartered accountant dated 20.8.2007 and proceed inaccordance with law. No costs. 18. With regard to TCA.No.440 of 2009, the levy of penaltyis set aside and the issue is remanded back to the AssessingOfficer to take a fresh decision after taking a decision in thequantum appeal and after affording an opportunity of personalhearing to the assessee. No costs. Sd/- Assistant Registrar//True Copy// Sub Assistant RegistrarTo1. The Commissioner of Income Tax Appeals(VI) Chennai2. The Deputy Commissioner of Income Tax, Media Circle-I, Chennai-34.3. The Deputy Commissioner of Income Tax, City Circle I(INV)(2), Chennai-6.+1cc to Mr.T.R.Senthilkumar, Advocate, S.R.No.67212+1cc to M/s.Philip George, Advocate, S.R.No.67678TCA.Nos.440 & 850 of 2009 BP(CO)RV(19/11/2020)