DCIT, CENTRAL CIRCLE 2(2), CHENNAI vs. N RAMASAMY, CHENNAI

आयकर अपीलीय अिधकरण, ‘ए’, �यायपीठ, चे�ई IN THE INCOME TAX APPELLATE TRIBUNAL, ‘A’ BENCH : CHENNAI �ी महावीर �संह, उपा�य� एवं �ी मंजुनाथ. जी, लेखा सद�य के सम� BEFORE SHRI MAHAVIR SINGH, VICE PRESIDENT AND SHRI MANJUNATHA.G, ACCOUNTANT MEMBER आयकर अपील सं./I.T.A Nos.127 & 128/CHNY/2019 िनधा�रण वष� /Assessment years : 2015-2016 & 2016-2017 The Deputy Commissioner of Vs. Shri. N. Ramasamy, Income Tax, No.14/19, Saraswathi Street, Central Circle 2(2), Mahaingapuram, Nungambakkam High Road, Chennai 600 034. Chennai 600 034. [PAN ADUPR 8003P] (अपीलाथ�/Appellant) (��यथ�/Respondent) अपीलाथ� क� ओर से/ Appellant by : Shri. Nilay Baran Som, IRS, CIT. ��यथ� क� ओर से /Respondent by : Shri. S. Sridhar, Advocate सुनवाई क� तारीख/Date of Hearing : 18.12.2023. घोषणा क� तारीख /Date of Pronouncement : 29.12.2023 आदेश / O R D E R PER MAHAVIR SINGH, VICE PRESIDENT:

These two appeals filed by the Revenue are arising out of two different orders of the Commissioner of Income Tax (Appeals)-18, (hereinafter the ‘CIT(A)”) Chennai in and 282/17-18, dated 03.10.2018 respectively for the assessment years 2015-2016 and 2016-2017. The assessments were framed by the Assistant Commissioner of Income Tax, Central Circle 2(2), Chennai for the assessment years 2015-2016 and 2016-2017, u/s.143(3) r.w.s. 153A of the Income Tax Act, & 128/Chny/2019 :- 2 -:

1961 (hereinafter the ‘Act’) and u/s.143 (3) of the Act, vide orders of even date 29.12.2017.

First we take up for the assessment 2. year 2015-2016 for adjudication. The first issue in this appeal of Revenue is with regard to order of the CIT(A) in deleting the addition made by the Assessing Officer being unexplained amount of gift received from his mother late Smt. Radha Narayanan to the tune of ₹1,74,00,000/-. For this, the Revenue has raised the following grounds of appeal.

‘’2.1. The Learned CIT(A) erred in deleting the addition of Rs.1,74,00,000/-, claimed by the assessee as gift received from his mother, on the ground that the gift is genuine. 2.2. The Learned CIT(A) failed to appreciate that the assessee was unable to produce any document in support of his claim of gift, state the mode of receipt of gift and not even able to furnish the date of receipt of the gift. 2.3. The Learned CIT(A) ought to have noted that the assessee has not stated the occasion which necessitated gift of a whopping amount of Rs.1,74,00,000/- by the assessee's mother in favour of the assessee. 2.4. The Learned CIT(A) failed to note that the assessee could have received the gift by cash only, in the light of the quantum of gift not getting reflected in the assessee's bank account, and it is illogical that a person would have kept cash of Rs.1.74 crores in her possession, before gifting the cash to his son’’.

The brief facts of the case are that there was search and seizure 3. operation conducted on the assessee on 30.09.2015. During the course of search certain incriminating materials were found and seized. Based on seized material, assessee had admitted an amount of ₹2,65,00,000/- as & 128/Chny/2019 :- 3 -: additional income for the financial year 2014-2015 relevant to assessment year 2015-16. Assessee had also agreed to disclose a sum of ₹5,50,00,000/- to meet out the cost of acquisition of distribution rights of Aranmanai movie and PISSASU movie. To explain the investments, assessee stated that out of total cost of acquisition of these movies of ₹10,70,00,000/-, assessee has invested sum received from his mother late Smt Radha Narayanan of ₹1,74,00,000/- as gift. Assessee tried to explain that the gift amount received from his mother of ₹1,74,00,000/- may be considered for set off against admitted income of ₹2,65,00,000/- and ₹5,50,00,000/- during the search. The Assessing Officer noted that the assessee is unable to file any proof in support of gift received from his mother amounting to ₹1,74,00,000/- and hence he added this amount as unexplained by observing at para 6.2 and 6.4 of his assessment as under:- ‘’6.2 With regard to gift amount of Rs. 1,74,00,000/- received from his mother late. Smt. Radhananrayanan there is no proof in support of amount received and date of receipt and no proof for the mode of receipt. During scrutiny also except stating as gift received, no evidence was produced in support of his claim of gift received from his mother late. Smt. Radhananrayanan. In the absence of sufficient evidence/proof in support of the assesse claim of gift amount of Rs. 1,74,00,000/- is not acceptable. 6.4 In view of the above discussion, the assessee claim of gift amount of Rs. 1,74,00,000/- received from his mother late. Smt. Radhananrayanan and undisclosed realization of the picture "Aranmanai amounts of Rs. 91,00,000/- was not considered in the absence of proper evidence/proof and accordingly the above amount of Rs. 2,65,00,000/- added back to the assessee total income’’. & 128/Chny/2019 :- 4 -:

Aggrieved, assessee preferred an appeal before the CIT(A).

The CIT (A), simpliciter, on the basis of statement of assessee 4. accepted the explanation of the assessee by basing his reasoning on conjectures and surmises and accordingly he deleted the addition that receipt of ₹1,74,00,000/- as unexplained is not backed by proper reasons, hence he deleted the addition by observing as under:- ‘’5.2. Smt. Radha Narayanan is no more and as the legal heir of Smt.Radha Narayanan, the Appellant naturally inherits the amounts held by her. Therefore, the availability of source in the hands of Smt. Radha Narayanan during her life time is the issue to be examined. Consequent to the Search Action in the group (late) Smt. Radha Narayanan was assessed to tax for the .AY.2012-13 in respect of her income u/s 153A of the Act. The appeal against the order passed on 2812.2017 was adjudicated by this office in dated 28.8.2018 in which, the appeal of the Smt. Radha Narayanan was allowed. The appellant on behalf of Smt. Radha Narayanan had filed the Return of Income for the A.Y.2012-13 admitting a taxable income of Rs 1,14,37,860/- The issue under consideration in the said appeal was whether the addition made of Rs.38,50,000/- as LTCG is exempt otherwise. The Appellate proceedings found that the said land was agricultural in nature and cannot be termed as a capital asset as per section 2(14) of the Act. Independent of the finding, it is a foregone conclusion at present, that Smt. Radha Narayanan had the creditworthiness to provide such a sum to her son being the appellant. Therefore, treating the receipt of Rs.1,74,00,000/- as unexplained is not backed by proper reasons and hence the corresponding addition is deleted’’.

Aggrieved, now the Revenue is in appeal before us. & 128/Chny/2019 :- 5 -:

We have heard rival contentions and gone through the facts and 5. circumstances of the case. We note that assessee neither before the Assessing Officer nor before the CIT(A) has submitted any details except that late Smt. Radha Narayanan was assessed to tax for the assessment year 2012-2013 in respect of her income u/s.153A of the Act and an appeal against the order was adjudicated in dated 28.08.2018 wherein admitted taxable income was assessed at ₹1,14,37,860/- and assessed addition of ₹38,50,000/- was made. Before us, the ld. Counsel for the assessee submitted that he is ready to file evidences to prove the genuineness of the gift and also will file assessment record for assessment year 2012-2013 wherein the donor late Smt. Radha Narayanan had admitted her income and will also file the nexus of this amount with the gift amount. After considering the submissions of the assessee counsel and the rival submissions of ld. CIT(DR), we note that assessee be given one more opportunity to file these details before the Assessing Officer to prove his claim of genuineness of the gift received from his mother late Smt. Radha Narayanan. Assessee will file all the details to prove that the amount received during the financial year 2011-12 with that of money received in the financial year 2014-15 relevant to the assessment year 2015-2016. Hence, this issue is set aside and remitted back to the file of the & 128/Chny/2019 :- 6 -:

Assessing Officer who will adjudicate the issue with proper reasoning after hearing to the assessee.

The second issue in this appeal is as regards to the order of 6. the ld. CIT(A) deleting the disallowance made by the Assessing Officer of expenditure claimed or incurred on account of movie ‘’Aranmanai’’ amounting to ₹3,36,00,155/-. For this, the Revenue has raised the following ground Nos. 3.1 and 3.2. ‘’3.1. The Learned CIT(A) erred in deleting the disallowance of Rs.3,36,00,155/-, claimed by the assessee as expenditure incurred for the movie "Aranmanai". 3.2. The Learned CIT(A) failed. to appreciate that according to clause 8 of the Minimum Guarantee Agreement, executed by the assessee distributor with the producer, the amounts spent by the assessee towards paper publicity, hoardings, promotion, etc., will be on the producer's account and therefore, there can be no scope for the assessee to claim expenditure towards advertisement, marketing, distribution, etc’’.

The brief facts of the case are that during the course of search 7. proceedings incriminating materials were seized and it was found that assessee had acquired distribution rights of the movie Aranmanai for a consideration of ₹10,70,00,000/- i.e. ₹5,20,00,000/- in Cheque and balance ₹5,50,00,000/- in cash. The Assessing Officer noted that assessee has not maintained proper books of accounts and has asked for explanation. The assessee submitted that other expenses amounting to & 128/Chny/2019 :- 7 -:

₹3,36,00,155/- was also incurred for the purchase of Aranmanai movie apart from the purchase cost. The Assessing Officer noted that assessee has failed to produce sufficient evidence in support of his claim and hence he added this amount of ₹3,36,00,155/- to the total income of the assessee by observing in para 7.1 as under:- ‘’7.1 But during the scrutiny the assessee AR failed to produce sufficient evidence in support of his claim of expenditure ie,. Bills/and mode of payment etc.,. Moreover Out of the total purchase cost of Rs. 10.70 crores the assessee admitted only 5.00 crores in the books and an amount of Rs 5.70 Crores paid as cash out side the books. This means the assessee has not maintained the proper books of accounts the same is accepted by the assessee at the time of search. In this circumstances the expenditure claimed amounting to Rs. 3,36,00,155/- without proper bills/ vouchers and also in the absence of proper payment details/mode of payment etc., the assessee claim of additional expenditure claim is not acceptable. This issue was never stated by the assessee at the time of search proceedings also. Hence in the absence of sufficient evidence/proof in the support of the assess claim, the additional amount claimed as expenditure towards purchase of "ARANMANAI" movie amounting to Rs. 3,36,00,155/- is disallowed added back to the assessee total income’’.

Aggrieved, assessee preferred an appeal before the CIT(A).

The CIT(A) deleted addition by observing as under:- 8. ‘’7. The same principle applies to the addition of Rs. 1,07,56,041/- in respect of the movie "PISASU". On verification of the cost, it is seen that, the same constitutes delivery, poster pasting, digital printing, and publicity expenses. A major portion of the expenditure have also & 128/Chny/2019 :- 8 -: suffered TDS and hence the genuineness of the same is not far from doubt. The copies of Ledger folio of the Corresponding expenditure are also available in the assessment record and it is found that the sums have actually been incurred. On the contrary, the A.O. has not illustrated that the expenses are otherwise bogus. Under such circumstances, when the search proceedings have not revealed anything contrary or adverse with regard to the genuineness of the expenses, the addition made of Rs.3.36 Crores and 1.07 Crores are incorrect and therefore directed to be deleted. Accordingly, the corresponding Grounds of appeal are allowed’’.

Aggrieved, now the Revenue is in appeal before us.

We have heard rival contentions and gone through the facts and 9. circumstances of the case. Before us, the ld. CIT(DR) heavily relied on the assessment order and he argued that the assessee is unable to produce any evidence in respect of claim of expenditure that he has spent ₹3,36,00,000/- for purchase of movie apart from the purchase cost. He argued that CIT(A) without bringing any evidence on record deleted the addition simpliciter on the reasoning that major portion of expenditure had suffered TDS and hence genuineness of the same is far from doubting.

On the other hand, the AR for the assessee drew our attention 10. to assessee’s submission filed before the CIT(A) that all documents and papers were seized by the investigation authorities which are nothing but documents relating to these expenses which are very much available on & 128/Chny/2019 :- 9 -: record. He argued that the supporting documents relating to the above said expenditure are in the possession of the Income Tax Department only.

11 We have noted that there is no such argument noted by the CIT(A). He has simpliciter deleted the addition on the basis that the expenditure had suffered TDS and copies of ledger folio of the corresponding expenditure is available in the assessment records . As the findings is incomplete and unreasonable, there may be documents available in the assessment records and the seized material relating to these expenses, the should have been examined and then this issue could have been decided. Hence in the interest of justice, the matter is set aside and remit back to the file of the Assessing Officer who will re adjudicate the issue after examining the seized material in the possession of department. The AO will find out the seized material and confront the same with the assessee while deciding the issue. The assessee is also free to submit any evidence in this regard as per law. With the above directions, the matter is remitted back to the file of the Assessing Officer for fresh adjudication.

amounting to Rs.1,07,56,041/-. For this, the Revenue has raised the following grounds of appeal.

‘’4.1. The learned CIT(A) erred in deleting the disallowance of Rs. 1,07,56,041/-, claimed by the assessee as expenditure incurred for the film "Pissasu". 4.2. The Learned CIT(A) failed to appreciate that the assessee has not established that the impugned expenditure has, in fact, been incurred by him. 4.3. The Learned CIT(A) ought to have noted that in the film industry, expenditure towards digital printing, poster pasting, etc., would be incurred on the producer's account and the assessee-distributor would not be fastened with such liability’’.

‘’5.1. The Learned CIT(A) erred in deleting the addition of Rs.9,46,269/-, attributable to expenses, such as, boarding & lodging, commission paid, office building maintenance and travelling. 5.2. The Learned CIT(A) failed to appreciate that the assessee did not produce any bills / vouchers to substantiate the expenditure and iIn the absence of bills / vouchers, the only inference could be that the impugned expenditure has not at all been incurred by the assessee. 5.3. The Learned CIT(A) ought to have noted that the burden of proof lies on the assessee to establish the genuineness of expenditure as well as that the expenditure has been incurred for business purposes. 5.4. Having regard to the Hon'ble Supreme Court's decision in the case of CIT v. Calcutta Agency Ltd. (19 ITR 191) to the effect that the burden of proving that an amount contended to be an expenditure, falls under section 37 (1), is on the assessee’’.

Aggrieved, the Revenue is in appeal before us.

17. We have heard the rival submissions and perused the material available on record. We noted that this expenditure is neither denied by the AO nor the CIT(A). Even now before us, the Revenue has pointed out that this expenditure is only normal expenditure but in the absence of any bills and vouchers, the AO has rightly estimated at 25% which is not very high. In the absence of evidence, we restrict the disallowance at 10% and direct the AO accordingly. This ground of the Revenue is partly allowed.

‘6.1. The Learned CIT(A) erred in holding that the loss claimed in the return of income u/s.153A is to be carried forward, by observing that the return of income filed in response to notice u/s.153A is treated as filed u/s.139(1) of the I.T. Act, 1961. 6.2. The Learned CIT(A) failed to appreciate that in the case of CIT v. Sun Engineering Works (P) Ltd. (198 ITR 297) and Chettinad Corporation P. Ltd. v. CIT (200 ITR 320), the Hon'ble Supreme Court has held that reopening is only for the benefit of revenue and that assessments made u/s.153A being in the nature of reassessment proceedings, the said Hon'ble Supreme Court's decisions apply to return of income filed u/s.153A too. 6.3. The Learned CIT(A) ought to have noted that in corporate cases, the accounts have to be adopted in the Annual General Body meeting which cannot be changed at the whims of the assessee and that a fresh claim, such as a loss, cannot be claimed in the return of income filed in response to notice u/s.153A of the Act’’.

‘’8. Based on the discussion made in this Appellate Order, the loss for the year is recomputed as under:-

Particulars Amount (in ₹) Loss Declared in return of income 4,26,71,136 Reduction in losses on account of 91,00,000 unexplained investment in the movie “Aranmanai’ u/s.69B Revised Losses available for C/f and future 3,35,71,136 set-off

Since the return of income filed in response to notice u/s.153A is treated as filed u/s.139(1) the losses are allowed to be carried forward.

Aggrieved, the Revenue is in appeal before us. 20. Before us, the ld. CIT(DR) tried to make a distinction between the return filed in response to 153A and the return filed in response to notice u/s.148 of the IT Act. The ld. CIT(DR) distinguished the Sections as under:-

Sec. 153A: "(1) Notwithstanding anything contained in section 139, section 147, section 148, section 149, section 151 and section 153, int eh case of a person where a search is initiated under section 132 or books of account, other documents or any assets are requisitioned under section 132A after the 31st day of May, 2003, the Assessing Officer shall---- (a) Issue notice to such person requiring him to furnish within such period, as may be specified in the notice, the return of income in respect of each assessment year falling within six & 128/Chny/2019 :- 15 -: assessment years (and for the relevant assessment year or years) referred to in clause (b), in the prescribed form and verified in the prescribed manner and setting forth such other particulars as may be prescribed and the provisions of this Act shall, so far as may be, apply accordingly as if such return were a return required to be furnished under section 139; (Emphasis Supplied) Sec. 148 (As applicable for A Y 2015-16): (1) Before making the assessment, reassessment, or recomputation under section 147, the Assessing Officer shall serve on the assessee a notice requiring him to furnish within such period as may be specified in the notice, a return of his income or the income of any other person in respect of which he is assessable under this Act during the previous year corresponding to the relevant assessment year, in the prescribed form and verified in the prescribed manner and setting forth such other particulars as may be prescribed; and the provisions of this Act shall, so far as may be, apply accordingly as if such return were a return required to be furnished under section 139".

The ld. CIR(DR) further submitted that return u/s.148/153A is to be construed as return filed u/s.139; only 'so far as may be' and not in toto. Therefore, in view of the grounds of appeal are reproduced with the above submissions and also noting the fact that the CIT(A) has suo-moto allowed the loss which was not claimed by the assessee in his appeal. He placed reliance on the judgment of the Hon'ble Calcutta High Court in the case of Shrikant Mohta v. CIT reported in 414 ITR 270. The CIT (DR) further contended that the assessee did not file the return within the time allowed in response to notice under section 153A of the Act. Therefore, the assessee is not entitled to carry forward his loss. Hence, he prayed & 128/Chny/2019 :- 16 -: that consequent to the AY 2016-17, recomputed loss for AY 2015-16 cannot be allowed to be set off with the income for the AY 2016-17.

For the purpose of carrying forward the loss in terms of Section 72 read with Section 80 of the Act, in a case where search operations have been conducted under Section 132 of the Act, the time to file the return within the meaning of Section 139(3) of the Act has to be regarded as the reasonable time afforded by the consequent notice under Section 153A (1)(a) of the Act.

(2) In a case where Section 153A of the Income Tax Act, 1961 applies, whether a return filed in response to the notice under Section 153A(1)(a) is required to be treated as a return under Section 139 and that any other return is of no consequence and non est:- When search operations are conducted under Section 132 of the Act, the obligation of the assessee to file any return remains suspended till such time that a notice is issued for such purpose under Section 153A(1)(a) of the Act. If the return is filed by the assessee within the reasonable time permitted by such notice under Section 153A(1)(a) of the Act, such return would then be deemed to have been filed within the time permitted under Section 139 (1) of the Act for the benefit under Section 139(3) of the Act to be availed of by the assessee.

& 128/Chny/2019 :- 17 -:

He further submitted that, the entire matter was remanded back by the Hon'ble Court by holding as follows:

In view of the above, it was argued that there was no statutory prescription of time limit for filing the return of income under Section 153A(1)(a) of the Act and in this regard, the statute envisages discretion to entertain the return of income for computation purposes. On the facts of the case, he submitted that the return filed in response to notice under Section 153A of the Act on 05.09.2017 for AY 2015-16 and the said return of income was acted upon by the Assessing Officer in para 10 of the search assessment order. In the light of the said admitted facts, the return of income filed being validated by the revenue in the search assessment order dated 29.12.2017, the decision of the Calcutta High Court in reckoning such return as filed under Section 139(1) of the Act would support the decision taken in the impugned order for the assessment year 2015- 16 in granting such benefit. Accordingly, he pleaded for dismissing & 128/Chny/2019 :- 18 -: the related grounds of appeal for the AY 2015-16 & pleads further for dismissal of the only ground taken by the revenue before the Bench for the AY 2016-17 as a consequence of the stand taken for the AY 2015-16 in the interest of justice.

22. We have heard the rival submissions and perused the material available on record. Admittedly, in the present case, before us, a notice u/s.153A of the Act was issued on 24.01.2017 and return is to be filed within thirty days as per the notice. But the assessee filed belated return or return filed after expiry of time limit fixed by the Department i.e. 05.09.2017. It means assessee filed return almost after seven months from the expiry of the time limit fixed by the Revenue. At this point, as relied by the decision of Hon’ble Calcutta High Court in the case of Shrikant Mohta (supra) by ld. CIT(DR), we note that Hon’ble Calcutta High Court had held as under:; ‘’To boot, the second proviso to Section 153A(1) insofar as it is material for the present purpose, mandates that any "assessment or reassessment relating to... the relevant assessment year or years... pending on the date of initiation of the search under Section 132. shall abate". [Para 14] It goes without saying that since the search operations in this case were initiated on 2-9-2004, it was no longer necessary for this assessee to file his regular return by 31-10-2004 notwithstanding the mandate of Section 139(1) of the Act. The obligation to file the return remained suspended, in view of the clear opening words of Section 153A(1) till such time that a notice was issued to him under clause (a) of such sub-section. If such is the meaning of Section 153A(1), the operation of Section 139(3) qua the time available for filing a return in order to avail of the benefit of carrying forward any loss stands extended till a return is called for under Section 153A(1)(a) and such return is & 128/Chny/2019 :- 19 -: filed, provided the return is filed within the time indicated in the relevant notice under Section 153A(1)(a) of the Act. There can be no dispute to such being the effect of Section 153A(1)(a). [Para 15] Unfortunately, the notice issued under Section 153A(1)(a) is not available in the records relied upon by the parties nor is there any reference to the date of such notice in any of the orders appended to the papers. Indeed, the time permitted by the relevant notice under Section 153A(1)(a) for the assessee to file the return is also not available. As recorded above, it is the submission of the assessee that such notice was received by the assessee on 27-3-2006 and it afforded a month's time to the assessee to file the assessee's return and the assessee's return for the assessment year 2004-05 was filed on 26-4-2006. The date when the return was filed, however, is verifiable from the orders available. [Para 16] Thus, a definitive final order cannot be passed without being sure of the date of issuance of the notice under Section 153A(1)(a) and the time afforded by such notice for the assessee to file the return. For such purpose, the orders impugned passed by the Tribunal requires to be set aside and the matters remitted back to the Tribunal for the Tribunal to ascertain the details as to the date of the notice and the time afforded to file the return and pass an order in the light of the views expressed herein on the questions of law and it is ordered accordingly. [Para 17] For the purpose of carrying forward the loss in terms of Section 72 read with Section 80 in a case where search operations have been conducted under section 132 the time to file the return within the meaning of section 139(3) has to be regarded as the reasonable time afforded by the consequent notice under Section 153A(1)(a). [Para 18] When search operations are conducted under Section 132, the obligation of the assessee to file any return remains suspended till such time that a notice is issued for such purpose under Section 153A(1)(a). If the return is filed by assessee within reasonable time permitted by such notice under Section 153A(1)(a), such return would then be deemed to have been filed within time permitted under section 139(1) for benefit under Section 139(3) to be availed of by assessee. [Para 19]’’ & 128/Chny/2019 :- 20 -:

We noted that in this case before Calcutta High Court the return of income was filed within the time allowed by revenue and not belatedly much after issuing notice u/s. 153A of the Act. But in the present case before us, the return of income in response to notice u/s. 153A of the Act was filed after seven months on 05.09.2017 as against notice issued on 24.01.2017. It means that the case laws Hon’ble Calcutta High Court in the case of Shrikant Mohta (supra) is factualy distinguishable and not applicable to the present case. Hence, the CIT(A) has erred in allowing set off of loss. In view of the above, we allow this issue raised by the Revenue.

25. Since, we have adjudicated the issue in appeal No.127/CHNY/2019 for the assessment year 2015- 2016 and hold that the loss cannot be carry forwarded, the order of the CIT(A) directing the AO to allow carry forward of loss of Rs.3,35,71,136/- have become redundant since there is no carry forward loss available to the assessee in this assessment year and hence this appeal of the Revenue stands allowed.

Order pronounced on 29th day of December, 2023 at Chennai.