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Income Tax Appellate Tribunal, BANGALORE BENCHES “C”, BANGALORE
Before: Shri Chandra Poojari, AM & Shri George George K, JM
IN THE INCOME TAX APPELLATE TRIBUNAL BANGALORE BENCHES “C”, BANGALORE Before Shri Chandra Poojari, AM and Shri George George K, JM ITA No.1977/Bang/2018 : Asst.Year 2014-2015 Smt.Nagamma Sidanna Patil The Income Tax Officer 2-2-449/1-2, Main Road Ward - 3 v. Kalaburagi. Chincholi, Kalaburagi District - 585 323 PAN : ARSPP1408J. (Appellant) (Respondent) Appellant by : Sri.Shree Hari Kutsa, Advocate Respondent by : Smt.Priyadarshini Besaganni, Addl.CIT-DR Date of Pronouncement : 11.04.2022 Date of Hearing : 07.04.2022 O R D E R Per George George K, JM : This appeal at the instance of the assessee is directed against CIT(A)’s order dated 28.03.2018. The relevant assessment year is 2014-2015.
The issue raised are as follows:- (i) Whether addition made on account of undisclosed investment in film production of Rs.1,19,50,253 based on the FIR lodged by Lokayukta Police is sustainable on the facts and circumstances of the case? (ii) Whether the CIT(A) is justified in upholding the disallowance u/s 40(a)(ia) of Rs.56,36,929 on the facts and circumstances of the case? (iii) Whether an ad-hoc disallowance u/s 40A(3) is sustainable on the facts and circumstances of the case?
Brief facts in relation to the addition made on account of undisclosed investment in film production of Rs.1,19,50,252, are as follows:
2 ITA No.1977/Bang/2018. Smt.Nagamma Sidanna Patil. The Assessing Officer in the assessment order completed u/s 143(3) of the I.T.Act (order dated 29.12.2016) had made an addition of Rs.1,19,50,252. The addition was based on the FIR lodged by Karnataka Lokayukta Police, wherein it was recorded that estimated investment towards production of movie “Kumbharashi” by the assessee is Rs.2 crore instead of Rs.80,49,749 recorded in the books of account. Therefore, the A.O. brought to tax the difference of Rs.1,19,50,252 (2,00,00,000 = 80,49,747) as undisclosed investment.
Aggrieved by the assessment order, the assessee filed an appeal before the first appellate authority. The assessee submitted that the investigation is nearing closure, no evidence has been found in support of the allegation regarding investment of Rs.2 crore, and therefore, it was requested that the addition may be deleted. The CIT(A), however, rejected the contention of the assessee and upheld the addition by holding that “if the assessee is penalized under one Act, he cannot claim relief under another Act because that will be frustrating / defeating the entire object of imposition of penalty / fine etc.” .
Aggrieved by the order of the CIT(A), the assessee has raised this issue before the ITAT. The submissions of the assessee is based on the development that took place in the Lokayukta proceedings. In this context, the assessee has filed a petition for admission of additional evidence under Rule 29 of the Income Tax (Appellate Tribunal) Rules, 1963. Our attention was specifically invited to the copy of the communication issued by the Lokayukta Police to the Income Tax Department informing the status of the investigation. In
3 ITA No.1977/Bang/2018. Smt.Nagamma Sidanna Patil. the said letter, it is mentioned that as per the closure report filed by the Lokayukta Police, a sum of Rs.80,49,747 only is treated as investment towards film “Kumbharashi” and a “B report” has been filed before the appropriate Court in this regard.
The learned Departmental Representative supported the orders of the Income Tax Authorities.
We have heard rival submissions and perused the material on record. The assessee has filed a petition for admission of additional evidence under Rule 29 of the Income Tax (Appellate Tribunal) Rules, 1963. The additional evidence that are sought to be admitted are as follows:- (i) Copy of complaint filed by the Lokayukta to the Police regarding incriminating material found during course of search by Lokayukta. (ii) Copy of the FIR and attached document. (iii) Copy of the Final Report / Charge Sheet dated 04.05.2017 filed by the police before the Court. (iv) Copy of the proceedings before the Principal District & Session Judge, Kalaburagi. (v) Copy of the communication by the Lokayukta Police to the Income Tax Department informing the status of the investigation. 7.1 The additional evidence filed goes to the root of the issue. Therefore, for proper adjudication of the issue and for substantial cause, the additional evidence is admitted and taken on record. One of the additional evidences is the copy of communication by Lokayukta Police to the Income-tax
4 ITA No.1977/Bang/2018. Smt.Nagamma Sidanna Patil. Department informing the status of the investigation and the same reads as follows:- “With reference to above cited subject, you had requested for information regarding present status of investigation in Crime No.14/2013 of Lokayukta Police Station Gulbarga and investment made in the production of movie “Kumbarashi”. In Crime No.14/2013 u/s 13(1)(e) r/w 13(2) of Prevention of corruption Act, 1988 of Kalaburagi Lokayukta Police Station, “B” Final Report has been filed to Dist. & Principal Sessions Judge Kalburgi on 04/05/2017. And regarding the investment in the production of movie “Kumbarashi” an amount of Rs.80,49,747=00 has been considered as investment in production of moview “Kumbarashi” by the producer of the movie Smt.Nagamma w/o Siddanna Patil while preparing the final report after the investigation.”
7.2 Since the amount of investment in production of film “Kumbarashi” has been found by the Lokayukta Police at Rs.80,49,747, the addition that is based on the complaint by the Lokayukta Police that the assessee’s wife’s investment of Rs.2 crore in production of the film “Kumbarashi” has lost the substratum in view of the above closure report filed by the Karnataka Lokayukta Police. Therefore, in the interest of justice and equity, since the additional evidence is admitted and taken on record, the same needs to be examined by the AO. For the aforesaid purpose, the main issue, i.e., the addition of sum of Rs.1,19,50,252 on account of investment in film production is restored to the files of the AO for de novo consideration. The AO shall take into consideration the evidences filed by the assessee and shall take a decision in accordance with law. It is ordered accordingly. Addition u/s 40(a)(ia) and u/s 40A(3) of the I.T.Act 8. The above additions are with reference to the disallowance of the entire expenditure incurred on the
5 ITA No.1977/Bang/2018. Smt.Nagamma Sidanna Patil. production of film “Kumbarashi” (the expenditure recorded in the books of account). The learned AR had contended that the expenditure cannot be disallowed since the Karnataka Lokayukta Police found that it is a bonafide expenditure to the extent of amount recorded in the books of account, i.e., Rs.80,49,747.
The learned Departmental Representative supported the orders of the Income Tax Authorities.
We have heard rival submissions and perused the material on record. Since the main issue as regards the expenditure incurred on production of film “Kumbarashi”, whether it can be treated as unexplained investment, has been restored to the AO for de novo consideration, we are of the view that the subsidiary issue of disallowance of expenditure u/s 40(a)(ia) and 40A(3) of the Act also need to be examined afresh by the AO. The AO is directed to afford a reasonable opportunity of hearing to the assessee and shall take a decision in accordance with law. It is ordered accordingly.
In the result, the appeal filed by the assessee is allowed for statistical purposes. Order pronounced on this 11th day of April, 2022. Sd/- Sd/- (Chandra Poojari) (George George K) ACCOUNTANT MEMBER JUDICIAL MEMBER Bangalore; Dated : 11th April, 2022. Devadas G*
6 ITA No.1977/Bang/2018. Smt.Nagamma Sidanna Patil. Copy to : 1. The Appellant. 2. The Respondent. 3. The CIT(A)-Gulbarga. 4. The Pr.CIT, Gulbarga. 5. The DR, ITAT, Bengaluru. 6. Guard File. Asst.Registrar/ITAT, Bangalore