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Income Tax Appellate Tribunal, “SMC-B” BENCH : BANGALORE
Before: SHRI JASON P BOAZ
O R D E R Per Jason P Boaz, Accountant Member:
These are a bunch of 4 appeals by the assessee directed against the consolidated order of CIT(A)-4, Bangalore, dated 27.09.2018 for Assessment Years 1995-96 to 1998-99. Since common issues are involved, these appeals were heard together and we deem it appropriate to dispose them off by way of this common order for the sake of convenience.
Briefly stated, the facts of the case are as under: to 3267/Bang/2018 Page 2 of 15 2.1 The assessee, late Smt. Chindodi Leela was a well known artiste, engaged in business of staging of dramas in various parts of Karnataka and production of T.V. Serials. A survey under section 133A of Income Tax Act, 1961 (in short ‘the Act’) was conducted at the assessee’s premises at ‘Shankar Leela Kalyana Mantapa’ at Davangere on 30.12.1999; wherein certain notebooks containing entries about receipts and payments of the aforesaid Drama Company were recorded, were found and impounded. Pursuant thereto, the Assessing Officer (AO) on the basis of findings in the course of survey initiated proceedings under section 147 of the Act as he had reason to believe that income of the assessee, liable to tax had escaped assessment for Assessment Years 199596 to 1998-99 and after recording reasons in this regard, issued notices under section 148 of the Act on 03.02.2000 to the assessee for these four assessment years. The assessments for these Assessment Years 1995-96 to 1998-99 were concluded under section 143(3) r.w.s. 147 of the Act on the basis of material impounded in the course of survey proceedings; vide separate orders dated 27.03.2002 as under:
Assessment Income Date of filing of Annual income Year Returned (Rs.) return of (Rs.) Income 1995-96 74,800/- 05.03.1998 6,33,434/- 1996-97 (-)44,940/- 05.03.1998 19,46,531/- 1997-98 1,42,950/- 05.03.1998 22,18,942/- 1998-99 69,600/- 21,59,829/- 2.2 Aggrieved by the orders of assessment dated 27.03.2002 for Assessment Years 1995-96 to 1998-99, the assessee filed appeals before the CIT(A)-IV, Bangalore, who vide orders in to 34/R-7/CIT(A)-IV/2003 dated 30.05.2003 allowed the assessee partial relief. On further appeal, the Co-ordinate Bench of ITAT, Bangalore Bench, in its order in ITA Nos.1238 to 1241/Bang/2003 and others dated 30.09.2004 allowed the assessee partial relief.
ITA Nos. 3264 to 3267/Bang/2018 Page 3 of 15 Both the assessee and Revenue went in further appeal before the Hon’ble Karnataka High Court and the Hon’ble Karnataka High Court in its order in of 2005 C/W ITA CROB No.3/2006 and others dated 03.10.2007 remitted the assessments for these four Assessment Years 1995-96 to 1998-99 to the file of the AO; observing as under at para 5 thereof:
“5. Both the learned counsel for the parties submitted that, in view of non-consideration of the documents found at the time of survey rendered the findings recorded by the assessing officer as erroneous in law and levying income tax on the undisclosed income is not only erroneous but also suffers from error in law for non- consideration of the documents and the explanation offered by the assessee. Therefore, it is submitted by them that it would be just and proper for this Court to remand the matter to the assessing officer to reconsider the matter. Since we are remanding the matter for the aforesaid reasons and since the notice under Sec.148(2) is also served upon the assessee, it is open for her to ask for reasons and file objection statement to the same which shall be considered by the assessing officer and orders shall be passed in accordance with law both in respect of income derived from drama company and rents received in respect of Kalyan Man tap. It is also open for the assessing officer to consider the legal contentions urged on behalf of assessee whether the rents received by the assessee from the choultry fall under Sec.22 or 28 of the Income Tax Act 86 whether it is an income from the house property or income from the business?.”
2.3 From the details on record, it is seen that pursuant to the High Court order (supra), the AO recommenced assessment proceedings afresh. In response to the assessee’s request, the reasons recorded for initiation of proceedings under section 148 of the Act were given to the assessee and the assessee has not objected to the same. The assessments for Assessment Years 1995-96 to 1998-99 were completed under section 143(3) r.w.s. 147 and 260A of the Act vide orders dated 27.03.2008 wherein the assessed income was determined as under: to 3267/Bang/2018 Page 4 of 15 Assessment Income Income assessed Year Returned (Rs.) (Rs.) 1995-96 74,800/- 2,58,360/- 1996-97 (-)44,940/- 6,39,831/- 1997-98 1,42,950/- 18,05,639/- 1998-99 69,600/- 13,73,289/- 2.4 Aggrieved by the orders of assessment dated 27.03.2008 for Assessment Years 1995-96 to 1998-99, the assessee filed appeals before the CIT-4, Bangalore. The CIT(A) disposed off the assessee’s appeals for these 4 years vide order dated 27.09.2018 allowing the assessee partial relief; the details of which are as under:
A. Income from KBR Drama Company sustained to the extent of 50% of income assessed by AO:
Assessment Assessed by AO Addition Year (Rs.) sustained by CIT(A) to the extent of 50% (Rs.) 1995-96 NIL NA 1996-97 4,11,831/- 2,05,916/- 1997-98 13,02,689/- 6,51,344/- 1998-99 10,91,689/- 5,45,845/- to 3267/Bang/2018 Page 5 of 15 B. Receipts from Kalyana Mantapa was sustained to the extent of 30% of receipts determined by the AO. Assessment Receipts from CIT(A) has upheld these Year Kalyana Mantapa as additions to the extent of determined by AO 30% of receipts (Rs.) determined by the AO (Rs.) 1995-96 2,29,450/- 68,835/- 1996-97 2,73,000/- 81,900/- 1997-98 4,50,000/- 1,35,000/- 1998-99 2,65,000/- 79,500/- 2.5 It appears that the impugned orders of the CIT(A) suffer from certain typographical errors as regards the actual quantum of relief given to the assessee in the impugned orders. However, I have endeavoured to work out the correct quantum sustained in the above tables, based on the relief given by the CIT(A) in his order and as specified by him in words. The CIT(A) in the concluding part of para 20 of his order has clearly stated that the assessee is entitled to relief to the extent of 50% of the additions made by the AO on account of income from Drama Company. The Table A (supra), regarding income from Drama Company depicts the amounts accordingly. Similarly, the CIT(A) in the concluding portion of para 25 of the impugned order has clearly stated that the assessee is entitled to relief to the extent of 70% of the receipts from Kalyana Mantapa as determined by the AO. The Table B (supra) depicts the amounts upheld/sustained accordingly.
3.1 Aggrieved by the orders of CIT(A)-4, Bangalore, dated 27.09.2018 for Assessment Years 1996-97 to 1998-99, the assessee has filed these appeals before the Tribunal wherein it has raised the following similar grounds for all these assessment years involved except for the differences in figures of quantum to 3267/Bang/2018 Page 6 of 15 additions. Therefore, the grounds raised for Assessment Year 1996-97 are extracted hereunder:
3.2 For Assessment Year 1995-96, the grounds raised are as under:
Ground Nos. 1, 8 and 9 (for Assessment Years 1996-97 to 1998-99 and Ground Nos. 1 & 6 for Assessment Year 1995-96) being general in nature, no adjudication is called for thereon, and the same are accordingly dismissed as infructuous. to 3267/Bang/2018 Page 11 of 15 5. Ground No. 7 for Assessment Year 1996-97 to 1998-99 Ground No. 6 for Assessment Year 1995-96 – Charging of interest under section 234A and 234B of the Act 5.1 In this ground (supra), the assessee denies himself liable to be charged interest u/s 234B of the Act. The charging of interest is consequential and mandatory and the AO has no discretion in the matter. This proposition has been upheld by the Hon’ble Apex Court in the case of Anjum H. Ghaswala (252 ITR 1) (SC) and I, therefore, uphold the action of the AO in charging the assessee the aforesaid interest u/s 234B of the Act. The AO is, however, directed to re-compute the interest chargeable u/s 234B of the Act, if any, while giving effect of this order.
Ground No. 4 for Assessment Year 1996-97 to 1998-99 – Income from KBR Company 6.1 In support of the grounds raised on this issue (supra), the learned AR for the assessee submits that the gross receipts as per the profit and loss accounts filed by the assessee, exceeds the total amount as per the impounded material and there is no suppression of turnover in Assessment Years 1996-97, 1997-98 and 1998-99. The learned AR further submitted that only a portion of the actual expenses are noted in the material impounded in the course of survey and the same does not cover all expenses. According to the learned AR, if only the expenses, which are partly recorded in the impounded material were to be considered against the actual expenses incurred, the same would lead to absurd results. The additions made by the AO, by considering the impounded material alone and not taking into account actual expenses, has thus resulted in huge unwarranted additions; which are contrary to facts. The learned AR has also furnished a table; wherein the working shows that the net income assessed by the ITA Nos. 3264 to 3267/Bang/2018 Page 12 of 15 AO as a percentage of gross receipts would come to 37.19% for Assessment Year 1996-97; 53.08% for Assessment Year 1997-98 and 54.92% for Assessment Year 1998-99. The learned AR further submits that as per the aforesaid table, if one were to consider the relief given by the CIT(A), the net income as a percentage of gross receipts would come to 18.60% for Assessment Year 1996-97; 26.54% for Assessment Year 1997-98 and 27.46% for Assessment Year 1998-99. The learned AR argued that the fact that drama companies are a vanishing tribe, in as much as there is not much of audience and the same is a dwindling art, the net income sustained by the CIT(A) itself is very high, let alone the income assessed by the AO. It is prayed that in view of the above and the fact that the Co-ordinate Bench of this Tribunal in its order in to 1241 and 1023 to 1026/Bang/2003 dated 30.09.2004 had come to the conclusion that no addition was called for on this account; the additions sustained @ 50% on account of income from drama company should be deleted.
6.2 Per contra, the learned DR supported the impugned orders of the CIT(A).
6.3.1 I have heard the rival contentions and perused and carefully considered the submission / details filed, the material on record and the judicial pronouncement cited. I find merit in the arguments put forth by the learned AR. The gross receipts shown in the profit and loss accounts filed by the assessee for Assessment Years 1996-97, 1997-98 and 1998-99 are Rs.11,98,500/-; Rs.25,06,156/- and Rs.25,26,128/- respectively and the gross receipts as per impounded material is Rs.11,07,350/- for Assessment Year 1996-97; Rs.24,54,095/- for Assessment Year 1997-98 and Rs.19,87,721/- for Assessment Year 1998-99. Thus, there is no understatement of gross receipts by the assessee. Moreover, in my considered view, the net income from the Drama Company, as a percentage of gross receipts, cannot be as high as has been held by the CIT(A). In this context, it is pertinent to note that the Co-ordinate Bench of this Tribunal to 3267/Bang/2018 Page 13 of 15 in its order dated 30.09.2004 (supra)in the first round of appeals for these Assessment Years at para 5.4 thereof had come to the conclusion that no addition was called for on this issue. This finding of the Tribunal has not been controverted by the authorities below i.e., by the CIT(A); while sustaining the addition made at on adhoc figure of 50%; as being the earnings of the drama company. In view of the peculiar facts and circumstances of the case and in the absence of any comparable case put forth by the authorities below, the additions, even to the adhoc extent upheld by the CIT(A) cannot be justified. In this view of the matter, I delete the additions sustained by the CIT(A) on account of income from drama company for Assessment Years 1996-97, 1997-98 and 1998-99. Consequently, ground No.4 raised in assessee’s appeal for these Assessment Years is allowed.
Ground No.4 for Assessment Year 1995-96 Ground No. 5 for Assessment Years 1996-97 to 1998-99 – Income from Kalyana Mantapa 7.1 On the issue of additions on account of Kalyana Mantapa (i.e., income from house property), the learned AR submitted that at para 24 and 25 of the impugned order, the CIT(A) has rendered a categorical finding that the receipts / donations of the Kalyana Mantapa are received by a Temple Committee and receipts are issued by Someshwara Temple and not the assessee and that the funds so collected are utilised towards temple organisational activity and the Kalyana Mantapa. Therefore, according to the learned AR, it is clear that the assessee neither collects the donations / receipts, nor does she incur any expenditure to run the same. The CIT(A) has upheld the additions made by the AO to the extent of 30% due to the fact that the Kalyana Mantapa Building and the land thereto is owned by the assessee. The learned AR contends that since she did not receive any part of the donations / receipts, no part of the income earned from temple / to 3267/Bang/2018 Page 14 of 15 Kalyana Mantapa is to be assessed in her hands for the Assessment Years under consideration.
7.2 Per contra, the learned DR for Revenue supported the orders of the learned CIT(A).
7.3 I have heard the rival contentions and perused and carefully considered the material on record. I find force in the arguments put forth by the learned AR for the assessee. It is a fact, as observed by the CIT(A) in the impugned order at para 25 thereof; that the assessee has neither received any income / receipt from the Kalyana Mantapa nor has she incurred any expenditure pertaining the same. All donations / receipts were received by Someshwar Temple Committee and the same were expended for temple organisational activity and the Kalyana Mantapa. If at all any addition is to be made, the same ought to have been done based on notional ALU of the property. In my view, the additions made, based on receipts by the Temple Committee, is not correct and therefore delete the addition sustained by the CIT(A) @ 30%, on account of income from Kalyana Mantapa. Consequently, grounds raised by the assessee on this issue are allowed.
Ground No. 2 (Assessment Years 1995-96 to 1998-99) – Validity of assumption of jurisdiction by AO under section 147/148 of the Act 8.1 In this ground (supra), the assessee challenges the validity of assumption of jurisdiction by the AO under section 147/148 of the Act for commencing assessment proceedings for Assessment Years 1995-96 to 1998-99. In this regard, I have heard the rival contentions and perused and carefully considered the material on record. From an appraisal of the material on record, it is seen that the assessee had requested for a copy of the reasons recorded for initiation of proceedings vide letter dated 05.11.2007; which were communicated to the to 3267/Bang/2018 Page 15 of 15 assessee by the AO vide letter dated 12.02.2008. It is a matter of record that the assessee has not raised any objections in this regard. In the light of the above facts, it is evident that the AO has correctly and validly assumed jurisdiction under section 147 of the Act for commencing proceedings for assessments for Assessment Years 1995-96 to 1998-99. Though raised by the assessee, it is seen that there is no violation of the provisions contained in section 151 of the Act. In view of the above and finding no merit in this ground No. 2 raised by the assessee (supra), the same is accordingly dismissed.
In the result, the assessee’s appeals for Assessment Years 1995-96 to 1998-99 are partly allowed.
Order pronounced in the open court on this 8th day of February, 2019.