A.RAGHURAM,VALSARAWAKKAM vs. DCIT CENTRAL CIRCLE-1(2), CHENNAI, CHENNAI

Brief facts of the case are that a search under section 132 of the Income Tax Act, 1961 [“Act” in short] was initiated and conducted in this assessee’s case on 31.10.2013. The assessee filed the return of income on 16.04.2015, admitting total income of ₹.2,03,67,310/-. The case was

With regard to the addition of ₹.4,00,00,000/- towards business income, upon gathering the cost of production and the sources to meet the same for the film “Arambam” during the search proceedings and post search investigation, the Assessing Officer arrived the cost of production at ₹.46,20,84,650/- against the source of ₹.42,16,00,000/-. When the above difference was pointed out during the statement recorded under section 132(4) of the Act on 26.12.2013, against question No. 3, the assessee had offered an additional income of ₹.4,00,00,000/- for the assessment year 2014-15 to cover up the commissions and omissions since the generation of the same occurred during the current year from the film which was released on 31.10.2013. Since the assessee has not

The assessee carried the matter in appeal before the ld. CIT(A). After considering the submissions of the assessee, the ld. CIT(A) confirmed the addition made by the Assessing Officer by observing as under: 7.1.3 I have considered the submissions of the appellant. During the course of search, incriminating material to the effect that the appellant had incurred Rs.46,20,84,650/- as cost of production of the film “Aarambam" was found. When the appellant was called upon to explain the source for the cost of production incurred, the appellant was not able to adduce full proof and there remained a sum of Rs.4 cr. as unexplained. In fact, the appellant has agreed to offer the said amount for tax in the statement recorded u/s 132(4) during the course of search. It is thus clear that the addition was not made on mere admission of the appellant but also based on the documents found during the course of search. Hence, the objections raised by the appellant against the addition are rejected. On merits, the appellant was not able to adduce source for the cost of production incurred. The appellant has not disputed the cost of production adopted by the AO. It is seen that in the case of Kishore Kumar Vs CIT 62 taxmann.com 215, 234 Taxman 771 (SC)], SLP dismissed against High Court's order where it was held that since assessee himself had stated in sworn statement during search and seizure about his undisclosed income, tax was to be levied on basis of admission without scrutinizing documents. It is seen that the assessee has not retracted his statement also. The statement was recorded under oath u/s 132(4) and has evidentiary value. In the case of Bannalal Jat Constructions (P.) Ltd. Vs ACIT [[2019] 106 taxmann.com 128 (SC)/[2019] 264 Taxman 5 (SC)], the Hon'ble Supreme Court held where High Court upheld addition made by authorities below relying upon statement made in course of search proceedings by director of assessee-company, since assessee failed to discharge its burden that admission made by director in his statement was wrong and said statement was recorded under duress and coercion, SLP filed against decision of High Court was to be dismissed. The important factor in this case is that there is incriminating material to the effect that the appellant had incurred Rs.46,20,84,650/- as cost of production of the film "Aarambam" which the assessee has not disputed. It is also not in dispute the sources that the assessee could explain is only to the extent of Rs.42,16,00,000/-. This is also not disputed by the AO. These materials are also corroborated by the

On the other hand, by filing written submissions and supporting the

We have heard both the sides, perused the materials available on record and gone through the orders of authorities below including written submissions filed by both the Counsels. In this case, the assessee was a producer of cinematographic films. A search under section 132 of the Act was conducted in the premises of the assessee on 31.10.2013. During the course of search proceedings and post search investigation, the Assessing Officer gather the details of the cost of production and sources to meet the same for the film “Arambam” produced by the assessee. The Assessing Officer found that the total cost of production of the above film was ₹.46,20,84,650/-, whereas, the assessee had sources only for ₹.42,16,00,000/-. When the assessee was examined on oath during the course of search proceedings under section 132(4) of the Act, the assessee has agreed to offer the sum of ₹.4,00,00,000/- to cover up the

We have perused the details of cost of production quantified by the Assessing Officer and the same reproduced as under: Sl.No. Artist payments/technician Description Amount (Rs.) payment and production expenses 1 Artists remuneration 1. Ajith Kumar 15,00,00,000/- 2. Arya 2,25,00,000/- 3. Rana 40,00,000/- 4. Other artists 1,54,75,000/- 2. Technician’s remuneration 1. Vishnu Vardhan, Director 2,25,00,000/- 2. N. Prakash, Cameraman 44,00,000/- 3. Yuvan Shankar Raja 1,25,00,000/- 4. Other technicians 2,96,17,000/- 3. Production Expenses 1. Computer graphic works 84,00,000/- 2. Camera Raid Box 9,00,000/- 3. Costume purchase 20,00,000/- 4. Co-artists payment 8,50,000/- 5. Publicity expenses 1,50,00,000/- 6. Effects & mixing 5,00,000/- 7. Dubbing artist expenses 13,62,64,000/- 8. Other production expenses 4. Interest payment - 3,67,28,650/- Total 46,20,84,650/- 9. The Assessing Officer has determined the sources to meet the above expenditure at ₹.42,16,00,000/- and thus, the difference of cost of production and sources for the same was quantified at ₹.4,00,00,000/-and

In the written submissions, the ld. counsel has submitted that as per the computation of the income generated from the said feature film and the cost of production, there would be loss of ₹.4,04,84,650/-. As rightly argued by the ld. DR, the assessee should have filed return of loss as mandated under section 139(3) of the Act in the prescribed format for claiming the loss, which was not done in this case. Thus, this argument of the ld. counsel stands rejected.

The alternative plea of considering to exclude the component of the income admitted in the return of income to the tune of ₹.2,03,67,310/- from the disputed addition also stands rejected as no detailed explanation

In the result, the appeal filed by the assessee is partly allowed for statistical purposes. Order pronounced on 21st March, 2024 at Chennai.