DEPUTY COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE 3, DELHI vs. BHUSHAN DUA, NEW DELHI

2. The appellant has not been able to establish the genuineness of the expenditure in view of the following : a) No work order, written agreement, email correspondence has been furnished. b) Sh. Gaurav Gupta (Director in Sadhna Group) stated that usually written agreements or release orders are sent by the client elaborating terms and conditions. But no such document is available in case of the assessee. c) A film wise detail has been tabulated in the assessment order listing out the total publicity expenses of a particular film vis-à-vis advertising expenses incurred through Sadhna Group and a conclusion drawn that such expenditure of advertisement for certain films is in the nature of bogus expenses. d) Non-compliance of summons issued to various individuals and entities of Sadhna Group etc. Super Cassettes Industries Pvt. Ltd. e) It is not believable that the advertisement for trailer of a commercial film is being run on a devotional channel.

3. The assessee in order to justify the impugned advertisement expenditure has filed copies of invoices and copies of log sheets giving particulars about date and time of telecast of advertisement slots run on the satellite TV Channels through Sadhna Group of Companies. However, existence of bills and payment by way of cheque is not sufficient to prove the genuineness of the expenditure. The assessee has not been able to prove that the alleged services were rendered by Sadhna Group to the appellant and the Sadhna Group has not been able to prove that services were rendered by them to appellant.

4. During course of search statements of various persons were taken and no one could establish that there was any rendition of services and during post search enquiries also it could not be established.

5. During the year the assessee has given Rs. 39 Crore to the Sadhna Group for alleged advertisement and had it been a genuine transaction the assessee would have taken all the details like channel, time slot etc for actual rendition of services and the same would have been maintained.

7. The advertisement aired is measured in terms of 1/100th of a second. The bill raised is on the basis of exact number of micro seconds details whereof are available.

8. The Ld. CIT (A) relied upon the judgment of CIT vs Calcutta Agency Ltd 19 ITR 191, wherein it was held that the onus of proving necessary facts in order to avail the deduction u/s 37(1) is on the assessee and if the assessee fails to establish the same then the claim of deduction is not admissible. Further the CIT(A) also relied upon Andhra Pradesh High Court in the case of CIT Vs Transport Corporation of India 256 ITR 701 and in the case of CIT Vs Imperial Chemical Industries (I) Pvt Ltd 74 ITR 17 (Para 229 Page 116 and 117)

10.19 Relevant paras of the appeal order for AY 2016-17 are reproduced as under:

“218. I have carefully considered the contents of the assessment order and the written submissions of the appellant. The dispute involved in this ground of appeal is with regard to the advertisement expenses aggregating Rs. 39,00,00,000/- incurred by the appellant through Sadhna Channel group of companies. The said expenditure has been disallowed by the assessing officer on the basis of various discrepancies and infirmities discussed in the assessment order.

219. As regards the argument of the appellant was that there was no material found during the search, therefore, no addition could have been made by the Assessing Officer in proceedings u/s 153A, the same is not valid for the assessment year under consideration. For the assessment year under consideration scrutiny assessment proceedings u/s 143(3) of the Act were initiated but were not completed till the date of search. Since the assessment proceedings remained uncompleted the present assessment year is abated assessment year as per provisions of section 153A of the Act. The assessment for an abated assessment year is not dependent upon discovery of any incriminating material found during search and therefore this argument of the appellant is not acceptable.

220. As regards the business expediency of the advertisement expenditure there is no dispute. It is an uncontroverted fact that the appellant company etc. Super Cassettes Industries Pvt. Ltd. is engaged in the business of selling and distribution of music and production of films. In order to promote a particular audio song or album or a film it is important to popularise the content by running paid promotions of the content on various satellite TV channels. It is also noted that the paid promotion through satellite TV channels is not restricted to Sadhna Group of companies alone but is telecast on various satellite TV channels such as Star Network, Sony India, Zee Network, MTV etc. The nature of advertisement expenses is such that it is an essential part of the business operations of the appellant company. In fact, the total quantum of advertisement expenses claimed in the P&L Account are much more than the disallowance made in the assessment order.

222. Regarding the genuineness of the expenditure I am in agreement with the findings discussed in the assessment order. The appellant has been unable to comprehensively establish the genuineness of the advertisement expenditure incurred through Sadhna Group entities in view of the following :- i) M/s SCIPL was not able to furnish any work order, written agreement, email correspondence in support of the advertisement expenses being claimed; ii) Shri Gaurav Gupta (Director in Sadhna Group of companies) stated in his statement that usually written agreements or release orders are sent by other clients elaborating the terms and conditions. Whereas no such written agreement or release orders are available in the case of SCIPL. A sample release order dated 05.10.2014 issued by M/s Dharampal Satyapal to Sadhna Media Pvt. Ltd. has been reproduced in the assessment order. iii) A film-wise detail has been tabulated in the assessment order listing out the total publicity expenses for a particular film vis-à-vis advertisement expenses incurred through Sadhna Group of Companies etc. Super Cassettes Industries Pvt. Ltd. and a conclusion has been drawn that such high expenditure of advertisement for certain films is in the nature of bogus expenses. iv) Non-compliance to summons issued to various individuals and entities of Sadhna Group of entities. v) It is also not believable that the advertisement for trailer of commercial feature film is being run on devotional satellite channels.

223. On the other hand, in order to justify the impugned advertisement expenses the appellant company, has filed the copies of invoices and copies of log sheets giving particulars about the date and time of telecast of advertisement slots run on the satellite TV channels through Sadhna Group of companies. However, existence of bills and payment by way of cheque is not sufficient to prove the genuineness of the expense. Only those expenses are allowable which has been incurred during the normal course of business. At no point of time, the appellant has been able to prove that alleged services were rendered by Sadhna Group to the appellant. The Sadhna Group has also not been able to prove that services were rendered by them to the appellant.

10.20 The Ld. Counsel of the assessee submitted that SCIPL is engaged in the activity of procuring and selling music and also engaged in production of films.

In order to promote a particular audio song or album it is required to popularise the said sound recording. One of the means of promoting the song is to run paid

96 | P a g e paid promotions containing teaser/trailer of the film are telecast of satellite TV channels for promoting the film. It is in this context and background that promotion and advertisement expenses were incurred through Sadhna Group of satellite TV channels. SCIPL made payments to various companies of Sadhna Group in this regard viz. Sadhna Media Pvt. Ltd., Ishwar Broadcasting Pvt. Ltd., Naman Broadcasting Pvt. Ltd., Sharp Eye Advertising Pvt. Ltd., Varun Media Pvt. Ltd., Sadhna Broadcast Ltd., Chirau Broadcast Network Ltd.

10.21 The Ld. Counsel of the assessee submitted that the advertisement and promotion department of the assessee was at that time handled by Sh. Vinod Bhanushali and his team. This department finalises the amount of promotion and publicity of a song or a film to be done and through which channels. Once these logistics are finalised, the team of the assessee used to get in touch with Sh.

Arpan Gupta and his team in Sadhna Group for actual telecast of advertisements.

In view of past relations and good rapport between the two teams release orders for telecast of advertisements was done orally though phone. After the telecast of advertisement, the log sheets showing date and time of telecast and the particulars of satellite TV channel were submitted by Sadhna Group alongwith invoice and in turn payment was released by SCIPL.

10.22 As regards the observation made in the assessment order and relied upon by the CIT (A) about the statement of Shri Guarav Gupta, Director in one of the 97 | P a g e same is of innocuous nature as nowhere in the statement he has admitted that transaction with SCIPL are bogus. On the contrary, he has confirmed that the transactions with SCIPL are genuine. It is merely elaborated in his statement that regarding the transactions with SCIPL there are no written agreements. Regarding the proof of telecast he has specified in the statement that “advertisement content” is received in pen-drive, CDs and hard disk. The content so received is kept in temporary memory of the server for approx. three months and then it is overwritten by new content. The Ld. Counsel of the assessee draws our attention towards the provisions of Cable Television Networks (Regulation) Act, 1995 read with Rule 21(3) of Cable Television Networks Amendment Rules, 2021 where it is a mandatory requirement for broadcasters and advertisers in India to retain content, including advertisements, for a period of 90 days from the date of transmission This record must be maintained in a manner that allows for easy access and inspection by the authorized officers of the Ministry of Information and Broadcasting (MIB) to ensure compliance with the Programme Code and Advertising Code prescribed under the Act. Hence as per the directive of the MIB and provisions of Cable Television Networks (Regulation) Act, 1995 read with Rule 7(11) of Cable Television Networks Rules, 1994, it is only mandatory to retain content including advertisements for a period of 90 days from the date of transmission and looking at the quantum of data and cost involved in storage of 98 | P a g e temporary memory for 90 days form the date of transmission only. Hence, the ground that the proof of running the advertisement was not furnished the reasons for the same have been explained above and the AO was not justified in making disallowance on this ground.

10.23 The Ld. Counsel of the assessee submitted that SCIPL commenced its operations as a producer of devotional music under the brand name T-Series.

Similarly, Sadhna was established in 2003 as a dedicated devotional television channel and both share a congruent ethos of promoting spiritual and devotional content. The business relationship between SCIPL and Sadhna has been in existence since 2003, characterized by a continuous and consistent course of dealings. Over the years, the terms and conditions governing the broadcast of SCIPL’s content on Sadhna’s platform have been mutually agreed upon through established business practices and verbal understandings, reflecting the trust and mutual reliance inherent in their long-standing association.

10.24 The Ld. Counsel of the assessee further argued that inspite of making a written request the Assessing Officer did not provide a copy of statement of Shri Gaurav Gupta, relied upon in the assessment order. It is a well settled proposition of law that not allowing the assessee an opportunity to cross-examine the statement of witness, which were made the basis for assessment, is a serious flow which makes the impugned order a nullity, as it amounts to violation of principle 99 | P a g e of Andaman Timber Industries vs. CCE (SC) 62 Taxmann.com 3/52 GST 355 (SC).

10.25 Regarding the observation made in the assessment order and by CIT (A) that there is no credible evidence in support of advertisement expenses and the assessee does not maintain details, bills and vouchers, the Ld. Counsel of the assessee submitted that the assessee has furnished the copies of every invoice and the log sheets/telecast certificates forming part of the invoice before the AO and the CIT (A) and the same established the rendition of services. The log sheets/telecast certificates give the details of date and time at which the advertisement of the assessee was run on the channel and also gives the duration of advdertisement.

10.26 Regarding non-compliance of summons issued to the entities belonging to Sadhna Group of companies, it is clarified by the Ld. Counsel of the assessee the assessee company has no control over third parties and hence no adverse inferences can be drawn against the assessee company based on such non- compliance of third parties. Further the Counsel of the assessee submitted that the Assessing Officer, in the assessment order, explicitly acknowledged that Mr. Arpan Gupta, a director of M/s Naman Broadcasting & Telecommunications Pvt. Ltd., M/s Sadhna Media Pvt. Ltd., and M/s Ishwar Broadcasting Pvt. Ltd., appeared before the Assessing Officer on July 27, 2021, to provide his statement. 100 | P a g e thereby cooperating with the proceedings. Furthermore, Mr. Gupta responded to several questions posed by the Assessing Officer during the recording of his statement and provided the login credentials for his email account. Neither a copy of the said statement was provided nor the said statement was confronted with M/s SCIPL for verification or response. Instead, the assessment order selectively reproduces only the concluding paragraph of Mr. Gupta’s statement, wherein he sought an adjournment of 15 days for the next hearing. The Assessing Officer has characterized this request for adjournment as a deliberate tactic to willfully evade compliance with the summons issued, which is an unsubstantiated and erroneous inference that fails to consider the extent of cooperation extended by Mr. Gupta during the proceedings.

10.27 Regarding the observations made in the assessment order that analysis of certain log sheets on sample basis revealed that the frequency of running the advertisement is within a very short gap of time, it is submitted and clarified by the Ld. Counsel of assessee that these are merely inferences being drawn. It needs to be appreciated that in order to popularise a content the advertisements have to be run frequently with very less gap of time so as to put it in public memory.

Similarly, the observations made that the trailer of commercial feature films are being telecast on satellite channels is also without any basis as the audience for 101 | P a g e out to theatre to watch feature films.

10.28 Regarding the observation made in the assessment order and by CIT(A) that in respect of certain feature films for which advertisement expenses has been claimed through Sadhna Group of companies, quantum of expenditure is very high, it is submitted by the Ld. Counsel of assessee that the same is without any meaningful basis as the quantum of advertisement expenditure for a film depends on various factors such as the budget and scale of the film, star cast, other films releasing on the same date, chances of the success of the film at box office. All such factors must be considered to evaluate the advertisement expenditure incurred for the promotion of a film rather than only comparing the cost incurred on advertisement through satellite TV channels belonging to the Sadhna Group of companies vis-à-vis other satellite channels.

10.29 Further the Ld. Counsel drew the attention of the bench to the assessment order of Sadhna Media Pvt Ltd for the assessment years 2014-15, 2016-17 and 2017-18 which were finalised under section 153A by Central Circle 32 Delhi pursuant to search action on Sadhna Group on 15.02.2017. From the perusal of the Assessment Order for these years the AO in the order has reproduced the order sheet noting of hearing on 24.12.2018 at Page No. 51 of the order in which he had asked Ld.Counsel for the assessee regarding certain cash expenses and Ld.Counsel for the assessee of Sadhna Group replied that “regarding T-series 102 | P a g e series. (a) T -Series cassettes were distributed. (b) All expenses related to advertisement of T-Series and T-Series is not aware of these expenses. (v) assessee is receiving money from T-Series & DS etc. Assessee has received cash from other clients. A part of this cash was spent for T-Series cassettes etc. so that T-Series will be impressed that due to advertisement on the channels of assessee, sales of T-Series items has increased. It may be noted that assessee has taken the entire advertising income from T-Series and DS Group by way of cheque and which are duly recorded in the audited books of accounts of Sadhna Group”. The AO of Sadhna Group had then come to conclusion at Para 4.3 page 53 of the assessment order that the Sadhna Group company got business of 93.46 Crore from DS and 12.90 Crore from T-Series which is duly recorded in the books of accounts. Further out of unaccounted cash generated the Sadhna Group has spent Rs. 10.83 Crore for DS and Rs. 1.95 Crore for T-Series for their advertisement in various functions which expenses have not been recorded in their books of accounts. The Ld. Counsel of the assessee based on the same argues that from the assessment order of Sadhna Media Pvt Ltd it is clearly establish that the advertisement expenses incurred by SCIPL through Sadhna Group were genuine as the AO of Sadhna Group has held that the income of Sadhna Group from T- Series was genuine and in order to gain more business from T-Series the Sadhna Group had incurred unaccounted expenses like purchasing of cassettes, CDs of T-

103 | P a g e These finding were recorded by the AO of Sadhna Group pursuant to search and after examining all the material found during search.

10.30 It is also submitted by the Ld. Counsel of assessee that similar disallowance was made in the case of Dharampal Satyapal Ltd for assessment year 2016-17 in respect of advertisement expenses incurred relating to Sadhna Media P Ltd, Kamdhenu Media Pvt Ltd and Prabhatam Advertisement Pvt Ltd which are Sadhna Group Entities by treating the same as bogus and in this case part relief was allowed by the CIT (A) and part disallowance was confirmed. In this matter the Coordinate bench of ITAT Delhi vide order dated 17.01.2025 in Satyapal Ltd by deleting addition confirmed by CIT (A) and dismissing the appeal of the department against the relief allowed by CIT (A) .Since on similar facts the advertisement expenses of Dharampal Satyapal ltd for AY 2016-17 has been treated as genuine, the expenses incurred by SCIPL are also genuine and to be allowed.

10.31 Further it is highlighted by the Ld. Counsel of assessee that in case of search conducted on Sadhna Group and the assessee, no material was found to indicate that the impugned expenses were not genuine, and cash was paid by Sadhna Group to the assessee. The AO has alleged that the assessee has taken cash from Sadhna Group against these expenses for the last 6 years then in case 104 | P a g e unearthed both with Sadhna Group and the assessee company to indicate that cash was paid in lieu of these expenses. But in both the searches no such material was found. Further various statements were recorded during both the searches and no person during both the searches has given any statement to indicate that cash was paid in lieu of these expenses.

10.32 Thus as per the Ld. Counsel of the assessee the disallowance was made purely on surmises and conjectures. As discussed above in the case of Sadhna Media Pvt Ltd on of the Sadhna Group entities the AO in Order U/s 153A has held that the income earned by Sadhna Media from SCIPL in respect of Advertising was genuine and not bogus. Then drawing corollary from the same the same cannot be held as bogus in the hands of the assessee company.

10.33 We have heard the respective submissions made by the parties; we have also perused the relevant materials available on record. It appears from the records that that the Ld. AO has disallowed the impugned amount and added to the total income of the assessee for AY 2016-17 alleging that advertisement expenses claimed from Sadhna Group of companies are bogus in nature premised on the observation that SCIPL does not maintain detailed bills and vouchers, work order, e-mail correspondence or any agreement for advertisement expenses paid to Sadhna Group of companies and on unsatisfactory reply received from 105 | P a g e Rakesh Gupta (Owner and Managing Director of Sadhna Group).

10.34 At the outset it is seen that this disallowance has been made by the AO on the presumption that no services were provided by Sadhna Group and they had raised bogus bills on the assessee and the assessee received back the bill amount in cash. To verify the genuineness of the expenses claimed the following ingredients are to be satisfied:

1. Business Expediency 2. Proof of the service provided 3. Payment made against service provided. 4. Compliance with statutory requirements.

10.35 Now if the business expediency is examined then the CIT(A) in the appellate order has himself mentioned that the business expediency of the advertisement expenditure is not in dispute since the appellant company is engaged in business of selling and distribution of music and production of films.

In order to promote a particular audio song or album or a film it is important to popularize the content by running paid promotion of the content on various channels. The paid promotion is not restricted to Sadhna Group Channels but also on various other satellite TV channels such as Star Network, Sony India, Zee Network MTV etc. The nature of advertising expenditure is such that it is an essential part of the business operations of the appellant company. This categorical finding by the CIT(A) establishes the business expediency of this 106 | P a g e assessee has furnished the complete bills, log sheets and telecast certificates for all the six years in support of the proof of services. The assessee had made the entire payment through Banking channels after deduction of Tax as applicable.

10.36 Now looking at the factual matrix of the case The AO and CIT(A) disallowed the advertisement expenses incurred by the assessee through Sadhna Group entities, namely Sadhna Media Pvt. Ltd., Ishwar Broadcasting Pvt. Ltd., Naman Broadcasting Pvt. Ltd., Sharp Eye Advertising Pvt. Ltd., Varun Media Pvt. Ltd., Sadhna Broadcast Ltd., and Chirau Broadcast Network Ltd., on the grounds that the transactions were not supported by written agreements, lacked credible evidence, and were allegedly bogus based on the statement of Shri Gaurav Gupta, Director of one of the Sadhna Group companies. We find the AO’s observation to be factually incorrect and legally unsustainable. The assessee has submitted that its advertisement and promotion department, headed by Shri Vinod Bhanushali, finalized the logistics for telecasting advertisements, and release orders were communicated orally to Shri Arpan Gupta of the Sadhna Group due to established business relations. Post-telecast, the Sadhna Group provided log sheets and invoices, which were duly acted upon by the assessee for releasing payments. In support of the same the assessee had provided all the invoices and log sheets / telecast certificates before the AO and CIT(A). The AO has observed in the order that the assessee does not maintain detailed bills and 107 | P a g e certifcate for the entire expenditure of all the six years (AY 2014-15 till 2019- 20) were furnished before the AO. In view of this fact it emerges that the AO during the course of assessment proceedings has not considered the evidence produced by the assessee and made a statement in the order that detailed bills and vouchers are not maintained which is without any basis.

10.37 The absence of written agreements does not ipso facto render the transactions invalid, as business practices often rely on trust and oral arrangements, particularly in long-standing relationships. It is observed that Super Cassettes Industries Private Limited (SCIPL), operating under the brand T- Series, began primarily as a producer of devotional music. Similarly, Sadhna, launched in 2003 as a dedicated devotional television channel, shares aligned ethos of promoting spiritual and devotional content. The business relationship between SCIPL and Sadhna, established in 2003, has been marked by a consistent and continuous course of dealings. The terms governing the broadcast of SCIPL’s content on Sadhna’s platform have been mutually agreed upon through established business practices and verbal understandings, demonstrating the trust and mutual reliance inherent in their long-standing association. It is not trite law that a written agreement is a must in every case. Lastly the assessee has furnished copies of invoices and log sheets/telecast certificates, which sufficiently establish

108 | P a g e is, therefore, misplaced and does not negate the genuineness of the transactions.

10.38 The AO and CIT (A) relied on the statement of Shri Gaurav Gupta to allege that the transactions were bogus. It was further noted that no records of SCIPL’s advertisement content were available with the Sadhna Group.

We find the reliance on Shri Gaurav Gupta’s statement to be misconceived. The assessee has rightly pointed out that Shri Gaurav Gupta, in his statement, confirmed the genuineness of transactions with SCIPL and clarified that advertisement content was received via pen drives, CDs, or hard disks, stored temporarily for approximately three months, and then overwritten as per industry practice. This is consistent with the provisions of the Cable Television Networks (Regulation) Act, 1995 read with Rule 21(3) of the Cable Television Networks Amendment Rules, 2021, which mandate retention of advertisement content for only 90 days. The AO’s expectation of perpetual retention of such content is unreasonable and contrary to statutory requirements. Furthermore, the AO’s failure to provide the assessee with a copy of Shri Gaurav Gupta’s statement or an opportunity for cross-examination constitutes a serious violation of the principles of natural justice, as held by the Hon’ble Supreme Court in Andaman Timber Industries vs. CCE [62 Taxmann.com 3]. Consequently, the statement cannot be used to discredit the assessee’s claim.

109 | P a g e inferences against the assessee, based on the alleged non-compliance of third- party entities belonging to the Sadhna Group with summons issued under the Income Tax Act. The assessee has no control over these third parties, and such non-compliance cannot justify adverse inferences against it. The assessee discharged its primary onus by furnishing invoices, log sheets, and telecast certificates, which substantiate the rendition of services and the genuineness of the expenses. The AO’s reliance on the non-cooperation of third parties is unjustified. Furthermore, we notes that Mr. Arpan Gupta, a director of M/s Naman Broadcasting & Telecommunications Pvt. Ltd., M/s Sadhna Media Pvt.

Ltd., and M/s Ishwar Broadcasting Pvt. Ltd., appeared before the AO on July 27, 2021, cooperated by providing his official email ID and password, and responded to several questions during the recording of his statement which is admitted by the AO in the assessment order. The AO’s failure to provide a copy of Mr. Gupta’s statement to SCIPL for verification or response, coupled with the selective reproduction of only the concluding paragraph where Mr. Arpan Gupta sought a 15-day adjournment mischaracterizes his cooperation as willful evasion.

We holds that the AO’s inference is unsubstantiated, erroneous, and fails to account for the extent of cooperation extended by Mr. Gupta during the proceedings.

110 | P a g e with short gaps and that telecasting trailers of commercial feature films on devotional satellite channels was inappropriate. We find the AO’s observation to be based on mere assumptions without any cogent evidence. The assessee has clarified that frequent telecasting with short gaps is a standard industry practice to ensure content remains in public memory, particularly for promoting songs or films. Further, the assumption that trailers of commercial films are unsuitable for devotional channels ignores the diverse viewership of satellite TV channels, which often includes audiences who patronize theaters for feature films. The AO’s inference lacks any evidential basis and cannot justify the disallowance.

10.41 The AO and CIT (A) contended that the quantum of advertisement expenditure for certain films was disproportionately high compared to other channels. We find this observation to be devoid of merit. The assessee has explained that advertisement expenditure depends on multiple factors, including the film’s budget, star cast, competing releases, and anticipated box office performance. The AO’s comparison of expenses incurred through Sadhna Group channels with other channels, without considering these factors, is arbitrary and lacks a rational basis. The assessee’s submissions, supported by invoices and log sheets, adequately justify the quantum of expenditure. It is the assessee companies prerogative to decide the publicity budget of its films and the AO cannot dictate the quantum of advertisement of a particular film.

111 | P a g e Media Pvt. Ltd., where unaccounted expenses were allegedly incurred to secure business from SCIPL and others. The assessment order of Sadhna Media Pvt. Ltd. for AY 2014-15, 2016-17, and 2017-18, passed under Section 153A, clearly records that the income of Rs. 12.90 crore from SCIPL was genuine and duly accounted for in the books of Sadhna Media. The expenses are matched with the expenses claimed by SCIPL in its books of accounts. The AO of Sadhna Media further noted that unaccounted expenses of Rs. 1.95 crore were incurred to secure additional business from SCIPL, which were allowed as business expenses. These findings, based on a search conducted on the Sadhna Group, unequivocally establish the genuineness of the transactions with SCIPL. Hence, this clearly establishes the genuineness of transaction based upon categorical finding given by the AO of Sadhna Media that the income earned by Sadhna Media from the assessee was entirely genuine and infact Sadhna Media had incurred expenditure in cash to boost its advertising income from the assessee company. The AO’s disallowance in the assessee’s case, despite these findings, is contradictory and unsustainable. This fact itself highlights that the addition made by the AO for six years on this count was without any basis and material on record but based on surmises and conjectures.

10.43 The Ld Counsel of the assessee relied upon the decision of the coordinate bench in the case of Dharampal Satyapal Ltd. [ITA Nos. 3071/D/2022 and 112 | P a g e through Sadhna Group entities for AY 2016-17 were held to be genuine, and the disallowance was deleted. We find that the facts of the present case are pari materia with those in Dharampal Satyapal Ltd. This decision to allow the advertisement expenses as genuine applies squarely to the present assessee’s case.

10.44 The AO alleged that the assessee received cash from the Sadhna Group against these expenses, rendering them bogus. We note that no incriminating material was found during searches conducted on both the assessee and the Sadhna Group to suggest that cash was paid or received in lieu of these expenses.

In fact the Ld Counsel has argued that in case of search conducted in the case of Sadhna Group and the assessee no material was found to indicate that the impugned expenses were not genuine, and cash was paid by Sadhna Group to the assessee. As per the argument of the Ld Counsel the AO has alleged that the assessee has taken cash from Sadhna Group against these expenses for the last 6 years then in case of search which has an element of surprise some material must have been unearthed both in case of Sadhna Group search and the assessee to indicate that cash was paid in lieu of these expenses. But in both the searches no such material was found. Further various statements were recorded during both the searches and no person during both the searches has given any statement to indicate that cash was paid in lieu of these expenses. The absence of any corroborative evidence, coupled with the lack of statements indicating such 113 | P a g e Sadhna Group was in the year 2017 and after the search also the assessee continued to make advertisement on Sadhna Channels, this itself points to the fact that it was a genuine expenditure based on business expediency. The disallowance, being based on surmises and conjectures, cannot be sustained.

10.45 The CIT (A) relied on the decisions in CIT vs. Calcutta Agency Ltd. [19 ITR 191], CIT vs. Transport Corporation of India [256 ITR 701], and CIT vs. Imperial Chemical Industries (I) Pvt. Ltd. [74 ITR 17] to uphold the disallowance.

We find these case laws to be distinguishable and inapplicable. In Calcutta Agency Ltd., the disallowance was upheld due to the failure to establish business expediency, whereas in the present case, the CIT(A) has not disputed the business expediency of the expenses. In Transport Corporation of India, the disallowance was based on the assessee’s failure to disclose details of secret commissions, whereas the assessee here has furnished invoices, log sheets, and telecast certificates, establishing the identity and genuineness of the expenses. Similarly, in Imperial Chemical Industries, the issue was business expediency, which is not contested in this case. Thus, the reliance on these precedents is misplaced.

10.46 In view of the above findings, we hold that the disallowance of advertisement and promotion expenses incurred by the assessee through Sadhna Group and sustained by CIT(A) entities is without any basis. The assessee has 114 | P a g e invoices and log sheets, to substantiate the genuineness of the expenses. The AO’s observations are based on assumptions, lack of corroborative evidence, and procedural lapses, such as denial of cross-examination, which violate natural justice. The findings in the assessment order of Sadhna Media Pvt. Ltd. and the Tribunal’s decision in Dharampal Satyapal Ltd. further reinforce the genuineness of the transactions. Accordingly, the addition confirmed by the CIT (A) for AY 2016-17 to AY 2019-20 are deleted, and the assessee’s appeal is allowed for AY 2016-17 to AY 2019-20 and the disallowance made on this count deleted.

Assessment Year Amount of addition 2016-17 3,79,37,675 2017-18 1,63,50,000 11.1 The assessee raised this common issue regarding addition on account of disallowance of Commission expense paid to Sanjay Singhal and M/s Balaji Agencies in order to avoid payment of taxes in India, which is present in appeals for Assessment Years 2016-17 and 2017-18 (ITA Nos. 2756/DEL/2023 and 115 | P a g e 2016-17 will be applicable for AY 2017-18 as the issues are identical and no new circumstances exist.

11.2 Brief facts of the case are that during search proceedings, bills were found at M/s SCIPL's premises indicating payments to Sanjay Singhal as commission, claimed as expenses by SCIPL. The AO observed that Sanjay Singhal claim of facilitation of better copyright prices for SCIPL, earning Rs. 4.80 Crores in commission for AY 2016-17 and 2017-18, is incorrect due to his vague and evasive responses in his statements recorded under oath. He failed to provide details of a "close friend" who connected him to TV channels, no proof of negotiations, or a written agreement for the 5% commission from SCIPL were provided.

11.3 Further the AO made another observation that No credible evidence supports the Rs. 5,42,87,675/- commission received by Singhal and his firm, M/s Balaji Agencies, for alleged services to SCIPL. Based on this observation the AO draws the observation that Sanjay Singhal Group allegedly manipulates unaccounted income through accommodation entries, such as bogus commission income, inflated movie rights sales, and fictitious share profits.

11.4 The CIT(A) confirm the addition made in the appeal order after relying on the observations made in the assessment order. The conclusive findings of the CIT(A) deserves to be reproduced herein below for further analysis and 116 | P a g e “241. I have carefully considered the contents of the assessment order and the submissions of the Appellant. The dispute in this ground of appeal is with regard to the disallowance of Rs. 3,79,37,675/- pertaining to the commission paid to Shri Sanjay Singhal and M/s Balaji Agencies. The assessing officer has treated the said claim of expenditure as bogus which is challenged by the Appellant.

242. The appellant during the course of appellate proceedings has tried to establish that because of efforts of Shri Sanjay Singhal, there was marginal increase in the revenue of the appellant. The appellant also relied upon the bills issued for commission and stated that the payments were made through the banking channels and therefore, the expenses were genuine. However, the appellant has not been able to furnish any evidence of any services having been rendered by Shri Sanjay Singhal or his partnership firm.

243. Commission is paid for introducing new parties and bringing new businesses. In this case the parties with whom the appellant has entered into agreement and for which alleged commission has been paid are those parties with whom the appellant already has agreements. Therefore, prima facie, payment of commission is not genuine.

I & II) with entities like Zee Entertainment, Multi Screen Media, Viacom 18 Media, GenX Entertainment, and Bennet Coleman & Co. These agreements show increased license fees and, in some cases, reduced licensed content, demonstrating the commercial benefits of Singhal’s services.

11.6 Further the Ld. Counsel of assessee submitted that Sh. Sanjay Singhal leveraged his industry contacts to negotiate better terms and higher license fees for SCIPL, as evidenced by the agreements. The incremental revenue (e.g., Rs. 1.54 crores from Zee, Rs. 3.37 crores from Viacom, Rs. 6.66 crores from GenX and Bennet Coleman) justifies the payments made to him. His connections and expertise, confirmed in his post-search statement, facilitated these favorable deals, distinguishing them from other agreements where his services were not utilized.

119 | P a g e transactions is supported by invoices, licensing agreements, and notarized affidavits from Singhal and Balaji Agencies, confirming that their assessments for A.Y. 2016-17 by DCIT, Central Circle-8, Delhi, found no adverse issues regarding transactions with SCIPL. Further the AR highlighted that the assessment order of Sanjay Singhal (dated 31.12.2019) noted unrelated accommodation entry issues with OPG Group but made no additions or adverse inferences regarding SCIPL transactions.

11.8 It was highlighted by the Ld. Counsel of the assessee that searches were conducted on both SCIPL and Sanjay Singhal yielded no incriminating material suggesting non-genuine transactions or cash payments between them was found.

The AO’s disallowance of the expenditure is based on presumptions without counter-evidence. The AO failed to verify the services with the satellite TV channels or provide SCIPL an opportunity to cross-examine Singhal regarding his statement, which actually supports the genuineness of the transactions.

11.9 We have heard the rival submissions made by the respective parties and we have pursued the material available on record. The CIT(A)'s rejection of the appellant's assertions that Sanjay Singhal's purported efforts led to a marginal revenue increase and that payments were routed through banking channels, as these claims remain unsubstantiated without concrete evidence of actual services rendered is justified. Such banking transactions, while indicative of formal 120 | P a g e services, aligning with established precedents that mere payment proof is insufficient without service corroboration.

11.10 The valid skepticism arising from the fact that the commissions were ostensibly for facilitating deals with pre-existing parties rather than procuring new business, which undermines the rationale for such payouts and suggests they may not be integral to revenue generation. The absence of a formal written agreement for the unusually high 5% commission rate is highlighted as a red flag, as commercial prudence typically demands documented terms for significant expenditures, especially in arm's-length dealings. Compounding this, Singhal bore no liability for ensuring timely payments from parties or mitigating bad debts, which questions the economic substance of his role and casts further doubt on the commission's legitimacy as a bona fide business expense. The tribunal places significant weight on the sworn statements recorded during the search operations and subsequent proceedings, wherein Sanjay Singhal failed to provide specifics on negotiations, key contacts, or any tangible contributions, exhibiting a lack of recall that erodes credibility and supports an inference of non- genuineness.

11.11 We observed that Sanjay Singhal's primary involvement in the gutkha and tobacco sector, devoid of any demonstrated expertise in the media or entertainment industry relevant to SCIPL's operations, fundamentally weakens 121 | P a g e mismatch in domain knowledge suggests his involvement was implausible for rendering value-adding services, reinforcing suspicions of contrived arrangements. The complete dearth of supporting documentation such as correspondence, meeting records, or performance metrics leads us, to conclude that the payments represent accommodation entries designed to artificially deflate taxable income and evade liabilities. We underscores that the onus under Section 37(1) squarely rests on the assessee to establish the expense's authenticity, necessity, and business linkage through preponderant evidence. Resultantly the appellant ground of appeal is dismissed.

Assessment Year Amount of addition 2016-17 10,00,000 (Assessee Appeal) 2017-18 84,09,000 (Assessee Appeal) And 28,00,000 (Department Appeal) 2018-19 34,80,000 (Assessee Appeal) 2019-20 8,80,000 (Assessee Appeal) And 10,00,000 (Department Appeal)

122 | P a g e 12.1 The assessee and the Department have raised a common issue regarding additions on account of unaccounted cash received from Singers in order to avoid payment of taxes in India, which is under appeal for Assessment Years 2016-17, 2017-18, 2018-19 and 2019-20 (ITA Nos. 2756/DEL/2023, 272/DEL/2024, 273/DEL/2024 and 326/DEL/2024 for assessee), and 2017-18 and 2019-20 (ITA No. 272/DEL/2024 and 326/DEL/2024 for department.

12.2 Year-wise details of additions made are tabulated as under:

S. Date Particulars A.Y. A.Y. 2017-18 A.Y. 2018-19 A.Y. 2019- No 2016-17 20 1. 28.10.2015 Receipt of cash 1,000,000 from Shri Kumar Mangat 2. 05.04.2016 Receipt of cash 1,100,000 from Tony and Given to Shivam 3. 12.04.2016 Receipt of cash 8,58,000 on behalf of Sh. Vinod Bhanushali 4. 19.06.2016 Receipt of cash 500,000 from Rahul (can be Rahul Vaidya singer) 5. 05.08.2016 Receipt of cash 821,000 from Meet Brothers and Neha 6. 09.11.2016 Receipt of cash 2,000,000 from Meet brothers and Neha 7. 19.08.2016 Receipt of cash 4,000,000 from Shri Shrey (person in Zeegroup) 8. 19.08.2016 Cash Income 1,130,000 received from Amaal Arman

123 | P a g e and others 9. 06.06.2017 Receipt of cash 980,000 from Neha Kakkar 10. 11.09.2017 Unaccounted 300,000 cash Expenditure – Chat with Shiv 11. 26.09.2017 Receipt of cash 2,500,000 from Vinod Bhanushali – Ranchi Diaries 12. 02.11.2018 Receipt of cash 880,000 from Neha Kakkar 13. 06.10.2018 Receipt of cash 1,000,000 Shri Raju Total 1,000,000 1,04,09,000 3,780,000 1,880,000 12.3 The CIT (A) provided partial relief to the appellant company considering the evidences, documents, ledgers submitted during appellate proceedings. Year- wise relevant paras of the CIT(A) order are reproduced as under:

2016-17 286. The contents of the assessment order and the submissions of the appellant have been carefully considered. Coming to the merits of the case and Ground No. 10, the appellant has contended that the A.O was not justified in making an addition of Rs. 10,00,000/-on account of alleged unaccounted cash income received from singers/others on the basis of WhatsApp messages, in the absence of any inquiries conducted from corresponding parties and lack of corroborating material.

2017-18 21.11 The contents of the assessment order and the submissions of the appellant have been carefully considered. Coming to the merits of the case and Ground No. 12, the appellant has contended that the A.O was not justified in making an addition of Rs. 10,40,900/-on account of alleged unaccounted cash income received from singers/others on the basis of WhatsApp messages, in the absence of any inquiries conducted from corresponding parties and lack of corroborating material.

21.12 For the assessment year under consideration, the assessing officer has referred various chats on different dates. The said chat has been reproduced in the earlier part of this order.

The issue to be decided in the present ground is whether a presumption can be drawn only on the basis of chats containing numerical figures without any corroborating material to reach a conclusion that unaccounted cash Income was earned by the appellant from singers.

21.13 The AO has determined unaccounted cash income from singers for various yearson the basis of whatsapp chat. It has been ascertained by him that the numerical figures appearing in the whatsapp message represent the real income of the appellant from singers i.e. Income from artist management. The AO refers the WhatsApp chat between on 05.08.2016 between Sonal and Bhushan Kumar regarding the receipts from Meet Brothers. The AO refers that cheque payment of 187000/- was reflected in the books of account therefore belleve that the cash mentioned in the chats were also received by the appellant however not recorded in the books of account.

21.14 The basis for the entire addition is the whatsapp message reproduced above. The appellant argued that the contents of the chat cannot be the 125 | P a g e etc. Super Cassettes Industries Pvt. Ltd. basis of any addition. However, such a contention of the appellant is baseless because the chat has been found from the phone of Shri Bhushan Kumar, the director the appellant company and Ms. Sonal, Artist Manager of the appellant company. Further, the contents of the chat has not been proved to be incorrect at any point of time by the appellant. It is also a matter of fact and record that neither of the two persons have stated that the transactions referred in the chat is incorrect or have not taken place. It is also to be noted that the chat is in respect of receipt of money by the appellant company. Therefore, the contents of the chat is considered as a valid evidence based on which addition can be made.

21.15 In the text of the chat there is clear mention of receipt of money from various persons. The document is self explanatory and the appellant has not furnished any evidence contrary to the evidence on record. The chats establish that the appellant had received monies and it was apparently not disclosed in the books maintained by the assessee. Be otherwise the onus to prove that cash transaction was recorded in the books lies on the assessee. The appellant has miserably failed to explain the same. Therefore, in principle, the Assessing Officer was justified in making the addition. In regard to the same whatsapp chat wise addition on merit are decided as under:-

A. Receipt of Cash from Tony and given to Shivam

The conversation dated 05.04.2016 between Sonal & Bhushan Kumar shows that sonal has mentioned that 11 was received from Tony and Given to Shivam and Mr. Bhushan has replied with ok. Hence this clearly establishes that 11 here means 11 lacs and the same was received from Tony and given top Shivam. The appellant has not furnished any evidence to show that this amount was received in cheque or accounted for in books of accounts. In the chat it has been clearly stated that this amount has been received from Tony. Therefore, the addition of Rs 11 lac received from Tony in cash hereby is sustained.

B. Receipt of cash on behalf of Vinod Bhanushali

This addition is related to chat sent by Mr. Beer Singh on 12/04/2016 to Mr. Bhushan Kumar wherein he has mentioned that 8.58 lacs was received on behalf of Mr. Vinod Bhanushali, to which Mr. Bhushan Kumar has replied that the same should be given to mummy. The appellant has argued that this amount has been received on behalf of 126 | P a g e etc. Super Cassettes Industries Pvt. Ltd. Mr. Vinod Bhanushali employee of the appellant company and the same cannot be added in the hand of the appellant company. Further from the chat it is not clear regarding the nature of this amount and who has given it. Therefore, in the absence of the same it cannot be added. In the chat it has been clearly mentioned that cash of Rs. 8.58 Lacs was received on behalf of Mr. Vinod Bhanushall and Mr. Bhushan instructed Mr. Beer Singh to give the same to his mummy. Once it has been established that cash amount has been received than the onus is on the appellant to explain and justify the same and the appellant has tried to discharge its onus by simply stating that name of the person giving the cash has not been found out by the AO. This argument put forth by the appellant will not hold good since the onus was on the appellant to prove that the cash received was not its Income and accounted for in the books of accounts. Further even if the same is received on behalf of an employee but the same was passed on to the mother of Mr. Bhushan Kumar and hence belonged to the company. Therefore the addition of Rs. 8,58,000/- made by the AO Is sustained.

C. Receipt of cash from Rahul (can be Rahul Vaidya singer) (INR 5 lakhs)

In this chat dated 19/06/2016 Sonal has informed Mr. Bhushan Kumar that 5 cash came of Rahul for feb and mar. When Mr. Bhushan asked where it is sonal Informed that it was with Mr. Shivam. IN this case cash of Rs. 5 lacs has been received from Rahul and the same has not been accounted for in the books of accounts. Therefore the addition of Rs. 5 lacs made by the AO Is sustained.

D. Receipt of cash from Meet Brothers and Neha (INR 8,21,000/-):

In this chat on 05/08/2016 Sonal Has written to Mr. Bhushan that Meet Bros money came total Rs. 1008000 out of which cheque was Rs. 187000 and cash was 821000 which was given to Susheel Ji. The AO in the order has reproduced ledger account of Meet Bros which shows receipt of 187000 on 24/08/2016. Hence based on this the AO concluded that the cash amount of Rs. 821000 has not been accounted for in the books of accounts and made addition of Rs. 821000. The appellant during appellate proceedings has not been able to substantiate that Rs. 821000 received in cash has been accounted for in the books of accounts. Hence the addition of Rs. 821000 made is sustained. 127 | P a g e

E. Receipt of cash from Meet Brothers and Neha (INR 20,00,000/-):

In this conversation Sonal has written to Mr. Bhushan on 09/11/2016 stating that Neha Kakkar amt 12L and Meet Bros amt 8L till October Month. Since the appellant is receiving artist management fees from singers the AO had made addition of Rs. 20 Lacs on the basis that Neha Kakkar and Meet Bros had given 12lacs and 8 lacs respectively to appellant company and the same has not been accounted for in books of accounts. The appellant has argued that the amounts mentioned cannot be presumed to have been received since it is not mentioned in the chat that these amounts have been received. It is seen from the chat that Sonal music manager has clearly mentioned that Neha 12 and Meet Bros 8 Lacs amount till October. This is the amount of artist management fees till October.

21.16 From the books of accounts of the appellant the appellant has furnished ledger account of Meet Bros in the boos for the Financial Year 2016-17 and as per the ledger the total fees received from Meet Bros for the financial year 2016-17 till October 2016 is Rs.5,63,250/-. The document relied upon cannot be accepted because the chat is dated 09.11.2016. The amount therefore, if credited in the books of accounts, can only be found from 09.11.2016 onwards. The ledger account till October, 2016 does not explain the receipt made on 09.11.2016. therefore, the argument of the appellant is not acceptable.

21.17 Therefore, the addition of an amount of Rs.8,00,000/-is upheld. Further amount of 12Lac from Neha Kakkar has not been recorded in the books of account, therefore the addition of 12,00,000/- made by AO is hereby upheld. To sum up, addition of Rs. 20,00,000/- is upheld.

A. Receipt of cash from Shri Shrey (person in Zee group) (INR 40 lakhs)

In this chat on 19/08/2016 Sonal stated that Shrey will be giving 40 in cash. After that there is no reply against this message from Mr. Bhushan. Then Sonal on 02/10/2016 has written to Mr. Bhushan that 20 Lakh from Shrey to which Mr. Bhushan replied when and Sonal replied that Mon (Monday). The appellant has argued that firstly the AO has assumed that Shrey is someone from Zee even though nothing has been mentioned in the chat that Shrey is from Zee. The appellant has argued that the chat mentions only that shrey will be giving 40 and the same is in chat dated 19/08/2016 after that there is no chat regarding the same. Then there is one 128 | P a g e etc. Super Cassettes Industries Pvt. Ltd. chat on 02/10/2016 that 20 lakhs from shrey on Monday. This chat has taken place on 02/10/2016 which was Sunday. The argument of the appellant is that as per the chat 20 lakhs will come on Monday. However, there is no further chat confirming as to whether this 20 Lakhs was received or not. Since there is no confirmation regarding actual receipt of any amount no addition is required.

21.18 A perusal of the chat would show that first on 19/08/2016 there was a message from Sonal to Mr. Bhushan that some Mr. Shrey will be giving 40 lakhs in cash. However after that there is no follow up chat to this message. Then the second message is on 02/10/2015 which Is after more than a month of the original message dated 19/08/2016 and In this message Sonal has written, that 20 Lakhs from Shrey and Mr. Bhushan asked when to which she replied that on Monday. This chat took place on Sunday. As regards the first message it only states that shrey will be giving 40 in cash, which the AO has presumed as 40 Lakhs, then in the next message after one and a half months it has been mentioned that 20 laks from shrey. The case of the AO is that total 40 lakhs was to be received from shrey as per the message dated 19/08/2016 and out of the same 20 lakhs was received on 02/10/2016. Hence the AD made addition of 40 Lakhs. The action of the AO in making addition of 40 Lakhs is not correct since the first part of the chat only states that Shrey will be giving 40 in cash and after that only 20 lakhs came in 02/10/2016. The undisclosed Income cannot be taxed on due basis. The principles of 'Real Income apply in respect of undisclosed Income or expense. Since only 20 lakhs cash was received as per the chats reproduced then the action of the AO in making addition of 40 Lakhs is not sustainable. The addition can be made of only Rs. 20 Lakhs which was received. Hence the appellant gets a relief of Rs. 20 Lakhs and the addition of Rs. 20 Lakhs is sustained out of total addition made of Rs. 40 Lakhs.

Cash Income received from Amaal Arman and others (11.30 lakhs)

In this chat on 19/08/2016 sonal has stated that 2.55 lacs in cheque and 3.30 lacs in cash came for august. Further it has been mentioned that Dubai commission will be received post show and it will be 5 lakhs of amaalarmaan plus 3 lacs of sukupuku. Based on the above the AO made addition of 11.30 lacs as per following detalls

Received in cash 3.30 Dubal commission amaal and armaan 5.00 Dubal Commission sukupuku 3.00 129 | P a g e

21.19 The appellant has argued that as regards 3.30 lacs In cash received it has not been mentioned as to whom the same was received and for what purpose. As regards the Dubai commission of 8 Lacs the same was to be received post show and there is no chat to substantiate that the same was received in cash and these were only proposed amounts. The submissions of the appellant have been considered and the argument of the appellant that the Dubai commission is only proposed amount which was to come post show is justified since there is no chat to substantiate as to whether this amount of 8 lacs was received or not. The chats relied upon by the AO for making the addition only Indicate that the appellant would receive Dubai commission post show, but there is no chat to indicate when the same was received if at all received. The undisclosed Income cannot be taxed on due basis. The principles of 'Real Income apply in respect of undisclosed Income or expense. Therefore, the addition of 8 lacs is deleted since the same was not actually received and is only a proposal. As regards the amount of Rs. 3.30 Lacs the same was received as indicated in the chat, therefore addition of Rs. 3.30 Lacs is sustained. Out of total addition of Rs. 11.30 Lacs addition of Rs. 8 Lacs is deleted and Rs. 3.30 Lacs sustained.

21.20 The conversation dated 12.04.2016 between Beer Singh &Bhushan Kumar shows that Beer Singh informing that Rs 8.58lac received on behalf of Vinod Bhushani and same is kept at the instruction of Bhushan Kumar. The appellant failed to substantiate that amount was not received in cash.

21.21 The conversation dated 19.06.2016 between Sonal and Bhushan Kumar shows that 5 cash came of Rahul of Feb and March and the same is confirmed that is with Shivam. The appellant has no corporative evidence to substantiate that amount was not received in cash from Ranul. Therefore, the addition of Rs 5 lac received from Rahul in cash is hereby is sustained.

21.22 The conversation dated 05.08.2016 shows that Sonal Inform that amount of Rs 1008000/- to be received from Meet Bros out of which amount of Rs 187000 was received in cheque and Rs 821000/- in cash. The AO reproduced the edger account of Meet Bros whereby receipt of Rs 1,87,000/- has been recorded in corroborate of the chat. Therefore, it is evident that amount of Rs 8,21,000/ must be received by the appellant in cash. Therefore, addition of Rs 8,21,000/- is rightly made by the AC is hereby upheld.

2018-19 15.15 The contents of the assessment order and the submissions of the appellant have been carefully considered. Coming to the merits of the case and Ground Nos. 6 and 7, the appellant has contended that the A.O was not justified in making an addition of Rs. 34,80,000/- and Rs. 3,00,000/- on account of alleged unaccounted cash income and cash expenditure received/paid from/to singers/ others on the basis of WhatsApp messages.

15.16 For the assessment year under consideration, the assessing officer has referred various chats on different dates. The said chat has been reproduced in the earlier part of this order.

15.17 The issue to be decided in the present ground is whether a presumption can be drawn only on the basis of chats containing numerical figures without any corroborating material to reach a conclusion that unaccounted cash income was earned by the appellant from singers.

15.18 The AO has determined unaccounted cash income from singers for various years on the basis of whatsapp chat. It has been presumed by him that the numerical figures appearing in the whatsapp message represent the real income of the appellant from singers i.e. income from artist management. The AO refers the WhatsApp chat on various dates which are reproduced above.

15.19 The basis for the entire addition is the whatsapp message reproduced above. The appellant argued that the contents of the chat cannot be the basis of any addition. However, such a contention of the appellant is baseless because the chat has been found from the phone of Shri Bhushan Kumar, the director the appellant company and Ms. Sonal, Artist Manager of the appellant company. Further, the contents of the chat has not been proved to be incorrect at any point of time by the appellant. It is also a matter of fact and record that neither of the two persons have stated that the transactions referred in the chat is incorrect or have not taken place. It is also to be noted that the chat is in respect of receipt of money by the appellant company. Therefore, the contents of the chat is considered as a valid evidence based on which addition can be made. etc. Super Cassettes Industries Pvt. Ltd. 15.20 In the text of the chat there is clear mention of receipt of money from various persons. The document is self explanatory and the appellant has not furnished any evidence contrary to the evidence on record. The chats establish that the appellant had received monies and it was apparently not disclosed in the books maintained by the assessee. Be otherwise the onus to prove that cash transaction was recorded in the books lies on the assessee. The appellant has miserably failed to explain the same. Therefore, in principle, the Assessing Officer was justified in making the addition. In regard to the same whatsapp chat-wise addition on merit are decided as under:-

Receipt of cash of Rs.9,80,000/- from Neha Kakkar

15.21 This addition is related to chat sent by Ms. Sonal, Artist Manager on 06.06.2017 to Mr. Bhushan Kumar wherein he has mentioned that Rs.9,80,000/- was received in cash from Neha Kakkar. The appellant has argued that this amount has been received by Ms. Sonal and not by the appellant company. Therefore, the same cannot be added in the hand of the appellant company. Further from the chat it is not clear regarding the nature of this amount and who has given it. Therefore, In the absence of the same It cannot be added. In the chat it has been clearly mentioned that cash of Rs. 9.80 Lacs was received. Once it has been established that cash amount has been received than the onus is on the appellant to explain and justify the same and the appellant has tried to discharge Its onus by simply stating that name of the person giving the cash has not been found out by the AO. This argument put forth by the appellant will not hold good since the onus was on the appellant to prove that the cash received was not its income and accounted for in the books of accounts. The chat clearly states that the amount was received by the employee of the company and the same was informed to the Director of the appellant company i.e. Shri Bhushan Kumar. Therefore the addition of Rs. 9,80,000/- made by the AO is sustained.

Receipt of cash by Vinod Bhanushali for Ranchi Diaries

15.22 In the whatsapp chat dated 26.09.2017, there is mentioned of receipt of Rs.50,00,000/- out of which Rs.25,00,000/- was in cheque and Rs.25,00,000/- was in cash. The same transaction is in respect of Music Video titled as Ranchi Diaries. A chat is between Shri Bhushan Kumar, Director of the appellant company and Shri Vinod Bhanushali, president sales of the appellant company. The cheque amount of Rs.25,00,000/- was received by the appellant on 05.10.2017 and was credited in the appellants 132 | P a g e etc. Super Cassettes Industries Pvt. Ltd. account. As part (cheque component) of the transaction referred to in chat is established to be correct, therefore, the other part (cash component) is also correct. Therefore, it is held that the cash was also received by the appellant and the same is not reflected in the accounts of the appellant. Therefore, the addition of Rs.25,00,000/- is confirmed.

Addition of Rs.3,00,000/- u/s 69C on account of chat with Shri Shiv Chanana

15.23 There was communication between Shri Bhushan Kumar (Director of the Activate Windows appellant company) and Shri Shiv Chanana. In the chat, there is mention of payment of Rs.3,00,000/- to Shri Shiv. The chat is self explanatory. The addition of Rs.3,00,000/-u/s 69C of the Act is confirmed.

15.24 In view of the above discussion, the addition of Rs.34,80,000/- (in ground no.6) and Rs.3,00,000/- (in ground no.7) are confirmed. Accordingly, ground no. 6 and 7 are dismissed.

2019-20 14.15 The contents of the assessment order and the submissions of the appellant have been carefully considered. Coming to the merits of the case and Ground Nos. 5, the appellant has contended that the A.O was not justified in making an addition of Rs. 18,80,000/- on account of alleged unaccounted cash income received from singers/others on the basis of WhatsApp messages.

14.16 For the assessment year under consideration, the assessing officer has referred various chats on different dates. The said chat has been reproduced in the earlier part of this order.

14.17 The issue to be decided in the present ground is whether a presumption can be drawn only on the basis of chats containing numerical figures without any corroborating material to reach a conclusion that unaccounted cash income was earned by the appellant from singers/ parties.

14.18 The AO has determined unaccounted cash income from singers for various years on the basis of whatsapp chat. It has been presumed by him that the numerical figures appearing in the whatsapp message represent etc. Super Cassettes Industries Pvt. Ltd. the real income of the appellant from singers i.e. income from artist management. The AO refers the WhatsApp chat on various dates which are reproduced above.

14.19 The basis for the entire addition is the whatsapp message reproduced above. The appellant argued that the contents of the chat cannot be the basis of any addition. However, such a contention of the appellant is baseless because the chat has been found from the phone of Shri Bhushan Kumar, the director the appellant company and Mr Shivam Chanana, AVP Digital and Content creation of the appellant company. Further, the contents of the chat has not been proved to be incorrect at any point of time by the appellant. It is also a matter of fact and record that neither of the two persons have stated that the transactions referred in the chat is incorrect or have not taken place. It is also to be noted that the chat is in respect of receipt of money by the appellant company. Therefore, the contents of the chat is considered as a valid evidence based on which addition can be made.

14.20 In the text of the chat there is clear mention of receipt of money from Singer/Parties. The document is self-explanatory and the appellant has not furnished any evidence contrary to the evidence on record. The chats establish that the appellant had received monies and it was apparently not disclosed in the books maintained by the assessee. Be otherwise the onus to prove that cash transaction was recorded in the books lies on the assessee. The appellant has miserably failed to explain the same. Therefore, in principle, the Assessing Officer was justified in making the addition. In regard to the same whatsapp chat-wise addition on merit are decided as under:-

Receipt of cash of Rs.8,80,000/- from Neha Kakkar

14.21 This addition is related to chat sent by Ms. Sonal, Artist Manager on 02.11.2018 to Mr. Bhushan Kumar wherein she has mentioned that Rs. 8,80,000/- was received in cash from Neha Kakkar and Rs. 17,28,000 was received by cheque. The appellant has argued that amount of Rs.8.80 Lakhs has not been received by Ms. Sonal. Therefore, the same cannot be added in the hand of the appellant company. Further from the chat it is not clear regarding the nature of this amount. Therefore, in the absence of the same it cannot be added. In the chat it has been clearly mentioned that cash of Rs. 8.80 Lacs was received. Once it has been established that cash amount has been received than the onus is on the appellant to explain and 134 | P a g e etc. Super Cassettes Industries Pvt. Ltd. justify the same and the appellant has tried to discharge its onus by simply stating that the same was never received. This argument put forth by the appellant will not hold good since the onus was on the appellant to prove that the cash received was not its income and accounted for in the books of accounts. Further as per the Chat dated 02.11.2018, the amount mentioned against term "Chq" is corroborated with the bank statement of the appellant company. Therefore the addition of Rs. 8,80,000/- made by the AO is sustained.

Receipt of cash from Shri Raju.

14.22 In the WhatsApp chat dated 06.10.2018, there is mentioned of receipt of Rs. 10,00,000/- from Shri Raju. The same transaction is in respect of license fees received from M/s TV Vision against use of musical rights. On 05.10.2018 Rs. 10 lacs was received in the bank account of M/s SCIPL, the status of which was submitted by Shri Shivam Chanana to Shri Bhushan Kumar in Chat dated 06.10.2018. Therefore, the addition made on the basis of WhatsApp chat is already taken into consideration by the appellant company for calculating total income. The appellant has furnished bank statement and ledger account of TV vision limited wherein the amount of Rs. 10,00,000 has been received and accounted for as income of the appellant. Further in the chat it has been mentioned that 10 came from Raju and the word cash is not mentioned. If the same was cash payment received, then the word cash must have been mentioned in the chat. The appellant has already demonstrated that the amount of Rs. 10,00,000 was received in cheque and accounted for in the books of accounts on that date. Therefore, the addition of Rs.10,00,000/- is deleted.

14.24 In view of the above discussion, the addition of Rs.8,80,000/- (in ground no.5) is confirmed. Accordingly, addition of Rs. 10,00,000/- is deleted. Ground No. 5 is partly allowed.

12.4 The Ld. Counsel for the assessee highlighted that there is no proof or evidence of the receipt of amounts mentioned in the WhatsApp chat as is being alleged. It is also not clear that such cash income is emanating on what account.

Thus, the whatsapp chat remains a dumb document.

135 | P a g e position is that a non-speaking document without any corroborative material (evidence on record and finding that such document has been materialized into transactions giving rise to income of the assessee which had not been disclosed in regular books of account by such assessee has to disregarded for the purposes of assessments to be framed pursuant to search and seizure action. From the search and seizure perspective, such nonspeaking seized documents are referred to as “Dumb Documents”.

12.6 We have heard the rival submissions made by the respective parties and we have pursued the materials available on record. We have reviewed the assessment order and the appellant's submissions, where the appellant challenged the Assessing Officer's (A.O.) additions made in AY 2016-17 to AY 2019-20 based on Whatsapp Chat extracted from the digital data seized during search proceedings at SCIPL premises. The addition made in the assessment order were mainly premised on the observation made by the AO that the appellant failed to disprove the chats’ contents or demonstrate that the amounts were recorded in their books.

12.7 The appellant argument that the WhatsApp chats lack evidentiary value under Section 65B without certification is rejected in view of the order of Supreme Court’s of India in the case of Ambalal Sarabhai Enterprises v. KS Infraspace LLP, in which it was held that WhatsApp chats, being virtual verbal

136 | P a g e treated as “dumb documents.”

12.8 The contention of the assessee that these chats are not supported any corroborative material is not correct in view of the fact that in some chats the amount received vide cheque has also been mentioned and the cheque figure as

per the chat has been received by the assessee and reflected in the books of accounts. In this regard certain chats are reproduced below wherein the amount has been reflected in the books of accounts.

Chat pertaining to AY 17-18

1. Chat pertaining to AY 18-19 chat dated 26.09.2017 between Bhushan Kumar and Vinod Bhanushali (president sales) mentioned Rs. 50,00,000 for the music video “Ranchi Diaries,” with Rs. 25,00,000 by cheque (recorded on 05.10.2017 in books) and Rs. 25,00,000 in cash.

12.9 During the appellate hearing, the ld. Counsel was asked that why artists were paying cash and cheque to SCIPL, when SCIPL is the one buying music rights from them and making payments for those rights. This question came up because the AO claimed these cash payments were hidden income, based on 137 | P a g e production company in India. It gives artists huge platforms to grow their careers.

In fact, SCIPL has helped launch many stars. To support this, SCIPL signs contracts with artists under which artists must share a part of their extra third party earnings like money from live shows, concerts, events, or award functions—with SCIPL for a certain period defined in the contract. The split is usually 80:20 (artist keeps 80%, SCIPL gets 20% of the gross amount, after taxes).

12.10 We agree with the AO's interpretation of the WhatsApp chats seized mentioning both cheque payments (which match bank records) and cash parts.

Since the cheque payments matched with the books of accounts, it's fair to say that cash was also received by artists and handed over to SCIPL as per the contract.These chats are reliable evidence because they match the real business setup. Under the "real income rule", if money actually comes in and benefits the company even if not recorded in books it counts as taxable income.So, we confirm the AO's addition of the cash amounts from the chats as real, taxable income for SCIPL.

12.11 Consequently, the contention advanced by the Learned Counsel for the appellant, asserting that the aforementioned chats lack corroboration with the books of accounts, is found to be untenable and devoid of merit. In light of this finding, the department ground of appeal, based on the incriminating evidence 138 | P a g e upheld and confirmed. Accordingly, the appeals filed by the assessee for Assessment Years 2017-18 to 2019-20 are dismissed and the appeals of the revenue for Assessment Tear 2017-18 and 2019-20 are allowed.

Assessment Year Assessee Appeal Department Appeal 2018-19 51,00,000 99,00,000 2019-20 1,50,00,000 Nil 13.1 Both assessee and department raised this common issue regarding addition on account of cash income & expenditure noted in Diary of Sudesh Kumari- Payment to Ved Prakash Chanana in order to avoid payment of taxes in India, which is present in appeals for Assessment Years 2018-19 and 2019-20 (ITA Nos.

51/DEL/2024 and 271/DEL/2024) for the assessee and Assessment Year 2019-20 (ITA No. 326/DEL/2024) for the Department.

13.2 Brief facts of the case are that a diary was seized (Annexure A-10) from SCIPL’s Noida office on 29.11.2018 as per the AO the diary contains payment made to Sh. Ved Prakash Chanana. Page 12 of the diary shows payments to Sh.

139 | P a g e marked "C." Smt. Sudesh Dua was asked via notice u/s 142(1) dated 15.02.2021 to explain payments to Sh. Ved Prakash Chanana and provide evidence. Sh. Ved Prakash Chanana was similarly questioned on 15.02.2021 about payments received and their accounting.

13.3 Further, summons were also issued to Sudesh Dua and Ved Prakash Chanana for appearance on 22.03.2021, but they failed to appear. Submission was filed by Smt. Sudesh Dua in which she claimed that entries shown on page 12 were related to purchase of ghee for charitable purposes in Haridwar, but provided no evidence. No documentary evidence, like ghee purchase bills, supported Smt.

Sudesh Dua’s claim. Smt. Sudesh Dua argued transactions belong to SCIPL, not her, but AO rejected this submission.

13.4 The AO observed that certain entries in the diary marked as “Chec” are reconciled with the corresponding credit entries in Bank Account of Sh. Ved Chanana which corroborates that the other entries made in cash are also true and made. Therefore, this proves that it is not a dumb document and it carries evidentiary value as when banking transaction recorded has taken place exactly the way mentioned in incriminating documents then this can be presumed that cash transactions must have happened which were not recorded but they have happened exactly the way it is mentioned in the diary. The diary qualifies as “books of account” under Section 2(12A), and Smt. Sudesh Dua failed to 140 | P a g e cash payments of Rs. 150 lakhs each in F.Y. 2017-18 and 2018-19 as unaccounted expenditure of appellant company.

13.5 As per the the amount mentioned in the diary was in Lacs and the AO interpreted 50 as 50 Lacs. However, in one instance the AO interpreted 1 as 1 Crore (100 Lacs) and not 1 Lacs. The CIT (A) coccured with the AO but provided part relief to the appellant company by stating that the AO’s treatment of “1” as Rs. 1 crore is inconsistent with his observations made in the assessment order, it should be Rs. 1 lakh, as “100” would denote Rs. 1 crore and accordingly gave relief of 99 Lacs to the assessee for Assessment Year 2018-19 but confirmed the addition of 51 Lacs for Assessment Year 2018-19 and the entire addition of 150 Lacs for Assessment Year 2019-20. The conclusive findings of the CIT (A) for Assessment Year 2018-19 deserves to be reproduced herein below for further analysis and determination of the grounds:

“17.23 I have carefully considered the assessment order and the written submission of the appellant. The entire dispute in these Grounds of Appeal is about the interpretation of figures mentioned at Page No. 12 and Page No. 15 of the seized annexure A10. The AD in the assessment order has interpreted the figures mentioned at Page No. 12 and Page 15 as figures mentioned in lakhs and made the following additions:

Addition AY 2018-19 AY 2019-20 Cash payment made to Director Ved 1,50,00,000 1,50,00,000 Prakash Chanana. (Page 12 of Annexure A10)

17.24 The AO has questioned the explanation in respect of jottings at Page No. 12 and Page No. 15 of the Annexure A 10. Therefore, the issue to examine would be whether transactions mentioned at Page No. 12 and Page No. 15 are merely rough jottings or amounts mentioned in lakhs.

17.25 The main argument of the Assessing Officer for making the addition is summarised as under:

I The assessee was given ample opportunity to explain the contents of rough jottings but the assessee avoiding the notice as well as not supporting any satisfactory evidence in support of the claim made.

II Notices issued to Shri Ved Prakash Chanana remain non complied and the reply received from Smt Sudesh Dua were not supported by any evidence such as invoices etc. Further it was submitted by Smt Sudesh Dua that the same may be III The AO draws an observation that on perusal of Page 12 where it is written that "50 chee" on various instances have been verified from the bank account of Shri Ved Prakash Chanana as 50 lacs and therefore the amounts mentioned at Page 12 and Page 15 are in lacs and not in thousands. Based on the above observations additions of Rs. 1,50,00,000 was made for AY 2018-19 and AY 2019-20.

17.26 There is another addition of Rs.1.50 Crores u/s 69C of the Act. The addition is based upon page 12 of Annexure A-10. In the said document, there is mention of payments to one Shri Ved in cash and cheque. The contents of page 12 are stated as under:-

"Complete ved 01.05.2017 C[50+[50chee 26.10.2017 [1C (50chee +30+20)-24.05.2018 21.07.2018 (50 chee+23.07.2018-(50C)

17.27 Based on the above document, the Assessing Officer has computed the amount of cash and cheque paid as under:- etc. Super Cassettes Industries Pvt. Ltd. S. Date Cheque paid (In Cash paid (in No. Lakhs) Lakhs) 1. 01.05.2017 50 50 2. 26.10.2017 Nil 100 3. 24.05.2018 50 50 4. 21.07.2018 50 Nil 5. 23.07.2018 Nil 50 6. 02.08.2018 Nil 50 Total 150 300

17.28 Accordingly, the Assessing Officer made addition of Rs.1,50,00,000/- u/s 69C of the Act for the impugned A.Y 2018-19. Another addition of Rs.1,50,00,000/- was made for the A.Y 2019-20. 17.29 In respect of amounts mentioned at Page No. 12 of the seized Annexure, the AO has interpreted that figures mentioned against the term "Chee" are amounts mentioned in lakhs as the same are corroborated with the bank statement of Shri Ved Chanana and resultantly figures mentioned against term "C" are interpreted as amounts mentioned in Cash which are added to the income of appellant company as unexplained expenditure. During the assessment proceedings the appellant submitted that the figures mentioned are nothing but instructions given to Shri Ved Chanana for arrangement of Desi Ghee which would be used for preparation of Desi Ghee Halwa for distribution to poors /religious sages on various occasions in haridwar. However, such an explanation of the appellant is not corroborated by any evidence. The amount of cheque is the same as mentioned in the document as chee. Therefore, chee do not represents Desi Ghee as claimed by the appellant. 17.30 Further, the appellant contradicted the allegation made in the assessment order that amounts mentioned at Page No. 12 of the seized annexure are amounts mentioned in lakhs with copy of bank statement of Shri Ved Chanana substantiating that out of 3 dates mentioned in the assessment order only one date is matching which is nothing but a coincidence. Further the submission of appellant that the amounts mentioned are in the nature payment of the amount which is matching is loan and not expenditure is not acceptable. It is a case, wherein the appellant has paid money in cash and has not been able to explain the 143 | P a g e etc. Super Cassettes Industries Pvt. Ltd. source of such money. Whether the amount by way of cash paid to Shri Ved Chanana was loan or expenditure is immaterial in deciding the availability of cash in the hands of the appellant. Therefore, the Assessing Officer was justified in making addition u/s 69C of the Act. 17.31 From the bank accounts of Shri Ved Prakash Chanana, it is seen that on 03.08.2017, he has received an amount of Rs.50,00,000/- from the appellant company in his Canara Bank account no.2009132000060. Therefore, It is established that 50 written in the document is actually Rs.50 lakhs. It is also evident that the sign "C [" represents cash and the sign "[chee" represents cheque. 17.32 The amount is written in lacs in the impugned document. If 50 Lakhs is paid in cheque, then 50 is written. Therefore, the same treatment has to be for the cash amount also. In the same document where 20 is written, the Assessing Officer has treated it as 20 Lakhs and so on. However, in respect of amount written as [1, the Assessing Officer has trated it as 1 crore. Clearly, there is contradiction. If the author of the document wanted to write 1 crore, in that case in the document, [100 would have been written instead of [1. Therefore, it is held that an amount of Rs. 51,00,000 was paid in cash and not Rs.1,50,00,000/- as held by the Assessing Officer. 17.33 During the year under consideration, the amount of Rs.50,00,000/- is reflected in the bank statement. The transaction amounting to Rs.51 lakhs is not reflected in the accounts of Shri Ved-Prakash Chanana. As a part of the document (relating to cheque) is found to be reflected, therefore, the other part (relating to cash) is also held to be undertaken. Therefore, the Assessing Officer was justified in making addition of in the hands of the appellant u/s 69 C of the Act. However, instead of amount of Rs.1,50,00,000/-, the addition to the extent of Rs.51,00,000/- Is only sustained. 17.34 In view of the findings discussed above out of addition of Rs. 1,50,00,000/-, addition to the extent of Rs. 51,00,000/- (in ground no. 9) is sustained.” 13.6 The Ld. Counsel of the assessee submitted that addition has been made based on Diary Seized (Annexure A-10) seized from company’s NOIDA Office

144 | P a g e addition as unexplained expenditure being salary paid outside books to Sh. Ved Chanana. The total addition made by AO is Rs. 1.5 Crore in Assessment Year 2018-19 and Rs. 1.5 Crore in Assessment Year 2019-20. The CIT(A) deleted addition of Rs. 99 Lacs in Assessment Year 2018-19 and confirmed addition of Rs. 51 Lacs in Assessment Year 2018-19. The addition of Rs. 99 Lacs was deleted since the AO had treated the amount of 1 written as 100 lacs (1 Crore) and the CIT deleted 99 Lacs by observing that since as per the AO all the amounts are in lakhs and then he cannot treat one single amount in crores, based on this observation the CIT(A) restricted the addition of 100 Lacs made against figure of 1 to Rs. 1 Lacs and gave relief of Rs. 99 Lacs.

13.7 Further the Ld. Counsel of assessee submitted that the jottings on Page 12, written by Mrs. Sudesh Dua, relate to charitable activities (e.g., feeding the poor and religious sages in Haridwar using pure ghee for halwa), not unaccounted transactions. Instructions were given to Sh. Ved Prakash Chanana for these arrangements. The Ld. Counsel of assessee submitted that Ledger accounts and statements of affairs confirm the loan given to Ved Chanana by Bhushan Dua in which only one entry matching out of 3 entries is coincidental, and since it’s a loan, not salary/expenditure, the AO’s claim of unexplained cash payments lacks basis.

145 | P a g e “dumb documents” under Section 34 of the Indian Evidence Act and require corroborative evidence to justify tax additions.

13.9 We have heard the rival submissions made by the respective parties and we have pursued the material available on record. In adjudicating the appeal we scrutinize the CIT(A)'s findings on the addition of Rs. 1,50,00,000 under Section 69C of the Income Tax Act, pertaining to unexplained expenditures derived from entries on "Page 12" of seized documents. This involves alleged cash and cheque payments to Sh. Ved Prakash Chanana, spanning Assessment Years (A.Y.) 2018-19 and 2019-20. It is evaluated that whether CIT(A)'s upholding of the addition, with partial modifications, aligns with evidentiary standards, interpretative consistency, and statutory provisions on unexplained sources, ensuring no arbitrary taxation without cogent proof.

13.10 We noted that CIT(A)'s endorsement of the Assessing Officer's (AO) reliance on "Page 12" entries as evidence of payments totalling Rs. 1,50,00,000, bifurcated into cash ("C") and cheque ("Chee") components. The AO's interpretation of “Chee” as denoting cheques (in lakhs) is supported by corroborative bank statements of Sh. Ved Prakash Chanana, treating these as unexplained expenditures under Section 69C. The appellant's alternative explanation—that “Chee” refers to "ghee" arrangements for charitable purposes—is dismissed for lack of substantiating evidence, as mere assertions

146 | P a g e This reinforces the principle that burden of proof shifts to the assessee under Section 69C to explain sources satisfactorily.

13.11 We concurs that the distinction between loans and expenditures is immaterial. The unexplained source of cash payments warrants addition regardless. Bank records substantiate a Rs. 50,00,000 cheque receipt by Chanana on 03.08.2017, validating “50” as Rs. 50 lakhs and “C” as cash. However, the AR submission of an inconsistency in the AO's scaling treating “1” as Rs. 1 crore and suggests “1” should be equates to Rs. 1 lakh are already considered.

This recalibration reduces the impugned cash component to Rs. 51,00,000, not the AO's Rs. 1,50,00,000, demonstrating corrective role by adjudicating authorities and we emphasis on proportionate and evidence-based additions.

13.12 We upholds core finding that the "Page 12" entries represent unexplained expenditures under Section 69C, justified by bank corroboration and the assessee's failure to provide credible alternatives. Nonetheless, we affirm the relief of Rs. 51,00,000 allowed by the CIT(A) and restricting the disallowance to Rs. 99 Lacs for Assessment Year 2018-19 since a concistency has to be maintained in interpretation of a document and by treating 1 as 100 Lacs instead of 1 lacs the AO was not factually correct. In view of the the assessee’s ground of appeal for Assessment Year 2018-19 and 2019-20 are dismissed and revenue grounds of appeal for Assessment Year 2018-19 is also dismissed.

14. Under this ground of appeal, addition on account of diversion of Income in Dubai through Bollywood Digial FZE is challenged by the Department. Details of additions made over the years are tabulated as under:

Assessment Year Amount of addition 2016-17 4,47,30,282 2017-18 13,34,86,898 14.1 The department raised this common issued regarding addition on account of diversion of Income in Bollywood Digital FZE by investing in property of London in order to avoid payment of taxes in India, which is present in appeals for Assessment Years 2016-17 and 2017-18 (ITA Nos. 2756/DEL/2023 and 272/DEL/2024). The decision for the appeal for Assessment Years 2016-17 will br applicable for AY 2017-18 as the issues are identical and no new circumstances exist.

14.2 Brief facts of the case are that during the search proceedings on SCIPL Premises documents extracted from digital data seized from trusteed employee of Bhushan Kumar (Beer Singh) like Board resolution, FDR Creation paper, Statement of London Flat shows that the control and management of Bollywood Digital FZE is with Bhushan Kumar. Further, WhatsApp Chats between Hiren Mehta and Bhushan Kumar shows discussion in respect of shifting of management structure of BDML and FZE by forming a LLC company in Dubai shows ultimate control of these companies with Bhushan Kumar. 148 | P a g e that Beer Singh shared online banking login credentials of Bollywood Digital FZE with Bhushan Dua, indicating that Bhushan Dua exercises ultimate control over the financial operations of Bollywood Digital FZE. The shareholders of Bollywood Digital FZE is JMD Investments Limited (Dubai) (100%). The AO draws the observation that Bollywood Digital FZE (BD FZE) was controlled from India, leading to its income being taxed in the hands of SCIPL.

14.4 Based on the above observations of the AO, profits declared by Bollywood Digial FZE in the audited financials for AY 2016-17 and AY 2017-18 were added to the total income of the appellant company. Details of the additions made are tabulated as under:

Assessment Profit In Conversion Addition Amount Year USD rate 2016-17 675276 66.24 4,47,30,282 2017-18 20,59,983 64.80 13,34,86,898 14.5 The additions so made were deleted by the CIT(A) by appreciating the facts and circumstances and concluding that there was sufficient explanation or the reason to substantiate that operation, management and control of Bollywood Digital FZE was not in India and the conclusive findings of the CIT(A) deserves to be reproduced herein below for further analysis and determination of the grounds. The relevant paras of AY 2016-17 are reproduced below:- etc. Super Cassettes Industries Pvt. Ltd. “57. I have carefully considered the assessment order and the written submissions of the appellant alongwith material filed in the Paper Books. The entire dispute in this Ground of appeal is with regard to the income (earned outside India) of the foreign entity BD FZE which has been taxed the hands of the appellant company (SCIPL) on the ground that income of SCIPL has been diverted into the hands of foreign entity namely BD FZE to a tax free jurisdiction for evading taxes and BD FZE it was not an independent entity, it only existed on paper and its control and management was being done from India. Accordingly, the AO treated the entire amount of revenue as per the D & L account for FY 2015 16the USD 675276 (equivalent to Rs.4,47,30,282/- taking 1USD equal to 66.24 INR as on 31.03.2016).

58. It is not the case of the AO that there was a Permanent Establishment (PE) of M/s BD FZE in India and the income of BD FZE is to be taxed in India. The AO has treated the entire Foreign investment of the foreign entity as income of the appellant company. It is also not the case of the AO that any undisclosed income of the appellant was parked in the BD FZE, Dubai.

59. The issue to be examined would be whether BD FZE existed and functioned independently or not. The appellant has filed evidence in support of existence and functioning of BD FZE which was also filed during the assessment before the assessing officer. The assessing officer has not examined the same by making a generalized statement that the in the assessment order that the reply of the assessee is not acceptable. He has primarily relied upon the material found during search to come to a conclusion that BD FZE was being controlled from India and therefore its income should be taxed in the hands of SCIPL. The submissions of appellant have been discussed in the foregoing part of this order on the basis of which the evidence/material in support of existence and functioning of BD FZE can be summarised as under :-

(i) Audited Balance Sheet showing revenue and expenditure (ii) Presence of employee on whom salary expenditure was incurred. (iii) Copy of lease agreement for registered office and invoices for admn. office. (iv) Copies of invoices for legal expenses, audit fees. (v) Details furnishing physical presence of Bhushan Dua in UAE for taking management decisions. etc. Super Cassettes Industries Pvt. Ltd. (vi) Auditors certificate giving classification of revenue earned by BD FZE during AY 2016-17 and 2017-18.

FOR A.Y 2015-16 S.NO Particular Date of presence in UAE 1. Bhushan Dua 01.08.2015 to 02.08.2015 2. Bhushan Dua 17.10.2015 to 18.10.2015 3. Bhushan Dua 19.01.2016 to 20.01.2016 4 Bhushan Dua 02.03.2016 to 03.03.2016 5. Bhushan Dua 12.03.2016 to 13.03.2016

FOR A.Y 2016-17 S.NO Particular Date of presence in UAE 1. Bhushan Dua 05.04.2016 to 06.04.2016 etc. Super Cassettes Industries Pvt. Ltd. 2. Bhushan Dua 06.10.2016 to 07.10.2016 3. Bhushan Dua 28.10.2016 to 02.11.2016 4 Bhushan Dua 03.02.2016 to 05.12.2016 5. Bhushan Dua 22.02.2017 to 23.02.2017

67.1 Sh. Bhushan Dua signed as authorised signatory on behalf of Bollywood Digital FZE for opening an FDR of AED (Arab Emirates Dirham) 20,00,000 (INR 3.8 crores approx.) by debiting the funds from its own account in First Gulf Bank, Dubai, which clearly proves that transfer of funds from the account of Bollywood Digital FZE is controlled by Shri Bhushan Kumar.

67.2 The documents recovered from the email data of M/s SCIPL during the search shows the shareholder resolution of Bollywood Digital FZE where Sh. Bhushan Kumar is appointing himself and one Ms. Neha Shinde for completing the formalities for the formation of subsidiary in Dubai as adopted in the shareholder resolution of Bollywood Digital FZE. The date of this resolution which has been signed by Shri Bhushan Kumar is 07/01/2017. From the resolution it becomes clear that even the policy decisions in the case of companies controlled by Shri Bhushan Kumar such 153 | P a g e etc. Super Cassettes Industries Pvt. Ltd. as formation of subsidiaries and authorising Ms. Neha Mukesh Shinde as the authorised person to operate the bank accounts etc are being taken from India only and agreements are being signed in India and sent through the email.

67.3 Another evidence recovered pertaining to M/s Bollywood Digital FZE during the search of M/s SCIPL also shows a property in London, United Kingdom in the name of Bollywood Digital FZE. The Landlord statement provided by an asset managing company namely Life residential clearly shows that property having address as 0609 Sovereign Tower, 1 Emily Street London, E161LU, belongs to Bollywood Digital FZE and the property is controlled by employees of Shri Bhushan Kumar as the evidence was found with Shri Beer Singh, trusted employee of Shri Bhushan Kumar.

67.4 There are so many evidences in the form of whatsapp chats & emails extracted from the seized data of SCIPL which clearly indicates that the actual control & management of Dubai based entities are with the trusted employees of the SCIPL. WhatsApp chat of Sh. Hiren Mehta with Shri Bhushan Kumar shows clearly that Shri Hiren Mehta is suggesting to set- up a management structure for Bollywood Digital Music Limited and Bollywood Digital FZE (subsidiary of BDML) so that the companies are not covered in the ambit of the concept of Place of Effective management (POEM) which was made effective by India Income Tax Act, 1961 from 01.04/2017.

67.5 Evidences in various chats of Shri Bhushan Kumar with his employee namely Shri Beer Singh suggest that all the decisions regarding the functioning of these Dubai based companies are being taken by Shri Bhushan Kumar from India. In a WhatsApp chat found between Shri Beer Singh and Shri Bhushan Kumar, it has been noticed that Shri Beer Singh is sending the details of internet banking id and password of the accounts of Dubai based companies owned by Shri Bhushan Kumar namely Bollywood Digital Music Limited and Bollywood Digital FZE.

“Thus, whether a transaction is used principally as a colourable device for the distribution of earnings, profits and gains, is determined by a review of all the facts and circumstances surrounding the transaction. It is in the above cases that the principle of lifting the corporate veil or the doctrine of substance over form or the concept of beneficial ownership or the concept of alter ego arises. There are many circumstances, apart from the one given above, where separate existence of different companies, that are part of the same group, will be totally or partly ignored as a device or a conduit (in the pejorative sense). [Para 67]”

“Applying the above tests, it can be said that every strategic foreign direct investment coming to India, as an investment destination, should be seen in a holistic manner. While doing so, the Revenue/Courts should keep in mind the following factors: the concept of participation in investment, the duration of time during which the Holding Structure exists; the period of business operations in India; the generation of taxable revenues in India; the timing of the exit; the continuity of business on such exit. In short, the onus will be on the Revenue to identify the scheme and its dominant purpose. The corporate business purpose of a transaction is evidence of the fact that the impugned transaction is not undertaken as a colourable or artificial device. The stronger the evidence of a device, the stronger the corporate business purpose must exist to overcome the evidence of a device. [Para 68]” etc. Super Cassettes Industries Pvt. Ltd. “Parent entities own equity stakes in their subsidiaries. Consequently, on many occasions, the parent suffers a loss whenever the rest of the group experiences a downturn. Such grouping is based on the principle of internal correlation. Courts have evolved doctrines like piercing the corporate veil, substance over form etc. enabling taxation of underlying assets in cases of fraud, sham, tax avoidant, etc. However, genuine strategic tax planning is not ruled out. [Para 79]”

Justice K.S. Radhakrishnan who was also part of the Bench gave a concurring view through a separate order. The relevant portion of his judgement is as under:-

“Lifting the Corporate veil doctrine is readily applied in the cases coming within the Company Law, Law of Contract, Law of Taxation. Once the transaction is shown to be fraudulent, sham, circuitous or a device designed to defeat the interests of the shareholders, investors, parties to the contract and also for tax evasion, the Court can always lift the corporate and examine the substance of the transaction. [Para 75]”

Lifting the Corporate veil doctrine can, therefore, be applied in tax matters even in the absence of any statutory authorisation to that effect. Principle is also being applied in cases of holding company - subsidiary relationship - wherein spite of being separate legal personalities, if the facts reveal that they indulge in dubious methods for tax evasion. [Para 76]

(i) There is ample material brought on record by the appellant to establish the existence and functioning of the BD FZE as discussed in earlier part of this order. It is established that BD FZE is engaged in business activities in UAE for earning income. It had infrastructure for carrying out its activities. The AO has been unable to dislodge any 159 | P a g e etc. Super Cassettes Industries Pvt. Ltd. evidence/material furnished by the appellant during assessment proceedings and instead of examining the material has simply overlooked the same by making a generalized statement that the reply of the assessee is not acceptable.

(ii) The revenue earned by BD FZE is in the nature of consultancy income, commission income and interest income from independent sources and a little bit of license income (which was assigned in its favor by BDML). Thus, there is no correlation between the business activities of BD FZE and SCIPL.

(iii) Further, the search action did not detect any worthwhile evidence to indicate that BD FZE is a shell company or it only existed on paper. Similarly, if BD FZE was a mere paper entity its entire records such as books of accounts, original license agreements, title deeds of immovable properties, original bank statements, original invoices and vouchers would have been based out of SCIPL’s office and would have been detected in the search action.

etc. Super Cassettes Industries Pvt. Ltd. 14.6 The ld. Counsel of the assessee defends the independent status of BD FZE, arguing its income cannot be taxed in SCIPL’s hands numerating the following points: a. The SCIPL-BDML licensing agreement (50:50 revenue sharing) ended in FY 2013-14 as SCIPL developed its own international licensing infrastructure. BDML was allowed to license T-Series content in Pakistan (post-termination until 31.03.2019) without sharing fees with SCIPL, due to Indian restrictions on Pakistan licensing. BD FZE, a step-down subsidiary of BDML, received this license income (USD 292,000 in FY 2015-16; USD 90,200 in FY 2016-17) as BDML’s nominee. b. The AO alleges BD FZE’s control lies in India due to Bhushan Kumar’s involvement however, “control and management” refers to where key policy decisions are made, not day-to-day operations.

1. BD FZE’s registered office and operations are in Dubai (SAIF Zone and Prism Tower, with tenancy agreements and rent payments).

2. Key decisions involving consultancy income, investments, London property purchase were made in Dubai by Dubai-based manager Neha Shinde and employee Jainulabdeen Anwar Batcha.

3. Statutory books, auditors, and bank accounts are maintained in Dubai; no BD FZE records were found in India during the 29.11.2018 search.

6. Bhushan Dua visited Dubai multiple times in AY 2016-17 (e.g., 01.08.2015–02.08.2015) and AY 2017-18 (e.g., 05.04.2016– 06.04.2016) for management decisions, supporting Dubai-based control.

14.7 The Ld. Counsel of the assessee further highlights that Section 6(3) of the Income Tax Act requires BD FZE’s control to be wholly in India to be taxed as a resident. Partial control outside India (e.g., by Neha Shinde in Dubai) excludes this. Even if resident, BD FZE’s income cannot be taxed in SCIPL’s hands, as they are separate entities. The AO’s attempt to tax BD FZE’s income in SCIPL’s hands is legally invalid.

14.8 The Ld. Counsel of the assessee submitted that the AO’s attempt to lift BD FZE’s corporate veil, alleging tax evasion via income diversion, lacks evidence.

BD FZE is owned by JMD Investments Pvt. Ltd., not SCIPL, so its income cannot be taxed in SCIPL’s hands even if the veil is lifted. Further BD FZE’s 162 | P a g e refute sham claims.

14.9 Lastly the Ld. Counsel of the assessee relied on the judgement of Vodafone International Holdings (SC), in which it was held that lifting the veil requires proof of a fraudulent “device.” The AO failed to provide such evidence, and BD FZE’s legitimate business purpose (revenue from independent sources) prevails.

14.10 Legally, “control and management” refers to the situs of the board of directors’ decision-making, not day-to-day operations, and BD FZE, a Free Zone Enterprise, was primarily managed by Neha Shinde in the UAE.

14.11 Bhushan Dua’s physical presence in the UAE for key decisions further supports this. No original BD FZE records were found during the search, undermining claims of Indian control. Even if BD FZE were deemed India- controlled, its income cannot be taxed in SCIPL’s hands, as it is a separate legal entity.

14.12 The AO’s claim of income diversion to a tax-free jurisdiction lacks evidence, as BD FZE’s revenue from consultancy, commission, interest, and minimal license income (assigned by BDML) is unrelated to SCIPL’s copyrighted content licensing.

14.13 The AO’s attempt to lift the corporate veil, alleging BD FZE as a tax evasion device, is unsupported, as BD FZE is owned by JMD Investments Pvt.

163 | P a g e Court’s Vodafone ruling emphasizes that lifting the corporate veil requires proof of sham transactions, which the AO failed to provide, as BD FZE’s independent operations, infrastructure, and revenue sources are well-documented.

14.14 We have heard the rival submissions made by the respective parties and we have pursued the material available on record. The addition made was premised on the AO finding in the assessment order that control management and operations of Bollywood Digital FZE were with Bhushan Dua and his close associates based on certain information, documents, Whatsapp Chats seized during the search proceedings.

14.15 Ld. Counsel for the assessee draws the attention of the bench towards the evidences including audited balance sheets, employee salary records, lease agreements, invoices for legal and audit expenses, and details of Bhushan Dua’s physical presence in the UAE for management decisions (Copy of passport stamps and immigration data), which demonstrates that BD FZE’s is an independent entity functioning in Dubai.

14.16 We observed that submission of audited financials including audited balance sheet signed by an independent auditor, cannot be summarily dismissed.

Further in the financial details extracted from the balance sheets of Bollywood Digital FZE submitted during the assessment and appellate proceedings the CIT (A) reveals legitimate revenue streams, including interest 164 | P a g e ($0.312 million), with expenses of $0.151 million (including salary, rent, legal, and other costs), resulting in a net profit of $0.523 million. These figures refute the Assessing Officer’s (AO) claim that BD FZE was used to divert SCIPL’s income to a tax-free jurisdiction, as no superfluous income was booked.

14.17 We observe that documents available on record including tenancy agreement with the Government of Sharjah for BD FZE’s registered office, lease invoices for its Dubai administrative office, and audit fee payments ($1,634.88), proves the legitimacy of expenses.

14.18 We further observed that AO assertion that BD FZE had no employees is factually incorrect and unsupported by the evidence on record. It is established that Jainulabdeen Anwar Batcha, a former employee of BDML, was employed and remunerated by BD FZE, thereby confirming the entity’s operational structure in the UAE. Furthermore, copies of license certificates (Nos. 12462 and 17502) issued by the SAIF Zone Authority substantiate that BD FZE was duly authorized to undertake activities in general trading and social media applications. The evidence further demonstrates that key management decisions were made in the UAE by Bhushan Dua, Neha Shinde, and Jainulabdeen Anwar Batcha. The physical presence of Bhushan Dua in the UAE during the Assessment Years (A.Y.) 2016-17 and 2017-18, as corroborated by travel records, reinforces the independent operational status of BD FZE in Dubai. 165 | P a g e establish BD FZE’s legitimate existence and functioning as an independent entity in the UAE, thereby contradicting the AO’s conclusion that it was a sham entity or controlled from India.

14.19 We observed that CIT (A)’s point-wise observation made in the appeal order based on whatsapp chat seized are cogent and supported by evidence.

Chat-wise explanation is furnished as under: 1. Operation of BD FZE’s Bank Account: The AO’s contention that Bhushan Dua’s operation of BD FZE’s bank account, including the placement of surplus funds in fixed deposits, indicates control and management from India is misconceived. The evidence clearly establishes that Neha Shinde, a resident of Dubai and an authorized signatory, also managed the bank account, thereby demonstrating that operational control was exercised within the UAE. The involvement of a Dubai-based signatory undermines the AO’s claim of Indian control.

2. Shareholder Resolution for Subsidiary Establishment: A shareholder resolution dated 07.01.2017, signed by Bhushan Dua, pertains to the establishment of a subsidiary in Dubai. The resolution appointed Neha Shinde and Jainulabdeen Anwar Batcha to manage the subsidiary, further evidencing that management and control were vested in UAE-based personnel. This resolution supports the conclusion that BD FZE’s operations were independently conducted in the UAE and not from India.

14.20 Upon careful consideration of the submissions and evidence presented, we find that the documentary and factual evidence adduced by the assessee conclusively establishes that the control and management of BD FZE were situated in the UAE and not in India. The evidence, including employee records, license certificates issued by the SAIF Zone Authority, records of management decisions taken by UAE-based personnel, and third-party transactions, unequivocally demonstrates the independent operational status of BD FZE in Dubai. The Revenue’s contention that BD FZE was controlled and managed from India lacks merit and is unsupported by the material on record.

14.21 Further audited financials signed by an independent auditor, reflecting interest income, commission income, and license fees along with expenses including salary, rent, legal, and other costs refute the AO claim that BD FZE was used to divert SCIPL’s income to a tax-free jurisdiction, as no superfluous income was booked in BD FZE.

14.22 We observe that The AO assertion that the operation of BD FZE’s bank account by Bhushan Dua, including the placement of surplus funds in fixed deposits, indicates control and management from India is erroneous and 167 | P a g e resident of Dubai and an authorized signatory, also actively managed the bank account. This establishes that operational control was exercised within the UAE, thereby negating the AO’s claim of control from India. Further shareholder resolution dated 07.01.2017, executed by Bhushan Dua, pertains to the establishment of a subsidiary in Dubai in which Neha Shinde and Jainulabdeen Anwar Batcha Dubai based persons were appointed to manage the operations, reinforcing the fact that management and control of BD FZE were vested with UAE-based personnel. This resolution unequivocally supports the finding that BD FZE’s operations were independently conducted in the UAE, independent of any control from India. Lastly the AO’s reliance on the landlord’s statement concerning a flat in London, valued at £425,000 and funded by BD FZE’s earnings, to infer control from India is misplaced as the statement lacks any material nexus to establishing control over BD FZE’s operations from India and was not intended to cause prejudice. Furthermore, the funding of the property through BD FZE’s legitimate earnings corroborates the independent operational status of BD FZE in the UAE.

14.23 It has been held in 215, 216, 1290, 1291, 1292 for Assessment Year 2007-08 till 2012-13 by the coordinate bench in the case of appellant company that BDML is a separate and distinct company and not a sham entity. We further observe that the AO has not mentioned that how the 168 | P a g e the assessee is not a shareholder of Bollywood Digital FZE. The AO even has not mentioned under which provisions of under which provisions of Income Tax Act this income has been assessed in the hands of the appellant. Therefore the profit of Bollywood Digital FZE cannot be added in the total income assessee company 14.24 Consequently, the grounds of appeal raised by the Revenue, premised on the erroneous assumption of Indian control over BD FZE, are unsustainable in law and fact. Accordingly, the Revenue’s grounds of appeal for AY 2016-17 and 2017-18 are hereby dismissed.

Assessment Year Amount 2017-18 63,11,784 2018-19 89,29,050 1,24,42,299 2019-20 15.1 The department raised this common issued regarding addition on account of retention of Income in Dubai through M/s Highpath Limited in order to avoid payment of taxes in India, which is present in appeals for Assessment Years 2017- 18, 2018-19 and 2019-20 (ITA Nos. 272/DEL/2024, 273/DEL/2024 and 326/DEL/2024). The decision for the appeals for Assessment Years 2017-18 will

169 | P a g e circumstances exist.

15.2 Brief facts of the case are that the during the search proceedings on appellant premises signed agreement was found between Highpath Ltd and SCIPL for sharing of revenue in the territories of Pakistan. Further, M/s HighPath Limited had another agreement with M/s Media Master Pakistan for distribution of music rights in Pakistan. Further the AO the funds received from Media Master Pakistan.

15.3 The additions so made were deleted by the CIT(A) by appreciating the facts and circumstances and concluding that there was sufficient explanation or the reason for which BDML was incorporated in Dubai and further Highpath Limited and Bollywood Digital FZE existed and functioned independently in Dubai and the conclusive findings of the CIT(A) deserves to be reproduced herein below for further analysis and determination of the grounds:

“12.15 I have carefully considered the assessment order and the written submission of the appellant. The entire dispute in this Ground of Appeal is about the income (earned outside India) of the foreign entity Bollywood Digital FZE (BD FZE) from another foreign entity Highpath Limited and the same has been taxed in the hands of appellant company (SCIPL) on the ground that income of SCIPL has been diverted into the hands of foreign entity Bollywood Digital FZE through Higpath Limited.

12.16 The AO has questioned transaction between Highpath limited and BD FZE. Therefore the issue to examine would be whether Highpath Limited and Bollywood Digital FZE existed and functioned independently or not. A license agreement dated 17.12.2016 executed between SCIPL and Highpath Limited was entered to facilitate Master Media Pakistan for 170 | P a g e etc. Super Cassettes Industries Pvt. Ltd. exploitation of rights of music videos, film etc copyrights belonging to M/s SCIPL in the territories of Pakistan.

12.17 The issue is determined in this ground is whether the amount received by Highpath Limited from Media Master Pakistan will be treated as income of SCIPL.

12.18 The main argument of the Assessing Officer for making the addition is summarised as under: a) Signed agreement was there between Highpath Ltd and SCIPL for sharing of revenue in the territories of Pakistan. Further, M/s HighPath Limited had another agreement with M/s Media Master Pakistan for distribution of music rights in Pakistan. The funds received from Media Master Pakistan have been retained in Dubai whereas these funds should have been offered to tax in India. b) Instructions have been given by employees of Sh. Bhushan Kumar to transfer the amount received in Highpath Ltd to BDML after deduction of 5%. c) On account of detailed reasoning given in assessment order for AY 2013-14 and 2014-15 regarding de facto control of the affairs of BDML by employees of SCIPL to prove that BDML Itself has been established for diverting Income of SCIPL, the Income diverted to Bollywood Digital FZE a nominee of BDML is to be added to the total income of the assessee. d) With these remarks the AO concluded that total USD 414594 retained in Dubai through Highpath Ltd is to be added for Assessment Years 2017-18, 2018-19 and 2019-20. The addition of AY2018-19 is 1,37,370 USD equivalent to Rs. 89,29,050/-.

12.19 The AO has argued that income of SCIPL has been diverted to tax free jurisdiction and parked with M/s Bollywood Digital FZE Dubal through M/s High path Limited. The AO In the order has stated that the bank account of Highpath Ltd shows credit of USD 97,344 on 01/03/2017, the same comes to AED 357252 taking 3.67 AED as exchange rate on 01/03/2017. This amount after deducting 5% commission has been credited in the bank account of Bollywood digital FZE an entity owned and controlled by Sh. Bhushan Kumar in Dubai. The Assessing Officer further stated that the bank account of Bollywood Digital FZE shows a credit of 171 | P a g e etc. Super Cassettes Industries Pvt. Ltd. AED 3,37,820 on 17/06/2017 and this amount is almost equal to amount after 5% deduction of commission from AED 3,57,252 credited in the bank account of Highpath Ltd from Media Master Pakistan. Hence relying on this argument, the assessing officer observed that income received in Highpath Ltd have been retained in Dubai through Bollywood Digital FZE an entity owned and controlled by Mr. Bhushan Kumar. However, the Assessing Officer has not referred to any document to support this contention.

12.20 Firstly, the fact that the money received by M/s Highpath from Media Master Pakistan has been transferred to BD FZE is not established. Even if it is assumed that income has been diverted to Bollywood Digital FZE, it has been held that matter of diversion of Income of SCIPL in the hands of Bollywood Digital FDE has been already addressed in the present appeal and in earlier years. It has been held that Bollywood Digital FZE is an independent and separate entity from SCIPL, therefore Income off Bollywood Digital FZE is not taxable in the hands of assessee. It is important to underline that this adjudication Include the income received by Bollywood Digital FZE from M/s Highpath Limited, ultimately settling the entire matter.

12.21 Moreover, the independent existence of BD FZE has been already confirmed under ground no 2 of the present appeal which is summarised under this ground. The appellant has filed evidences in support of existence and functioning of BD FZE which was also filed during the assessment before the assessing officer. The assessing officer has not examined the same during the course of assessment before the assessing officer. The evidence /material in support of existence and functioning of BD FZE furnished by the appellant can be summarised as under:-

(i) Audited Balance Sheet showing revenue and expenditure (ii) Presence of employee on whom salary expenditure was incurred. (iii) Copy of lease agreement for registered office and invoices for admn office. (iv) Copies of Invoices for legal expenses, audit fees. (v) Details furnishing physical presence of Bhushan Dua in UAE for taking management decisions. (vi) Auditors certificate giving classification of revenue earned by BD FZE during AY 2016-17 and 2017-18. etc. Super Cassettes Industries Pvt. Ltd. 12.22 Upon examination of the above Balance Sheet and Auditors certificate it is seen that revenue is 2.059 million USD and after taking into account the expenses of 0.207 million USD, the net profit for the year was 1.851 million USD. Amount of 2,07,990 USD was incurred on administrative expenses which includes salary (96,000 USD), rent (42,000 USD), Legal & professional expenses (20136 USD) other administrative expenses (49,654 USD). The above results also indicate that BD FZE has not booked superfluous income, to boost its profits and maximise tax free profits, contrary to the allegation made in the assessment order that BD FZE was a device for diversion of Income of SCIPL to a tax free jurisdiction. 12.23 The appellant has also submitted that after the closure of operations of BDML its earlier employee namely Jainulabdeen Anwar Batcha was working for BD FZE to whom Salary was paid. Therefore, the observation made in the assessment order that BDML had no employee is found to be factually incorrect. The appellant has also filed copy of tenancy agreement executed with Govt. of Sharjah for its registered office premises at P.O. Box 123029 within Sharjah Airport International Free Zone bearing address at R2-2191, SAIF Lounge, Sharjah, UAE. The lease agreement for office premises has been executed with a third party that too Govt. of Sharjah. Further for is administrative office located at premises bearing No. 2604, The Prism Tower, Business Bay, P.O. Box 34724, Dubai, UAE the appellant has filed copies of lease invoices and expenditure on rent has been recorded in the P&L account of BD FZE. The fully furnished premises has been taken on rent on all Inclusive basis including electricity, water, maintenance and secretarial assistance. Also an amount of USD 18444.13 was paid to Magus Consultancy for renewal of license fee of BDFZE, an amount of USD 1634.88 was paid to the Auditors towards audit fee. Copy of relevant ledger accounts and substantiating invoices have been filed. Therefore, it has been Incorrectly presumed in the assessment order that these expenses appear to be bogus. Further, the Appellant has filed copies of License Certificate having License No. 12462 and License No. 17502 for the relevant period issued by SAIF Zone Authority permitting General Trading and permitting social media applications development and management as activities (i.e. creating and distribution of copyrighted content and its derivatives on mobile phones) for BDFZE for the relevant etc. Super Cassettes Industries Pvt. Ltd. period. All these evidences/materials are in the nature of transactions of BD FZE with non-related third party and therefore cannot be over looked. The material and evidence brought on record by the appellant supports the submission that during the relevant assessment year the entity BD FZE existed and functioned from Dubai. 12.24 It is also noted that all the key management decisions were taken by Sh. Bhushan Dua Director, Ms. Neha Shinde, Manager and Mr. Jainalubdeen Anwar Batcha, employee in UAE. Ms. Neha Shinde and Mr. Jainalubdeen Anwar Batcha were residents of UAE and Shri Bhushan Dua physically visited UAE for taking these management and policy decisions. The dates of his visits in UAE during AY 2016-17, 2017-18 AY 2018-19 are tabulated below :- For A.Y 2016-17 S. No. Particulars Date of presence in UAE 1. Bhushan Dua 01.08.2015 to 02.08.2015

12.26 From the above discussed material/evidence it is found that there is sufficient material on record to hold that BD FZE had Independent existence and functioned Independently from UAE.

12.27 It has been established that Highpath Limited is an Independent foreign entity. Shri Bhushan Kumar neither holds a directorial position nor any ownership shares in M/s Highpath Limited. Additionally, none of his associated entities or employees have any directorial or ownership roles within this company, further affirming the lack of control over this entity by Mr. Bhushan Kumar. The legal position is well settled that the expression "control and management" means control and management of a company and not carrying on day to day business. In order to determine the residence of a foreign company the real test to be applied is where does the control and directing power function. The situs of the "Board of Directors" of a foreign company would determine the place of control and management. Since the Bhushan Kumar is neither a director in the company Highpath Limited nor any of his employee or associate entity having any directorship or ownership in the company therefore no question of controlling the entity by Bhshan Kumar has been arises.

12.28 For the sake of argument even if it is believed that the control and management of Highpath Ltd. or BD FZE was in India, even in that case the income of Highpath or BD FZE cannot be taxed in the hands of the appellant company. In that scenario, M/s Highpath or M/s BD FZE can be taxed separately holding their PE to be in India. However, it is not the case of the Assessing Officer that the overseas entities are to be taxed Independtly in India.

12.29 Another important aspect which needs to be noted is that the search action which had element of surprise did not detect any original records of M/s Highpath Limited in the nature of its books of accounts, Invoices, vouchers, original agreements, title deeds of immovable property, tenancy agreements, cheque books, bank statement etc. If the argument made regarding M/s Highpath Limited being controlled and managed from India was taken to be true at least some original record of M/s Highpath Limited would have been detected in the search action. Thus, it is established that 175 | P a g e etc. Super Cassettes Industries Pvt. Ltd. the control and management of M/s Highpath Limited during assessment year under appeal was in UAE only.

12.30 It may be noted that even if it is held that M/s Highpath Limited was controlled and managed from India its income cannot be taxed in the hands of SCIPL since it is a separate legal entity. Thus, even if the provisions of section 6(3) of the Income Tax Act were made applicable, then M/s Highpath Limited is to be separately taxed in India on the basis of its residence being in India. But under no circumstances, the income of M/s Highpath Limited can be taxed in the hands of the appellant company. In the assessment order, the Assessing Officer has discussed and vehemently argued that M/s Highpath Limited has place of effective management and control in India. If that be so, then it is not understandable as to why the income of M/s Highpath Limited has been assessed to tax in the hands of the appellant company. If the Assessing Officer believed that M/s Highpath Limited had place of effective management and control in India, then the income accruing in India of M/s Highpath Limited 's case should have been taxed in the hands ofM/s Highpath Limited only. Therefore, I find that the addition made in the assessment order is not sustainable even on this ground.

12.31 It has been vehemently contended in the assessment order that income of M/s Highpath Limited is actually income of SCIPL which has been diverted to a tax-free jurisdiction for evading taxes In India. However, in support of this argument the assessing officer has not been able to bring on record anything material or substance except for alleging that Highpath Limited is not an independent entity and was being controlled and managed from India. The term "diversion of income", would mean a process by which income is diverted before it is earned by the assessee.

12.32 There has been no evidence to establish in any manner whatsoever that the receipt of either BD FZE or Highpath was returned back to the appellant company in any manner whatsoever. On this ground also the addition made is not sustainable.

12.33 In view of the above discussion, it is held that the income of M/s Highpath Limited cannot be treated as a case of diversion of Income of SCIPL.

12.34 In view of the findings discussed above the addition of Rs. 89,29,050/- is not sustainable on merits. Consequently, the addition of Rs.

176 | P a g e 15.4 The Ld. Cousel of the assessee argued that BDML’s independent existence in Dubai is already established by coordinate bench in prior years (2007-08 to 215, 216, 1290, 1291, 1292), and additions treating BDML’s income as SCIPL’s diversion deleted by CIT(A) are upheld. Thus, the current addition of taxing income of Highpath in the hands of the assessee is not at all justified and without any basis, more so in this case the assessee or its directors have no stake or control in High path which is a independent entity.

15.5 Further the Ld. Cousel of the assessee in respect of WhatApp chat between Bhushan Kumar and Beer Singh, alleging Highpath Limited is a pass-through entity diverting SCIPL’s income to a low-tax jurisdiction submitted that the agreement dated 17.12.2016 between SCIPL and Highpath Limited was solely to demonstrate to Media Master (Pakistan) that Highpath had rights to license T- Series content for Pakistan, as Indian entities (like SCIPL) are restricted from direct licensing there.Highpath acted as a facilitator for the commercial arrangement between BDML and Media Master, not as a conduit for diverting SCIPL’s income.

15.6 We have heard the rival submissions made by the respective parties and we have pursued the material available on record. We have meticulously examined the record and the submissions made by the appellant company and it is observed

177 | P a g e approximations without docs). Appellant counters with concrete, third-party verified evidence (audits, govt. leases, licenses), which AO ignored during assessment.

15.7 In reply the appellant submitted evidence (audited balance sheets, employee records, lease agreements, expense invoices, and Bhushan Dua's UAE visit proofs via passport stamps/immigration data) in substantiation of the fact that BD FZE's was an independent entity in UAE. Critically, AO's failure is highlighted to rebut or even address this material, including the independent auditor-signed balance sheet, which carries presumptive validity under auditing standards. This omission by AO amounts to a procedural infirmity, rendering the assessment order flawed and unsustainable, as per precedents on fair inquiry.

15.8 We observe that BD FZE's financial figures including revenue USD 2.059 million, expenses of USD 0.207 million (broken down into salaries, rent, legal/professional fees, etc.), yielding a net profit of USD 1.851 million debunks AO's allegation of income diversion from SCIPL to a tax-free heaven, as no inflated or fictitious income is evident. We view this as evidence of arm's-length operations, aligning with Section 92 of the Act on transfer pricing, and underscore that mere routing suspicions without proof cannot justify additions.

178 | P a g e documents (Sharjah Government tenancy agreement, Dubai office lease invoices, audit fees, license certificates for trading/social media activities). It corrects AO's factual errors, such as the "no employees" claim, by noting Jainulabdeen Anwar Batcha's employment (post-BDML closure). Management decisions by Bhushan Dua (during documented UAE visits in AY 2016-17/2017-18), Neha Shinde, and Batcha in UAE further prove effective control outside India. We see these as irrefutable third-party interactions, negating AO's "bogus expenses" narrative and supporting non-residency under Section 6(3).

15.10 Extending to Highpath, absence of Bhushan Kumar's ownership/directorship/employee involvement confirms its UAE-based control.

No incriminating records found in Indian searches bolsters this.

15.11 The ground of appeal that Bollywood Digital FZE is a separate legal and independent entity and its income can-not be taxed in the hands of SCIPL in India is already addressed above.

15.12 We find that the AO’s order is speculative and evidence-deficient. BD FZE and Highpath are deemed separate, UAE-resident entities with legitimate operations, not conduits for SCIPL's income diversion. AO's failure to engage with appellant's proofs violates natural justice, while CIT(A)'s evidence-based analysis aligns with law. This decision safeguards against overreach in cross-

179 | P a g e Since no diversion of SCIPL's income is proven, the department’s ground of appeal for AY 2017-8 to AY 2019-20 is dismissed.

16. The addition made in the assessment order based on WhatsApp Chat Extracted from the digital data seized using codewords Tapes has been challenged by the department. Details of additions made over the years are tabulated as under:

Assessment Year 2018-19 2019-20 Unaccounted Cash Receipts 50,00,000 75,00,000 Unaccounted Cash Payments 5,00,000 Nil 16.1 The department raised this common issue regarding addition on account of cash transaction conducted using the-Codewords Tapes in order to avoid payment of taxes, which is present in appeals for Assessment Years 2018-19 and 2019-20 (ITA Nos. 273/DEL/2024 and 326/DEL/2024).

16.2 Brief facts of the case are that WhatsApp chats between Shri Shivam Chanana and Shri Bhushan Kumar reveal discussions about receiving "tapes," with 75 tapes confirmed on 04/07/2018, 50 tapes (including 25 from the previous day) on 30/11/2017, and 5 tapes given to Shri Susheel for POP (Plaster of Paris) on 30/04/2017, which the assessing officer linked to the construction of M/s SCIPL’s new corporate office in Mumbai. The AO interpreted the term "tapes" as unaccounted cash income received by SCIPL in lakhs. Despite Shri Bhushan 180 | P a g e draws the observation that evidence suggests the 5 tapes represent unaccounted expenditure of Rs. 5 Lakhs in cash for the office construction.

16.3 The appellant’s primary contention is that WhatsApp chats lack evidentiary value under Section 65B unless certified, and this issue is addressed first. Relying on the Supreme Court’s ruling in Ambalal Sarabhai Enterprises v. KS Infra space LLP, WhatsApp chats are virtual verbal communications with evidentiary value, subject to proof during trial, and are not “dumb documents.”

16.4 Based on the details extracted from the WhatsApp communications, a year- wise bifurcation of cash transactions allegedly conducted by Super Cassettes Industries Private Limited (SCIPL), using the codeword “Tape,” has been tabulated by the Assessing Officer (AO). The AO determined that the appellant company received cash payments amounting to Rs. 50,00,000/- during the Assessment Year (A.Y.) 2018-19 and Rs. 75,00,000/- during A.Y. 2019-20.

Additionally, an expenditure of Rs. 5,00,000/- was incurred in cash during A.Y. 2018-19. Consequently, these amounts, were added to the total income of the appellant company for the respective assessment years, as unexplained income and unexplained expenditure.

16.5 The additions so made were deleted by the CIT(A) by appreciating the facts and circumstances and concluding that no corroborative material

181 | P a g e relevant paras of AY 2018-19 are reproduced below:-

“18.7 The contents of the assessment order and the submissions of the appellant have been carefully considered. Coming to the merits of the case and Ground Nos. 11 and 12, the appellant has contended that the A.O was not justified in making an addition of Rs. 50,00,000/- and Rs. 5,00,000/- during AY 2018-19 on account of un accounted income on account of alleged unaccounted cash income received /paid.

18.8 For the assessment year under consideration, the assessing officer has referred various chats on different dates which are re produced as under:

From: 919920533221@s.whatsapp.net Shivam Timestamp: 04-07-2018 15:11:47(UTC+0) Source App WhatsApp Body: 75 tapes revived From: From: 919821444221@s.whatsapp.net Bhushan Kumar Timestamp: 04-07-2016 15:12:16(UTC+0) Source App: WhatsApp Body: From: 919920533221@s.whatsapp.net Shivam Timestamp: 30-11-2017 11:08:00 (UTC+0) Source App: WhatsApp Body: Got 25 tapes From: From: 919821444221@s.whatsapp.net Bhushan Kumar Timestamp: 30-11-2017 11:09:53(UTC+0) Source App: WhatsApp Body: Total 50 right From: From: 919821444221@s.whatsapp.net Bhushan Kumar Timestamp: 30-11-2017 11:10:01(UTC+0) Source App: WhatsApp Body: Yesterday and today From: 919920533221@s.whatsapp.net Shivam etc. Super Cassettes Industries Pvt. Ltd. Timestamp: 30-11-2017 11:10:12(UTC+0) Source App: WhatsApp Body: Yes sir From: 919920533221@s.whatsapp.net Shivam Timestamp: 22-04-2017 06:52:22 (UTC+0) Source App: WhatsApp Body: Given 5 tapes to susheelji From: 919920533221@s.whatsapp.net Shivam Timestamp: 22-04-2017 06:52:27(UTC+0) Source App: WhatsApp Body: For POP From: From: 919821444221@s.whatsapp.net Bhushan Kumar Timestamp: 22-04-2017 06:52:37 (UTC+0) Source App: WhatsApp Body: Ok

18.9 The issue to be decided in the present ground is whether a presumption can be drawn only on the basis of chats containing numerical figures without any corroborating material to reach a conclusion that unaccounted cash income / Expenses were earned /incurred by the appellant.

18.10 The AO has determined unaccounted cash Income / expenses were incurred for construction work-at-Bombay on the basis of whatsapp chat. It has been presumed by him that the numerical figures appearing in the whatsapp message are amounts mentioned in lakhs. It has further been assumed that tapes mean unaccounted cash.

18.11 The basis for the entire addition is the whatsapp message reproduced above. During the course of search action, no other corroborating material has been found to support the inferences drawn by the AO for making the Impugned addition. From the assessment order, it is found that no statement of any person involved in the chat with Director Sh. Bhushan Kumar (Managing Director) have been recorded at the time of search u/s 132(4) of the Act or during post search enquiries. It is also found that apart from relying on the whatsapp chat, the AO failed to make any enquiry on the impugned Issue during the course of assessment proceedings. Lastly Shri Bhushan Dua in his statement recorded on 02.09.2019 replied in 183 | P a g e etc. Super Cassettes Industries Pvt. Ltd. respect of Q 103 that the Chat is in respect of Tapes which were asked from Shri Shivam, the details of which could not be remembered by him at the time of statement.

18.12 It is observed that the explanation in respect of the Chat furnished at the same of search, during the post search proceedings and during the assessment proceedings are same i.e. Musical Tapes for some Music Album, therefore the same cannot be inferred as afterthought. There is no evidence available in the order to establish that the use of word "tapes' are indicative/representative for the word cash or money.

18.13 If the chats found from the mobile phone of Shri Bhushan Kumar is seen, then it is found that the word tapes are used in the impugned chat only. At other places for cash he does not uses any acronym after the amount. In any way the Assessing Officer has not discussed or established that tapes means cash. The appellant is in the business of making of films and music. In this line of business tape is commonly used word. It appears that probably some film or music tapes were called for revival.

18.14 In the chat the use of the word 'revived' indicates that probably some old music/film tapes may have been called for revival. If the persons involved in the chat was mentioning about the cash in the chat, in that case the word 'received' or 'paid' would have been written. The use of the word 'revived' does not indicate that it was in respect of transaction of any money. Therefore, the presumption drawn by the Assessing Officer is baseless and not supported by any evidence.

18.15 Therefore, the well settled legal position is that a non speaking document referred to as a "Dumb Document" without any corroborative material, evidence on record and finding that such document has materialized into transactions giving rise to income of the assessee which had not been disclosed in regular books of account by such assessee, has to disregarded for the purposes of assessments to be framed u/s 153A of the Act.

18.16 In view of the above it is held that the addition made based on whatapp chat with Shri Shivam are nothing but a Dumb Document. The same has to be disregarded for the purpose of computation of total income and therefore addition of Rs 50,00,000/-(Ground No. 11) and Rs. 5,00,000/- (Ground No. 12) during AY 2018-19 is hereby is deleted. Accordingly, Ground No. 11 and 12 are allowed.”

184 | P a g e corroborating evidence, can support a presumption of unaccounted cash income or expenses incurred by the appellant. The AO assumed unaccounted cash income/expenses for construction work in Bombay based on WhatsApp chats, presuming numerical figures were amounts in lakhs and that “tapes” referred to unaccounted cash.

16.7 The Ld. Counsel of the assessee submitted that as per chat dated 04.07.2018, the messages read as “75 tapes revived” which mean that some corrections were done in the tapes before finalisation. Nowhere it is mentioned that the tapes are received. It may be highlighted that these tapes containing media were damaged and therefore the same were revived with the help of technical persons. The data maintained in the tapes is very crucial and must be preserved. At times some tapes got wear and tear which required repair and maintenance. This matter was being discussed in chat which the Ld. AO alleged to be unaccounted amount received in cash. Therefore, the allegation is completely baseless.

16.8 Further Ld. Counsel of the assessee submitted that there is no corroborating material on record which states that 50 tapes and 5 tapes mentioned in the chat is amount in lacs. The Ld. AO has not highlighted even one instance where the amount mentioned in chat in tapes is interpreted as amount mentioned in lacs. Further Shri Bhushan Kumar in the post search proceedings in his 185 | P a g e the allegations of AO are meaningless and without any base. The Ld Counsel further argued that in the chat no name has been mentioned and it is only mentioned that tapes revived or tapes got. As per the Ld Counsel if the argument of the Ld. AO that tapes means cash is accepted then also no names have been mentioned in the chats as to from whom the cash was received and for what.

Hence the presumption of the AO that tapes is cash is not correct and without any basis.

16.9 The AO alleged that 5 tapes given to Susheel ji (another employee of appellant company) for POP meant that amount of 5 lacs was spent on construction of Bombay office without establishing a link between the two. In this regard the The Ld. Counsel of the assessee submitted that there is no corroborating material highlighted in the order which proves that 5 tapes handed over to Susheel ji were 5 lacs spent on building of Bombay Office. There is no link between tapes given to Susheel ji and construction of Bombay Building.

Further “POP” used in the chat here means POP music tapes and not Plaster of Paris. Be that as it may, there is no proof or evidence of the receipt of cash of Rs. 75 lacs during AY 2019-20, 50 lacs and 5 lacs during AY 2018-19 as is being alleged. It is also not clear that such cash income is emanating on what account and from whom. There are no particulars specified in the SCN regarding the 186 | P a g e chat remains a dumb document.

16.10 Lastly the Ld. Counsel of the assessee highlighted that the well settled legal position is that a non-speaking document without any corroborative material, evidence on record and finding that such document has materialized into transactions giving rise to income of the assessee which had not been disclosed in regular books of account by such assessee, has to be disregarded for the purposes of assessments to be framed pursuant to search and seizure action. From the search and seizure perspective, such nonspeaking seized documents are referred to as ”Dumb Documents”.

16.11 We have heard the rival submissions made by the respective parties and we have pursued the material available on record.The AO’s determination is premised on interpretation of WhatsApp Chats extracted from the digital data seized from SCIPL premises during search proceedings. The AO interpreted the words used as “Tapes” as cash and the figure mentioned in lakhs and added Rs. 50 lakhs and Rs. 75 Lakhs as unexplained income in AY 2018-19 and AY 2019-20 and Rs. 5 lakhs as unexplained expenditure in AY 2018-19.

16.12 The primary issue before us is whether numerical figures contained in WhatsApp chats, in the absence of corroborative evidence, can form the basis for presuming unaccounted cash income or expenses incurred by the appellant company. The Assessing Officer (AO) made additions to the appellant’s income, 187 | P a g e unaccounted cash transactions related to construction work in Bombay, with the term “tapes” interpreted as a codeword for cash and the figures assumed to be amounts in lakhs. These additions were solely based on the WhatsApp chats, without any corroborative evidence recovered during the search conducted under Section 132(4) of the Income Tax Act, 1961.

16.13 The AO failed to conduct any further investigation to substantiate the presumption that the term “tapes” referred to cash. A statement recorded from Shri Bhushan Dua on 02.09.2019 clarified that the chats pertained to musical tapes requested from Shri Shivam, though specific details were not recalled. The absence of any inquiry or corroborative material renders the AO’s presumption speculative and unsupported by evidence.

16.14 The appellant has consistently maintained, during the search, post-search inquiries, and assessment proceedings, that the term “tapes” referred to musical tapes related to a music album, not cash. We find that this explanation is consistent and cannot be dismissed as an afterthought. The record reveals no evidence to suggest that “tapes” was a codeword for cash or money. Notably, the term “tapes” appears only in the impugned WhatsApp chat, while other communications by Shri Bhushan Kumar do not employ acronyms to denote cash.

Given the appellant’s business in the film and music industry, the term “tapes” is more likely to refer to film or music tapes, particularly for revival purposes. The 188 | P a g e reference was to old music or film tapes, not cash transactions. Had the chats referred to cash, terms such as “received” or “paid” would likely have been used.

Further there are no names mentioned in the WhatsApp chat from whom the alleged unaccounted receipts were made. The AO’s interpretation of “tapes” as cash lacks evidential foundation and is unsustainable. Further no name has been mentioned in the chats relied upon by the AO and even if the presumption drawn by AO is taken as correct then also in the absence of any names it cannot be held that the assessee had received cash. The absence of corroborative material renders the AO’s reliance on the WhatsApp chat legally untenable.

16.15 In light of the above facts, we find that the additions of Rs. 50,00,000/- and Rs. 75,00,000/- (alleged cash receipts) during AY 2018-19 and AY 2019-20 and Rs. 5,00,000/- (alleged cash expenditure) during Assessment Year (A.Y.)

2018-19 are devoid of evidential support and are based on an erroneous presumption. The AO’s failure to conduct inquiries, the lack of corroborative evidence, and the appellant’s consistent explanation regarding the term “tapes” collectively render the additions unsustainable. Accordingly, the additions of Rs. 50,00,000/- and Rs. 75,00,000/- during AY 2018-19 and AY 2019-20 as unexplained receipts and Rs. 5,00,000/- during Assessment Year (A.Y.) 2018-19 as unexplained expenditure deleted by CIT(A) are upheld and revenue ground of 189 | P a g e

Assessment Particulars Amount Year 2015-16 Enhancement done on account of Roy 17,52,50,000 Movie Expenses Enhancement done on account of 8,73,51,431 2018-19 Raabta Movie Expenses 17.1 The assessee raised this common issue regarding enhancement done in appeal in respect of Roy Movie / Raabta Movie Expenses in order to avoid payment of taxes, which is present in appeals for Assessment Years 2015-16 and 2018-19 (ITA Nos. 2713/DEL/2023 and 51/DEL/2024).

17.2 Brief facts of the case are that for AY 2015-16, the appellant company produced a film titled “Roy” which was released on 13.02.2015. The main cast of the said film included eminent stars. The assessee company had shown and claimed expenditure of Rs. 78,25,37,440/- in respect of this film for the Financial Year ended 31.03.2015 relevant to Assessment Year 2015-16. The AO

190 | P a g e disallowing part of the expenses incurred on foreign shooting of the film “Roy”.

In the First Appellate proceedings for the Assessment Year 2016-17 the assessee argued before the CIT(A) that the disallowance of Rs. 26,81,39,398/- for the Assessment Year 2016-17 is not sustainable since these expenses were never debited and claimed in the Assessment Year 2016-17. The CIT(A) after considering the submission of the assessee deleted the disallowance made in the Assessment Year 2016-17 and issued a notice for enhancement for the Assessment Year 2015-16 since the appellate proceedings for Assessment Year 2015-16 were pending before the CIT(A). The assessee filed response before the CIT(A) in respect of notice for enhancement issued for Assessment Year 2015-

191 | P a g e and debited in the Profit & Loss Account for the Assessment Year 2018-19. The CIT(A) after considering the submission of the assessee deleted the disallowance made in the Assessment Year 2017-18 and issued a notice for enhancement for the Assessment Year 2018-19 since the appellate proceedings for Assessment Year 2018-19 were pending before the CIT(A). The assessee filed response before the CIT(A) in respect of notice for enhancement issued for Assessment Year 2018-19. The CIT(A) upon considering the response of the Assessee made enhancement of Rs. 8,73,51,431/- by disallowing expenses incurred for the movie Raabta.

17.4 Ld. Counsel for the assessee argued before us that the CIT (A) was not legally correct in enhancing the income of the assessee by Rs. 17,52,50,000/- in respect of Roy Movie Expenses for Assessment Year 2015-16 and Rs. 8,73,51,431/-in respect of Roy movie for AY 2018-19. According to the Ld Counsel this disallowance was made by the AO in Assessment Year 2016-17 and AY 2017-18 respectively, these expenses were debited in the Profit and Loss Account for the Financial Year 2014-15 and AY 2017-18 relevant to Assessment Year 2018-19 and AY 2015-16. Based on the same the CIT(A) deleted the additions made in Assessment Year 2016-17 and 2017-18 and issued notice for enhancement for the Assessment Year 2015-16 and 2018-19 respectively.

192 | P a g e income for the Assessment Years 2015-16 and 2018-19 respectively since these issues were never the part of the Assessment Orders for both these years, further these issues were never discussed in the Assessment Years 2015-16 and 2018-19.

According to the Ld. Counsel the jurisdiction to deal with this was under section 147/148 and section 263 and hence the CIT(A) exceeded its jurisdiction by enhancing the income for Assessment Years 2015-16 and 2018-19. The Ld Counsel in this regard placed reliance on the following judicial precedents a) Commissioner of Income Tax VS Sardari Lal & Co. (2002) 120 Taxmann 595 (Delhi High Court) b) Hari Mohan Sharma VS Assistant Commissioner of Income-tax, Circle-63(1), New Delhi [2019] 110 taxmann.com 119 (Delhi - Trib.) c) CIT VS Union Tyres (1999) 107 Taxmann 447 (Delhi High Court) d) Rai Bahadur Hardutroy Motilal Chamaria 66 ITR 443 (SC) e) Shapoorji Pallonji Mistry 44 ITR 891 (SC)

17.6 The Ld DR has drawn attention of the Bench to the Judgement of Supreme Court in the case of CIT v. Nirbheram Daluram 224 ITR 610 to argue that the powers of CIT(A) are wide and CIT(A) can make enhancement on new source of income. The Ld. Counsel for the assessee argued that the case laws relied upon by him have considered and distinguished the judgement of Supreme Court in the case of CIT v. Nirbheram Daluram 224 ITR 610. The Ld Counsel submitted

193 | P a g e although CIT(A) has wide powers, they are not absolute. The Supreme Court in Rai Bahadur Hardutroy Motilal Chamaria 66 ITR 443 (SC) reaffirmed that the appellate authority can exercise enhancement power only in respect of issues that were the subject of the AO's inquiry. In Shapoorji Pallonji Mistry 44 ITR 891 (SC), the Court emphasized that the enhancement power is circumscribed by what was already processed in assessment. The CIT(A) cannot act as an alternate assessing authority or initiate proceedings on new income sources. In the present case the issues on which enhancement was made were never the subject matter AO’s enquiry for the Assessment Year in which enhancement was made and the Ld Counsel stressed that CIT(A) does not have the power to act as alternate assessing authority. The Ld Counsel also submitted that the CIT(A) could issue notice for enhancement only due to the fact that the appeals for Assessment Year 2015-16 and 2018-19 were pending before the CIT(A), however if these appeals were not pending then the recourse before CIT(A) would have been to instruct the AO to initiate 148 or 263 proceedings. The CIT(A) by issuing notice for enhancement has exceeded its powers by making enhancement on a completely new source of income which was not at all the subject matter of the Assessment order for the year in which enhancement was made.

17.7 We have heard the rival submissions made by the respective parties; we

194 | P a g e records that that the Ld. AO has disallowed the impugned amount of Rs.

26,81,39,398/- as inflated production expenses for the film Roy in Assessment Year (A.Y.) 2016-17 and Rs. 8,73,51,431/- for the film Raabta in A.Y. 2017-18, on the grounds that these expenses were not genuine. During the course of appellate proceedings the CIT(A) found that these expenses were never claimed in the year in which these were disallowed. These expenses were claimed in the Assessment Years 2015-16 and 2018-19 respectively. Accordingly, the CIT(A) deleted these disallowances made in Assessment Year 2016-17 and 2017-18 respectively and further issued enhancement notices on these disallowances for Assessment Years 2015-16 and 2018-19. After considering the reply of the assessee the CIT(A) made enhancement of income of Rs. 17,52,50,000/- for Assessment Year 2015-16 by disallowing inflated expenditure on production of film Roy and Rs. 8,73,51,431/- by disallowing inflated expenditure on production of film Raabta. The assesse has challenged the power of the CIT(A) to make enhancement of income on a completely new source of income.

17.8 We have meticulously examined the record and the submissions made by the parties. The Ld. AR of the assessee, submitted before the commissioner of Income Tax (Appeals) [CIT (A)] and us that the disallowed expenses were not claimed in the Profit and Loss Account for the Financial Years ending 31.03.2016 (A.Y. 2016-17) and 31.03.2017 (A.Y. 2017-18). Instead, the 195 | P a g e 2014-15), and those for Raabta were incurred in A.Y. 2018-19 (relevant to Financial Year 2017-18). In response to these submissions, the CIT (A) issued enhancement notices and added these expenses to their respective assessment years i.e. AY 2015-16 and AY 2018-19 for Roy and Raabta movies.

17.9 The CIT(A) enhanced the appellant’s income by Rs. 17,52,50,000/- for A.Y. 2015-16 and Rs. 8,73,51,431/- for A.Y. 2018-19, corresponding to the expenses for Roy and Raabta, respectively. The CIT (A) provided relief for A.Y. 2016-17 and A.Y. 2017-18 by deleting the AO’s erroneous additions for those years.

17.10 Ld. Counsel for the assessee Mr. Nirbhay Mehta has vehemently argued that the CIT (A) lacked jurisdiction to enhance the income for A.Y. 2015-16 and A.Y. 2018-19, as these disallowances constituted new sources of income not considered in the AO’s assessment orders for those years. The Ld counsel in support of the argument has relied on various judicial pronouncement of the Supreme Court jurisdictional High Court and Delhi Income Tax Tribunal.

17.11 On examination of the facts the contention of the Ld Counsel that the enhancement made by the CIT(A) was on a completely new source of income which was not a subject matter of the Assessment proceedings for that Assessment Year. It is a settled principle that each Assessment Year is a separate year and there are separate proceedings for each Assessment Year. In the present

196 | P a g e and it is quite apparent that the issue on which enhancement was made were neither the part of the Assessment order for those years nor there was any enquiry by the AO made on the issue on which enhancement was done by CIT(A).

17.12 Coming to the issue of powers of enhancements by the ld CIT (A), Powers of Ld CIT (A) enshrined u/s 251 of the Act is as under:—

"251. POWERS OF THE(...)COMMISSIONER (APPEALS). (1) In disposing of an appeal, the Commissioner (Appeals) shall have the following powers-- (a) in an appeal against an order of assessment, he may confirm, reduce, enhance or annul the assessment;

(aa) in an appeal against the order of assessment in respect of which the proceeding before the Settlement Commission abates under section 245HA, he may, after taking into consideration all the material and other information produced by the assessee before, or the results of the inquiry held or evidence recorded by, the Settlement Commission, in the course of the proceeding before it and such other material as may be brought on his record, confirm, reduce, enhance or annul the assessment;

(b) in an appeal against an order imposing a penalty, he may confirm or cancel such order or vary it so as either to enhance or to reduce the penalty;

(c) in any other case, he may pass such orders in the appeal as he thinks fit.

(2) The Commissioner (Appeals) shall not enhance an assessment or a penalty or reduce the amount of refund unless the appellant has had a 197 | P a g e etc. Super Cassettes Industries Pvt. Ltd. reasonable opportunity of showing cause against such enhancement or reduction. Explanation In disposing of an appeal, the Commissioner (Appeals) may consider and decide any matter arising out of the proceedings in which the order appealed against was passed, notwithstanding that such matter was not raised before the Commissioner (Appeals) by the appellant." 17.13 A careful reading of the Section 251 which lays down the powers of CIT(A) the explanation to Section 251 clearly lays down that in disposing of an appeal the CIT(A) may consider any matter arising out of the proceedings in which the order appeal against was passed whether or not such matter was raised before the CIT(A) or not. In the present case the enhancement has been done by the CIT(A) on the issue which was not at all arising out of the proceedings in which the order appealed against was passed. The assessee was in appeal before the CIT(A) for Assessment Years 2015-16 and 2018-19. However, it is an undisputed fact that the disallowance of expenses of Roy Movie for Assessment Year 2015-16 and expenses of Movie Raabta for Assessment Year 2018-19 were never a subject matter of assessment proceedings before the Ld. AO for those years. Therefore, the enhancement done by the CIT(A) for the two years is in violation of the provisions of section 251 since these issues were never the part proceedings before the AO in assessment years 2015-16 and 2018-19.

17.14 Hon’ble Delhi High Court in [2013] 213 Taxman 33 (Mag.)/[2012] 18 taxmann.com 176/348 ITR 170, Gurinder Mohan Singh Nindrajog v. CIT has discussed in paragraph nos. 19 and 20 laying down the guidance as to when the 198 | P a g e High Court held the following:

"19. We have considered the submissions of both the parties. There is no doubt about the fact that while framing the assessment even under section 143(3) of the Act, the Assessing Officer may omit to make certain additions of income or omit to disallow certain claims which are not admissible under the provisions of the Act thereby leading to escapement of income. The Income- tax Act provides for remedial measures which can be taken under these circumstances. While framing an assessment under section 143(3) of the Act, any of the following situations may occur: (a) the Assessing Officer may accept the return of income without making any addition or disallowance; or (b) the assessment is framed and the Assessing Officer makes certain addition or disallowance and in making such additions or disallowances, he deals with such item or items of income in the body of order of assessment but he under assessed such sums; or (c) he makes no addition in respect of some of the items, though in the course of hearing before him holds a discussion of such items of income;

(d) yet, there can be another situation where the Assessing Officer inadvertently omits to tax an amount which ought to have been taxed and in respect of which he does not make any enquiry;

(e) further another situation may arise, where an item or items of income or expenditure, incurred and claimed is not at all considered and an assessment is framed, as a result thereof, a prejudice is caused to the Revenue, or (f) where an item of income which ought to have been taxed remained untaxed, and there is an escapement of income, as a result of the assessee's failure to disclose fully and truly all material facts necessary for computation of income. etc. Super Cassettes Industries Pvt. Ltd.

21. In the category stated in (a), obviously if an income escapes an assessment, the provisions of section 147 of the Act can be invoked, subject to the condition stated in the proviso to the said section. In the category of cases falling in category (b), section 251(1)(a) provides the Commissioner of Income-tax (Appeals) could enhance such an assessment qua the under assessed sum, i.e., where the Assessing Officer had dealt with the issue in the assessment and was the subject-matter of appeal. In category falling in (c) and (e), the Commissioner of Income-tax has been empowered to take an appropriate action under section 263 of the Act In the category of cases falling under clauses (d) and (f), appropriate action under section 147 of the Act can be taken to tax the income which has escaped assessment or had remained to be taxed. There can be situations where an item has been dealt with in the body of the order of assessment and the assessee being aggrieved from the addition or disallowances so made, had preferred an appeal before the Commissioner of Income-tax (Appeals) against the said addition and disallowance, the said disallowance and addition being the subject-matter of appeal before the Commissioner of Income-tax (Appeals) in such cases, the Commissioner of Income-tax (Appeals) has been empowered under section 251(1)(a) of the Act to enhance such an income where the Assessing Officer had proceeded to make addition or disallowance by dealing with the same in the body of order of assessment by under assessing the same as the same was the subject-matter of the appeal as per the grounds of the appeal raised before him. In other words, the Commissioner of Income-tax (Appeals) has a power of enhancement in respect of such item or items of income which has been dealt with in the body of the order of the assessment, and arose for his consideration as per the grounds of appeal

raised before him, being the subject-matter of appeal." A careful reading of the observation made by the Hon;ble Delhi High Court would suggest that the CIT(A) can use power of enhancement under section 251 in a case where the assessment is framed and the Assessing Officer makes certain addition or disallowance and in making such additions or disallowances, he deals with such item or items of income in the body of 200 | P a g e etc. Super Cassettes Industries Pvt. Ltd. order of assessment but he under assessed such sums. This is not the fact in the present case. The issue before us is that the issue of enhancement was never discussed by the AO during the course of assessment proceedings of the year in which enhancement was made i.e. AY 2015-16 and 2018-19. The AO never made any enquiry on this issue during AY 2015-16 and 2018-19. This being the case the correct recourse would have been section 147/148 or section 263 but the CIT(A) exceeded its jurisdiction by making enhancement under section 251 of the Income Tax Act 13.13 The Division Bench of Delhi High court in CIT v. Union Tyres [1999] 240 ITR 556 (Delhi) reiterated that the first appellate authority cannot consider new scope of income under section 251(1) of the Act. "Section 251 of the Act prescribes the power of the Appellate Assistant Commissioner, now the Commissioner (Appeals). Section 251(1)(a) of the Act empowers the Appellate Assistant Commissioner in disposing of an appeal by the assessee against an order of assessment to confirm, reduce, enhance or annul the assessment or to set aside and refer the case back to the Income-tax Officer for making fresh assessment in accordance with the directions given by the Appellate Assistant Commissioner. The Explanation to section 251 provides that the Appellate Assistant Commissioner may hear and decide any matter arising out of the proceedings in which the order appealed against was passed notwithstanding that such a matter was not raised before the Appellate Assistant Commissioner by the appellant. (Para 8) The issue with regard to the scope of powers of the first appellate authority in disposing of an appeal has come up before the courts umpteen times but we do not propose to burden the judgment by making reference to all the decisions on the point. We will notice a few decisions which we consider are relevant to answer the question referred. In CIT v. Shapoorji Pallonji Mistry [1962]

44. ITR 891 (SC), while construing the corresponding provisions of the Indian Income- tax Act, 1922, relating to the jurisdiction of the Appellate Assistant Commissioner in such an appeal, the Supreme Court held that, in an appeal filed by the assessee, the Appellate Assistant Commissioner has no power to enhance the assessment by discovering a new source of income, not considered by the Income-tax Officer in the order appealed against. Similar views were expressed by the apex court in CIT v. Rai Bahadur Hardutroy Motilal Chamaria [1967]

66. ITR 443 (SC). It was held that the power of 201 | P a g e etc. Super Cassettes Industries Pvt. Ltd. enhancement under section 31(3) of the 1922 Act was restricted to the subject-matter of the assessment or the source of income which had been considered expressly or by clear implication by the Income-tax Officer from the point of view of taxability and that the Appellate Assistant Commissioner had no power to assess a source of income which had not been processed by the Assessing Officer." (Para 9)

17.15 This view of the Division Bench was confirmed by Full Bench of Delhi High Court in Commissioner of Income Tax v. Sardari Lal & Co. [2002] 120 Taxman 595 holding as follows:

“Looking from the aforesaid angles, the inevitable conclusion is that whenever the question of taxability of income from a new source of income is concerned, which had not been considered by the Assessing Officer, the jurisdiction to deal with the same in appropriate cases may be dealt with under section 147/148 and section 263, if requisite conditions are fulfilled. It is inconceivable that in the presence of such specific provisions, a similar power is available to the first appellate authority. That being the position, the decision in Union Tyres' case [1999] 240 ITR 556 (Delhi) of this court expresses the correct view and does not need reconsideration. This reference is accordingly disposed of.' ” (Para 8)

17.16 The Full Bench of jurisdictional Delhi High Court has observed that as regards the question of taxability of income from a new source is concerned which was not considered by the AO, the jurisdiction to deal with same is under Section 147/148 and Section 263 subject to fulfilment of requisite conditions.

The facts of the present case are similar wherein the CIT(A) has exceeded its powers by making enhancement on a new source of income not at all considered in Assessment Proceedings for the year. The jurisdiction to deal with same is 202 | P a g e 17.17 The AR’s reliance on the Delhi ITAT decision in Hari Mohan Sharma v.

Assistant Commissioner of Income-tax [2019] 110 taxmann.com 119 (Delhi - Trib.) is opposite, wherein it was observed:

“The principle emerging from various pronouncements of the Supreme Court, Union Tyres observes, is that the first appellate authority is invested with very wide powers under section 251(1)(a) of the Act and once an assessment order is brought before the authority, his competence is not restricted to examining only those aspects of the assessment about which the assessee makes a grievance and ranges over the whole assessment to correct the Assessing Officer not only regarding a matter raised by the assessee in appeal but also regarding any other matter considered by the Assessing Officer and determined in assessment. (Para 18 (48))

“Undeniably, the precedential position on the powers of the first appellate authority under section 251 undulates. There are seeming contradictions. But, as held by Union Tyres, and as affirmed on reference by Sardari Lal, there is a consistent judicial assertion that the powers under section 251 are, indeed, very wide; but, wide as they are, they do not go to the extent of displacing powers under, say, sections 147, 148, and 263 of the Act.” (Para 18 (51))

“The principle culled out from the above judicial precedents clearly shows that words ‘enhance the assessment’ are confined to the assessment reached through a particular process. It cannot be extended to the amount which ought to have been computed.” (Para 19)

17.18 The Ld DR has relied upon the Supreme Court’s decision in CIT v.

Nirbheram Daluram [1997] 224 ITR 610. The Ld AR has distinguished the same by emphasizing that in that case the hundi loans added at the later stage were of same nature on which addition was already made in the assessment order unlike the case of assessee where there is no link with the additions made in assessment order. The Ld AR also mentioned that the case CIT v. Nirbheram Daluram [1997] has been distinguished in the citations relied upon by him. On examining Daluram's holding, a Division Bench of the Delhi High Court in CIT v. Union Tyres , Delhi [1999] 240 ITR 556 has observed that Daluram did not comment whether these wide powers also include the power to discover a new source of income. So, Union Tyres concludes that the principle of law laid down in 204 | P a g e Hardutroy Motilal Chamaria [1967] 66 ITR 443 (SC) and Shapoorji Pallonji Mistry [1962] 44 ITR 891 (SC) clarified that enhancements are limited to issues already processed by the AO, and the CIT(A) cannot act as an alternate assessing authority by introducing new sources of income.

17.19 Further the Coordinate Bench in the case of Prashant Pitti in held that first appellate authority has no power to take into account a new source of income that came up for consideration in appellate proceedings. The Coordinate Bench deciding the appeal in favour of appellant held as under:

“20. The issue whether the Ld.CIT(A) has power to enhanced the income from a source which was not before him in appeal is shrouded in controversy. In CIT vs. Union Tyres (1999) 240 ITR 556 (Del), the Hon'ble Delhi High Court considered the relevant decisions including the decision of Hon'ble Supreme Court in CIT vs. Nirbheram Daluram (1997) 224 ITR 610 (SC) where the Hon'ble Supreme Court reiterated the powers of Ld. CIT(A) "co-terminus with ITA No.- 3032/Del/2022 Prashant Pitti that that of the Ld. AO" so that "the Ld. CIT(A) can do what the Ld. AO can do and can also direct him to do what he failed to do", a proposition laid down by the Hon'ble Supreme Court in the case of Kanpur Coal Syndicate (supra) which was followed in Jute Corporation of India Ltd. vs. CIT (1991) 187 ITR 688 (SC) and applied the principles of Law laid down by the Hon'ble Supreme Court in their earlier decisions in CIT vs. Shapoorji Pallonji Mistry (1962) 44 ITR 891(SC) and CIT vs. Rai Bahadur Hardutroy Motilal Chamaria (1967) 66 ITR 443 (SC) that there is a solitary but significant limitation to the power of Ld. CIT(A) u/s 251 of the Act, namely that it is not open to him to introduce in the assessment a new source of income and the assessment has to be confined to those items of income which were the subject of matter of original assessment. 205 | P a g e etc. Super Cassettes Industries Pvt. Ltd.

17.20 Further in the decision of Coordinate Bench in the case of Mandeep Singh Anand Vs DCIT CC-04 New Delhi it was held that the undisputed facts show that Rs.30,753/- paid by M/s Spring Travels Pvt. Ltd. to HDFC via regular banking channels was claimed as business promotion expenses by the company. However, the Assessing Officer (AO) treated this as unexplained expenditure under Section 69C of the Income Tax Act in the hands of the assessee, Mandeep Singh Anand.

The Commissioner of Income Tax (Appeals) [CIT (A)] reclassified this amount as a perquisite under Section 17(2) of the Act, deeming it an expense incurred by the company on behalf of its director. This reclassification is considered a new source of income, which the CIT(A) lacked the authority to introduce without issuing an enhancement notice as required under Section 251(2). Consequently,

206 | P a g e deemed invalid, and the assessee’s grounds of appeal are allowed, leading to the deletion of the addition. Relevant Paras are as under:

“5. The Ld. CIT(A) observed that the expenditure of Rs.30,753/- has been paid from the bank statement of M/s Spring Travels Pvt. Ltd. and the same pertains to M/s Spring Travels Pvt. Ltd. However, he concluded that the same would be treated as prerequisite as it is a payment made on behalf of its Director u/s 17(2) instead of section 69C of the Act.

6. From the above narration of facts which are undisputed, it could be seen that the lower authorities had categorically agreed that a sum of Rs.30,753/- paid to HDFC by M/s Spring Travels Pvt. Ltd. by regular banking channels and the same was claimed as & 3070/Del/2022 Mandeep Singh Anand vs. ACIT business promotion expenses by M/s Spring Travels Pvt Ltd. The same was treated as an unexplained expenditure in the hands of the assessee by the Ld. AO. Once it is proved that the said expenditure is reflected in the books of Spring Travels Pvt. Ltd. and sourced out of regular banking channels from the funds of the said company, the same cannot be added an unexplained expenditure in the hands of the assessee u/s 69C of the Act. But what has been done by the Ld. CIT(A) is treating the very same sum as perquisite in the hands of the assessee on the premise that the said expenditure has been incurred by M/s Spring Travels Pvt. Ltd. on behalf of its director u/s 17(2) of the Act. This in our considered opinion, becomes a new source of income which CIT(A) is not entitled to add/enhance under the powers provided to him under the statute. In any event, the Ld.CIT(A) had also not given any enhancement notice to the assessee proposing to shift the addition from unexplained expenditure u/s 69C of the Act to perquisite u/s 17(2) of the Act, thereby violating the requirements of provisions of section 251(2) of Act. Hence, in any case, the addition made by the Ld. AO and sustained by the Ld. CIT(A) are on different count and & 3070/Del/2022 Mandeep Singh Anand vs. ACIT deserves to be deleted. Accordingly, the grounds raised by the assessee are allowed.”

207 | P a g e 17.21 In the present case the CIT(A) has made enhancement in the Assessment Years 2015-16 of Rs. 17,52,50,000/- by disallowing inflated movie expenses of Roy and made enhancement in Assessment Year 2018-19 of Rs. 8,73,51,431/- by disallowing inflated movie expenses of Raabta. The fact is that these issues were never part of the assessment proceedings for those Assessment years and it was completely new issues on which enhancement was made. In view of the various judicial pronounced on this identical issue it is held that addition made by the CIT(A) freshly during appellate proceedings, on a new source of income which CIT(A) is not entitled to add/enhance under the statutory powers. The CIT(A) erred in enhancing the appellant’s income for A.Y. 2015-16 and A.Y.

2018-19, as these enhancements introduced disallowances not considered in the original assessments for those years and were never a subject matter of proceedings for those years. Such actions fall outside the scope of Section 251 and the correct jurisdiction for the same is under Sections 147/148 or 263.

17.22 In light of the above findings and judicial precedents, it is held that the by the CIT (A) exceeded its jurisdictional powers by enhancing the income of the assessee on a new source of income. As a result the enhancement of Rs. 17,52,50,000/- for A.Y. 2015-16 and Rs. 8,73,51,431/- for A.Y. 2018-19 made by the CIT(A) are deleted and the ground of the assessee for both the years are treated as allowed. etc. Super Cassettes Industries Pvt. Ltd. Now coming to grounds which are not common over the year and therefore the same are addressed yearwise as under:

Un-Common Grounds for AY 2014-15

18.1 Brief facts of the case are that evidence from a handwritten sheet recovered during a survey on Shri Ritesh Srivastava on 06/10/2016 confirms that SCIPL received Rs. 3.5 crore in cash, corroborated by a ledger showing a payment of Rs. 3.93 crore to M/s Ayush Add. Com Pvt. Ltd. in FY 2013-14. Shri Ritesh Srivastava, under oath in his statement, admitted that the bills issued by Ayush Add. Com Pvt. Ltd. were fictitious, with no advertising or other services provided to SCIPL, and that payments made through banking channels were returned in cash to SCIPL after deducting a commission. Thus, the AO draws the observation that advertising and song promotion expenses claimed by SCIPL were bogus.

18.2 The AO disallowed the expenses pertaining to advertisement from M/s Ayush Add.Com Pvt ltd concluding that although SCIPL submitted invoices from Ayush Add. Com Pvt. Ltd. to support its advertisement expense claims, these lack credibility given Shri Ritesh Srivastava’s admission that no services were rendered.

209 | P a g e appreciating the facts and circumstances and concluding that no incriminating material was found during course of search on SCIPL and the AO has made addition based on document seized from survey proceedings on Shri Ritesh Srivastava on 06/10/2016. Further assessment U/s 143(3) was already completed in the year 2016 and date of search was 28.11.2018 and therefore, the said assessment is a completed assessment. Reliance was placed on the decision of Hon’ble Delhi High Court in the case of Pr. CIT vs Kabul Chawla 61 Taxmann.com 421 which was upheld by the Supreme Court in the case of Pr CIT Vs Abhishar Buildwell Pvt Ltd vide order dated 24.04.2022. The conclusive findings of the CIT(A) deserves to be reproduced hereinbelow for further analysis and determination of the grounds. The relevant paragraphs are reproduced below:-

“196. The contents of the assessment order and the written submissions of the appellant as regards the addition of Rs. 3,50,00,000/- on account of disallowance of advertisement charges paid to Ayush Ad.com Pvt. Ltd. have been carefully considered by me.

etc. Super Cassettes Industries Pvt. Ltd. 198. In the survey action on Ayush Ad-com Pvt. Ltd. undertaken on 06.10.2016, Material the form of hand written note, where certain cash payments are recorded was impounded.

that assessment year under appeal is a completed assessment. From the examination of the assessment order, it is apparent that no incriminating material was found during the course of search action on 29.11.2018 on the appellant qua the aforesaid disallowance. Whatever incriminating material is discussed in the assessment order for making the impugned disallowance was found in the survey action on 06.10.2016 on Ayush Ad-com Pvt. Ltd. The appellant has placed reliance on the ratio of the decision of Hon'ble Delhi High Court in the case of Pr. CIT Vs. Kabul Chawla

61. Jaxmann.com 421. This decision of Hon'ble Delhi High Court came up for consideration of the Hon'ble Supreme Court in the case of Pr. CIT Vs. Abhisar Buildwell Pvt. Ltd. in Civil Appeal No. 6580 of 2021 and other connected appeals. The apex court vide its order dated 24.04.2022 has upheld the above referred order of Delhi High Court, The relevant portion of the order of the Hon'ble Supreme Court has been reproduced in detail while adjudicating Ground No. 3 of the present appeal. The ratio laid down by the apex court is reproduced below:-

211 | P a g e v) that in case of search under Section 132 or requisition under Section 132A, the AO assumes the jurisdiction for block assessment under section 153A; vi) All pending assessments/reassessments shall stand abated; vii) in case any incriminating material is found/unearthed, even, in case of unabated/completed assessments, the AO would assume the jurisdiction to assess or reassess the 'total income taking into consideration the incriminating material unearthed during the search and the other material available with the AO including the income declared in the returns; and viii) in case no incriminating material is unearthed during the search, the AO cannot assess or reassess taking into consideration the other material in respect of completed assessments/unabated assessments. Meaning thereby, in respect of completed/unabated assessments, no addition can be made by the AO in absence of any incriminating material found during the course of search under Section 132 or requisition under Section 132A of the Act, 1961. However, the completed/unabated assessments can be re-opened by the AO in exercise of powers under Section 147/148 of the Act, subject to fulfilment of the conditions as envisaged/mentioned under sections 147/148 of the Act and those powers are saved.

i. Books of accounts were seized from the premises of SCIPL and these become incriminating in nature when seen in the light of statements recorded during search and other findings during post search investigations. etc. Super Cassettes Industries Pvt. Ltd. ii. Sample invoices/bills, ledger account and sample release orders have been attached to the above referred letter of the Assessing Officer.

"In view of the above, we are of the considered view that the regular books of accounts maintained by the assessee in tally software, now being referred by the revenue, to justify the addition did not constitute incriminating material unearthed during the search."

"We have considered the aforesaid contentions and are of the view that no substantial question of law arises, as the matter is squarely covered by Kabul Chawla supra, which has been correctly applied to the facts of the case by the ITAT. The ITAT, in the impugned order has held that in the audited report filed by the assessee along with the report, cash book, ledger, bank book etc. were mentioned; that 213 | P a g e etc. Super Cassettes Industries Pvt. Ltd. the respondent assessee was maintaining books on TALLY Accounting Software which was seized during the search and was being treated as incriminating material; however, regular books of account of the assessee, by no stretch of imagination, could be treated as incriminating material to form basis of framing assessment under Section 153A read with Section 143(3) of the Act.

206.1 Further, even the statement does not form part of incriminating material and the same has been held in the following cases:-

1. Ajay Gupta Vs. DCIT 81 Taxmann.com 462 (Del-ITAT) Para 7- No addition can be made or sustained simply on the basis of statement recorded at the time of search, for which no corroborative material is found. In order to make a genuine and legally sustainable addition on the basis of surrender during search, it is sine qua non that some incriminating material must have been found to correlate the undisclosed income with such statement. Thus, where surrender made by the assessee's elder brother on his behalf on account of commission income was not backed by any material/evidence indicating the involvement of the assessee in the agency business, no addition could be made to the assessee's income on basis of such surrender.

2. CIT Vs. Harjeev Aggarwal 70 taxmann.com 95 (Del)

A statement recorded under section 132(4) can form basis for a block assessment only if such statement relates to any incriminating evidence of undisclosed income unearthed during search 3. CIT Vs. Sunil Aggarwal 64 Taxmann.com 107 (Del)

Where assessee during search conducted under section 132 made admission that a sum of Rs. 86 lakhs seized from his employee belonged to him and it represented undisclosed income and subsequently he retracted above admission and offered an explanation that said amount was verifiable from records and books of account and Assessing Officer did not accept explanation and added said amount in income as unexplained cash credit, impugned addition was not justified

18.4 The Ld. Counsel of the assesse submitted that for AY 2014-15 assessment was already completed much before the date of search and therefore these assessment years were unabated years. Since no incriminating material was found during course of search the addition made was liable to be deleted in view of the judgement of Hon’ble Delhi High Court in the case of Pr. CIT vs Kabul Chawla 61 Taxmann.com 421 which was upheld by the Supreme Court in the case of Pr CIT Vs Abhishar Buildwell Pvt Ltd vide order dated 24.04.2022.

18.5 The Ld. Counsel of the assesse draws the attention of bench on the letter dated 16.05.2023 which was addressed to the AO by CIT(A) requiring to bring to notice incriminating document found during search on this issue in respect of which a reply was received on 13.06.2023 stating that Books of accounts seized along with copies of sample invoices, ledgers etc are incriminating in nature.

215 | P a g e material was found during search for making the addition. The only document relied by the Ld. AO for making the additions are books of accounts seized, copy of invoices and legder accounts. It was argued that the books of accounts, copy of invoices and legder accounts are not incriminating in nature and this assessment year being unabated addition can only be made on the basis of incriminating material found and in this particular case no incriminating material was found during the year.

18.7 We have heard the respective submissions made by the parties; we have also perused the relevant materials available on record. The primary contention of the assessee is that no addition can be made by the AO in the absence of incriminating material since this is an unabated year. The CIT(A) in the appeal order has duly verified this aspect by addressing a letter to the AO asking him the furnish the incriminating material relied upon for making the addition. It is seen that the AO in response has mentioned that the marterial relied upon is books of accounts, invoices and bills. It is a settled law that Books of Accounts, biils, vouchers and invoices are not incriminating in nature. We upon careful consideration of the facts and circumstances of the case, concur with the findings of the CIT(A) that no incriminating material was unearthed during the search proceedings during AY 2014-15. The addition made by the Assessing Officer were solely based on surmises and conjectures, lacking any substantive evidence.

216 | P a g e assessment under Section 143(3) of the Income Tax Act, 1961, was completed prior to the date of the search, i.e., 28th November 2018.

18.8 Since no incriminating material was found during course of search, the addition was correctly deleted by the CIT(A) reling on the judgement of Hon’ble Delhi High Court in the case of Pr. CIT vs Kabul Chawla 61 Taxmann.com 421 which was upheld by the Supreme Court in the case of Pr CIT Vs Abhishar Buildwell Pvt Ltd vide order dated 24.04.2022. Accordingly the finding of the CIT(A) is upheld and this ground raised by the department for AY 2014-15 is dismissed.

AY 2015-16

19.2 The Learned Counsel representing the assessee chose not to press this particular ground of appeal, citing that the amount involved was relatively minor in nature. Consequently, this ground of appeal raised by the assessee for the Assessment Year 2015-16 has been dismissed as being not pressed.

20. The addition of Rs. 5,24,00,000/- on account of disallowance of expenses of production of film TUM BIN-2 considering them as bogus expense is challenged for AY 2017-18 by the assessee company.

20.1 Brief facts of the case are that the SCIPL routed funds through overseas subsidiaries, including T-Series (UK) Films Ltd., to Dubai-based entities such as Magus Consultancy DMCC, NM Worldwide Ltd., and Al Mohazab General Trading LLC, controlled indirectly by SCIPL’s employees, in order to inflate movie production expenses and park funds abroad. For the filmTum Bin 2, SCIPL transferred Rs. 18.16 crores to T-Series (UK) Films Ltd., which in turn remitted around Rs. 7 crores to Magus Consultancy DMCC under the guise of director and writer fees for Shri Anubhav Sinha. However, evidence showed that Shri Anubhav Sinha actually received only Rs. 1.5 crores, leaving Rs. 5.5 crores retained in Dubai as bogus expenses. Agreements produced by SCIPL to justify these transactions were found inconsistent and considered afterthoughts. Despite repeated notices, SCIPL failed to provide satisfactory evidence or compliance, leading the Assessing Officer to conclude that the inflated payments represented sham transactions and the same were intended to claim false deductions, warranting disallowance of Rs. 5.5 crores from the company’s books for A.Y. 2017–18.

218 | P a g e 22/01/2016 with T Series Films UK for production of film Tum Bin 2. The company has transferred Rs. 18.67 Crore to T Series UK Transferred out of which it transferred 674150 Pounds equivalent to 7 Crores to Magus Consultancy Dubai for providing services of Anubhav Sinha Director and writer of the film. The AO has stated that out of the same Magus only paid Rs. 1.5 Crore to Anubhav Sinha.

It is to be noted that the appellant was supposed to bear the amount of cost involved in making of the film and T Series UK was only supposed to execute the project and the cost of Directors fees was paid by the assessee to T Series UK.

SCIPL has claimed inflated expenses on account of payment made to Sh.

Anubhav Sinha Director of Tum Bin 2. The payment to Sh. Anubhav Sinha was only Rs. 1.5 Crore as against transfer of 674150 Pounds to Magus. Therefore, the excess payment to Magus by T Series UK over and above what was paid to Anubhav Sinha is to be disallowed.

20.3 The AO disallowed the expenses pertaining to expenses on production of film TUM BIN-2 and considered the same as bogus expenses.

20.4 The additions so made in AY 2017-18 were partly upheld by the Ld. CIT(A) by stating that the appellant inflated its expenditure for production of Film Tum Bin 2 to the extent of Rs. 5,24,00,000/- and accordingly addition to the extent of Rs. 5,24,00,000/- is confirmed and Rs. 26,00,000/- is deleted.The

219 | P a g e the CIT(A), the department had not filed appeal on the deletion of Rs.

24,00,000/- by the CIT(A). The relevant paras from the order of CIT(A) are reproduced below:-

“14.12 The Assessing Officer has made addition of Rs. 5.50 crores on the assumption that the appellant transferred an amount of Rs.7 crores to M/s Magus through T-series UK Limited. There appears to be a clerical mistake in computing the amount of disallowance which will be dealt in the end.

14.13 The appellant company had entered into a film commissioning agreement dated 22/01/2016 with T series (UK) Films Limited (T Series UK) for production of film Tum Bin 2. The appellant transferred Rs. 18.67 Crore to T series UK for production of the film and out of the same the Assessing Officer has disallowed Rs. 5.50 Crores. The facts of the case briefly stated are as under: 14.13 The company had entered into a film commissioning agreement dated 22/01/2016 with T Series UK for production of film Tum Bin 2. The company had paid Rs. 18.67 Crore and out of the same T series UK transferred 6,74,150 Pounds equivalent to approx. 7 Crore to Magus Consultancy DMCC (Magus) in Dubai for providing services of Anubhav Sinha, director, and writer of the film. The assessing Officer has stated that M/s Magus Consultancy has only paid Rs.1.50 Core to Shri Anubhav Sinha as compensation for direction of the film.

14.14 On the basis of the above material discussed in the assessment order, it was observed by the Assessing Officer that the amount of Rs. 18.67 Crore was transferred by SCIPL to T-Series (UK) Films Limited out of which an amount of Rs. 7 crore was paid to M/s Magus Consultancy DMCC (Dubai) for providing services of Anubhav Sinha, director and writer of the film. Whereas, M/s Magus Consultancy has only paid Rs.1.50 Core to Shri Anubhav Sinha as compensation for direction of the film from which it is clear that Rs.5.50 core has been retained in Dubai by Magus Consultancy etc. Super Cassettes Industries Pvt. Ltd. DMCC as bogus expenses and the agreement submitted by the assessee between T-Series (UK) Films Limited and Magus Consultancy DMCC is an after-thought to justify the retention of Rs.5.50 Crore in Dubai against bogus expenses.

14.15 The Assessing Officer had made the disallowance by observing that the shareholders of Magus are Neha Mukesh Side (50%), Sh. DipendraAmin (25%) and Mrs. Yogini Ami (25%) ad the trade license issued to Magus by UAE Authorities shows magus is licensed to provide consultancy services, document clearing services and other corporate services and the Authorised Signatory of Magus is Ms. Neha Mukesh Shinde. It was stated by the Assessing Officer that evidences have been found which shows that SCIPL has used entities based I Dubai such as Magus to retain funds in Dubai in the garb of bogus film production expenses. There was transfer of funds from T Series UK to Magus and during the search at corporate office of SCIPL at Noida books of accounts of T Series UK was found in Tally Format for the FY 2015-16 and 2016-17 and the books of accounts shows that huge funds have been transferred from T Series UK to Magus. As per books of accounts of Magus these sums have been paid as Directors Fees to Magus, However in the professional trade license of Magus it is nowhere mentioned that Magus can provide any assistance in film making or any ancillary activities. Therefore Magus seems to be a company which was used by SCIPL to divert the funds belonging to SCIPL and retain these funds in tax free jurisdiction.

14.16 Further the Assessing Officer has stated that Magus has transferred funds to Bollywood Digital FZE. Based on the above the Assessing Officer has disallowed Rs. 5.5 crore out of total expenses debited in respect of Tum Bin 2 as bogus since the same were finally transferred in the books of accounts of Bollywood Digital FZE.

14.17 The appellant has argued that all payments for foreign shooting of the film were made as agreed between the parties and in terms of agreement Rs. 18,16,71,123 was transferred to the bank account of T Series UK towards cost of shooting and out of the same if 674150 GBP was transferred by T Series UK to a Dubai Entity Magus for accomplishing etc. Super Cassettes Industries Pvt. Ltd. part of shooting then the said agreement was between two parties and as far as SCIPL is concerned the entire cost Incurred and claimed was backed by a valid and subsisting commercial agreement. The appellate has argued that there is no evidence to suggest that the amount transferred to Magus was received back y SCIPL in any manner. Further the reference made in the assessment order of the amount transferred to Bollywood Digital FZE does not conclusively prove that these are the same funds which were received from T Series UK by Magus. As regards the inquiry from Anubhav Sinha if the director has been paid a lesser amount as compared to amount charged from T Series UK by Magus the it would not lead to an inference that expense have been Inflated it can be due to higher margin retained by Magus. The appellant has drawn attention to clause 2.1 of the film commissioning agreement wherein the entire cost of foreign shooting was to be incurred by T Series UK and same was to be reimbursed by SCIPL. As per the budget forming part of the film commissioning agreement it includes expenditure of 7,13,000/- pounds (Approx 7 Crore) as directors fee and hence the amount contemplated in the budget matches with the amount claimed by T Series UK on account of Directors Fees.

14.18 The AO has disallowed Rs. 5.5 Crore bogus expenditure. This disallowance is based upon transfer of Rs. 7 crore by T Series UK to Magus for Directors Fess and out of the same only Rs. 1.5 Crore was paid. On perusal of the assessment order and contentions of the appellant, it is undisputed fact that the appellant transferred an amount of Rs.18.17 Crores to T Series UK. The same has been claimed as expenditure in the books of accounts of the appellant company for the F.Y 2016-17. It is also an undisputed fact that out of Rs.18.17 Crores, an amount of 674150 GBP was transferred by T Series UK to Dubai based entity named Magus.

14.19 The transfer of GBP 674150 was for payment of directors' fees to Anubhav Sinha and the SCIPL has claimed the same to be paid to Anubhav Sinha. However, in the response to summons u/s 131(1A) SH. Anubhav Sinha has confirmed that he has received only Rs. 1.5 Crore from Magus in his bank account in FY 2016-17. As per the submission of Sh. Anubhav Sinha an agreement dated 10/08/2014 was entered between Sh. Anubhav Sinha and Magus titled Directors Loan out Contract for the Film Tum Bin etc. Super Cassettes Industries Pvt. Ltd.

2. According to this agreement compensation to be paid to Sh. Anubhav Sinha is shown as Rs. 1.5 Crore which was received in FY 2016-17 by Sh. Anubhav Sinha from Magus.

14.20 SCIPL has furnished two agreements dated 25/01/2016 between T Series UK and Magus one titled Directors Loan out agreement (Tum Bin 2) and other titled Writers Loan out agreement (Tum Bin 2). The compensation to be paid to Sh. Anubhav Sinha for Directors Loan out agreement was 600000 GBP and for Writers Loan out Agreement 100000 GBP. The total compensation to be paid to Sh. Anubhav Sinha was 700000 GBP. Against the same Sh. Anubhav Sinha has confirmed receipt of only 1.5 Crore. If the amount of Rs.7,00,00,000/- has been booked by the appellant on account of payment to the director, in that case it is not known as to why the entry of 5.5 crores was not written back if it was not actually paid.

14.21 It is to be noted that the appellant was supposed to bear the amount of cost involved in making of the film. T series UK was only supposed to execute the project. The cost of director's fee was paid by the appellant to T-series UK.

14.22 Hence it is clearly established that SCIPL has claimed inflated expenses on account of payment made to Sh. Anubhav Sinha, Director of Tum Bin 2. The payment to Sh. Anubhav Sinha was only Rs. 1.5 Crore as against transfer of 674150 pounds to Magus. Therefore, the excess payment to Magus by T Series UK over and above what was paid to Sh. Anubhav Sinha is to be disallowed.

14.23 The Appellant has also taken an alternate argument that the Assessing Officer has made a mistake in working of disallowance. The appellant has argued that at Page No. 89 of the order the Assessing Officer has mentioned that 674150 Pounds (6.74 Crore INR Approx) were transferred to Magus from T Series UK and against the same Sh. Anubhav Sinha has confirmed receipt of 1.5 Crore from Magus. Hence the addition if any that can be made is difference of 6.74 Crore which is the amount etc. Super Cassettes Industries Pvt. Ltd. transferred to Magus by T Series UK and Rs. 1.5 Crore which is the actual payment made to Sh. Anubhav Sinha which comes to 5.24 Crores.

14.24 This argument of the appellant has been considered and found to be correct. It is seen from assessment order that at Page 89 assessing officer has clearly stated that 674150 (6.74 Crore INR Approx) pounds were transferred from T-Series UK to Magus, but while working out the disallowance the assessing officer has considered this amount as Rs. 7 Crores and reduced actual payment of Rs. 1.5 Crore to Anubhav Sinha and worked out disallowance of 5.5 Crore. It seems while working out the disallowance the assessing officer has considered the amount appearing in Directors Loan out agreement (Rs. 6 Crore) and Writers Loan Out agreement (Rs. 1 Crore). However, for working out the disallowance the amount actually paid to Magus is to be take into consideration and the same is Rs. 6.74 Crore which has also been confirmed by the assessing officer in the assessment order page 89 Para C1.5.

14.25 The addition on account of inflated expense therefore, can only be made to the extent of Rs. 5,24,00,000/-.

14.26 In view of the above discussion, it is held that the appellant inflated its expenditure for production of Film Tum Bin 2 to the extent of Rs. 5,24,00,000/- and accordingly addition to the extent of Rs. 5,24,00,000/- is confirmed. In view of the above discussion, the addition of Rs. 5,24,00,000/- is confirmed and the addition of Rs. 26,00,000/- is deleted.

20.5 The Ld. Counsel of the assessee submitted before us that a major portion of the film Tum Bin-2 was shot in UK. This film is a sequel of the earlier film Tum Bin which was also produced by SCIPL in 2001 and was appreciated by public.

The director of the earlier film as well as Tum Bin-2 is the same person namely Shri Anubhav Sinha. The foreign shooting of the film was done through the line producer i.e. T-Series (UK) Films Ltd. which is an associate entity. An agreement

224 | P a g e between SCIPL and T-Series (UK) Films Ltd. for the shooting of the film in UK.

20.6 The Ld. Counsel of the assesse submitted that in accordance with the above referred agreement, all payments for foreign shooting of the film were made as agreed between the parties. An amount of Rs. 18,16,71,123/- was transferred to the bank account of T-Series (UK) Films Ltd. towards cost of foreign shooting.

Out of the same if an amount of Rs.674150 GBP was transferred by T-Series (UK) Films Ltd. to a Dubai entity for accomplishing part of the shooting then the said agreement was between those two parties. As far as SCIPL is concerned the entire cost incurred and claimed as expenditure on foreign shooting of the film is backed by a valid and subsisting commercial agreement.

20.7 Further the Ld. Counsel of the assesse highlighted that there is no evidence on record to suggest that the amount transferred to Dubai entity was received back by SCIPL in any manner. The reference made in the assessment order of the amount transferred to the bank account of Bollywood Digital FZE does not conclusively prove that these are the same funds which were received from T- Series (UK) Films Ltd. which were transferred. It may be explained that Bollywood Digital FZE is a separate and independent entity, being step down subsidiary of Bollywood Digital Music Ltd., which was engaged in the business activities in UAE including earning of commission and consultancy income. As 225 | P a g e director has been paid lesser amount as compared to the amount charged from T- Series (UK) Films Ltd. by Magus Consultancy DMCC then it would not automatically lead to an inference that the expenses have been inflated. The same can at the highest be attributed as extra margin retained by Magus Consultancy which the appellant has nothing to do with.

20.8 We have heard the respective submissions made by the parties; we have also perused the relevant materials available on record. It appears from the records that the Assessing Officer (AO) added Rs. 5.5 crore to the income of SCIPL, alleging that out of Rs. 18.67 crore transferred to T-Series (UK) Films Limited for Tum Bin 2 production under a film commissioning agreement dated 22/01/2016, Rs. 6.74 crore was paid to Magus Consultancy DMCC (Dubai) for director Anubhav Sinha’s services, but only Rs. 1.5 crore was paid to him, with the remaining Rs. 5.5 crore retained as bogus expenses. The initial disallowance made by the AO was Rs. 5.5 Crore on the basis that Rs. 7 Crore was transferred to Magus against payment of Rs. 1.5 Crore to Anubhav Sinha however before the CIT(A) it was argued that amount paid to Magus was Rs. 6.74 Crore and disallowance, if any, required to be made is only Rs. 5.24 Crore. The CIT(A) after verification accepted the contention of the assessee and restricted the disallowance to Rs. 5.24 Crore.

226 | P a g e issued notice to Anubhav Sinha requiring him to furnish the details of amount received by him against services provided as director and writer for the film TUM BIN 2. In response to the notice as per the AO Sh. Anubhav Sinha furnished that he had received Rs. 1.5 Crore total for the services. Whereas as per the documents Magus Cosultancy Dubai was paid Rs. 6.74 crore by T-Series (UK) Films Limited. This Rs. 6.74 crore paid to Magus Dubai by T-Series (UK)

Films Limited was against receipt of Rs. 18.67 Crore from the assessee under film commissioning agreement dated 22/01/2016. This chain of events leads to conclusion that Magus was paid extra Rs. 5.24 Crore (Rs. 6.74 Crore minus Rs. 1.5 Crore). The ld. Counsel of the assessee has not been able to explain the reason as to why payment of 6.74 crores was made to Magus for directors / writer’s fee to be paid further to Anubhav Sinha. However, out of the same only 1.5 crore was paid to Shri Anubhav Sinha as confirmed by him. The only argument of the assessee for this is that same can at the highest be attributed as extra margin retained by Magus Consultancy which the assessee has nothing to do with. This argument of the assessee is not valid when seen because why an Indian Director was being paid through a foreign entity.

20.10 The contention of the Ld Counsel that the payments were as per a valid agreement and there is no evidence of funds remitted were returned to them is not 227 | P a g e inflated and there is no proper justification for the same.

20.11 Based on the discussion the disallowance of Rs. 5.24 crore as bogus expenditure is upheld and this ground of appeal for AY 2017-18 of the assessee company is dismissed.

21. The addition of Rs. 2,39,60,000/- being amount paid to Sanjay Singhal during AY 2017-18 for acquisition of remake rights of film Tum Bin 2 is challenged by the assessee company.

21.1 Brief facts of the case are that the SCIPL claimed Rs. 2.64 crore as an expense for buying Tum Bin 2 remake rights from Shri Sanjay Singhal, a gutkha/pan masala trader with no film experience. Shri Sanjay Singhal had bought the same rights from SCIPL for only Rs. 25 lakh two months earlier and sold them at an inflated price to T-Series (UK). He provided no documentary proof of negotiations, and his income tax returns did not reflect this foreign income. Investigations indicate the transaction was a scheme to adjust unaccounted cash through a fake capital gain. Consequently, the Rs. 2.64 crore expenses were deemed bogus and added to SCIPL’s income for A.Y. 2017 21.2 During the first appellate proceedings the CIT(A) restricted the addition to Rs. 2,39,60,000/- by holding that the initial amount of Rs. 25,00,000 recievd

228 | P a g e of determining the disallowance. The CIT(A) therefore confirmed addition of Rs. 2,39,60,000/- (Rs. 2,64,00,000/- minus Rs. 25,00,000/-)The relevant paras from the order of CIT(A) are reproduced below:-

“15.6 The appellant company had produced film named 'TUM BIN'. Subsequently, he planned to produce 'TUM BIN-2'. The appellant had right over 'TUM BIN'. Any right over production of Film TUM BIN-2, therefore, existed with the appellant. 15.7 Subsequently, vide film commissioning agreement dated 22.01.2016, between the appellant and M/s T-series (UK) Films Limited (T-series UK), the M/s T-series (UK) Films Limited was commissioned as producer for the film 'TUM BIN-2'. In this agreement, the appellant company appointed T- series UK for producing the film. In this agreement, the budget for making of the film was also agreed upon for 3033992 pound sterling. In the same agreement, the estimate for story and script was decided at 300000 pound sterling. 15.8 In April, 2016, the appellant claims to have sold the story of film of TUM BIN-2 to Shri Sanjay Singhal for a consideration of Rs.25 lakhs. Later on, M/s T-Series UK purchased the same story from Shri Sanjay Singhal for 300000 pound sterling equivalent to Rs.2,64,60,000/-. Apparently, the impugned transaction with Shri Sanjay Singhal was a concocted deal wherein profits were artificially transferred to him by way of a sham transaction. 15.9 The Assessing Officer made addition of Rs.2,64,60,000/- by treating the same as bogus expenses on account of the following: a. The story rights purchased by Shri Sanjay Singhal from the appellant in April, 2016 for Rs.25,00,000/- and later sold to T-series UK for Rs.2,64,60,000/-. No plausible explanation for this huge increase in price of purchase of story rights have been furnished and Shri Sanjay Singhal in his statement recorded has given an evasive reply in his statement that he does not remember the reason for such huge increase in the price of re- make rights. etc. Super Cassettes Industries Pvt. Ltd. b. Shri Sanjay Singhal in his ITR filed for the assessment year 2017-18 has not shown any foreign income. 15.10 The appellant has argued as under:- a. Shri Sanjay Singhal had shown interest in the remake rights of the movie and therefore, Shri Bhushan Kumar had sold rights to him for Rs.25,00,000/-However, later on, the potential commercial benefit for independtly producing the film TUM BIN-2 were recognized and therefore, after hard negotiation with Shri Sanjay Singhal the buyback price was agreed that Rs.2,64,60,000/-. Hence, this was purely business transaction. b. The expenditure for purchase of remake rights was incurred by T-series UK and the same has not been debited in the books of the appellant. c. The Assessing Officer has failed to record and evidence which suggest that amount which was paid to Shri Sanjay Singhal by Tseries UK was routed back to SCIPL in any manner. d. The assessment of Shri Sanjay Singhal for assessment year 2017-18 was completed under section 153A and no adverse Inference was drawn in respect of this transaction relating to procurement of remake rights of TUM BIN-2. e. Shri Sanjay Singhal in his statement has not denled this transaction but rather confirmed the transaction and its genuineness. f. The appellant has also taken an alternative argument that in case any adverse inference is likely to be drawn on this issue then the benefit of Rs.25,00,000/-on account of income declared from sale of remake rights may kindly be given.

15.11 It is not understood as to how the appellant could sale the rights of story of the film when it was assigned to T series UK for 300000 pound sterling. The appellant in the agreement dated 22.01.2016 had already transferred the rights to T series UK for production of film. The appellant was supposed to only finance the making of the movie. When in January 2016, T series UK was commissioned as producer of the film, the appellant could not have sold the story to Shri Sanjay Singhal and subsequently purchased it from him. etc. Super Cassettes Industries Pvt. Ltd. 15.12 From schedule I of the agreement, it is seen that the story of the film was written by Shri Anubhav Sinha. The story written by Anubhav Sinha for the film could not have been sold by the appellant to Sanjay Singhal. The deal between the two persons was a sham transaction aimed at inflating the price of the film. Further, no evidence in support of the claim has been furnished by the appellant. 15.13 It is therefore, held that the transaction with Shri Sanjay Singhal was a sham transaction and expenses claimed on account of such impugned transaction is not allowable deduction. 15.14 In view of the above, the Assessing Officer was correct in making addition. However, the correct amount that needs to be added is only Rs.2,39,60,000/-(Rs. 2,64,60,000 - 25,00,000). The appellant accordingly, gets relief to the extent of Rs. 25,00,000/-. The addition on account of sham transaction with Sanjay Singhal is restricted to Rs. 2,39,60,000/-.”

21.3 The CIT(A) confirming the addition held that it is not understood as to how the appellant could sale the rights of the story of the film when it was assigned to T-Series Films UK for 300000 Pounds sterling. The appellant was only supposed to finance the making of the film and the assessee could not have sold the story to Sh. Sanjay Singhal and subsequently purchased it from him. Further the CIT(A) held that it is not reasonable as to how a story which was sold to Sanjay Singhal for Rs.25,00,000/- was purchased by T Films UK Limited for such a higher amount Rs.2,64,60,000/- compared to its purchase price in just 2 month period.

21.4 That Ld. Counsel of the assessee submitted that payment of Rs 2,64,60,000/- made to Sh Sanjay Singhal was for acquisition of remake rights of the movie Tum Bin 2. Since the Film Commissioning agreement had been 231 | P a g e purchased by the UK company.

21.5 Further the Counsel submitted that the rights were purchased by Sh Sanjay Singhal from SCIPL for 25 lacs which was later on sold for Rs 2.64 Cr to T series (UK) Films Ltd. Regarding the hike in the prices of the remake rights it is submitted that Sh Sanjay Sinhgal has shown the interest in the remake rights of the movie and therefore Sh Bhushan Kumar has sold the rights to Sh Sanjay Singhal for 25 lakhs. However, later on SCIPL recognized the potential for commercial benefit in independently producing the film 'Tum Bin 2. Therefore, SCIPL approached to Sh Sanjay Singhal approximately after 2 month and after a hard negotiation buy back prices were agreed at Rs 2,64,60,000/-. This sequence of events highlights that the initial sale of rights to Sh. Sanjay Singhal was primarily a business transaction. The subsequent decision by SCIPL to reclaim the rights was rooted in their assessment of the favourable prospects of self- production, rendering it a well-considered business move. The Ld Counsel also submitted that Tum Bon was the first film produced by Sh. Bhushan Kumar and and hence was very close to his heart. In light of these circumstances, it is reasonable to view the buyback of rights by the assessee company from Sh Sanjay Singhal at a higher price is nothing more than an innocuous business transaction.

232 | P a g e purchase of remake rights of movie TUM BIN 2 were incurred by T-Series (UK)

Films Ltd which is backed by a valid and subsisting commercial agreement. As far as question arises that payment made to Sh Sanjay Singhal was a bogus expenditure the AO failed to record any evidence on record which suggest that amount which was paid to Sh Sanjay Singhal by T-Series (UK) Films Ltd was routed back to SCIPL in any manner. The AO failed to appreciate the fact that the impunged expenditure of Rs 2,64,60,000/- was never debited in the books of SCIPL since it did not make any payment to Sanjay Singhal.

21.7 The AO observed that Sh Sanjay Singhal does not have any domain expertise in the field of film production and alleged that investigation wing has established that modus operandi of Sh Sanjay Singhal is to adjusted his unaccounted cash. Regarding the same the counsel highlighted that Sh Sanjay Singhal is close friend of Sh Bhushan Kumar. Apart from his involvement in the Gutkha and Pan Masala business, Sh. Sanjay Singhal has consistently demonstrated an inclination towards diversifying his business venture. There exists no unlawful element in this regard. Further it is worth noting that assessment in the case of Sanjay Singhal was completed for A.Y 2017-18 u/s 153A, during which no additions were made to his income nor were any adverse inferences drawn with respect to the transactions related to the procurement of the Remake Rights for the movie 'Tum Bin 2.

233 | P a g e Sanjay Singhal is concerned, only a part of which has been reproduced in the assessment order, it is submitted that the said statement in fact supports the case of the assessee. An examination of the said statement would confirm that Shri Sanjay Singhal has not denied his transactions with SCIPL but rather confirmed the transactions and its genuineness 21.9 As regards the observation of the CIT(A) that the story written by Sh.

Anubhav Sinha could not have been sold by the assessee it is submitted that the assessee has sold the remake rights and not the story. Once the remake rights were repurchased by T Series UK then the Sh. Anubhav Sinha was appointed by T Series UK to direct and write the film. Hence, this observation of the CIT(A) has not merit.

21.10 We have heard the respective submissions made by the parties; we have also perused the relevant materials available on record. It appears from the records that the appellant, SCIPL, had sold the remake rights of TUM BIN to Sh.

Sanjay Singha in April 2016 for Rs. 25,00,000/- and after just 3 months the same were brought back for Rs. 2,64,60,000/- from Sh. Sanjau Singhal. The assessee thereby incurred a loss of Rs. 2,39,60,000/- in this transaction. The AO observed that it was a sham transaction just to avoid taxes and the CIT(A) concurred with the view of the AO and confirmed the disallowance.

234 | P a g e transaction, the repurchase followed negotiations recognizing commercial potential, the expense was borne by T-Series UK, and no evidence showed funds returning to SCIPL is rejected since Sanjay Singhal who being in the business of tabocco lacks film production experience. As per the argument of the Ld Counsel the film very dear to Sh. Bhushan Kumar if that was the case then why the same was sold to SH. Sanjay Singhal in first place is difficult to comprehend. Moreso, the same was brought back from Sh. Sanjay Singhal in just 3 months at 10 times the price. The assessee kept the rights of TUM BIN for more than 10 years and then sold them and within a span of 3 months brought them back. This act of the assessee creates doubt regarding the genuineness of the transaction.

21.12 The CIT(A) has observed that how the appellant could sale the rights of story of the film when it was assigned to T series UK for 300000 pound sterling.

The appellant in the agreement dated 22.01.2016 had already transferred the rights to T series UK for production of film. The appellant was supposed to only finance the making of the movie. When in January 2016, T series UK was commissioned as producer of the film, the appellant could not have sold the story to Shri Sanjay Singhal and subsequently purchased it from him. Thus, it was a sham transaction just to inflate the cost of the film to evade taxes. The Ld Counsel has not been able to explain as to how when the assessee had already entered into an agreement with T Series Films UK for production of TUM BIN-2

235 | P a g e has no experience in Film production Line and then buy it back from him at 10 times the price at which they were sold to SH. Sanjay Singhal. Therefore, the transaction with Shri Sanjay Singhal was a sham transaction and expenses claimed on account of such impugned transaction is not allowable deduction.

21.13 We uphold the order of CIT(A) of confirming disallowance of Rs. 2,39,60,000 (Rs. 2,64,60,000 minus Rs. 25,00,000). Therefore, this ground of the assessee is dismissed.

21.14 So far as the addition to the tune of Rs. 3,00,000/- under Section 69 of the Act as unacounted expenditure incurred in respect of whatsapp chat with Shiv Channa is concerned, we have already discussed this particular ground in A.Y. 2018-19 in the forgoing paragraph in assessee’s own appeal whereby and whereunder this addition made in the hands of the assessee has already been upheld.

Un-Common Grounds for AY 2018-19

22. The addition of Rs. 6,21,14,771/- on account of disallowance of expenses of production of Film Hate Story-4 considering them as bogus expense is challenged for AY 2018-19 by the assessee company.

22.1 Brief facts of the case are that M/s SCIPL produced "Hate Story 4," released on 09.03.2018, with major filming in the UK through Super T Films (UK) Ltd. which outsourced the payments in respect of cast, crew, and 236 | P a g e SCIPL transferred Rs. 19,56,92,500 to Super T Films (UK) Ltd for foreign shooting, of which 874,626 GBP (approx. Rs. 7.50 crores) was sent to NM Worldwide Ltd (line producer) for payments to the Director, Dialogue Writer, and Screenplay Writer. On Investigation by the Investigation Wing it was found that out of Rs. 7.50 crores remitted to NM Worldwide Limited, an amount of Rs. 1,28,85,229/- was actually paid by NM Worldwide to cast, crew, and technicians, etc. and resultantly Rs. 6,21,14,771/- being Rs. 7.50 crores transferred to NM Worldwide less Rs. 1,28,85,229 actually paid by NM Worldwideis added to the total income of appellant company being bogus expenses claimed on account of production of movie “Hate Story 4”.

22.2 The additions so made by the AO in AY 2018-19 were upheld by the CIT(A) by stating that the appellant inflated its expenditure for production of Film Hate Story-4. The relevant paras are reproduced below:-

“13.28 The appellant company produced a film titled "Hate Story 4" which was released on 09.03.2018. The main cast of the said film included Karan Wahi and Ihana Dhillon and it was directed by Vishal Pandya. A major portion of this film was shot in United Kingdom (UK) for which a separate line producer was engaged for carrying out the shooting of the film in London, United Kingdom. The production of the film in UK was carried out through Super T Films (UK) Ltd. The local line producer in London (UK) i.e. Super T Films (UK) Ltd in turn outsourced part of the activities related to the production of the film to a Dubai based entity namely NM Worldwide Ltd for making payments to certain cast crew and technicians of the film. The entire funds required to produce the film were transferred from the bank account of SCIPL in India to the bank account of Super T etc. Super Cassettes Industries Pvt. Ltd. Films (UK). Certain expenses towards the shooting of the film and payment to cast, crew and technician was incurred through bank account of Super T Films (UK). Certain amount was further transferred from the bank account of Super T Films (UK) to the bank account of NM Worldwide Ltd in Dubai. 13.29 It was observed by the assessing officer SCIPL had transferred 19,56,92,500/- to Super T Films (UK) Ltd towards cost of foreign shooting and out of this 874626 GBP equivalent to 7.50 crores were transferred to NM Worldwide Ltd in Dubai for the making payments the Director, Dialogue Writer, Screenplay Writer. The payments claimed to be made to these persons as under:

S.NO Nature of Expense Name of Individual Amount 1 Director Loan Out Vishal Pandya 3,50,00,000/- 2 Dialogue Writer Loan Out Milap Milan Zaveri 1,50,00,000/- 3 Assignment of Story Rights Sameer Brijmohan 1,00,00,000/- Arora 4 Screenplay Writer Loan Out Sameer Brijmohan 50,00,000/- Arora 5 Director of Photography (DOP) Sunita Radia 1,00,00,000/- Loan Out TOTAL 7,50,00,000/-

13.30 The investigation wing during post search proceedings had summoned the above-mentioned persons under section 131(1A) and persons were asked to justify the sources of income and whether any income both foreign and domestic has been received by them with respect to the film Hate Story-4. They were also summoned to furnish the agreement entered by them with NM Worldwide Limited with respect to Hate Story-4. The replies of the individuals were received, and based on their response received the payments received from NM Worldwide Limited by these persons is as per the table given below:

S.No Name Amount received Value of Agreement From NM Worldwide Entered with NM Limited Worldwide Limited 1. Vishal Pandya(Director) 89,14,997/- 91,00,000/- 2. Milap Milan Zaveri 14,83,894/- 15,00,000/- etc. Super Cassettes Industries Pvt. Ltd. (Dialogue Writer) 3. Sunita Radia(DOP) 24,86,338/- 25,00,000/- 4. Sameer Brijmohan Arora Not submitted Not Submitted (Screenplay Writer) Total 1,28,85,229/-

13.31 The assessing officer has made addition of Rs. 6,21,14,771/- being difference of funds paid to NM Worldwide and actual payment made by them (Rs. 7,50,00,000 1,28,85,229) by treating the same as bogus expenses debited against production of movie Hate Story 4. The Assessing officer has observed that Rs. 6,21,14,771/- were retained In Dubai for the benefit of the appellant. 13.32 The appellant has argued that all payments for foreign shooting of the film were made in accordance with the agreement. An amount of Rs. 19,56,92,500/- was transferred to the bank account of Super T Films (UK) Ltd. for meeting the cost of foreign shooting. Out of the above sum if Super T Films (UK) Ltd transferred an amount of 874,626 pounds approx. Rs. 7.50 crores to an entity in Dubai for doing part of the shooting work, the said arrangement is between those 2 parties. As far as appellant is concerned the entire cost incurred on the foreign shooting is backed by commercial agreement. The appellant has further argued that there is no evidence on record to suggest that the amount transferred to Dubai entity namely NM Worldwide Ltd. was received back by SCIPL in any manner. Therefore, it was claimed by the appellant that the modus operandi stated in the assessment order only remains an allegation. Enquiries were done from Sh. Vishal Pandya; Director of the film Milap Milan Zaveri Dialogue Writer, Sameer Brijmohan Arora screenplay writer and Sunita Radia Director of Photography and the same has been referred to in the assessment order. However, it may be noted that if these persons director has been paid a lesser amount as compared to the amount charged from Super T Films (UK) Ltd. by NM Worldwide Ltd. then it cannot be inferred that expenses have been inflated, the same can at the most be attributed as margin retained by NM Worldwide Ltd. Another argument of the appellant is that as per terms of the film commissioning agreement the entire cost of foreign shooting was to be incurred by Super T Films (UK) Ltd. and the same was to be reimbursed by SCIPL etc. Super Cassettes Industries Pvt. Ltd. 13.33 The AO has disallowed Rs. 6,21,14,771 as bogus expenditure. This disallowance is based upon transfer of Rs. 7.5 crore by Super T Films (UK) Ltd to NM Worldwide Dubai for for the making payments the Director, Dialogue Writer, Screenplay Writer and out of the same only Rs. 1,28,85,229 was paid. On perusal of the assessment order and contentions of the appellant, it is undisputed fact that the appellant transferred an amount of Rs.19.57 Crores to Super T Films (UK) Ltd. The same has been claimed as expenditure in the books of accounts of the appellant company for the F.Y 2017-18. It is also an undisputed fact that out of Rs.19.57 Crores, an amount of 874626 GBP was transferred by Super T Films (UK) Ltd to Dubai based entity named NM Worldwide. 13.34 The transfer of GBP 874626 was for payments to the Director, Dialogue Writer, Screenplay Writer and the SCIPL has claimed the same to be paid to various persons. However, in the response to summons u/s 131(1A) the various persons to whom payments were made have confirmed the receipt of following payments. S.No Name Amount received From Value of Agreement Entered NM Worldwide with NM Worldwide Limited Limited 1. Vishal Pandya(Director) 89,14,997/- 91,00,000/- 2. Milap Milan Zaveri 14,83,894/- 15,00,000/- (Dialogue Writer) 3. Sunita Radia(DOP) 24,86,338/- 25,00,000/- 4. Sameer Brijmohan Not submitted Not Submitted Arora (Screenplay Writer) Total 1,28,85,229/-

13.35 From the above table it can be seen that the total payment to various persons by NM Worldwide was only Rs. 1,28,85,229/- against Rs.7.5 crore claimed by SCIPL as expense against the movie Hate Story - 4. 13.36 Hence it is clearly established that SCIPL has claimed inflated expenses on account of payment made to Director, Dialogue Writer, Screenplay Writer Hate Story - 4. The payment to them was only Rs. 1,28,85,229/- as against transfer of 874626 GBP to NM Worldwide Dubai. Therefore, the excess payment to NM Worldwide Dubai by Super T Films etc. Super Cassettes Industries Pvt. Ltd. (UK) Ltd over and above what was paid to Director, Dialogue Writer, Screenplay Writer is to be disallowed. 13.37 In view of the above discussion, it is held that the appellant inflated its expenditure for production of Film Hate Story 4 to the extent of Rs.6,21,14,771/- and accordingly addition to the extent of Rs. 6,21,14,771/- is confirmed. 22.3 The Commissioner of Income Tax (Appeals) [CIT(A)] upheld the addition made in the assessment order, rejecting SCIPL's contention that all payments were governed by valid commercial agreements. The CIT(A) found that SCIPL transferred Rs. 19,56,92,500 to Super T Films for production expenses, out of which 874,626 GBP (approximately Rs. 7,50,00,000) was further transferred to NM Worldwide for payments to the Director, Dialogue Writer, and Screenplay Writer. However, upon investigation, it was determined that NM Worldwide disbursed only Rs. 1,28,85,229 to the Director, Dialogue Writer, and Screenplay Writer, thereby justifying the disallowance of the excess amount.

22.4 We have heard the respective submissions made by the parties; we have also perused the relevant materials available on record. It appears from the records that SCIPL transferred Rs. 19,56,92,500 to Super T Films (UK) Ltd. for foreign shooting, of which 874,626 GBP (approx. Rs. 7.5 crore) was transferred to NM Worldwide Ltd. in Dubai for payments to the Director (Vishal Pandya), Dialogue Writer (Milap Milan Zaveri), Screenplay Writer (Sameer Brijmohan Arora), and Director of Photography (Sunita Radia). Investigation under section 131(1A) revealed that only Rs. 1,28,85,229 was paid to these individuals. SCIPL

241 | P a g e evidence on record to show that funds were returned to SCIPL, attributing the shortfall to NM Worldwide’s profit margins is rejected as the investigation reveals that finances and operations of NM Worldwide are operated and managed by Bhushan Dua and his employees.

22.5 It is seen that the AO has disallowed Rs. 6,21,14,771 as bogus expenditure.

This disallowance is based upon transfer of Rs. 7.5 crore by Super T Films (UK)

Ltd to NM Worldwide Dubai for for the making payments the Director, Dialogue Writer, Screenplay Writer and out of the same only Rs. 1,28,85,229 was paid. On perusal of the assessment order and contentions of the appellant, it is undisputed fact that the appellant transferred an amount of Rs.19.57 Crores to Super T Films (UK) Ltd. The same has been claimed as expenditure in the books of accounts of the appellant company for the F.Y 2017-18. It is also an undisputed fact that out of Rs.19.57 Crores, an amount of 874626 GBP (approx. Rs. 7.5 crore) was transferred by Super T Films (UK) Ltd to Dubai based entity named NM Worldwide.

22.6 The transfer of GBP 874626 was for payments to the Director, Dialogue Writer, Screenplay Writer and the assessee has claimed the same to be paid to various persons. However, in the response to summons u/s 131(1A) the various persons to whom payments were made have confirmed the receipt of following payments. etc. Super Cassettes Industries Pvt. Ltd. S.No Name Amount received Value of Agreement From NM Worldwide Entered with NM Limited Worldwide Limited 1. Vishal Pandya(Director) 89,14,997/- 91,00,000/- 2. Milap Milan Zaveri 14,83,894/- 15,00,000/- (Dialogue Writer) 3. Sunita Radia(DOP) 24,86,338/- 25,00,000/- 4. Sameer Brijmohan Not submitted Not Submitted Arora (Screenplay Writer) Total 1,28,85,229/- 22.7 From the above table it can be seen that the total payment to various persons by NM Worldwide was only Rs. 1,28,85,229/- against Rs.7.5 crore claimed by SCIPL as expense against the movie Hate Story - 4.

22.8 Hence it is clearly established that SCIPL has claimed inflated expenses on account of payment made to Director, Dialogue Writer, Screenplay Writer Hate Story - 4. The payment to them was only Rs. 1,28,85,229/- as against transfer of 874626 GBP(approx. Rs. 7.5 crore) to NM Worldwide Dubai. Therefore, the CIT(A) was ciorrect in confirming disallowance of excess payment to NM Worldwide Dubai by Super T Films (UK) Ltd over and above what was paid to Director, Dialogue Writer, Screenplay Writer.

22.9 In view of the above observations we upheld the order of CIT(A) confirming the disallowance of Rs. 6,21,14,771 as bogus expenditure for the film Hate Story 4, produced by SCIPL and released on 09.03.2018. Therefore this ground of appeal of assessee is dismissed.

243 | P a g e Branding Activity is challenged for AY 2018-19 by the assessee company. Brief facts of the case are that the WhatsApp chats between Bhushan Kumar and an SCIPL employee, Rajendra Ankula, indicated a deal for a song in the movie Bhoomi valued at Rs. 18 lakh. Rs. 10 lakh paid by cheque and Rs. 8 lakh in cash.

While the cheque payment was recorded in SCIPL’s books, the cash component was omitted. During the Assessment proceedings, Sh. Bhushan Kumar denied recalling the chats. Since the cheque payment tallied with the chats, the unrecorded cash payment was accepted as genuine. Accordingly, Rs. 8 lakh was added to SCIPL’s business income as unaccounted cash.

23.1 The additions so made by the AO in AY 2018-19 were upheld by the CIT(A) by stating that the content of the chat is proved to be correct. As the cheque amount is reflected in the books of accounts of the appellant, therefore, it is established that the cash amount is also received by the appellant but not disclosed in the books of accounts. The relevant paras are reproduced below:-

“16.14 The arguments of the Assessing Officer and of the appellant have been seen. It is found that the appellant company entered into an agreement for making of music video for magic moment vodka brand with M/s Radico Khetan Ltd. For making of the video, an amount of Rs.18,00,000/- was agreed upon. The consideration of Rs. 10,00,000/- was to be taken to the appellant in cheque and Rs.8,00,000/- In cash as is evident from the chat reproduced above.

16.15 The Issue to be decided in the present ground is whether a presumption can be drawn only on the basis of chats containing numerical 244 | P a g e etc. Super Cassettes Industries Pvt. Ltd. figures without any corroborating material to reach a conclusion that unaccounted cash Income was earned by the appellant from singers.

16.16 The AO has determined unaccounted cash income of the appellant on the basis of whatsapp chat. It has been presumed by him that the numerical figures appearing in the whatsapp message represent the real income of the appellant from M/s Radico Khaitan Ltd.

16.17 The basis for the entire addition is the whatsapp message reproduced above. The appellant argued that the contents of the chat cannot be the basis of any addition. However, such a contention of the appellant is baseless because the chat has been found from the phone of Shri Bhushan Kumar, the director the appellant company and Shri Rajinder Ankula. Further, the contents of the chat has not been proved to be incorrect at any point of time by the appellant. It is also a matter of fact and record that neither of the two persons have stated that the transactions referred in the chat is incorrect or have not taken place. It is also to be noted that the chat is in respect of receipt of money by the appellant company. Therefore, the contents of the chat is considered as a valid evidence based on which addition can be made.

16.18 In the text of the chat there is clear mention of receipt of money from Radico Khaltan. The document is self-explanatory and the appellant has not furnished any evidence contrary to the evidence on record. The chats establish that the appellant had received monies and it was apparently not disclosed in the books maintained by the assessee. Be otherwise the onus to prove that cash transaction was recorded in the books lies on the assessee. The appellant has miserably failed to explain the same. Therefore, the Assessing Officer was justified in making the addition.

16.19 It is seen that the appellant in his books of accounts has recorded the amount of Rs. 10,00,000/- (plus GST) vide entry dated 14.08.2017. Therefore, the content of the chat is proved to be correct. As the cheque amount is reflected in the books of accounts of the appellant, therefore, it is established that the cash amount is also received by the appellant but not disclosed in the books of accounts.

16.20 In view of the above discussion, the addition of Rs.8,00,000/- is confirmed. Ground No.8 is dismissed.

23.2 The Ld. Counsel of the assessee highlighted provisions of section 65B of the Indian Evidence Act, 1872 are to be followed scrupulously. It is the contention of the assessee that any information contained in any electronic record is not admissible as evidence as per the provisions of section 65B of the Indian Evidence Act, 1872 unless the conditions prescribed in sub-section (2) & (4) of section 65B are satisfied in relation to the information and respective electronic device in question. In view of the same the whatsapp messages referred are merely a piece of paper not having any evidentiary value until and unless the conditions stated in section 65B of the Indian Evidence Act, 1872 are satisfied.

23.3 Further the counsel of the assessee relying on the judgement of Hon’ble Supreme court (Three Judge bench) in the case of Anvar V. Basheer, reported in (2014) 10 SCC 473 argued that the requisite certificate from an officer certifying that the print outs in question are from the seized electronic record/device is missing in the present case.

23.4 Further Ld. Counsel of the assessee highlighted that, there is no proof or evidence of the receipt of cash of Rs. 8 lacs as is being alleged. No enquiries have been conducted from M/s Radico Khaitan Ltd. The counter party has not confirmed having made any cash payment to SCIPL. Even the chat mentioned in 246 | P a g e mentioned in the chat is the finalised proposal only and not the actual transaction.

The material is in the nature of a mere whatsapp Chat containing certain information is not sufficient to derive an inference about undisclosed receipts in cash in the absence of any cogent and corroborating material/evidence and particularly lack of any enquiry from the alleged third party from whom such cash payments have been received. Since the corroborating material/evidence in the present case is completely missing, the impugned addition is required to be deleted.

23.5 We have heard the respective submissions made by the parties; we have also perused the relevant materials available on record. The Assessing Officer’s (AO) addition of Rs. 8,00,000 as unaccounted cash income is premised on Whatsapp Chat extracted from digital data seized between Bhushan Dua and his employee SCIPL, Rajendra Ankulafor production of a music video for the company M/s Radico Khaitan Ltd. for promotion of brand Magic Moments vodka. The WhatsApp chat stipulated a total consideration of Rs. 18,00,000, with Rs. 10,00,000 to be paid by cheque and Rs. 8,00,000 in cash. The chats was retrieved from the phone of SCIPL’s Managing director, Shri Bhushan Kumar, and Shri Rajinder Ankula. The AO relied on these chats to conclude that the Rs. 8,00,000 cash payment was unaccounted income not recorded in SCIPL’s books as Rs. 10,00,000/- mentioned in the chat corroborated with the books of accounts.

247 | P a g e of Anvar V. Basheer (2014) 10 SCC 473 that the WhatsApp chats lacked evidentiary value under Section 65B of the Indian Evidence Act, 1872, as no certificate was provided to authenticate the electronic record is rejected as SCIPL failed to disprove the authenticity or content mentioned in the chat retrieved from Bhushan Kumar’s phone, explicitly mentioning the receipt of money from M/s Radico Khaitan.

23.7 Further argument of Ld. Counsel of assessee that the chats only reflected a proposed transaction, not an actual cash receipt, and no inquiry was conducted with Radico Khaitan to confirm the payment is rejected as the amount of Rs. 10,00,000/- mentioned in the chat is corroborated with the books of accounts of SCIPL. We have rejected SCIPL’s arguments, finding the WhatsApp chats to be valid evidence. Neither Bhushan Kumar nor Rajinder Ankula denied the transactions referenced in the chats. Is is noted that SCIPL recorded the Rs. 10,00,000 cheque payment (plus GST) in its books on 14.08.2017, corroborating part of the chat’s content and lending credibility to the claim that the Rs. 8,00,000 cash payment was also received but not disclosed.

23.8 The onus was on SCIPL to demonstrate that the cash transaction was recorded in its books, which it failed to do. Regarding the applicability of Section 65B, we found SCIPL’s reliance on Anvar V. Basheer unpersuasive, as the chats’ authenticity was not contested by the individuals involved, and their context 248 | P a g e Khaitan was deemed immaterial, as the chats were corroborated by cheque entry of Rs. 10,00,000/- and sufficient to establish the receipt of unaccounted cash.

Consequently, we upheld the order of CIT(A) confirmingaddition of Rs. 8,00,000 as undisclosed income, therefore assessee of appeal is dismissed.

24.1 Page 15 of the annexure A 10 seized during search proceedings shows some figures which were confronted with Smt. Sudesh Dua in respect of which it was submitted that there is cash expenditure of 35,980/- + 40,000/- + 50,000/- + 22,000/- totalling Rs. 1,47,980/- spent on repair of furniture in Bombay. Based on Page 12 of Annexure A10 seized during search proceedings in which the payment reflecting against the word “Chec” is corroborated with the bank statement, the AO has drawn conclusion that Page 15 is not a Dumb Document and the figures mentioned on Page 15 are also in lakhs and therefore total payment made is Rs. 1,47,98,000 and not 1,47,980/-. Further the AO draws the observation that diary qualifies as “books of account” under Section 2(12A), and Smt. Sudesh Dua failed to explain entries satisfactorily. Resultantly addition of Rs. 1,47,98,000/-

249 | P a g e 19.

24.2 The CIT(A) provided partial relief to the assessee company by holding both the pages and the matter written in them are completely different having no relation with each other. Therefore, no corroborative evidence is available on record in substantiation of figures mentioned at Page No. 15 as figures mentioned in lacs. The CIT(A) on this basis held that the amount written are not in Lakhs and on this basis confirmed the addition of Rs. 1,47,980/- and deleted the addition of Rs. 1,46,50,020/- The relevant paras from the order of CIT(A) are reproduced below:-

“17.23 I have carefully considered the assessment order and the written submission of the appellant. The entire dispute in these Grounds of Appeal is about the interpretation of figures mentioned at Page No. 12 and Page No. 15 of the seized annexure A10. The AO in the assessment order has interpreted the figures mentioned at Page No. 12 and Page 15 as figures mentioned in lakhs and made the following additions:

17.24 The AO has questioned the explanation in respect of jottings at Page No. 12 and Page No. 15 of the Annexure A 10. Therefore, the issue to examine would be whether transactions mentioned at Page No. 12 and Page No. 15 are merely rough jottings or amounts mentioned in lakhs. 250 | P a g e

17.25 The main argument of the Assessing Officer for making the addition is summarised as under: I The assessee was given ample opportunity to explain the contents of rough jottings but the assessee avoiding the notice as well as not supporting any satisfactory evidence in support of the claim made. II Notices issued to Shri Ved Prakash Chanana remain non complied and the reply received from Smt Sudesh Dua werd not supported by any evidence such as invoices etc. Further it was submitted by Smt Sudesh Dua that the same may be considered in SCIPL case instead of her personal case.

III In case of Contents mentioned at Page No. 15 of Annexure A 10, assessee himself admitted that cash payment of Rs. 1,47,980/- was made for repair of furniture in Bombay in cash. Further question was whether the amount admitted by the assessee were in thousand or lacs.

IV The AO draws an observation that on perusal of Page 12 where it is written that "50 chee" on various instances have been verified from the bank account of Shri Ved Prakash Chanana as 50 lacs and therefore the amounts mentioned at Page 12 and Page 15 are in lacs and not in thousands. Based on the above observations additions of Rs. 1,50,00,000 was made for AY 2018-19 and AY 2019-20 and another addition of Rs. 1,47,98,000 for AY 2018-19.

V In Annexure A-15, there is mention of Bombay furniture with date and amount written as 35.98, 40, 50, 22. The Assessing Officer presumed that the amounts are in lakhs and therefore, computed unaccounted expenditure at Rs.14798000/-. In respect of addition of Rs.14798000/-, the appellant during the course of assessment proceedings had stated that an amount of Rs.147980/- was unaccounted expenditure incurred for purchase of furniture at his Bombay office. However, the Assessing Officer made addition on the ground that the figures are in lakhs and consequently made addition of Rs.14798000/-. The Assessing Officer had no evidence contrary to the claim of the appellant that the figures are in lakhs and not in thousands. etc. Super Cassettes Industries Pvt. Ltd. VI When In respect of amounts mentioned at Page No. 15 of the seized annexure, the appellant himself admitted that the amounts mentioned are in thousands and the said figures are expenses incurred in respect of Furniture at Bombay Office, there is no basis for the Assessing Officer to arrive at different conclusion.

VII Moreover, the fact that addition has been made based upon jottings at Page 15 of the Diary and to decipher that the figure is in Lacs the AO had used the jottings made on Page 12 of the diary as reference and assumed that since the figures mentioned on page 12 are in Lacs then the same must be the case for figures on Page 15 is not justified as both the pages and the matter written in them are completely different having no relation with each other. Therefore no corroborative evidence is available on record in substantiation of figures mentioned at Page No. 15 as figures mentioned in lacs.

VIII It can be assumed that there may be unaccounted purchase of furniture to the extent of Rs.147980/- in cash. However, it cannot be assumed that someone will sell the furniture of Rs.14798000/- in cash to one party. On furniture, the appellant is eligible to claim depreciation @10%. Apparently, the appellant company is a cash rich company. In such a case, it is very unlikely that furniture worth 1.48 Crores would be purchased in cash and the appellant foregoes his claim of depreciation. On the ground of preponderance of probability, it is highly unlikely that the appellant may have purchase furniture of Rs.1.48 Crores in cash.

IX Resultantly, addition of Rs. 1,47,98,000/- made in respect of rough jottings at Page No. 15 of the seized annexure A 10 is restricted to Rs. 1,47,980/-Therefore, the appellant gets relief of Rs.14650020/- and addition of Rs.147980/-u/s 69 C of the Act is confirmed.

24.3 We have heard the respective submissions made by the parties; we have also perused the relevant materials available on record. It appears from the records that that the Ld.AO has disallowed an amount of Rs. 1,47,98,000 for AY 2018-19, based on entries in Annexure A-15, a seized diary of Sudesh Kumari, which mentioned amounts of 35.98, 40, 50, and 22 alongside "Bombay furniture." The AO presumed these figures represented lakhs, interpreting them as 252 | P a g e SCIPL’s Bombay office.

24.4 We have evaluated the arguments, evidence, and legal merits to determine the validity of the addition. The AO’s addition was based on the assumption that the figures (35.98, 40, 50, 22) in the diary were in lakhs, relying on a reference to page 12 of the same diary where figures were noted in lakhs. The AO concluded that the same explanation applied to page 15, leading to the computation of Rs. 1,47,98,000 as unaccounted expenditure. However, it is found that the AO lacked corroborative evidence to substantiate this presumption. The entries on page 12 were unrelated to those on page 15, as they pertained to different matters, rendering the AO’s assumption speculative and unsupported. No additional evidence was presented by the AO to contradict SCIPL’s claim that the amounts were in thousands.

24.5 We found merit in SCIPL’s arguments as the AO’s presumption that the diary figures were in lakhs was not supported by any corroborative evidence, and the reliance on unrelated entries on page 12 was unjustified. It is noted that SCIPL’s admission of Rs. 1,47,980 as unaccounted expenditure was consistent with the diary entries when interpreted as thousands, and the AO failed to provide contrary evidence to challenge this claim. Furthermore, it is agreed that a cash purchase of furniture worth Rs. 1.48 crores was implausible for a company like SCIPL, which would likely prioritize recorded transactions to claim depreciation. 253 | P a g e that such a large cash transaction was unlikely. Therefore, the relief provided by CIT(A) is upheld and addition of Rs. 1,47,980/- confirmed by the CIT(A) is upheld and the deletion of addition of Rs. 1,46,50,020/- by CIT(A) is also upheld and both the assessee’s and revenue’s ground of appeal for AY 2018-19 are dismissed.

25. The addition of Rs. 75,00,000/- on account of cash transaction conducted using the Codewords Sweet/Kg is challenged for AY 2018-19.

25.1 Brief facts of the case are that the WhatsApp chats between Shri Shiv Chanana, Shri Bhushan Kumar, and Ms. Shilpa (CFO, Viiking) revealed that M/s SCIPL received cash, coded as “Kg,” for bogus expenses through agencies like Viiking. One chat dated 15.06.2017 records Shiv Chanana acknowledging receipt of Rs. 25 lakhs from Sachin Joshi (Viiking Beverages). The discussions detail deliveries of 25 “Kg” (Rs. 25 lakhs) on 15th June, 29th June, and 30th November, along with Rs. 25 lakhs by cheque, forming a total deal of Rs. 1 crore with Viiking. “Kg” was used as a code for ₹1 lakh in cash. SCIPL’s Tally ledger for Viiking Beverages reflected only Rs. 25 lakhs on 23.11.2017 under Advertisement and Publicity. The ledger corroborates the chats, confirming a Rs. 1 crore arrangement, of which Rs. 75 lakhs was received in unaccounted cash and Rs. 25 lakhs through cheque (recorded). The cheque acted as security, with Shilpa requesting confirmation of cash delivery to adjust it. As WhatsApp chats are 254 | P a g e The ledger entry further validates their authenticity. Accordingly, Rs. 75 lakhs of unrecorded cash receipts were added to SCIPL’s income for A.Y. 2018–19.

25.2 The additions so made by the AO in AY 2018-19 were upheld by the CIT(A) by stating that WhatsApp chat between Shri Shiv Chanana and Mrs Shilpa is corroborated with the books of accounts and the figures mentioned in the chat are in lakhs as per the books of accounts, the other 3 figures are also treated as amount mentioned in lakhs. The total transaction as per WhatsApp chat was for 100KG i.e. 100 Lacs out of which only 25 lacs was found in the books and therefore, the balance amount of Rs. 75 lacs is treated as un accounted income of the appellant company. The relevant paras from the order of CIT(A) are reproduced below:-

“19.16 The contents of the assessment order and the submissions of the appellant have been carefully considered. Coming to the merits of the case and Ground Nos. 13, the appellant has contended that the A.O was not justified in making an addition of Rs. 75,00,000/- on account of alleged unaccounted cash income, in the absence of any inquiries conducted from corresponding parties and lack of corroborating material.

19.17 For the assessment year under consideration, the assessing officer has referred various chats found between Shri Shiv Chanana and Mrs. Shilpa (CFO Viiking Beverages Pvt Ltd) and another chat between Shri Shiv Chanana and Shri Bhushan Kumar on different dates.

19.18 The AO has determined unaccounted cash income from M/s Viiking Beverages Pvt Itd on the basis of whatsapp chat. The Assessing Officer on the basis of above referred chats has drawn an inference that kg is being used as code word for cash in the chats and 1 kg is equivalent to 1 lacs. It has been found by him that the numerical figures appearing in the 255 | P a g e etc. Super Cassettes Industries Pvt. Ltd. whatsapp message represent the amount received from M/s Viiking Beverages Pvt Ltd as unaccounted income of appellant company.

19.19 The chat between Shri Shiv Chanana and Mrs Shilpa dated 02.12.2017 shows that 25kg was delivered on 15th June, 25 kg on 29th June, 25 kg on 30th Nov and 25 kg through cheque. Hence using 25 kg against cheque clearly shows that kg is being used as code word for Cash in lakhs. Another chat was also found between Shri Bhushan Kumar and Shri Shiv Chanana dated 15.06.2017, where Shri Shiv Chanana confirms receiving Rs. 25 lakhs from Sachin Joshi (Viiking Beverages). Further, the Ledger of Viikings Beverages Pvt Ltd was found from the seized books which show income of only Rs.25 lakhs to M/s Viikings Beverages Pvt Ltd on 23.11.2017 under the head Advertisement and Publicity. As per chat found in between Shiv Chanana and Mrs Shilpa, AO observed that the total transaction was for 100KG I.e. 100 Lacs out of which only 25 lacs was found in the books and therefore the balance amount of 75 lacs was added to the total Income of appellant company.

19.20 The appellant submitted that the entire basis for the addition is the whatsapp message found during the course of search proceedings. During the course of search action, no other corroborating material has been found to support the inferences drawn by the AO for making the impugned addition. From the assessment order, it is found that no statement of any person involved in the chat with Director Sh. Bhushan Kumar (Managing Director) have been recorded at the time of search u/s 132(4) of the Act or during post search enquiries. It is also found that apart from relying on the whatsapp chat, the AO failed to make any enquiry on the impugned issue during the course of assessment proceedings.

19.21 The appellant highlighting the provisions of section 65B of the Indian Evidence Act, 1872 submitted that requisite certificate from an officer certifying that the print outs in question are from the seized electronic record/device are missing. Further, the appellant also submitted that apart from the reference made in the SCN about the WhatsApp chats and emails, a copy of the same has not been provided during post search investigation or during the assessment proceedings. Therefore, the whatsapp messages, emails, etc being referred to in your SCN are merely a piece of paper not having any evidentiary value until and unless the conditions stated in section 65B of the Indian Evidence Act, 1872 are satisfied. etc. Super Cassettes Industries Pvt. Ltd. 19.22 In support of the above contention, reliance is made by the appellant on following cases: 1. ITO v. W.D. Estate (P.) Ltd. [1993] 46 TTJ (Bom.) 143 2. Shri Neeraj Goel Vs. ACIT In ITA No. 5951/Del./2017 3. ACIT V Layer Exports P. Ltd. [2017] 184 TTJ 469 (MUM) 4. Nishant Construction Pvt. Ltd. V ACIT in

5. ITO v. Kranti Impex (IT Appeal No. 1229/Mumbai/2013) 6. Asst. CIT v. Karodilal Agarwal 50 TTJ 393

19.23 The primary legal contention of the appellant raised by the appellant that as per the provisions of section 65B of the Indian Evidence Act, 1872, whatsapp messages, emails, etc are merely a piece of paper not having any evidentiary value is first taken up for adjudication.

19.24 We rely on the judgement of Hon'ble Supreme Court in the case of Ambalal Sarabhai Enterprises v KS infraspace LLP Limited in which it was held that WhatsApp chat messages which are virtual verbal communications are a matter of evidence with regard to their meaning and its contents to be proved during the trial by evidence in chief and cross examination. Therefore, it was interpreted that whatsapp chats available on record can-not be treated as dumb document.

19.25 Coming to the merits of the case, chat dated 02.12.2017 between Sh. Shiv Chanana and Mrs Shilpa states that the deal from Beverages was for 100kg of which 25 kg was delivered on 15th June, 25 kg on 29th June, 25 kg on 30th Nov and 25 kg through cheque. Hence using 25 kg against cheque clearly shows that kg is being used as code word for Cash. Further as per another chat between Shri Bhushan Kumar and Shri Shiv Chanana dated 15.06.2017 Shri Shiv Chanana confirms receiving Rs. 25 lakhs from Sachin Joshi who also belongs to Viiking Beverages. Lastly, the Ledger of Viikings Beverages Pvt Ltd was found from the seized books which show Income of only Rs. 25 lakhs to M/s Viikings Beverages Pvt Ltd on 23.11.2017 under the head Advertisement and Publicity. The appellant has not been able to establish as to what was the item referred to in chats in Kg which was delivered. The onus was on the appellant to explain the chat with evidence which the appellant has not been able to demonstrate.

19.26 Since the WhatsApp chat between Shri Shiv Chanana and Mrs Shilpa is corroborated with the books of accounts and the figures mentioned in the chat are in lakhs as per the books of accounts, the other 3 figures is also treated as amount mentioned in lakhs. The total transaction as per etc. Super Cassettes Industries Pvt. Ltd. WhatsApp chat was for 100KG i.e. 100 Lacs out of which only 25 lacs was found in the books and therefore the balance amount of Rs. 75 lacs is treated as un accounted income of the appellant company.

19.27 In view of the above it is submitted that the addition of of Rs. 75,00,000/- made based on whatapp chat with Shri Shiv is hereby confirmed.

25.3 The AO referred WhatsApp chats between Shri Shiv Chanana, Mrs. Shilpa (CFO, Viiking Beverages), and Shri Bhushan Kumar, used to infer unaccounted cash income. The AO concluded from the chats that “Kg” is a code for cash (1 Kg = Rs. 1 lakh), interpreting numerical figures as unaccounted income from Viiking Beverages.

25.4 A chat dated 02.12.2017 between Shiv Chanana and Shilpa details 25 Kg (Rs. 25 lakhs) delivered on 15th June, 29th June, 30th November, and Rs. 25 lakhs via cheque, totaling a Rs. 100 lakh deal. Another chat (15.06.2017) confirms Chanana received Rs. 25 lakhs from Sachin Joshi (Viiking). The ledger shows only Rs. 25 lakhs recorded on 23.11.2017 under Advertisement and Publicity, leading to the AO adding Rs. 75 lakhs as unaccounted income.

25.5 The predominant judicial view is that no arbitrary addition to the income can be made by the Assessing Officer based on the dumb documents, loose papers containing scribbling, rough/vague notings in the absence of any corroborative material, evidence on record and finding that such dumb documents had materialized into transactions giving rise to income of the assessee which had 258 | P a g e Ld. AR.

25.6 The well settled legal position is that a non-speaking document referred to as a “Dumb Document” without any corroborative material, evidence on record and finding that such document has materialized into transactions giving rise to income of the assessee which had not been disclosed in regular books of account by such assessee, has to disregarded for the purposes of assessments to be framed u/s 153A and 153C of the Act, as further argued by the Ld. AR.

25.7 We have heard the respective submissions made by the parties; we have also perused the relevant materials available on record. We have reviewed the assessment order and the appellant’s submissions, where the appellant challenged the AO addition of Rs. 75,00,000/- as unaccounted cash income from M/s Viiking Beverages Pvt. Ltd. The AO’s addition was based on WhatsApp chats between Shri Shiv Chanana and Mrs. Shilpa (CFO, Viiking Beverages) and Shri Bhushan Kumar, interpreting “kg” as a code for cash, with 1 kg equating to Rs. 1 lakh. A chat dated 02.12.2017 indicated a transaction of 100 kg (Rs. 100 lakhs), with 25 kg (Rs. 25 lakhs) paid via cheque and recorded in the seized ledger on 23.11.2017 under “Advertisement and Publicity,” while the remaining 75 kg (Rs. 75 lakhs) was treated as unaccounted income. Another chat dated 15.06.2017 confirmed receipt of Rs. 25 lakhs from Sachin Joshi of Viiking Beverages.

259 | P a g e dated 02.12.2017 between Sh. Shiv Chanana and Mrs Shilpa (CFO Viking Beverages), states that the deal from Beverages was for 100kg of which 25 kg was delivered on 15th June, 25 kg on 29th June, 25 kg on 30th Nov and 25 kg through cheque. Hence using 25 kg against cheque clearly shows that kg is being used as code word for Cash. Further as per another chat between Shri Bhushan Kumar and Shri Shiv Chanana dated 15.06.2017 Shri Shiv Chanana confirms receiving Rs. 25 lakhs from Sachin Joshi who also belongs to Viiking Beverages.

The Ledger of Viikings Beverages Pvt Ltd shows Income of Rs. 25 lakhs booked by the assessee under the head Advertisement and Publicity. The assessee has not been able to establish as to what was the item referred to in chats in Kg which was delivered. The onus was on the assessee to explain the chat with evidence which the assessee has not been able to demonstrate.The argument of the Ld Counsel that the addition made by the AO relying solely on WhatsApp chats without corroborative evidence and further stating that no statements were recorded u/s 132(4), and further no inquiries were conducted is rejected as the chat is duly corroborated by the ledger of Viking showing entry of Rs. 25 lakhs against advertising and publicity income. This corroborates the chat where in 75 lacs is received in cash and 25 lacs in cheque.

25.9 Since the WhatsApp chat between Shri Shiv Chanana and Mrs Shilpa is corroborated with the books of accounts and the figures mentioned in the chat are 260 | P a g e mentioned in lakhs. The total transaction as per WhatsApp chat was for 100KG i.e. 100 Lacs out of which only 25 lacs was found in the books and therefore the balance amount of Rs. 75 lacs is to be treated as unaccounted income of the assessee company.

25.10 Further the contention of the appellant that the chats lacked evidentiary value under Section 65B of the Indian Evidence Act, 1872, due to the absence of a certificate authenticating the electronic records and non-provision of chat copies during proceedings is also rejected in view of the Supreme Court’s ruling in Ambalal Sarabhai Enterprises v. KS Infraspace LLP Limited, in which held that WhatsApp chats are not “dumb documents” and can be admissible, subject to proving their contents through evidence.

25.11 As a result the addition of Rs. 75,00,000/- confirmed by the CIT(A) upheld. Consequently, this ground of appeal of the assessee is dismissed.

Un-Common Grounds for AY 2019-20

261 | P a g e chats, a total of Rs. 4,97,000 was added to SCIPL’s income. The assessee argued that WhatsApp chats lack evidentiary value under Section 65B without certification. However, relying on the Supreme Court’s decision in Ambalal Sarabhai Enterprises v. KS Infraspace LLP, it was held that WhatsApp chats, being virtual verbal communications, have evidentiary value subject to proof at trial and cannot be treated as “dumb documents.”

26.1 The additions so made by the AO in AY 2019-20 were upheld by the CIT(A) by stating that the addition made based on whatsapp chat with Ms Sonal and Ms Priya for their alleged cash component of salary amounting to Rs. 4,97,000/- during AY 2019-20. The relevant paras are reproduced below:-

“17.7 The contents of the assessment order and the submissions of the appellant have been carefully considered. Coming to the merits of the case and Ground No. 8, the appellant has contended that the A.O was not justified in making an addition of Rs. 4,97,000/- during AY 2019-20 on account of unaccounted income on account of alleged unaccounted cash income received/paid. 17.8 For the assessment year under consideration, the assessing officer has referred various chats on different dates which are re produced as under: From: 919820151838@s.whatsapp.net Sonal Music Manager Timestamp: 01-11-2018 17:02:59(UTC+0) Source App: WhatsApp Body: Sir can I take my cash salary from u tomw? Need for diwali. March- october. 30k X 8 months = 2.40

From: 919820219359@s.whatsapp.net Priya Gupta Tseries Timestamp: 28-05-2018 04:20:54(UTC+0) Source App: WhatsApp Body:

Hi Bhushanji. How are u? I was away to Kedarnathji & Badrinathji past week & then I fell sick due to the tough Yatra. Wanted to check with you when I could come and meet u. My cash component of 17 days Rs 2.57 Lakhs is due. Bhushanji I had accepted cash only as u wanted it. For me it was always a part of salary. I hope and I know you will be fair to me for not withholding this money that is fairly due to me. Also I have been following up with Samir past 3 months much before I left on my car reimbursement payment but he just tells me it's coming today but it never comes. This is the last two sums due for my final settlement. Request you to please tell him to clear my dues. Thank you.

From: From: 919821444221@s.whatsapp.net Bhushan Kumar Timestamp: 28-05-2018 04:41:09(UTC+0) Source App: WhatsApp Body: I will tell him

17.9 The issue to be decided in the present ground is whether a presumption can be drawn only on the basis of chats containing numerical figures without any corroborating material to reach a conclusion that unaccounted cash income / Expenses were earned /incurred by the appellant. 17.10 The AO has determined unaccounted cash expenses were incurred for salary payment to Ms Sonal and Ms Priya on the basis of whatsapp chat. The basis for the entire addition is the whatsapp message reproduced above. During the course of search action, no other corroborating material has been found to support the inferences drawn by the AO for making the impugned addition. From the assessment order, it is found that no 263 | P a g e etc. Super Cassettes Industries Pvt. Ltd. statement of any person involved in the chat with Director Sh. Bhushan Kumar (Managing Director) have been recorded at the time of search u/s 132(4) of the Act or during post search enquiries. It is also found that apart from relying on the whatsapp chat, the AO failed to make any enquiry on the impugned issue during the course of assessment proceedings. 17.11 The appellant submission that whatsapp chat of Sonal making request for cash salary of Rs. 2,40,000/- on 01.11.2018 was never replied by Shri Bhushan ji. There is no corroborated response on record to prove that the cash salary of Rs. 2,40,000/- was paid to Ms Sonal. From the chat, it is evident that Ms. Sonal was promised a cash salary of Rs.30,000/- per month apart from the salary paid by way of cheque. Ms. Sonal is continuing in the appellant company till date. If the salary in cash was not paid, in that case there was no reason for her to continue in the organization. Because Ms. Sonal is continuing in the appellant organization till date, therefore, it is presumed that the transaction referred to in the chat was fulfilled and completed.

17.12 In view of the above, addition of Rs. 2,40,000/- is upheld.

17.13 Further, in case of Priya Gupta from the chat she was asking Mr. Bhushan Kumar about her pending cash component of the salary amounting to Rs.2.57 lakhs. In response, Shri Bhushan Kumar did not say no to her request but told that he will tell Mг. Sameer about her pending cash component of salary. Since, Mr. Bhushan Kumar has not out rightly denied her claim in respect of cash salary of Rs. 2.75 lakhs and that he informed the HR head about the same indicates that it was paid to her. Therefore, it is held that the transaction referred to in the chat was fulfilled and completed.

17.14 In view of the above, addition of Rs. 2,57,000/- is upheld.

17.15 In view of the above it is held that the addition made based on whatsapp chat with Ms Sonal and Ms Priya for their alleged cash component of salary amounting to Rs. 4,97,000/- during AY 2019-20 is hereby confirmed.”

26.2 We have heard the respective submissions made by the parties; we have also perused the relevant materials available on record. We have examined the 264 | P a g e expenditure for Assessment Year (AY) 2019-20, based on WhatsApp chats involving SCIPL’s Managing Director, Shri Bhushan Kumar, with Sonal (Music Manager) and Priya Gupta. The chats, dated 01.11.2018 and 28.05.2018, referenced cash salary payments of Rs. 2,40,000 (Sonal, for eight months at Rs. 30,000/month) and Rs. 2,57,000 (Priya Gupta, for 17 days), respectively. The AO inferred these as unaccounted expenses, as they were not recorded in SCIPL’s books. SCIPL argued that the chats, as “dumb documents,” lacked corroborative evidence under Section 65B of the Indian Evidence Act, 1872, and no payment was confirmed, as Bhushan Kumar did not respond to Sonal’s request, and no further inquiry was conducted.

26.3 The submission of Ld Counsel is that whatsapp chat of Sonal making request for cash salary of Rs. 2,40,000/- on 01.11.2018 was never replied by Shri Bhushan ji. There is no corroborated response on record to prove that the cash salary of Rs. 2,40,000/- was paid to Ms Sonal. From the chat, it is evident that Ms. Sonal was promised a cash salary of Rs.30,000/- per month apart from the salary paid by way of cheque. Ms. Sonal is continued to be employed in the assessee company till date. If the salary promised in cash was not paid, in that case she would have left the job. Because Ms. Sonal is continuing in the assessee company till date, therefore, the transaction referred to in the chat was fulfilled

265 | P a g e recorded in the books of accounts.

26.4 Further, in case of Priya Gupta from the chat she was asking Mr. Bhushan Kumar about her pending cash component of the salary amounting to Rs.2.57 lakhs. In response, Shri Bhushan Kumar did not say no to her request but told that he will tell Mг. Sameer about her pending cash component of salary. From the chat it is clear that Mr. Bhushan Kumar has not out rightly denied claim of Ms Priya Gupta in respect of cash salary of Rs. 2.75 lakhs and that he informed the HR head about the same. Which clearly means that cash amount of Rs. 2.75 Lakhs was paid to her. Therefore, it is held that the transaction referred to in the chat was fulfilled and completed.

26.5 Therefore, in view of the above discussion the addition of Rs. 4,97,000/- confirmed by the CIT(A) is upheld. Consequently, this ground of appeal of assessee is dismissed.

Un-Common Grounds for AY 2019-20

Brief facts of the case are that during a search at SCIPL’s Film City-Noida office, cash of Rs. 55,00,369/- was found, out of which Rs. 34,67,000/- was seized.

When summoned under Section 131(1A) of the Income Tax Act, 1961, SCIPL failed to explain the source of the seized cash. The company claimed that Rs.

266 | P a g e documents in substantiation of this claim, such as a written agreement, were provided during the post search proceedings. This claim was held untenable under Sections 292C and 132(4A). SCIPL further stated that Rs. 16,47,000/- came from scrap sales, but no bills or vouchers were produced. Consequently, the entire seized sum of Rs. 34,67,000/- was treated as unexplained money under Section 69A and added to SCIPL’s total income, taxable under Section 115BBE.

27.1 The additions so made by the AO in AY 2019-20 was upheld by the CIT(A) by stating that the scrap sales or submission of appellant that money belong to SH. Krishan Kumar was unsupported by evidence with no proof of cash movement or scrap transactions. The relevant paras are reproduced below:-

“19.6 The contents of the assessment order and the submissions of the appellant have been carefully considered. Coming to the merits of the case and Ground No. 10, the appellant has contended that the A.O was not justified in making an addition of Rs. 34,67,000/- during AY 2019-20 on account of un accounted cash found during the search proceedings from the premises of appellant company.

19.7 The issue to be decided in the present ground of appeal is whether cash found during the search proceeding is duly accounted for in the books or not. Cash amounting to Rs. 55,00,369/- found during search proceedings out of which cash of Rs. 34,67,000/-was seized and balance cash, Rs. 20,33,369/- was released being cash shown in books. In respect of balance cash of Rs. 34,67,000/- an explanation was submitted during assessment and appellate proceedings that cash Rs. 18,00,000/- belongs to Shri Krishan Kumar who is a family member and close relative of Shri Bhushan Kumar. Further in respect of balance cash of Rs. 16,67,000/- it was submitted that the said cash pertains to cash proceedings from scrap sale which is pending for book entries. etc. Super Cassettes Industries Pvt. Ltd. 19.8 The appellant also submitted copy of financials of Shri Krishan Kumar for the year ended 31.03.2018 and 31.03.2019 showing cash balance of Rs. Rs. 49,78,210/- as on 31.03.2018 and Rs. 18,52,210/- as on 31.03.2019. Shri Krishan Kumar lives in Mumbai and his accounts and cash balances are in Mumbai. The cash was found at Delhi office of the appellant. No corresponding entry of cash given to the appellant was shown in the books of Shri krishan Kumar. There is no explanation regarding movement of cash from Mumbai to Delhi. Therefore, the argument of the appellant that cash found from his premise belonged to Shri Krishan Kumar is not tenable.

19.9 Further no explanation in respect of balance cash of Rs. 16,67,000/- is furnished during assessment or appellate proceedings. No bills, vouchers, documents in substantiation of scrap sales were furnished. In view of the same the cash of Rs. 16,67,000/- is treated as un explained cash and the addition made on account of cash found during the course of search proceedings to the extent of Rs. 16,67,000/- is hereby confirmed.

19.10 In view of the above it is held that the Assessing Officer was justified in making addition of Rs. 34,67,000/- u/s 69A of the Act in respect of cash found at the premise of the appellant.

19.11 Accordingly, Ground No. 10 is Dismissed.”

27.2 The Ld. Counsel of assessee argued that during the search proceedings cash amounting to Rs. 55,00,369/- was found from office premises of appellant company located at Plot No. 1, Film City Noida, 201301. Out of total cash found Rs. 55,00,369/-, cash amounting to Rs. 34,67,000/- was seized and balance cash was released. From the cash seized of Rs. 34,67,000/- cash totalling Rs. 18,00,000/- belongs to Krishan Kumar who is brother of Shri Gulshan Kumar (father of Shri Bhushan Kumar). The family relations are so close that only verbal agreements are enough for the decisions and actions to be taken. Since the relations between Shri Bhushan Kumar and Shri Krishan Kumar are like close

268 | P a g e A verbal talk between them is more than enough for the transactions to be undertaken.

27.3 Further the counsel of assessee also submitted the source of cash being statement of affairs of Shri Kishan Kumar as on 31.03.2018 and 31.03.2019 reflecting cash balance as on 31.03.2019 was Rs. 18,52,210/- in substantiation of the fact that cash of Rs. 18,00,000/- found in the strong room from the appellant company premises was belonging to Krishan Kumar. The statement of affairs of Sh. Krishan Kumar 27.4 Further the counsel of assessee in respect of balance cash of Rs. 16,47,000/- submitted that the same pertains to cash received by the appellant company from scrap dealers on sale of scrap.

27.5 We have heard the respective submissions made by the parties; we have also perused the relevant materials available on record. It is seen from the records that the Ld.AO has made addition of Rs. 34,67,000 as unaccounted cash under Section 69A of the Income Tax Act, 1961, based on cash found during a search at SCIPL’s premises. The total cash found was Rs. 55,00,369, of which Rs. 20,33,369 was released as it was accounted for in SCIPL’s books, while Rs. 34,67,000 was seized.

269 | P a g e family member of Shri Bhushan Kumar, and Rs. 16,67,000 pertained to unrecorded proceeds from scrap sales. To support the claim regarding Krishan Kumar, SCIPL submitted his financials, showing cash balances of Rs. 49,78,210 as on 31.03.2018 and Rs. 18,52,210 as on 31.03.2019. However, it is found this explanation untenable, as Krishan Kumar resided in Mumbai, and no evidence of cash movement to SCIPL’s Delhi office or corresponding entries in his books was provided. Futher the proof of availability of cash with Mr. Krishan Kumar is as on 31.03.2019 as per the statement of affaris of Mr. Krishan Kumar. Whereas the cash was seized on date of search which is 29.11.2018. Hence the availability of cash with Mr. Krishan Kumar on 29.11.2018 which was the date of search is not established form this. The assessee has not furnished any evidence like bank statement of Sh. Krishan Kumar to show withdtawl of cash. Hence this argument of the assessee is not acceptable. As regards the contention that cash of Rs.

16,67,000 was from sale of scapr outside the books of accounts. The assessee has failed to furnish any bills, vouchers, or documents substantiating the scrap sales.

It is held that the AO was justified in treating the entire amount of Rs. 34,67,000 as unexplained cash under Section 69A, as SCIPL’s explanations lacked corroborative evidence. As a result, the addition of Rs. 34,67,000/- confirmed by the CIT(A) is upheld. Consequently, this ground of appeal raised by assessee for AY 2019-20 is dismissed.

270 | P a g e cash transaction conducted using the Codewords Sweet/Kg is challenged by the department for AY 2019-20. Brief facts of the case are that the WhatsApp chats between Shri Shiv Chanana and Shri Bhushan Kumar, recovered during search, show that a request was made by “Luv” through Shiv Chanana for 0.5 kg of sweets on 09.11.2018, which Shri Bhushan Dua did not confirm. Another chat on 12.11.2018 shows Shiv requesting 0.75 kg of sweets, again with no response from Shri Bhushan Dua. The Assessing Officer interpreted “kg” as lakhs and added ₹1,25,00,000 to SCIPL’s total income.

28.1 The appellant contended before the AO that WhatsApp chats lack evidentiary value under Section 65B unless certified. However, the AO draws the observations that relying on the Supreme Court decision in Ambalal Sarabhai Enterprises v. KS Infraspace LLP, WhatsApp chats are considered virtual verbal communications with evidentiary value, subject to proof at trial, and cannot be treated as “dumb documents.”

28.2 The additions so made by the AO in AY 2019-20 were deleted by the Ld. CIT(A) by stating that the action of the AO in making addition of Rs. 1,25,00,000/- based on the chat without any basis and justification, since there is no confirmation as to whether the actual delivery took place or not. The relevant paras are reproduced below:- etc. Super Cassettes Industries Pvt. Ltd. “16.20 The contents of the assessment order and the submissions of the appellant have been carefully considered. Coming to the merits of the case and Ground Nos. 7, the appellant has contended that the A.O was not justified in making an addition of Rs. 1,25,00,000/- on account of alleged unaccounted cash income, in the absence of any inquiries conducted from corresponding parties and lack of corroborating material. 16.21 For the assessment year under consideration, the assessing officer has referred various chats found between Shri Shiv Chanana and Mr. Bhushan Dua on different dates. The said chats are reproduced as under:

16.22 It is prima facie visible that chat dated 12.11.2018 is a continuing chat of 09.11.2018 which means that "half a kg of sweets" is part of 0.75kg of sweets and therefore alleged addition of 50 lacs is completely baseless. Further, the proposal of Shiv Chanana dated 12.11.2018 for 0.75 kg of sweets was also not confirmed by Shri Bhushan Kumar. 272 | P a g e etc. Super Cassettes Industries Pvt. Ltd. 16.23 It is pertinent to point out in this regard that no enquiries have been conducted from Luv Ranjan. The counter party has not confirmed having received any cash payment from SCIPL. Even the chat mentioned in the SCN does not specify that any amount in cash has been received. What is mentioned in the chat is the term "Kgs". Therefore, it is presumptuous to treat "Kgs" as lacs and resultantly the addition made in assessment order without any basis. Further the assessment of Sh. Luv Ranjan was with the same Assessing Officer and no addition of receipt of cash based on this chat has been made in the hands of Sh. Luv Ranjan nor any enquiry conducted by the Assessing Officer from Sh. Luv Ranjan.

16.24 The appellant submitted that the entire basis for the addition is the WhatsApp message found during the course of search proceedings. During the course of search action, no other corroborating material has been found to support the inferences drawn by the AO for making the impugned addition. From the assessment order, it is found that no statement of any person involved in the chat with Director Sh. Bhushan Kumar (Managing Director) have been recorded at the time of search u/s 132(4) of the Act or during post search enquiries. It is also found that apart from relying on the whatsapp chat, the AO failed to make any enquiry on the impugned issue during assessment proceedings.

16.25 The appellant highlighting the provisions of section 65B of the Indian Evidence Act, 1872 submitted that requisite certificate from an officer certifying that the print outs in question are from the seized electronic record/device are missing. Further, the appellant also submitted that apart from the reference made in the SCN about the WhatsApp chats and emails, a copy of the same has not been provided during post search investigation or during the assessment proceedings. Therefore, the whatsapp messages, emails, etc being referred to in your SCN are merely a piece of paper not having any evidentiary value until and unless the conditions stated in section 658 of the Indian Evidence Act, 1872 are satisfied.

16.26 In support of the above contention, reliance is made by the appellant on following

5. ITO v. Kranti Impex (IT Appeal No. 1229/Mumbai/2013) 6. Asst. CIT v. Karodilal Agarwal 50 TTJ 393

16.27 The primary legal contention of the appellant raised by the appellant that as per the provisions of section 65B of the Indian Evidence Act, 1872, whatsapp messages, emails, etc are merely a piece of paper not having any evidentiary value is first taken up for adjudication.

16.28 We rely on the judgement of Hon'ble Supreme Court in the case of Ambalal Sarabhai Enterprises v KS infraspace LLP Limited in which it was held that WhatsApp chat messages which are virtual verbal communications are a matter of evidence with regard to their meaning and its contents to be proved during the trial by evidence in chief and cross examination. Therefore, it was interpreted that whatsapp chats available on record can-not be treated as-dumb document.

16.29 Coming to the merits of the case, chat dated 09.11.2018 was not confirmed by Shri Bhushan Kumar and therefore the alleged transaction of half a kg of sweets never took place. Further chat dated 12.11.2018 where shri Shiv Chanana ask again Shri Bhushan Kumar for 0.75 kg to be given to Shri Luv Ranjan was never confirmed. Shri Shiv Chanana was asking permission for the same which was never confirmed and therefore this transaction was never materialised.

16.30 Since the WhatsApp chat between Shri Shiv Chanana and Shri Bhushan Kumar is not corroborated with any other evidence available on record, the figures mentioned in the chat can-not be treated as figures mentioned in lakhs. Further, both the chat dated 09.11.2018 and 12.11.2018 are interlinked to each other which establishes that Rs. 50 lakhs which was mentioned in chat dated 09.11.2018 was doubly added in the income of appellant.

16.31 The AO has determined unaccounted cash expenditure to Shri Luv Ranjan on the basis of whatsapp chat. The Assessing Officer on the basis of above referred chats has drawn an inference that kg is being used as code word for cash in the chats and 1 kg is equivalent to 1 crore. It has been found by him that the numerical figures appearing in the whatsapp message represent the amount paid to Shri Luv Ranjan as unaccounted expenditure of appellant company. etc. Super Cassettes Industries Pvt. Ltd. 16.32 Firstly it is not clear that cash payment allegedly by SCIPL to film director Luv Ranjan is on what account and for what purpose. Further, the first chat dated 09.11.2018 i.e. Friday in which Shiv Chanana was requesting Bhushan Kumar for arrangement of half a kg of sweets, in response to which Shri Bhushan Kumar replied and asked Shiv that the arrangement could not be done till Monday i.e. 12.11.2018 can-not be ignored. The AO has interpreted that 1 would mean 1 crore and accordingly the figures mentioned in chat dated 09.11.2018 i.e. half kg sweets is equivalent to 50 Lakhs. Based on the same the AO considered 50 Lakhs for addition from this chat.

16.33 Further continuing to next chat dated 12.11.2018 i.e. Monday between Shiv Chanana and Bhushan Kumar dated 12.11.2018, where Shri Shiv Chanana is asking Shri Bhushan Kumar, permission for 0.75 kg to be given to Luv Ranjan in response to which there is no reply by Shri Bhushan Ji but instead there is another message by Shiv Chanana to Shri Bhushan Kumar stating "Ok" which has been reproduced. In this chat there is no confirmation by Shri Bhushan Kumar. Based on this chat the Assessing Officer made addition of Rs. 75,00,000/-.

16.34 From the chats reproduced above firstly it is seen that both the chats cannot be read in isolation and have to be read together. In the first chat Shiv Chanana is asking from Mr. Bhushan that Luv has asked for half kg sweets for today i.e. 09/11/2018 which was Friday. Mr. Bhushan replied that nothing can be done till Monday. Therefore, against this chat even if the assumption of the Assessing Officer that "sweets" represent cash and one kg is equivalent to 1 crore is taken as correct then also since no actual payment was made no addition can be made against this chat. The concept of real income applies when undisclosed income is determined. When no actual delivery was made then there is no question of any addition. Therefore, the Assessing Officer was not justified in making addition of Rs.50,00,000/-. 16.35 In the second chat made on Monday 12.11.2018, what has been reproduced is message written by Mr. Shiv Chanana. Firstly Mr. Shiv Chanana has written that Mr. Luv is saying that.75 KG be given today, and balance tomorrow is fine. Then there is another message of Mr. Shiv Chanana which has been reproduced in the message Mr. Shiv Chanana has written to Mr. Bhushan "Ok Sır". There is no message from Mr. Bhushan to Mr. Shiv Chanana on 12.11.2018 which has been reproduced. It seems that this message is in continuation of chat dated 09.11.2018 wherein Mr. Shiv has written to Mr. Bhushan that Luv has asked for half a KG sweet to 275 | P a g e etc. Super Cassettes Industries Pvt. Ltd. which Mr. Bhushan replied that nothing can be done till Monday (12.11.2018). In continuation of this chat the messages written by Mr. Shiv Chanana on 12.11.2018 have been reproduced. As per the chats of 09.11.2018 no payment was made to Mr. Luv as discussed in para-No. 16.34 above. Similarly, in the chats dated 12.11.2018 there is no confirmation for the same from Shri Bhushan Kumar. The Assessing Officer has only reproduced the message sent by Mr. Shiv where he is saying to Mr. Bhushan that Mr. Luv is asking for 0.75 KG sweets for today and balance tomorrow. There is no reply from Mr. Bhushan on this message and it seems an incomplete communication. The context of the chat "ok" from Shivam Chanana to Bhushan Kumar was for another matter not having any link with the Chat in reference to arrangement of 0.75 Kg for Luv Ranjan. In this case, there is no evidence even in the chat that the transaction mentioned has actually been carried out or Shri bhushan Kumar has given a nod to go ahead with the transaction. Therefore, the action of the AO in making addition of Rs. 75,00,000 based on this chat without any basis and justification, since there is no conformation as to whether the actual delivery took place or not. 16.36 In view of the above it is held that the addition of Rs. 1,25,00,000/- made based on whatapp chat with Shri Shiv Chanana is deleted.

16.37 Ground No. 7 of this appeal is Allowed.”

28.3 The CIT(A) draws the observation that WhatsApp chat of 12.11.2018 continues from the 09.11.2018 chat, indicating that “half a kg of sweets” is part of the 0.75 kg request, rendering the Rs. 50 lakh addition baseless. Both requests by Shiv Chanana were unconfirmed by Bhushan Kumar, and no inquiries were made with Luv Ranjan or SCIPL to verify any cash payment. The term “kg” does not explicitly indicate cash, so equating it to lakhs is speculative. No corroborating evidence or statements were recorded, and copies of chats/emails were not provided to SCIPL when requested.

276 | P a g e Estate, Shri Neeraj Goel vs. ACIT, ACIT v. Layer Exports, Nishant Construction, ITO v. Kranti Impex, Asst. CIT v. Karodilal Agarwal in which it was established that WhatsApp messages are inadmissible under Section 65B without certification. The Supreme Court in Ambalal Sarabhai Enterprises held that WhatsApp chats are verbal communications requiring proof through evidence and cross-examination, not standalone documents. Since the chats were unconfirmed, lacked corroboration, and were linked (showing double counting), the addition of Rs. 1.25 crore (Rs. 50 lakh + Rs. 75 lakh) based solely on WhatsApp messages is deleted.

28.5 The Ld. Counsel of assessee submitted that total alleged expenditure incurred during the year under consideration by using the keywords “Sweets, kg” amounting to Rs. 1,25,00,000/- cannot be treated as un-accounted expenditure in view of the fact that first chat is dated 09.11.2018 i.e. Friday in which Shiv Chanana was requesting Bhushan Kumar for arrangement of half a kg of sweets.

In response to the said chat Shri Bhushan Kumar replied and asked Shiv that the arrangement could not be done till Monday i.e. 12.11.2018. Therefore, no transaction was made in response to chat dated 09.11.2018. Therefore, no addition of alleged half KG of sweets treated as Rs.50,00,000/- unaccounted cash payment can be made. Next as per second chat between Shiv Chanana and Bhushan Kumar dated 12.11.2018, Shiv Chanana is continuing the same chat

277 | P a g e asking Shri Bhushan ji permission for 0.75 kg to be given to Luv Ranjan. In response to that said chat there is another message by Shiv Chanana to Bhushan Kumar stating “Ok”. Here it is highlighted that there is no confirmation for the same from Shri Bhushan Kumar ji. The context of the chat “ok” from Shivam Chanana to Bhushan Kumar was for another matter not having any link with the Chat in reference to arrangement of 0.75 Kg for Luv Ranjan. Further Sh.

Bhushan Kumar has not replied to the question asked by Shiv Chanana regarding permission for 0.75 kg sweets to be given to Luv. Therefore the action of the AO in treating the same as income of the appellant is without any basis and justification.

28.6 The Ld. Counsel of assessee highlighted that it is prima facie visible that chat dated 12.11.2018 is a continuing chat of 09.11.2018 which means that “half a kg of sweets” is part of 0.75kg of sweets and therefore alleged addition of 50 lacs is completely baseless and liable to be deleted. Further, the proposal of Shiv Chanana dated 12.11.2018 for 0.75 kg of sweets was also not confirmed by Shri Bhushan Kumar and therefore the addition made based only on the WhatsApp chat is nothing but a dumb document and therefore the addition made is liable to be deleted.

28.7 Further the counsel of the assessee submitted that there is no proof or evidence of the payment of cash of Rs. 75 lacs and 50 lacs as alleged in the 278 | P a g e to film director Luv Ranjan is on what account and for what purpose. It is submitted that inspite of specific request being made the assessee has not been provided with a copy of the printout of the complete transcript of the whatsapp chat referred for making the addition.

28.8 The Ld. Counsel of assessee argued that the addition has been made on the presumption that the assessee paid amounts mentioned in the chat to Luv Ranjan, based upon chat between Mr. Bhushan Kumar and Mr. Shiv Chanana. However, there is no chat between Mr. Luv Ranjan with either Mr. Bhushan Kumar or Mr. Shiv Chanana wherein he had made such request asking cash from either of the two. In fact, the Ld Counsel pointed out that a search happened on Mr. Luv Ranjan also and no chats were recovered from his phone to this effect. Further no enquiries have been conducted from Luv Ranjan. The counter party has not confirmed having received any cash payment from SCIPL. Even the chat referred does not specify that any amount in cash has been received. What is mentioned in the chat is the term “Kgs”. Therefore, it is presumptuous to treat “Kgs” as lacs and resultantly the addition made in assessment order is liable to be deleted.

28.9 The Ld. Counsel of assessee submitted that the well settled legal position is that a non-speaking document without any corroborative material, evidence on record and finding that such document has materialized into transactions giving rise to income of the assessee which had not been disclosed in regular books of 279 | P a g e be framed pursuant to search and seizure action. From the search and seizure perspective, such non speaking seized documents are referred to as ”Dumb Documents”.

28.10 We have heard the respective submissions made by the parties; we have also perused the relevant materials available on record. It appears from the records that that the Ld.AO has disallowed the impugned amount of Rs. 1,25,00,000 as unaccounted cash expenditure based on WhatsApp chats dated 09.11.2018 and 12.11.2018 between Shiv Chanana and Shri Bhushan Kumar, SCIPL’s Managing Director. The AO interpreted references to “half a kg” and “0.75 kg of sweets” in the chats as code for cash payments to Luv Ranjan, equating 1 kg to Rs. 1 crore, and added Rs. 50,00,000 and Rs. 75,00,000, respectively, as unaccounted expenditure.

28.11 SCIPL argued that the chats were “dumb documents” lacking evidentiary value under Section 65B of the Indian Evidence Act, 1872, due to the absence of a certifying officer’s certificate and failure to provide copies of the chats during proceedings. It is seen that chat dated 09.11.2018 was not confirmed by Shri Bhushan Kumar and therefore the alleged transaction of half a kg of sweets never took place. Further chat dated 12.11.2018 where Shri Shiv Chanana again asked Shri Bhushan Kumar for 0.75 kg to be given to Shri Luv Ranjan was also never confirmed. Shri Shiv Chanana was asking permission for the same which was 280 | P a g e WhatsApp chat between Shri Shiv Chanana and Shri Bhushan Kumar are not corroborated with any other evidence available on record, therefore the assumption of the AO that amounts mentioned are in Lacs is without any basis and not supported by any corroborative evidence. Therefore, the figures mentioned in the chat cannot be treated as figures mentioned in lakhs. Further, both the chat dated 09.11.2018 and 12.11.2018 are interlinked to each other which establishes that Rs. 50 lakhs which was mentioned in chat dated 09.11.2018 was doubly added in the income of appellant.

28.12 The AO has determined unaccounted cash expenditure to Shri Luv Ranjan on the basis of whatsapp chat. The Assessing Officer based on above referred chats has drawn an inference that kg is being used as code word for cash in the chats and 1 kg is equivalent to 1 crore. It has been found by him that the numerical figures appearing in the whatsapp message represent the amount paid to Shri Luv Ranjan as unaccounted expenditure of appellant company. The AO has not been able to establish that the alleged cash payment by SCIPL to film director Luv Ranjan was on what account and for what purpose. The first chat dated 09.11.2018 i.e. Friday in which Shiv Chanana was requesting Bhushan Kumar for arrangement of half a kg of sweets, in response to which Shri Bhushan Kumar replied and asked Shiv that the arrangement could not be done till Monday i.e. 12.11.2018 cannot be ignored. The AO has interpreted that 1 would

281 | P a g e half kg sweets is equivalent to 50 Lakhs. Based on the same the AO considered 50 Lakhs for addition from this chat. Continuing to next chat dated 12.11.2018 i.e. Monday between Shiv Chanana and Bhushan Kumar dated 12.11.2018, where Shri Shiv Chanana is asking Shri Bhushan Kumar, permission for 0.75 kg to be given to Luv Ranjan in response to which there is no reply by Shri Bhushan Ji but instead there is another message by Shiv Chanana to Shri Bhushan Kumar stating "Ok" which has been reproduced. In this chat there is no confirmation by Shri Bhushan Kumar. Based on this chat the Assessing Officer made addition of Rs.

75,00,000/-.From the chats firstly it is seen that both the chats cannot be read in isolation and have to be read together. In the first chat Shiv Chanana is asking from Mr. Bhushan that Luv has asked for half kg sweets for today i.e. 09/11/2018 which was Friday. Mr. Bhushan replied that nothing can be done till Monday.

Therefore, against this chat even if the assumption of the Assessing Officer that "sweets" represent cash and one kg is equivalent to 1 crore is taken as correct then also since no actual payment was made no addition can be made against this chat since no actual payment was made.

28.13 In the second chat made on Monday 12.11.2018, what has been reproduced is message written by Mr. Shiv Chanana. Firstly Mr. Shiv Chanana has written that Mr. Luv is saying that.75 KG be given today, and balance tomorrow is fine.

Then there is another message of Mr. Shiv Chanana which has been reproduced

282 | P a g e no message from Mr. Bhushan to Mr. Shiv Chanana on 12.11.2018 which has been reproduced. It is clear that this message was in continuation of chat dated 09.11.2018 wherein Mr. Shiv has written to Mr. Bhushan that Luv has asked for half a KG sweę to which Mr. Bhushan replied that nothing can be done till Monday (12.11.2018). In continuation of this chat the messages written by Mr.

Shiv Chanana on 12.11.2018 have been reproduced. As per the chats of 09.11.2018 no payment was made to Mr. Luv as discussed above. Similarly, in the chats dated 12.11.2018 there is no confirmation for the same from Shri Bhushan Kumar. The Assessing Officer has only reproduced the message sent by Mr. Shiv where he is saying to Mr. Bhushan that Mr. Luv is asking for 0.75 KG sweets for today and balance tomorrow. There is no reply from Mr. Bhushan on this message and it was an incomplete communication. The context of the chat "ok" from Shivam Chanana to Bhushan Kumar was for another matter not having any link with the Chat in reference to arrangement of 0.75 Kg for Luv Ranjan. In this case, there is no evidence even in the chat that the transaction mentioned has actually been carried out or Shri bhushan Kumar has given a nod to go ahead with the transaction. Therefore, the action of the AO in making addition of Rs. 75,00,000 based on this chat is without any basis and justification, since there is no conformation as to whether the actual delivery took place or not.

283 | P a g e Bhushan Kumar did not approve the transactions, and no inquiries were made with Luv Ranjan, whose assessment was made by the same AO. In fact a search action had also taken place on Luv Ranjan and no chats related to this eere recovered from his phone. The absence of inquiries with Luv Ranjan and lack of other material evidence further weakens the AO's case.

28.15 Based on the discussion above it is held that deletion of the addition of Rs. 1,25,00,000/- on this ground by CIT(A) required no interference. Consequently, the addition of Rs. 1,25,00,000 deleted by CIT(A) is upheld and the ground of appeal of revenue is dismissed.

(A.Y. 2019-20) Departmental appeal in Luv Ranjan: for A.Y. 2019-20 in the case of Luv Ranjan the Revenue raised this particular deletion of addition of Rs. 1,25,00,000/- before us.

We note that the observation made by us on this issue while dismissing the ground of appeal raised by Revenue is applied mutatis mutandis. This appeal is, thus, dismissed.

Departmental appeal - 2509, 2950, 2951 & 279/Del/2023 (A.Y. 2013-14 to 2017-18) & & 281/Del/2024 (A.Y. 2018-19 & 2019- 20) in case of BHUSHAN DUA

Subsequently the case of the assessee company along with assessee was centralised to the charge of PCIT, Central Delhi - I by and under the order under section 127(1) dated 10.12.2018. Based upon the search action, assessment orders were passed u/s 153A in the case of SCIPL for A.Y. 2013-14 to 2018-19 and u/s 143(3) for A.Y. 2019-20. During the post-search proceedings, certain additions made in the assessment of Super Cassettes Industries Pvt. Ltd. on substantive basis were also made in the assessee's hand on a protective basis. The additions

285 | P a g e by the CIT(A). The revenue has preferred an appeal against the same.

i. Addition on account of Diversion of Income in Dubai through Bollywood Digital Music Limited for AY 2013-14 to 2014-15. ii. Addition on account of Diversion of Income in Dubai through BKK Investment LLC FZ (Dubai) for AY 2015-16 to AY 2019-20 iii. Addition on account of diversion of Income in Bollywood Digital FZE by investing in property of London for AY 2016-17 and 2017-18. iv. Addition on account of retention of Income in Dubai through M/s Highpath Limited for AY 2017-18 to AY 2019-20. v. Addition on account of bogus expenses claimed for production of Roy / RaabtaMovie for AY 2016-17 and AY 2017-18.

The common grounds are addressed first as under:

Common Grounds

Assessment Amount of Income Year retained

286 | P a g e 33.1 The revenue raised this common issue regarding Income of SCIPL Retained in BDML UAE in order to avoid payment of taxes in India, which is present in appeals for Assessment Years 2013-14 and AY 2014-15 (ITA Nos.

2510/DEL/2023, 2509/DEL/2023). The decision for the assessee’s appeals for Assessment Years 2013-14 will beapplicable for AY 2014-15, as the issues are identical and no new circumstances exist.

33.2 Brief facts of the case are that in order to increase the music licensing income from commercial exploitation of music from sources outside India, a foreign entity by the name of Bollywood Digital Music Limited (BDML) was incorporated on 03.04.2006 as Jebel Ali Free Zone Company in Dubai. At the time of its incorporation the entire shareholding comprising of 10,000 shares of AED 100 each were fully held by Shri Bhushan Kumar as single shareholder.

For international licensing of music, BDML entered into a licensing arrangement with SCIPL vide agreement dated 10.04.2006 which gave a license to BDML to commercially exploit the copyrighted contents of SCIPL in the form of audio and audio visual sound recordings by giving further license to users in territory outside India. Pursuant to this licensing arrangement, BDML entered into further licensing agreements with various parties. The revenue earned from granting licenses to these parties were shared between BDML and SCIPL in the ratio of 287 | P a g e treated as diversion of income of SCIPL in the hands of BDML in a tax-free jurisdiction by the assessing authorities in the assessment orders passed for A.Y. 2007-08 to A.Y. 2014-15 pursuant to search action undertaken on SCIPL on 29.11.2018. The operations of BDML and the arrangement between SCIPL and BDML was later discontinued, A.Y. 2014-15 being the last year. Hence, from assessment year 2015-16 onwards the entire exploitation of its copyrighted content outside territory of India was carried out by SCIPL on its own. Details of additions made from AY 2007-08 to AY 2014-15 on this issue is tabulated as under:

Assessment year Royalty Received 2007-08 3,69,88,901 2008-09 5,70,15,876 2009-10 1,17,62,546 2010-11 51,87,893 2011-12 3,40,78,168 2012-13 3,89,95,596 2013-14 2,43,45,103 2014-15 7,12,97,129 33.3 The AO has made the above additions referred to in all the years on substantive basis in the hands of SCIPL and on protective basis in the hands of assessee.

33.4 The additions made on a substantive basis in the hands of SCIPL were deleted by the Commissioner of Income Tax (Appeals) [CIT(A)], who determined 288 | P a g e entity and possessed an independent existence, justifying its autonomous operations from Dubai. Additionally, the protective addition made in the hands of the assessee to safeguard the revenue's interest was also deleted by the CIT(A), on the grounds that the substantive addition in the hands of SCIPL was not sustainableon merits, since it was held that BDML was not a sham entity, thereby warranting the deletion of the protective addition in the assessee's case.

33.5 The Learned Counsel for the assessee contended that the matter was adjudicated on a substantive basis in the case of Super Cassettes Industries Pvt. Ltd. (SCIPL). It was emphasized that the Commissioner of Income Tax (Appeals)

[CIT(A)] had deleted the addition after a thorough examination of its merits in SCIPL’s case. Consequently, as the addition has been deleted on substantive grounds, it is not legally sustainable on a protective basis in the hands of the assessee.

33.6 Further the Ld. Counsel of the assessee submitted that this ground of appeal is already covered in case of SCIPL by the order of ITAT G Bench Delhi Dated 18.09.2024 for AY 2007-08 to AY 2012-13 in ITAs Numbers ITAs No.214, 215, 216, 1290, 1291 & 1292/Del/2023 in which the additions made on account of income retained in BDML in the hands of SCIPL on substantive basis were completely deleted and the order of the CIT(A) upheld for these years.

33.7 We have heard the respective submissions made by the parties; we have 289 | P a g e that the substantive addition made in the hands of SCIPL is already dealth on merits and the same has been deleted by the CIT (A) in AY 2013-14 and 2014- 15 (Relevant para of appeal order of AY 2013-14 is 102 Page 74). Further the order of CIT(A) deleting the additions made in AY 2007-08 to AY 2012-13 in ITAs No.214, 215, 216, 1290, 1291 & 1292/Del/2023) has been upheld by the coordinate bench vide order dated 18.09.2024. The facts of the present year are identical to the Assessment Years 2007-08 till 2012-23.

33.8 The Protective addition was merely made in the hands of the assessee under consideration to protect the interest of revenue. The AO made protective addition only in the hands of the assessee on the presumption that if substantive addition is made in the hands of M/s. SCIPL accepted, the protective addition may be made in the hands of the assessee and, therefore, it was imperative to protect the interest of revenue to avoid the possibility of leakage of revenue and to deal with the contingent situation till the substantive addition gets finalized. We note that since the substantive addition has been deleted in the hands of the SCIPL for Assessment Years 2007-08 till 2012-13 on merits by the Coordinate Bench, then no protective addition can be susntained in the hands of the assessee.

The protective addition can only be made when prima facie it appears to the revenue that income has been diverted either by M/s. SCIPL or by assessee 290 | P a g e to tax the income in hands of M/s. SCIPL or in the hands of the assessee under consideration. In view of the above the addition for AY 2013-14 and 2014-15 deleted by the CIT (A) in the case of the assessee is upheld since the same has been deleted on merits in the hands of SCIPL as discussed above.

33.9 In the result, the appeal of the revenue is dismissed.

Assessment Year Expenses Incurred 2015-16 6,14,08,363 2016-17 86,88,235 2017-18 2,12,02,003 2018-19 7,92,18,696 2019-20 4,29,32,219 34.1 The Department raised this common issue regarding addition on account of Diversion of Income in Dubai through BKK Investment LLC FZ (Dubai) in order to avoid payment of taxes in India, which is present in appeals for Assessment Years 2015-16, 2016-17, 2017-18, 2018-19 and 2019-20 (ITA No.

2950/DEL/2023, 2951/DEL/2023, 279/DEL/2023, 280/Del/2024 and 281/Del/2024). The decision for the Department’s appeals for Assessment Years

291 | P a g e as the issues are identical and no new circumstances exist.

34.2 Brief facts of the case are that funds were provided by BDML and Bollywood Digital FZE to BKK to make the investment without charging any interest. All these entities are based out in Dubai and the controlling interest in these entities is with Bhushan Kumar and not with SCIPL. The shareholders of BKK are Bollywood Digital FZE (99%) and Sh. Bhushan Dua (1%). The AO in the assessment order of SCIPL draws the observation that main purpose of BDML is diversion of income by the SCIPL in respect of copyright income and resultantly funds provided by BDML and Bollywood Digital FZE to BKK Investment is also diversion of income. Further AO added the above-mentioned amounts to the total income of SCIPL alleging that funds remitted through BDML and Bollywood Digital FZE to BKK Investment are logically foreign income of SCIPL retained outside India to avoid taxes in India. In order to protect the interest of revenue, same additions were also made in the hands of assessee on protective basis.

34.3 The additions made were deleted by the Commissioner of Income Tax (Appeals) [CIT(A)] on the facts and circumstances, by concluding that sufficient evidence and rationale were provided to demonstrate that BDML was incorporated for legitimate purposes and was not a sham entity. Consequently, the 292 | P a g e BDML does not constitute a diversion of income.

34.4 The Ld. Counsel of the assessee argued that it has already been held in the case of SCIPL by the coordinate bench in AY 2007-08 to AY 2012-13 in 215, 216, 1290, 1291, 1292 for Assessment Year 2007-08 till 2012-13 that BDML from whom funds were remitted to BKK for property acquisition is not a sham entity and possessed an independent existence, justifying its autonomous operations from Dubai.

34.5 The ld. counsel for the assessee contended that the matter was adjudicated on a substantive basis in the case of SCIPL. It was emphasized that the CIT(A) had deleted the addition after examination of its merits in SCIPL’s case.

Consequently, as the addition has been deleted on substantive grounds, it is not legally sustainable on a protective basis in the hands of the assessee.

34.6 We have heard the respective submissions made by the parties; we have also perused the relevant materials available on record. It appears from the records that the substantive addition made in the hands of SCIPL is already deleted on merits by the CIT (A) for AY 2015-16 to AY 2019-20 (Relevant para of appeal order of AY 2015-16 is 36 Page 28). Further the addition was premised on the legal and independent existence of BDML from which funds were remitted to 293 | P a g e bench in the SCIPL case in AY 2007-08 to AY 2012-13 in ITAs No.214, 215, 216, 1290, 1291 & 1292/Del/2023.We observed that BDML is not a sham entity and possessed an independent existence, justifying its autonomous operations from Dubai and therefore funds remitted from BDML from to BKK for property acquisition are also legible.

34.7 The Protective addition was merely made in the hands of the assessee under consideration to protect the interest of revenue. The AO made protective addition only in the hands of the assessee on the presumption that if substantive addition is made in the hands of M/s. SCIPL accepted, the protective addition may be made in the hands of the assessee and, therefore, it was imperative to protect the interest of revenue to avoid the possibility of leakage of revenue and to deal with the contingent situation till the substantive addition gets finalized. We note that since the substantive addition has been deleted in the hands of the SCIPL, then no protective addition should be susntained in the hands of the assessee.

The protective addition can only be made when prima facie it appears to the revenue that income has been diverted either by M/s. SCIPL or by assessee under consideration, then it would be open to the Income Tax Authorities either to tax the income in hands of M/s. SCIPL or in the hands of the assessee under consideration. In view of the above the addition for AY 2015-16 to 2019-20 294 | P a g e been deleted on merits in the hands of SCIPL as discussed above.

34.8 In the result, the appeal of the revenue is dismissed.

Assessment Year Amount of addition 2016-17 4,47,30,282 2017-18 13,34,86,898 35.1 The department raised this common issue regarding addition on account of diversion of Income in Bollywood Digital FZE by investing in property of London in order to avoid payment of taxes in India, which is present in appeals for Assessment Years 2016-17 and 2017-18 (ITA Nos. 2951/DEL/2023 and 279/DEL/2023). The decision for the appeal for Assessment Years 2016-17 will be applicable for AY 2017-18 as the issues are identical and no new circumstances exist.

35.2 Under this ground of appeal addition is made by the AO holding that ultimate control of Bollywood Digital FZE which is the Subsidiary of BDML is with SCIPL. Based on the above observations of the AO, profits declared by Bollywood Digial FZEin the audited financials for AY 2016-17 and AY 2017-18

295 | P a g e hands of assessee on protective basis. Details of the additions made are tabulated as under:

Assessment Profit In USD Conversion Addition Amount Year rate 2016-17 675276 66.24 4,47,30,282 2017-18 20,59,983 64.80 13,34,86,898 35.3 The additions so made were deleted by the CIT(A) by appreciating thefacts and circumstances and concluding that there was sufficient explanation orthe reason to substantiate that operation, management and control of Bollywood Digital FZE was not in India. Documents placed on record including Audited Balance Sheet showing revenue and expenditure earned, Presence of employee in UAE to whom salary was paid, Copy of lease agreement for registered office and invoices for admn. office., Copies of invoices for legal expenses, audit fees, Details of physical presence of Bhushan Dua in UAE for taking management decisions, Auditors certificate giving classification of revenue earned by BD FZE during AY 2016-17 and 2017-18 prooves that BD FZE fuctions independently in UAE. Since the substantive addition in the hands of SCIPL was deleted on merits, the same warrents deletion of the protective addition in the assessee's case.

35.4 The learned counsel for the assessee contended that the matter was adjudicated on a substantive basis in the case of Super Cassettes Industries Pvt.

296 | P a g e [CIT(A)] had deleted the addition after examination of its merits in SCIPL’s case.

Consequently, as the addition has been deleted on substantive grounds, it is not legally sustainable on a protective basis in the hands of the assessee.

35.5 We have heard the respective submissions made by the parties; we have also perused the relevant materials available on record. It appears from the records that the substantive addition made in the hands of SCIPL is already dealth on merits and the same has been deleted by the CIT (A) in AY 2016-17 and 2017- 18 (Relevant para of appeal order of AY 2016-17 is 82 Page 60).Documents placed on record including audited balance sheet, employee details in UAE, lease agreement for registered office and invoices for admn. office. In UAE, invoices for legal expenses incurred, audit fees, details of physical presence of Bhushan Dua in UAE for taking management decisions adequately prooves that BD FZE fuctions independently in UAE.

35.6 The Protective addition was merely made in the hands of the assessee under consideration to protect the interest of revenue. The AO made protective addition only in the hands of the assessee on the presumption that if substantive addition is made in the hands of M/s. SCIPL accepted, the protective addition may be made in the hands of the assessee and, therefore, it was imperative to protect the interest of revenue to avoid the possibility of leakage of revenue and to deal with the contingent situation till

297 | P a g e the substantive addition has been deleted in the hands of the SCIPL, then no protective addition should be susntained in the hands of the assessee.

The protective addition can only be made when prima facie it appears to the revenue that income has been diverted either by M/s. SCIPL or by assessee under consideration, then it would be open to the Income Tax Authorities either to tax the income in hands of M/s. SCIPL or in the hands of the assessee under consideration. In view of the above the addition for AY 2016-17 and 2017-18 deleted by the CIT (A) in the case of the assessee is upheld since the same has been deleted on merits in the hands of SCIPL as discussed above.

35.7 In the result, the appeal of the revenue is dismissed.

Details of additions made over the years are tabulated as under:

Assessment Year Amount 2017-18 63,11,784 89,29,050 2018-19 2019-20 1,24,42,299 36.1 The department raised this common issue regarding addition on account of retention of Income in Dubai through M/s Highpath Limited in order to avoid

298 | P a g e 18, 2018-19 and 2019-20 (ITA Nos. 279/DEL/2023, 280/DEL/2024 and 281/DEL/2024). The decision for the appeals for AY 2017-18 will be applicable for AY 2018-19 and 2019-20 as the issues are identical and no new circumstances exist.

36.2 Brief facts of the case are that during the search proceedings on SCIPL premises signed agreement was found between Highpath Ltd and SCIPL for sharing of revenue in the territories of Pakistan. Further, M/s HighPath Limited had another agreement with M/s Media Master Pakistan for distribution of music rights in Pakistan. The AO observed that the bank account of Highpath Ltd shows credit of USD 97,344 which is equivalent to AED 357252. Relying on this argument, the assessing officer observed that income received in Highpath Ltd have been retained in Dubai.

36.3 The additions so made were deleted by the CIT(A) by appreciating the facts and circumstances and concluding that there was sufficient explanation or the reason for which BDML was incorporated in Dubai and further Highpath Limited existed and functioned independently in Dubai. Extending to Highpath, absence of Bhushan Kumar's ownership / directorship / employee involvement confirms its UAE-based control.

36.4 The Ld. Cousel of the assessee argued that BDML’s independent 299 | P a g e (2007-08 to 2012-13, per 215, 216, 1290, 1291, 1292), and additions treating BDML’s income as SCIPL’s diversion deleted by CIT(A) are upheld. Thus, the current addition of taxing income of Highpath in the hands of the assessee is not at all justified and without any basis, more so in this case the assessee or its directors have no stake or control in Highpath which is anindependent entity.

36.5 We have heard the respective submissions made by the parties; we have also perused the relevant materials available on record. It appears from the records that the substantive addition made in the hands of SCIPL is already dealth on merits and the same has been deleted by the CIT (A) in AY 2017-18 to 2019-20 (Relevant para of appeal order of AY 2017-18 is 13.35 Page 77). This stand is upheld by coordinate bench in ITAs No.214, 215, 216, 1290, 1291 & 1292/Del/2023. Extending to Highpath, absence of Bhushan Kumar's ownership / directorship / employee involvement confirms its independent UAE-based control.

36.6 The Protective addition was merely made in the hands of the assessee under consideration to protect the interest of revenue. The AO made protective addition only in the hands of the assessee on the presumption that if substantive addition is made in the hands of M/s. SCIPL accepted, 300 | P a g e it was imperative to protect the interest of revenue to avoid the possibility of leakage of revenue and to deal with the contingent situation till the substantive addition gets finalized. We note that since the substantive addition has been deleted in the hands of the SCIPL, then no protective addition should be susntained in the hands of the assessee.

The protective addition can only be made when prima facie it appears to the revenue that income has been diverted either by M/s. SCIPL or by assessee under consideration, then it would be open to the Income Tax Authorities either to tax the income in hands of M/s. SCIPL or in the hands of the assessee under consideration. In view of the above the addition for AY 2017-18, 2018-19 and 2019-20 deleted by the CIT (A) in the case of the assessee is upheld since the same has been deleted on merits in the hands of SCIPL as discussed above.

36.7 In the result, the appeal of the revenue is dismissed.

Details of additions are tabulated as under:

Assessment Year Particulars Amount 2016-17 Enhancement done on account of Roy 26,81,39,398 Movie Expenses

301 | P a g e 37.1 The revenue raised this common issue regarding addition made during assessment proceedings in respect of Roy Movie / Raabta Movie Expenses being bogus in nature, which is present in appeals for Assessment Years 2016-17 and 2017-18 (ITA Nos. 2951/DEL/2023 and 279/DEL/2023).

37.2 Brief facts of the case are that for AY 2015-16, the SCIPL a film titled “Roy” which was released on 13.02.2015. The main cast of the said film included Ranbir Kapoor, Arjun Rampal and Jaqueline Fernandez and it was directed by Vikramjit Singhthe. SCIPL had shown and claimed expenditure of Rs. 78,25,37,440/- in respect of this film for the Financial Year ended 31.03.2015 relevant to Assessment Year 2015-16. The AO in case of SCIPL made a disallowance of Rs. 26,81,39,398/- in the Assessment Year 2016-17 by disallowing part of the expenses incurred on foreign shooting of the film “Roy”.

In order to protect the interest of revenue protective addition was made in the hands of assessee. In the First Appellate proceedings the Assessment Year 2016- 17 SCIPL argued before the CIT (A) that the disallowance of Rs. 26,81,39,398/- for the Assessment Year 2016-17 is not sustainable since these expenses were never debited and claimed in the Assessment Year 2016-17. The CIT(A) after considering the submission of the assessee deleted the disallowance made in the Assessment Year 2016-17. Similarly on the same grounds that substantive

302 | P a g e by the assessee.

37.3 FurtherAO had disallowed amount of Rs 8,73,51,431/- being inflated production expenses of film 'Raabta’ in A.Y 2017-18. SCIPL in appellate proceedings for Assessment Year 2017-18 before the CIT(A) submitted that disallowance should not be made in AY 2017-18 since these expenses do not pertain to A.Y 2017-18 and were never claimed in the P&L Account for the year ended 31.03.2017 but were incurred during AY 2018-19 and debited in the Profit & Loss Account for the Assessment Year 2018-19. The CIT(A) after considering the submission of the assessee deleted the disallowance made in the Assessment Year 2017-18. Similarly on the same grounds that substantive addition was deleted in the hands of SCIPL, protective addition was also deleted by the assessee.

37.4 The learned counsel for the assessee contended that the matter was adjudicated on a substantive basis in the case of Super Cassettes Industries Pvt. Ltd. (SCIPL). It was emphasized that the Commissioner of Income Tax (Appeals)

[CIT(A)] had deleted the addition after a thorough examination of the facts that the production expenses to be bogus were not claimed in the year in which the addition is made and eince the expense were never claimed in the year in which addition was made the same were deleted by the CIT(A).

303 | P a g e 37.5 We have heard the respective submissions made by the parties; we have also perused the relevant materials available on record. It appears from the records that the substantive addition made in the hands of SCIPL is already dealt on merits and the same has been deleted by the CIT (A) in AY 2016-17 and 2017- 18 (Relevant para of appeal order of AY 2016-17 is 97 Page 71). Since the expenses incurred for production of Film Roy were debited in the profit and loss account of AY 2015-16 instead of AY 2016-17, the same was deleted. Further the expenses incurred for production of Film Raabta were debited in the profit and loss account of AY 2018-19 instead of AY 2017-18, and the same were deleted.

37.6 The Protective addition was merely made in the hands of the assessee under consideration to protect the interest of revenue. The AO made protective addition only in the hands of the assessee on the presumption that if substantive addition is made in the hands of M/s. SCIPL accepted, the protective addition may be made in the hands of the assessee and, therefore, it was imperative to protect the interest of revenue to avoid the possibility of leakage of revenue and to deal with the contingent situation till the substantive addition gets finalized. We note that since the substantive addition has been deleted in the hands of the SCIPL, then no protective addition should be susntained in the hands of the assessee.

The protective addition can only be made when prima facie it appears to the 304 | P a g e under consideration, then it would be open to the Income Tax Authorities either to tax the income in hands of M/s. SCIPL or in the hands of the assessee under consideration. In view of the above the addition for AY 2016-17 and 2017-18 deleted by the CIT (A) in the case of the assessee is upheld since the same has been deleted on merits in the hands of SCIPL as discussed above.

37.7 In the result, the appeal of the revenue on the instant ground is dismissed.

Un-Common Grounds for AY 2017-18

39.1 SCIPL has entered into a film commissioning agreement dated 22/01/2016 with T Series Films UK for production of the film Tum Bin 2. The company has transferred Rs. 18.67 Crore to T Series UK ltd out of which it transferred 674150 Pounds equivalent to 7 Crores to Magus Consultancy Dubai for providing services of Anubhav Sinha Director and writer of the film. The AO has stated that out of the same Magus only paid Rs. 1.5 Crore to Anubhav Sinha. It is to be noted that the SCIPL was supposed to bear the amount of cost involved in 305 | P a g e the cost of Directors fees was paid by SCIPL to T Series UK Ltd. SCIPL has claimed inflated expenses on account of payment made to Sh. Anubhav Sinha Director of Tum Bin 2. The payment to Sh. Anubhav Sinha was only Rs. 1.5 Crore as against transfer of 674150 Pounds to Magus. Therefore, the excess payment to Magus by T Series UK over and above what was paid to Anubhav Sinha is to be disallowed.

39.2 The additions so made in AY 2017-18 were partly upheld by the Ld. CIT(A) by holding that accrual amount transferred to Magus Consultancy Dubai for providing services of Anubhav Sinha Director and writer of the film was 6,74,00,000/- (674150 pound converted in INR) instead of Rs. 7,00,00,000/- claimed in the assessment order. Further Magus consultancy Dubai has paid 1,50,00,000/- only to Anubhav Sinha and therefore and therefore SCIPL inflated its expenditure for production of Film Tum Bin 2 to the extent of Rs. 5,24,00,000/- i.e. Rs. 6,74,00,000/- less 1,50,00,000/- and accordingly addition to the extent of Rs. 5,24,00,000/- was confirmed and relief of Rs. 26,00,000/- was provided.

39.3 We have heard the respective submissions made by the parties; we have also perused the relevant materials available on record. It has come on record that the substantive addition on this ground of appeal is already confirmed on merits by the CIT(A) in the hands of SCIPL vide appeal order dated 07.11.2023 in ITA 306 | P a g e position, protective assessment of the same amount at the hands of the assessee would amounts to double taxation.

39.4 In view of the foregoing discussions, the appeal of department is dismissed.

Un-Common Grounds for AY 2018-19

40.1 Brief facts of the case are that M/s SCIPL produced "Hate Story 4," released on 09.03.2018, with major filming in the UK through Super T Films (UK) Ltd. which outsourced the payments in respect of cast, crew, and technicians to NM Worldwide Ltd in Dubai. The Assessing Officer (AO) noted SCIPL transferred Rs. 19,56,92,500 to Super T Films (UK) Ltd for foreign shooting, of which 874,626 GBP (approx. Rs. 7.50 crores) was sent to NM Worldwide Ltd (line producer) for payments to the Director, Dialogue Writer, and Screenplay Writer. On Investigation by the Investigation Wing it was found that out of Rs. 7.50 crores remitted to NM Worldwide Limited, an amount of Rs. 1,28,85,229/- was actually paid by NM Worldwide to cast, crew, and technicians,

307 | P a g e Worldwide less Rs. 1,28,85,229 actually paid by NM Worldwideis added to the total income of SCIPL being bogus expenses claimed on account of production of movie “Hate Story 4”. In order to protect the interest of revenue, same additions were also made in the hands of assessee on protective basis.

40.2 The CIT (A) in the case of SCIPL upheld the addition made in the assessment order, rejecting SCIPL's contention that all payments were governed by valid commercial agreements. The CIT(A) found that SCIPL transferred Rs. 19,56,92,500 to Super T Films for production expenses, out of which 874,626 GBP (approximately Rs. 7,50,00,000) was further transferred to NM Worldwide for payments to the Director, Dialogue Writer, and Screenplay Writer. However, upon investigation, it was determined that NM Worldwide disbursed only Rs. 1,28,85,229 to the Director, Dialogue Writer, and Screenplay Writer, thereby justifying the disallowance of the excess amount. Resultantly the CIT(A) deleted the substantive addition in the hands of assessee as the addition in the hands of SCIPL is confirmed.

40.3 We have heard the respective submissions made by the parties; we have also perused the relevant materials available on record. It has come on record that the substantive addition on this ground of appeal is already confirmed on merits

308 | P a g e No. 23/10295/ 2017-18 at Para No. 13.37 Page 66. That being the position, protective assessment of the same amount at the hands of the assessee would amounts to double taxation.

40.4 In view of the foregoing discussions, the appeal of department is dismissed.

Order pronounced in the open court on 25.09.2025.