2005 (9) TMI 545 - AT - Income Tax

Tribunal Upholds CIT(A)'s Decision on Reassessment, Consistency with Rule 9B

The Tribunal upheld the CIT(A)'s decision, dismissing the revenue's appeal. It found that the reassessment proceedings were unwarranted as the assessee's ... Business income Issues Involved:1. Deletion of addition of Rs. 9,25,688 by the CIT(A) on account of understated profit on 'Insaniyat Ka Devta'.2. Allowing excess loss of Rs. 2,66,050 by the CIT(A) on account of 'Shreeman Ashiq'.Detailed Analysis:1. Deletion of Addition of Rs. 9,25,688 on 'Insaniyat Ka Devta':The Assessing Officer (AO) observed that the assessee had shown a carried forward loss of Rs. 9,25,687.91 for the film 'Insaniyat Ka Devta'. However, the AO determined that as per Rule 9B of the Income-tax Rules, the correct amount of such carried forward loss should be Nil, leading to an understated profit of Rs. 9,25,688. The CIT(A) deleted the addition, noting that the assessee consistently followed a system of accounting where the cost of prints and publicity was deducted from the gross collection to determine net realization. This method had been accepted by the Department in previous years and was only questioned starting from the assessment year 1992-93. The CIT(A) upheld the assessee's method as consistent with Rule 9B, and no infirmity was found in the accounting method.2. Allowing Excess Loss of Rs. 2,66,050 on 'Shreeman Ashiq':Similarly, for the film 'Shreeman Ashiq', the AO noted a carried forward loss of Rs. 7,31,413.84, which should have been Rs. 4,65,364 as per Rule 9B. The AO claimed the assessee had shown an excess loss of Rs. 2,66,050. The CIT(A) found that the assessee's method of accounting, which included deducting the cost of prints and publicity from the gross collection, was consistent and had been accepted in prior years. The CIT(A) referenced earlier decisions where similar additions were deleted, supporting the assessee's approach.General Observations and Conclusion:The CIT(A) observed that the assessee, a film distributor, consistently followed an accounting system where the cost of prints and publicity was deducted from gross collections to determine net realization. This method was accepted by the Department until the assessment year 1992-93. The CIT(A) noted that the AO did not find the assessee's accounts incomplete or incapable of properly deducing income. Previous CIT(A) decisions upheld the assessee's method as consistent with Rule 9B. The CIT(A) concluded that the reassessment proceedings were unjustified as the income assessed under the original method was not less than what would be assessed under the AO's method.Support from Case Law:The assessee's counsel cited several cases supporting the position that the Tribunal could consider issues not raised in cross-appeals if they supported the order under appeal. These included CIT v. Steel Cast Corpn., CIT v. Cochin Refineries Ltd., Marolia & Sons v. CIT, CED v. Estate of Late Smt. K. Narasamma, and CIT v. Smt. S. Vijayalakshmi. The Tribunal agreed with this position, noting that the reassessment proceedings should have been dropped as the original assessment was not less favorable to the revenue.Final Decision:The Tribunal upheld the CIT(A)'s order and dismissed the revenue's appeal, concluding that the reassessment proceedings were not justified and the assessee's consistent accounting method was appropriate.