TaxTMI 
TaxTMI 
TaxTMI 
2013 (11) TMI 727
X X X X Extracts X X X X
X X X X Extracts X X X X
....ent proceedings, the Assessing Officer (A.O.) observed that the same were outstanding since financial year (f.y.) 2003-04. The same in fact represented expenses incurred in relation to the film 'Raja Bhaiya' released during the said year. The same had, thus, been outstanding for about seven years, i.e., at the time of the assessment proceedings in late 2010 over which no payment has been made. Legally, a liability cannot be enforced after it is due for more than three years. Even no confirmations from the creditors were furnished. Under the circumstances, it was inferred that the liability in its respect had ceased. The assessee having been allowed deduction in respect of the said expenses, the same were added u/s. 41(1). The same was confirmed on principally the same grounds; the assessee having not made any payment during the intervening years, nor even adduced any evidence to show that the liability was an existing liability. The assessee's claim that she was trying her best to launch her next project, and which she could not until she settles all her outstanding dues, which were to artists, technicians and various other parties dealing with her as a producer of a feature film, ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....definitely, and on that basis claim that the liability subsists, so that there has been no cessation of liability. Though, therefore, the presumption in law would be that the accounts correctly represent the facts as obtaining, the onus to exhibit that it is indeed so, where called upon to, would be on the assessee. Explanation 1 to the provision cannot be interpreted negatively to conclude that there could be no remission or cessation of the liability unless the same is written off in accounts. The matter, thus, boils down to the burden of the proof, which we have on a purposive reading of the provision, found to be on the assessee. How could, one may ask, the said liability/s be treated any differently, i.e., qua the obligation on the assessee to prove the same, claiming the same as liability, from any other liability reflected per his accounts? We may though hasten to add that the scope of the burden of proof on the assessee qua section 41(1) would only be with regard to subsistence of the liability as at the relevant year-end, so that the liability is alive, and in fact a liability as on that date. Toward this, we also derive support from the decision in the case of Kesoram In....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... statement of the liability in her accounts, the assessee has furnished no positive material to establish the subsistence of the liability as at the year-end (31.03.2008). The correspondence of FWICE adduced is in respect of only four (4) out of eighteen (18) parties, for an aggregate of Rs.4.02 lacs, and has been discounted by the Revenue on the ground of being very old. Would that mean that the balance parties (14) have not contacted FWICE, which can only be where they are members of their respective associations. Why, we wonder, could the assessee not produce a more recent or present position from FWICE, stating of all the persons who have moved through it, along with the amounts due/being pressed by them. For all we know, the assessee may well be contesting the liability before FWICE. Why, again, the assessee could not furnish the current addresses, as no payment could possibly be made if the assessee does not know the whereabouts of the persons, some of whom may have also left their profession or even the city inasmuch as there can be no presumption in this regard, and the facts and circumstances change with time. The assessee's explanation for being unable to furnish the conf....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ng of the fact by the tribunal of the assessee having consequently discharged the onus on it in exhibiting the sustenance of the liability/s. In CIT vs. Jaipur Jewellers (Exports) [2010] 187 Taxman 169 (Del), the basis of the Revenue's claim was the takeover of the liability of an erstwhile firm by the assessee, who was since paying off the liability. It was under these circumstances that it was held that there is no question of application of section 41(1) in the facts of the case. In Dy. CIT vs. Hotel Excelssier Ltd. [2010] 60 DTR 450 (Del-trib), there is no discussion of facts. The basis of the tribunal's order, as would be apparent from its reading, is not a finding of fact as to the cessation of liability, but on the basis that there could be no cessation of liability solely on the ground that it is over three years old, and on which there is no dispute, having been since settled by the apex court in the case of CIT vs. Sugauli Sugar Works (P.) Ltd. [1999] 236 ITR 518 (SC), since affirmed by it in Chief CIT vs. Kesaria Tea Co. Ltd. [2002] 254 ITR 434 (SC). The reliance on the said case law would, therefore, be of not assistance to the assessee in the facts and circumstances of....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ition on the assessee to sell the rights of her next production, i.e., if and when it materializes, to the creditor, FIPL. Compliance of the MOU may even otherwise become unfeasible, as where the parties are unable to agree on the price. Future is uncertain, and for all we know the distributor may no longer be interested in the said production, i.e., when it actually comes up for sale. The arrangement is thus contingent. As it would appear to us, the parties agreed to a reduction in the sale price by Rs.5 lacs and, further, non-refund of the same, having been since received, and which was to be adjusted against the sale price of a future production. As such, the nature/character of the receipt as a trade receipt is not lost, and the arrangement in effect amounts to a reduction in the sale price of any future film, to that extent. In fact, it is also not clear as to why, as stated by FIPL vide its letter dated 21.12.2005 (PB pg.22), did it pay Rs.5 lacs to M/s. Adlabs Films Ltd. on instruction by the assessee. However, both the assessee and the Revenue proceeded on the footing that it did not constitute sale price or a business receipt for that year. In any case the non-adjustment o....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ed to be received, as given, were on verification not found to be reflected in the balance-sheet either as on 31.03.2007 or 31.03.2006 or for any earlier year. Even no details, viz. addresses, confirmation, etc. stood submitted to enable further investigation. Under the circumstances, the same stood added as the assessee's unexplained income u/s.68. In appeal, the assessee claimed that the said amount could not be added u/s.68 inasmuch as the same formed part of the business receipts for the relevant year. However, the same were not disclosed as business receipts, which were thus shown at the net amount of Rs.21.95 lacs, because they were only receipt back of earlier advances, and which get, thus, squared-up/adjusted. As such, addition u/s.68 was not maintainable. The same did not find favour with the ld. CIT(A) as the amounts having been credited in the assessee's regular books of accounts, there was no bar on the same being cash credit liable to be explained u/s.68 of the Act. The same having not been properly explained, were, thus, rightly deemed as income by the A.O. 7. We have heard the parties, and perused the material on record. As we understand, the addition is not toward....