TaxTMI 
TaxTMI 
2014 (7) TMI 954
X X X X Extracts X X X X
X X X X Extracts X X X X
....(A) and AO have not considered that the appellant maintains books on mercantile basis while the recipients being film artists maintain books on cash basis. The appellant submits that the above amounts are liabilities as per the mercantile system of accounting filed by the appellant and not income of the appellant.' Additional ground of appeal 'On the facts and circumstances of the case the Commissioner of Income- tax (Appeals) erred in confirming the addition of Rs. 6,00,000/- made by the Assessing Officer on account of cash found at the premises of Ms. Rani Mukherjee.' The additional ground arising out of the impugned order, was, after preliminary hearing, admitted. We shall proceed to discuss each of the three sums, claimed as a liability, since confirmed for disallowance/addition by the ld. CIT(A). 3. The assessee is in the business of event promotion, arranging celebrity endorsements, etc., per his two proprietary firms, M/s. Limelight and M/s. Alliance Media and Entertainment (AME). In the course of the assessment proceedings for the relevant year, the assessee's accounts, maintained on mercantile basis, were observed to reflect a liability outstand....
X X X X Extracts X X X X
X X X X Extracts X X X X
....00/- The assessee, on being called upon to explain the manner of accounting for the income from the said receipts, explained that he stood to gain Rs. 12,50,000/- from the said contract, i.e., Rs. 50 lacs - Rs. 37.50 lacs. For A.Y. 2000-01, against the receipt of Rs. 32 lacs, Rs. 10 lacs stood accounted for as income, while the balance Rs. 22 lacs was taken to the 'Advance account'. On the expense side, of Rs. 27.225 lacs paid to Ab, Rs. 20 lacs was accounted as expenditure, treating the balance Rs. 7,22,500/- as advance to the artist. For A.Y. 2001-02, the current year, another Rs. 10 lacs was recognized as income, leaving a balance of Rs. 12 lacs in the 'advance account'. The balance consideration of Rs. 18 lacs was received from PFL in the following year (A.Y. 2002-03) and accounted for as income for that year. No further payment was made to Ab during the year relevant to A.Y. 2001-02 as the performance period stood extended by another year, i.e., upto 02.12.2001 (PB pg. 44). In fact, another Rs. 10,27,500/- (Rs.37,50,000/- - Rs. 27,22,500/-) was due to Ab, which, however, was not paid. The said amount getting time barred in 2004, would be offered to....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e of Rs. 10.275 lacs (Rs.17.50 lacs - Rs. 7.225 lacs) ceased only subsequently, and, accordingly, was rightly assessable for A.Y. 2004-05, on its write back, while considering to an overclaim for the current year for Rs. 7.225 lacs. 5.2 We are completely unable to appreciate the assessee's case. He claims non- payment during the current year on the basis that the time period of performance stood extended. There is, firstly, no material to support the contention; the letter dated 23.01.2001, adverted to by the ld. Authorized Representative (AR) during hearing in this regard, being unsigned (PB pg.44). Two, the same is not material as in terms of the agreement, payment becomes due within 15 days of the commencement of the performance period, which, i.e., due date, remains unchanged. The accrual of income to the celebrity, as per the agreement, is not linked mathematically to his personal appearance. All that he has to do is to make himself available for 10 days during the performance period, of which personal appearance is to be made on six occasions at mutually agreed dates. Thus, though in respect of performance, for which time span is defined, the revenue arising (or expens....
X X X X Extracts X X X X
X X X X Extracts X X X X
....end, in terms of the relevant contracts and the payment made to him as per the assessee's accounts. 5.3 Under the circumstances, we have no hesitation in confirming the disallowance/addition in respect of the unproved expense/liability for Rs. 17.50 lacs outstanding in the name of Ab as on 31.03.2001. Further, though there is no finding by the authorities below in its respect, as it appears from the statement of the amount written back for A.Y. 2004-05 (PB pg.62), the assessee has offered this amount as income for that year. Though this would not alter our decision, based as it is on the finding of fact of no liability to that extent as having, in fact, accrued, or, in any case existing as on 31.03.2001, with the assessment having been finalized prior to 31.03.2004, at the same time, the same amount cannot be subject to tax twice. Accordingly, where the assessee accepts the assessment of this income for the current year, he shall, on moving the Revenue, be allowed, upon verification, consequential relief for A.Y. 2004-05. In fact, even in the case of non-acceptance by the assessee, the Revenue cannot, impending the resolution of the dispute, collect tax twice, so that the de....
X X X X Extracts X X X X
X X X X Extracts X X X X
....to do so at a later point in time. The same, in our view, therefore, stood rightly added (disallowed) by the Revenue. There is, again, no merit in the charge of the income having been subject to tax on cash basis, as being followed by the payee, who admittedly was not paid any amount. Further on, the assessee claiming a write back of the liability in his accounts, and its offer as income for A.Y. 2004-05 (PB pg.63), our comments at para 5.3 of this order in respect of liability to Ab, qua which a similar claim had been made, would apply in equal measure for this liability as well. We decide accordingly. Rani Mukherjee (RM) - Rs. 6 lacs: 8. The assessee's explanation for this liability was that the same stands since paid on 31.03.2002. As, however, the same was paid in cash, 20% thereof stood disallowed suo motu u/s.40A(3) of the Act for A.Y. 2002-03. Upon confirmation from RM, it was found that she had been subject to search and seizure action on 08.10.2000, whereat cash amounting to Rs. 7.50 lacs was found from her locker. As explained by her father, Shri Ram Mukherjee, Rs. 1.50 lacs of the same belonged to the family, and the balance Rs. 6 lacs was received for safe kee....
X X X X Extracts X X X X
X X X X Extracts X X X X
....conceding vide his letter dated 22.12.2004 that one addition may be retained (refer para 3.6 of the impugned order). As it appears, the assessee was required to pay RM for her performance for the Bata commercial, for which he had received Rs. 14.64 lacs (or is it Rs. 15.645 lacs - the amount as per the orders by the authorities below being different) during the current year from Bata India Ltd. (at net of TDS). However, what is not clear is the amount of the liability, and when it was finally paid? If paid in September, 2000, there is no question of any liability on that account subsisting as on 31.03.2001. Besides, in that case, what is the payment on 31.03.2002 for? Again, what is the source of payment in September, 2000, not recorded in the assessee's books of account? The availability of cash in the assessee's accounts at the relevant time would, therefore, be to no avail. Nobody would withdraw cash - which as per the assessee's own books is for commercial shooting expenses, from bank for safe keeping and, further, deposit it with another for the purpose, and that too without any evidence. The cash as per the books would, in any case, only stand to be utilized for b....