TaxTMI 
TaxTMI 
2022 (1) TMI 479
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....erred in holding that reopening u/s.147 is not valid in law as the assessment is reopened beyond four years and on mere change of opinion; 2.1 The CIT(A) ought to have appreciated the fact that the assessment has been reopened after four years but before six years according to Sec.151(1) of the Act. Hence, the reopening of assessment u/s 147 after four years and before six years is valid in law. 2.2 The Id CIT(A) failed to appreciate the fact that there was tangible material to reopen the assessment u/s.147 since the assessee had claimed the post production expenditure under Rule 9A of the Act. This has been considered to be a tangible material for reopening the assessment u/s 147 of the Act. 2.3 The Id CIT(A) ought to have appreciated the fact that reassessment is well within the provisions of sec.147 and Explanation 1 of sec. 147 of the I T Act clarifies that production of account or other evidences before the AO from which material evidence could with due diligence have been discovered, will not necessarily amount to disclosure within the meaning of the proviso to sec. 147. 2.4 The Id CIT(A) ought to have appreciated the fact that , as per cla....
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....A) erred in deleting the disallowance made under the head post production expenses amounting to Rs. 57.85 lacs; 3.1 The Id CIT(A) failed to appreciated that in para 11 of the CIT(A) order, it could be seen that in respect of the films Boys(Telugu) and Nee Manasu, Naaku Telusu (Telugu) no income has been admitted by the assessee towards realization of pictures. 3.2 The Id CIT(A) ought to have appreciated the fact that nature of expenditure claimed by the assessee relates to publicity expenses, which are post production expenses and the assessee did not admit an realization from pictures. Hence the assessee did not act as a distributor for the above said two films. 3.3 It is submitted that according to Rule 9B, a producer can claim PostProduction Expenses of the film if he also acts as a distributor for thesefilms. In this case the assessee did not act as a distributor and as per Rule 9A, a producer cannot claim post production expenses; 3.4 The Id CIT(A) ought to have appreciated the fact that film producers are covered by the specific provisions Rule 9A and 9B to claim the expenditure incurred on the production of the films and post production ex....
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....ccordingly, rejected arguments challenging validity of reopening of assessment and held that audit objection is a solid ground for reopening of assessment, because said information constitutes fresh tangible materials and opined that reopening of assessment for all assessment years is valid in view of specific ratio laid down by the Hon'ble Supreme Court in the case of PVS Beedies Pvt. Ltd. 103 taxmann 294 (SC) and also Rajesh Jhaveri Stock Brokers 291 ITR 500 (SC). The Assessing Officer had also made additions towards disallowance of post production expenses of certain feature films on the ground that when the assessee has acted as only producer without exhibiting those films to public, then post production expenses cannot be allowed as deduction, in view of specific procedure followed for computation of expenses under Rule 9A & 9B of Income Tax Rules, 1962. The Assessing Officer had also made additions towards interest on loans and unsecured loans u/s.68 of the Income Tax Act, 1961. 5. Being aggrieved by the assessment order, the assessee preferred an appeal before the learned CIT(A). Before the learned CIT(A), the assessee has challenged reopening of assessment u/s.147 of....
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....d further, there is tangible material in the form of audit objection for arriving at a reasonable conclusion on escapement of income and thus, in view of the ratio laid down by the Hon'ble Supreme Court in the case of PVS Beedies Pvt.Ltd. (supra) and also Rajesh Jhaveri Stock Brokers (supra), reopening of assessment for assessment years 2005-06 and 2006-07 are valid and thus, rejected arguments taken by the assessee. 7. As regards additions made by the Assessing Officer towards post production expenses, the learned CIT(A) after considering relevant submissions of the assessee held that since the assessee has released Boys (Telugu) and Nee Manasu Naaku Telusu (Telugu) feature films within 90 days and also earned realizations from the pictures. It is incorrect on the part of the Assessing Officer to apply Rule 9A for computing disallowances in respect of post production expenses. The learned CIT(A) observed that although the Assessing Officer has rightly applied Rule 9A to disallow excess of expenditure over realization from the film, but because assessment proceedings u/s.147 of the Act are held to be void, disallowance also gets nullified and thus, directed the Assessing Off....
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....realized revenue from those two feature films, post production expenses is allowable and accordingly, deleted additions made by the Assessing Officer. As regards disallowance of post production expenses of Rs. 21,86,649/- in respect of Muddula Koduku (Telugu) feature film, the learned CIT(A) held that even though said expenditure is not deductible under Rule 9A, but same can be allowed as deduction u/s.37(1) of the Act, because said expenditure was incurred for purpose of business of the assessee. Insofar as additions made towards disallowance of unsecured loans and consequent interest u/s.68 of the Act, the learned CIT(A) deleted additions made by the Assessing Officer by holding that the assessee has filed detailed statement of loans taken, addresses, PAN of creditors etc. However, the Assessing Officer has disallowed loans and consequent interest u/s.68 of the Act, without any reasons and thus, directed the Assessing Officer to delete additions made towards unsecured loans and consequential interest u/s.68 of the Act. Aggrieved by the learned CIT(A) order, the Revenue is in appeal before us. 10. The first issue that came up for our consideration from ground no.2.1 to 2.9 of r....
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....he Act, and during the course of assessment proceedings, the assessee has disclosed all facts necessary for completion of assessment. Therefore, reopening of assessment on the basis of audit objection is only a change of opinion which is not permissible. The learned CIT(A) after considering relevant facts has rightly quashed assessment order and his order should be upheld. 10.3. We have heard both the parties, perused materials available on record and gone through orders of the authorities below. Admittedly, the Assessing Officer formed reasonable belief of escapement of income on the basis of audit objection. As per reasons recorded for reopening of assessment, escapement of income was determined by applying Rule 9A & 9B of Income Tax Rules, 1962, which deals with quantification of expenses allowable in case of film producer and distributor. The assessee being film producer, has claimed certain post production expenses. The Assessing Officer formed reasonable belief of escapement of income on the ground that as per Rule 9A, post production expenses cannot be allowed. If you go through reasons recorded by the Assessing Officer to form belief of escapement of income, we find that....
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....sed. ITA No.1737/Chny/2013: (AY 2005-06): 13. The first issue that came up for consideration from ground No.2 to 2.4 of revenue appeal is deletion of disallowance made by the Assessing Officer towards post production expenses amounting to Rs. 20.03 lakhs in respect of feature film 7G Brindabhan Colony (Telegu). The Assessing Officer has disallowed post production expenses on the ground that the assessee has acted only as producer, but not a distributor for the film 7G Brindavan Colony (Telugu), which is evident as per financial statement filed by the assessee for relevant assessment year which shows that there is no realization from the above film. Therefore, in terms of Rule 9A & 9B of I.T. Rules, 1962, the Assessing Officer has disallowed post production expenses of feature film 7G Brindabhan Colony for Rs. 20,03,118/-. On appeal, the learned CIT(A) has deleted additions made by the Assessing Officer by holding that the film was released within 90 days from end of the financial year and hence, expenditure is eligible for deduction under Rule 9A. 14. The learned DR submitted that the learned CIT(A) failed to appreciate that in para 16 of the learned CIT(A) order, it could....
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.... by either Rule 9A or 9B of I.T. Rules, 1962. Therefore, the issue has to be examined in light of capacity of the assessee in which he acted in a particular film. The Assessing Officer has disallowed post production expenses of 7G Brindavan Colony (Telugu) on the ground that the assessee does not act as a distributor and uch finding was recorded on the basis of no realization from pictures. As we have already stated in earlier paragraph of this order, Rule 9A / 9B is applicable only in a case where a person acts in a capacity of producer and distributor. In this case, in respect of 7G Brindavan Colony (Telugu), the assessee seems to have acted as a producer and distributor, because there is no realization from picture, it means he has not acted as an exhibitor. Therefore, post production expenses incurred by the assessee is not governed under rule 9A or 9B of I.T.Rules, 1962. Therefore, deductibility of same needs to be considered u/s.37(1) of the Act as expenditure wholly and exclusively incurred for purpose of business of the assessee. This proposition is supported by decision of the Hon'ble Bombay High Court in the case of Dharma Productions Ltd. Vs CIT (2019) 263 taxmann 583, w....
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....ext issue that came up for our consideration from ground no.4 to 5.3 of revenue appeal is deletion of additions made towards estimation of interest on loans from M/s. Focus Computers and M/s. Rakesh Sarin & Sons. The Assessing Officer has made addition of Rs. 2,40,000/- towards interest on loans form M/s. Focus Computers on the ground that when the assessee was not able to prove loan taken form said party, same has been treated as unexplained cash credit and added back to total income for the assessment year 2003-04. Since, the assessee has paid interest for the impugned assessment year on said loan, the Assessing Officer has disallowed and added back to total income. Similarly, the Assessing Officer has disallowed interest amounting to Rs. 1,26,000/- in respect of sum of Rs. 7 lakhs being difference in opening balance as per confirmation received from M/s. Rakesh Sarin & Sons and Mr. Rakesh. On appeal, the learned CIT(A) has deleted additions made by the Assessing Officer by holding that when no addition was made towards loans, question of making addition of interest on said loan does not arise. 20. We have heard both the parties, perused material available on record and gone t....
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....iction of additions towards resale of set materials. An identical issue has been considered by us in ITA No.1737/Chny/2013 for assessment year 2005-06. The reasons given by us in preceding paragraph No.17, shall mutatis mutandis apply to this appeal, as well. Therefore, for similar reasons, we direct the Assessing Officer to estimate 5% of total cost incurred for set materials as income from resale of set materials. 25. The next issue that came up for our consideration from ground no. 5 to 5.3 of revenue appeal is deletion of additions made towards unsecured loans amounting to Rs. 9.53 crores and consequent interest thereon at Rs. 1.75 crores. The Assessing Officer has made addition towards unsecured loans and consequent interest thereon for want of evidence. According to the Assessing Officer, although a specific show cause notice was issued calling upon for various details, the assessee has failed to file any evidence to prove identity of the party, genuineness of transaction and creditworthiness of parties, except objecting reopening of assessment. Therefore, the Assessing Officer has made addition towards unsecured loan for want of evidence. The learned CIT(A) has deleted ad....