TaxTMI 
TaxTMI 
2022 (6) TMI 1404
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....and in law, Learned CIT(A) erred in confirming the action of Assessing Officer in making the various additions/disallowance in the absence of any incriminating material found during the course of search action, as per the grounds contained in the assessment order or otherwise. 2. On the facts and circumstances of the case and in law, Learned CIT(A) erred in confirming the action of Assessing Officer in holding that the expenses claimed on account of film production are inflated and bogus expenses, as per the grounds contained in the assessment order or otherwise. 3. On the facts and circumstances of the case and in law, Learned CIT(A) erred in confirming the action of Assessing Officer in disallowing sum to the extent of Rs.5,00,000/ - being film production related expenses, as per the grounds contained in the assessment order or otherwise. 4. On the facts and circumstances of the case and in law, Learned CIT(A) erred in confirming the action of Assessing Officer in disallowing a sum of Rs.2,81,265/-treating the same as personal expenses, as per the grounds contained in the assessment order or otherwise. 5. The appellant craves leaves to alter, a....
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....e Act was issued on 22.12.2016 and assessee has filed its return of income for assessment year 2010-11 on 14.01.2017 declaring total income at Rs.11,06,92,352/-. During the course of the search action statement of some employees of the assessee were recorded u/s 132(4) of the Act in which they stated that assessee had inflated the expenses of various movies with the motive to reduce the taxable profit. One employee Mr. Nushrat Javed Khan has identified some expenses in which bogus bill had been issued by some parties to the assessee. During the course of assessment the A.O stated that Mr. Nushrat J. Khan explained the modus operandi in detail and on the basis of statement of Mr. Nushrat J. Khan certain expenses totaling to Rs.8,60,50,160/- was identified in which bogus bills had been issued by the certain parties. Assessment u/s 143(3) r.w.s 153A of the Act was finalized on 29.12.2017 assessing the total income of the assessee at Rs.21,15,86,117/-. Further relevant facts pertaining to the grounds of appeal filed by the assessee are discussed while adjudicating these ground of appeal as under: (1) Ground No. 1: Absence of any incriminating material during the course of search: ....
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....de in cash. The A.O has relied on the statement of Mr. Nushrat J. Khan wherein he admitted that assessee company had booked certain expenses which were not genuine in nature for the purpose of reducing the taxable income of the assessee. In his answer to question no. 23 of his statements he provided the details of non-genuine entries from the books of account of the assessee reproduced at page 15 of the assessment order as under: Movie Nature of non-genuine expense booked Amount (Rs.) F.Y. Name of the Party Baaghi Re-make rights of Telugu film "Varsham" 3,00,00,000 2015-16 Viking Media & Entertainment Pvt. Ltd., Mumbai (Shri Sachin Joshi) Phantom Providing lights for shooting at site 25,36,537 2015-16 M/s Monalisa Enterprises (Shri Rahul Gupta) Phantom Providing lights for shooting at site 41,35,895 2015-16 Visual Lights Private Limited (Shri Rahul Gupta) Heropanti Visual effects 55,95,528 2014-15 Futureworks Media Limited Kick Visual effects 4,43,82,200 2014-15 Futureworks Media Limited Total 8,66,50,160 The assessing officer has also reproduced the rele....
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....Digital Intermediate, DCP, Sound Mixing, Dubbing, Foley and Film Equipment services etc. (i.e. camera etc. on hire)with the fees charged for such services to assessee for the relevant period'; (v) The units and rates of the services at which such services were provided to assessee; (vi) details of payments/part payments received from assessee against such services (Movie wise with respective year of release mentioned against the title); including the mode of payment, Bank accounts' statements reflecting such payments received from assessee, treatment of these receipts in books of accounts etc; alongwith ledger of assessee in books of accounts for 'the relevant period'; Reply from M/s Futureworks Media Private Limited was received on 13.11.2017 and the same has been taken on records. (c) .M/s Monalisa Enterprises:- (i) Copy/ies of the agreement/s, MOU/s, Terms and Reference/s etc. entered into with assessee with respect to services provided alongwith copy/ies of correspondence undertaken with assessee in this regard i.e. emails, letters, logbooks, Minutes of meetings held etc.; (ii) The details of the services pro....
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....nts for 'the relevant period' (vii) Whether, similar services have been provided to any other producer/production house/studio during 'the relevant period', if yes, then, details as asked for in respect of assessee above;" After receiving the above referred information the A.O asked the assessee vide notice dated 5.12.2017 to explain why the following amount shall not be considered as bogus expenses: Name of the entity 2010-11 2011-12 2012-13 2013-14 2014-15 2015-16 01.04.2015 to 08.12.2015 (2016-17) Total Viking Media & Ent. Pvt. Ltd. 3,00,00,000 3,00,00,000 Monalisa 4 4,86,000 20,50,000 86,88,050 28,26,537 1,40,50,587 Visual Lights Pvt. Ltd. 5,00,000 9,79,211 0 18,80,548 3792063 1125000 4135895 1,24,12,717 Futureworks Media Ltd. 20147802 0 35937223 368316 49977728 572500 10,70,03,569 Prima Focus (London) 160000000 160000000 Total 500000 21127013 0 38303771 6210379 ....
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....see company. The details of VAT/Service Tax included in such expenses was produced at page 25 of the assessment order. The total amount of Rs.131,21,338/- was pertained to VAT/Service Tax included in the gross expenses which was not debited to the P&L A/c. It was also explained that such expenses were debited to the P&L a/c in the assessment year in which the movies were released. The A.O had not agreed with the submission of the assessee. The A.O was of the view that assessee was in practice of making payment to the parties providing bogus bills to the assessee as admitted by the employees of the assessee in their statement. The A.O had made party wise analysis of the bogus expenses claimed by the assessee as under: (1) Monalisa Enterprise & Visual Lights: 6. The A.O referred folder containing performa invoices, statement of account and challan issued by M/s Monalisa Enterprises for film Kick for the period relevant to A.Y. 2015-16. In response to notice u/s 133(6) the M/s Monalisa Enterprises and M/s Visual Lights Private Limited, submitted that all its light equipments accessories, office records files and papers which were kept in its premises at Sawant Niwas 4 Block, And....
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....Ltd. Stating that no log book/worksheet or work order have been maintained in respect of VFX services rendered to the assessee. The A.O has also stated that consideration received from the assessee was substantial as compared to the same to be received from other entities. In view of the aforesaid discussion the A.O has disallowed amount of Rs.1 crore paid to Future Work Media Pvt. Ltd pertaining to A.Y. 2010-11. 8. Aggrieved, the assessee filed the appeal before the ld. CIT(A). The ld. CIT(A) has partly allowed the appeal of the assessee. The part of the decision of CIT(A) is reproduced as under: "B: Transaction of Rs 2,02,07,805 in AY 2011-12 6.57 The issue pertains to AY 2011-12 and has been dealt with while deciding the relevant grounds for AY 2011-12. C: Transaction of Rs.3,78,04,856 in AY 2013-14 6.58 The transaction pertains to AY 2013-14 and has been decided while dealing with the ground in appeal for AY 2013-14 D: Transaction of Rs.3,68,316 in AY 2014-15 6.59 The transaction pertains to AY 2014-15 and has been decided while dealing with the ground in appeal for AY 2014-15. E: Transaction of Rs.4,99,77,728/- ....
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....made by the A.O merely on the basis of retracted statement u/s 132(4) could not be sustained in the absence of any evidence material or recovery of any movable or immovable assets at the time of search to corroborate the disclosure made by the assessee. The Hon'ble Supreme Court in Vinod Solanki Vs. Union of India (92 SCL 157 held that evidence brought as record by way of confession which stand retracted must be substantially corroborated by other independent and cogent evidences which would lead adequate assurance to the court that it may seek to rely thereupon. The CBDT vide circular No.F.No.286/2/2003-IT(Inv.), dated 10.03.2003 has categorically directed that authorities should focus on collection of evidence of undisclosed income in search cases and abstain from laying undue emphasis on plan statements which are later on retracted. The relevant part of the circular is reproduced as under:- "Instances have come to the notice of the Board where assessees have claimed that they have been forced to confess the undisclosed income during the course of the search & seizure and survey operations. Such confessions, if not based upon credible evidence, are later retracted by ....
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....ed to him had denied the contents of the statement and stated that Mr. Nushrat J. Khan had rightly retracted his statement after explaining the situation in which the statement was given. It was also explained that no unaccounted cash was found in any of the premises which could substantiate that the assessee group was engaged in generation of unaccounted cash. Even Mr. Sajid Nadiadwala had denied the statement and stated that no opportunity of cross-examination was provided, in spite of the facts that both the persons were present in the premises. Mr. Rakesh Madhotra, CEO had also retracted his statement immediately after the search action stating that the same was recorded under pressure by continuously questioning of 5 days. It is undisputed fact that the statements of the employees were not supported with any documentary evidences and same were retracted immediately after the search action. At para 9.5 of the assessment order the A.O stated that loose paper folder containing performa invoices, statement of accounts and challan issued by Monalisa Enterprises for film Kick for relevant to A.Y. 2015-16 were seized but the A.O had failed to substantiate anywhere in his findings tha....
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....enses accounted in the books of accounts and the amount of any personal expenses was subject to verification. Therefore, assessee was issued show cause notice dated 05.12.2017 to explain why the following expenses should not be disallowed. Sr. No. Particulars 2010-11 2015-16 2016-17 2017-18 1. Kokilaben Hospital ... ... 3,60,000 ... 2. Vedanta Lifestyle Furniture ... ... ... 1,00,920 3. Portugal Football Match Trip ... ... 72,000 .... 4. Amol Waghmare Security Body Guard ... ... 49,500 ... 5. HSBC Credit Card Sketch Clinic ... ... 25,000 ... 6. Sunrise Luxury Sports Shoe ... ... 32,000 ... 7. Subhan Nadiadwala Visa Expenses ... ... 85,000 ... 8. Juhu Premises Expenses (approx.) ... ... 1,25,00,000 ... 9. Khanna Club Membership ... 1,16,118 ... ... 10. Asma Cook ... ... 9,000 ... 11. Jyoti Baai ... ... 8,000 ... 12. Doremon ... ... 10,000 ... 13. Iron Man ... ... 8,500 ... 14. Driver ... ... 6,000 ... 15. Poruge....
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....earch proceedings details of expenses were submitted. It was explained that expenses of Rs.125,00,000/-was on account of furniture facility provided to the CMD of the assessee company and depreciation claimed on such expenses was duly considered as perquisite in the hand of Mr. Sajid Nadiadwala under the head salary and filed supporting evidences i.e. computation of income along with copy of return of income of Mr. Sajid Nadiadwala. It was undisputed fact that an amount of Rs.4,32,000/- was not debited in the books of account of the assessee company. The assessee explained that there was a duplicate entry for expenses of Rs.85,000/- and the remaining expenses of Rs,711,313/- were incurred for the purpose of the business. However, the A.O has disallowed an amount of Rs.2,81,265/- pertaining to payment made for J.W. Mariot Hotel Membership. It was claimed that hotel was used for holding meetings with the parties related to production of the films. We observe that the part of the hotel facility for personal use cannot be ruled out however, looking to the fact that the impugned addition was merely made on the basis of the retracted statement without fully linking with specific ev....
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....PORTS 0 5000000 0 0 0 0 0 5000000 9. MEENAXI DIAMONDS PVT. LTD. 0 10000000 0 0 0 0 0 10000000 10. VAISHALI GEMS 0 5000000 0 0 0 0 0 5000000 11. RAJ ASSOCIATES/RAJ RAJPAL HUF 15000000 0 0 0 0 0 0 15000000 12. SUNITA TRILOK MOTIANI 1500000 0 0 0 0 0 0 1500000 13. MURLI MOTIANI 1500000 0 0 0 0 0 0 1500000 Total 85000000 25000000 0 0 0 0 0 110000000 14. The AO further stated that Mr. Nushrat J. Khan in his statement admitted that these unsecured loan from were obtained from non-genuine entities through a broker Shri Pravin Talreja. Subsequently, the promoter director Shri Sajid Nadiadwala was confronted with the statement, he had not agreed with the statement and claimed that all these loans were genuine. Mr. Nusrat Javed Khan had retracted his statement immediately after search claiming that the statement had been given under extreme mental/pressure and disturbed state of mind due to continuously recording of statement throughout the day and till midnight for almost 4-5 days....
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....sessee filed the appeal before the ld. CIT(A). The ld. CIT(A) has deleted the addition made by the AO, the relevant part of the decision of ld. CIT(A) is as under: "Decision 7.29 The various facts related to this issue has been noted. With respect to five parties, the AO has held that these pertain to Bhanwarlal Jain Group wherein it has been found that the group, through various entities under their control, were engaged in providing various accommodation entries which included bogus purchase invoices, bogus share capital / premium and bogus loans etc. for a commission. He also noted that the other entities were also of similar profile and hence, their creditworthiness was not proved. He also held that the parties did not appear when summoned u/s 131 of the Act and the appellant, on being asked, neither knew much about these entities nor could it produce these parties before the AO for confirmation. 7.30 The assessee has claimed that it had routine and natural loan transactions with these parties, undertaken through a finance broker whom commission has been paid through cheque. It is also claimed that the fact that these parties were engaged in providing....
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.... involved are very high. It is also noted that there exist finance brokers who represent various lenders and can provide funds on a commission. In such an arrangement, the borrower only transacts through the broker and not directly with the lenders. Such arrangements depend on the creditworthiness of the borrower. It is noted that the entries comprise of lending, payment of interest on such lent amount and return of loans indicating that most of these loans are taken on short term basis when the need arose and were mostly repaid in the next year /same year along with interest immediately on release of the film. The nature of transactions undertaken by the lender concerns has been discussed by the AO in the behalf of certain unknown parties who want these items out of their own books. After import, while the diamonds are handed over to these parties and consideration is taken in cash, the assessee is left with stock in trade of diamonds in his books and unaccounted cash. There is a foreign exporters. The concerns are able to give bogus sale bills to needy parties receiving money through a/c payee cheques while these transactions are squared up in cash. Now, these concerns have money....
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.... cash was delivered against the loans and again from whom was the cash collected when the loans were returned. Also, it is incorrect that all the above parties belong to the same group. While only five parties belong to the Bhanwarlal Jain group, based on which decision has been taken by the AO in respect of all the parties. It is also clear from the statement that Nusrat does not have specific details with respect to this transaction of loans which are generally handled by Sajid Nadiadwala. 7.35 The bank account of the appellant has been examined. The code name for movie Anjana Anjani was 'Prodn 5'. The Citibank account wherein these amounts has been credited has been examined. It is noted that on receipt these amounts have been immediately spent expenses related to the movie. The bank account for the subsequent year when these amounts have been returned back, is also examined. A selected summary of the movie have been immediately utilized to repay these loans. Date Particulars Vch Type Debit Credit 01.06.2019 Cr. Opening Balance 1,86,20,569.20 01.06.2010 Dr. Subhdil Gems Payment 1,91,250 01.06.2....
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....appellant has approached a broker for raising genuine finance for his films under which these amounts have been borrowed. Further the return of these loans was after release of the film, when Eros, being appellant's distributor, provided the proceeds of release. 7.37 It is also noted that the above parties are not the only parties from whom the appellant has taken loans during the various years. Film production, admittedly, is a capital intensive activity wherein a huge amount of funds are deployed during production process which culminate into release of the film. The assessee has provided following details with respect to other loans taken in various years. Name of the party F.Y. Opening Balance Received Paid Interest Closing Balance Aastha Sarin 2010-11 12,60,000 12,60,000 AKK Entertainment Pvt. Ltd. 2011-12 20,00,00,000 20,00,00,000 2012-13 20,00,00,000 20,00,00,000 Global Automobiles Pvt Ltd. 2010-11 50,00,000 52,25,000 2,25,000 Paresh Murli Motiani 2010-11 20....
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....nt is a well-known name in film industry for him to interact with the lenders or to keep track of their whereabouts. In the case of Vashu Bhagnani in ITA No. 5648/Mum/2016 having similar facts the addition on account of loan taken by an assessee from m/s Daksh Diamonds (an entity controlled by Bhanwarlal Jain) was deleted by the ITAT in light of the fact the loan was taken by the assessee in 2006 and returned by him to M/s Daksh Diamonds in 2010 while the search took place on 03.10.2013 observing that one has to respect the transactions which occurred more than three years before the search and seizure action by the department and the addition was made without any supporting documents indicating that the loan entry was a bogus one. 7.39 The discussion above reveals that there is sufficient ground to infer that the borrowings taken by the appellant are not an arrangement to introduce his unaccounted cash in his books but to meet a genuine requirement of funds. It is also noted that such funds have been returned back immediately on generation of funds in form of theatre income received from distributors. Undisputedly, such transactions do not include merely lending but they ....
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....etracting his statement given under section 132(4) of the Act. Therefore, when the person who gave the statement with an affidavit then the statement recorded during the course of search does not have any evidentially value, therefore the same cannot be considered as sacrosanct to come to the conclusion that the transactions were bogus in nature. The ld. A.R further submitted that the sole basis for the AO to make additions towards unsecured loans is a statement of Shri Bhanwarlal Jain, which was subsequently retracted by him. Further, inspite of specific request, the AO declined to provide the statements or evidence relied upon and also declined to give opportunity to cross examine the parties. The Ld. AR further submitted that during the course of survey in the group cases of assessee, no incriminating material was found to link credits found in the books of account of the assessee and a/so to evidences collected from Shri Bhanwarlal Jain group cases during the search. The AO as well as the Ld. CIT(A) has given much importance to the modus operand! and evidence collected during the search in the case of Shri Bhanwarlal Jain ignoring the evidences filed by the assessed during the ....
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....en, the evidences collected during the search as well as survey clearly shows that transactions between the parties are not genuine tractions, therefore, there is no error in the findings recorded by the lower authorities. Accordingly, additions made by the A.O should be upheld." 7.40 It is noted that the facts in this case are similar to the facts of the above case. The ITAT has elaborated on various aspects and has decided the issue as below: 8. The provisions of section 68 of the Act deals with the cases, where any sum found credited In the books of account of the assessee in any Financial Year, and the assessee offers no explanation about the nature and source thereof or explanation offered by the assessee is not in the opinion of the AO satisfactory, then the sum so credited may be charged to income tax as the income of the assessee of that previous year. A plain reading of section 68 makes it very clear that in order to fix any credit within the ambit of section 68 of the Act, the AO needs to examine three ingredients i.e. identity, genuineness of transaction and creditworthiness of the parties. If the assessee proves all ingredients provided under section 6....
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....ssee from the firm and companies controlled and managed by Shri Bhanwarlal Jain and his associates. 9. Having said so, let us examine what is the basis for the AO to arrive at conclusion that the transactions between the parties are not genuine and which are hit by the provisions of section 68 of the Act. The AO never brought out any further facts to link credits found in the books of accounts of the assessee to the evidences found during the course of search in the case of Shri Bhanwarlal Jain except statement of Shri Bhanwarlal Jain. Even during the course of survey in group cases of assessee, no incriminating material was found which can be linked to evidences collected during the course of search in case of Shri Bhanwarlal Jain. Further, during the course of survey in assessee's group cases, the directors and employees have categorically admitted that they have personally visited office of Shri Bhanwarlal Jain Group companies for arranging Loans. The AO did not controvert this fact by bringing any other evidences. On the other hand, the assessee has filed complete details including confirmations from Loan creditors, their PAN details, master data, affidavit from th....
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.... Securities Ltd. vs DCIT (2018) 96 taxmann.com 602(Delhi-Trib) 4. Pavankumar M. Sanghvi vs. Income Tax Officer (2018) 97 taxmann.com 398(SC) After considering the case law relied upon by the learned D.R. i.e. the case of NRA Iron & Steel (P.) Ltd. we note certain distinguishing features vis-a-vis factual matrix of the present case. Upon perusal of paras 3.7 & 3.8 of the said judgement, it is noted that the Ld. AO had issued summons to as many as 19 investor entities but nobody appeared on behalf of the investor companies. Submissions were received through DAK only which created a doubt about the identity of the investor company. Further the AO independently got field inquiries conducted at the location of investor companies, the result of which has been tabulated in the said para. Notice was served on few entities but the same were not replied to. In few cases, the notices were returned back submissions were received in few cases through DAK wherein the company only provided the mode of investment but no reasons were supplied for paying a huge premium of 190/- per share. Another striking feature was that most of the investors had reflected meagre income during ass....
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....ned above are squarely applicable to the facts of this case. It is noted that there is no allegation by the AO that the loan entries are coupled with similar contra-transactions in cash in the pen drive seized from the premises of Bhanwarlal Jain. The conduct of the two parties also does not lead us to an inference that each loan entry was coupled with a contra cash transaction. In fact, the appellant has provided enough evidence to demonstrate that the funds have been utilized for his business activity and subsequently, these have been genuinely returned on receipt of film receipts. It is not a case of isolated bogus transaction (wherein no return of capital or payment of interest is contemplated, as has been the case in many other Bhanwarlal Jain entries). The transactions include transactions of receipt of loans, complete or part repayment of these loans during the year and payment of interest after deduction of TDS. With respect to the inability of the appellant to provide current whereabout of these entities, it is held that there was no reason for the assessee to keep full knowledge of the activities of the other person subsequent to squaring off of the transaction related to....
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....record. The A.O has disallowed the unsecured loan obtained by the assessee on the ground that same was taken from 5 parties pertaining to Sh.Bhanwarlal Jain Group. The A.O stated that these 5 parties were engaged in providing bogus accommodation entries. The A.O has extensively discussed the issue in his assessment order in the light of the facts gathered during the course of search in case of Sh. Bhanwarlal Jain. During the course of assessment the A.O had rejected the claim of the assessee that they had established the identity and creditworthiness of the parties and stated that it had been established that assessee had entered into loan transaction with the bogus entities floated and managed by Shri Bhanwerlal Jain. The sole basis of the A.O to make addition was the statement of Shri Bhanwarlal Jain which had been retracted by him by filings affidavits before the Income Tax authorities. Mr. Nushrat Javed Khan has also retracted his statement therefore addition cannot be made merely on the basis of retracted statement without bringing on record corroborative evidence. The assessee has claimed that identify of the creditors has been established on the basis of PAN Card, return of ....
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....A) and the relevant supporting material as discussed above, we don't find any infirmity in the decision of ld. CIT(A). Since, we have sustained the findings of the ld. CIT(A) on ground no. 2 of the Revenue on the issue of the genuineness of the loan taken by the assessee, therefore, we do not find any error in the order of the ld. CIT(A)in deleting addition on account of payment of interest of Rs.50 lac and payment of brokerage of Rs. 1,12,500/- as genuine expenses. Therefore grounds nos. 2 to 4 of the Revenue are dismissed. ITA No. 1493/Mum/2021 Ground No.1(Absence of any incriminating material during the course of search) 19. As the facts and the issue involved in this ground are same as in ITA No. 1492/Mum/2021, therefore, applying the same as mutatis mutandis this ground of appeal of the assessee stand dismissed. Ground No. 2 & 3: (Inflated and bogus expenses related to production amounting to Rs.9,79,211 in respect of M/s Visual Lights and Rs.2,00,00,000 in respect of M/s Futureworks Media Pvt. Ltd. 20. The facts and issue involved in this ground of appeal are similar and identical to the ground numbers 2 and 3 of the assessee's appeal filed vide ITA No. 1492/Mu....
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....s transaction although the amount is significant. It is noted that the invoice does not have any service tax/sales tax component nor it has been subject to TDS. It is clear that this represents a bogus bill without rendering of any service. The assessee, other than submitting the invoice, has not pointed out as to how this expenditure had indeed been incurred and constituted an essential item of the production of the movie. 6.61 The other two expenses mentioned in the above chart are found to be normal charges essential for processing movies and hence, accepted as genuine." On the similar basis as discussed in the ground No. 2 and 3 of the appeal of the assessee for A.Y. 2010-11, the A.O had disallowed an amount of Rs.9,79,211/- in respect of M/s Visual Lights and Rs.2,02,07,805/- in respect of M/s Futurworks Media Pvt. Ltd. on the basis of statement of the employee of the assessee company i.e Mr. Nushrat Javed Khan and Mr. Rakesh Madhotra in respect of bogus expenses booked by the assessee company in order to inflate expenses incurred in production of movies. During the course of survey action at M/s Futurworks Media Pvt. Limited, its director Shri Gaurav Shushil Gupta....
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....ting to Rs.1,16,07,807/- which was never debited to P&L. a/c. It was also explained that assessee was having long period of association with the Future media Pvt. Ltd. and have taken its various services over the years. It was also explained that the entire work of VFX, visual effects equipment hire etc, in a particular movie such as Housefull 2, Heropanti, Anjana Anjani and Kick have been executed by M/s Future Media Pvt. Ltd. It was also explained that as the said company was executing the entire work of a particular film therefore a lump sum contract was given to M/s Future Media Pvt. Ltd. and because of long association the agreement was made brief in nature. It was also explained that disallowing the entire VFX and other charges incurred for a particular movie is illogical since VFX and other charges were essential and necessary charges for any film and without which the film cannot be completed. CIT(A) had stated in a general manner that camera hire charges for 5 months appeared to be doubtful without specifying relevant details. It is noticed that in para 9 of the assessment order, the A.O has not given any specific detail of discrepancy established from the invoices in r....
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....e contract mentioned in the MOU with reference to pricing. As such, the AO's inference is that the FMPL is charging from other parties based on manhours and there is a lumpsum consideration from the appellant is not found to be correct. 6.52 The MOU also indicates that while the agreement with appellant is for VFX work, the agreement with Pooja Entertainment is for additional services like digital intermediate and sound post (dubbing, premix/final mix/ mastering) etc. Hence, the conclusion drawn by the AO that the other MOUs are more specific than the MOUs with the appellant is also not found to be a tenable argument. 6.53 In light of the above finding, the main plank of the AO, being the variation in MOUs, in making a general finding that all the transactions between the appellant and FMPL are bogus in nature does not survive. 6.54 The AO has also relied on the findings of survey action on the G G Group to conclude that the G G Group, to which FMPL belongs, has engaged in providing accommodation entries and hence, there is a presumption that even FMPL is engaged in providing such accommodation entries. He notes that two concerns of the group had two undi....
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.... expenses as Recee expenses for the different films which comprising Air fare and Travelling Visa fees and Insurance Hotels etc. Before the lower authorities it was explained that assessee company was required to explore various countries to select the appropriate shooting location for any upcoming movie which was known "Location Recee". In the said procedure the director or its employee travel to various locations in order to examine the requirement of the upcoming movie and then obtain the necessary approval after finalizing the same. It is observed that disallowance was made on doubtful basis without linking to specific seized material demonstrating that claim of the assessee is totally bogus. There is no material brought on record to support the complete disallowances of such expenses. However, looking to the nature of expenses and material placed on record as adjudicated such issue in the appeal of the assessee vide ITA No.1492/Mum/2020 the nature of personal element cannot be ruled out therefore, we restrict the disallowance to the 50% of Rs.27,80,640/-. Accordingly, this ground of appeal of the assessee is partly allowed ITA No. 2222/Mum/2021 (Revenue's Appeal) Ground ....
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....23/Mum/2021 (Revenue's Appeal) Ground No. 1 (Ld. CIT(A) erred in allowing relief of Rs.2,60,07,056/- by holding expenses are indispensable expenses) 29. Without reiterating the facts the ld. CIT(A) has allowed these expenses holding the same as necessary for the business of the assessee. The ld. CIT(A) has examined the invoices filed by the assessee. The ld. CIT(A) has also taken into consideration the cost of production sheet of the relevant film to evidence that expenses have not been inflated. The ld. CIT(A) also stated in para 6.57 of his order that M/s Future Works Media Pvt. Ltd. (FMPL) was genuinely engaged in rendering various support services related to film production. We do not find any error in the decision of ld. CIT(A) also the issue on similar fact has been adjudicated as per ground no. 2 and 3 of the appeal of the assessee vide ITA No. 1494/Mum/2021 as supra, therefore, applying the findings mutatis mutandis this ground of appeal of the Revenue stand dismissed. ITA No. 1495/Mum/2021 (Assessee's Appeal) Ground No.1 (Absence of any incriminating material during the course of search): 30. As the issue involved in this grounds are the same as ground no....
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.... Prime Focus of VFS charges was made on doubtful basis as the ld. CIT(A) at para 6.71 of his order categorically stated that invoices raised by Prime Focus found to be in doubt without corroborating the same with any relevant material. Therefore applying mutatis mutandis the findings of Grounds 2 & 3 of ITA No.1492/Mum/2021 and ITA No. 1493/Mum/2021 these ground of appeal of the assessee are allowed. Ground No. 4: (Disallowance of Personal Expenses) 35. As the facts and the issue involved in this ground are the same as in ITA No. 1492/Mum/2021, therefore applying the findings mutatis mutandis the disallowance is restricted 50% to Rs.1,16,118/-. Therefore, this ground of appeal of the assessee is partly allowed. Ground No. 5: (Addition of Rs.3,00,000/- being salary paid to employee in cash: 36. During the course of assessment the A.O referred the statement Mr. Rakesh Madhotra that salary in cash @ Rs.25,000/- per month was given to him. In response the assessee explained that Mr. Rakesh Madhotra has retracted his statement, therefore, this contention was not tenable that he has received salary in cash. However, the A.O has not accepted the submission of the assessee and ....
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....led to corroborate the retracted statement of Mr. Nusrat Javed Khan and Mr. Madhotra with relevant supporting evidence/material therefore this ground of appeal of the Revenue stand dismissed. Ground No. 2:Deleting Payment made to M/s Nadiadwala Grandson Films Ltd.(NGFL) towards foreign shooting expenses of Rs.16,11,29,496/-) 39. The A.O opined on the basis of retracted statement of Mr. Madhotra that non-genuine payment of Rs.16 crore was made to M/s Prime Focus (London) while the actual work done was to the extent of Rs.4 crore which was carried out by M/s Prime Focus India for VFX services performed by them for "Kick" for which a separate payment of Rs.4 crore was made by assessee. It was also stated that all message relating to casting of film Kick were deleted at the instruction of chartered accountant. The A.O stated that this amount of Rs.16 crore was received back by Mr. Sajid Nadiadwala through unknown channel and main reason for inflating of such expenses was to obtain grants from UK Governments as any person incurring expenses in London for any work related to making a film would be entitled to receive 25% of the amount of expenses incurred as subsidy. The assessee s....
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....of the ld. CIT(A). Accordingly, this ground of appeal of the Revenue stand dismissed. ITA No. 1497/Mum/2021 (Assessee's Appeal) Ground No. 1: (Absence of any incriminating material during the course of search) 40. As the issue and facts involved in this ground are the same as ground no. 1 of ITA No. 1492/Mum/2021, therefore applying the mutatis mutandis this ground of appeal stand dismissed. Ground Nos. 2 & 3: (Disallowance of Rs.1,19,62,432/- being film production related expenses) 41. The facts and the issues involved pertaining to production expenses related to Monolisa Enterprises and Visual Lights Pvt. Ltd. were same as adjudicated in ground no. 2 & 3 vide ITA No. 1492/Mum/2021, similarly the ld. CIT(A) has also disallowed an amount of Rs.50 lac pertained to Viking Media solely on the basis of retracted statement of employee Mr. Pasi without corroborating with relevant material. Therefore, applying the findings of ground no. 2 & 3 of ITA No. 1492/Mum/2021 mutatis mutandis these ground of appeal of the assessee are also allowed. Ground No. 4: Disallowance of Personal Expenses of Rs.20,00,010/-: 42. As the fact and issue involved in this grounds are the same....
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....ed the appellant to re-make a Hindi movie without charging any consideration which is against normal business prudence. 6.51 From the observations of the AO, it appears that the decision to enter into an agreement for purchase of remake rights of the movie Varsham was a decision taken during the year itself when Viking had generated a substantial amount through "Executive Membership Fee" and was desirous of introducing this amount in the books, while the appellant was in lookout for fake invoices to inflate its expenses. 6.52 The contents of the agreement, which was already available with the AO, having been found and seized at the appellant's place as well as at the premises of Viking Media, tell a different story. The chronology of events has been enumerated on the first page of the agreement. The movie was made by M/s Sumanth Art Productions and released on 2004 and was a smash hit. The remake rights of the film in Hindi language were transferred by M/s Sumanth Art Productions, being the copyright owner to Mr. Satish Salvi through an agreement dated 10" May 2011 for a consideration mentioned in that agreement. Mr. Satish Salvi in turn, vide an agreement dat....
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....f Varsham were transferred was in year 2011 and subsequently, the appellant acquired these rights in 2015 when NGEPL had decided to remake the movie. It is a matter of record that the production of the movie started immediately after acquisition of such rights and the movie was released in 2016 acknowledging that it was a remake of Varsham. 6.56 Once Mr. Salvi has paid a consideration for acquiring the remake rights, it would be illogical to conclude that he would part with such right without any consideration and that the elaborate arrangement between him and the appellant was totally fake and no consideration was ever paid for such copyright. It is also a known fact that the Hindi remake Baaghi was also a huge hit in the Indian market, collecting over Rs 125 crore. In light of the above facts, it can safely be concluded that the agreement between the two parties was not a total sham and concoction. 6.57 However, it is also noted that both, Mr. Nusrat Javed Khan and Mr. Madhotra have indicated that there was some inflation in the consideration paid for these rights. it is also noted that Mr Ravindra Pasi, in his statement, at Q No. 9, admitted to having received ....
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....tra that Mr. Sajid Nadiadwala had received cash of Rs.4 crore from M/s Super Cassettes Industries Ltd. pertaining to sale of Music Rights of movie Rangoon. The A.O referred the retracted statement that it was agreed between the two parties that total amount of Rs.10 crores would be paid by M/s Super Cassettes Industries Ltd. for sale of music rights of Rangoon in cheque, out of which Rs. 5 crore has been received till date. The A.O also referred the statement of Mr. Abdul Faruq Shaikh, driver of Mr. Sajid Nadiadwala that he had brought cash of Rs.4 crore from T-Series in the first week of November, 2015. The ld. CIT(A) has deleted the addition. The relevant part of the decision of CIT(A) is reproduced as under: "Decision 7.11 While making the addition, the AO has relied on the statement of Mr. Madhotra and Mr. Abdul Faruq Shaikh to conclude that a part of the total consideration for sale of music rights of film Rangoon have been received in cash. The AO has treated the same as unaccounted income and has brought the same to tax in this year. 7.12 In this regard, the statement given by Mr. Madhotra has been examined. His statement (Q. No, 34 and 35 of st....
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....d in the earlier part of the statement that part of the consideration is received at the time of agreement and remaining part can be received subsequently, at the time of delivery of the product. 7.15 The agreement itself has been examined. It is noted that the assessee has got the agreement "Music &Audio Visual Song Rights for the Film tentatively titled "RANGOON" registered with Delhi Government on 17") November, 2015 i.e. before the search action was initiated wherein the agreement contains the total consideration at Rs.10 crore and a payment of Rs 5 crore is acknowledged. 7.16 The submission made by the appellant that the remaining payment was received subsequent to the search action and that during the year, the entire consideration of Rs.10 crore has been received and has been included in the revenue for the year is found to be correct and acceptable. In the assessment order, the AO has not doubted the agreement and has merely relied on the statement to conclude that an unaccounted receipt of Rs 4 crore with respect to this agreement. However, he has failed to address the contention of the appellant that since the entire consideration mentioned in the agreem....