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IN THE HIGH COURT OF JUDICATURE AT MADRAS
R. MAHADEVAN, MOHAMMED SHAFFIQ, JJ.
M/s. Pyramid Films International, Chennai - Appellant
Versus
The Deputy Commissioner of Income Tax, City Circle V (Inv.), Chennai - Respondent
Tax Case (Appeal) No. 1976 of 2008
Decided On : 19-01-2022
Income Tax Act, 1961 - Section 260-A, 132, 132(4), 158BB(1) , 158BC r/w 158BD - appellant is a partnership firm consisting, as partners and engaged in the production of feature films - During the course of such business, they entered into an agreement, represented by its Proprietrix for grant of Telugu dubbing and distribution, exhibition and exploitation rights of the Tamil movie titled “Love Birds” produced by the appellant, for a total consideration - Whether on facts and circumstances of case the Income Tax Appellate Tribunal is right in law in confirming the addition as undisclosed income, assessable under Section 158 BC of the Income Tax Act, 1961 - whether said impugned amount would come under undisclosed income as contemplated under Chapter XIVB of the Act, or not – Held, Therefore, it is evident that on the basis of the statement made by the one of the partners of the assessee viz., and the entries made in the documents seized during the search, the Assessing Officer has determined the undisclosed income of the assessee - In other words, the undisclosed amount determined by the Assessing Officer has a direct nexus with the incriminating materials seized during the search. We also agree with the findings of the Tribunal that the three agreements that had been entered into by the assessee with the distributors clearly indicate that same have nothing to do with flop of film at the box office or otherwise – Court have also noticed that clause 4 of agreement between appellant / assessee and the assignee provides a default clause that in case of default in payment, appellant is at liberty to proceed against the defaulter -Whereas, it was stated before the lower authorities that the appellant did not proceed to recover balance amount and that, they waived same -Tribunal, on examination of ledger account pertaining to G.V. Films, which was seized during the search, has concluded that the amount were received by the assessee on various dates and same were duly accounted - In view of same, Tribunal has come to a definite conclusion that appellant already received the entire amount from distributors much before release of film and therefore question of waiver would not arise - Such a factual finding arrived at by Tribunal, based on material evidence, cannot be found fault with, in opinion of this court - wherein assessee filed their returns only after the conduct of inspection by Enforcement wing officials and materials seized disclosed unaccounted income and appellant did not pinpoint anything by supportive material to rebut same, we find no reason to differ with finding so rendered by Tribunal - Tax Case (Appeal) dismissed.
JUDGMENT :-
R. Mahadevan, J.
Prayer: Appeal filed under Section 260-A of The Income Tax Act, 1961 against the Order dated 15th July 2008 passed in I.T. (SS) A.No.52/MDS/02 and IT (SS) A.No.96/MDS/04 on the file of the Income Tax Appellate Tribunal, Chennai ‘B’ Bench.
1. This appeal is filed by the appellant/assessee questioning the legality and validity of the order dated 15th July 2018 passed by the Income Tax Appellate Tribunal, Chennai “B” Bench, relating to the block assessment period 01.04.1987 to 17.03.1997.
2. The factual background of the case, which prompted the appellant to file this appeal, are necessary for deciding the issue involved herein and are set out hereunder:
2.1 The appellant is a partnership firm consisting of one V. Natarajan and Ghanshyam Hemdev, as partners and engaged in the production of feature films. During the course of such business, they entered into an agreement dated 10.03.1995 with M/s.Nirmala Arts, represented by its Proprietrix Nirmala Raju for grant of Telugu dubbing and distribution, exhibition and exploitation rights of the Tamil movie titled “Love Birds” produced by the appellant, for a total consideration of Rs.60,01,000/-. Subsequently, on 25.11.1995, the appellant assigned the rights of the said movie to M/s.GV Films Limited for a total sum of Rs.35,00,000/- in respect of Salem and Dharmapuri areas and for a total consideration of Rs.15,00,000/- in respect of Tirunelveli and Kanyakumari areas, on royalty minimum guarantee basis.
2.2 While so, on 17.03.1997, a search was conducted as contemplated under Section 132 of The Income Tax Act, 1961 (in short, ‘the Act’), in the business and residential premises of the said V. Natarajan. During the course of the same, several incriminating materials including books of account of the assessee firm were recovered. Sworn statements under section 132(4) were also recorded from the said V.Natarajan and his brothers. On the basis of search report, proceedings under Section 158BC read with Section 158BD were initiated against the assessee firm and they were called upon to file their return for the block period in question. In response, the assessee filed their return in Form 2B on 17.05.1998 indicating income as ‘Nil’.
2.3 Thereafter, the assessment was finalised, based on the sworn statement of the said Natarajan, one of the partners of the assessee, recorded on 09.04.1997 under Section 131 of the Act. According to his statement, all the areas were sold and the consideration for the same were received, in terms of the agreements entered into between the parties. However, it was noticed that in the agreement dated 25.11.1995, the consideration agreed upon by the assessee was Rs.35 lakhs, whereas, in the books of account for the year 1995-96 (seized material - S22), they mentioned as if they received only Rs.25 lakhs. During enquiry, the assessee stated that Rs.10 lakhs was waived as the cheque given for the same at the time of release of the movie, was not honoured and further action was not taken, as the picture had failed; and that, a confirmation letter dated 22.11.1999 received from M/s. GV Films was also filed to that effect. Therefore, the assessee stated that the sum of Rs.10 lakhs should not be treated as a concealed income and it does not warrant initiation of the proceedings under Sections 158BC read with Section 158BD of the Act.
2.4 The assessing officer did not accept the explanation offered by the appellant and noticed from the seized material (S22) during the course of search that the amount of Rs.35 lakhs was received by the appellant/ assessee on various dates between 23.08.1995 and 11.01.1996 and duly credited to the ledger account, even prior to the release of the said film on 15.01.1996. Hence, the assessing officer brushed aside the plea of the assessee that the film did not hit the box office and it resulted in reduction of the am
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