Learning from reported judgment in case of Super Star Amitabh Bachachan

[C.A. DEV KUMAR KOTHARI]

Relevant links and references:

CIT  Versus SHRI AMITABH BACHCHAN 2012 (7) TMI 374 - BOMBAY HIGH COURT

Sections 69, 143(3), 147, 148 and 260A of the Income-tax Act, 1961.

Learning from reported judgments:

Reported judgments are a major source of information required to learn and gain experience  which the parties before the court had. In case of elaborate judgment including linked judgments of lower courts and authorities we can find treasure of information about facts, legal provisions, art of applying legal provisions in a given situation in favour of a party to the case. We can also learn about strength and weaknesses relating to facts and applicable provisions. 

While reading any judgment we read the facts of the case, the applicable provisions, various contentions raised by parties, various judgments cited and considered by the court , applicability or non applicability of judgments cited, and decision of the court.

On reading of judgments many times we can observe what was going in the mind of concerned parties and person acting on their behalf. We can also observe how he was trying to make out his case by removing weaknesses and fortifying the case with points which could lend strength.

By reading arguments of one party and counter arguments of opposite parties we can learn how to make a distinction and put a counter argument. In some cases we find considerable strength but due to wrong approach one loose the case. Whereas even in a weak case one can win by using strategic placement of relevant facts and arguments.

Learning from recently reported income-tax case of Super Star Shri Amitabh Bachchan:

The case relates to assessment year 2002-03 – a decade old matter.

The assessee filed a ROI declaring income of Rs.14.99 crores.

Then assessee filed a revised ROI in which he claimed 30% adhoc expenses (Rs. 6.31 crores) and reduced income to Rs. 8.11 crores.

When the AO asked the assessee to substantiate the expenses, assessee withdrew the claim of Rs.6.31 crore.

The AO passed a s. 143(3) assessment determining the income at Rs.56.41 crores.

The AO then issued a s. 148 notice to reopen the assessment on the ground that the assessee had met expenses of Rs.6.31 Crores out of undisclosed sources and need to be assessed as income u/s 69. Besides this, there were many more grounds for reopening the assessment. Those grounds are not being discussed in this article as the theme and scope of this article is learning from reported judgments to be more careful.

The CIT (A) & Tribunal struck down the reassessment order on the ground that the material on the basis of which the assessment was sought to be reopened was always available at the time of the original proceeding and there was no new material.

It seems that there have been some more proceedings like rectification, revision or appeal etc. against original assessment in which relief was sought and allowed, however reference of the same is not found in the reported judgments. In the reported judgment it is noticed that after reassessment income was reassessed by an order dated 31st December 2007 at  a total income of Rs.20.05 crores including addition of Rs.6.31 Crore.

In CIT vs. Amitabh Bachchan recently decided by the Bombay High Court the issue was about application of section 147 However on reading of the entire judgment and looking into history of assessment proceedings we find lot of material to learn and to be more careful while filing return of income and preferring claims. For reopening of assessment which was made u/s 143(3). The reopening was held invalid since courts found that reasons for reopening were not based on any fresh tangible material. Thus on the point of reopening the assessee has won the case on technical and factual grounds that there was no fresh tangible material which is a precondition to assume jurisdiction to re-assess income.

An eye-opener case:

This case is an eye-opener and suggest that asessee must learn to be very serious, while preparing return of income and making claims. The assessee must himself apply his mind also and should not rely solely on people looking after his tax matters. This is because ultimately the assessee is liable to pay tax, interest and penalty if his claims are not proved.

 The tax practitioners also need to learn to be very careful in such matters. In case a tax professional is asked to compensate for the damages due to his carelessness and casual approach, causing loss to his client, he may be in great trouble.

Considering the financial and social status as well as amount of returned and assessed income we can very safely and strongly presume that the income-tax matters of Super Star Shri Amitabh Bachchan are dealt with expert guidance of top tax experts. In such circumstances we find a pointer of certain claims made by him in a very casual and careless manner so that he had to withdraw claim just when the junior most authority in process of assessment, that is the Assessing Officer, started inquiry and asked him to substantiate his claim which was made in a revised return.

Apparent carelessness and casual approach:

First we can assume that there was carelessness while filing original return. It appears that homework was not done properly to explore possibilities of making possible claims. This caused reason to revise return of income subsequently.

A claim of Rs.631 lakh was not preferred in a revised return of income.  The amount involved is not small one. Thus not making claim in original return and making  such claim in revised return both points to carelessness particularly when  the assessee withdraw his claim just when the AO start making enquiry,

This shows that the people who prepared return of income and revised return of income had adopted a very casual and careless approach. While preparing original return why possibility of making claim of expenses (whether actually paid or liability incurred) was not examined. Again when preferring claim for expenses on adhoc basis, why actual payment of expenses or liability incurred was not examined.

The return preparers must have borne in mind that when a claim is made for the first time in revised return and that too of a very substantial amount, it is quite natural that the related issue will be probed in detail by tax authorities therefore a very careful approach was required instead of a careless and casual approach.

When a claim of substantial amount was made, the assessee and his tax consultants should have prepared well to substantiate the same. Withdrawals of such claim can easily be a reason to conclude that a false claim was made. 

Such approach should be avoided at all costs and in all circumstances. Otherwise assessee may land into great trouble because such cases can be very serious case in which charge of concealing income or furnishing inaccurate particulars of income can be proved by the conduct of assessee himself and reliance on tax experts may not help assessee.

Earlier articles on point of learning:

Readers may refer to other articles found on this website about learning from reported cases. 

COMMISSIONER OF INCOME TAX, CENTRAL –I Versus SHRI AMITABH BACHCHAN 2012 (7) TMI 374 - BOMBAY HIGH COURT