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2015 (5) TMI 937 - BOMBAY HIGH COURT

2015 (5) TMI 937 - BOMBAY HIGH COURT - [2015] 374 ITR 503 (Bom) - Revision u/s 263 - CIT was of the view that Assessing Officer erred in addition of alleged suppressed business profit aggregating to ₹ 11 crores - Assessing Officer erred in disallowing the alleged cost of production claimed - ITAT quashed revision order - Held that:- We do not find that the Tribunal erred in holding that clause (c) of the Explanation to subsection (1) of section 263 cannot be applied. In the present case, t .....

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ng paragraphs to the case of the Assessee before the Assessing Officer, his initial order, the order of the first appellate authority, the direction issued by the first appellate authority and which was given effect to by the Assessing Officer. All these would denote that something which was very much part and parcel of the appellate authority's order and dealt with extensively therein is now sought to be revised and revisited.

We fully agree with the Tribunal when it concluded in pa .....

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her argument that applicability of Rule 9A has not been considered by the Commissioner, the Tribunal in para 15 found that this was also very much before the authorities and hence, even in relation thereto, it cannot be said that the Assessing Officer at the time of making the assessment order did not consider the applicability of Rule 9A vis a vis the claim of the Assessee on the aspect of cost of production of the film. - Decided against revenue. - Income Tax Appeal No. 1027 of 2013 - Dated:- .....

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Income Tax dated 29th March, 2012. The said Commissioner exercised power under section 263 of the Income Tax Act, 1961 and the correctness of that exercise was put in issue by the Assessee before the Tribunal. 3. Mr. Mohanty appearing for the Revenue, after inviting our attention to section 263 of the Income Tax Act, 1961 and particularly Explanation( c) to subsection (1) of the said section, submitted that clause (c) of the said Explanation to subsection (1) will not be attracted, as the Commis .....

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al questions of law. Mr.Mohanty also invited our attention to Rule 9A of the Income Tax Rules to submit that the applicability of this Rule and to the given facts and circumstances was not subject matter of the appellate exercise. In such circumstances, he submits that the Appeal deserves to be admitted. 4. Mr. Mistrilearned Senior Counsel appearing for the Assessee/Respondent, on the other hand, submits that there is no merit in this Appeal. Once there is a finding of fact by the Tribunal that .....

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ppeal. That Appeal was decided on 12th October, 2011. The Asessing Officer has given effect to the direction in the appellate authority's order. It is that order, whereby the Assessing Officer gives effect to the above direction, which is sought to be revised by the Commissioner under section 263 of the Income Tax Act, 1961. That was plainly and clearly impermissible given the above doctrine. Thirdly, the Commissioner did not put the Assessee to notice on certain aspects which he took into c .....

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notice purporting to revise the order of the assessment dated 31st December, 2009 did not mention this sale of share of theatrical rights to M/s. RGV Enterprises. If the Assessee was not put to notice of this issue, then, the final order of the Commissioner revising the Assessing Officer's order takes into consideration something which is not part of the show cause notice. On that ground also the Tribunal rightly interfered with the revisional authority's order. Consequently, this Appea .....

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as because the Assessee who was engaged in the business of production, financing and distribution of cinematographic films, filed return of income on 10th September, 2009 declaring income at ₹ 87,64,620/-. The assessment order under section 143(3) read with 153A of the Income Tax Act, 1961 was passed by the Assessing Officer on 31st December, 2009 assessing income of the Assessee at ₹ 14,37,20,890/-. 7. The order passed by the revisional authority, copy of which is at Annexure 'C .....

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e Assessee claimed that it has earned income of ₹ 11,25,00,000/- from this film. Later on, however, the Assessee claimed before the Assessing Officer that this was not income from the production of the film, but this was a sum received as share application money from various persons. The breakup of the receipt and to the tune of ₹ 11 crores was provided by the Assessee to the Assessing Officer. The Assessing Officer, therefore, had before him explanation of the Assessee that this amo .....

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of Rule 9A of the Income Tax Rules, when the film is released for exhibition on a commercial basis at least ninety days before the end of previous year, then, the cost of production of the film is to be allowed as deduction and that is restricted to the extent of income earned and the balance part of cost of production expenses are to be allowed as income of the previous year. Film "Darna Zaroori Hai" was released on promotional basis on 22nd February, 2006 and its commercial release w .....

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fact that against such an order of the Assessing Officer, the Assessee has preferred an Appeal to the Commissioner of Income Tax (Appeals). Ground No. 1 of that Appeal was whether on the facts and circumstances and in law, the Assessing Officer erred in addition of alleged suppressed business profit aggregating to ₹ 11 crores as per the order dated 31st December, 2009 (para 9.2). The first appellate authority, in dealing with this ground, in its order dated 12th October, 2011, concluded th .....

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2,34,91,380/- as per para 10 of the impugned order. In other words, if the amount of ₹ 11,25,00,000/- is not taken to be the income of the Assessee from film "Darna Zaroori Hai", then, by applying Rule 9A, the cost of production of this film deserves to be deducted and in full as claimed by the Assessee. From para 2.1 onwards in the appellate order, this aspect has been dealt with. When this aspect was considered by the first appellate authority, not only did he have before him t .....

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s, as against the expenses or cost of production to the tune of ₹ 27,19,28,504/- only a sum of ₹ 4,01,467/was deleted. 10. We find that despite this position emerging from the record and being undisputed, the order under section 263 of the Income Tax Act makes detailed reference to the show cause notice. The show cause notice as also this order passed under section 263 make detailed reference to the claims of the Assessee and which were part of the Appeal before the Commissioner and .....

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cer. Meaning thereby, the contents of the remand report, giving effect to the order of the first appellate authority, as submitted by the Assessing Officer, came to be reconsidered and revisited. In addition thereto, one more aspect of sale of theatrical rights of "Darna Zaroori Hai" to M/s. RGV Enterprises was considered. Naturally, therefore, the doctrine of merger was invoked by the Assessee and it was applied by the Tribunal to uphold the objection raised by the Assessee. 11. In th .....

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exercised so as to deal with the same matters which have been considered and decided in the Appeal. We do not find any merit in Mr. Mohanty's submission because detailed references have been made in the foregoing paragraphs to the case of the Assessee before the Assessing Officer, his initial order, the order of the first appellate authority, the direction issued by the first appellate authority and which was given effect to by the Assessing Officer. All these would denote that something whi .....

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