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2016 (5) TMI 617 - ITAT MUMBAI

2016 (5) TMI 617 - ITAT MUMBAI - TMI - Penalty u/s.271(1)(c) - the financing or investing in distribution of film is not connected with the main object of the assessee company - Held that:- Since the onus is always on the AO to prove as to what particulars of income has been concealed by the assessee or what inaccurate particulars have been furnished by the assessee. In the present case the ld. DR was not in a position to convince us as to what particulars furnished by the assessee are inaccurat .....

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I.T.A. No. 4104/Mum/2013 - Dated:- 6-4-2016 - SHRI JASON P. BOAZ, AM AND SHRI SANDEEP GOSAIN, JM For The Appellant : Shri Vivek Batra For The Respondent : Shri Niraj Sheth ORDER Per Sandeep Gosain, J. M.: The Present Appeal has been filed by the Revenue against the order of Commissioner of Income Tax (Appeals)- 8, dated 04.03.2013 for A.Y. 2003-04 on the following grounds of appeal. 1. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in deleting the penalty levi .....

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s filed on 30.10.2003 by the assessee thereby declaring total loss of ₹ 1,01,43,720/-. The assessment was completed u/s 143(3) of the I.T. Act,1961 on 13/02/2006 determining total income of ₹ 3,56,274/- by making additions of ₹ 1,05,00,000/- During the course of assessment proceedings, the AO observed that the assessee had entered into an agreement with M/s. Harmone Show biz Ltd. on 26/04/2002. As per the terms and conditions of the agreement the theatrical distribution exhibit .....

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business los. The Assessing Officer disallowed this amount as the payment was towards acquisition of capital assets and the cancellation of the same cannot be considered as revenue expenditure. Assessing Officer initiated penalty proceedings u/s 271(1)(c). Meanwhile the assessee preferred an appeal before CIT(A) who allowed the assessee s appeal. Thereafter, Department filed an appeal before the Hon ble ITAT who dismissed the assessee s appeal and allowed the appeal in favour of the Department. .....

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d 04/03/2013. 3.1 Aggrieved by the order of CIT(A), the revenue filed the present appeal before us on the grounds mentioned herein above. Ground No. 1,2 &3 Since all the grounds raised by the assessee are inter-connected and interrelated therefore we thought it fit to dispose off the same through the present consolidated order. 4. At the very outset ld. DR submitted while appearing on behalf of revenue that the agreement of the assessee with M/s. Harmone Show biz Ltd. regarding payment of &# .....

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as furnished inaccurate particulars of its income and reduced the tax liability. Ld. DR further argued that the financing or investing in distribution of film is not connected with the main object of the assessee company. Therefore, as per ld. DR the penalty was rightly levied by the AO. In the last setting aside of CIT(A) order was sought. 5. On the other hand, ld. AR representing the assessee submitted that the assessee has disclosed all the particulars of its income as well as expenditure etc .....

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n case of CIT vs. Reliance Petroproducts Private Ltd. 322 ITR 158 SC and case titled Kanbay Software India (P) Ltd. vs. DCIT decided by ITAT Pune Bench. 6. We have heard the counsels for both the parties and we have also perused the material placed on record as well as the orders passed by revenue authorities. Before we come on to the merits of the case it is necessary to evaluate the impugned order passed by CIT(A) and the operative paras are reproduced herein below: 2.3 I have carefully consid .....

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ant accordingly paid ₹ 1.50 crores and claimed the same as business loss. The Ld. CIT confirmed the addition made by the Assessing Officer by relying on several High Court/Supreme Court decisions. The matter was taken up by the appellant before the Hon'ble Tribunal and Tribunal held that it is not revenue loss but a capital loss and therefore, cannot be allowed as a deduction. The penalty therefore was levied by the Assessing Officer stating inter alia that the appellant had furnished .....

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hing of inaccurate particulars of income and vice versa.( CIT-v- Lakhdhirlalji 85 ITR 77(Guj)). Thus, there must be a clear finding about the charge of penalty. It is incumbent upon the AO to state whether penalty was being levied for concealment of income or for furnishing of inaccurate particulars of income. In the absence of such finding, the order would be bad in law.-Manu engg. Works 122 ITR 306 (Guj), New Sorathia Engg.Co 282 ITR, 642 (Guj), Padma Ram Bharali 110 ITR 54 (Gau): Thus, basis .....

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#39;s Dictionary means "to hide, withdraw, or remove from observation; cover or keep' from sight; to keep secret; to avoid disclosing or divulging. That means non disclosure of particulars of income. On the other hand, where particulars are disclosed but such disclosure is not correct, true or accurate, it would amount to furnishing of inaccurate particulars of income. For example, in case of businessman, if a particular transaction of sale is not shown in the books, it would amount to .....

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of inaccurate particulars of income" appearing in section 271 (1)(c) in the case of Kanbay Software India (P) t.td. 122 IT J 721 (Pune). It was held that the expression 'particular' refers to facts, details, specifics or the Information about someone or something. Thus, the details or information about the income would deal With factual details of income and cannot b extended to areas which are subjective such as status of the taxability of an income, admissibility of a deduction a .....

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inaccurate particulars of income. The penalty was held to be illegally imposed by the tribunal since factual details of income furnished by the 'A' were found to be correct. The matter ultimately reached the SC and the Hon'ble court upheld the view of the tribunal by holding that "mere making of the claim, which is not sustainable ln law, by itself, will not amount to furnishing inaccurate claim of furnishing inaccurate particulars regarding the income of the assessee." 2.3 .....

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A' has not disclosed the particulars of income under the main provisions or the case of 'A' falls within the scope of the deeming fictions created under the Explanations. For example, the 'A' might not disclose particular sales or dividend income or income from any source. Such instances would fall under the main provisions itself. In such cases, the burden is on the AO to establish the existence of the charge on the basis of material on record. 2.3(e) Explanation 1 creates a .....

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me in respect of which particulars are concealed. It is pertinent to note that this Explanation is restricted to a case where 'A' is unable to offer an explanation or is unable to substantiate the explanation offered by him in respect of factual detail of the income. Therefore, even this Explanation does not and cannot apply to a case where addition/disallowance has been made by mere rejection of legal claim made by AO. This view has also been taken by Pune Bench of the Tribunal in the c .....

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he impugned order passed by CIT(A) and we have also considered the arguments advanced by the counsel for parties. ld. DR. The first and foremost argument raised by ld. DR was that, the financing or investing in distribution of film is not connected with the main object of the assessee company. In this context our attention was drawn to page no. 40 of paper book where Memorandum and Articles of Association of assessee company has been placed and on perusal of the same we found in para no. 1 itsel .....

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as furnished inaccurate particulars of his income and reduce the tax liability, in this respect, our attention was drawn to paper book at page no. 62 wherein agreement between the assessee and M/s. Hormone Showbiz Pvt. Ltd., was executed and as per the conditions of agreement, certain terms and conditions were agreed between the parties and by virtue of those terms and conditions the assessee was required to make payment of ₹ 1.50 crores. We have also perused the P&L A/c at page no. 34 .....

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enture. The source of said payment has been categorically shown at page no. 30 of paper book. 8. We have also perused the communications and correspondences between the assessee and M/s. M/s. Hormone Showbiz Pvt. Ltd., which are also part and parcel of paper book and since there arose occur dispute between the parties therefore, the agreement entered between the parties was cancelled by executing the deed of cancellation which is at page no. 74 of the paper book. 9. Now, the important question b .....

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