TMI Blog2009 (7) TMI 1319X X X X Extracts X X X X X X X X Extracts X X X X ..... served by him that these payments were made for the rights of the film Sar Aankho Par from M/s. Pinnacle Entertainment Pvt. Ltd. The assessee has sold these rights to the same company M/s. Pinnacle Entertainment Pvt. Ltd. of ₹ 4,43,024 by a general entry. The Assessing Officer has called the explanation from the assessee with regard to above transaction. The assessee has explained before the Assessing Officer that the sale of film rights was accepted on behalf of the assessee by M/s. Pinnacle Entertainment Pvt. Ltd. and the amount of ₹ 4,43,024 has been duly credited in the books of account. However, the Assessing Officer has not satisfied with the explanation and observed that the assessee is in the business of trading in shares and securities. The assessee had purchased these rights from M/s. Pinnacle Entertainment Pvt. Ltd. for ₹ 2,85,00,000. The assessee had sold these rights for ₹ 4,43,024. The sale of the same by assessee was done again through M/s. Pinnacle Entertainment Pvt. Ltd. from whom he has purchased the rights. The Assessing Officer came to a conclusion that the entire operation conducted by the assessee was only to defraud the revenue and b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the facts and circumstances of the case, we confirm the disallowance of ₹ 2,80,56,976. This ground is decided against the assessee. 4. The Assessing Officer has initiated the penalty proceedings under section 271(1)(c) of the Act, 1961 and issued notice dated 5-11-2003 to the assessee. Again the simple interview Memo dated 24-9-2004 and 2-3-2005 was issued to the assessee to furnish the submissions in this regard. The assessee has filed his reply before the Assessing Officer vide letter dated 7-3-2005 wherein the assessee has stated as follows:- We have neither concealed any particulars of income nor have furnished inaccurate particulars thereof. Conscious concealment is necessary for levy of penalty under section 271(1)(c) which on the facts mentioned above is absent. The assessee s explanation in this regard is bona fide, penalty under section 271(1)(c) cannot be levied. Penalty for concealment can only be levied if both the conditions are fulfilled viz., assessee has failed to substantiate its explanation and also failed to prove its bona fides. The penalty cannot be levied where additions are purely on legal issues. The assessee neither concealed income nor f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ate details which results suppression of income is also a concealment. The assessee not brought anything on record that inaccurate particulars were filed due to some reasonable cause. The conduct of the assessee proves that the default committed is deliberate and which attract the penal provision under section 271(1)(c) of the Act. The Assessing Officer has imposed minimum penalty of ₹ 1,21,45,540. 9. On being aggrieved, the assessee carried the matter in appeal before the CIT(A). The ld. CIT(A) in his order held that the assessee not made any submissions except filing of an agreement. The assessee claimed expenses on account of losses incurred by the assessee on sale of film rights. The assessee had purchased the film rights from M/s. Pinnacle Entertainment Pvt. Ltd. for an amount of ₹ 2,85,00,000 and sold this right to same company for ₹ 4,43,024. The assessee credited the same amount via general entry. This entire transaction was raised that it has resulted into loss of ₹ 2,80,56,976. The assessee had failed to produce any evidence to justify us to why the film rights were sold at a meagre amount of ₹ 4,43,024 through M/s. Pinnacle Entertainment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee submitted that a copy of agreement for purchase of film rights dated 15-7-1999 has been furnished with Assessing Officer during the assessment proceedings and also relevant documents to support the same. According to him all the details were submitted. Therefore, penalty cannot be imposed. 12. The AR of the assessee has further submits that the Explanation 1 to section 271(1)(c) has a duty on Assessing Officer to first record that there is a concealment or inaccurate particulars can seek explanation from the assessee, once he has found explanation to be false, penalty can be levied. The ld. AR of the assessee has further submits that there is no finding in the assessment order that the assessee did not offer complete particulars. The expenses actually incurred by the assessee and the Assessing Officer disallowed the expenses due to inability of assessee to explain his satisfaction and the Assessing Officer has not brought anything on record to state that the expenses have been incurred only to defraud the revenue and beyond business prudence and not based on legitimate principles. For that the Assessing Officer not recorded any finding that the explanation offered b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ] 253 ITR 6302 (Punj. Har.); (17) Asstt. CIT v. Jain Motor Tractors [2003] 85 ITD 68 (Agra); (18) Nashu Industries (P.) Ltd. v. ITO 40 ABCAJ 450; (19) Vainik Investors Ltd. v. ITO [2006] 5 SOT 591 (Delhi); (20) ITO v. Choudhary Farrque Ali Marble Co. [2004] 3 SOT 689 (Jodh.); (21) CIT v. Amitabh Bachan [IT Appeal No. 295 (Mum.) of 2008, dated 17-8-2008]; (22) Mysore Kirloskar Ltd. v. CIT [1987] 166 ITR 8363 (Kar.); (23) CIT v. Sudhir Kumar Chottubhai [2001] 250 ITR 528 (Bom.); (24) S. Puran Sethi v. IAC [1986] 19 ITD 18 (Delhi); (25) Ronaq Ram Nand Lal v. ITO [2005] 92 ITD 514 (Chd.). 16. On the other hand the ld. DR submitted that the assessee was entered into a totally new area of the business and purchased the film rights from M/s. Pinnacle Entertainment Pvt. Ltd. for an amount of ₹ 2,85,00,000 while this right was sold through the same company for ₹ 4,43,024. 17. The ld. DR further submitted that the assessee has failed to explain why he was purchased the film rights for such a huge amount and why he sold through the same company for such a low price. According to the ld. DR of the assessee, this is only an arranged and coloura ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... venture undertaken by the assessee. No particulars or details or evidence were produced by the assessee company on the ground that the matter was very old and it was very difficult to trace out the details and particulars. This is purely an evasive stand. The assessee is claiming huge amount of loss that too an extraordinary items the assessee has onerous responsibility of proving the same with documentary evidence. The Tribunal finally came to a conclusion that the loss was creation of the assessee company to reduce tax liability. 21. The Assessing Officer has initiated the penalty proceedings on the ground that the entire sale transaction was so arranged that it has resulted into loss of ₹ 2,80,56,976. The assessee has not brought anything on record to prove that this entire transaction is genuine one except filing an agreement. It is proved beyond reasonable doubt that the assessee has suppressed his income by arranging such transaction. Further, the assessee has explained before the Assessing Officer that all the particulars with regard to purchase of the film and selling of the film was produced before the Assessing Officer. Therefore, the assessee neither concealed t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessee is unbelievable and not bona fide. The Assessing Officer rightly initiated penalty proceedings under section 271(1)(c) of the Act, by issuing a notice and considered explanation given by the assessee and passed the penalty order. Insofar as surcharge is concerned, it is well settled fact that income-tax includes surcharge also. 23. After careful consideration of the order passed by the lower authorities, and the finding given by the Tribunal in the quantum appeal, we are of the considered opinion that the assessee has suppressed his income to reduce its tax liability. The Assessing Officer has rightly invoked both the limbs of section 271(1)(c) of the Act. The ld. CIT(A) rightly considered the issue and held that the assessee entered into an agreement with a view to evade the income on account of purchase and sale of film distribution rights. The agreement entered between the assessee and the said Pinnacle Entertainment Pvt. Ltd. was with an ulterim motive with an intention to defraud revenue, it can never be called as a genuine commercial arrangement and upheld the order passed by the CIT(A). Insofar as donation is concerned, the assessee failed to produce any evidence ..... X X X X Extracts X X X X X X X X Extracts X X X X
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