TMI Blog2022 (6) TMI 1404X X X X Extracts X X X X X X X X Extracts X X X X ..... ial on record brought by the A.O to substantiate that in fact assessee had inflated its expenses by overbilling. AO has only relied on the retracted statement and there was no independent material /evidences to substantiate the same. A.O has not made further investigation to contrary prove the claim of occurrence of fire as claimed by the aforesaid party. We consider that the decision of ld. CIT(A) to sustain the addition of Rs.5 lac pertaining to the production expenses merely based on retracted statement was contrary to the surroundings facts and material and not justified, therefore, we direct the A.O to delete the addition. Disallowance of Personal Expenses - A.O has disallowed payment made for J.W. Mariot Hotel Membership. -as claimed that hotel was used for holding meetings with the parties related to production of the films - HELD THAT:- We observe that the part of the hotel facility for personal use cannot be ruled out however, looking to the fact that the impugned addition was merely made on the basis of the retracted statement without fully linking with specific evidences, therefore we restrict such disallowance to 50% of Rs.2,81,265/-. Therefore, this ground of a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hooting of the film at London and claim of tax rebate of Rs.3.65 cr. Therefore, we do not find any infirmity in the decision of the ld. CIT(A). Accordingly, this ground of appeal of the Revenue stand dismissed. Accommodation entry provided by Viking Media Entertainment Pvt. Ltd. - Addition made on the basis of retracted statement of the employees of the assessee - HELD THAT:- During the course of assessment the assessee has submitted the entire document, agreement invoices, bank statement in support of genuineness of transactions. It is undisputed fact that assessee had made the film Baaghi on the basis of remake of the telgue film Varsham . The A.O has purely relied upon the retracted statement without disproving the correctness of the supporting documents furnished by the assessee. No merit in the appeal of the Revenue. - ITA Nos. 1492 to 1497/Mum/2021, ITA Nos. 2221 to 2223, 2237 & 2238/Mum/2021 - - - Dated:- 7-6-2022 - Shri Amarjit Singh, Accountant Member And Ms. Kavitha Rajagopal, Judicial Member For the Appellant : Mani Jain Prateek Jain. For the Respondent : Dr. Mahesh Akhade. ORDER PER BENCH : All these cross appeals comprising of a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ether the ld. CIT(A) has erred in deleting the additions of Rs. 8,50,00,000/- made by the AO u/s. 68 of the Act without appreciating the fact that the assessee has failed to satisfy all the three conditions viz. identity, creditworthiness and genuineness of the transaction in respect of the unsecured loan availed by the assessee. 3. On the facts and circumstances of the case and in law, whether the Ld. CIT(A) erred in deleting the addition of a sum of Rs.50,00,000/-on account of interest debited towards bogus unsecured loan entries in the books of the assessee. 4. On the facts and circumstances of the case and in law, whether the Ld. CIT(A) erred in deleting the addition on account of commission expenses amounting to Rs.1,12,500/- for arranging the entry of bogus unsecured loan. 5. The appellant craves to leave, to add, to amend and/or to alter any of the ground of appeal, if need be. 2. The fact in brief is that a search and seizure action u/s 132(1) of the Act was carried out on 08.12.2015 at Nadiadwala Group covering group concerns and connected cases. The assessee company is a film production company and it was incorporated in the year 2005 with main busines ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The ld. Counsel has also submitted that other employee including Mr. Rakesh Madhotra and Mr. Ravindar Khurdan Passi have also retracted their statements on the similar grounds. On the other hand, the ld. D.R submitted that the employees have themselves admitted the fact of inflation of expenditure and supported the order of A.O. 4. Heard both the side and perused the material on record. The ld. CIT(A) has discussed in detail the factual and legal aspects in his findings at page no. 5 to 12 of his order on the issue of incriminating material found during the course of search. The ld. CIT(A) has referred purchase/work contract and purchase invoices along with the statement recorded u/s 132(4) of the Act holding that because of contrary statements of employees, nature of invoices constituent incriminating material and such facts were not existed at the time of original assessment made in the case of the assessee. After considering the facts and the detailed findings of the ld. CIT(A) discussed at page No. 5 to 12 of his order we don t find any reason to interfere in the decision of the ld. CIT(A), therefore, this ground of appeal of the assessee stand dismissed. (2) Ground ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h a view to inflate the expenses. In the cases of Monalisa Enterprises Viking Media Entertainment Pvt. Ltd. he stated that amount was paid through RTGS same was received back in cash from the party by Mr. Sajid Nadiawala. In the case of Future Work Media Ltd. he stated that the amount was paid by cheque and the same was received back in cash from the party by Mr. Nadiawala. The A.O called the following details from the said parties by issuing of notices u/s 133(6) of the Act: (a). M/s Viking Media Entertainment Private Limited :- (i) copy/ies of the agreement/s, MOU/s, Terms and Reference/s etc. entered into with assessee with respect to sale of Remake-rights of movies; (ii) details of articles in respect of sale of the aforementioned Re-make rights (such as CD/DVD of the original movie, Copy of Script, copy of the Original print of such movie) provided to assessee at the time/ before or after such sale of Re-make rights; (iii) copy/ies of correspondence undertaken with assessee such as email/s, letter/s, logbook, minutes of meetings held etc.; (iv) details of payments/part payments made by assessee against such re-make rights, i.e. the details incl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f various lights, location wise with the fees charged for such services during 'the relevant period'; (iv) The units and rates thereof at which such services were provided to assessee; (v) Details of payments/part payments made by assessee against such services (Movie wise with respective year of release mentioned against the title) including the mode of payment, Bank accounts' statements reflecting such payments by assessee, treatment of such receipts in books of accounts etc; (vi) The ledger of assessee in books of accounts for 'the relevant period' (vii) Whether, similar services have been provided to any other producer/production house/studio during 'the relevant period', if yes, then, details as asked for in respect of assessee above; Reply from M/ s Monalisa Enterprises was received on 02.11.2017 and the same has been taken on records. (d) M/s Visual Lights Private Limited:- (i) Copy/ies of the agreement/s, MOU/s, Terms and Reference/s etc. entered into with assessee with respect to services provided alongwith copy/ies of correspondence undertaken with assessee in this regard i.e. emails, letters, logbooks, Minu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 49977728 572500 10,70,03,569 Prima Focus (London) 160000000 160000000 Total 500000 21127013 0 38303771 6210379 219790778 37534932 323466873 In response the assessee explained that the said expenses were stated to be bogus expenditure only on the basis of statement of Mr. Nushrat J. Khan and Mr. Rakesh Madhotra both employee of the assessee company. It is further stated that in spite of search action carried out for 5 days not even a single documentary evidences found which showed that assessee was engaged in the alleged bogus activities mentioned in the notice. During the course of assessment proceeding Mr. Sajid Nadiadwala CMD was asked to go through the contents of the statement of Mr. Nushrat J. Khan and offer his comments. In response Mr. Sajid Nadiadwala CMD of the assessee submitted that he has gone through the st ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1) Monalisa Enterprise Visual Lights: 6. The A.O referred folder containing performa invoices, statement of account and challan issued by M/s Monalisa Enterprises for film Kick for the period relevant to A.Y. 2015-16. In response to notice u/s 133(6) the M/s Monalisa Enterprises and M/s Visual Lights Private Limited, submitted that all its light equipments accessories, office records files and papers which were kept in its premises at Sawant Niwas 4 Block, Andheri (W), Mumbai, caught fire in the night of 31.12.2014 at 00.16 hours as a result there was major loss of lights equipments accessories and documents, therefore records were not available. Therefore, the A.O stated that claim of expenses of the assessee remained unverified and non cross checked. The expenses claimed by the assessee made to these two concerns i.e Monalisa Enterprises Visual Lights were held as bogus in nature reproduced as under: Sr. No. Expenses booked in name of A.Y. 2010-11 A.Y. 2011-12 A.Y. 2012-13 A.Y. 2013-14 A.Y.2014-15 A.Y. 2015-16 A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed to the same to be received from other entities. In view of the aforesaid discussion the A.O has disallowed amount of Rs.1 crore paid to Future Work Media Pvt. Ltd pertaining to A.Y. 2010-11. 8. Aggrieved, the assessee filed the appeal before the ld. CIT(A). The ld. CIT(A) has partly allowed the appeal of the assessee. The part of the decision of CIT(A) is reproduced as under: B: Transaction of Rs 2,02,07,805 in AY 2011-12 6.57 The issue pertains to AY 2011-12 and has been dealt with while deciding the relevant grounds for AY 2011-12. C: Transaction of Rs.3,78,04,856 in AY 2013-14 6.58 The transaction pertains to AY 2013-14 and has been decided while dealing with the ground in appeal for AY 2013-14 D: Transaction of Rs.3,68,316 in AY 2014-15 6.59 The transaction pertains to AY 2014-15 and has been decided while dealing with the ground in appeal for AY 2014-15. E: Transaction of Rs.4,99,77,728/- in AY 201 6.60 The transaction pertains to A.Y. 2015-16 and has been decided while dealing with the ground in appeal for AY 2015-16. 6.61 In light of the above discussion the disallowance of an amount of Rs.5,00,000 made by the AO stands conf ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on ble Supreme Court in Vinod Solanki Vs. Union of India (92 SCL 157 held that evidence brought as record by way of confession which stand retracted must be substantially corroborated by other independent and cogent evidences which would lead adequate assurance to the court that it may seek to rely thereupon. The CBDT vide circular No.F.No.286/2/2003-IT(Inv.), dated 10.03.2003 has categorically directed that authorities should focus on collection of evidence of undisclosed income in search cases and abstain from laying undue emphasis on plan statements which are later on retracted. The relevant part of the circular is reproduced as under:- Instances have come to the notice of the Board where assessees have claimed that they have been forced to confess the undisclosed income during the course of the search seizure and survey operations. Such confessions, if not based upon credible evidence, are later retracted by the concerned assessees while filing returns of income. In these circumstances, such confessions during the course of search seizure and survey operations do not serve any useful purpose. It is, therefore, advised that there should be focus and concentration on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ises which could substantiate that the assessee group was engaged in generation of unaccounted cash. Even Mr. Sajid Nadiadwala had denied the statement and stated that no opportunity of cross-examination was provided, in spite of the facts that both the persons were present in the premises. Mr. Rakesh Madhotra, CEO had also retracted his statement immediately after the search action stating that the same was recorded under pressure by continuously questioning of 5 days. It is undisputed fact that the statements of the employees were not supported with any documentary evidences and same were retracted immediately after the search action. At para 9.5 of the assessment order the A.O stated that loose paper folder containing performa invoices, statement of accounts and challan issued by Monalisa Enterprises for film Kick for relevant to A.Y. 2015-16 were seized but the A.O had failed to substantiate anywhere in his findings that contents of such material demonstrate that assessee had obtained bogus bills to inflate the production expenses. We observe that merely retracted statements of the employees without corroborating with any other evidences/materials cannot form a sole basis of ad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Sr. No. Particulars 2010-11 2015-16 2016-17 2017-18 1. Kokilaben Hospital 3,60,000 2. Vedanta Lifestyle Furniture 1,00,920 3. Portugal Football Match Trip 72,000 . 4. Amol Waghmare Security Body Guard 49,500 5. HSBC Credit Card Sketch Clinic 25,000 6. Sunrise Luxury Sports Shoe 32,000 7. Subhan Nadiadwala Visa Expenses 85,000 8. Juhu Premises Exp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s considered as his income under the head salary for the year under consideration. Further, in respect of remaining expenses of Rs.12,48,313/- it was stated that amount of Rs.4,32,000/- was not debited in the books of account of the assessee. However, the ld. CIT(A) has restricted the addition to the amount of Rs.2,81,265/- being payment for JW Mariott Hotel Membership, stating that assessee has not given evidence for using the same for the business purposes. 12. Heard both the side and perused the material on record. During the course of search Shri Ravindar Khurdan Passi financial controller of the assessee company stated that some personal expenses have been debited to the account of the assessee company. He retracted his statement immediately after search stating that at the time of recording statement he was in physically drained and mentally disturbed state of mind as the authorized officer recorded his statement continuously throughout the day till midnight for almost 4 5 days and he had signed the statement without understanding the meaning of question raised by the authorized officer. However, during post search proceedings details of expenses were submitted. It was e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s.1,12,500/ The A.O stated that during search proceedings it was found that assessee had obtained bogus unsecured loan to the amount of Rs.11 crore from the entities controlled and managed by Sh. Bhanwarlal Jain . The A.O also noticed that assessee debited interest on the bogus unsecured loan taken in the form of accommodation entries. The detail of such loan as per page no. 43 of the assessment order is reproduced as under: Sr. No. Name of the Concerns F.Y. 2009-10 F.Y. 2010-11 F.Y. 2011-12 F.Y. 2012-13 F.Y. 2013-14 F.Y. 2014-15 F.Y. 2015-16 Grand Total 1. AASTHA IMPEX 5000000 0 0 0 0 0 0 5000000 2. MAAN DIAMOND 10000000 0 0 0 0 0 0 10000000 3. MAXIMUS GEMS ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 0 110000000 14. The AO further stated that Mr. Nushrat J. Khan in his statement admitted that these unsecured loan from were obtained from non-genuine entities through a broker Shri Pravin Talreja. Subsequently, the promoter director Shri Sajid Nadiadwala was confronted with the statement, he had not agreed with the statement and claimed that all these loans were genuine. Mr. Nusrat Javed Khan had retracted his statement immediately after search claiming that the statement had been given under extreme mental/pressure and disturbed state of mind due to continuously recording of statement throughout the day and till midnight for almost 4-5 days under pressure of officer during search. During the assessment proceedings, the A.O noticed that out of the 13 parties from whom the loan were obtained five entities were connected to the Bhanwarlal Jain i.e Astha Impex Maan Diamond, Maximus Gems, Suman Export Meenaxi Diamond Pvt. Ltd. In response to notices u/s 133(6) the parties connected to Bhanwarlal Jain have provided details i.e (i) copy of PAN card (ii) Cop of account confirmation for F.Y. 2009-10 and F.Y. 2010-11 (iii) copy of ledger a/c for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e invoices, bogus share capital / premium and bogus loans etc. for a commission. He also noted that the other entities were also of similar profile and hence, their creditworthiness was not proved. He also held that the parties did not appear when summoned u/s 131 of the Act and the appellant, on being asked, neither knew much about these entities nor could it produce these parties before the AO for confirmation. 7.30 The assessee has claimed that it had routine and natural loan transactions with these parties, undertaken through a finance broker whom commission has been paid through cheque. It is also claimed that the fact that these parties were engaged in providing bogus sale bills and other entries to many of the parties did not mean that the assessee's short term loan transaction were also of similar nature. It has been claimed that the identity of the creditors/ lenders has been established on the basis of the PAN card, return of income and a' genuineness of the transact confirmation bank statements filed before A.O where all the loans taken from above mentioned parties by account payee cheques are reflected. The creditworthiness of the creditor is established o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... repaid in the next year /same year along with interest immediately on release of the film. The nature of transactions undertaken by the lender concerns has been discussed by the AO in the behalf of certain unknown parties who want these items out of their own books. After import, while the diamonds are handed over to these parties and consideration is taken in cash, the assessee is left with stock in trade of diamonds in his books and unaccounted cash. There is a foreign exporters. The concerns are able to give bogus sale bills to needy parties receiving money through a/c payee cheques while these transactions are squared up in cash. Now, these concerns have money in their account which can be advanced to needy parties on a short term basis until the credit period in respect of the import is available. The money is paid for the foreign party within the credit period. Hence in respect of these same concerns, while the sales invoices issued by them are positively bogus as well as the share capital subscribe by them in other entities and long term loans are also bogus, the same cannot be said about all the loans advanced by these parties. Such loans have to be tested on the principle ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... llant has been examined. The code name for movie Anjana Anjani was 'Prodn 5'. The Citibank account wherein these amounts has been credited has been examined. It is noted that on receipt these amounts have been immediately spent expenses related to the movie. The bank account for the subsequent year when these amounts have been returned back, is also examined. A selected summary of the movie have been immediately utilized to repay these loans. Date Particulars Vch Type Debit Credit 01.06.2019 Cr. Opening Balance 1,86,20,569.20 01.06.2010 Dr. Subhdil Gems Payment 1,91,250 01.06.2010 Dr. Sunit Trilok Motiani Payment 16,875 01.06.2010 Dr. Murli Motiani Payment 16,875 01.06.20 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 10 Dr. Maximum Gems Payment 1,00,00,000 14.06.2010 Dr. AStha Impex Payment 50,00,000 14.06.2010 Dr. Cash in Hand-5 Contra 10,00,000 14.06.2010 Sr. Suman Exports Payment 50,00,000 14.06.2010 Dr. Subhdil Gems Payment 2,70,00,000 14.06.2010 Dr. Sunita Trilok Motiani Payment 15,00,000 14.06.2010 Murli Motiani Payment 15,00,000 14.06.2010 Dr. Yash Enterprise Payment 1,50,00,000 14.06.2010 Dr. Cash in Hand-5 Contra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 90,000 Yash Enterprise 2010-11 2,80,00,000 2,57,20,000 7,20,000 30,00,000 2011-12 30,00,000 20,00,000 51,35,000 1,35,000 Yogi Diam 2010-11 50,00,000 51,50,000 1,50,000 G.G. Photo Limited HF 2 2011-12 9,00,00,000 5,59,00,000 59,00,000 4,00,00,000 2012-13 4,00,00,000 4,00,00,000 G.G. Photo Ltd. 2010-11 6,00,00,000 2,48,00,000 48,00,000 4,00,00,000 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r to keep track of their whereabouts. In the case of Vashu Bhagnani in ITA No. 5648/Mum/2016 having similar facts the addition on account of loan taken by an assessee from m/s Daksh Diamonds (an entity controlled by Bhanwarlal Jain) was deleted by the ITAT in light of the fact the loan was taken by the assessee in 2006 and returned by him to M/s Daksh Diamonds in 2010 while the search took place on 03.10.2013 observing that one has to respect the transactions which occurred more than three years before the search and seizure action by the department and the addition was made without any supporting documents indicating that the loan entry was a bogus one. 7.39 The discussion above reveals that there is sufficient ground to infer that the borrowings taken by the appellant are not an arrangement to introduce his unaccounted cash in his books but to meet a genuine requirement of funds. It is also noted that such funds have been returned back immediately on generation of funds in form of theatre income received from distributors. Undisputedly, such transactions do not include merely lending but they also include receipt of interest and return of capital. There is no evidence that t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on who gave the statement with an affidavit then the statement recorded during the course of search does not have any evidentially value, therefore the same cannot be considered as sacrosanct to come to the conclusion that the transactions were bogus in nature. The ld. A.R further submitted that the sole basis for the AO to make additions towards unsecured loans is a statement of Shri Bhanwarlal Jain, which was subsequently retracted by him. Further, inspite of specific request, the AO declined to provide the statements or evidence relied upon and also declined to give opportunity to cross examine the parties. The Ld. AR further submitted that during the course of survey in the group cases of assessee, no incriminating material was found to link credits found in the books of account of the assessee and a/so to evidences collected from Shri Bhanwarlal Jain group cases during the search. The AO as well as the Ld. CIT(A) has given much importance to the modus operand! and evidence collected during the search in the case of Shri Bhanwarlal Jain ignoring the evidences filed by the assessed during the assessment proceedings. Therefore, when the assessee discharged initial burden by filin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e, there is no error in the findings recorded by the lower authorities. Accordingly, additions made by the A.O should be upheld. 7.40 It is noted that the facts in this case are similar to the facts of the above case. The ITAT has elaborated on various aspects and has decided the issue as below: 8. The provisions of section 68 of the Act deals with the cases, where any sum found credited In the books of account of the assessee in any Financial Year, and the assessee offers no explanation about the nature and source thereof or explanation offered by the assessee is not in the opinion of the AO satisfactory, then the sum so credited may be charged to income tax as the income of the assessee of that previous year. A plain reading of section 68 makes it very clear that in order to fix any credit within the ambit of section 68 of the Act, the AO needs to examine three ingredients i.e. identity, genuineness of transaction and creditworthiness of the parties. If the assessee proves all ingredients provided under section 68 of the Act, then the onus shifts to the AO to prove otherwise. In this legal background, if you examine the identity of the assessee in light of findings rec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r the AO to arrive at conclusion that the transactions between the parties are not genuine and which are hit by the provisions of section 68 of the Act. The AO never brought out any further facts to link credits found in the books of accounts of the assessee to the evidences found during the course of search in the case of Shri Bhanwarlal Jain except statement of Shri Bhanwarlal Jain. Even during the course of survey in group cases of assessee, no incriminating material was found which can be linked to evidences collected during the course of search in case of Shri Bhanwarlal Jain. Further, during the course of survey in assessee's group cases, the directors and employees have categorically admitted that they have personally visited office of Shri Bhanwarlal Jain Group companies for arranging Loans. The AO did not controvert this fact by bringing any other evidences. On the other hand, the assessee has filed complete details including confirmations from Loan creditors, their PAN details, master data, affidavit from the directors/partners/proprietors of those companies, income tax acknowledgements receipts along with financial statements, bank statements of loan creditors in ord ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... elied upon by the learned D.R. i.e. the case of NRA Iron Steel (P.) Ltd. we note certain distinguishing features vis-a-vis factual matrix of the present case. Upon perusal of paras 3.7 3.8 of the said judgement, it is noted that the Ld. AO had issued summons to as many as 19 investor entities but nobody appeared on behalf of the investor companies. Submissions were received through DAK only which created a doubt about the identity of the investor company. Further the AO independently got field inquiries conducted at the location of investor companies, the result of which has been tabulated in the said para. Notice was served on few entities but the same were not replied to. In few cases, the notices were returned back submissions were received in few cases through DAK wherein the company only provided the mode of investment but no reasons were supplied for paying a huge premium of 190/- per share. Another striking feature was that most of the investors had reflected meagre income during assessment year under dispute. The two companies in Mumbai as well as Guwahati were found to be non-existent. With respect to Kolkata companies, the response came through DAK only and nobody app ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ive seized from the premises of Bhanwarlal Jain. The conduct of the two parties also does not lead us to an inference that each loan entry was coupled with a contra cash transaction. In fact, the appellant has provided enough evidence to demonstrate that the funds have been utilized for his business activity and subsequently, these have been genuinely returned on receipt of film receipts. It is not a case of isolated bogus transaction (wherein no return of capital or payment of interest is contemplated, as has been the case in many other Bhanwarlal Jain entries). The transactions include transactions of receipt of loans, complete or part repayment of these loans during the year and payment of interest after deduction of TDS. With respect to the inability of the appellant to provide current whereabout of these entities, it is held that there was no reason for the assessee to keep full knowledge of the activities of the other person subsequent to squaring off of the transaction related to loans. 7.43 The reliance placed by the AO on the decisions of Hon'ble Supreme Court in the cases of Sumati Dayal and Durga Prasad More (supra). However, for such reliance, the nature of tra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ngaged in providing bogus accommodation entries. The A.O has extensively discussed the issue in his assessment order in the light of the facts gathered during the course of search in case of Sh. Bhanwarlal Jain. During the course of assessment the A.O had rejected the claim of the assessee that they had established the identity and creditworthiness of the parties and stated that it had been established that assessee had entered into loan transaction with the bogus entities floated and managed by Shri Bhanwerlal Jain. The sole basis of the A.O to make addition was the statement of Shri Bhanwarlal Jain which had been retracted by him by filings affidavits before the Income Tax authorities. Mr. Nushrat Javed Khan has also retracted his statement therefore addition cannot be made merely on the basis of retracted statement without bringing on record corroborative evidence. The assessee has claimed that identify of the creditors has been established on the basis of PAN Card, return of income, account confirmations, genuineness of the transactions have been established on the basis of account confirmations and bank statements where all the loan were taken by account payee cheques and cred ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on the issue of the genuineness of the loan taken by the assessee, therefore, we do not find any error in the order of the ld. CIT(A)in deleting addition on account of payment of interest of Rs.50 lac and payment of brokerage of Rs. 1,12,500/- as genuine expenses. Therefore grounds nos. 2 to 4 of the Revenue are dismissed. ITA No. 1493/Mum/2021 Ground No.1(Absence of any incriminating material during the course of search) 19. As the facts and the issue involved in this ground are same as in ITA No. 1492/Mum/2021, therefore, applying the same as mutatis mutandis this ground of appeal of the assessee stand dismissed. Ground No. 2 3: (Inflated and bogus expenses related to production amounting to Rs.9,79,211 in respect of M/s Visual Lights and Rs.2,00,00,000 in respect of M/s Futureworks Media Pvt. Ltd. 20. The facts and issue involved in this ground of appeal are similar and identical to the ground numbers 2 and 3 of the assessee s appeal filed vide ITA No. 1492/Mum/2021. Therefore, without reiterating the fact after applying the finding of ITA No. 1492/Mum/2021, these grounds of appeal are adjudicated as follows. The ld. CIT(A) has sustained the addit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... transaction although the amount is significant. It is noted that the invoice does not have any service tax/sales tax component nor it has been subject to TDS. It is clear that this represents a bogus bill without rendering of any service. The assessee, other than submitting the invoice, has not pointed out as to how this expenditure had indeed been incurred and constituted an essential item of the production of the movie. 6.61 The other two expenses mentioned in the above chart are found to be normal charges essential for processing movies and hence, accepted as genuine. On the similar basis as discussed in the ground No. 2 and 3 of the appeal of the assessee for A.Y. 2010-11, the A.O had disallowed an amount of Rs.9,79,211/- in respect of M/s Visual Lights and Rs.2,02,07,805/- in respect of M/s Futurworks Media Pvt. Ltd. on the basis of statement of the employee of the assessee company i.e Mr. Nushrat Javed Khan and Mr. Rakesh Madhotra in respect of bogus expenses booked by the assessee company in order to inflate expenses incurred in production of movies. During the course of survey action at M/s Futurworks Media Pvt. Limited, its director Shri Gaurav Shushil Gupta had ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 07,807/- which was never debited to P L. a/c. It was also explained that assessee was having long period of association with the Future media Pvt. Ltd. and have taken its various services over the years. It was also explained that the entire work of VFX, visual effects equipment hire etc, in a particular movie such as Housefull 2, Heropanti, Anjana Anjani and Kick have been executed by M/s Future Media Pvt. Ltd. It was also explained that as the said company was executing the entire work of a particular film therefore a lump sum contract was given to M/s Future Media Pvt. Ltd. and because of long association the agreement was made brief in nature. It was also explained that disallowing the entire VFX and other charges incurred for a particular movie is illogical since VFX and other charges were essential and necessary charges for any film and without which the film cannot be completed. CIT(A) had stated in a general manner that camera hire charges for 5 months appeared to be doubtful without specifying relevant details. It is noticed that in para 9 of the assessment order, the A.O has not given any specific detail of discrepancy established from the invoices in respect of disall ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... OU with reference to pricing. As such, the AO s inference is that the FMPL is charging from other parties based on manhours and there is a lumpsum consideration from the appellant is not found to be correct. 6.52 The MOU also indicates that while the agreement with appellant is for VFX work, the agreement with Pooja Entertainment is for additional services like digital intermediate and sound post (dubbing, premix/final mix/ mastering) etc. Hence, the conclusion drawn by the AO that the other MOUs are more specific than the MOUs with the appellant is also not found to be a tenable argument. 6.53 In light of the above finding, the main plank of the AO, being the variation in MOUs, in making a general finding that all the transactions between the appellant and FMPL are bogus in nature does not survive. 6.54 The AO has also relied on the findings of survey action on the G G Group to conclude that the G G Group, to which FMPL belongs, has engaged in providing accommodation entries and hence, there is a presumption that even FMPL is engaged in providing such accommodation entries. He notes that two concerns of the group had two undisclosed bank accounts wherein cheques wer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent films which comprising Air fare and Travelling Visa fees and Insurance Hotels etc. Before the lower authorities it was explained that assessee company was required to explore various countries to select the appropriate shooting location for any upcoming movie which was known Location Recee . In the said procedure the director or its employee travel to various locations in order to examine the requirement of the upcoming movie and then obtain the necessary approval after finalizing the same. It is observed that disallowance was made on doubtful basis without linking to specific seized material demonstrating that claim of the assessee is totally bogus. There is no material brought on record to support the complete disallowances of such expenses. However, looking to the nature of expenses and material placed on record as adjudicated such issue in the appeal of the assessee vide ITA No.1492/Mum/2020 the nature of personal element cannot be ruled out therefore, we restrict the disallowance to the 50% of Rs.27,80,640/-. Accordingly, this ground of appeal of the assessee is partly allowed ITA No. 2222/Mum/2021 (Revenue s Appeal) Ground No. 1(Against relief of Rs.2,07,805/- r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al) Ground No. 1 (Ld. CIT(A) erred in allowing relief of Rs.2,60,07,056/- by holding expenses are indispensable expenses) 29. Without reiterating the facts the ld. CIT(A) has allowed these expenses holding the same as necessary for the business of the assessee. The ld. CIT(A) has examined the invoices filed by the assessee. The ld. CIT(A) has also taken into consideration the cost of production sheet of the relevant film to evidence that expenses have not been inflated. The ld. CIT(A) also stated in para 6.57 of his order that M/s Future Works Media Pvt. Ltd. (FMPL) was genuinely engaged in rendering various support services related to film production. We do not find any error in the decision of ld. CIT(A) also the issue on similar fact has been adjudicated as per ground no. 2 and 3 of the appeal of the assessee vide ITA No. 1494/Mum/2021 as supra, therefore, applying the findings mutatis mutandis this ground of appeal of the Revenue stand dismissed. ITA No. 1495/Mum/2021 (Assessee s Appeal) Ground No.1 (Absence of any incriminating material during the course of search): 30. As the issue involved in this grounds are the same as ground no. 1 of ITA No.1492/M ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... us of VFS charges was made on doubtful basis as the ld. CIT(A) at para 6.71 of his order categorically stated that invoices raised by Prime Focus found to be in doubt without corroborating the same with any relevant material. Therefore applying mutatis mutandis the findings of Grounds 2 3 of ITA No.1492/Mum/2021 and ITA No. 1493/Mum/2021 these ground of appeal of the assessee are allowed. Ground No. 4: (Disallowance of Personal Expenses) 35. As the facts and the issue involved in this ground are the same as in ITA No. 1492/Mum/2021, therefore applying the findings mutatis mutandis the disallowance is restricted 50% to Rs.1,16,118/-. Therefore, this ground of appeal of the assessee is partly allowed. Ground No. 5: (Addition of Rs.3,00,000/- being salary paid to employee in cash: 36. During the course of assessment the A.O referred the statement Mr. Rakesh Madhotra that salary in cash @ Rs.25,000/- per month was given to him. In response the assessee explained that Mr. Rakesh Madhotra has retracted his statement, therefore, this contention was not tenable that he has received salary in cash. However, the A.O has not accepted the submission of the assessee and made d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he two parties entering the agreement and the customer who dictates the nature of MOU. It is also stated that description in each of the MOU is broad based. In the light of the above facts we consider the A.O has failed to prove contrary that VFX services were not rendered by the M/s Future Media Pvt. Ltd. and also failed to corroborate the retracted statement of Mr. Nusrat Javed Khan and Mr. Madhotra with relevant supporting evidence/material therefore this ground of appeal of the Revenue stand dismissed. Ground No. 2:Deleting Payment made to M/s Nadiadwala Grandson Films Ltd.(NGFL) towards foreign shooting expenses of Rs.16,11,29,496/-) 39. The A.O opined on the basis of retracted statement of Mr. Madhotra that non-genuine payment of Rs.16 crore was made to M/s Prime Focus (London) while the actual work done was to the extent of Rs.4 crore which was carried out by M/s Prime Focus India for VFX services performed by them for Kick for which a separate payment of Rs.4 crore was made by assessee. It was also stated that all message relating to casting of film Kick were deleted at the instruction of chartered accountant. The A.O stated that this amount of Rs.16 crore was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... After taking into consideration the finding of the ld. CIT(A) and material on record we observe that the A.O had not disproved the aforesaid material facts of incurring expenses by the assessee for shooting of the film at London and claim of tax rebate of Rs.3.65 cr. Therefore, we do not find any infirmity in the decision of the ld. CIT(A). Accordingly, this ground of appeal of the Revenue stand dismissed. ITA No. 1497/Mum/2021 (Assessee s Appeal) Ground No. 1: (Absence of any incriminating material during the course of search) 40. As the issue and facts involved in this ground are the same as ground no. 1 of ITA No. 1492/Mum/2021, therefore applying the mutatis mutandis this ground of appeal stand dismissed. Ground Nos. 2 3: (Disallowance of Rs.1,19,62,432/- being film production related expenses) 41. The facts and the issues involved pertaining to production expenses related to Monolisa Enterprises and Visual Lights Pvt. Ltd. were same as adjudicated in ground no. 2 3 vide ITA No. 1492/Mum/2021, similarly the ld. CIT(A) has also disallowed an amount of Rs.50 lac pertained to Viking Media solely on the basis of retracted statement of employee Mr. Pasi wit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was a superhit Telugu film which launched Prabhas as an extremely popular Tamil actor. The claim of the AO is that the rights for its remake in Hindi by the appellant represented a bogus transaction. The claim of the assessee is that if the AO s version is accepted, this would mean that the copyright owners of this movie allowed the appellant to re-make a Hindi movie without charging any consideration which is against normal business prudence. 6.51 From the observations of the AO, it appears that the decision to enter into an agreement for purchase of remake rights of the movie Varsham was a decision taken during the year itself when Viking had generated a substantial amount through Executive Membership Fee and was desirous of introducing this amount in the books, while the appellant was in lookout for fake invoices to inflate its expenses. 6.52 The contents of the agreement, which was already available with the AO, having been found and seized at the appellant's place as well as at the premises of Viking Media, tell a different story. The chronology of events has been enumerated on the first page of the agreement. The movie was made by M/s Sumanth Art Productions a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ake rights for a consideration. It is noted that this agreement between Mr Salvi and Sumanth Art Productions has been found and seized by the Department at bundle no. A-54 of the material seized from office premises of NGEPL and was in the knowledge of the Officer. Hence, the first time, the remake rights of Varsham were transferred was in year 2011 and subsequently, the appellant acquired these rights in 2015 when NGEPL had decided to remake the movie. It is a matter of record that the production of the movie started immediately after acquisition of such rights and the movie was released in 2016 acknowledging that it was a remake of Varsham. 6.56 Once Mr. Salvi has paid a consideration for acquiring the remake rights, it would be illogical to conclude that he would part with such right without any consideration and that the elaborate arrangement between him and the appellant was totally fake and no consideration was ever paid for such copyright. It is also a known fact that the Hindi remake Baaghi was also a huge hit in the Indian market, collecting over Rs 125 crore. In light of the above facts, it can safely be concluded that the agreement between the two parties was not a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Revenue stand dismissed. Ground No. 2 3 (The CIT(A) erred in deleting the addition of Rs.4,00,00,000/-)(Without appreciating statement of Shri Rakesh Madhotra on receiving cash from M/s Super Cassettes Industries Ltd.) 46. The A.O has opined on the basis of statement of Mr. Madhotra that Mr. Sajid Nadiadwala had received cash of Rs.4 crore from M/s Super Cassettes Industries Ltd. pertaining to sale of Music Rights of movie Rangoon. The A.O referred the retracted statement that it was agreed between the two parties that total amount of Rs.10 crores would be paid by M/s Super Cassettes Industries Ltd. for sale of music rights of Rangoon in cheque, out of which Rs. 5 crore has been received till date. The A.O also referred the statement of Mr. Abdul Faruq Shaikh, driver of Mr. Sajid Nadiadwala that he had brought cash of Rs.4 crore from T-Series in the first week of November, 2015. The ld. CIT(A) has deleted the addition. The relevant part of the decision of CIT(A) is reproduced as under: Decision 7.11 While making the addition, the AO has relied on the statement of Mr. Madhotra and Mr. Abdul Faruq Shaikh to conclude that a part of the total consideration for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cheque but observes that since an amount of Rs.5 crore was received in cheque, the receipt of Rs.4 crore in cash can be presumed to pertains to the same transaction. Such presumption is not found to be correct as Mr. Madhotra has himself elaborated in the earlier part of the statement that part of the consideration is received at the time of agreement and remaining part can be received subsequently, at the time of delivery of the product. 7.15 The agreement itself has been examined. It is noted that the assessee has got the agreement Music Audio Visual Song Rights for the Film tentatively titled RANGOON registered with Delhi Government on 17 ) November, 2015 i.e. before the search action was initiated wherein the agreement contains the total consideration at Rs.10 crore and a payment of Rs 5 crore is acknowledged. 7.16 The submission made by the appellant that the remaining payment was received subsequent to the search action and that during the year, the entire consideration of Rs.10 crore has been received and has been included in the revenue for the year is found to be correct and acceptable. In the assessment order, the AO has not doubted the agreement and has me ..... X X X X Extracts X X X X X X X X Extracts X X X X
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