TMI Blog1982 (5) TMI 70X X X X Extracts X X X X X X X X Extracts X X X X ..... loitation of the said picture. In return, the assessee undertook to supply funds necessary for production of that films as and when needed. The picture was released on 30th May,1975. The assessee had a running account in its books in the name of H.M. Films, wherein it used to debit the amounts advanced by it and also to credit the amounts received from H.M. Films or from others on behalf of H.M. Films. 3. There was a raid at the premises of the assessee on 4th Oct, 1976, and a lot of materials consisting of books of accounts, and other documents were seized, and taken away by the IT Department. The Panchnama prepared on 4th Oct,1976, lists the documents and books of accounts that was seized and taken away by the IT Department. This list shows the cash book and ledge for the year under consideration as well as the aforesaid agreement dt. 7th Apr,1973 as having been seized and taken away. 4. The ITO examined the seized materials and made out an assessment order wherein he proposed to make addition to the tune of Rs. 72,88,149 including a sum of Rs. 3,33,000 being certain entries in the accounts of M/s. H.M. Films as appearing in the books of the assessee. These entries appear o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sh credits. The IAC did not accept the explanation of the assessee. He rejected the confirmatory letter given by the party affirming the genuine nature of the transactions relating to the amounts under consideration on the ground the M/s. H.M. Films did not appear to maintain any books of accounts and that M/s. H.M. Films filed its own return of income after the search and seizure at the premises of the assessee. He, therefore, directed the ITO to assess the sum of Rs. 3,33,000 which was done by the ITO accordingly. 5. The assessee appealed to the CIT (Appeals) and contended that the action of the ITO was not justified. The CIT (Appeals) observed that the conclusion of the ITO was based on materials, which were not relevant. According to him, the entries in the cash book of the assessee, though not supported by any narration in them were supported by a confirmatory letter from the party concerned. The mere fact that the said party did not maintain proper books of accounts, or that it did file its own return of income in time was, according to the CIT (A), not relevant. He observed that income was not made or unmade by mere book entries and referred to the decision in the case of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nowledge of the assessee. He pointed out that the accounting year ended on 31st July, 1975, and the books were not closed down even as late as 4th Oct, 1976. The assessment was made on 26th Sep, 1979, and there was no reason as to why the assessee did not explain the source thereof even after the passage of such a long time. He pointed out that the assessee stated, for the first time, in the course of 144B proceedings that the amounts came from M/s. H.M. Films, whereas he should have stated the same much before. According to him, the earlier conduct of the assessee was such that his later explanation was not believable. He referred to the assessee's reply dt. 17th Sep, 1979 addressed to the IAC, wherein it was stated that the amounts under consideration were deposited by M/s. H.M. Films for safe custody as the same were not required by them immediately for the production of the picture. His point was that the moneys were not given to the assessee in connection with the agreement dt. 7th April, 1973, but were given for safe custody. Under the circumstances, he urged that the decision of the CIT (Appeals) deserved to be vacated and that of the ITO deserved to be restored. 7. Shri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r to fix up the proper accounting year in which he wanted to consider the amounts under consideration. 10. Shri D.M. Harish then took us through the agreement dt 7th Apr, 1973 between the assessee and M/s. H.M. Films. Under this agreement, the assessee has been appointed as world right controllers of the picture 'Lafange' produced by H.M. Films and financed by the assessee, Clause 9(b) of the said agreement states that the assessee will have the benefit of all contracts and agreements in connection with the said picture. Clause 11(c) of agreement states that all amounts payable to the producers by any person exploiting the said picture, in any way, would be payable to the assessee, but not to the producer, so however, that if any amount was directly paid to the producer, then the producer shall immediately hand over the same to the assessee to be credited in the accounts of the picture 'Lafange'. He drew our attention to cl. 23 of the said agreement which also makes a similar provision relating to the royalties received from the use of the records of the said picture. Shri D.M.Harish then took us through the accounts of H.M. Films as appearing in the books of the assessee and po ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . The short question that is raised in the appeal is whether the following entries appearing in the cash book of the assessee can be regarded as satisfactorily explained: 19th Nov,1974 Rs. 20,000 6th Dec,1974 Rs. 50,000 10th Dec,1974 Rs. 30,000 21st Dec,1974 Rs. 50,000 28th Dec,1974 Rs. 50,000 3rd Jan, 1975 Rs. 10,000 7th Jan, 1975 Rs.1,00,000 14th Jan,1975 Rs. 10,000 15th Jan, 1975 Rs. 10,000 . Rs. 3,30,000 12. It is a fact that the assessee had entered into an agreement with M/s. H.M. Films in connection with the financing of the picture 'Lafange' and that the said agreement was seized and taken away by the IT Department, alongwith the cash book and ledger of the year under consideration. The aforesaid entries were made in pencil without any narration against them, nor were they ledgerised. In the initial stages, the assessee was not able to explain the source of these amounts, on the ground that he had no access to the books of accounts, and the accountant who wrote the books was not available, and that he was not able to recollect the exa ..... X X X X Extracts X X X X X X X X Extracts X X X X
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