Case Law Details
ACIT Vs Suresh Productions (ITAT Hyderabad)
ITAT Hyderabad held that entire re-assessment proceeding is illegal and deserves to be quashed in absence of mandatory issue of notice under section 143(2) of the Income Tax Act.
Facts-
The assessee is a partnership firm engaged in film production. It filed its return on 27.11.2003. The original assessment was completed on 17.11.2005 with an addition of Rs.4,11,133/-. Subsequently, it was noticed that the assessee made a wrong claim to the tune of Rs.1,50,00,000/- emanating from the agreement dated 01.04.2002. Therefore, the assessment was reopened by issue of notice u/s. 148 dated 18.03.2010 which was served on Mr. B.S. Murthy, Manager of the assessee on 26.03.2010.
During the course of re-assessment proceedings, AO noted that the original assessment of the sister concern M/s Suresh Movies Film Distributors (SMFD) was completed u/s.143(3) on 17-11-2005 on a total income of Rs.10,84,870/-. M/s. Suresh productions produced a film called “Nee Premakai” which was released on 01-03-2002. As AO felt that the unpaid amount of Rs.1.50 Crores was not an allowable expenditure, therefore, he disallowed the same in the reassessment proceedings being excess liability claimed towards cost of acquisition of the rights of the exploitation of the film. AO made addition of Rs. 1,50,00,000/- being the difference between the amount offered at Rs.75,00,000/- and the consideration money in the agreement at Rs.2,25,00,000/-.
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