Case Law Details
Saif Ali Khan Mansurali Vs Asst. Commissioner of Income Tax (ITAT Mumbai)
ITAT Mumbai held that addition merely on the basis of seized paper which is neither signed nor dated, without any corroborative evidence, is untenable in law.
Facts- A search and seizure action u/s.132 was carried out in the case of M/s. Tips Films P. Ltd. and its Directors. During the course of search in the residence of one of the Directors Shri Kumar S. Taurani, certain papers were seized in which in page No.4 certain expenditures were recorded being payment to Artists. One of the name included in it is of the assessee Shri Saif Ali Khan against whom a payment of ` 20,00,000/- have been recorded.
Shri Kumar Taurani vide his letter submitted on 10.05.2004 and 10.06.2004 has submitted that the amount of Rs. 20,00,000/- have been made to the assessee for the services rendered as an Artist in the film “Kachche Dhaage” in cash, over and above Rs. 20,00,000/- paid in cheque.
Rejecting various explanations, AO reopened the assessment and treated the amount of Rs. 20,00,000/- as concealed income of the assessee being cash payments received from M/s Tips Films Pvt. Ltd. for acting in the film ‘Kachche Dhaage’.
CIT(A) upheld the action of the A.O. in re-opening the assessment as well as making addition of Rs. 20 lacs. Being aggrieved, the present appeal is filed.
Conclusion- A perusal of the seized paper shows that it is neither signed nor dated. Further, it does not contain the name of the picture ‘Kachche Dhaage’. The seized paper does not indicate the year or years to which the alleged unaccounted money relates. It does not contain any narration of ‘on money’ or ‘cash money’ paid to the assessee in terms of agreement dt. 14th Feb., 1996 for playing a leading role in the film ‘Kachche Dhaage’. The statement given by Mr. Taurani and the letter addressed by Mr. Taurani and Tips Films (P) Ltd. are not supported by any corroborative evidence. Further, Mr. Taurani in his reply to the questions put by Saif Ali Khan during the course of cross examination has stated that he does not re-collect the exact date, but it should be 1996 or 1999. Similarly, Mr. Taurani in his statement has categorically stated that he does not remember the denomination of the cash paid, the place where he paid the money, the time when he paid the money, the person to whom he paid the money etc. Under these circumstances, the statement given by Mr. Taurani has no evidentiary value due to so many contradictions and cannot be accepted as a valid proof especially in absence of any corroborative evidence. Further, when Mr. Taurani has stated that the amount has been paid in year 1996 or 1999 and when the Department has no evidence that the money has not been received in the year 1996, there is no basis to conclude that the amount has been received in the year 1999. In this regard, we find force in the submission of the learned counsel for the assessee that since the A.Y. prior to 1999-2000 had become time barred, therefore, this is the only reason for the Revenue to contend that the payment in question was made during the previous year relevant to A.Y. 1999-2000. In view of the detailed reasons given above we hold that the amount cannot be taxed in the impugned A.Y.
FULL TEXT OF THE ORDER OF ITAT MUMBAI
This appeal filed by the assessee is directed against the order dt. 3.12.2008 of the CIT(A)- XI, Mumbai relating to A.Y. 1999-2000.
2. The assessee in his grounds of appeal No. 1 has challenged the validity of the reassessment proceedings which has been upheld by the ld. CIT(A). In the second ground the assessee has challenged the order of the ld. CIT(A) in confirming the addition of ` 20 lacs made by the A.O.
3. Facts of the case in brief are that original return of income was filed by the assessee on 8.10.99 declaring total income of ` 20,76,110/- which was processed u/s 143(1) on 29.2.2000 accepting the returned income. Subsequently, proceedings u/s 147 of the Act were initiated and notice u/s 148 was issued and served on the assessee on 24.3.06 for the reasons recorded as under:-
“In this case the return of income for A.Y. 1999-2000 was processed u/s.143(1) on 29.02.2000 accepting the returned income of ` 20,76,110/- (inclusive of agricultural income of ` 33,663/-). M/s. Tips Films P. Ltd. 501, Durga Chambers, 5th floor, Linking Road, Khar (West), Mumbai 400 052 vide undated letter filed on 10.05.2004 has informed that they had effected cash payment of ` 20,00,000/- (Rupees Twenty Lacs only) to Mr. Saif Ali Khan in addition to payment of ` 20,00,000/- (Rupees twenty lacs only) made by cheque for rendering services as Artist in the film “Kachche Dhaage”. M/s. Tips Films P. Ltd. in their undated letter has also informed that the cash payment of ` 20,00,000/- (Rupees Twenty Lacs only) was not recorded in the books of accounts and was made in cash to Mr. Saif Ali Khan. During the course of assessment proceedings for A.Y. 2000-01, it is found that the payments mentioned above relates to a period prior to February 1999 and as such, falls within the A.Y. 1999-2000. I have, therefore, reason to believe that income chargeable to tax of ` 20,00,000/- (Rupees Twenty Lacs only) has escaped assessment for A.Y. 1999-2000.”
3.1 The assessee requested the A.O. to treat the original return of income filed as in response to the notice u/s 148 and also requested to provide him the reasons recorded for initiating the proceedings u/s 148. After rejecting the objections raised by the assessee during assessment proceedings, the A.O. proceeded to assess the income. The A.O. noted that a search and seizure action u/s.132 was carried out in the case of M/s. Tips Films P. Ltd. and its Directors on 27/7/99. During the course of search in the residence of one of the Directors Shri Kumar S. Taurani, certain papers were seized, which were kept behind the photo frame kept in his Dressing Room and seized as Annexure A-1 containing pages 1-23, in which in page No.4 certain expenditures were recorded being payment to Artists. One of the name included in it is of the assessee Shri Saif Ali Khan against whom a payment of ` 20,00,000/- have been recorded. The A.O. noted that during the course of assessment proceedings in the case of Tips Films P. Ltd. the payments recorded in Page No.4 as stated above have been treated as cash expenditure not recorded in the books of Tips Films P. Ltd. Accordingly, Shri Kumar Taurani vide his letter submitted on 10.05.2004 and 10.06.2004 has submitted that the amount of ` 20,00,000/- have been made to the assessee for the services rendered as an Artist in the film “Kachche Dhaage” in cash, over and above ` 20,00,000/- paid in cheque.
3.2 During the course of assessment proceedings for A.Y. 2000-01, the assessee was given a copy of the loose paper in which the above mentioned transactions were recorded and was asked to explain why the said cash payment of ` 20,00,000/- shall not be treated as his concealed income. In response to this the assessee’s representative vide letter dated 27.12.2005 expressed his desire to cross examine the person representing Tips Films Pvt. Ltd. Accordingly, an opportunity was given by the A.O. to the assessee on 09.01.2006 and Shri Kumar Taurani, Director of Tips Films Pvt. Ltd. was cross examined by the assessee. During the course of cross examination Shri Kumar Taurani reconfirmed the cash payments as submitted by the letters mentioned above. However, during the course of cross examination it was stated by Mr. Taurani that the film Kachche Dhaage was released in Feb. 1999 and the cash payments as above were made prior to the release of the film. Since the payments do not pertain to previous year relevant to A.Y. 2000-01, the assessment year in question was reopened and the proceedings initiated.
3.3 The assessee requested the A.O. not to make any addition on account of the following reasons:-
> No date was mentioned in the said paper, nor was the film ‘Kacheche Dhaage’ mentioned.
> The seized paper did not indicate the year or years to which the alleged unaccounted money relate.
> There is no indication that the amount in question is cash or unaccounted payment.
>A loose paper of this nature may not be genuine.
> It could be a ploy of the Tips people to avoid taxes which the Department appears to have allowed as business deduction.
> The party searched was Mr. Kumar Taurani of Tips and not the assessee. + In cross examination, Mr. Taurani gave vague and evasive replies on which no reliance can be placed.
> Mr. Taurani did not remember the date on which such payment was made, place or timing of payment and the person to whom paid.
> The assessee requested not to make addition on the basis of such loose paper.
3.4 Rejecting the various explanations given by the assessee and considering the fact that Shri Kumar Taurani, Director of the Tips Films Pvt. Ltd. vide letters filed on 10.5.04 & 10.6.04 had again reiterated during the course of cross examination by the assessee the A.O. held that the same leads to the circumstantial evidences that payment in cash of ` 20,00,000/- was accepted by the assessee. The A.O. therefore treated the amount of ` 20,00,000/- as concealed income of the assessee being cash payments received from M/s Tips Films Pvt. Ltd. for acting in the film ‘Kachche Dhaage’.
3.5 In appeal, the assessee filed written submissions, the gist of which, are as under:-
√ The admission made by the party searched binds him (for e.g. Mr. Taurani) and not the assessee.
√ The assessee had received ` 20 lakh in cheque which has been recorded in his books.
√ The ratio of the decision in Lata Mangeshkar’s case (97 ITR 696 Bom) would apply.
√ The A.O.’s letters to the assessee citing the letter from Tips stated that cash payment of ` 20 lakh was mentioned in the said loose paper on various dates and from time to time but not recorded in the regular books of account.
√ In response to query No.6 during cross-examination, Mr. Taurani was asked about the date of payment to which he replied that he did not recollect the exact date but should be 1996 or 1999.
√ The stand taken by Mr. Taurani and Tips are inconsistent because in their letter of May, 2004 it was mentioned that the payments were made on various dates and from time to time whereas in the cross examination Mr. Taurani stated that the payment was made in 1996 or 1999.
√ The said amount of ` 20 lakh was allowed as expenditure in the hands of Tips in the block assessment relevant to year ended 31.03.08. In that case the same could not be taxed in the hands of the assessee in A.Y. 1999-00.
3.6 However, the CIT(A) was not convinced with the explanation given by the assessee and upheld the action of the A.O. in re-opening the assessment as well as making addition of ` 20 lacs. While upholding the action of the A.O. in re-opening the assessment, he held that the A.O. came to be in possession of information with regard to unaccounted cash payment to the assessee by Tips. Therefore, it cannot be said that there was no information in the possession of the A.O. on the basis of which he could not have formed reason to believe. According to him ‘reason to believe’ is not the same as ‘opinion’ but is not mere suspicion either. At the stage of issue of notice, the A.O. has to have a basis linking escapement of income through formation of reason to believe. Since in the instant case, the A.O. had information in his possession that the assessee has received unaccounted cash, therefore, the notice issued u/s 148 is valid.
3.7 On merit, while upholding the addition made by the A.O., he noted that the document found and seized during the course of search indicates payment of ` 20 lacs to the assessee. The entries made in the said paper cannot simply be a figment of imagination. It does relate to specific persons and the amounts are consistent with the amounts paid through recorded channels. Therefore, it could be either recorded payments or payments over and above the recorded payments. Further, Mr. Taurani has consistently taken a stand that these were in the nature of unaccounted payments to the persons concerned including the assessee. Even during the cross examination he has held on to such stand. Therefore, the A.O. was justified in making the addition of ` 20 lacs. He accordingly rejected the contention of the assessee. Aggrieved with such order of the ld. CIT(A), the assessee is in appeal before us.
4. The ld. counsel for the assessee at the outset referring to the decision of the Tribunal in the case of ACIT vs. Ajay Devgan in ITA No. 4135/Mum/2009 for A.Y. 1999-2000 order dt. 21.5.2010 submitted that the Tribunal in the said decision has upheld the reassessment proceeding. However, the said decision is not applicable to the facts of the present case in view of the decision of Hon’ble Delhi High Court in the case of Haryana Acrylic Mfg. Co. vs. CIT reported in 308 ITR 38 (Del). He submitted that in the instant case the notice u/s 148 was served on the assessee on 24.3.06 which is just before the completion of 6 years from the end of the assessment year. Further notice u/s 148 was not accompanied with the reasons for re-opening of the assessment. Therefore, in view of the decision of Hon’ble Delhi High Court in the case of Haryana Acrylic Mfg. Co. (supra), the notice issued u/s 148 is void.
4.1 Referring to the decision of Delhi Bench of ITAT in the case of Shri Balwantrai Rai Wadhwan vs. ITO in ITA No. 4806/Del/10 for A.Y. 2001-02 order dt. 14.1.2011, he submitted that the Tribunal, following the decision of Hon’ble Delhi High Court in the case of Haryana Acrylic Mfg. Co. (supra) has quashed the re-assessment proceedings on the ground that issuance of the notice and the communication and furnishing of reasons would go hand in hand. The reasons are to be supplied to the assessee before the expiry of period of 6 years. If it has not been done then validity u/s 148 could not be upheld. Sine in the instant case, notice u/s 148 was served on 24.3.06 and the reasons for re-opening of the assessment was supplied on 29.6.06, therefore, the notice issued u/s 148 becomes barred by limitation in view of the decisions cited above. He accordingly submitted that on this preliminary ground alone the reassessment proceeding should be held as null and void.
4.2 Now coming to the merits of the case, he submitted that the addition was made on the basis of a loose paper found from the residence and business premises of M/s Tips Films Pvt. Ltd. and its Director on 27.7.99. Referring to page 3 of the paper book, the ld. counsel for the assessee drew the attention of the Bench to the said paper and submitted that the same is un-dated, unsigned and does not contain the name of the picture ‘Kachche Dhaage’. Further, the said seized document does not show any year in which the payment has been made. He submitted that against the name of the assessee an amount of ` 20 lacs has been shown. However, identical amount has been received by the assessee by cheque from the said company, therefore, it cannot be said that the assessee has received an amount of ` 20 lacs in cash over and above the amount of ` 20 lacs received by cheque. He submitted that in absence of corroborative evidence, the seized paper cannot be construed as a valid proof. The statement of Mr. Taurani has no evidentiary value due to number of contradictions and in-consistencies in his statement. He submitted that there is no witness to substantiate that extra money has been paid, the place where cash has been paid to the assessee, the denominations etc. to the assessee. He submitted that presumption u/s 132(4) can only be against Tips Films P. Ltd. and not against the assessee.
4.3 Referring to the letter dtd.10.5.2004 and 9.6.2004 addressed by Tips Films Pvt. Ltd. to the ACIT (copies of which are placed at paper book page 6 to 8) he submitted that those letters were written by Tips Films Pvt. Ltd. to the A.O. after a period of above 5 years.
4.4 Referring to the proceedings of cross examination recorded during the course of assessment proceedings for the A.Y. 2000-01 (copy of which is placed at paper book page 3 to 5), the ld. counsel for the assessee drew the attention of the Bench to the reply given by Mr. Taurani to the question put by the assessee. He submitted that Mr. Taurani in the said statement has stated that he does not recollect the exact date but it should be 1996 or 1999. He further stated that he does not recollect whom he has handed over the cash, he does not maintain any record for making cash payment, he does not remember the denomination of the cash, he does not remember the place where he made the alleged payment, he does not remember the exact time when he made the payment, he even did not remember whether the cash has been paid directly to the assessee or to any other person. Therefore, in view of all these contradictions, the statement cannot be relied upon. Mr. Taurani was evasive in his replies. Therefore, no emphasis can be given to the loose papers. For this proposition, he relied upon the decision of Hon’ble Bombay High Court in the case of CIT vs. Lata Mangeshkar reported in 97 ITR 696 wherein it has been held that entries in the books of account regarding payment to an assessee was not sufficient as there was no guarantee that the entries were genuine.
5. The ld. D.R., on the other hand, while challenging the preliminary ground on validity of the re-opening of the assessment submitted that the law nowhere mandates the A.O. to give the reasons along with 148 notice. Referring to page 3 of the paper book he submitted that the papers seized contain the names of different persons including that of the assessee to whom unaccounted cash payments have been made. The assessee has also never disputed that he has not acted in the film ‘Kachche Dhaage’. He submitted that when the assessee received notice u/s 148 on 24.3.06, he has 7 days before 31.3.06 to ask for the reason. However, the assessee filed letter dtd. 8.5.06 asking the A.O. to supply the reasons. He submitted that as per the provisions of the Act, when a notice u/s 148 is issued, one has to first file the return and then ask for the reasons recorded u/s 148. In the instant case the assessee asked the reasons recorded for the re-assessment proceeding only on 8.5.06. Therefore, the notice u/s 148 was not required to be accompanied with the reasons recorded. Distinguishing the decisions of Hon’ble Delhi High Court in the case of Haryana Acrylic Mfg. Co. (supra) he submitted that in the said case there was no indication in the reasons recorded about the failure on the part of the assessee to disclose fully and truly all material facts necessary for the assessment. Further, the reasons supplied to the assessee are different from the reasons mentioned in counter affidavit. The period between when the assessee made request for communicating the reason and when counter affidavit filed are fairly very long which was not a reasonable period. Under these circumstances, the Hon’ble Court came to the conclusion that the notice issued u/s 148 is invalid. However, in the instant case no such failures are there. There was proper recording of reasons in the re-assessment proceedings. The reasons were supplied to the assessee immediately after the request was made by him, therefore, the validity of the re-assessment proceeding cannot be disputed.
5.1 Now, coming to the merits of the case, he submitted that the assessee has only questioned the date of receipt. He has never said that he had received the money earlier to 1999. This implies that he has received the payment during the impugned A.Y. Referring to the statement of Mr. Taurani and various letters addressed to the A.O. by Tips Films Pvt. Ltd., he submitted that it has been categorically stated by them that the amount of ` 20 lacs paid in cash to the assessee is over and above the amount of ` 20 lacs paid to him by cheque. So far as the reliance of the decision of Hon’ble jurisdictional High Court in the case of Lata Mangeshkar (supra), he submitted that the said case is an old case. In the instant case specific details are there, a paper has been found and the director of the company has given his statement. The assessee has never denied that he has not acted in the film. Not a single person as per the loose paper placed at page 3 of the paper book has filed a case against Mr. Taurani or Tips Films Pvt. Ltd. till date. He submitted that the assessee has also acted in the films produced by Tips Films Pvt. Ltd. subsequently.
5.2 Referring to the provisions of section 292(1) of the Act, he submitted that when the document is found during the course of search u/s 132, it may be presumed that the said document belongs to such person and the contents of such document are true.
5.3 The ld. counsel for the assessee, in his rejoinder, again reiterated that a notice u/s 148 and reasons recorded for such re-opening go hand in hand. The assessee has no-where admitted that he had received the money. He submitted that even if the assessee has received un-accounted cash, still the same cannot be taxed in the A.Y. 1999-2000 since the director has stated that it is either in 1996 or 1999 during which the amount has been paid. If the money is paid during 1996, the case is time barred. As regards the submission of the ld. D.R. that so many names are appearing in the seized documents, the ld. counsel for the assessee submitted that the assessee is least bothered about the others or in the film industry. So far as the argument of the ld. D.R. that no one has filed a case against Mr. Taurani or Tips Films Pvt. Ltd., he submitted that it tarnishes the public image since everybody will come to know of it. Since it is confined to Income-tax Department only the assessee preferred not to file any suit.
5.4 Referring to the decision of Hon’ble Calcutta High Court in the case of Peerless Finance and Investment Co., the decision of Hon’ble Allahabad in the case of Addl. CIT vs. Hasmatrai Raj Pal reported in 167 ITR 794 (All.) and the decision of Hon’ble Delhi High Court in the case of CIT vs. Gupta Abhusan Ltd. reported in 312 ITR 166 (Delhi), he submitted that the period of escapement has to be clear in the reasons recorded. So far as the argument of the ld. D.R. regarding the presumption in the case of documents seized, he submitted that the presumption applies to the person who has been searched. In the instant case, the person searched is Tips Films Pvt. Ltd. and Mr. Taurani. Therefore the presumption applies to them and not to the assessee.
6.We have considered the rival arguments made by both the sides, perused the orders of the A.O. and the ld. CIT(A) and the paper book filed on behalf of the assessee. We have also considered the various decisions cited before us. Before deciding the legal ground challenging the validity of the re-assessment proceedings, we would first like to decide the issue on merit. In the instant case, a piece of paper containing names of different persons of the film industry including that of the assessee was found and seized during the course of search in the premises of M/s Tips Films Pvt. Ltd. and its Directors on 27th July, 1999. Against the name of the assessee in the said seized paper, an amount of ` 20 lacs has been shown. A perusal of the seized paper shows that it is neither signed nor dated. Further, it does not contain the name of the picture ‘Kachche Dhaage’. The seized paper does not indicate the year or years to which the alleged unaccounted money relates. It does not contain any narration of ‘on money’ or ‘cash money’ paid to the assessee in terms of agreement dtd. 14.2.96 for playing a leading role in the film ‘Kachche Dhaage’. The statement given by Mr. Taurani and the letter addressed by Mr. Taurani and Tips Films Pvt. Ltd. are not supported by any corroborative evidence. Further, Mr. Taurani in his reply to the questions put by Saif Ali Khan during the course of cross examination has stated that he does not re-collect the exact date, but it should be 1996 or 1999. Similarly, Mr. Taurani in his statement has categorically stated that he does not remember the denomination of the cash paid, the place where he paid the money, the time when he paid the money, the person to whom he paid the money etc. Under these circumstances, the statement given by Mr. Taurani has no evidentiary value due to so many contradictions and cannot be accepted as a valid proof especially in absence of any corroborative evidence. Further, when Mr. Taurani has stated that the amount has been paid in year 1996 or 1999 and when the Department has no evidence that the money has not been received in the year 1996, there is no basis to conclude that the amount has been received in the year 1999. In this regard, we find force in the submission of the ld. counsel for the assessee that since the assessment year prior to 1999-2000 had become time barred, therefore, this is the only reason for the Revenue to contend that the payment in question was made during the previous year relevant to A.Y. 1999-2000. In view of the detailed reasons given above we hold that the amount cannot be taxed in the impugned A.Y. Since we have decided the issue on merit, the legal ground challenging the validity of the re-assessment becomes academic in nature.
7. In the result, appeal filed by the assessee is allowed.
Order pronounced on 23.9.2011.
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