IN THE INCOME TAX APPELLATE TRIBUNAL "C" BENCH, MUMBAI
BEFORE SHRI D. KARUNAKARA RAO, ACCOUNTANT MEMBER
AND SHRI AMIT SHUKLA, JUDICIAL MEMBER
I.T.A. No. 4919/M/2012 (AY:2008-2009)
M/s. Chrome Pictures Pvt Ltd., / ACIT-11(1),
504/505, Makhija Arcade, 35 Mumbai.
Road, Khar (W),
Mumbai 400 052.
./ PAN : AACCC3031E
( /Appellant) .. ( / Respondent)
/ Appellant by : Shri Ashok L. Sharma
/ Respondent by : Shri B.S. Bist, DR
/ Date of Hearing : 20.07.2015
/Date of Pronouncement : 28 .08.2015
/ O R D E R
PER D. KARUNAKARA RAO, AM:
This appeal filed by the assessee against the order of the CIT (A)-3, Mumbai
dated 30.5.2012 for the assessment year 2008-2009. In this appeal, assessee raised
the following grounds which read as under:
"1. On the facts of the case, the Ld AO erred in adding and the Ld CIT (A) in
confirming the addition of 25% of expenses of cost of production amounting
to Rs. 50,42,186/- incurred in cash terming it as non-genuine.
2. On the facts of the case, the Ld AO erred in adding and learned CIT (A)
erred in confirming the addition of prior period expenses of Rs. 5,27,346/-
to the total income."
2. Before us, at the outset, Ld Counsel for the assessee brought our attention to
the Ground no.2 and submitted that Revenue Officers made an addition of Rs.
5,27,346/- on account of prior period expenses. In this regard, after narrating the
facts, Ld Counsel for the assessee fairly mentioned that the relevant bills / invoices
were raised after the end of the previous year. On the other hand, Ld DR relied on
the orders of the Revenue Authorities.
3. After hearing both the parties, we find para 2.3 of the CIT (A)s order is
relevant in this regard. In the said para, it is discussed that the said prior period
expenses are not allowable considering the system of accounting followed by the
assessee. It is not the case of the assessee that the payability is crystallized during
the year under consideration. After considering the facts narrated by the Ld Counsel
for the assessee as well as the relevant material placed before us, we are of the
opinion, the conclusion drawn by the CIT (A) in this regard is fair and reasonable and
it does not call for any interference. Accordingly, Ground no.2 raised by the
assessee is dismissed.
4. In connection with the Ground no.1, Ld Counsel for the assessee narrated
the facts which include that the assessee is in the business of ,,Production of Ad -films
and lot of cash payments are required to be made to the technicians, wages,
administrative expenses. During the year, assessee incurred cash expenses
amounting to Rs. 2,01,68,744/-. During the assessment proceedings, assessee could
not furnish the relevant third party vouchers to substantiate its claim of the said
expenses. Considering the assessees failure, AO proceeded to make disallowance
applying the flat rate of 25% of the claim and made an addition of Rs. 50,42,186/-.
Aggrieved, assessee carried the matter in appeal before the first appellate authority.
5. During the proceedings before the first appellate authority, after considering
the submissions of the assessee, CIT (A) confirmed the conclusions of the AO and
dismissed the relevant ground of the assessee. While dismissing the assessees
ground, CIT (A) held that the assessee failed to establish the veracity and
genuineness of the payments and the cash vouchers are not supported by the third
party bills. Again aggrieved, assessee filed the present appeal by raising the above
mentioned Ground no.1.
6. During the proceedings before us, on this issue, Ld Counsel for the assessee
fairly submitted that the assessee is in this line of business for many years and the
disallowance of this magnitude is done only in the year under consideration.
Mentioning that certain ad-hoc additions of Rs. 1 lakh and Rs. 1.5 lakhs was made in
the AYs 2011-12 and 2012-13 respectively. Further, he mentioned that no
disallowance was made in the scrutiny assessment for the AY 2010-2011. Ld
Counsel for the assessee fairly submitted that proportionate ad-hoc disallowance may
be made in this year also as the disallowance @ 25% is extremely in higher side.
Further, Ld Counsel for the assessee submitted that assessee is consistently
reporting the turnover running into crores and the expenditure of Rs. 2,01,68,744/-
is required to for registering the turnover of Rs. 17.2 Crs (rounded-of).
7. On the other hand, Ld DR for the Revenue heavily relied on the orders of the
Revenue Authorities. However, he has not reply on the basis for adopting 25% for
8. We have heard both the parties and perused the orders of the Revenue
Authorities as well as the relevant material placed before us. On hearing both the
parties and on perusal of the orders of the Revenue Authorities, we find the assessee
has failed to discharge its onus in furnishing evidences in support of the cash
expenses amounting to Rs. 2.01 Crs (rounded-of). We also find similar expenses
were incurred in all the AYs commencing from AY 2007-08 to 2012-13 and the
amount of expenses incurred vary from Rs. 2.2 Crs to Rs. 1.3 Crs in respect of the
assessment years. It is also noticed that the Revenue did not make disallowance in
some years and made disallowance of Rs. 5 laksh in AY 2011-2012 and Rs. 1 lakh in
AY 2012-2013. It is also in the year under consideration, AO resorted to disallow
25% of the total claim and made huge addition of Rs. 50.42 lakhs. Considering the
above facts, we are of the opinion that such % based ad-hocisam is not acceptable
as it is without any basis. In all fairness, in our opinion, making an ad-hoc amount of
Rs. 5 lakhs would meet the ends of justice. Accordingly, we direct the AO to restrict
the disallowance to Rs. 5 lakhs on ad-hoc basis in order to bring the finality of the
litigation on this issue as discussed in open court. Thus, Ground no.1 raised by the
assessee is partly allowed.
9. In the result, appeal of the assessee is partly allowed.
Order pronounced in the open court on 28th August, 2015.
(AMIT SHUKLA) (D. KARUNAKARA RAO)
JUDICIAL MEMBER ACCOUNTANT MEMBER
.../ OKK , Sr. PS
/Copy of the Order forwarded to :
1. / The Appellant
2. / The Respondent.
3. () / The CIT(A)-
4. / CIT
5. , , / DR,
6. / Guard file.
/ BY ORDER,
/ (Dy./Asstt. Registrar)
, / ITAT, Mumbai