The order of the Bench was delivered by
B. R. MITTAL (Judicial Member).-The assessee has filed this appeal for the assessment year 2008-09 against the order of the learned Commissioner of Income-tax (Appeals) dated February 23, 2012 disputing confirmation of addition of Rs. 10,00,000 on the ground that the said amount ought to have been declared under cash method of accounting.
2 The relevant facts giving rise to this ground of appeal are that the assessee is a story and screen play writer. He is a proprietor of Mis. Bhatt Productions and engaged in the business of sale of rights. During the course of assessment proceedings, the Assessing Officer observed from the balance-sheet as on March 31, 2008 that the assessee had shown Rs. 10,00,000 under the head "current liabilities". The Assessing Officer has stated that the assessee is following the cash method of accounting. The Assessing Officer asked the assessee to explain why said advance amount should not be considered as income of the assessee. The assessee filed reply stating, inter alia, that the said amount of Rs. 10,00,000 was received from Red Chillies Entertainment P. Ltd. for purchase of negative rights of his film. "Chahat" which is advance receipt and was to be adjusted by Red Chillies Entertainment P. Ltd. on signing formal agreement. The Assessing Officer did not accept the contention of the assessee on the groun? that the assessee is following the cash method of accounting. Hence, advance so received is receipt in nature of income irrespective of the fact that when and how services are going to be performed. The Assessing Officer made the addition of the said amount of Rs. 10,00,000 to the income of the assessee. Being aggrieved, the assessee filed appeal before the first appellate authority.
On behalf of the assessee it was contended that the assessee had received the said amount of Rs. 10,00,000 from Red Chillies Entertainment P. Ltd. vide indent dated June 10, 2004 as token money in connection with acquring the negative rights of Chahat film, which was shown as revenue advance. It was further contended that even in cash basis, receipt cannot partake the character of income as the assessee only received Rs. 10,00,000 as earnest money. It was also contended that the assessee has to return back the:' advance vide letter dated September 11, 2011. The leamed Commissioner of Income-tax (Appeals) did not accept contention of the assessee and confirmed the action of the Assessing Officer. Hence, this appeal before the Tribunal.
During the course of hearing it was contended that said amount was received in the assessment year 2005-06 and was also appearing in the balance-sheet as on March 3l2005. The leamed authorised representative referred to page 42 of the paper book to substantiate his submission. He submitted that if the said amount is to be treated as income on receipt basis, it could be considered as income in the assessment year 2005-06 and not in the assessment year under consideration. He further submitted that the said amount in the assessment year under consideration appearing as an advance towards liabilities side. The leamed Departmental representative has not disputed the above facts of the assessee, save and except relying on the order of the learned Commissioner of Income-tax (Appeals).
We have carefully considered the submissions of the representative of the parties and the orders of the authorities below. We observe that the said amount of Rs. 10,00,000 was received as an advance by the assessee in the course of its business in the assessment year 2005-06. Even if the assessee following the cash system of accounting, the said advance of Rs. 10,00,000 would be considered as income of the assessee, in the year in which the assessee has performed the work. There is no material on record that the assessee has completed the work in the assessment year under consideration, viz, assessment year 2008· 09. In view of the above, we consider it prudent that thus issue be set aside to the file of the Assessing Officer to consider whether the income has ,accrued to the assessee in the assessment year under consideration, viz., assessment year 2008-09 in respect of the said advance amount received by the assessee in the assessment year 2005-06. The Assessing Officer will allow due opportunity of hearing to the assessee and decide the issue afresh after considering such evidences as may be furnished by the assessee by a reasoned order as per law. Hence, the ground of appeal taken by the assessee is allowed for statistical purposes by restoring the issue to the Assessing Officer.
6 In the result, the appeal of the assessee is allowed for statistical purposes.
7 The order pronounced on the 27th day of November, 2013.