Rajnikanth vs Commissioner of Income Tax

R. Jayasimha Babu, J.—The assessee is a film actor. He reported, for the assessment year 1979-80, his estimated taxable income from his profession at Rs. 1,50,000 and showed a gross income of Rs. 3,51,101. He did not maintain any books of account. The ITO relying upon two agreements dated 8-3-1978, found during a search in the assessee''s residence on 3-4-1981, held that the assessee had reported only 28 per cent of his total receipts, as the two agreements found in his residence showed that the remuneration payable to him by the film production company, namely, Senthil Kumar Production was Rs. 35,000 under one agreement and Rs. 1,25,000 under the other agreement. The correspondence between the assessee and the film producers were also examined and they showed that the two agreements related to one and the same picture and the remuneration payable to the assessee for acting the picture was Rs. 1,25,000 while agreement showing a figure of Rs. 35,000 was meant only for the income tax purpose. On appeal, the Commissioner (Appeals) did not agree with the ITO. He estimated the assessee''s income by doubling the gross receipts reported by him and thereafter allowed one-fourth of that amount as expenditure and arrived at a figure of Rs. 5,26,652 as his net income from the profession. That finding of the Commissioner (Appeals) has been affirmed by the Tribunal.

The assessee aggrieved by that finding has caused this reference for deciding the questions as to whether the determination of the assessee''s net income from profession as upheld by the Tribunal is justified in law? and as to whether the mode of estimate of the assessee''s net income upheld by the Tribunal is right in law?

As noticed earlier the assessee had not maintained true and correct books of account, the best material for computing the income of the assessee. The ITO had made an estimate on the basis of certain documents which had been obtained from the residence of the assessee. The Commissioner (Appeals) considered those documents along with some other documents referred to in the order of the Commissioner (Appeals). Those other documents showed that the assessee had failed to disclose a sum of Rs. 1,250 received from ''Premalaya'' out of the total receipts of Rs. 19,000 and suppression there was 6.5 per cent of the gross receipts. The other document considered by the Commissioner (Appeals) disclosed that a sum of Rs. 4,000 received from ''Valli Manalan Pictures'' for the picture Justice Gopinath, out of the total receipts of Rs. 11,000 had not been disclosed and the extent suppression there was 36 per cent. Though the Commissioner (Appeals) would have been justified in upholding the estimate made by the ITO, he chose to reduce the income as estimated by the ITO. The revenue did not file an appeal against the order of the Commissioner (Appeals). However, the assessee filed an appeal and thereafter the revenue filed cross-objections. The cross-objections filed by the revenue was dismissed as it was beyond the period of limitation. It is apparent that the revenue had no real interest in challenging the order of the Commissioner (Appeals). The assessee''s appeal was also dismissed.

None of the authorities below and the assessee as well have been able to compute the income of the assessee on the basis of complete and the accurate data by way of books of account and supporting vouchers, etc. The assessee had reported certain figures without producing the books of account. Since the figures reported by the assessee were not found credible, the ITO estimated on the basis of some of the documents obtained from him. The basis adopted by the ITO could not be said to be arbitrary or whimsical. It was based upon the materials which had been secured from the assessee''s own premises during the search. The Commissioner (Appeals) revised the estimate made by the ITO to a lower figure though he could very well have upheld the order of the ITO. The Tribunal has affirmed the order of the Commissioner (Appeals). As we find that even the higher figure adopted by the ITO could have been sustained, the figure as determined by the Commissioner (Appeals) and the Tribunal which is less than what the ITO had estimated does not require our interference. No error of principle has been pointed out in the order of the Tribunal while it rejected the assessee''s appeal. In the result, the questions referred to us, i.e., "(1) Whether, on the facts and in the circumstances of the case, the determination of the petitioner''s net income from profession as upheld by the Tribunal is justified in law? and (2) Whether, on the facts and in the circumstances of the case, the mode of estimate of the petitioner''s net income upheld by the Tribunal is right in law?" are answered in the affirmative, in favour of the revenue and against the assessee. Parties shall bear their respective costs.