Income Tax Appellate Tribunal (ITAT) has given relief to actor Shahrukh Khan by quashing reassessment order issued for allegedly not paying tax in India on remuneration for the film ‘Ra.one.’
“We are of the considered view that the re-assessment proceedings initiated by the AO (Assessing Officer) , in the present case, are bad in law on more than one count and are not in conformity with the provisions of section 147 of the Act,” the Mumbai bench of ITAT said in a ruling dated March 4. This section empowers the assessing AO to reopen the assessment proceeding if she/has reason to believe that any income chargeable to tax has escaped assessment for any assessment year.
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The bench also quashed the assessment order passed under section 143(3) related with section 147 of the Income Tax Act. Section 143(3) of Income Tax Act, provides that AOs have to determine and assess the income correctly. Different types of claims together with accounts, records and all documents enclosed with the return are required to be examined in detail in scrutiny assessments.
The matter is related with Assessment Year 2012-13, when Khan in filed original Income Tax Return, showing an income of over ₹83.42 crore. This return was selected for scrutiny and notices along with a questionnaire were issued. Based on the response, the AO, in March 2015, passed order and assessed the total income of the assessee at ₹84,17,99,923 ( over ₹84.17 crore), after making certain additions/disallowances.
Then after the expiry of 4 years from the end of the relevant assessment year, notice under section 148 (a notice issued by the income tax officer to reassess the taxpayer’s ITR if they disagree with the taxpayer’s assessment and believe that some income has not been properly assessed) was issued on March 31, 2019. In response to this notice, Khan filed his ITR in April, 2019, return of income on 29/04/2019. Post examination, the AO, assessed the total income at ₹84,17,99,920, (₹84.17 crore) after completely denying the claim.
While initiating the re-assessment proceedings, the AO recorded various reasons. According to one of such reasons, it is found that Red Chillies Entertainment (in which Khan is a director and holds half of the shares) has paid artiste remuneration to Khan ₹10 crore. for the film ‘Ra.one’ which was routed through Winford Production (UK- based line producer). Red Chillies paid ₹10 crore to UK based company after deducting TDS of ₹1 crore.
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The UK based company deducted ₹1.40 crore as FEU (UK Tax Deduction) and finally paid ₹7.6 crore to Khan. “The assessee offered this amount as income earned in UK and paid additional tax in UK of ₹2,70,17,977. This is evident that such an arrangement of payment has caused revenue loss to the government of India,” AO recorded.
However, the bench observed there were neither any fresh facts nor some information with regard to the facts previously disclosed, which came to the possession of the AO after conclusion of the scrutiny assessment proceedings. Accordingly, it quashed the notice and orders.