K. Venkatewara Reddy, Hyderabad V. ACIT, Cir-8(1), Hyderabad

ITA 1412/HYD/2011

• Counselvise Citation: 141222514 RSA 2011
• Duration Of Justice: 2 year(s) 4 month(s) 30 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-01-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2005-2006
• Appeal Filed On: 02-08-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: P SOMASEKHAR REDDY
• Assessee Lawyers: S RAMA RAO
• Keywords: Unexplained cash credit; Reasonable cause
• Section: 143(3); 153A; 234B; 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH A, HYDERABAD BEFORE SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER AND SMT. ASHA VIJAYARAGHAVAN, JUDICIAL MEMBER ITA NOS. 2059, 1412, 1413, 1414 & 53/HYD/2011 ASSESSMENT YEARS : 2004-05, 2005-06, 2006-07, 2007 -08 & 2008-09 K. VENKATESWARA REDDY HYDERABAD. PAN: AGXPK2086R ASST. COMMISSIONER OF INCOME- TAX, CIRCLE - 8(1), HYDERABAD. (APPELLANT) (RESPONDENT) ASSESSEE BY SHRI S. RAMA RAO REVENUE BY SHRI P. SOMASEKHAR REDDY DATE OF HEARING : 06-11-2013 DATE OF PRONOUNCEMENT : 01-01-2014 O R D E R PER BENCH: THESE APPEALS BY ASSESSEE ARE DIRECTED AGAINST THE ORDERS OF CIT(A)-III, HYDERABAD. SINCE IDENTICAL ISSUES ARE I NVOLVED, THESE APPEALS WERE CLUBBED AND HEARD TOGETHER AND, THEREF ORE, WE DISPOSE OF THESE APPEALS BY WAY OF THIS CONSOLIDATED ORDER. ITA NO. 2059/HYD/2011 FOR AY 2004-05. THERE WAS A DELAY OF THREE DAYS IN FILING THIS APPE AL AND TO THIS EFFECT ASSESSEE FILED A PETITION REQUESTING FOR CON DONATION OF DELAY. ASSESSEE ALSO FILED AN AFFIDAVIT AFFIRMING THE REAS ONS FOR THE DELAY MENTIONED IN THE PETITION FOR CONDONATION OF DELAY. AFTER HEARING THE PARTIES AND PERUSING THE RECORD, WE FIND THAT ASSES SEE WAS PREVENTED 2 ITA NOS. 2059, 1412, 1413 & 1414/HYD/2011AND ITA NO. 53/HYD/12 SHRI K. VENKATESWARA REDDY BY REASONABLE CAUSE FOR FILING THE APPEAL WITHIN TH E STIPULATED TIME, AND, THEREFORE, WE CONDONE THE DELAY AND ADMIT THE APPEAL FOR ADJUDICATION. 2. GROUND NO. 1 & 4 ARE GENERAL IN NATURE. GROUND N O. 2 IS PERTAINING TO THE ADDITION WITH REFERENCE TO THE EX PENDITURE INCURRED ON CONSTRUCTION OF COMPOUND WALL. GROUND NO. 3 IS W ITH REFERENCE TO THE ADDITION TOWARDS DOMESTIC EXPENSES ON ESTIMATE BASIS. GROUND NO. 4 IS PERTAINING TO CHARGING OF INTEREST U/S 234 A, 234B & 234C OF THE ACT, WHICH IS CONSEQUENTIAL IN NATURE. 3. ASSESSEE HAD ADMITTED LONG TERM CAPITAL GAIN OF RS. 3,89,159/-. FROM THE COMPUTATION OF TOTAL INCOME FILED, THE AO NOTICED THAT ASSESSEE HAD CLAIMED AN AMOUNT OF RS. 75,000/- TOW ARDS ERECTION OF A COMPOUND WALL. SINCE ASSESSEE HAD NOT FILE ANY PR OOF BY WAY OF BILLS, VOUCHERS, ETC. IN SUPPORT OF THE SAID EXPEND ITURE INCURRED, THE AO MADE THE ADDITION OF RS. 75,000 /-. ON APPEAL, THE CIT(A) CONFIRMED THE SAID ADDITION. 3.2 AFTER CONSIDERING THE RIVAL SUBMISSIONS AND P ERUSING THE RECORD, WE ARE OF THE OPINION THAT ASSESSEE HAS NOT PROVED THE COST ON THE IMPROVEMENT MADE TO THE PROPERTY AND EVEN THE CASH FLOW STATEMENT FILED DOES NOT SHOW ANY EXPENDITURE INCURRED THEREO N. THEREFORE, IN THE ABSENCE OF ANY EVIDENCE OF INCURRING THE AMOUNT , THE SAME CANNOT BE CONSIDERED AS DEDUCTION WHILE COMPUTING C APITAL GAIN. TO THAT EXTENT, THE ORDER OF THE AO/ CIT(A) IS CONFIRM ED. HOWEVERIT WAS NOTICED THAT AO MADE THE ADDITION TO TOTAL INCOME R ETURNED WHERE AS HE HAS TO ADJUST THE SAME IN CAPITAL GAIN COMPUTATI ON, AO IS DIRECTED TO EXCLUDE THE AMOUNT AS A DIRECT ADDITION TO THE T OTAL INCOME RETURNED AND TO COMPUTE CAPITAL GAIN SEPARATELY, A S CAPITAL GAIN TAX RATE IS LESSER THAN THE TAX ON OTHER INCOMES. TO TH AT EXTENT COMPUTATION HAS TO BE MODIFIED BY THE AO. GROUND NO . 2 IS REJECTED. 3 ITA NOS. 2059, 1412, 1413 & 1414/HYD/2011AND ITA NO. 53/HYD/12 SHRI K. VENKATESWARA REDDY 4. AS REGARDS GROUND NO. 3, THE ISSUE IS OF ADDITIO N TOWARDS PERSONAL EXPENDITURE. IN THE ABSENCE OF ANY EVIDENC E OF DRAWAL IN WIFE ACCOUNT AND OF AGRICULTURAL INCOME, LD CIT(A) CONFIRMED THE ADDITION. 4.2 AFTER CONSIDERING THE RIVAL CONTENTIONS WE ARE NOT INCLINED TO ACCEPT ASSESSEE CONTENTIONS. NO EVIDENCE WAS FURNIS HED AGAINST THE WITHDRAWAL FROM ANY OTHER SOURCE TOWARDS DOMESTIC E XPENDITURE .IN VIEW OF SMALLNESS OF THE PERSONAL EXPENDITURE CLAIM ED, WE CONSIDER IT REASONABLE TO RESTRICT THE DISALLOWANCE TO RS. 30,0 00/- AS AGAINST RS. 40,000/- ADDED BY THE AO. THIS GROUND IS PARTLY ALL OWED. 5. IN THE RESULT APPEAL FOR AY 2004-05 IS PARTLY AL LOWED. ITA NO. 1412/HYD/2011 FOR AY 2005-06 6. GROUND NO. 1 & 5 ARE GENERAL IN NATURE. GROUND N O. 4 IS CHARGING OF INTEREST U/S 23A, 234B AND 234C, WHICH IS CONSEQUENTIAL IN NATURE. 7. GROUND NOS. 2 & 3 ARE PERTAINING TO THE ADDITION OF RS. 60,00,000/- TOWARDS ADVANCE AGAINST SALE OF SHOP AN D AGRICULTURAL LAND, MADE U/S 68 OF THE ACT DISBELIEVING THE SAME BY THE AO. 8. WE HAVE CONSIDERED THE SUBMISSIONS OF THE PARTI ES AND PERUSED THE RECORD. THE CONTENTION OF ASSESSEE BEFORE US IS THAT THE DOCUMENTARY EVIDENCE SUBMITTED BY HIM HAS NOT BEEN PROPERLY VERIFIED BY THE AO AND FURTHER SUBMITTED THAT IF TH E AO HAS ANY DOUBT ABOUT RECEIPT OF RS. 60,00,000/- BY WAY OF AGREEMEN T EXECUTED ON 05/06/2005, WHICH WAS CANCELLED LATER, HE SHOULD HA VE EXAMINED THE ISSUE IN DETAIL. WE ARE OF THE OPINION THAT IT IS B ETTER TO EXAMINE THE PARTIES CONCERNED AND ALSO THE CASH FLOW STATEMENT FURNISHED BY ASSESSEE, WHICH WAS NOT DONE BY AO. AFTER CONSIDERI NG THE TOTALITY OF 4 ITA NOS. 2059, 1412, 1413 & 1414/HYD/2011AND ITA NO. 53/HYD/12 SHRI K. VENKATESWARA REDDY THE FACTS OF THE CASE, IN THE INTEREST OF JUSTICE, WE RESTORE THIS ISSUE TO THE FILE OF THE AO WITH A DIRECTION TO MAKE NECESSA RY ENQUIRIES. DUE OPPORTUNITY MAY BE GIVEN TO ASSESSEE AND THEREAFTER CONSIDER THE INVESTMENT MADE IN THE PARTNERSHIP FIRM. ACCORDINGL Y, THIS GROUND IS ALLOWED FOR STATISTICAL PURPOSES. 9. IN THE RESULT, APPEAL FOR AY 2005-06 IS ALLOWED FOR STATISTICAL PURPOSES. ITA NO. 1413/HYD/2011 FOR AY 2006-07 10. GROUND NO. 1 IS GENERAL IN NATURE. GROUND NO. 2 IS REGARDING ADDITION OF RS. 30,00,00/- MADE BY THE AO U/S 68 OF THE ACT. 11. DURING THE YEAR ASSESSEE HAD MADE INVESTMENT IN M/S NV SEETHARAMANJANEYA CONSTRUCTIONS AND M/S SEETHARAMAN JANEYA CONSTRUCTIONS OUT OF THE ADVANCES OF RS. 30,00,000/ - STATED TO HAVE RECEIVED BY ASSESSEE AGAINST THE AGREEMENT ENTERED FOR SALE OF LAND ON VARIOUS DATES. DURING THE COURSE OF ASSESSMENT P ROCEEDINGS, ASSESSEE HAD FILED COPY OF AGREEMENT OF SALE EXECUT ED ON 01-06- 2005 IN FAVOUR OF SRI MANNEM RAMI REDDY AND SRI MAN NEM SASI REDDY FOR THE SALE OF LAND AND ALSO SUBMITTED COPIE S OF RECEIPTS FOR THE AMOUNTS RECEIVED BY ASSESSEE. ASSESSEE SUBMITTE D THAT AN AMOUNT OF RS. 30,00,000/- WAS RECEIVED BY HIM FROM THE SAID PARTIES FOR PURCHASE OF LAND BUT THAT THE SALE DID NOT FINA LIZE. THE AO DID NOT ACCEPT THE EXPLANATION AND TREATED THE ENTIRE AMOUN T OF RS. 30,00,000 AS UNEXPLAINED CASH CREDIT U/S 68 OF THE ACT. THE C IT(A) CONFIRMED THE ADDITION MADE BY THE AO. 12. WE HAVE CONSIDERED THE SUBMISSIONS AND EXAMINED THE ISSUE. THIS ISSUE IS MATERIALLY IDENTICAL TO THAT OF THE I SSUE DECIDED IN AY 2005-06 VIDE GROUND NOS. 2 & 3 AT PARAS 7 & 8 (SUPR A). THEREFORE, FOLLOWING THE CONCLUSIONS DRAWN THEREIN, THE ISSUE IS RESTORED TO THE 5 ITA NOS. 2059, 1412, 1413 & 1414/HYD/2011AND ITA NO. 53/HYD/12 SHRI K. VENKATESWARA REDDY FILE OF THE AO WITH IDENTICAL DIRECTIONS. THIS GROU ND IS ALLOWED FOR STATISTICAL PURPOSES. 13. GROUND NO. 3 IS DIRECTED AGAINST THE DISALLOWAN CE OF EXPENDITURE OF RS. 6,00,000/- INCURRED FOR LEVELING OF LAND AND CONSTRUCTION OF COMPOUND WALL CLAIMED AS COST OF IM PROVEMENTS FOR THE PURPOSE OF CAPITAL GAINS. 14. ASSESSEE HAD ADMITTED LONG TERM CAPITAL GAIN OF RS. 4,39,090/-. FROM THE COMPUTATION OF TOTAL INCOME FILED, THE AO NOTICED THAT ASSESSEE HAD CLAIMED AN AMOUNT OF RS. 1,00,000/- AN D RS. 5,00,000/- TOWARDS CLEANING, LEVELING & FENCING AND MUD FILLING RESPECTIVELY. SINCE ASSESSEE HAD NOT FILED ANY PROO F BY WAY OF BILLS, VOUCHERS, ETC. IN SUPPORT OF THE SAID EXPENDITURE I NCURRED, THE AO MADE THE ADDITION OF RS. 6,00,000/-. ON APPEAL, TH E CIT(A) CONFIRMED THE SAID ADDITION. 15. WE HAVE CONSIDERED RIVAL SUBMISSIONS AND PERUSE D THE RECORD AS WELL AS THE ORDERS OF REVENUE AUTHORITIES. WE HA VE EXAMINED THE CASH FLOW STATEMENT ALSO AND NOTICED THAT THE AMOUN T OF RS. 6,00,000/- HAS NOT BEEN SHOWN AS EXPENDITURE IN WAY S AND MEANS STATEMENT, THEREFORE, IN THE ABSENCE OF EXPLANATION ABOUT SOURCE / EVIDENCE OF HAVING SPENT THE AMOUNT OF EXPENDITURE BY WAY OF DOCUMENTS, THE SAME CANNOT BE ALLOWED TO THAT EXTEN T. ORDER OF AO/CIT(A) IS CONFIRMED. GROUND RAISED BY ASSESSEE IS DISMISSED. 16. IN THE RESULT, APPEAL FOR AY 2006-07 IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. ITA NO. 1414/HYD/11 FOR AY 2007-08 17. GROUND NO. 1 & 5 ARE GENERAL IN NATURE. GROUND NOS. 2 & 3 ARE PERTAINING TO ADDITION OF RS. 16,11,442/- ON ACCOUN T OF INTEREST RECEIPT 6 ITA NOS. 2059, 1412, 1413 & 1414/HYD/2011AND ITA NO. 53/HYD/12 SHRI K. VENKATESWARA REDDY FROM M/S NVM SEETHARAMANJANEYA CONSTRUCTIONS AND TH E ADDITION OF RS. 19,80,092/- ON THE GROUND THAT THE SAME REPRESE NT THE INTEREST ON CAPITAL FROM SEETHARAMANJANEYA CONSTRUCTIONS. 18. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, TH E AO FOUND THAT AS PER THE SEIZED DOCUMENT, VIDE ANNEXURE NO. A/DNR/06, ASSESSEE WAS PAID INTEREST AMOUNTING TO RS. 16,11,4 42/- ON HIS CAPITAL BY THE FIRM M/S NVM CONSTRUCTIONS. HE FURT HER NOTED THAT ASSESSEE WAS ALSO PAID INTEREST OF RS. 19,80,092/- BY THE FIRM M/S SEETHARAMANJANEYA CONSTRUCTIONS, AS PER SEIZED DOCU MENT, VIDE ANNEXURE NO. A/DNR/18, DURING THE YEAR RELEVANT TO AY 2007-08. HOWEVER, STATING THAT BOTH SUCH AMOUNTS HAD NOT BEE N OFFERED BY ASSESSEE FOR TAXATION IN THE RETURN OF INCOME FILE D BY HIM FOR THIS ASSESSMENT YEAR, THE AO ADDED THE SAID AMOUNTS AGGR EGATING TO RS. 35,91,534/- TO HIS RETURNED INCOME AND COMPLETED TH E ASSESSMENT ON A TOTAL INCOME OF RS. 39,71,340/- U/S 143(3) R.W.S. 153A OF THE ACT ON 30-12-2009. THE LEARNED CIT(A) CONFIRMED THE ACTIO N OF THE AO. 19. BEFORE US, THE LEARNED COUNSEL SUBMITTED THAT T HE FIRM NVM SEETHARAMANJANEYA CONSTRUCTIONS CREDITED INTEREST T O THE PARTNERS @ 24% AND THE AO WHILE COMPLETING THE ASSESSMENT OF T HE SAID FIRM ALLOWED INTEREST PAID TO PARTNERS AT 12% PER ANNUM ON THE CAPITAL AND DISALLOWED THE BALANCE AMOUNT. FURTHER, IT WAS SUBM ITTED THAT ASSESSEE HAS A CURRENT ACCOUNT IN THE FIRM AND HE P AID A NET INTEREST OF RS. 1,07,649/- TO THE FIRM AND, THUS, THE INTERE ST CREDITED BY THE FIRM TO THE CAPITAL ACCOUNT OF ASSESSEE WAS OFF-SET BY THE INTEREST PAID BY ASSESSEE. HE, THEREFORE, CONTENDED THAT THE AO BROUGHT TO TAX THE ENTIRE AMOUNT OF INTEREST CREDITED TO THE C APITAL ACCOUNT OF ASSESSEE AS PER ANNEXURE NO. A/DNR/06 OF THE SEIZE MATERIAL. I T WAS SUBMITTED THAT ANY INTEREST PAID TO PARTNER WHICH W AS NOT ALLOWED AS DEDUCTION, CANNOT BE BROUGHT TO TAX IN THE HANDS OF THE PARTNER. 7 ITA NOS. 2059, 1412, 1413 & 1414/HYD/2011AND ITA NO. 53/HYD/12 SHRI K. VENKATESWARA REDDY 20. THE LEARNED COUNSEL FURTHER SUBMITTED THAT IN T HE REGULAR RETURN OF INCOME FILED, THE PARTNERSHIP FIRM DID NO T DEBIT SUCH INTEREST PAID TO THE PARTNERS. IT WAS SUBMITTED THA T ACCORDING TO PROVISIONS OF SECTION 28(V), IN CASE THE AMOUNT OF INTEREST, SALARY, BONUS OR COMMISSION IS NOT ALLOWED AS A DEDUCTION U /S 40(B) IN THE HANDS OF THE FIRM, SUCH AMOUNT SHALL NOT BE INCLUDE D IN THE HANDS OF THE PARTNER. 21. THE LEARNED COUNSEL PLACED ON RECORD THE DECISI ON OF COORDINATE BENCH IN THE CASE OF G. VENKAT RAO AND G . MADHAVA RAO IN ITA NO. 1075 & 1076/HYD/2011, ORDER DATED 10 -07-2012 WHERE ON SIMILAR SET FACTS COORDINATE BENCH DECIDED AS UNDER: 8. WITH RESPECT TO THE ADDITION OF RS. 6,06,332/-, THE ASSESSEE SUBMITTED A COPY OF THE RETURN OF INCOME F OR THE ASSESSMENT YEAR 2008-09. THE LEARNED COUNSEL FOR TH E ASSESSEE SUBMITTED THAT THERE IS INCOME FOR THE YEA R UNDER CONSIDERATION AND THE PROFIT & LOSS ACCOUNT DOES NO T DEBIT ANY INTEREST PAID TO THE PARTNERS. EVEN THE CAPITAL ACC OUNT DOES NOT HAVE ANY CREDIT UNDER THE HEAD INTEREST. INTERES T PAID TO PARTNERS, WHICH HAS BEEN DISALLOWED IN THE HANDS OF THE PARTNERSHIP FIRMS CANNOT BE ASSESSED IN THE HANDS O F THE PARTNERS. IN THESE CIRCUMSTANCES, WE DEEM IT FIT TO SET ASIDE THE ISSUES WITH RESPECT TO THE ADDITION OF RS. 3,54,65 5/- AND THE ADDITION OF RS. 6,06,332/- TO THE FILE OF THE ASSE SSING OFFICER TO DETERMINE THE CORRECT AMOUNT OF INTEREST RECEIVED B Y THE ASSESSEE FROM PARTNERSHIP FIRMS. ACCORDINGLY, GROUN D NOS. 4 & 5 ARE ALLOWED FOR STATISTICAL PURPOSES. 22. IN VIEW OF THE DECISION OF THE COORDINATE BENCH , WE SET ASIDE THE ISSUE TO THE FILE OF THE ASSESSING OFFICER TO B RING TO TAX IN THE HANDS OF ASSESSEE ONLY TO THE EXTENT OF INTEREST AL LOWED IN THE CASE OF THE FIRM. THUS, GROUND NOS. 2 & 3 ARE ALLO WED FOR STATISTICAL PURPOSES. 23. GROUND NO. 4 IS REGARDING CHARGING OF INTEREST U/S 234B AND 234C OF THE ACT, WHICH IS CONSEQUENTIAL IN NATURE, THEREFORE, AO IS DIRECTED ACCORDINGLY. 8 ITA NOS. 2059, 1412, 1413 & 1414/HYD/2011AND ITA NO. 53/HYD/12 SHRI K. VENKATESWARA REDDY 24. IN THE RESULT, APPEAL FOR AY 2007-08 IS ALLOWED FOR STATISTICAL PURPOSES. ITA NO. 53/HYD/12 FOR AY 2008-09 25. GROUND NO. 1 & 5 ARE GENERAL IN NATURE. GROUND NOS. 2 & 3 ARE PERTAINING TO ADDITION OF RS. 3,73,087/- ON ACCOUNT OF INTEREST RECEIPT FROM M/S NVM SEETHARAMANJANEYA CONSTRUCTIONS AND TH E ADDITION OF RS. 8,34,799/- ON THE GROUND THAT THE SAME REPRESEN T THE INTEREST ON CAPITAL FROM SEETHARAMANJANEYA CONSTRUCTIONS. GROUN D NO. 4 IS REGARDING CHARGING OF INTEREST U/S 234A, 234B AND 2 34C OF THE ACT, WHICH IS CONSEQUENTIAL IN NATURE. 26. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, TH E AO FOUND THAT AS PER THE SEIZED DOCUMENT, VIDE ANNEXURE NO. A/DNR/08, ASSESSEE WAS PAID INTEREST AMOUNTING TO RS. 3,73,08 7 ON HIS CAPITAL BY THE FIRM M/S NVM CONSTRUCTIONS. HE FURTHER NOTE D THAT ASSESSEE WAS ALSO PAID INTEREST OF RS. 8,34,799/- BY THE FIR M M/S SVK SEETHARAMANJANEYA CONSTRUCTIONS, AS PER SEIZED DOCU MENT, VIDE ANNEXURE NO. A/DNR/04, DURING THE YEAR RELEVANT TO AY 2008-09. HOWEVER, STATING THAT BOTH SUCH AMOUNTS HAD NOT BEE N OFFERED BY ASSESSEE FOR TAXATION IN THE RETURN OF INCOME FILE D BY HIM FOR THIS ASSESSMENT YEAR, THE AO ADDED THE SAID AMOUNTS AGGR EGATING TO RS. 12,07,886/- TO HIS RETURNED INCOME AND COMPLETED TH E ASSESSMENT ON A TOTAL INCOME OF RS. 15,88,121/- U/S 143(3) OF THE ACT ON 30-12-2009. THE LEARNED CIT(A) CONFIRMED THE ACTION OF THE AO. 27. BEFORE US, THE LEARNED COUNSEL SUBMITTED THAT T HE FIRM NVM SEETHARAMANJANEYA CONSTRUCTIONS CREDITED INTEREST T O THE PARTNERS @ 24% AND THE AO WHILE COMPLETING THE ASSESSMENT OF T HE SAID FIRM ALLOWED INTEREST PAID TO PARTNERS AT 12% PER ANNUM ON THE CAPITAL AND DISALLOWED THE BALANCE AMOUNT. FURTHER, IT WAS SUBM ITTED THAT THERE IS NO CLAUSE IN THE PARTNERSHIP DEED PROVIDING FOR PAY MENT OF INTEREST TO 9 ITA NOS. 2059, 1412, 1413 & 1414/HYD/2011AND ITA NO. 53/HYD/12 SHRI K. VENKATESWARA REDDY THE PARTNERS. NO INTEREST WAS CREDITED TO THE CAPIT AL ACCOUNT OF THE PARTNERS AND IN THE FINAL ACCOUNTS DRAWN BASED ON T HE BOOKS OF ACCOUNT IMPOUNDED, SUCH AMOUNT WAS TREATED AS WITHD RAWAL AND WAS DEBITED TO THE CAPITAL ACCOUNT. NO PAYMENT OF INTER EST WAS DEBITED TO THE PROFIT AND LOSS ACCOUNT OF THE FIRM AND THE AO ALSO DID NOT ALLOW ANY SUCH AMOUNT AS DEDUCTION U/S 40(B) OF THE IT AC T. 28. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE RECORD. WE HAVE DECIDED IDENTICAL ISSUE IN AY 2007-08 (ITA NO. 1414/H/11) VIDE PARAS 18 TO 22, THEREFORE, FOLLOWING THE DECISION T HEREIN, WE RESTORE THE ISSUE TO THE FILE OF THE AO WITH IDENTICAL DIRE CTIONS. THUS, GROUND NOS. 2 & 3 ARE ALLOWED FOR STATISTICAL PURPOSES. 29. GROUND NO. 4 IS REGARDING CHARGING OF INTEREST U/S 234B AND 234C OF THE ACT, WHICH IS CONSEQUENTIAL IN NATURE, THEREFORE, AO IS DIRECTED ACCORDINGLY. 30. IN THE RESULT, APPEAL FOR AY 2008-09 IS ALLOWED FOR STATISTICAL PURPOSES. 31. TO SUM UP, ITA NO 2059/H/11 FOR AY 2004-05 IS P ARTLY ALLOWED, ITA NOS. 1412, & 1413/H/11 AND 53/H/12 FOR AY, 2005 -06, 2007-08 & 2008-09 ARE ALLOWED FOR STATISTICAL PURPOSES AND I TA NO. 1414/H/11 FOR AY 2006-07 IS PARTLY ALLOWED FOR STATISTICAL P URPOSES. PRONOUNCED IN THE OPEN COURT ON 1 ST JANUARY, 2014. SD/- SD/- (ASHA VIJAYARAGHAVAN) (B. R AMAKOTAIAH) JUDICIAL MEMBER ACCOUNTANT M EMBER HYDERABAD, DATED: 1 ST JANUARY, 2014. KV 10 ITA NOS. 2059, 1412, 1413 & 1414/HYD/2011AND ITA NO. 53/HYD/12 SHRI K. VENKATESWARA REDDY COPY TO:- 1) SHRI K. VENKATESWARA REDDY, C/O SHRI S. RAMA RAO , ADVOCATE, FLAT NO. 102, SHRIYAS RESIDENCY, ROAD NO. 9, H IMAYATNAGAR, HYDERABAD. 2) ACIT, CIRCLE - 8(1), HYDERABAD. 3) CIT(A)-III, HYDERABAD. 4) CIT-II, HYDERABAD 5) THE DEPARTMENTAL REPRESENTATIVE, I.T.A.T., HYDE RABAD. DESCRIPTION DATE INTLS 1. DRAFT DICTATED ON SR.P.S./P.S 2. DRAFT PLACED BEFORE AUTHOR SR.P.S/PS 3 DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER JM/AM 4 DRAFT DISCUSSED/APPROVED BY SECOND MEMBER JM/AM 5 APPROVED DRAFT COMES TO THE SR.P.S./PS SR.P.S./ P.S 6. KEPT FOR PRONOUNCEMENT ON SR. P.S./P.S. 7. FILE SENT TO THE BENCH CLERK SR.P.S./P.S 8 DATE ON WHICH FILE GOES TO THE HEAD CLERK 9 DATE OF DISPATCH OF ORDER