Renu Sarin, CHENNAI V. DCIT, CHENNAI

ITA 228/CHNY/2015

• Counselvise Citation: [2019] 115 COUNSELVISE.COM (IT) 4444 (ITAT-CHENNAI)
• Duration Of Justice: 4 year(s) 1 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-03-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Next Hearing Date: 28-07-2016
• Assessment Year: 2009-2010
• Appeal Filed On: 27-01-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: K RAVI
• Assessee Lawyers: DR M SRINIVASA RAO
• Keywords: Unexplained cash credit; Business income; Earning of tax free income; Block assessment; Rule 8D
• Section: 143(3); 14A

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL , D BENCH, CHENNAI . , . , BEFORE SHRI A.MOHAN ALANKAMONY, ACCOUNTANT MEMBER AND SHRI DUVVURU RL REDDY, JUDICIAL MEMBER ./ I.T.A.NOS.226, 227, 228/CHNY/2015, 1814 TO 1816, 2880/CHNY/2014 [ [ / ASSESSMENT YEARS: 2004-05, 2007-08, 2009-10, 2006-07 TO 2008-09 & 2010-11 SMT. RENU SARIN, NO.15/4, MASILAMANI ROAD, BALAJI NAGAR, ROYAPETTAH, CHENNAI 600 014. THE DEPUTY COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE II(1), CHENNAI -34. PAN: ADXPR7379F ( /APPELLANT) ( /RESPONDENT) / APPELLANT BY : DR.M. SRINIVASA RAO, CIT / RESPONDENT BY : SHRI K.RAVI, ADVOCATE /DATE OF HEARING : 29.01.2019 /DATE OF PRONOUNCEMENT : 22.03.2019 / O R D E R PER A. MOHAN ALANKAMONY, AM:- THESE APPEALS BY THE ASSESSEE ARE DIRECTED AGAINST THE COMMON ORDER PASSED BY THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS)-19, CHENNAI, DATED 28.11.2014 IN ITA NOS.326/06-07, 126/11-12 FOR THE ASSESSMENT YEARS 2004-05 & 2009-10 PASSED U/S.250(6) R.W.S. 143(3) OF THE ACT AND ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX(A)(C)-II DATED 28.11.2014 IN ITA NO.22/10-11 FOR THE ASSESSMENT YEAR 2007-08 PASSED U/S.250(6) R.W.S. 271F OF THE ACT AND COMMON ORDER DATED 31.03.2014 IN ITA 2 ITA NOS.226 TO 228/CHNY/2015, 1814 TO 1816, 2880/CHNY/2014 NO.66/08-09, 178/09-10 & 271/10-11 FOR THE ASSESSMENT YEARS 2006-07 & 2008-09 PASSED U/S.250(6) R.W.S. 143(3) OF THE ACT AND U/S.250(6) R.W.S. 144 OF THE ACT FOR THE ASSESSMENT YEAR 2007-08 AND ORDER DATED 30.09.2014 IN ITA NO. 13/13-14 FOR THE ASSESSMENT YEAR 2010-11, PASSED U/S.250(6) R.W.S. 143(3) OF THE ACT. 2. ITA NOS.226 & 228/CHNY/2015 FOR THE ASSESSMENT YEARS 2004-05 & 2009-10:- THE ASSESSEE HAS RAISED SEVERAL GROUNDS IN HER APPEAL HOWEVER THE CRUX OF THE ISSUE IS THAT THE LD.CIT(A) HAS ERRONEOUSLY UPHELD THE ORDER OF LD.AO WHO HAD MADE ADDITION TOWARDS INTEREST EARNED ON PRO-NOTES AMOUNTING TO RS.1,75,200/- & RS.17,52,000/- FOR THE ASSESSMENT YEARS 2004-05 & 2009-10 RESPECTIVELY, INTEREST EARNED ON THE ADVANCES RECORDED IN THE COMPUTER OF THE ASSESSEE AMOUNTING TO RS.9,99,600/- EACH FOR THE ASSESSMENT YEARS 2004- 05 & 2009-10 AND INTEREST EARNED ON THE INVESTMENTS IN BONDS AND KISAN VIKAS PATRAS AMOUNTING TO RS.3,600/- EACH FOR THE ASSESSMENT YEARS 2004-05 & 2009-10 AND RS.30,313/- TOWARDS INTEREST EARNED ON THE RECURRING DEPOSIT ACCOUNT AMOUNTING TO 3 ITA NOS.226 TO 228/CHNY/2015, 1814 TO 1816, 2880/CHNY/2014 RS.3,03,125/- FOR THE ASSESSMENT YEAR 2004-05, ALL OF WHICH WAS NOT ACCOUNTED IN THE BOOKS OF THE ASSESSEE. 2.1 THE BRIEF FACTS OF THE CASE ARE THAT, THE ASSESSEE HAD FILED RETURN OF INCOME FOR THE ASSESSMENT YEARS 2004-05 & 2009-10 ADMITTING TOTAL INCOME OF RS.6,59,870/- & RS.6,75,430/- ON 01.11.2004 & 17.05.2010 RESPECTIVELY. THEREAFTER THE CASE WAS TAKEN UP FOR SCRUTINY AND ASSESSMENT ORDER WAS PASSED ON 22.12.2006 & 29.11.2011 FOR THE ASSESSMENT YEARS 2004-05 & 2009-10 RESPECTIVELY, WHEREIN THE LD.AO MADE THE FOLLOWING ADDITIONS:- PARTICULARS ASSESSMENT YEAR 2004-05 ASSESSMENT YEAR 2009-10 INTEREST ON PRO-NOTES 1,75,200 17,52,000 INTEREST ON ADVANCES RECORDED IN COMPUTER 9,99,600 9,99,600 INTEREST ON INVESTMENTS IN BONDS & KISAN VIKAS PATRAS 3,600 3,600 INTEREST ON RECURRING DEPOSIT 30,313 - TOTAL 12,08,713 27,55,200 2.2 THE LD.AO HAD MADE THE ADDITION TOWARDS INTEREST EARNED ON PRO-NOTES BY ESTIMATING THE INTEREST RATE @ 24% PER ANNUM BECAUSE DURING THE COURSE OF SEARCH OPERATION IN THE CASE OF THE ASSESSEE CERTAIN PRO-NOTES WERE SEIZED AND IN THE BLOCK 4 ITA NOS.226 TO 228/CHNY/2015, 1814 TO 1816, 2880/CHNY/2014 ASSESSMENT 1997-98 TO 2002-03 AND PART OF 2003-04 AN AMOUNT OF RS.73,00,000/- WAS TREATED AS THE UNDISCLOSED INCOME OF THE ASSESSEE ON THE PRESUMPTION THAT THE AGGREGATE OF THE PRO-NOTES SEIZED WERE THE AMOUNT ADVANCED BY THE ASSESSEE FOR WHICH THE SOURCE WAS NOT EXPLAINED. ACCORDINGLY THE LD.AO WORKED OUT THE INTEREST FOR THE BROKEN PERIOD FOR THE ASSESSMENT YEAR 2004-05, RS.1,75,200/- AND FOR THE ASSESSMENT YEAR 2009-10, RS.17,52,000/-. ON APPEAL THE LD.CIT(A) CONFIRMED THE ADDITION MADE TOWARDS INTEREST AS HE HAD CONFIRMED THE ADDITION WITH RESPECT TO THE UNDISCLOSED INCOME TOWARDS PRO-NOTES FOUND DURING THE COURSE OF SEARCH. 2.2.1 SINCE THIS BENCH OF THE TRIBUNAL VIDE ORDER DATED 20.03.2019 IN ITA NO.17/CHNY/2014 FOR THE BLOCK ASSESSMENT YEARS 1997-98 TO 2002-03 AND PART OF 2003-04 HAD DELETED THE ADDITION MADE ON THE HANDS OF THE ASSESSEE TOWARDS PRO-NOTES FOUND DURING THE COURSE OF SEARCH IN THE PREMISES OF THE ASSESSEE AMOUNTING TO RS.73,00,000/-, THE ADDITION MADE BY THE LD.REVENUE AUTHORITIES BY ESTIMATING THE INTEREST EARNED ON THE SAME DO NOT HAVE ANY LEGS TO STAND. THEREFORE WE HEREBY DIRECT THE LD.AO TO DELETE THE ADDITION MADE IN THE HANDS OF THE ASSESSEE TOWARDS 5 ITA NOS.226 TO 228/CHNY/2015, 1814 TO 1816, 2880/CHNY/2014 INTEREST EARNED ON THE ADVANCES WITH RESPECT TO THE PRO-NOTES AMOUNTING TO RS.1,75,200/- FOR THE ASSESSMENT YEAR 2004-05 AND RS.17,52,000/- FOR THE ASSESSMENT YEAR 2009-10. 2.3 THE LD.AO HAD MADE ADDITION TOWARDS INTEREST PRESUMED TO HAVE BEEN EARNED BY THE ASSESSEE FROM THE ADVANCES RECORDED IN THE COMPUTER OF THE ASSESSEE WHICH WAS RETRIEVED DURING THE COURSE OF THE SEARCH THOUGH THE ASSESSEE HAD CLAIMED THAT NO SUCH ADVANCES WAS EXTENDED. THE LD.AO HAD MADE SUCH ADDITION OF RS.9,99,600/- BY COMPUTING THE INTEREST @ 24% ON THE ADVANCES AGGREGATING TO RS.41,65,000/- FOR EACH OF THE ASSESSMENT YEAR 2004-05 AND 2009-10. ON APPEAL THE LD.CIT(A) CONFIRMED THE ADDITION BY AGREEING WITH THE VIEW OF LD.AO. 2.3.1 SINCE THIS BENCH OF THE TRIBUNAL VIDE ORDER DATED 20.03.2019 IN ITA NO.17/CHNY/2014 FOR THE BLOCK ASSESSMENT YEARS 1997-98 TO 2002-03 AND PART OF 2003-04 HAD DELETED THE ADDITION MADE ON THE HANDS OF THE ASSESSEE TOWARDS THE ADVANCES RECORDED IN THE COMPUTER WHICH WAS RETRIEVED DURING THE COURSE OF SEARCH IN THE PREMISES OF THE ASSESSEE AMOUNTING TO RS.41,65,000/-, THE ADDITION MADE BY THE LD.REVENUE AUTHORITIES 6 ITA NOS.226 TO 228/CHNY/2015, 1814 TO 1816, 2880/CHNY/2014 TOWARDS INTEREST ON THE SAME DO NOT HAVE ANY LEGS TO STAND. THEREFORE WE HEREBY DIRECT THE LD.AO TO DELETE THE ADDITION MADE IN THE HANDS OF THE ASSESSEE AMOUNTING TO RS.9,99,600/- FOR EACH OF THE ASSESSMENT YEARS 2004-05 AND 2009-10. 2.4 THE LD.AO HAD ESTIMATED RS.3,600/- AS THE INTEREST ACCRUED TOWARDS THE INVESTMENT IN BONDS, KISAN VIKAS PATRAS, ETC., WHICH WAS NOT DISCLOSED. ON APPEAL THE LD.CIT(A) CONFIRMED THE ORDER OF THE LD.AO. 2.4.1 WE DO NOT FIND ANY MERIT IN THE ORDER OF THE LD.REVENUE AUTHORITIES IN THIS REGARDS BECAUSE THE ADDITIONS ARE MADE ON THE BASIS OF ESTIMATE WHEN THE LD.REVENUE AUTHORITIES COULD HAVE COMPUTED THE ACCRUED INTEREST FROM SUCH INVESTMENTS AND PATRAS. MOREOVER THE INTEREST ACCRUED ON SUCH INVESTMENT IS NOT REALIZED BY THE ASSESSEE DURING THE RELEVANT ASSESSMENT YEAR AND IF THE ASSESSEE PREFERS TO ACCOUNT THE SAME ON CASH BASIS, THE INCOME ARISING OUT OF SUCH INVESTMENT WILL BE TAXED IN THE YEAR IN WHICH ASSESSEE REALIZES SUCH INTEREST OR ON THE REDEMPTION OF THE BOND AND THE PATRAS. THEREFORE WE HEREBY DIRECT THE LD.AO TO DELETE THE 7 ITA NOS.226 TO 228/CHNY/2015, 1814 TO 1816, 2880/CHNY/2014 ADDITION MADE FOR RS.3,600/- IN THE HANDS OF THE ASSESSEE FOR BOTH THE RELEVANT ASSESSMENT YEARS. 2.5 THE LD.AO HAD MADE ADDITION OF RS.30,313/- BY ESTIMATING THE INTEREST INCOME EARNED ON THE RECURRED DEPOSIT OF RS.3,03,125/- ON APPEAL THE LD.CIT(A) CONFIRMED THE ORDER OF THE LD.AO BY AGREEING WITH HIS VIEW. 2.5.1 AT THE OUTSET WE DO NOT AGREE WITH THE ADDITION MADE BY THE LD.REVENUE AUTHORITIES FOR THE SAME REASON STATED BY US IN PARA NO.2.4.1. THEREFORE WE HEREBY DIRECT THE LD.AO TO DELETE THE ADDITION OF RS.30,313/- FOR THE ASSESSMENT YEAR 2004-05. 3. ITA NOS.1814 TO 1816/CHNY/2014, ASSESSMENT YEARS 2006- 07 TO 2008-09:- THE ASSESSEE HAS RAISED SEVERAL GROUNDS IN HER APPEALS HOWEVER THE CRUX OF THE ISSUE IS THAT THE LD.CIT(A) HAS ERRED IN CONFIRMING THE ORDER OF THE LD.AO WITH RESPECT TO THE FOLLOWING ADDITIONS:- PARTICULARS A.Y. 2006-07 RS. A.Y. 2007-08 RS. A.Y. 2008-09 RS. INTEREST ON PRO-NOTES 17,52,000 17,52,000 17,52,000 INTEREST ON ADVANCES RECORDED IN 9,99,600 9,99,600 9,99,600 8 ITA NOS.226 TO 228/CHNY/2015, 1814 TO 1816, 2880/CHNY/2014 COMPUTER INTEREST ON INVESTMENTS IN BONDS & KISAN VIKAS PATRAS 3,600 3,600 3,600 UNEXPLAINED CASH CREDIT 2,27,000 - - ESTIMATION OF BUSINESS INCOME - 4,00,000 - TOTAL 29,82,200 31,55,200 27,55,200 3.1 SINCE THE FACTS WITH RESPECT TO THE ISSUES OF ADDITION MADE TOWARDS INTEREST ON PRO-NOTES AMOUNTING TO RS.17,52,000/-, INTEREST ON ADVANCES AMOUNTING TO RS.9,99,600/-, INTEREST ON INVESTMENT IN BONDS, KISAN VIKAS PATRAS AMOUNTING TO RS.3,600/- ARE SAME WITH THAT OF THE ASSESSMENT YEARS 2004-05 & 2009-10 AND SINCE THOSE ADDITIONS WERE DELETED BY US HEREIN ABOVE, THE SAME DECISION HOLDS GOOD FOR THESE ASSESSMENT YEARS ALSO. ACCORDINGLY ALL THE ADDITIONS MADE IN THE ASSESSMENT YEARS 2006-07 TO 2008-09 WITH RESPECT TO INTEREST ON PRO-NOTES RS.17,52,000/-, INTEREST ON ADVANCES RECORDED AND RETRIEVED FROM THE COMPUTER OF THE ASSESSEE RS.9,99,600/-, INTEREST ON INVESTMENTS IN BONDS AND KISAN VIKAS PATRAS RS.3,600/- STANDS DELETED. IT IS ORDERED ACCORDINGLY. 3.2 DURING THE COURSE OF SCRUTINY ASSESSMENT PROCEEDINGS FOR THE ASSESSMENT YEAR 2006-07, IT WAS OBSERVED BY THE LD.AO THAT THERE WERE CASH DEPOSITS TO THE TUNE OF RS.2,27,000/- IN THE BANK ACCOUNT MAINTAINED BY THE ASSESSEE IN STANDARD CHARTERED BANK, 9 ITA NOS.226 TO 228/CHNY/2015, 1814 TO 1816, 2880/CHNY/2014 MYLAPORE BRANCH. SINCE ASSESSEE COULD NOT EXPLAIN THE SOURCE FOR THE CASH DEPOSIT, THE LD.AO ADDED THE SAME AS UNEXPLAINED CASH CREDITS IN THE HANDS OF THE ASSESSEE. ON APPEAL, THE LD.CIT(A) CONFIRMED THE ORDER OF THE LD.AO BECAUSE EVEN BEFORE HIM, THE ASSESSEE COULD NOT EXPLAIN THE SOURCE OF INVESTMENT. 3.2.1 EVEN BEFORE US AT THIS STAGE, THE LD.AR DID NOT FURNISH ANY EXPLANATION TOWARDS THE CASH DEPOSIT MADE BY THE ASSESSEE IN HER BANK ACCOUNT FOR RS.2,27,000/-. THEREFORE WE HEREBY CONFIRM THE ADDITION OF RS.2,27,000/- MADE BY THE LD.REVENUE AUTHORITIES FOR THE ASSESSMENT YEAR 2006-07. 3.3 DURING THE COURSE OF SCRUTINY ASSESSMENT PROCEEDINGS FOR THE ASSESSMENT YEAR 2007-08, THE LD.AO WAS OF THE VIEW THAT THE ASSESSEE HAD NOT DECLARED HER BUSINESS INCOME. THEREAFTER THE LD.AO RECORDED IN HIS ASSESSMENT ORDER THAT BASED ON THE FACTS AVAILABLE ON RECORD AND SUBMISSIONS OF THE ASSESSEE THE BUSINESS INCOME OF THE ASSESSEE FOR THE RELEVANT ASSESSMENT YEAR IS TREATED AS RS.4,00,000/- AND ACCORDINGLY PASSED ORDERS U/S.144 OF THE ACT. ON APPEAL, THE LD.CIT(A) CONFIRMED THE ADDITION MADE BY THE 10 ITA NOS.226 TO 228/CHNY/2015, 1814 TO 1816, 2880/CHNY/2014 LD.AO FOR RS.4,00,000/- REJECTING THE CLAIM OF THE ASSESSEE THAT THE RETURN WAS FILED DECLARING THE INCOME OF RS.2,54,470/-. 3.3.1 AS DISCUSSED EARLIER BY US, IT APPEARS THAT THE LD.REVENUE AUTHORITIES HAS NOT EXAMINED THE RETURN OF INCOME PRODUCED BEFORE THEM STATED TO HAVE BEEN FILED BY THE ASSESSEE. IT WAS SIMPLY REJECTED BECAUSE THE ACKNOWLEDGMENT NUMBERS OF THE RETURN OF INCOME FILED BY THE ASSESSEE DID NOT MATCH WITH THE RECORDS MAINTAINED BY THE REVENUE AUTHORITIES. SINCE THE LD.REVENUE AUTHORITIES HAD NOT CONDUCTED PROPER ENQUIRIES ON THAT REGARD AND HAD SIMPLY BRUSHED ASIDE THE DOCUMENTS PRODUCED BY THE ASSESSEE, WE DO NOT FIND ANY MERIT IN THE STAND OF THE LD.REVENUE AUTHORITIES. THEREFORE WE ARE OF THE CONSIDERED VIEW THAT THE ADDITION MADE BY THE LD.REVENUE AUTHORITIES FOR RS.4,00,000/- TOWARDS THE BUSINESS INCOME OF THE ASSESSEE IS NOT WARRANTED. ACCORDINGLY WE HEREBY DIRECT THE LD.AO TO DELETE THE ADDITION MADE FOR RS.4,00,000/- FOR THE ASSESSMENT YEAR 2007-08, HOWEVER TREAT THE AMOUNT OF RS.2,54,470/- AS THE BUSINESS INCOME BEING THE ADMITTED AMOUNT IN THE RETURN OF INCOME FILE BY THE ASSESSEE. 11 ITA NOS.226 TO 228/CHNY/2015, 1814 TO 1816, 2880/CHNY/2014 4. ITA NO.227/CHNY/2015, ASSESSMENT YEAR 2007-08:- THE ONLY GROUND RAISED BY THE ASSESSEE IN THIS APPEAL IS THAT THE LD.CIT(A) HAS ERRED IN UPHOLDING THE ORDER OF THE LD.AO WHO HAD LEVIED PENALTY OF RS.5,000/- INVOKING THE PROVISION OF SECTION 271F OF THE ACT. 4.1 SINCE THE ASSESSEE DID NOT FILE HER RETURN OF INCOME FOR THE ASSESSMENT YEAR 2007-08 IN SPITE OF NOTICE ISSUED U/S.142(1) OF THE ACT ON 19.09.2008 AND 20.07.2009, THE LD.AO INVOKED THE PENAL PROVISIONS OF SECTION 271F OF THE ACT AND LEVIED PENALTY FOR RS.5,000/-. WHILE DOING SO, THE LD.AO HAD REJECTED THE REPLY FILED BY THE ASSESSEE IN LIEU OF THE NOTICE ISSUED U/S.142(1) OF THE ACT THAT SHE HAD FILED THE RETURN OF INCOME FOR THE ASSESSMENT YEAR 2007-08 ON 02.06.2009 BELATEDLY BY ADMITTING INCOME OF RS.2,54,470/- CLAIMING AN AMOUNT OF RS.65,719/- AS REFUND. 4.2 ON APPEAL THE LD.CIT(A) UPHELD THE ORDER OF THE LD.AO BY AGREEING WITH HIS VIEW. 4.3 AT THE OUTSET WE ARE NOT IN AGREEMENT WITH THE VIEW OF THE LD.REVENUE AUTHORITIES ON THIS ISSUE BECAUSE OF THE REASON STATED 12 ITA NOS.226 TO 228/CHNY/2015, 1814 TO 1816, 2880/CHNY/2014 IN PARA NO.3.3.1 HEREIN ABOVE. FURTHER IT IS PERTINENT TO MENTION THAT THE LD. REVENUE AUTHORITIES HAS ALSO NOT VERIFIED THE CLAIM OF THE ASSESSEE THAT SHE HAD CLAIMED AN AMOUNT OF RS.65,719/- AS REFUND. THEREFORE WE ARE OF THE CONSIDERED VIEW THAT THE PENALTY LEVIED BY THE LD.AO INVOKING THE PROVISIONS OF SECTION 271F OF THE ACT IS NOT WARRANTED BECAUSE IT IS NOT CONCLUSIVELY PROVED THAT THE ASSESSEE HAS NOT FILED HER RETURN OF INCOME. HENCE WE HEREBY DIRECT THE LD.AO TO DELETE THE PENALTY LEVIED FOR RS.5,000/- INVOKING THE PROVISIONS OF SECTION 271F OF THE ACT. 5. ITA 2880/CHNY/2014, ASSESSMENT YEAR 2010-11:- THE ASSESSEE HAS RAISED SEVERAL GROUNDS IN HER APPEALS HOWEVER THE CRUX OF THE ISSUE IS THAT THE LD.CIT(A) HAS ERRED IN CONFIRMING THE ORDER OF THE LD.AO WITH RESPECT TO THE FOLLOWING ADDITIONS:- PARTICULARS AMOUNT INTEREST ON PRO-NOTES 17,52,000 INTEREST ON ADVANCES RECORDED IN COMPUTER 9,99,600 INTEREST ON INVESTMENTS IN BONDS & KISAN VIKAS PATRAS 3,600 INTEREST FROM SUNDRY DEBTORS 31,99,293 DISALLOWANCE U/S.14A 92,483 TOTAL 60,46,976 13 ITA NOS.226 TO 228/CHNY/2015, 1814 TO 1816, 2880/CHNY/2014 5.1 SINCE THE FACTS WITH RESPECT TO THE ISSUES OF ADDITION MADE TOWARDS INTEREST ON PRO-NOTES AMOUNTING TO RS.17,52,000/-, INTEREST ON ADVANCES AMOUNTING TO RS.9,99,600/-, INTEREST ON INVESTMENT IN BONDS, KISAN VIKAS PATRAS AMOUNTING TO RS.3,600/- ARE SAME WITH THAT OF THE ASSESSMENT YEARS 2004-05 & 2009-10, THE SAME DECISION HOLDS GOOD FOR THIS ASSESSMENT YEAR ALSO. ACCORDINGLY ALL THE ABOVE ADDITIONS MADE TOWARDS INTEREST ON PRO-NOTES AMOUNTING TO RS.17,52,000/-, INTEREST ON ADVANCES AMOUNTING TO RS.9,99,600/- INTEREST ON INVESTMENT IN BONDS& KISAN VIKAS PATRAS AMOUNTING TO RS.3,600/- FOR THE ASSESSMENT YEARS 2010-11 STANDS DELETED. IT IS ORDERED ACCORDINGLY. 5.2 DURING THE COURSE OF SCRUTINY ASSESSMENT PROCEEDINGS, IT WAS OBSERVED BY THE LD.AO THAT THE ASSESSEE HAD DISCLOSED SUNDRY DEBTORS AMOUNTING TO RS.2,66,60,775/-. SINCE THE ASSESSEE HAD NOT DISCLOSED INTEREST INCOME FROM THE ABOVE SUNDRY DEBTORS AND SINCE THE ASSESSEE WAS IN MONEY LENDING BUSINESS, THE LD.AO ESTIMATED THE ACCRUED INTEREST ON THE ABOVE AMOUNT OF RS.2,66,60,775/- @ 12% PER ANNUM WHICH WORKS OUT TO RS.31,99,293/- AND ADDED TO THE INCOME OF THE ASSESSEE. 14 ITA NOS.226 TO 228/CHNY/2015, 1814 TO 1816, 2880/CHNY/2014 5.2.1 BEFORE THE LD.CIT(A) THE LD.AR HAD EXPLAINED THAT THE NATURE OF THE BUSINESS OF THE ASSESSEE IS FILM FINANCING WHEREIN INTEREST IS REALIZED ONLY AT THE TIME OF RELEASE OF THE MOVIES AND THEREFORE THE ASSESSEE HAS MAINTAINED HER BOOKS IN CASH SYSTEM OF ACCOUNTING. IT WAS THEREFORE PLEADED THAT DURING THE RELEVANT ASSESSMENT YEAR THE ASSESSEE HAD NOT RECEIVED ANY INTEREST INCOME AND HENCE THE ACCRUED INTEREST WAS NOT TREATED AS INCOME. THE LD.CIT(A) REJECTED THE SUBMISSION OF THE ASSESSEE BECAUSE ON THE EARLIER INSTANCE IT WAS SUBMITTED BY THE LD.AR THAT THE ASSESSEE WAS MAINTAINING THE BOOKS ON MERCANTILE BASIS. THEREFORE THE LD.CIT(A) ACCEPTING THE VIEW OF THE LD.AO CONFIRMED THE ADDITION. 5.2.2 AFTER HEARING BOTH SIDES, WE FIND MERIT IN THE SUBMISSION OF THE LD.AR. THE ASSESSEE HAS ONLY DECLARED RS.4,21,490/- AS HER INCOME IN HER RETURN OF INCOME FILED WITH RESPECT TO THE RELEVANT ASSESSMENT YEAR. SINCE THE INCOME DECLARED BY THE ASSESSEE IN HER RETURN OF INCOME IS MEAGER THERE IS NOTHING TO SUGGEST THAT THE ASSESSEE IS MAINTAINING HER ACCOUNTS AS PER MERCANTILE SYSTEM OF ACCOUNTING BECAUSE PREDOMINANTLY HER INCOME FLOWS ONLY FROM HUGE ADVANCE EXTEND WHICH IS DISCLOSED AS SUNDRY DEBTORS AND 15 ITA NOS.226 TO 228/CHNY/2015, 1814 TO 1816, 2880/CHNY/2014 THAT HAS TO BE ENORMOUS IN COMMENSURATE WITH THE ADVANCE EXTENDED . THE ASSESSEE HAS ALSO CLAIMED THAT SHE IS MAINTAINING HER BOOKS OF ACCOUNTS AS PER CASH SYSTEM OF ACCOUNTING AND HER DECLARED SUNDRY DEBTORS IS RS.2,66,60,775/- FROM WHICH SHE HAS TO RECEIVE SUBSTANTIAL REVENUE AS INTEREST. THEREFORE IT IS OBVIOUS FROM THE RETURN FILED BY THE ASSESSEE THAT THE ASSESSEE IS MAINTAINING HER BOOKS OF ACCOUNTS AS PER CASH SYSTEM OF ACCOUNTING. AS PER SECTION 145(1) OF THE ACT, THE ASSESSEE IS ENTITLED TO MAINTAIN HER BOOKS OF ACCOUNTS REGULARLY AS PER CASH OR MERCANTILE SYSTEM OF ACCOUNTING. SINCE THE ASSESSEE IS MAINTAINING HER BOOKS OF ACCOUNTS AS PER CASH SYSTEM OF ACCOUNTING WE ARE OF THE CONSIDERED VIEW THAT THE ADDITION MADE BY ESTIMATING THE ACCRUED INTEREST ON THE SUNDRY DEBTORS BY THE LD.REVENUE AUTHORITIES IS NOT WARRANTED BECAUSE THE SAME OUGHT TO BE TREATED AS THE INCOME OF THE ASSESSEE IN THE PREVIOUS YEAR IN WHICH THE ASSESSEE RECEIVES THE INTEREST AS PER CASH SYSTEM OF ACCOUNTING. HENCE WE HEREBY DIRECT THE LD.AO TO DELETE THE ADDITION MADE FOR RS.31,99,293/- BY ESTIMATING THE ACCRUED INTEREST ON SUNDRY DEBTORS. 5.3 THE LD.AO HAD INVOKED THE PROVISIONS OF SECTION 14A R.W.R.8D OF THE RULES AND THEREBY MADE ADDITION OF RS.92,483/- IN 16 ITA NOS.226 TO 228/CHNY/2015, 1814 TO 1816, 2880/CHNY/2014 THE HANDS OF THE ASSESSEE BECAUSE THE ASSESSEE HAD MADE INVESTMENTS EARNING EXEMPT INCOME WHICH STOOD AT RS.1,37,38,262/- AS ON 01.04.2009 AND AT RS.31,21,029/-AS ON 01.04.2010 . THE LD.CIT(A) ALSO CONFIRMED THE ORDER OF THE LD.AO BY RELYING IN THE DECISION OF THE HONBLE APEX COURT IN THE CASE CIT VS. WALFORT SHARE & STOCK BROKERS (P) LTD., REPORTED IN 326 ITR 1. 5.3.1 AT THE OUTSET WE DO NOT FIND ANY MERIT IN THE ORDERS OF THE LD.REVENUE AUTHORITIES BECAUSE FROM THE FACTS OF THE CASE THERE IS NOTHING ON RECORD TO SUGGEST THAT THE ASSESSEE HAD INCURRED ANY EXPENDITURE FOR EARNING EXEMPT INCOME BECAUSE NO SUCH EXPENDITURE APPEARS TO BE DEBITED TO THE P&L ACCOUNT OF THE ASSESSEE. THE ASSESSEE IS AN INDIVIDUAL AND IT APPEARS THAT SHE HAS MADE THE INVESTMENT BASED ON HER OWN DECISION WITHOUT ANY EXTERNAL OR INTERNAL AID AND FROM HER OWN INTEREST FREE FUNDS. IN SUCH SITUATION NO EXPENDITURE COULD BE ATTRIBUTED FOR MAKING SUCH INVESTMENT. MOREOVER THERE IS NOTHING ON RECORD TO SUGGEST THAT THE ASSESSEE HAVE CLAIMED ANY EXPENDITURE AS DEDUCTION. WHEN THE ASSESSEE HAS NOT CLAIMED ANY EXPENDITURE THERE COULD NOT HAVE BE ANY EXPENDITURE THAT IS ATTRIBUTABLE TOWARDS EARNING EXEMPT INCOME. HENCE THE DECISION OF THE HON. APEX COURT RELIED 17 ITA NOS.226 TO 228/CHNY/2015, 1814 TO 1816, 2880/CHNY/2014 BY THE LD.CIT(A) IS NOT APPLICABLE TO THE CASE OF THE ASSESSEE. THEREFORE WE ARE OF THE CONSIDERED VIEW THAT NO DISALLOWANCE CAN BE MADE U/S.14A OF THE ACT OR BY INVOKING RULE 8D OF THE RULES IN THE CASE OF THE ASSESSEE. HENCE WE HEREBY DIRECT THE LD.AO TO DELETE THE ADDITION MADE FOR RS.92,483/- MADE IN THE HANDS OF THE ASSESSEE INVOKING THE PROVISIONS OF SECTION 14A OF THE ACT. 6. IN THE RESULT, THE APPEALS OF THE ASSESSEE IN ITA NOS.226 TO 228/CHNY/2015 FOR THE ASSESSMENT YEARS 2004-05, 2007-08 & 2009-10 AND ITA NOS.1815,1816 & 2880/CHNY/2014 FOR THE ASSESSMENT YEARS 2007-08, 2008-09 & 2010-11 ARE ALLOWED AND THE APPEAL OF THE ASSESSEE IN ITA NO.1814/CHNY/2014 FOR THE ASSESSMENT YEAR 2006-07 IS PARTLY ALLOWED. ORDER PRONOUNCED ON THE 22 ND MARCH, 2019 AT CHENNAI. SD/- SD/- ( ) (DUVVURU R.L REDDY) /JUDICIAL MEMBER ( . ) (A. MOHAN ALANKAMONY) / ACCOUNTANT MEMBER /CHENNAI, /DATED 22 ND MARCH, 2019 RSR /COPY TO: 1. /APPELLANT 2. /RESPONDENT 3. ( )/CIT(A) 4. /CIT 5. /DR 6. [ /GF