DCIT, Central Circle-7, Hyderabad V. Sri Venkateswara Creations, Hyderabad

ITA 253/HYD/2011

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 74578 (ITAT-HYDERABAD)
• Duration Of Justice: 2 year(s) 11 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-01-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 22-08-2011
• Assessment Year: 2003-2004
• Appeal Filed On: 17-02-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: D SUDHAKAR RAODR
• Assessee Lawyers: S RAMA RAO
• Keywords: Unexplained cash credit; Unexplained investment; Unexplained expenditure; Search and seizure; Opportunity of being heard; Peak credit; Corroborative evidences; Valuation report; Revised return
• Section: 133A; 153A; 131; 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD B BENCH, HYDERABAD BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SHRI SAKTIJIT DEY, JUDICIAL MEMBER ITA NOS. ASTT. YEARS APPELLANT RESPONDENT 384,385 & 445/H/11 2004 - 05, 06-07 & 08-09 DCIT, CC-7, HYDERABAD V.ANANTA VENKATA NARASIMHA REDDY, HYDERABAPAN:ACYPN5 637N 386,387&444/ H/2011 - DO - - DO - V.VENKATA RAMANA REDDY HYDERABAD. PAN:ABFPV5930Q 839/H/11 07 - 08. SRI VENKATESWARA CREATIONS, HYD PAN:AAVFS 4573P DCIT, CC - 7, HYDERABAD 253,369 , 370,373 &498/H/11 2003-04, 04-05, 05-06,06- 07&08-09 DCIT,CC - 7, HYDERABAD SRI VENKATESWARA CREATIONS, HYDERABAD. PAN:AAFVS4573P 388 - 389/H/11 2004-05 & 06-07 DCIT, CC - 7, HYDERABAD. S. LAXMAN RAO, HYDERABAD. PAN:AKDPS8964J 390/H/11 2004-05 - DO - S.BIKSHAMAIAH, HYDERABAD. PAN:AFVPS5575A 391/H/11 2006-07 - DO - - DO - 837 & 838/H/11 2004-05& 2006-07 SRI VENKATESWRA CREATIONS, HYDERABAD DCIT,CC - 7, HYDERABAD. 846 & 847/H/11 2007-08 & 08-09 SRI VENKATESWARA FILMS, HYDERABAD AAMFS5921 L - DO - 2 ITA NOS.253,369,370 AND GROUP OF 2011 VENKATESWARA CR EATIONS AND OTHERS, HYD. DEPARTMENT BY SHRI D. SUDHAKAR RAO(DR) ASSESSEES BY SHRI S. RAMA RAO DATE OF HEARING 06 - 11 - 2013. DATE OF PRONOUNCEMENT 31 - 01 - 2014 ORDER PER SAKTIJIT DEY, J.M: THIS BUNCH OF 20 APPEALS OF DEPARTMENT AS WELL AS DIFFERENT ASSESSEES ARE DIRECTED AGAINST SEPARATE ORDERS OF CIT (A)-VII, HYDERABAD PERTAINING TO THE ASSESSMENT YEARS 2003-0 4 TO 2008-09. SINCE COMMON AND IDENTICAL ISSUES ARE INVOLVED IN A LL THESE APPEALS AND ASSESSEES BELONG TO THE SAME GROUP, THESE ARE H EARD, CLUBBED TOGETHER AND DISPOSED OF BY THIS CONSOLIDATED ORDER FOR THE SAKE OF CONVENIENCE. ITA NO. 846/HYD/11 (SRI VENKATESWAR FILMS) A.Y. 2007-08 :- 2. THE ASSESSEE HAS RAISED THE FOLLOWING TWO EFFEC TIVE GROUNDS:- 1. THE LD CIT (A) ERRED IN CONFIRMING THE ACTION OF THE ASSESSING OFFICER IN MAKING AN ADDITION OF RS.21,55 ,563/- ON THE GROUND THAT THE EXPENDITURE INCURRED IN RESP ECT OF THE FILM GODAVARI WAS NOT CORRECTLY RECORDED IN T HE BOOKS OF ACCOUNT. 2. THE LD. CIT (A) ERRED IN CONFIRMING THE ACTION OF THE ASSESSING OFFICER IN MAKING AN ADDITION OF RS.55,25 ,000/- WITHOUT CONSIDERING THE FACT THAT THE APPELLANT DID NOT INCUR SUCH EXPENDITURE ON ACCOUNT OF THE PAYMENTS M ADE TO MAHARSHI CINEMA. 3 ITA NOS.253,369,370 AND GROUP OF 2011 VENKATESWARA CR EATIONS AND OTHERS, HYD. 3. BRIEFLY STATED, THE ASSESSEE IS A PARTNERSHIP FI RM ENGAGED IN THE BUSINESS OF DISTRIBUTION OF FILMS. A SEARCH AND SEIZURE OPERATION/S 132 OF THE ACT WAS CONDUCTED ON 4-3-200 8 IN CASE OF GROUP CONCERN SRI VENKATESWARA CREATIONS AND OTHERS . PURSUANT TO THE AFORESAID SEARCH AND SEIZURE OPERATION, A SURVE Y U/S 133A OF THE ACT WAS CONDUCTED IN CASE OF THE ASSESSEE. FOR TH E IMPUGNED ASSESSMENT YEAR, THE ASSESSEE HAD ORIGINALLY FILED ITS RETURN OF INCOME ON 31-10-2007 DECLARING A TOTAL INCOME OF RS .4,26,500/-. IN PURSUANCE TO THE SEARCH OPERATION CONDUCTED IN GR OUP CONCERNS, NOTICES U/S 153C WERE ISSUED TO THE ASSESSEE CALLIN G FOR RETURNS OF INCOME FOR THE ASSESSMENT YEARS 2002-03 TO 2007-08. IN RESPONSE TO THE NOTICE ISSUED, THE ASSESSEE FILED A RETURN O F INCOME FOR THE ASSESSMENT YEAR UNDER DISPUTE ON 23-3-2009 DECLARIN G TOTAL INCOME OF RS.54,26,500/- WHICH INCLUDED ADDITIONAL INCOME OFFERED AT THE TIME OF SEARCH OF RS. 50 LAKH. IN COURSE OF ASSES SMENT PROCEEDINGS, WHILE EXAMINING THE DOCUMENTS IMPOUNDE D AT THE TIME OF SURVEY OPERATION, THE ASSESSING OFFICER NOTICED THAT AMONGST THE INCRIMINATING MATERIAL FOUND IS A LETTER DATED 15-1 0-2006 OF M/S SSC ARTS, PLOT NO.A-35, ROAD NO.6, FILM NAGAR, JUBI LEE HILLS, HYDERABAD INTIMATING THAT AS AGAINST THE INVESTMENT MADE BY THE ASSESSEE OF RS.1,92,00,000 IN THE FILM GODAVARI P RODUCED BY M/S SSC ARTS, THEY HAVE ONLY BEEN ABLE TO COLLECT ONLY RS.1,39,00,000/-. SINCE THERE IS A SHORT FALL OF RS.53 LAKHS, M/S SSC ARTS STATED THAT THEY WERE ISSUING TWO CHEQUES, ONE FOR RS.25 LAKHS DATED 25-`12- 2006 AND ANOTHER FOR RS.28 LAKHS DATED 20-1-2007. THE ASSESSING OFFICER HOWEVER NOTICED THAT AS AGAINST THE AMOUNT OF RS.1.92 CRORES, THE ENTRIES MADE IN THE BOOKS OF ACCOUNTS O F ASSESSEE FIRM 4 ITA NOS.253,369,370 AND GROUP OF 2011 VENKATESWARA CR EATIONS AND OTHERS, HYD. SHOWED INVESTMENTS OF RS1.71 CRORES. THE ASSESSIN G OFFICER THEREFORE WAS OF THE VIEW THAT AN AMOUNT OF RS.20,4 4,437/- WAS NOT REFLECTED IN THE BOOKS OF ACCOUNT. THOUGH IN THE STATEMENT RECORDED FROM THE PARTNER VAV NARASIMHA REDDY AS W ELL AS SUBSEQUENT REPLY DATED 15-12-2009 IT WAS EXPLAINED THAT THE TOTAL PAYMENT MADE TO M/S SSC ARTS AMOUNTED TO RS.1.50 C RORES WHICH HAS BEEN ACCOUNTED FOR IN THE BOOKS OF ACCOUNTS WHI CH WAS ALSO AGREED BY MS. SSC ARTS. IT WAS SUBMITTED THAT THE ONLY DIFFERENCE IN SO FAR AS THE PAYMENT TO SSC ARTS IS THE DIFFERE NCE IN EXPENDITURE TOWARDS PRINTS AND PUBLICITIES AMOUNTING TO RS.42 L AKHS. IT WAS STATED THAT THE MAXIMUM AMOUNT TO BE SPENT FOR PRIN TS AND PUBLICITIES WAS RS.42 LAKHS WHICH IS TO BE TREATED AS PAYMENT TO SSC ARTS AND SSC ARTS CONSIDERED THE EXPENDITURE OF RS.42 LAKHS FOR THE PURPOSE OF ACCOUNTING THE TOTAL AMOUNT. HOWEVE R, SSC ARTS HAD NO DATA ABOUT THE AMOUNT ACTUALLY SPENT BY THE ASSE SSEE IN OBTAINING THE PRINTS AND PUBLICITIES. HENCE, IT ME NTIONED THAT THE AMOUNT OF RS.42 LAKHS IS PERMISSIBLE TO BE SPENT. WHEREAS INSTEAD OF RS.42 LAKHS FIXED AS MAXIMUM BY SSC ARTS THE AS SESSEE HAS INCURRED ONLY RS.20,84,563/- AS ASSESSEE WAS OF THE VIEW THAT THE MOVIE WOULD NOT BE SUCCESSFUL. THEREFORE, IT REDUC ED THE COST OF PRODUCTION OF PRINTS AND PUBLICITIES AND THE ACTUAL EXPENDITURE INCURRED WAS RS.20,84,563/-. IT WAS THEREFORE SUB MITTED THAT AMOUNT OF RS.1,71,55,563/- AS RECORDED IN THE BOOKS OF ACCOUNTS WAS THE ACTUAL AMOUNT PAID AND NOT RS.1.92 CRORES. 4. THE ASSESSING OFFICER FURTHER NOTICED THAT IN TH E IMPOUNDED DOCUMENTS IS A LETTER OF UNDERSTANDING DATED 12-7-2 006 OF M/S MAHARSHI CINEMA, HYDERABAD. AS PER THIS LETTER ASSE SSEE HAS MADE INVESTMENTS OF RS.4 CRORES IN THE FILM ASHOK PROD UCED BY M/S 5 ITA NOS.253,369,370 AND GROUP OF 2011 VENKATESWARA CR EATIONS AND OTHERS, HYD. MAHARSHI CINEMA. HOWEVER ON VERIFICATION OF BOOKS OF ACCOUNTS OF THE ASSESSEE, IT WAS NOTICED THAT AN AMOUNT OF RS.3 ,44,75,000/- WAS SHOWN AS PAYMENT MADE TO M/S MAHARSHI CINEMA. THEREFORE, THERE IS DIFFERENCE TO THE EXTENT OF RS.55,25,000/- . THOUGH, IN THE STATEMENT RECORDED FROM SRI VAV NARASIMHA REDDY ON 3-4-2008 AND REPLY DATED 15-12-2009 IT WAS SUBMITTED THAT TOTAL PAYMENT MADE TO M/S MAHARSHI CINEMA AMOUNTED TO RS.3.44 CRORES W HICH IS CORRECTLY REFLECTED IN THE BOOKS OF ACCOUNT, BUT, T HE ASSESSING OFFICER WAS NOT CONVINCED WITH THE EXPLANATION OF T HE ASSESSEE BOTH WITH REGARD TO THE EXPENDITURE INCURRED IN RESPECT OF FILM GODAVARI AND ASHOK. THE ASSESSING OFFICER RELYING UPON CE RTAIN JUDICIAL PRECEDENTS OPINED THAT WHEN INCRIMINATING MATERIALS ARE SEIZED FROM THE ASSESSEE, THE ASSESSEE IS REQUIRED TO REBUT THE PRESUMPTION WITH REGARD TO THEIR CORRECTNESS BY PRODUCING EVIDE NCE TO PROVE THEM INCORRECT. THE ASSESSING OFFICER CONCLUDED TH AT SINCE THE ASSESSEE NEITHER SUBMITTED ANY EXPLANATION WHICH IS SUPPORTED BY PROPER EVIDENCE TO SHOW THAT THE AMOUNTS OF RS.20,4 4,437/- AND 55,25,000/- WERE NOT PAID TOWARDS EXPENDITURE OF FI LMS GODAVARI AND ASHOK, THEY ARE TO BE TREATED AS UNEXPLAINED E XPENDITURE. SINCE THE ASSESSEE HAS DECLARED ADDITIONAL INCOME O F RS.50 LAKHS IN THE RETURN FILED IN PURSUANCE TO THE NOTICE U/S 153 C, THE ASSESSING OFFICER ADDED THE BALANCE AMOUNT OF RS.25,69,437/- TO THE INCOME OF THE ASSESSEE. BEING AGGRIEVED OF THE ADDITION M ADE BY THE ASSESSING OFFICER, THE ASSESSEE PREFERRED AN APPEAL BEFORE THE CIT (A). 5. THE CIT (A) CONFIRMED THE ADDITION BY HOLDING AS UNDER: 5.5. THE SUBMISSIONS MADE BY THE AUTHORISED REPRES ENTATIVE HAVE BEEN CONSIDERED. THE OBSERVATIONS OF THE ASSE SSING 6 ITA NOS.253,369,370 AND GROUP OF 2011 VENKATESWARA CR EATIONS AND OTHERS, HYD. OFFICER ARE ALSO VERIFIED. HAVING CONSIDERED THE SU BMISSION MADE BY THE AR AND ALSO THE OBSERVATION OF THE ASSE SSING OFFICER, I AM OF THE VIEW THAT THE APPELLANT HAS MA DE THE PAYMENTS TO M/S SSC ARTS AT RS.20,44,437 AND RS.55, 25,000 TO M/S MAHARSHI CINEMA OUTSIDE OF THE BOOKS OF ACCO UNTS THEREBY THE APPELLANT DID NOT ACCOUNT TOTAL EXPENDI TURE OF RS.75,69,437. THE APPELLANT HAS ADMITTED RS.50,00, 000/- AGAINST THE UNACCOUNTED EXPENDITURE MADE BY THE APP ELLANT- FIRM AT RS.75,69,437. THEREFORE, THE ASSESSING OFF ICER IS JUSTIFIED TO MAKE AN ADDITION OF RS.25,69,437 TOWAR DS INVESTMENT MADE IN THE FILMS BY THE APPELLANT FIRM. HENCE, HAVING CONSIDERED THE FACTS OF THE CASE, I AM INCLI NED TO CONFIRM THE ADDITION MADE BY THE ASSESSING OFFICER, HENCE, ALL THE GROUNDS OF APPEAL PERTAINING TO THE ADDITION MA DE BYT EH ASSESSING OFFICER AND INTEREST LEVIED THEREON ARE D ISMISSED. 6. THE LEARNED AR MOSTLY REITERATING THE STAND TAKE N BEFORE THE LOWER AUTHORITIES SUBMITTED THAT THE IMPOUNDED DOCU MENT CANNOT BE CONSIDERED TO BE AN AGREEMENT FOR PAYMENT OF RS.1.9 2 CRORES TO SSC ARTS AS ALLEGED BY THE ASSESSING OFFICER. IT W AS SUBMITTED THAT THE CHEQUE DATED 25-12-2006 FOR RS.25 LAKHS AND CH EQUE DATED 21- 1-2007 FOR RS.28 LAKHS WERE NOT ENCASHED SINCE BOTH THESE CHEQUES BOUNCED. IT WAS SUBMITTED THAT NO ONE FROM THE SSC ARTS WAS EVER EXAMINED BY THE ASSESSING OFFICER TO ASCERTAIN WHAT AMOUNT IS ACTUALLY PAID. IN THESE CIRCUMSTANCES, IT CANNOT B E SAID THAT THE AMOUNT SHOWN IN THE BOOKS OF ACCOUNTS TOWARDS EXPEN DITURE INCURRED IS INCORRECT. SO FAR AS EXPENDITURE INCU RRED TOWARDS THE FILM ASHOK IS CONCERNED, THE LEARNED AR SUBMITTED THAT THE ASSESSING OFFICER WAS TOTALLY WRONG IN COMING TO A CONCLUSION THAT 7 ITA NOS.253,369,370 AND GROUP OF 2011 VENKATESWARA CR EATIONS AND OTHERS, HYD. THE ASSESSEE HAS INCURRED EXPENDITURE OF RS.4 CRORE S TOWARDS PAYMENT MADE TO M/S MAHARSHI CINEMA, WHEREAS THE AS SESSEE HAS ACTUALLY PAID MUCH LESS WHICH HAS BEEN CORRECTLY RE FLECTED IN THE BOOKS OF ACCOUNTS. THE LEARNED AR IN THIS CONTEXT REFERRED TO A LETTER STATED TO HAVE BEEN WRITTEN BY MAHARSHI CINE MA, A COPY OF WHICH IS PLACED AT PAGE-10 OF THE PAPER BOOK, WHIC H MENTIONS THAT AN AMOUNT OF RS.3,24,75,000/- WAS PAID TO THEM. IT WAS THEREFORE SUBMITTED BY THE LEARNED AR THAT THERE IS NO REASON TO DISBELIEVE THE AMOUNT RECORDED IN THE BOOKS OF ACCOUNT. HENCE , THE ADDITIONS MADE OF RS.75,69,437/- (RS.55,25,000 PLUS RS.21,55, 563/-) SHOULD BE DELETED. 7. THE LEARNED DR, ON THE OTHER HAND SUBMITTED THAT THE DOCUMENTS IMPOUNDED FROM THE PREMISES OF THE ASSESS EE CLEARLY DISCLOSE THE FACT THAT THE ASSESSEE HAS INCURRED EX PENDITURE MORE THAN WHAT IS REFLECTED IN THE BOOKS OF ACCOUNT. TH EREFORE, THE BURDEN WAS ON THE ASSESSEE TO PROVE WITH SUPPORTING EVIDENCE THAT IT HAS NOT ACTUALLY MADE PAYMENTS AS MENTIONED IN T HE IMPOUNDED DOCUMENTS. IN THE CIRCUMSTANCES, THERE IS NO REAS ON TO INTERFERE WITH THE ORDER OF THE CIT (A). 8. WE HAVE HEARD THE PARTIES AND PERUSED THE ORDERS OF THE REVENUE AUTHORISE AS WELL AS OTHER MATERIAL ON RECO RD. UNDISPUTEDLY, IN CASE OF FILM GODAVARI THE LETTER DT. 15-10-2006 OF M/S SSC ARTS WHICH WAS IMPOUNDED AT THE TIME OF SUR VEY FROM THE PREMISES OF THE ASSESSEE CLEARLY MENTIONS THAT THE ASSESSEE HAD INVESTED RS.1,92,00,000/- IN THE FILM GODAVARI PROD UCED BY THEM. THE LETTER FURTHER MENTIONS THAT SINCE THE PICTURE HAS REALISED RS.1.39 CRORES, THE SHORTFALL OF RS.53 LAKHS WAS PA ID BY M/S SSC ARTS THROUGH CHEQUES ISSUED BY THEM AMOUNTING TO RS .25 LAKHS AND 8 ITA NOS.253,369,370 AND GROUP OF 2011 VENKATESWARA CR EATIONS AND OTHERS, HYD. RS.28 LAKHS. HOWEVER, THE ASSESSEE HAS CLAIMED THA T THE SAID CHEQUES COULD NOT BE ENCASHED AS THEY BOUNCED. THE ASSESSEE HAS FURTHER CLAIMED THAT THE ACTUAL EXPENDITURE INCURRE D TOWARDS PRINTS AND PUBLICITIES IS RS.20,84,563/- AND NOT RS.42 LA KHS AS ALLEGED BY THE ASSESSING OFFICER. AS CAN BE SEEN FROM THE AFOR ESAID FACTS, THE BASIS ON WHICH THE ASSESSING OFFICER HAS INFERRED A BOUT THE INCURRING OF EXPENDITURE OF RS.1.92 CRORES BY THE A SSESSEE IS THE LETTER OF M/S SSC ARTS WHICH SPEAKS OF PAYMENT OF A TOTAL AMOUNT OF RS.53 LAKHS THROUGH TWO CHEQUES DATED 25-12-2006 AN D 20-1-2007. THEREFORE, THIS FACT OF PAYMENT OF RS.53 LAKHS COU LD EASILY HAVE BEEN ASCERTAINED BY THE ASSESSING OFFICER BY MAKING INQUIRY WITH THE CONCERNED BANKS. WITHOUT ASCERTAINING THIS FACT THE ASSESSING OFFICER COULD NOT HAVE CONCLUDED THAT ASSESSEE HAS PAID MORE THAN WHAT IS RECORDED IN THE BOOKS OF ACCOUNTS. THEREFOR E, WE DIRECT THE ASSESSING OFFICER TO VERIFY THIS ASPECT. 9. SIMILARLY, IN CASE OF FILM ASHOK THE ASSESSE E HAS OFFERED SIMILAR EXPLANATION BY CONTENDING THAT THE AMOUNT M ENTIONED TO HAVE BEEN PAID AS PER IMPOUNDED DOCUMENTS WAS NOT A CTUALLY PAID AND THE ACTUAL PAYMENT WAS MADE AS PER BOOKS OF ACC OUNTS I.E. RS.3.44 CRORES. IN SUPPORT OF SUCH CONTENTION THE A SSESSEE HAS PLACED UPON A LETTER ISSUED BY MAHARSHI CINEMA CERT IFYING THAT THEY HAVE RECEIVED AN AMOUNT OF RS.3,24,75,000/- AND NOT RS.4 CRORES AS MENTIONED IN THE LETTER OF UNDERSTANDING. THE ASSE SSEE HAS ALSO SUBMITTED ASSESSEES ACCOUNT COPY IN THE BOOKS OF MAHARSHI CINEMA WHICH ALSO SHOWS PAYMENT OF RS.3,24,75,000/-. HAVI NG CONSIDERED THE FACTS AND CONTENTIONS OF THE PARTIES, WE ARE OF THE VIEW THAT THE ASSESSING OFFICER HAS INFERRED THE PAYMENT OF RS.4 CORES BY THE ASSESSEE SOLELY RELYING UPON THE LETTER OF UNDERSTA NDING IMPOUNDED 9 ITA NOS.253,369,370 AND GROUP OF 2011 VENKATESWARA CR EATIONS AND OTHERS, HYD. FROM THE ASSESSEE. HOWEVER, AS IT APPEARS HE HAS N OT VERIFIED WHETHER THE AMOUNT OF RS.4 CRORES WAS ACTUALLY PAID BY THE ASSESSEE TO MAHARSHI CINEMA. IF AT ALL THE AMOUNT OF RS.4 CRORES WAS PAID AS PER THE LETTER OF UNDERSTANDING THEN IT MUST BE RECORDED AT LEAST IN THE BOOKS OF ACCOUNTS OF M/S MAHARSHI C INEMA. THEREFORE, WITHOUT VERIFYING THE BOOKS OF ACCOUNTS OF THE ASSESSEE AS WELL AS THAT OF MAHARSHI CINEMA THE ASSESSING OF FICER UNILATERALLY COULD NOT HAVE COME TO A CONCLUSION THAT THE ASSESS EE HAS PAID THE AMOUNT OF RS.4 CRORES SOLELY RELYING UPON THE IMPOU NDED DOCUMENT I.E. LETTER OF UNDERSTANDING. IT IS MORE SO WHEN TH E ASSESSEE HAS NOT ONLY PRODUCED A CONFIRMATION FROM MAHARSHI CINEMA C ERTIFYING THAT THEY HAVE RECEIVED AN AMOUNT OF RS.3,24,75,000/- SU PPORTED BY THE ACCOUNT COPY ALSO. THEREFORE, CONSIDERING THE TOTAL ITY OF FACTS AND CIRCUMSTANCES, WE ARE INCLINED TO REMIT THIS MATTER BACK TO THE FILE OF THE ASSESSING OFFICER WHO SHALL DECIDE THE ISSUE AFRESH AFTER CONSIDERING ALL FACTS AND MATERIALS ON RECORD. FOR COMING TO AN APPROPRIATE CONCLUSION THE ASSESSING OFFICER IS FRE E TO MAKE ANY ENQUIRY AS MAY BE DEEMED NECESSARY INCLUDING EXAMIN ING THE PERSONS CONCERNED FROM SSC ARTS AND MAHARSHI CINEMA . IT GOES WITHOUT SAYING THAT THE ASSESSING OFFICER SHALL AFF ORD A REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE IN THE M ATTER. WITH THE AFORESAID DIRECTION, WE REMIT THE MATTER TO THE FIL E OF THE ASSESSING OFFICER. 10. IN THE RESULT, THE ASSESSEES APPEAL IS TREATED AS ALLOWED FOR STATISTICAL PURPOSES. ITA NO.847/HYD/2011 (SRI VENKATESWARA FILMS)- ASSES SMENT YEAR 2008-09 : 10 ITA NOS.253,369,370 AND GROUP OF 2011 VENKATESWARA CR EATIONS AND OTHERS, HYD. 11. THE ONLY ISSUE IN THE PRESENT APPEAL IS WITH RE GARD TO ADDITION OF AN AMOUNT OF RS.20 LAKHS MADE BY THE ASSESSING O FFICER AND SUSTAINED BY THE CIT (A). 12. BRIEFLY THE FACTS ARE, IN COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER NOTICED THAT IN THE INCRIMINATING MATERIAL IMPOUNDED DURING SURVEY OPERATIONS IS LETTER OF UND ERSTANDING DATED 23-7-2007 WITH M/S CREATIVE COMMERCIALS. AS PER T HE SAID LETTER OF UNDERSTANDING, THE ASSESSEE WAS TO ACQUIRE DISTRIBU TION RIGHTS OF A FILM I.E PRODUCTION NO.21 FROM NIZAM AREA FOR LEASE PERIOD OF 5 YEARS. THE LETTER FURTHER MENTIONED THAT OUT OF T HE AGREED AMOUNT OF RS.5,90,00,000/- TO BE PAID BY THE ASSESSEE TO M /S CREATIVE COMMERCIALS, AN AMOUNT OF RS.49,99,000/- INCLUDING CASH PAYMENT OF RS.20 LAKHS ON 23-7-2007 WAS MADE AS AN ADVANCE BY THE ASSESSEE. HOWEVER, ON VERIFICATION OF THE BOOKS O F ACCOUNTS, THE ASSESSING OFFICER NOTICED THAT THE ASSESSEE HAD ONL Y MENTIONED THE CHEQUE PAYMENT OF RS.29 LAKHS WHEREAS THE CASH PAYM ENT OF RS.20 LAKHS WAS NOT ACCOUNTED FOR. IN COURSE OF RECORDIN G OF STATEMENT FROM THE PARTNER SRI VAV NARASIMHA REDDY WHEN A QUE RY WAS MADE IN THIS REGARD SRI VAV NARASIMHA REDDY ON GOING THR OUGH THE CONTENTS OF THE LETTER OF UNDERSTANDING ACCEPTED TH E CASH PAYMENT OF RS.20 LAKHS. HOWEVER, DURING THE ASSESSMENT PRO CEEDINGS, THE ASSESSEE CONTENDED THAT IT HAS INCURRED AN EXPENDI TURE OF RS.1,04,99,000/- UPTO TO 31-3-2008 AND THE ENTIRE A MOUNT WAS PAID EITHER THROUGH CROSSED CHEQUES OR CROSSED PAY ORDER S. IT WAS FURTHER STATED THAT NO CASH PAYMENT WAS MADE TO M/S CREATIVE COMMERCIALS. THE ASSESSING OFFICER HOWEVER REJECT ING SUCH EXPLANATION OF THE ASSESSEE TREATED THE AMOUNT OF R S.20 LAKHS AS UNEXPLAINED INVESTMENT OF THE ASSESSEE AND ADDED IT TO THE INCOME 11 ITA NOS.253,369,370 AND GROUP OF 2011 VENKATESWARA CR EATIONS AND OTHERS, HYD. OF THE ASSESSEE FOR THE IMPUGNED ASSESSMENT YEAR. THE ASSESSEE CHALLENGED THE ADDITION BY PREFERRING AN APPEAL BEF ORE THE CIT (A). HOWEVER, THE CIT (A) ALSO SUSTAINED THE ADDITION MA DE BY THE ASSESSING OFFICER. 13. WE HAVE HEARD PARTIES AND PERUSED THE MATERIA LS ON RECORD. IT IS THE CONTENTION OF THE LEARNED AR BEFORE US TH AT IN LETTER DATED 11-11-2009 M/S CREATIVE COMMERCIALS HAVE CATEGORIC ALLY STATED OF HAVING RECEIVED RS.4,66,53,750/- FROM THE ASSESSEE UPTO 31-5- 2008. OUT OF WHICH AN AMOUNT RS.1,04,99,000/- WAS RECEIVED UP TO 31-3-2008 AND THE ENTIRE AMOUNT WAS PAID THROUGH DD S, PAY ORDERS OR CHEQUES. IN THIS CONTEXT, THE LEARNED AR REFERR ED TO THE SAID LETTER DATED 11-11-2009 AT PAGE 14 OF THE PAPER BOO K AND THE ACCOUNT COPY OF THE ASSESSEE IN THE BOOKS OF CREATI VE COMMERCIALS. THE LEARNED AR HAS FURTHER CONTENDED THAT WITHOUT E XAMINING THE ACCOUNTS OF M/S. CREATIVE COMMERCIALS AND WITHOUT C ONTROVERTING THE LETTER DATED 11-11-2009 OF CREATIVE COMMERCIALS , THE ASSESSING OFFICER WAS NOT JUSTIFIED IN ADDING THE AMOUNT OF R S.20 LAKHS. 14. THE LEARNED DR, ON THE OTHER HAND HAS CONTENDED THAT SINCE THE DOCUMENT WAS IMPOUNDED FROM THE ASSESSEE, THE O NUS IS ON THE ASSESSEE TO DISPROVE IT. THE ASSESSEE HAVING FAILE D TO DO SO THE ADDITION WAS JUSTIFIED. 15. IN THE IMPOUNDED DOCUMENT I.E. LETTER OF UNDERS TANDING DATED 23-7-2007 M/S CREATIVE COMMERCIALS HAVE CATEGORICAL LY STATED OF HAVING RECEIVED AN AMOUNT OF RS.49,99,000/- TOWARDS ADVANCE WHICH INCLUDED CASH PAYMENT OF RS.20 LAKHS MADE ON 23-7-2007. WHEN THE ASSESSEE DOES NOT DISPUTE THE CHEQUE PAYME NT OF RS.29 LAKHS MENTIONED IN THE LETTER OF UNDERSTANDING, THE RE IS NO REASON TO 12 ITA NOS.253,369,370 AND GROUP OF 2011 VENKATESWARA CR EATIONS AND OTHERS, HYD. BELIEVE THAT THE CASH PAYMENT OF RS.20 LAKHS WAS NO T MADE BY THE ASSESSEE. THAT BESIDES THE PARTNER OF THE ASSESSEE FIRM SRI VAV NARASIMHA REDDY WHEN CONFRONTED WITH THE AFORESAID LETTER OF UNDERSTANDING ALSO ACCEPTED THE FACT THAT CASH PAYM ENT OF RS.20 LAKHS WAS MADE TO CREATIVE COMMERCIALS. IN THE AFO RESAID CIRCUMSTANCES, THE SUBSEQUENT LETTER DATED 11-11-20 09 OF CREATIVE COMMERCIALS IS ONLY A SELF SERVING DOCUMENT HAVING LITTLE EVIDENTIARY VALUE. SO FAR AS RELIANCE PLACED BY THE ASSESSEE O N THE ACCOUNT COPY OF ASSESSEE APPEARING IN THE BOOKS OF M/S CREA TIVE COMMERCIALS IS CONCERNED, IT IS LOGICAL THAT THE CA SH PAYMENT OF RS.20 LAKHS WOULD NOT BE MENTIONED THERE AS IT IS P AYMENT MADE OUTSIDE THE BOOKS. IN THESE CIRCUMSTANCES, WE DO N OT FIND ANY REASON TO INTERFERE WITH THE ORDER OF THE CIT (A) W HICH IS ACCORDINGLY UPHELD. THE GROUND RAISED IS DISMISSED. 16. IN THE RESULT, THE ASSESSEES APPEAL IS DISMI SSED. ITA NO.253/HYD/2011 (SRI VENKATESWARA CREATIONS)- ASSESSMENT YEAR 2003-04 : 17. THE ONLY ISSUE IN THE AFORESAID APPEAL OF THE D EPARTMENT IS IN RESPECT OF CIT (A) DELETING THE ADDITION OF RS.27,8 0,000/-. 18. BRIEFLY THE FACTS ARE, THE ASSESSEE IS A PARTNE RSHIP FIRM ENGAGED IN THE BUSINESS OF FILM PRODUCTION. FOR TH E IMPUGNED ASSESSMENT YEAR, THE ASSESSEE FILED ITS RETURNS OF INCOME DECLARING LOSS OF RS.4,19,930/-. THE RETURN WAS PROCESSED U/ S 143(1) OF THE ACT. SUBSEQUENTLY, ON 4-3-2008 A SEARCH AND SEIZUR E OPERATION U/S 132 OF THE ACT WAS CONDUCTED IN CASE OF THE ASSESSE E AS WELL AS OTHERS IN THE GROUP. AS A CONSEQUENCE OF SEARCH OPE RATION, NOTICES U/S 153A WERE ISSUED TO THE ASSESSEE CALLING FOR TH E RETURNS OF 13 ITA NOS.253,369,370 AND GROUP OF 2011 VENKATESWARA CR EATIONS AND OTHERS, HYD. INCOME FOR ASST. YEARS 2002-03 TO 2007-08. IN RESP ONSE TO THE NOTICE, THE ASSESSEE FILED ITS RETURN OF INCOME AGA IN DECLARING LOSS OF RS.4,19,930/-. AS STATED BY THE ASSESSING OFFICER IN THE ASSESSMENT ORDER, IN COURSE OF SEARCH PROCEEDINGS, THE EXAMINA TION OF BOOKS OF ACCOUNTS OF THE ASSESSEE REVEALED THAT HUGE CASH RE CEIPTS WERE CREDITED IN ITS BOOKS FROM ASSESSMENT YEAR 2003-04 ONWARDS. THE CREDITS WERE IN THE NAME OF VARIOUS PERSONS AS WELL AS THE GROUP CONCERN SRI VENKATESWARA FILMS. THE ASSESSING OFFI CER NOTICED THAT CASH CREDIT FROM SRI VENKATESWARA FILMS IN DIFFEREN T ASSESSMENT YEARS WERE AS UNDER:- A.Y. CASH RECEIPTS FROM OTHERS (RS.) CASH RECEIPTS FROM FILMS (RS.) TOTAL UNEXPLAINED CASH CREDIT (RS.) 2003-04 -- 2780000 2780000 2004-05 9750000 3920000 13670000 2005-06 8625000 0 8625000 2006-07 10805000 0 10805000 2007-08 NIL 2450000 2450000 2008-09 350000 0 350000 TOTAL 29530000 9150000 38680000 19. THE ASSESSING OFFICER WHILE VERIFYING THE AFORE SAID ENTRIES IN THE BOOKS OF THE ASSESSEE VIS--VIS THE BOOKS OF S RI VENKATESWARA FILMS FOUND THAT CERTAIN CASH CREDITS WERE NOT REFL ECTED IN THE BOOKS OF SRI VENKATESWARA FILMS. DURING SEARCH OPERATION WHEN THE PARTNERS OF THE ASSESSEE FIRM WERE ASKED ABOUT THE CASH CREDITS THEY STATED THAT SO FAR AS CASH CREDIT FROM SRI VE NKATESWARA FILMS 14 ITA NOS.253,369,370 AND GROUP OF 2011 VENKATESWARA CR EATIONS AND OTHERS, HYD. ARE CONCERNED, THEY ARE GENUINE AND FURTHER THEY A RE NOT ACTUALLY CASH CREDITS BUT ARE ADVANCES IN THE REGULAR COURSE OF BUSINESS. SO FAR AS CREDITS FROM OTHERS ARE CONCERNED, IT WAS AC CEPTED THAT THEY ARE ACTUALLY RECEIVED FROM CLOSE RELATIVES AND FAMI LY MEMBERS BUT SINCE IT IS VERY SENSITIVE ISSUE WHICH WILL AFFECT THE RELATION OF THE FAMILY MEMBERS THE PEAK CREDITS WERE OFFERED AS INC OME IN THE INDIVIDUAL HANDS OF THE PARTNERS. IT WAS STATED TH AT AS THE FIRM M/S VENKATESWARA CREATIONS CAME INTO EXISTENCE IN THE M ONTH OF OCTOBER, 2002 AND IT IS FIRST YEAR OF PRODUCTION, T HE PARTNERS HAVE BURROWED THE MONIES FROM CLOSE RELATIVES AND FRIEND S. IT WAS SUBMITTED BY THE ASSESSEE, BOTH M/S SRI VENKATESWAR A CREATIONS AND SRI VENKATESWARA FILMS ARE SISTER CONCERNS HAVI NG COMMON PARTNERS AND HAVE BUSINESS CONNECTION WITH EACH OTH ER. IT WAS SUBMITTED THAT WHILE THE ASSESSEE IS ENGAGED IN THE PRODUCTION OF FILMS, SRI VENKATESWARA FILMS IS THE DISTRIBUTOR OF SUCH FILMS FOR NIZAM AREA. IT WAS SUBMITTED THAT THE TRANSACTION B ETWEEN BOTH THE CONCERNS IS A BUSINESS TRANSACTION AND AMOUNTS WERE PAID FOR THE PURPOSE OF BUSINESS FROM OUT OF CASH AVAILABLE IN T HE BOOKS OF ACCOUNTS OF SRI VENKATESWARA FILMS AND THE ENTIRE PAYMENT MADE AND RECEIVED BACK HAS BEEN RECORDED IN THE BOOKS OF ACCOUNTS OF BOTH THE CONCERNS. IT WAS SUBMITTED THAT SRI VENKA TESWARA FILMS IS AN ASSESSEE AND HAS FILED THE RETURN OF INCOME BEFO RE THE SAME ASSESSING OFFICER. THE ASSESSING OFFICER HOWEVER W AS NOT CONVINCED WITH THE CONTENTIONS RAISED BY THE ASSESSEE AND BY HOLDING THAT THE ASSESSEE HAS NOT BEEN ABLE TO ESTABLISH THE IDENTIT Y OF THE CREDITOR, CREDITWORTHINESS AND GENUINENESS OF THE TRANSACTION , TREATED THE AMOUNT OF RS.27,80,000/- AS UNEXPLAINED CASH CREDIT AND ADDED IT TO THE INCOME OF THE ASSESSEE. BEING AGGRIEVED OF SUCH ADDITION THE ASSESSEE PREFERRED AN APPEAL BEFORE THE CIT (A) . 15 ITA NOS.253,369,370 AND GROUP OF 2011 VENKATESWARA CR EATIONS AND OTHERS, HYD. 20. THE CIT (A) DELETED THE ADDITION BY HOLDING THA T THE ASSESSING OFFICER HAS NOT MADE OUT A CASE THAT THE AMOUNT REC EIVED FROM SRI VENKATESWARA FILMS IS BOGUS IN NATURE. 21. THE LEARNED DR SUBMITTED THAT THE CIT (A) WAS N OT JUSTIFIED IN DELETING THE ADDITION WHEN THE ASSESSEE HAS FAILED TO PROVE THE GENUINENESS OF THE TRANSACTION. 22. THE LEARNED AR SUBMITTED BEFORE US THAT THE TO TAL AMOUNT OUTSTANDING AS ON THE LAST DAY OF THE RELEVANT PREV IOUS YEAR WAS RS.32,69,861/-. IT WAS CONTENDED BY THE LD.AR THAT THIS FACT IS VERY CLEAR FROM THE ACCOUNT COPY OF SRI VENKATESWARA FIL MS IN THE BOOKS OF THE ASSESSEE AND THE ASSESSEES ACCOUNT IN THE B OOKS OF SRI VENKATESWARA FILMS. 23. WE HAVE HEARD THE PARTIES AND PERUSED THE MATER IAL ON RECORD. AS CAN BE SEEN FROM THE ASSESSMENT ORDER, THE ASSES SING OFFICER HAS TREATED THE AMOUNT OF RS.27,80,000/- AS UNEXPLA INED CASH CREDIT ON THE GROUND THAT ASSESSEE HAS FAILED TO PR OVE THE THREE INGREDIENTS OF IDENTITY OF THE CREDITOR, CREDITWORT HINESS AND GENUINENESS OF THE TRANSACTION. HOWEVER, ON A PERUS AL OF THE ASSESSMENT ORDER WOULD REVEAL THAT SOME OF THE CRED ITS EVEN ACCORDING TO THE ASSESSING OFFICER HIMSELF, APPEARS IN THE BOOKS OF SRI VENKATESWARA FILMS. THIS PROVES THE FACT THAT THE ASSESSEE HAD A CLOSE BUSINESS CONNECTION WITH SRI VENKATESWARA F ILMS AND THEY HAVE A RUNNING ACCOUNT. A PERUSAL OF THE BALANCE-S HEET OF SRI VENKATESWARA FILMS AS ON 31-3-2003, A COPY OF WHICH IS PLACED IN THE PAPER BOOK SUBMITTED BEFORE US, INDICATES THAT AN AMOUNT OF RS.32,69,861/- WAS SHOWN AGAINST THE ASSESSEE FIRM AS AN OUTSTANDING. THEREFORE, WHEN SUCH IS THE FACT, IT CANNOT BE TERMED 16 ITA NOS.253,369,370 AND GROUP OF 2011 VENKATESWARA CR EATIONS AND OTHERS, HYD. AS UNEXPLAINED CASH CREDIT. WHEN THE AMOUNT IN Q UESTION APPEARS IN THE BOOKS OF ACCOUNTS OF BOTH THE CREDITOR AND D EBTOR THE ALLEGATION OF THE ASSESSING OFFICER THAT THE ASSESS EE HAS FAILED TO ESTABLISH THE IDENTITY, CREDITWORTHINESS AND GENUIN ENESS IS TOTALLY UNSUBSTANTIATED AND CONTRARY TO THE FACTS AND MATER IAL ON RECORD. THIS IS MORE SO WHEN THE CREDITOR SRI VENKATESWARA FILMS IS AN ASSESSEE BEFORE THE SAME ASSESSING OFFICER. IN THE AFORESAID CIRCUMSTANCES, WE DO NOT FIND ANY REASON TO INTERFE RE WITH THE ORDER OF THE CIT (A) WHICH IS ACCORDINGLY CONFIRMED. THE GROUND RAISED BY THE DEPARTMENT IS THEREFORE DISMISSED. IN THE RESUL T APPEAL IS ALSO DISMISSED. ITA NOS.369 AND 837/HYD/2011 (SRI VENKATESWARA CREATIONS)- ASSESSMENT YEAR 2004-05 : 24. THESE ARE CROSS APPEALS BY DEPARTMENT AND THE ASSESSEE. THERE IS A DELAY OF 61 DAYS IN THE APPEAL FILED BY THE ASSESSEE BEING ITA NO.837/HYD/11. THE ASSESSEE HAS FILED A DELAY C ONDONATION PETITION SUPPORTED BY AN AFFIDAVIT EXPLAINING THE C AUSE OF DELAY. AFTER HEARING THE PARTIES, AND CONSIDERING THE EXPL ANATION OF THE ASSESSEE, WE ARE INCLINED TO CONDONE THE DELAY OF 6 1 DAYS AND ADMIT THE APPEAL FOR DISPOSAL ON MERITS. 25. IN GROUND NO.2, THE DEPARTMENT HAS CHALL ENGED THE DELETION OF ADDITION OF RS.39,20,000/- ON ACCOUNT O F UNEXPLAINED CASH CREDIT IN THE NAME OF SRI VENKATESWARA FILMS. SINCE FACTS ARE SIMILAR TO FACTS AS IN ITA NO.253/HYD/11, IT IS NO T NECESSARY TO DEAL WITH THE FACTS OVER AGAIN IN THIS APPEAL. ONLY FO R THE MATTER OF RECORD, WE NEED TO MENTION THAT FOR THE IMPUGNED AS SESSMENT YEAR, THE ASSESSING OFFICER QUANTIFIED THE UNEXPLAINED CA SH CREDIT IN THE 17 ITA NOS.253,369,370 AND GROUP OF 2011 VENKATESWARA CR EATIONS AND OTHERS, HYD. NAME OF SRI VENKATESWARA FILMS AT RS.39,20,000/- AN D ADDED IT TO THE TOTAL INCOME OF THE ASSESSEE, WHEREAS THE CIT ( A) DELETED THE ADDITION BY HOLDING THAT THE TRANSACTION CANNOT BE TREATED AS NOT GENUINE. 26. HAVING HEARD THE CONTENTIONS OF THE PARTIES, I N THE CONTEXT OF MATERIALS ON RECORD, WE ARE OF THE VIEW THAT THE CI T (A) WAS JUSTIFIED IN DELETING THE ADDITION. AS WE HAVE ALR EADY HELD IN DEPARTMENTAL APPEAL IN ITA NO.253/HYD/11, THE ASSES SEE HAS BUSINESS CONNECTION WITH SRI VENKATESWARA FILMS AND HAS A RUNNING ACCOUNT WITH IT. A PERUSAL OF THE ACCOUNT COPY OF THE ASSESSEE AND THAT OF SRI VENKATESWARA FILMS SHOWS THE OUTSTANDIN G OF RS.11,66,321/- AGAINST THE ASSESSEE . WHEN THE TRA NSACTION APPEAR BOTH IN THE BOOKS OF SRI VENKATESWARA FILMS AS WELL AS THE ASSESSEE AND WHEN BOTH ARE FILING THEIR RETURN, IT CANNOT BE HELD THAT THE TRANSACTION IS UNEXPLAINED CASH CREDIT. SINCE THE CREDITOR IS IDENTIFIED AND THE TRANSACTION IS REFLECTED IN THE BOOKS OF ACCOUNTS OF CREDITOR AS WELL AS DEBTOR, IT CANNOT BE HELD AS NOT GENUINE. THEREFORE, FOLLOWING OUR DECISION IN ITA NO.253/HYD /11, WE UPHOLD THE ORDER OF THE CIT (A) BY DISMISSING THE GROUNDS RAISED BY THE DEPARTMENT. 27. THE NEXT ISSUE IS WITH REGARD TO THE CIT (A) SU STAINING ADDITION OF RS.50 LAKHS OUT OF TOTAL ADDITION OF RS.97,50, 000/- MADE BY THE ASSESSING OFFICER. WHILE THE DEPARTMENT HAS COME I N APPEAL FOR RESTORING THE ENTIRE ADDITION OF RS.97,50,000/- MAD E BY THE ASSESSING OFFICER, THE ASSESSEE SEEKS DELETION OF THE AMOUNT OF RS.50 LAKHS SUSTAINED BY THE CIT (A). 18 ITA NOS.253,369,370 AND GROUP OF 2011 VENKATESWARA CR EATIONS AND OTHERS, HYD. 28. BRIEFLY THE FACTS ARE, DURING THE ASSESSMENT PR OCEEDINGS, THE ASSESSING OFFICER ON VERIFICATION OF SEIZED BOO KS OF ACCOUNTS OF THE ASSESSEE NOTED THAT CASH CREDIT SHOWN BY THE ASSESSEE FROM OTHER PERSONS DURING THE YEAR AMOUNTED TO RS.9 7,50,000/-. IN COURSE OF THE ASSESSMENT PROCEEDINGS, WHEN THE A SSESSEE WAS CONFRONTED WITH THIS FACT, AND WAS ASKED TO PROVE T HE GENUINENESS OF THE CASH CREDITS THE PARTNER OF ASS ESSEE FIRM SRI VAV NARASIMHA REDDY STATED THAT THE CASH CREDITS SH OWN IN THE BOOKS OF THE ASSESSEE FIRM ARE GENUINE AND THEY HAV E RECEIVED FROM THE CLOSE RELATIVES OF THE PROMOTERS. HOWEVER , AT THE SAME TIME, IT WAS STATED THAT SINCE IT IS VERY SENSITIVE FAMILY AFFAIR WHICH AFFECTS THE RELATIONSHIP OF THE FAMILY MEMBER S THE PEAK CREDIT WAS DISCLOSED AS INCOME IN THE HANDS OF INDI VIDUAL PARTNERS. THE ASSESSING OFFICER HOWEVER DISBELIE VED THE CLAIM OF THE ASSESSEE AND TREATED THE AMOUNT OF RS.97,50, 000/- AS UNEXPLAINED CASH CREDIT U/S 68 OF THE ACT. THE ASS ESSEE CHALLENGED THE ADDITION BEFORE THE CIT (A). 29. IN COURSE OF HEARING BEFORE THE CIT (A), IT W AS SUBMITTED BY THE ASSESSEE THAT THE MANAGING PARTNER OF ASSESS EE FIRM HAD MADE A DISCLOSURE OFFERING THE AMOUNTS DEPOSITED IN THE ASSESSEES BOOKS TERMED TO HAVE RECEIVED FROM OUTSI DERS. HOWEVER, THE ASSESSING OFFICER HAS TREATED THE ENTI RE CREDIT AND ADDED THE AMOUNT OF RS.97,50,000/- WHICH IS NOT CO RRECT. IT WAS SUBMITTED THAT WHILE THE ASSESSING OFFICER HAS TAKE N ALL THE CREDIT APPEARING IN THE BOOKS WHICH PERTAINED TO THE OUTSI DERS BUT AT THE SAME TIME HE HAS IGNORED THE DEBITS APPEARING T HEREIN. IT WAS SUBMITTED THAT WHEN THERE ARE CREDITS AND DEBIT S ONLY PEAK CREDIT COULD HAVE BEEN CONSIDERED FOR THE PURPOSE O F ADDITION. IT 19 ITA NOS.253,369,370 AND GROUP OF 2011 VENKATESWARA CR EATIONS AND OTHERS, HYD. WAS SUBMITTED THAT SIMILAR TRANSACTIONS ALSO APPEAR IN THE SUBSEQUENT YEARS. THEREFORE, IT IS APPROPRIATE TO CONSIDER THE HIGHEST PEAK OF THE CREDIT FOR ADDITION. THE ASSES SEE CONTENDED THAT FOR THE YEAR UNDER CONSIDERATION PEAK CREDITS OF RS.50 LAKHS COULD BE CONSIDERED AS ADDITION WHEREAS FOR THE AS SESSMENT YEAR 2006-07, THE PEAK CREDIT IS RS.90,95,000/-. THEREFO RE, IF PEAK CREDIT OF RS.50 LAKHS IS CONSIDERED FOR THE ASSESSM ENT YEAR 2004- 05, THEN FOR THE ASSESSMENT YEAR 2006-07, THE BALAN CE AMOUNT OF RS.47,95,000/- (RS.97,95,000 RS.50,00,000) HAS TO BE CONSIDERED. IT WAS FURTHER CONTENDED THAT THE PART NERS OF THE FIRM WHO ARE ALSO COMMON PARTNERS OF OTHER PARTNERS HIP FIRM SRI VENKATESWARA FILMS HAVE MADE A COMBINED DISCLOSURE OF RS.90.96 LAKHS FOR THE ASSESSMENT YEAR 2004-05 AND 2006-07. IT WAS THEREFORE CONTENDED THAT IF THE PEAK CREDITS ARE AD DED IN THE HANDS OF THE ASSESSEE THEN IT SHOULD NOT BE CONSIDE RED IN THE HANDS OF THE PARTNERS. THE CIT (A) CONSIDERING TH E SUBMISSIONS OF THE ASSESSEE IN THE LIGHT OF THE DECISION OF INC OME-TAX APPELLATE TRIBUNAL, MUMBAI BENCH IN CASE OF SUREND ER M. KHANDER VS.. ACIT (76 ITD 121) HELD THAT WHEN THERE ARE CREDITS AS WELL AS DEBITS, IN SUCH SITUATION ONLY THE PEAK CREDIT SHOULD BE CONSIDERED FOR THE PURPOSE OF ADDITION. HE THEREF ORE ACCEPTING THE ASSESSEES CONTENTION THAT THE PEAK CREDIT FOR THE IMPUGNED ASSESSMENT YEAR WAS RS.50 LAKHS HELD THAT ADDITION TO THE EXTENT OF RS.50 LAKHS IS TO BE SUSTAINED AND THE BALANCE A DDITION IS TO BE DELETED. BEING AGGRIEVED OF THE AFORESAID ORDER, BOTH THE ASSESSEE AS WELL AS THE DEPARTMENT IS IN APPEAL BEF ORE US. 30. WE HAVE HEARD THE CONTENTIONS OF THE PARTIES AN D PERUSED THE MATERIALS ON RECORD. ON A PERUSAL OF THE EXT RACT OF DATE- 20 ITA NOS.253,369,370 AND GROUP OF 2011 VENKATESWARA CR EATIONS AND OTHERS, HYD. WISE CASH CREDITS AND REPAYMENTS AT PAGE-3 AND 4 OF THE ASSESSMENT WOULD MAKE IT CLEAR THAT WHILE THERE IS RECEIPT OF RS.97,50,000/-, THERE ARE ALSO REPAYMENT OF RS.1,02 ,00,000/-. IT IS VERY MUCH CLEAR FROM THE ASSESSMENT ORDER THA T THE ASSESSING OFFICER HAS CONSIDERED THE CREDITS OF RS. 97,50,000/- WHILE COMPLETELY IGNORING THE REPAYMENTS OF RS.1,02 ,00,000/-. IT IS ALSO A FACT ON RECORD IN SUBSEQUENT ASSESSMENT Y EAR ALSO; THERE ARE SIMILAR CREDITS AND REPAYMENTS. IN THE A FORESAID SITUATION, WHEN THERE ARE BOTH CREDITS AND DEBITS T HEN ONLY PEAK CREDIT IS TO BE CONSIDERED FOR THE PURPOSE OF ADDIT ION. 31. THE LEARNED AR CONTENDED BEFORE US THAT THE PE AK CREDIT FOR THE YEAR UNDER CONSIDERATION IS RS.50 LA KHS AS ON 9-10- 2003. IN THIS CONTEXT, HE REFERRED TO THE STATEMEN TS AT PAGE-33 OF THE PAPER BOOK. ON A PERUSAL OF THE SAID STATEM ENT, THE ASSESSEES CONTENTION IS FOUND TO BE CORRECT. IT I S ALSO RELEVANT TO NOTE THAT AS PER THE STATEMENT, THERE IS NO OPEN ING BALANCE AS ON 1-4-2003. WHEREAS THERE IS AN OPENING BALANCE O F RS.13,50,000/- AS ON 1-4-2004. IN THE AFORESAID C IRCUMSTANCES, IT IS TO BE HELD THAT ONLY THE PEAK CREDIT CAN BE C ONSIDERED FOR ADDITION IN THE HANDS OF THE ASSESSEE. SINCE THE A SSESSEE HAS DEMONSTRATED THE PEAK CREDIT DURING THE RELEVANT PR EVIOUS YEAR WAS RS.50 LAKHS WHICH COULD NOT BE CONTROVERTED BY THE LEARNED DR. THAT APART, ANOTHER IMPORTANT FACT WHICH NEEDS TO BE TAKEN NOTE OF IS, AO WHILE CONSIDERING THE CASH CREDIT OF FERED AT THE HANDS OF THE PARTNERS ACCEPTED THE FACT THAT ONLY P EAK OF THE CASH CREDITS CAN BE CONSIDERED FOR ADDITION. THEREF ORE, THE SAME PRINCIPLE MUST ALSO APPLY WHILE CONSIDERING THE CAS H CREDITS IN THE HANDS OF THE FIRM. IN THE AFORESAID CIRCUMSTANCES, WE ARE OF THE 21 ITA NOS.253,369,370 AND GROUP OF 2011 VENKATESWARA CR EATIONS AND OTHERS, HYD. VIEW THAT CIT (A) WAS JUSTIFIED IN SUSTAINING THE A DDITION OF RS.50 LAKHS. SO FAR AS ASSESSEES CONTENTION THAT PEAK C REDIT HAS BEEN OFFERED AT THE HANDS OF THE INDIVIDUAL PARTNERS, HE NCE NO ADDITION SHOULD HAVE BEEN MADE IN THE HANDS OF THE ASSESSEE, WE ARE NOT CONVINCED WITH THE CONTENTION OF THE LEARNED AR. A S CAN BE SEEN, THE CASH CREDIT IN QUESTION IS APPEARING IN THE BOO KS OF ASSESSEE FIRM IN THE NAMES OF VARIOUS PERSONS. ONLY AS A RE SULT OF SEARCH AND SEIZURE OPERATION, THE INDIVIDUAL PARTNERS CAME FORWARD TO OFFER THE CASH CREDITS AS THEIR INCOME. HOWEVER, T HE ASSESSEE HAS NOT BEEN ABLE TO PROVE THE IDENTITY OF THE CRED ITORS, THEIR CREDITWORTHINESS AS WELL AS GENUINENESS OF THE TRAN SACTION. THAT APART, IT APPEARS FROM THE ORDER OF THE CIT(A), THE ASSESSEE ALSO ACCEPTED THE FACT THAT ADDITION CAN BE CONSIDERED E ITHER IN THE HANDS OF THE FIRM OR IN CASE OF THE PARTNERS. THER EFORE, IN THESE CIRCUMSTANCES, THE ADDITION AT THE HANDS OF THE ASS ESSEE FIRM IS APPROPRIATE AND THERE IS NO NEED TO INTERFERE WITH THE SAME. GROUNDS RAISED BY THE DEPARTMENT AS WELL AS ASSESSE E ARE THEREFORE DISMISSED. IN THE RESULT BOTH THE APPEALS ARE DISMISSED. ITA NO.370/HYD/2011(SRI VENKATESWARA CREATIONS)-A.Y - 2005-06 32. THE ONLY ISSUE IN THIS APPEAL OF THE DEPARTME NT IS WITH REGARD TO DELETION OF ADDITION OF RS.86,25,000/- MADE BY T HE ASSESSING OFFICER ON ACCOUNT OF UNEXPLAINED CASH CREDIT. 33. WE HAVE HEARD THE PARTIES AND PERUSED THE MATE RIALS ON RECORD. THIS ISSUE IS IDENTICAL TO THE ISSUE RAISE D IN GROUND NO.3 OF DEPARTMENTS APPEAL IN ITA NO.369/HYD/11. AS CAN B E SEEN FROM THE ASSESSMENT ORDER, THE ASSESSING OFFICER NOTICED DATE WISE CASH 22 ITA NOS.253,369,370 AND GROUP OF 2011 VENKATESWARA CR EATIONS AND OTHERS, HYD. CREDITS DURING THE YEAR TOTALLING TO RS.86,25,000/- WHEREAS TOTAL REPAYMENTS ARE RS.47,50,000. AS IN THE CASE OF ASS ESSMENT YEAR 2004-05 THE ASSESSING OFFICER ADDED THE AMOUNT OF R S.86,25,000/- AS UNEXPLAINED CASH CREDIT. THE CIT (A) HELD THAT WHEN THERE ARE BOTH CASH CREDITS AND REPAYMENTS, THE ASSESSING OFF ICER CANNOT CONSIDER THE CASH CREDITS ALONE IGNORING THE REPAYM ENTS. HE HELD THAT IN THAT SITUATION ONLY THE PEAK CREDIT CAN BE CONSIDERED FOR ADDITION. SINCE PEAK CREDIT FOR THE YEAR WAS FOUND TO BE RS.47,50,000/-, THE CIT (A) HELD THAT ONLY AMOUNT O F RS.47.50,000/- CAN BE CONSIDERED FOR ADDITION. TH E CIT (A) FURTHER HELD THAT SINCE IN THE PREVIOUS ASSESSMENT YEAR PEAK CREDITS OF RS.50,00,000/- WAS ADDED TO THE INCOME O F THE ASSESSEE, THE SAID AMOUNT IS AVAILABLE FOR ASSESSME NT YEAR 2005- 06. ACCORDINGLY, THE CIT (A) DELETED THE ENTIRE AD DITION. ON A PERUSAL OF THE STATEMENT SHOWING RECEIPTS AND REPAY MENTS AT PAGE 35 OF THE PAPER BOOK, IT IS TO BE NOTED THAT PEAK C REDITS AS ON 8-6- 2004 IS RS.47,50,000. THEREFORE, WHEN THERE ARE BO TH RECEIPTS AND PAYMENTS ONLY RECEIPTS CANNOT BE CONSIDERED TOT ALLY IGNORING THE REPAYMENTS. IN SUCH SITUATION ONLY THE PEAK AM OUNT IS TO BE CONSIDERED. FURTHER, IT IS A FACT THAT PEAK CREDITS OF RS.50 LAKHS ADDED TO THE INCOME OF THE ASSESSEE IN THE ASSESSM ENT YEAR 2004-05 WAS AVAILABLE WITH THE ASSESSEE FOR TELESCO PING. IN THESE CIRCUMSTANCES WE DO NOT FIND ANY REASON TO INTERFER E WITH THE FINDING OF THE CIT (A) WHICH IS ACCORDINGLY CONFIRM ED. IN THE RESULT APPEAL IS DISMISSED. ITA NOS. 373/HYD/11 & 838/HYD/11(SRI VENKATESWARA CREATIONS) A.Y.-2006-07 23 ITA NOS.253,369,370 AND GROUP OF 2011 VENKATESWARA CR EATIONS AND OTHERS, HYD. 34. THESE ARE CROSS APPEALS BY DEPARTMENT AND TH E ASSESSEE. THERE IS A DELAY OF 61 DAYS IN THE APPEAL FILED BY THE ASSESSEE BEING ITA NO.838/HYD/11. THE ASSESSEE HAS FILED A D ELAY CONDONATION PETITION SUPPORTED BY AN AFFIDAVIT EXPL AINING THE CAUSE OF DELAY. AFTER HEARING THE PARTIES, AND CONSIDERI NG THE EXPLANATION OF THE ASSESSEE, WE ARE INCLINED TO CON DONE THE DELAY OF 61 DAYS AND ADMIT THE APPEAL FOR DISPOSAL ON MER ITS. WHILE THE DEPARTMENT HAS CHALLENGED THE ORDER OF THE CIT (A) FOR NOT SUSTAINING THE ENTIRE ADDITION, THE ASSESSEE IS AGG RIEVED BY THE ADDITION OF RS.40,95,000/- BEING SUSTAINED BY CIT ( A). 35. WE HAVE HEARD THE PARTIES. ON PERUSAL OF THE MATERIALS ON RECORD AS WELL AS ORDERS OF THE REVENUE AUTHORIT IES WE FIND THAT FACTS INVOLVED AND ISSUES RAISED IN THESE TWO APPEA LS ARE IDENTICAL TO ITA NO.369/HYD/11 AND 837/HYD/11. IN THE IMPUGNE D YEAR ALSO THE ASSESSING OFFICER HAS ADDED THE ENTIRE RECEIPTS OF RS.1,08,05,000/- IGNORING THE REPAYMENTS OF RS.55 ,65,000/-. DURING THE APPEAL PROCEEDINGS, THE CIT (A) NOTICED THAT THE PEAK CREDITS FOR THE RELEVANT PREVIOUS YEAR WAS RS.90,95 ,000. CONSIDERING THE FACT THAT PEAK CREDITS OF RS.50 LAK HS WAS ADDED AS INCOME FOR THE ASST. YEAR 2004-05, THE CIT (A) DI RECTED THE ASSESSING OFFICER TO RETAIN THE BALANCE PEAK CREDIT S OF RS.40,95,000/- AS INCOME OF THE YEAR UNDER CONSIDER ATION. IN VIEW OF OUR FINDING IN ITA NO.369/HY7D/11 AND 837/H YD/11, WE DO NOT FIND ANY INFIRMITY IN THE AFORESAID DIRECTION O F THE CIT (A) WHICH IS ACCORDINGLY CONFIRMED. 36. IN THE RESULT, BOTH THE APPEALS ARE DISMISSED. 24 ITA NOS.253,369,370 AND GROUP OF 2011 VENKATESWARA CR EATIONS AND OTHERS, HYD. ITA 839/HYD/2011(SRI VENKATESWARA CREATIONS)A.Y.-20 07- 08 37. THIS IS AN APPEAL BY THE ASSESSEE. THE ASSESS EE HAS RAISED THE FOLLOWING EFFECTIVE GROUNDS:- THE LD. CIT (A) ERRED IN CONFIRMING THE ORDER OF T HE ASSESSING OFFICER IN NOT EXCLUDING THE AMOUNT OF RS .50 LAKHS FROM THE TOTAL INCOME WHEN THE ASSESSING OFFICER DID NO T ACCEPT THE OFFER MADE BY THE APPELLANT. THE LD CIT (A) OUGHT TO HAVE DIRECTED THE ASSESSING OFFICER TO DELETE THE AMOUNT OF RS.50 LAKHS 38. BRIEFLY THE FACTS ARE, THE ASSESSEE HAD ORIGINALLY FILED ITS RETURN FOR THE ASST. YEAR UNDER DISPUTE DECLARING I NCOME OF RS.65,77,850. AS A CONSEQUENCE OF SEARCH AND SEIZU RE OPERATION U/S 132 OF THE ACT IN CASE OF THE ASSESSEE NOTICES U/S 153A WERE ISSUED CALLING FOR RETURNS FOR ASST. YEARS 2002-03 TO 2007-08. IN RESPONSE TO THE NOTICE, THE ASSESSEE FILED ITS RETU RN FOR THE IMPUGNED ASSESSMENT YEAR DECLARING INCOME OF RS.1,1 5,77,850/- INCLUDING ADDITIONAL INCOME OF RS.50,00,000/-. IN C OURSE OF ASSESSMENT PROCEEDING THE ASSESSING OFFICER NOTICED THAT IN THE BOOKS OF ACCOUNTS OF THE ASSESSEE CASH CREDIT OF RS .24,50,000/- HAS BEEN SHOWN IN THE NAME OF SRI VENKATEWARA FILMS. TH E ASSESSEE EXPLAINED THAT THE AMOUNT SHOWN IN BOOKS IS IN REGU LAR COURSE OF BUSINESS WITH SRI VENKATESWARA FILMS AND THEY HAVE A RUNNING ACCOUNT WHICH APPEARS IN THE BOOKS OF ACCOUNTS OF B OTH THE FIRMS. IT WAS THEREFORE SUBMITTED THAT SINCE THE TRANSACTI ON IS GENUINE, THE AMOUNT OF RS.24,50,000/- CANNOT BE TREATED AS UNEXP LAINED CASH CREDIT. THE ASSESSING OFFICER HOWEVER REJECTED THE EXPLANATION OF 25 ITA NOS.253,369,370 AND GROUP OF 2011 VENKATESWARA CR EATIONS AND OTHERS, HYD. THE ASSESSEE BY APPLYING THE SAME REASONS ON WHICH SIMILAR ADDITIONS WERE MADE IN THE EARLIER ASSESSMENT YEARS . HOWEVER, THE ASSESSING OFFICER NOTED THAT SINCE IN TERMS WITH TH E OFFER MADE AT THE TIME OF RECORDING OF STATEMENT U/S 132(4), THE ASSESSEE HAS DECLARED ADDITIONAL INCOME OF RS.50 LAKHS FOR THE Y EAR UNDER DISPUTE, NO SEPARATE ADDITION IS REQUIRED TO BE MAD E. ACCORDINGLY, THE ASSESSING OFFICER ACCEPTED THE INCOME RETURNED BY THE ASSESSEE AND COMPLETED THE ASSESSMENT. THE ASSESSEE CHALLENG ED THE ASSESSMENT ORDER PASSED BY PREFERRING AN APPEAL B EFORE THE CIT (A). 39. IN COURSE OF HEARING BEFORE THE CIT (A), IT WAS CONTENDED ON BEHALF OF THE ASSESSEE THAT AT THE TIME OF SEARC H, THE MANAGING PARTNER HAD ADMITTED CERTAIN CREDITS RECEIVED FROM OTHERS AS UNDISCLOSED INCOME. WHILE FILING THE RETURN OF INC OME, THE PARTNERS HAD DISCLOSED PEAK OF THE SAID CREDITS IN RESPECTIV E HANDS FOR THE ASSESSMENT YEAR 2004-05 AND 2006-07. THE TOTAL DIS CLOSURE MADE BY THE PARTNERS AMOUNTED TO RS.19,95,000/- FOR THE AFORESAID TWO ASSESSMENT YEARS. THE ASSESSING OFFICER WHILE FRA MING THE ASSESSMENT OF THE ASSESSEE FOR OTHER ASSESSMENT YEA RS MADE THE ADDITION OF AGGREGATE CASH CREDITS FOR THE RESPECTI VE ASSESSMENT YEARS. THE ASSESSEE SUBMITTED THAT SINCE THE ASSES SING OFFICER HAD MADE ADDITION IN FIRMS AND SINCE THE PARTNERS HAVE DISCLOSED PEAK CREDITS IN THE RESPECTIVE PARTNERS HANDS, THEREFOR E THERE COULD BE ONLY ONE ADDITION I.E. IN THE HANDS OF THE FIRM WHI CH HAVE BEEN CONFIRMED AS PEAK CREDIT FOR ASSESSMENT YEAR 2005-0 6 AND 2006-07 AMOUNTING TO RS.90,95,000/-. IT WAS THUS SUBMITTED THAT THE PEAK CREDITS CONFIRMED IN THE HANDS OF THE FIRM WOULD BE SUFFICIENT FOR ALL THE SHORTCOMINGS OF THE ASSESSEE FIRM AND PARTNERS. THEREFORE, 26 ITA NOS.253,369,370 AND GROUP OF 2011 VENKATESWARA CR EATIONS AND OTHERS, HYD. ADDITIONAL DISCLOSURE MADE BY THE ASSESSEE FIRM AT RS.50 LAKHS FOR THE ASSESSMENT YEAR UNDER CONSIDERATION IS TO BE DE LETED. IT WAS FURTHER CONTENDED BY THE ASSESSEE THAT SINCE SUFFIC IENT DISCLOSURE WAS MADE BY THE ASSESSEE FOR THE ASSESSMENT YEAR 20 04-05 AND 2006-07, DISCLOSURE MADE BY THE ASSESSEE FOR THE IM PUGNED ASSESSMENT YEAR WAS NOT WARRANTED AND THE ASSESSING OFFICER SHOULD NOT HAVE ACCEPTED THE INCOME DISCLOSED BY TH E FIRM AMOUNTING TO RS.50 LAKHS. HE THEREFORE CONTENDED TH AT THE ADDITIONAL INCOME OF RS.50 LAKHS OFFERED BY THE ASS ESSEE IN THE RETURN FILED SHOULD BE DELETED. THE CIT (A) AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE WAS OF THE VIEW THAT TH E PEAK CREDITS OFFERED IN THE HANDS OF THE PARTNERS FOR THE ASSESS MENT YEAR 2004- 05 AND 2006-07 WERE DELETED WHILE CONFIRMING THEM I N THE HANDS OF THE FIRM. HE FURTHER OBSERVED THAT DISCLOSURE OF A DDITIONAL INCOME FOR THE IMPUGNED ASSESSMENT YEAR HAS NO LINK WITH P EAK CREDITS ADMITTED BY THE PARTNERS OF THE ASSESSEE FIRM OR WI TH THE ADDITION MADE IN ASSESSEES HAND. HE THEREFORE WAS OF THE V IEW THAT THERE IS NO NEXUS TO HAVE ANY TELESCOPING OF RS.50 LAKHS DIS CLOSURE MADE BY THE FIRM. HE FURTHER OPINED THAT THE ASSESSEE DISC LOSED RS.50 LAKHS FOR THE YEAR UNDER CONSIDERATION KNOWING WELL THAT THE PARTNERS HAD MADE DISCLOSURE TOWARDS PEAK CREDIT IN THE ASSESSME NT YEAR 2004- 05 AND 2006-07 WHICH ULTIMATELY STOOD DELETED IN TH E FIRST APPEAL. HE THEREFORE CONCLUDED THAT NO RELIEF COULD BE GRAN TED TO THE ASSESSEE WITH REGARD TO THE DISCLOSURE MADE IN THE RETURN AND ASSESSED BY THE ASSESSING OFFICER . 40. WE HAVE HEARD THE SUBMISSIONS OF THE PARTIES AN D PERUSED THE ORDERS OF THE LOWER AUTHORITIES AS WELL AS OTHER MA TERIALS ON RECORD. UNDISPUTEDLY, DURING THE RECORDING OF STATEMENT U/S 132(4) OF THE 27 ITA NOS.253,369,370 AND GROUP OF 2011 VENKATESWARA CR EATIONS AND OTHERS, HYD. ACT IN COURSE OF SEARCH AND SEIZURE PROCEEDINGS, TH E PARTNER OF THE FIRM CAME FORWARD WITH AN OFFER OF ADDITIONAL INCOM E OF RS.50 LAKHS FOR THE IMPUGNED ASSESSMENT YEAR. IN TERMS WITH TH E OFFER MADE DURING THE SEARCH PROCEEDINGS, THE ASSESSEE ALSO FI LED A RETURN OF INCOME IN RESPONSE TO NOTICE U/S 153A OF THE ACT DE CLARING ADDITIONAL INCOME OF RS.50 LAKHS. IT IS VERY MUCH EVIDENT FROM THE ASSESSMENT ORDER THAT THOUGH THE ASSESSING OFFICER TREATED THE AMOUNT OF RS.24,85,000/- CREDIT STANDING IN THE NAM E OF SRI VENKATESWARA FILMS IN THE BOOKS OF THE ASSESSEE AS UNEXPLAINED CASH CREDIT BUT, ULTIMATELY HE HAS NOT MADE ANY SEP ARATE ADDITION OF THE SAID AMOUNT CONSIDERING THE FACT THAT THE ASSES SEE HAD DECLARED ADDITIONAL INCOME OF RS.50 LAKHS. IN FACT THE ASSE SSING OFFICER COMPLETED THE ASSESSMENT BY ACCEPTING THE INCOME RE TURNED BY THE ASSESSEE. IN THE AFORESAID VIEW OF THE MATTER, THE ASSESSEES CONTENTION THAT THE AMOUNT OF RS.50 LAKHS OFFERED A S ADDITIONAL INCOME SHOULD BE DELETED HAS NO LEGS TO STAND. IT IS A FACT ON RECORD THAT THE ASSESSEE HAS DECLARED THE ADDITIONA L INCOME OF RS.50 LAKHS IN KEEPING WITH HIS OFFER MADE AT THE T IME OF SEARCH OPERATION. THEREFORE, WHEN THE ASSESSEE HAS OFFERE D RS.50 LAKHS VOLUNTARILY WHICH HAS BEEN ACCEPTED BY THE ASSESSIN G OFFICER, THERE IS NO REASON TO DELETE THE AMOUNT OF RS.50 LAKHS FR OM THE RETURNED INCOME THAT TOO EVEN WITHOUT ANY REVISED RETURN BEI NG FILED BY THE ASSESSEE. EVEN THOUGH IT MAY BE A FACT THAT THE AS SESSING OFFICERS FINDING WITH REGARD TO THE UNEXPLAINED CASH CREDI TS OF RS.24,50,000/- MAY NOT BE CORRECT BUT AT THE SAME T IME THAT WOULD NOT BE A REASON TO DELETE THE AMOUNT OF RS.50 LAKHS FROM THE RETURNED INCOME WHEN THERE IS NOTHING ON RECORD TO PROVE THAT AMOUNT OF RS.50 LAKHS OFFERED AS ADDITIONAL INCOME WAS ON ACCOUNT OF CASH CREDITS FROM SRI VENKATESWARA FILMS. IN TH IS VIEW OF THE 28 ITA NOS.253,369,370 AND GROUP OF 2011 VENKATESWARA CR EATIONS AND OTHERS, HYD. MATTER, WE DO NOT FIND ANY INFIRMITY IN THE ORDER O F THE CIT (A) IN REJECTING ASSESSEES CLAIM. THE GROUNDS RAISED AR E THEREFORE DISMISSED. 41. IN THE RESULT, THE APPEAL IS DISMISSED. ITA NO.498/HYD/2011 A.YEAR 2008-09 (SRI VENKATESWAR A CREATIONS) 42. IN THIS APPEAL, THE DEPARTMENT HAS RAISED THRE E ISSUES. THE FIRST ISSUE AS RAISED IN GROUND NO.2 T O 7 RELATES TO THE CIT (A) DELETING THE ADDITION OF RS.3,50,000/- AS UNEXPLAINED CASH CREDIT. 43. IN COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER NOTED THAT THE ASSESSEE HAS SHOWN CREDITS OF RS.3,50,000/- IN THE NAME OF CREDITOR VIGNESHWAR RE DDY. THOUGH THE ASSESSEE EXPLAINED THE CREDIT TO BE GENU INE BUT, THE ASSESSING OFFICER REJECTING SUCH EXPLANATION OF THE ASSESSEE ADDED AN AMOUNT OF RS.3,50,000/- AS UNEXPLAINED CAS H CRAEDIT. THE CIT (A) HOWEVER DELETED THE ADDITION BY HOLDIN G THAT SINCE PEAK CREDITS TOTALLING TO RS.90.95 LAKHS FOR THE AS SESSMENT EYAR 2004-05 AND 2006-07 HAVE BEEN CONSIDERED IN THE HAN DS OF THE ASSESSEE FIRM THE ADDITION MADE BY THE ASSESSING O FFICER FOR THE IMPUGNED ASSESSMENT YEAR CANNOT BE SUSTAINED. 44. WE HAVE HEARD THE PARTIES AND PERUSED THE MA TERIAL ON RECORD. IN OUR VIEW, THIS ISSUE IS COVERED BY O UR DECISION IN ITA NO.369/HYD/11 AND 373/HYD/11 WHEREIN WE HAVE U PHELD THE ORDER OF THE CIT (A) IN DELETING THE ADDITION M ADE BY THE 29 ITA NOS.253,369,370 AND GROUP OF 2011 VENKATESWARA CR EATIONS AND OTHERS, HYD. ASSESSING OFFICER AND DIRECTING HIM TO CONSIDER ONL Y THE PEEK CREDITS FOR THE PURPOSE OF ADDITION. AS CAN BE SEE N FROM THE EXTRACTS OF THE ACCOUNTS IN THE ASSESSMENT ORDER, WHILE THE ASSESSEE HAS SHOWN RECEIPTS OF RS.3,50,000/- AT THE SAME TIME REPAYMENT OF RS.3.50,000/- HAS ALSO BEEN SHOWN. TH E ASSESSING OFFICER WHILE TREATING THE RECEIPTS OF RS .3,50,000/- AS UNEXPLAINED CASH CREDIT HAS TOTALLY IGNORED THE REP AYMENTS OF RS.3,50,000/-. THIS, IN OUR VIEW, IS NOT A CORRECT APPROACH ON THE PART OF THE ASSESSING OFFICER. IN THESE CIRCUM STANCES, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE CIT ( A) IN DELETING THE ADDITION OF RS.3,50,000/-. THE GROUNDS RAISED ARE THEREFORE DISMISSED. 45. THE SECOND ISSUE AS RAISED IN GROUND NO.8 RE LATES TO THE CIT (A) DELETING THE ADDITION OF RS.3,74,04,511 /- AS UNEXPLAINED INVESTMENT MADE IN PRODUCTION OF A FILM . 46. BRIEFLY THE FACTS RELATING TO THE ISSUE IN DISPUTE ARE DURING THE ASSESSMENT PROCEEDINGS, THE ASSESSING OF FICER FOUND THAT IN COURSE OF SEARCH AND SEIZURE OPERATION IT C AME TO THE NOTICE OF THE DEPARTMENT THAT THE ASSESSEE FIRM WAS IN THE PROCESS OF PRODUCING A MOVIE WHICH HAS SUBSEQUENTLY BEEN RELEASED BEING TITLED AS PARUGU. THE PRODUCTION O F THE MOVIE WAS REFERRED AS PRODUCTIONNO.6 IN THE BOOKS OF ACCO UNTS. ON VERIFYING THE DETAILS, IT WAS NOTED THAT THE PARTNE RS OF THE ASSESSEE FIRM INCORPORATED A COMPANY NAMELY M/S SRI VENKATESWARA CREATIONS P. LTD., WHICH AVAILED BANK LOAN FROM IDBI BANK FOR PRODUCTION OF THE FILM. FOR THE PURP OSE OF 30 ITA NOS.253,369,370 AND GROUP OF 2011 VENKATESWARA CR EATIONS AND OTHERS, HYD. OBTAINING THE LOAN, THE ASSESSEE HAS FILED AN AUDIT ORS CERTIFICATE TO THE BANK STATING THAT THE AVAILED BA NK LOAN WAS UTILISED FOR THE PRODUCTION OF THE SAID FILM. THE TOTAL EXPENDITURE INCURRED FOR THE PRODUCTION OF THE FILM WAS MENTIONED IN THE AUDITORS CERTIFICATE AS UNDER:- I) PROMOTERS, DISTRIBUTORS ADVANCES & SUPPLIERS CREDITS ETC., RS. 507.40 LAKHS II) IDBI BANK LOAN PROCEEDS RS. 441 .30 LAKHS TOTAL RS.948.70 LAKHS 47. WHEN IT WAS NOTICED BY THE DEPARTMENT THAT THE FIGU RES MENTIONED IN THE AUDITORS CERTIFICATE DID NOT TALL Y WITH THE FIGURES APPEARING IN THE BOOKS OF ACCOUNTS OF THE A SSESSEE FIRM, THEN THE ASSESSEE WAS ASKED TO EXPLAIN. ONE OF TH E PARTNERS OF THE ASSESSEE FIRM STATED THAT THE AMOUNT OF RS.9 48.70 LAKHS MENTIONED IN THE AUDITORS CERTIFICATE WAS NOT ACTU ALLY INCURRED BUT AN AMOUNT OF RS.8.63 CRORES WAS INCURRED. THE DEPARTMENT NOT BEING CONVINCED, EXAMINED THE AUDITOR WHO IN TH E STATEMENT RECORDED FROM HIM STATED THAT THE EXPENDI TURE OF RS.948 CRORES WAS INCURRED AS ON 8-2-2008 FOR THE UNDERPRODUCTION MOVIE. DURING POST SEARCH PROCEED INGS, WHEN THE ASSESSEE WAS CONFRONTED WITH THIS FACT, IT WAS EXPLAINED BY THE ASSESSEE THAT THE AMOUNT MENTIONED IN THE CERTI FICATE INCLUDE THE EXPENDITURE INCURRED BUT NOT PAID. AS IT WAS NOT PAID THE SAME IS NOT RECORDED IN THE BOOKS OF ACCOU NT. IT WAS FURTHER EXPLAINED THAT JOURNAL ENTRIES WERE NOT MAD E AS SUCH 31 ITA NOS.253,369,370 AND GROUP OF 2011 VENKATESWARA CR EATIONS AND OTHERS, HYD. ENTRIES WOULD BE MADE ONLY AT THE END OF THE YEAR. THE ASSESSEE STATED THAT THE DETAILS OF EXPENDITURE INC URRED BUT NOT PAID, IF TAKEN INTO CONSIDERATION WOULD TALLY WITH THE AMOUNT MENTIONED IN THE CERTIFICATE ISSUED BY THE AUDITOR. IN THIS CONTEXT, IT WAS FURTHER BROUGHT TO THE NOTICE OF TH E DEPARTMENT THAT THOUGH THE CERTIFICATE MENTIONS THE AMOUNT REC EIVED FROM THE DISTRIBUTORS, PROMOTERS ETC., OF RS.507.40 LAKH S BUT THE ACTUAL AMOUNT RECEIVED IS MUCH LESS. THOUGH THE BA LANCE AMOUNT IS RECEIVABLE, BUT IT IS STILL RECORDED IN T HE AUDITORS CERTIFICATE. 48. THE ASSESSING OFFICER ON VERIFICATION OF THE BOOKS OF ACCOUNTS OF THE ASSESSEE NOTED THAT THE DETAILS OF EXPENDITURE INCURRED IN RESPECT OF PRODUCTION NO.6 AS REFLECTED IN THE BOOKS OF ACCOUNTS OF THE ASSESSEE FOR THE IMPUGNED ASSESS MENT YEAR IN THE LEDGER OF BHASKER PRODUCTION SHOWS THE TOTAL PAYMENT OF RS.5,74,65,489/-WHEREAS THE EXPENDITURE INCURRED AS PER THE AUDITORS CERTIFICATE IS RS.9,48,70,000/-. THE ASS ESSING OFFICER THEREFORE TREATED THE DIFFERENTIAL AMOUNT OF RS.3,7 4,04,511/- AS THE UNDISCLOSED INVESTMENT OF THE ASSESSEE IN PR ODUCTION OF THE FILM AND ADDED IT TO THE INCOME OF THE ASSESSEE . THE AFORESAID ADDITION WAS CHALLENGED BY THE ASSESSEE I N AN APPEAL PREFERRED BEFORE THE CIT (A) 49. BEFORE THE CIT (A), IT WAS CONTENDED THAT TH E ASSESSEE HAD ACTUALLY INCURRED TOTAL EXPENDITURE OF RS.11,88,79,982/- TOWARDS PRODUCTION OF FILM PARUG U WHICH IS IN FACT MORE THAN WHAT IS CERTIFIED BY THE AUDITOR. THEREFORE, 32 ITA NOS.253,369,370 AND GROUP OF 2011 VENKATESWARA CR EATIONS AND OTHERS, HYD. THE CERTIFICATE GIVEN BY THE AUDITOR ONLY INDICATES THAT THE COST INCURRED AS ON THE DATE OF CERTIFICATE WAS RS.9,48, 70,000/-. EVEN THOUGH THE ACTUAL PAYMENT OF EXPENDITURE WAS O NLY RS.5,74,65,489/- AND THE BALANCE EXPENDITURE OF RS.3,74,04,511/- THOUGH INCURRED BUT WAS ACTUALLY P AID IN DUE COURSE BEFORE THE END OF THE FINANCIAL YEAR. IT WA S FURTHER CONTENDED BY THE ASSESSEE THAT THE ASSESSING OFFICE R HAD NO VALID REASON TO SUSPECT THAT THE ASSESSEE HAS PAID OR INCURRED ANY EXPENSES OUTSIDE THE BOOKS. BY THE END OF THE FINANCIAL YEAR IN FACT THE ASSESSEE HAS NOT ONLY RECORDED THE CERTIFIED EXPENDITURE AS GIVEN BY THE AUDITOR BUT HAS ACTUALL Y RECORDED MORE THAN THAT. IT WAS SUBMITTED THAT SINCE THE CO ST OF PRODUCTION CONTINUED TO THE NEXT FINANCIAL YEAR ALS O THE ASSESSEE CARRIED FORWARD THE EXPENDITURE INCURRED A S ON 31-3- 2008 TO THE NEXT FINANCIAL YEAR AND THE CONSOLIDATE D EXPENSES COULD BE SET OFF AGAINST THE COLLECTION OF THE FILM AFTER IT IS RELEASED. THE CIT (A) AFTER CONSIDERING THE SUBMI SSIONS OF THE ASSESSEE DELETED THE ADDITION BY HOLDING THAT THE E XPENDITURE MENTIONED IN THE AUDITOR CERTIFICATE ONLY INDICATES THE COST INCURRED FOR THE FILM UNTIL THAT DATE. OUT OF THE E XPENDITURE INCURRED, A PART WAS ACCOUNTED AND OTHER PART WAS CLAIMED AS EXPENDITURE INCURRED WHICH HAS BEEN RECORDED AS ON THE PAYMENTS MADE AND THE BOOKS OF ACCOUNTS IN FACT WAS RECORDED WITH THE TOTAL EXPENDITURE OF RS.11,88,79,982/-. 50. THE LEARNED DR SUBMITTED BEFORE US THAT WHEN THE ASSESSEE IS FOLLOWING MERCANTILE SYSTEM OF ACCOUNTI NG, THE 33 ITA NOS.253,369,370 AND GROUP OF 2011 VENKATESWARA CR EATIONS AND OTHERS, HYD. EXPENDITURE INCURRED WHICH REMAINS PAYABLE ALSO SH OULD HAVE BEEN RECORDED IN THE BOOKS OF ACCOUNTS. IT WAS SUB MITTED THAT WHEN THE AUDITOR HAS SPECIFICALLY STATED THAT THE A MOUNT OF RS.9.4 CRORES IS THE ACTUAL EXPENDITURE INCURRED BY THE ASSESSEE, THE CIT (A) WAS NOT JUSTIFIED IN DELETING THE ADDITION. 51. THE LEARNED AR, ON THE OTHER HAND SUBMITTED THAT THE CERTIFICATE ISSUED BY THE AUDITOR WAS ONLY FOR THE PURPOSE OF OBTAINING BANK LOAN THAT IS WHY, THE EXPENDITURE OF RS.9.4 CRORES MENTIONED THEREIN WHICH INCLUDED THE EXPENDI TURE BUT NOT PAID ON THE DATE ON WHICH THE AUDITOR CERTIFIED IT. THE LEARNED AR SUBMITTED THAT THE ASSESSING OFFICER WAS NOT CORRECT IN OBSERVING THAT THE ACTUAL AMOUNT PAID AS RECORDE D IN THE BOOKS OF ACCOUNTS IS RS.5,74,65,489/-. IT WAS SUBMI TTED THAT WHILE TAKING THE AFORESAID FIGURE THE ASSESSING OFF ICER HAS TOTALLY IGNORED AN AMOUNT OF RS.4,52,63,212/- INCUR RED AS EXPENDITURE BUT NOT PAID. IN THIS CONTEXT, THE LEA RNED AR REFERRED TO PAGE-28 OF THE WRITTEN SUBMISSIONS FILE D BEFORE THE CIT (A) A COPY OF WHICH HAS BEEN SUBMITTED IN THE P APER BOOK. 52. WE HAVE HEARD THE PARTIES AND PERUSED THE MA TERIAL ON RECORD. IT IS A FACT ON RECORD THAT IN THE AUDI TORS CERTIFICATE SUBMITTED BEFORE THE BANK MENTIONED THE TOTAL EXPEN DITURE INCURRED FOR PRODUCTION OF FILM PARUGU AS ON 8- 2-2008 AT RS.9.48 CRORES. IN THE STATEMENT RECORDED U/S 131 OF THE ACT, THE AUDITOR SRI GVV SATYANARAYANA MURTY ALSO STATED THAT AFTER VERIFYING THE VOUCHERS AND AGREEMENTS, HE HAS MENTI ONED INCURRING OF EXPENDITURE OF RS.9.48 CRORES. AS AGA INST THIS, IT IS 34 ITA NOS.253,369,370 AND GROUP OF 2011 VENKATESWARA CR EATIONS AND OTHERS, HYD. THE CONTENTION OF THE ASSESSEE THAT THOUGH SOME AMO UNT OF EXPENDITURE WAS INCURRED BUT IT WAS NOT ACTUALLY PA ID AND WERE ACTUALLY PAID AT SUBSEQUENT DATE BUT BEFORE THE FIN ANCIAL YEAR ENDED. IT IS THE CONTENTION OF THE ASSESSEE THAT I F THE BOOKS OF ACCOUNTS ARE VERIFIED, IT WILL BECOME CLEAR THAT TH E ASSESSEE HAS SHOWN EXPENDITURE INCURRED IN MAKING OF FILM PARUG U AT RS.11.88 CRORES WHICH IS MUCH MORE THAN MENTIONED I N THE AUDITORS CERTIFICATE. IT IS ALSO THE CONTENTION OF THE ASSESSEE THAT THE ASSESSING OFFICER WHILE MENTIONING THAT AS PER THE BOOKS THE ASSESSEE HAS INCURRED EXPENDITURE OF RS.5,74,64,489/- HAS TOTALLY IGNORED THE EXPENDITUR E INCURRED BUT NOT PAID AMOUNTING TO RS.4,52,63,212/-. IN AF ORESAID FACTUAL MATRIX, WE ARE OF THE VIEW THAT THE ASSESSE E IS REQUIRED TO RECONCILE THE DIFFERENCE BY PRODUCING ITS BOOKS OF ACCOUNTS AND OTHER RELEVANT MATERIAL TO PROVE THAT ACTUAL EX PENDITURE INCURRED AS ON 8-2-2008 IS NOT WHAT IS MENTIONED IN THE AUDITORS CERTIFICATE. IN AFORESAID VIEW OF THE MA TTER, WE ARE INCLINED TO REMIT THE ISSUE BACK TO THE FILE OF THE ASSESSING OFFICER WHO SHALL DECIDE IT AFRESH AFTER GIVING DUE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE TO EXPLAIN ITS CASE. HENCE, THIS GROUND IS ALLOWED FOR STATISTICAL PURPOSES. 53. THE THIRD ISSUE AS RAISED IN GROUND NO.9 IS WIT H REGARD TO CIT (A) DELETING THE ADDITION OF RS.4,39,000/- BEIN G THE CASH FOUND AND SEIZED AT THE TIME OF SEARCH. 54. BRIEFLY THE FACTS ARE DURING THE COURSE OF SEAR CH AND SEIZURE OPERATION IN THE BUSINESS PREMISES OF THE A SSESSEE CASH 35 ITA NOS.253,369,370 AND GROUP OF 2011 VENKATESWARA CR EATIONS AND OTHERS, HYD. OF RS.4,39,000/- WAS FOUND. IT ALSO CAME TO THE NO TICE OF THE DEPARTMENT THAT THE CASH FOUND WAS NOT RECORDED IN THE BOOKS OF ACCOUNTS. WHEN THE PARTNER OF THE ASSESSEE FIRM WAS ASKED TO EXPLAIN, HE EXPRESSED HIS INABILITY TO EXPLAIN I MMEDIATELY. DURING THE ASSESSMENT PROCEEDINGS, IT WAS EXPLAINED BY THE ASSESSEE THAT CASH BOOK WAS WRITTEN UPTO 19-2-2008 ON WHICH DATE CASH AVAILABLE WAS RS.5,74,100/- AND THERE WER E NO ENTRIES FOR 13 DAYS PRIOR TO THE DATE OF SEARCH. I T WAS SUBMITTED THAT DURING THIS PERIOD, EXPENDITURE INCU RRED WAS RS.37,05,574/- AND THE BALANCE AMOUNT WITH THE ASSE SSEE WAS RS.8,68,526/- WHICH WAS AS PER CASH BOOK AVAILABLE AT THE TIME OF SEARCH. THE ASSESSING OFFICER HOWEVER REJECTED T HE CONTENTION OF THE ASSESSEE AND TREATING THE CASH FO UND OF RSA.4,39,000 AS UNDISCLOSED INCOME, ADDED IT TO THE INCOME OF THE ASSESSEE. THIS ADDITION WAS CHALLENGED IN THE APPEAL FILED BEFORE THE CIT (A). 55. IN COURSE OF HEARING BEFORE THE CIT (A) IT WAS SUBMITTED BY THE ASSESSEE THAT THE CASH FOUND WERE OUT OF WIT HDRAWALS FROM THE BANK. IT WAS ALSO SUBMITTED THAT THE ASSE SSEE HAS SUFFICIENT MONEY IN THE BOOKS OF ACCOUNTS FOR THE E XPENSES INCURRED BUT THERE WAS SOME DELAY IN UPDATING CASH BOOK. BUT, THAT CANNOT BE REASON FOR THE ASSESSING OFFICER TO PRESUME THAT THE ASSESSEE HAS SPENT MORE THAN THE BALANCE AVAILA BLE IN THE BOOKS. IN SUPPORT OF SUCH CONTENTION, THE ASSESSEE ALSO SUBMITTED THE COPY OF CASH BOOK FOR VERIFICATION. THE CIT (A) AFTER VERIFYING THE CASH BOOK, DELETED THE ADDITION . 36 ITA NOS.253,369,370 AND GROUP OF 2011 VENKATESWARA CR EATIONS AND OTHERS, HYD. 56. WE HAVE HEARD THE PARTIES AND PERUSED THE MATER IAL ON RECORD. AS CAN BE SEEN FROM THE ASSESSMENT ORDER, THE CASH FOUND OF RS.4,39,000/- WAS ADDED ON THE GROUND THAT IT IS NOT RECORDED IN THE BOOKS OF ACCOUNTS. HOWEVER, ON A P ERUSAL OF THE ORDER PASSED BY THE CIT (A), IT IS TO BE SEEN T HAT ON VERIFYING THE CASH BOOK, HE HAS DELETED THE ADDITIO N BEING SATISFIED WITH THE CASH AVAILABILITY. THE DEPARTMEN T HAS NOT BEEN ABLE TO CONTROVERT THE AFORESAID FINDING OF TH E CIT(A). IN THE AFORESAID CIRCUMSTANCES, WE DO NOT FIND ANY REA SON TO INTERFERE WITH THE ORDER PASSED BY THE CIT (A). AC CORDINGLY, WE DISMISS THE GROUND RAISED BY THE DEPARTMENT. 57. IN THE RESULT, THE DEPARTMENTAL APPEAL IS PARTL Y ALLOWED FOR STATISTICAL PURPOSES. ITA NOS.386-387/HYD/11 SRI VENKATA RAMANA REDDY- 388-389/HYD/11- S. LAXMAN RAO- 390-391/HYD/11- S. BIKSHAMAIAH- 384-385/HYD/11- VAV NARASIMHA REDDY 58. THE ONLY COMMON ISSUE IN ALL THESE APPEALS OF T HE DEPARTMENT IS WITH REGARD TO CIT (A) DELETING THE I NCOME OFFERED IN RESPECTIVE HANDS OF THE PARTNERS ON THE GROUND THAT IT HAS BEEN ADDED IN THE HANDS OF THE PARTNERSHIP F IRM M/S SRI VENKATESWARA CREATIONS. 59. BRIEFLY THE FACTS ARE, DURING COURSE OF SEARCH AND SEIZURE OPERATION IN CASE OF SRI VENKATESWARA CREATIONS AND OTHER GROUP CONCERN, ON VERIFICATION OF BOOKS OF ACCOUNT S OF THE FIRM M/S. SRI VENKATESWARA CREATIONS IT CAME TO THE NOTI CE OF THE 37 ITA NOS.253,369,370 AND GROUP OF 2011 VENKATESWARA CR EATIONS AND OTHERS, HYD. DEPARTMENT THAT THE FIRM HAS SHOWN CASH CREDITS IN THE NAMES OF VARIOUS PERSONS. WHEN THIS FACT WAS CONFRONTED TO THE PARTNER OF SRI VENKATESWARA CREATIONS, HE STATED TH AT THOUGH THE CASH CREDITS ARE GENUINE HAVING BEEN TAKEN FROM CLOSE RELATIVES AND FAMILY MEMBERS BUT, HE STATED THAT SI NCE IT IS A VERY SENSITIVE FAMILY AFFAIR AFFECTING THE RELATION SHIP OF THE FAMILY MEMBERS, THEY OFFERED TO DECLARE PEAK OF THE CASH CREDITS APPEARING IN THE BOOKS OF SRI VENKATESWARA CREATIONS IN THE INDIVIDUAL HANDS OF THE PARTNERS. ACCORDINGLY, RETURNS WERE FILED BY THE PARTNERS OFFERING THE PEAK OF CASH CRE DITS IN THEIR INDIVIDUAL HANDS. 60. THE ASSESSING OFFICER COMPLETED THE ASSESSMENT IN CASE OF ALL THE PARTNERS BY ACCEPTING THE PEAK OF CASH CRED ITS OFFERED BY THEM. HOWEVER, THE ASSESSING OFFICER HAD ALSO ADDE D THE CASH CREDITS IN THE ASSESSMENT MADE IN THE CASE OF PARTN ERSHIP FIRM SRI VENKATESWARA CREATIONS. THE CIT (A) WHILE DECI DING THE APPEAL IN CASE OF SRI VENKATESWARA CREATIONS HELD T HAT THE PEAK OF CASH CREDITS OFFERED IN THE HANDS OF INDIVIDUAL PARTNERS AMOUNTING TO RS.90.50 LAKHS IS TO BE TREATED AS INC OME OF THE FIRM. ACCORDINGLY, HE SUSTAINED THE ADDITION OF RS .50 LAKH FOR THE ASSESSMENT YEAR 2004-05 AND RS.40.50 LAKHS FOR THE ASSESSMENT YEAR 2006-07 IN CASE OF THE ASSESSEE FIR M. WHILE DOING SO, THE CIT (A) ALSO HELD THAT THE SAME AMOUN T CANNOT BE ASSESSED IN THE HANDS OF THE INDIVIDUAL PARTNERS. IN THE AFORESAID BACK GROUND, THE PARTNERS PREFERRED APPEA LS BEFORE THE CIT (A) CONTENDING THAT SINCE THE ADDITIONS OF THE PEAK 38 ITA NOS.253,369,370 AND GROUP OF 2011 VENKATESWARA CR EATIONS AND OTHERS, HYD. CASH CREDITS HAVE BEEN MADE AT THE HANDS OF THE PAR TNERSHIP FIRM M./S VENKATESWARA CREATIONS THE SAME AMOUNT OF FERED AS INCOME BY THE INDIVIDUAL PARTNER CANNOT AGAIN BE AS SESSED IN THEIR HANDS. THE CIT (A) ACCEPTING THE CONTENTION OF THE ASSESSEE DELETED THE INCOME OFFERED BY THE ASSESSEE ON ACCOUNT OF PEAK CASH CREDITS BY HOLDING THAT SINCE THE AMOUNT HAS ALREADY BEEN ASSESSED IN THE HANDS OF THE PARTN ERSHIP FIRM THE SAME INCOME CANNOT BE TAXED TWICE BY AGAIN ASSE SSING AT THE HANDS OF THE INDIVIDUAL PARTNERS. 61. WE HAVE HEARD THE PARTIES AND PERUSED THE MATER IAL ON RECORD. IT IS VERY MUCH CLEAR FROM THE ASSESSMENT ORDER THAT THE ADDITIONAL INCOME OFFERED IS ON ACCOUNT OF PEAK CASH CREDIT ARISING OUT OF CASH CREDITS APPEARING IN THE BOOKS OF ACCOUNTS OF SRI VENKATESWARA CREATIONS. IT IS ALSO A FACT T HAT THOUGH THE PEAK CASH CREDITS WERE OFFERED IN THE INDIVIDUAL HA NDS OF THE PARTNERS BUT THE CASH CREDITS WERE ALSO ADDED AT TH E HANDS OF THE PARTNERSHIP FIRM BY THE ASSESSING OFFICER. THE CIT (A) HOWEVER WHILE DECIDING THE APPEAL OF THE PARTNERSHI P FIRM SRI VENKATESWARA CREATIONS SUSTAINED THE ADDITION ON AC COUNT OF PEAK CASH CREDIT OF AN AMOUNT OF RS.90.50 LAKHS FOR THE ASSESSMENT YEAR 2004-05 AND 2006-07 WHICH WAS OFFER ED AS INCOME AT THE HANDS OF THE INDIVIDUAL PARTNERS FOR THOSE ASSESSMENT YEARS. THE CIT (A) THEREFORE WHILE UPHO LDING THE ADDITION OF THE SAID AMOUNT IN THE HANDS OF THE PAR TNERSHIP FIRM DIRECTED TO DELETE THE SAME FROM THE INCOME OF THE PARTNERS. IN OUR VIEW, THE DIRECTION OF THE CIT (A) IS MOST A PPROPRIATE. 39 ITA NOS.253,369,370 AND GROUP OF 2011 VENKATESWARA CR EATIONS AND OTHERS, HYD. WHEN THE PEAK CREDIT OF RS.90.50 LAKHS OFFERED AT T HE HANDS OF INDIVIDUAL PARTNERS HAVE BEEN CONSIDERED AS INCOME OF THE PARTNERSHIP FIRM, WHICH IS ALSO SUSTAINED BY US, IT IS LOGICAL THAT THE SAME INCOME SHOULD BE EXCLUDED FROM THE HANDS O F THE PARTNERS ON THE PRINCIPLE THAT SAME INCOME CANNOT B E TAXED BOTH AT THE HANDS OF THE PARTNERS AS WELL AS PARTNE RSHIP FIRM. IN AFORESAID VIEW OF THE MATTER, THERE IS NO REASON TO INTERFERE WITH THE ORDER OF THE CIT (A). 62. IN THE RESULT, THE GROUNDS RAISED ARE DISMISSED AND ALL THE APPEALS ARE ALSO DISMISSED. ITA 444/HYD/11 (DEPARTMENTAL APPEAL) SRI V.VENKATARAMANA REDDY- A.Y. 2008-09. 63. THE GRIEVANCE OF THE DEPARTMENT IN THIS APPEAL IS WITH REGARD TO CIT (A) DELETING THE ADDITION OF RS.15,21 ,519/- ON ACCOUNT OF UNEXPLAINED INVESTMENT IN JEWELLERY. 64. BRIEFLY THE FACTS ARE, THE ASSESSEE IS AN INDIV IDUAL. IN RESPONSE TO A NOTICE ISSUED U/S 142(1), THE ASSESSE E FILED A RETURN OF INCOME ON 25-11-2009 FOR THE IMPUGNED ASS ESSMENT YEAR SHOWING A TOTAL INCOME OF RS.12,80,560/- WHIC H INCLUDED ADDITIONAL INCOME OF RS.12,50,000/- OFFERED AS A CONSEQUENCE OF SEARCH AND SEIZURE OPERATIONS. IN COURSE OF TH E ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER NOTED THAT DURIN G THE SEARCH AND SEIZURE OPERATION AT THE RESIDENCE OF THE ASSES SEE, GOLD JEWELLERY VALUED AT RS.43,95,172/- WERE FOUND AND I NVENTORIED AND JEWELLERY WORTH RS.15,55,289 WAS SEIZED. A STA TEMENT WAS 40 ITA NOS.253,369,370 AND GROUP OF 2011 VENKATESWARA CR EATIONS AND OTHERS, HYD. RECORDED U/S 132(4) OF THE ACT FROM THE ASSESSEES WIFE SMT. V. ANITHA WHEREIN IT WAS STATED THAT OUT OF THE TOTA L JEWELLERY, JEWELLERY OF RS.15,21,519/- WAS STATED TO BE BELONG TO THE FAMILY OF SRI VIJAYASIMHA REDDY AND JEWELLERY WORTH RS.1,99,176/- WAS STATED TO BE BELONGING TO ASSESSE ES MOTHER. DURING THE ASSESSMENT PROCEEDINGS, WHEN THE ASSESS EE WAS ASKED TO EXPLAIN IT WAS SUBMITTED BY THE ASSESSEE THAT HE HAD ADMITTED AN ADDITIONAL INCOME OF RS.35.24 LAKHS FOR THE ASSESSMENT YEAR 2004-05 AND 2006-07 AND 2007-08 BEI NG SHARE OF PEAK CREDIT ADMITTED IN THE BOOKS OF FIRM. THE AMOUNT INVESTED IN THE FIRM WAS WITHDRAWN AND WAS USED FOR ACQUISITION OF JEWELLERY WORTH RS.15,21,519/-. THE ASSESSING OFFICER HOWEVER DID NOT ACCEPT THE CONTENTION OF TH E ASSESSEE AND HELD THAT IN ABSENCE OF ANY DETAILS WITH REGARD TO THE JEWELLERY OF RS.15,21,519 AND IN ABSENCE OF ANY COR ROBORATIVE EXPLANATION OFFERED BY HIM WHICH IS SUPPORTED BY EV IDENCE, HE THE JEWELLERY OF RS.15,21,519 IS TO BE TREATED AS B ELONGING TO THE ASSESSEE AND ADDED IT TO THE INCOME FOR THE IM PUGNED ASSESSMENT YEAR. BEING AGGRIEVED OF THE ADDITION M ADE, THE ASSESSEE PREFERRED AN APPEAL BEFORE THE CIT (A). 65. IN COURSE OF HEARING BEFORE THE CIT (A), IT WAS CONTENDED BY THE ASSESSEE THAT IN THE TOTAL INCOME DECLARED F OR THE YEAR, THE ASSESSEE HAS ADMITTED INCOME OF RS.12,50,000/- WHICH SHOULD HAVE BEEN CONSIDERED BY THE ASSESSING OFFICE R AS INVESTMENT IN GOLD AND JEWELLERY. HE FURTHER SUBMI TTED THAT THE INVESTMENTS IN THE FIRM TOWARDS PEAK CREDITS WE RE 41 ITA NOS.253,369,370 AND GROUP OF 2011 VENKATESWARA CR EATIONS AND OTHERS, HYD. SUBSEQUENTLY WITHDRAWN FROM THE FIRM AND FUNDS WERE AVAILABLE TO THE ASSESSEE TO MAKE INVESTMENTS IN GOLD AND JEW ELLERY. IN THESE CIRCUMSTANCES, THE INVESTMENT IN JEWELLERY OF RS.15,21,519 CANNOT BE CONSIDERED TO BE AN UNEXPLAI NED INVESTMENT. THE CIT (A) AFTER CONSIDERING THE SUBM ISSIONS OF THE ASSESSEE HELD THAT JEWELLERY OF RS.15,21,519 CA NNOT BE TREATED AS UNEXPLAINED INVESTMENT OF THE ASSESSEE AS THE INVESTMENT IN THEM CAN BE CONSIDERED TO HAVE BEEN MADE OUT OF FUNDS AVAILABLE WITH THE ASSESSEE. ACCORDINGLY, THE CIT (A) DELETED THE ADDITION. 66. THE LEARNED DR SUBMITTED BEFORE US THAT ON THE DATE OF ACQUISITION OF THE JEWELLERY THERE MUST BE AVAILABI LITY OF FUNDS WITH THE ASSESSEE. UNLESS THE ASSESSEE ESTABLISHES NEXUS BETWEEN THE AVAILABILITY OF FUNDS AND INVESTMENT MA DE, IT CANNOT BE HELD THAT THE FUNDS AVAILABLE WERE INVEST ED IN THE JEWELLERY. 67. THE LEARNED AR, ON THE OTHER HAND, SUBMITTED BE FORE US THAT DURING THE COURSE OF SEARCH, GOLD JEWELLERY WA S INVENTORIED AND VALUED BY A VALUER AND THE TOTAL JEWELLERY FOUN D WAS VALUED AT RS.43,95,172/-. THE VALUATION REPORT, A COPY O F WHICH IS AT 59 OF THE PAPER BOOK, WOULD SHOW THAT GOLD JEWELLER Y BELONGING TO EACH ONE IS TO BE CONSIDERED SEPARATELY WHICH IN CLUDES JEWELLERY BELONGING TO VIJAYASIMHA REDDY AND ALSO M OTHER OF THE ASSESSEE. THE JEWELLERY WAS KEPT SEPARATELY AN D SEPARATE VALUATIONS ARE MADE. THEY HAVE BEEN IDENTIFIED SEPA RATELY AT THE TIME OF SEARCH AND BASED ON SUCH IDENTIFICATION THE NAMES 42 ITA NOS.253,369,370 AND GROUP OF 2011 VENKATESWARA CR EATIONS AND OTHERS, HYD. OF PERSONS TO WHOM THE JEWELLERY BELONGS IS ALSO NO TED IN THE VALUATION REPORT. IT WAS THEREFORE SUBMITTED THAT GOLD JEWELLERY BELONGING TO THOSE TWO PERSONS CANNOT BE CONSIDERED AT THE HANDS OF THE ASSESSEE. IT WAS FURTHER CONTE NDED THAT ALTERNATIVELY, THE ADDITIONAL INCOME OFFERED OF RS. 12,50,000/- WAS NOT REFERABLE TO ANY SPECIFIC ITEM. THEREFORE, THE SAID AMOUNT CAN BE CONSIDERED TO BE AMOUNT AVAILABLE WIT H THE ASSESSEE FOR INVESTMENT IN JEWELLERY. 68. WE HAVE CONSIDERED THE SUBMISSIONS OF THE PARTI ES AND PERUSED THE MATERIAL ON RECORD. IT IS THE SPECIFI C CONTENTION OF THE ASSESSEE THAT TOTAL JEWELLERY WORTH RS.43,95,17 1 ALSO INCLUDED JEWELLERY BELONGING TO VIJAYASIMHA REDDY AND THE ASSESSEES MOTHER. ON A PERUSAL OF THE VALUATION R EPORT, A COPY OF WHICH IS AT PAGE-59, IT IS TO BE NOTED THAT JEWELLERY BELONGS TO VARIOUS FAMILY MEMBERS. THEREFORE, ON W HAT BASIS THE ASSESSING OFFICER ARRIVED AT THE FIGURE OF RS.1 5,21,519 IS NOT BROUGHT OUT ON RECORD. THAT BESIDES IT IS A FA CT THAT THE ASSESSEE HAS OFFERED AS ADDITIONAL INCOME OF RS.12. 50,000 WHICH HAS BEEN ACCEPTED BY THE ASSESSING OFFICER. T HEREFORE, EVEN ASSUMING THAT JEWELLERY IN QUESTION BELONGS T O THE ASSESSEE, THEN ALSO THE DECLARED INCOME AVAILABLE C AN BE SAID TO HAVE BEEN INVESTED BY HIM IN THE JEWELLERY AS TH ERE IS NO OTHER MATERIAL ON RECORD TO SHOW THAT THE ADDITION AL INCOME OF RS.12,50,00/- WAS UTILISED BY THE ASSESSEE FOR ANY OTHER PURPOSE. THEREFORE, EVEN ASSUMING THAT THE EXCESS JEWELLERY FOUND WORTH OF RS.15,21,519 BELONGS TO THE ASSESSEE , THE SAME 43 ITA NOS.253,369,370 AND GROUP OF 2011 VENKATESWARA CR EATIONS AND OTHERS, HYD. CAN BE SAID TO BE OUT OF FUNDS AVAILABLE WITH THE A SSESSEE. IN THE AFORESAID CIRCUMSTANCES, WE ARE NOT INCLINED TO INTERFERE WITH THE ORDER PASSED BY THE CIT (A) WHICH IS ACCOR DINGLY CONFIRMED. GROUNDS RAISED ARE DISMISSED. 69. IN THE RESULT DEPARTMENTS APPEAL IS DISMISSED . ITANO.445/HYD/11 (ASST. YEAR 2008-09) V. ANANTA VENKATA NARASIMHA REDDY 70. THE ONLY ISSUE IN THE APPEAL OF THE DEPARTMENT IS IN RESPECT OF CIT (A) DELETING THE ADDITION OF RS.9,62 ,727/- MADE ON ACCOUNT OF UNEXPLAINED INVESTMENT IN JEWELLERY. 71. FACTS AND ISSUES BEING IDENTICAL TO ITA NO. 444 /HYD/2011, FOLLOWING OUR DECISION THEREIN, WE UPHOLD THE ORDER OF THE CIT (A) IN THIS CASE ALSO. HENCE, THE GROUNDS RAISED I N THIS APPEAL ARE ACCORDINGLY DISMISSED. 72. IN THE RESULT, THE APPEAL IS DISMISSED. 73. TO SUM UP, EXCEPT DEPARTMENTS APPEAL IN ITA NO.498/HYD/2011 WHICH IS PARTLY ALLOWED FOR STATIST ICAL PURPOSES AND ASSESSEES APPEAL IN ITA NO.846/HYD/20 11 WHICH IS ALLOWED FOR STATISTICAL PURPOSE, ALL OTHER APPEA LS FILED BY THE 44 ITA NOS.253,369,370 AND GROUP OF 2011 VENKATESWARA CR EATIONS AND OTHERS, HYD. DEPARTMENT AS WELL AS ASSESSEES MENTIONED IN CAUSE- TITLE ARE DISMISSED. ORDER PRONOUNCED IN THE COURT ON 31-01-2014. SD/- (CHANDRA POOJARI) ACCOUNTANT MEMBER SD/- (SAKTIJIT DEY) JUDICIAL MEMBER HYDERABAD, DATED THE 31 ST JANUARY, 2014. JMR* COPY TO:- 1. DCIT, CENTRAL CIRCLE-7, HYDERABAD. 2. ALL ASSESSEES, C/O SRI S. RAMA RAO, ADVOCATE, FLAT NO.102, SHRIYAS RESIDENCY, ROAD NO.9, HIMAYATNAGAR , HYDERABAD. 3. CIT(A)-VII, HYDERABAD. 4. CIT (CENTRAL), HYDERABAD. 5. THE DR, INCOME-TAX APPELLATE TRIBUNAL, HYDERABAD. 45 ITA NOS.253,369,370 AND GROUP OF 2011 VENKATESWARA CR EATIONS AND OTHERS, HYD.