Shri N. Saibaba Naidu, Hyderabad V. The ITO, Ward-6(1), Hyderabad

ITA 28/HYD/2011

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 59226 (ITAT-HYDERABAD)
• Duration Of Justice: 1 year(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-01-2012
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 13-06-2011
• Assessment Year: 2007-2008
• Appeal Filed On: 07-01-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: T DIWAKAR PRASAD
• Keywords: Deemed to accrue or arise in india; Additional evidence; Onus to prove
• Section: 69C

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH A', HYDERABAD BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SMT. ASHA VIJAYARAGHAVAN, JUDICIAL MEMBER I.T.A. NO. 28/HYD/2011 ASSESSMENT YEAR : 2007-08 SRI N. SAIBABA NAIDU HYDERABAD PAN: AASPN3301M V S. INCOME TAX OFFICER WARD-6(1) HYDERABAD APPELLANT RESPONDENT APPELLANT BY: SHRI MOHD. AFZAL RESPONDENT BY: SHRI T. DIWAKAR PRASAD DATE OF HEARING: 17 . 0 1.201 2 DATE OF PRONOUNCEMENT: 25.01.2012 O R D E R PER CHANDRA POOJARI, AM: THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST TH E ORDER OF THE CIT(A)-IV, HYDERABAD DATED 30.11.2010 FOR A.Y. 2007-08. 2. THE ASSESSEE RAISED THE FOLLOWING GROUNDS: 2. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS ) ERRED IN CONFIRMING THE ORDER OF THE ASSESSING OFFI CER, WHEREIN, IT WAS ASSUMED THAT THE ASSESSEE HAS NO EXPLAINABLE SOURCES IN RESPECT OF CREDITS SHOWN FRO M HUF AMOUNTING TO RS. 41,59,905/- AND CASH CREDITS AMOUNTING TO RS. 23,12,400/- AGGREGATING TO RS. 64,72,305/- AND FURTHER ERRED IN TREATING THE SAME AS INCOME U/S. 68 OF THE I.T. ACT, IN SPITE OF EXPLAIN ING ALL THE TRANSACTIONS WITH SOURCES. 3. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ALSO ERRED IN CONFIRMING AN ADDITION OF RS. 3,93,68 7/- AS FICTITIOUS LIABILITY, WITHOUT APPRECIATING THE F ACT THAT THE ASSESSEE IS NOT LIABLE TO MAINTAIN BOOKS OF ACC OUNT AND THE BALANCE SHEET DRAWN IS ONLY ON ESTIMATE BAS IS. 3. BRIEF FACTS PERTAINING TO GROUND NO. 2 ARE THAT THE ASSESSEE IS AN INDIVIDUAL DERIVING INCOME FROM HOUSE PROPERT Y AND OTHER SOURCES. FROM THE 'CONSTRUCTED BALANCE SHEET' FOR THE YEAR ENDED I.T.A. NO. 28/HYD/2011 SRI N. SAIBABA NAIDU =================== 2 31.3.2007, FILED BY HIM ALONG WITH THE RETURN OF IN COME, AS ALSO HIS EARLIER YEAR'S BALANCE SHEET, THE ASSESSING OFF ICER NOTED THAT THE ASSESSEE HAD OBTAINED ICICI MORTGAGE LOAN OF RS . 60 LAKHS DURING THE YEAR AND HAD REPAID UNSECURED LOANS OF R S. 20 LAKHS TO TEN CREDITORS IN EACH. BESIDES, THE ASSESSEE HAD A LSO INCURRED EXPENDITURE OF RS. 30 LAKHS TOWARDS CIVIL WORKS. D URING THE ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER OBTAI NED THE BANK ACCOUNTS MAINTAINED BY HIM WITH VARIOUS BANKS. FRO M THE BANK ACCOUNT WITH AXIS BANK, AC GUARDS BRANCH, HYDERABAD , THE ASSESSING OFFICER NOTICED THAT THE ASSESSEE HAD MAD E AN FD OF RS. 36,64,000 ON 3.1.2007 WITH ACCOUNT NO. 008910401135 9259. HE HAD RECEIVED INTEREST OF RS. 27,368 THEREON. THE A SSESSING OFFICER REQUIRED THE ASSESSEE TO EXPLAIN SOURCES OF ABOVE D EPOSITS. THE ASSESSEE EXPLAINED THAT IT WAS OUT OF AGRICULTURAL INCOME CARRIED ON OVER 140 ACRES OF AGRICULTURAL PROPERTY OWNED BY ASSESSEE'S HUF IN AND AROUND CHINTALAPALEM VILLAGE, PRAKASAM D ISTRICT. THE ASSESSING OFFICER OBSERVED THAT THE ASSESSEE HAS NO T AT ALL DECLARED ANY AGRICULTURAL INCOME DURING THE YEAR AN D HIS GROSS RECEIPTS FROM ALL THE HEADS OF INCOME WERE RS. 9,09 ,093 ONLY. FURTHER THE ASSESSEE AVAILED HOUSING LOAN OF RS. 60 LAKHS FROM ICICI BANK BY PLEDGING ASSESSEE'S SON'S HOUSE PROPE RTY. ON 31.3.2007, THE SAID LOAN WAS TRANSFERRED TO AXIS BA NK, BEGUMPET BRANCH, HYDERABAD AND THERE WAS A FD OF RS. 48 LAKH S IN THE NAME OF THE ASSESSEE. THERE WAS AGRICULTURAL INCOM E DECLARED BY THE ASSESSEE IN EARLIER ASSESSMENT YEARS AT RS. 54, 000 AND RS. 66,000 IN A.Y. 2006-07 AND A.Y. 2005-06, RESPECTIVE LY. ACCORDING TO THE ASSESSING OFFICER THE SOURCES OF FIXED DEPOS IT WERE NOT EXPLAINED. HE TREATED AN AMOUNT OF RS. 41,59,905 C REDIT SHOWN AS RECEIVED FROM HUF, AND ANOTHER AMOUNT OF RS. 23,12, 400 APPEARING IN THE AXIS BANK, BEGUMPET BRANCH AS UNDI SCLOSED INCOME OF THE ASSESSEE U/S. 68 OF THE INCOME-TAX AC T, 1961. ON I.T.A. NO. 28/HYD/2011 SRI N. SAIBABA NAIDU =================== 3 APPEAL THE CIT(A) CONFIRMED THE ORDER OF THE ASSESS ING OFFICER. AGGRIEVED, THE ASSESSEE IS IN SECOND APPEAL BEFORE US. 4. THE LEARNED AR SUBMITTED THAT THE ASSESSEE IS HAVIN G INCOME FROM PROPERTY AND OTHER SOURCES (INTEREST FR OM BANKS), THEREFORE, THE ASSESSEE IS NOT REQUIRED TO MAINTAIN ANY BOOKS OF ACCOUNT IN RESPECT OF HIS TRANSACTIONS. HOWEVER, T O CLARIFY THE AFFAIRS OF THE ASSESSEE THE ACCOUNTANT CONSTRUCTED A BALANCE SHEET AS ON 31.3.2007 AND ALSO DRAWN UP A CAPITAL ACCOUNT . INADVERTENTLY THE ACCOUNTANT MISSED THE TRANSACTION S OF THE ASSESSEE WITH THAT OF HUF. DURING THE COURSE OF AS SESSMENT PROCEEDINGS THE ASSESSEE CLARIFIED THE SAME BY PROD UCING A CASH BOOK, LEDGER AND PATTA PASS BOOKS. HOWEVER, THE AS SESSING OFFICER DISBELIEVED THE FACTS WITHOUT MAKING ANY ENQUIRIES IN RESPECT OF HOLDING OF AGRICULTURAL LANDS IN THE NAME OF HUF. THE ASSESSING OFFICER APPLIED SECTION 68 OF THE I.T. ACT WHEREAS SECTION 68 CLEARLY STATES THAT IT APPLIES ONLY IN CASES WHERE THE BOOK S OF ACCOUNT ARE MAINTAINED. IN THE CASE OF ASSESSEE, IT IS NOT REQ UIRED TO MAINTAIN ANY BOOKS OF ACCOUNT AS THE ASSESSEE IS HAVING NO B USINESS INCOME, THEREFORE, ADDITION CANNOT BE MADE U/S. 68 OF THE ACT. 5. THE AR FURTHER SUBMITTED THAT THE ASSESSING OFFICER HAS NOT STATED HOW THE EXPLANATION SUBMITTED IN RESPECT OF TRANSACTIONS WITH HUF IS NOT SATISFACTORY IN HIS OPINION. HOWEV ER, HE HAS SIMPLY STATED THAT THE ASSESSEE IS NOT HOLDING ANY LAND IN THE NAME OF HUF AND ALSO HELD AS NOT PRODUCED ANY PROOF OF AGRICULTURAL INCOME, IN SPITE OF PRODUCING PATTA PA SS BOOKS , WHICH CLEARLY SHOW THE ASSESSEE IS HAVING ABOUT 140 ACRES OF AGRICULTURAL LAND OWNED BY MEMBERS OF HUF. FOR ST RENGTHENING THE CLAIM OF THE AGRICULTURAL INCOME IN THE HANDS O F HUF, THE ASSESSEE APPROACHED THE TAHASILDAR, JARUGUMALLI MAN DAL, PRAKASAM DISTRICT FOR CONFIRMING THE AGRICULTURAL I NCOME. AFTER MAKING THE APPROPRIATE ENQUIRIES, THE TAHASILDAR IS SUED A I.T.A. NO. 28/HYD/2011 SRI N. SAIBABA NAIDU =================== 4 CERTIFICATE OF INCOME FROM AGRICULTURAL LANDS AT RS . 15,00,000 AS THE ASSESSING OFFICER DISBELIEVED THE AGRICULTURAL LAND HOLDINGS AND AGRICULTURAL INCOME IN THE STATUS OF HUF, THERE FORE, THE ASSESSEE TO STRENGTHEN THE FACTS HAS OBTAINED SUCH A CERTIFICATE FROM THE APPROPRIATE AUTHORITY. THOUGH THE CLAIM O F AGRICULTURAL INCOME WAS MADE BEFORE THE ASSESSING OFFICER AND AL SO PATTA PASS BOOKS WERE PRODUCED, THE INCOME CERTIFICATE FROM TA HASILDAR WAS NOT SUBMITTED AT THE TIME OF ASSESSMENT PROCEEDINGS . IN THE INTEREST OF JUSTICE THE SAME MAY KINDLY BE ADMITTED IF IT IS CONSIDERED AS ADDITIONAL EVIDENCE. 6. THE LEARNED AR SUBMITTED THAT THE ASSESSEE IS HAVIN G ONLY INCOME FROM PROPERTY AND INTEREST INCOME FROM BANK. THEREFORE, THERE IS NO SCOPE FOR THE ASSESSEE TO EARN AN INCOM E OF RS. 69,07,346 DURING THE PERIOD RELEVANT TO THE SUBJECT ASSESSMENT YEAR. EVEN ON THE THEORY OF PROBABILITY THE EARNIN G OF SUCH INCOME IN THE SUBJECT ASSESSMENT YEAR IS BEYOND THE IMAGIN ATION FOR THE ASSESSEE. THEREFORE, THE TRANSACTION FROM THE HUF IS GENUINE. THE AR SUBMITTED THAT SECTIONS 68, 69, 69A, 69B AND 69C OF THE ACT USE THE WORD MAY IN RESPECT OF ASSUMING THE DEE MED INCOME, THEREFORE, THE PROVISIONS OF THESE SECTIONS ARE TO BE USED JUDICIOUSLY, AS HELD BY THE SUPREME COURT IN THE CA SE OF CIT VS. SMT. P.K. NOORJAHAN, 237 ITR 570. HE RELIED ON THE ORDER OF THE TRIBUNAL IN THE CASE OF NAIM ALI KHAN VS. ASST. CIT (2004) 86 TTJ (AGRA TRIB.) 721, WHEREIN IT WAS HELD THAT THE ASS ESSEE'S INCOME FROM AGRICULTURAL LAND WAS UNDISPUTED AND AO FAILED TO PROVE ANY OTHER INCOME. ADDITION U/S. 69 NOT CALLED FOR. 7. THE AR FURTHER RELIED ON IN THE CASE OF MAHABIR PRA SAD MUNNALAL VS. CIT (1947) ITR 393 (ALL), GAGAN PRASAD VS. CIT (1941) 9 ITR 373 (ALL) AND CIT VS. SOPHIA FINANCE LTD. (19 94) 205 ITR 98 (DELHI FB), WHEREIN IT WAS HELD THAT IT WAS INCUMBE NT UPON THE ASSESSING OFFICER TO MAKE PROPER ENQUIRIES REGARDIN G THE TRUTH AND I.T.A. NO. 28/HYD/2011 SRI N. SAIBABA NAIDU =================== 5 GENUINENESS OF THE DEPOSIT OR LOAN. THUS, IT IS ON LY WHEN THE EXPLANATION OFFERED BY THE ASSESSEE IS FALSE OR UNB ELIEVABLE OR THAT THE ASSESSEE GIVES EVASIVE REPLIES TO THE QUERIES R EGARDING THE SOURCE OF CREDIT ENTRY, THE ASSESSING OFFICER WOULD BE JUSTIFIED TO PRESUME THE WHOLE RECEIPT TO BE REVENUE RECEIPT. I N THE CASE OF ASSESSEE ALSO, THE ASSESSING OFFICER DISBELIEVED TH E TRANSACTION WITH HUF ONLY ON SURMISES AND CONJECTURES WITHOUT M AKING ANY ENQUIRIES. THEREFORE, THE ADDITION IS TO BE DELETE D CONSIDERING THE RATIONALE OF THE ABOVE MENTIONED JUDGEMENTS. 8. THE AR FURTHER SUBMITTED THAT DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE ASSESSEE SUBMITTED ON 4. 12.2009 A BALANCE SHEET, TRIAL BALANCE, CASH BOOK AND LEDGER INCORPORATING THE TRANSACTIONS WITH HUF, HOWEVER, THE ASSESSING O FFICER MADE THE ADDITIONS WITHOUT LOOKING INTO THE SAME AND WIT HOUT MAKING ANY FURTHER ENQUIRIES. THE ASSESSEE HAS TAKEN ON R S. 41,59,905 FROM HUF, WHICH AMOUNT HAS BEEN DEPOSITED AND WITHD RAWN AS MENTIONED THE CASH BOOK AND LEDGER OF THE ASSESSEE, DISBELIEVING THE RECEIPTS FROM HUF, THE SAID AMOUNT IS CONSIDERE D AS DEEMED INCOME U/S. 68 OF THE ACT. FURTHER, AN AMOUNT OF R S. 23,12,400 IS ADDED CONSIDERING THE CREDITS IN THE BANKS ON VARIO US DATES, WHICH ARE GERMINATED OUT OF THE FUNDS TAKEN FROM HU F AND WITHDRAWN SUBSEQUENTLY. THE ASSESSING OFFICER HAS MADE THIS ADDITION WITHOUT VERIFYING THE CASH BOOK AND LEDGER PRODUCED. 9. THE LEARNED AR FURTHER SUBMITTED THAT IN THE CASE OF THE ASSESSEE THE ASSESSING OFFICER DISBELIEVED THE EVID ENCE PRODUCED JUST ON SURMISES WITHOUT MAKING ANY ENQUIRIES, THER EBY NOT DISCHARGING THE ONUS TO DISPROVE THE FACTS PRESENTE D BEFORE HIM, THEREFORE, THE BURDEN OF PROOF SHIFTED TO THE DEPAR TMENT WHICH IS NOT DISCHARGED. THE AR PLACED RELIANCE ON THE DECI SION OF GAUHATI HIGH COURT, IN THE CASE OF CIT VS. SHRI GOPAL & CO. (1993) 204 ITR 285, WHEREIN IT WAS HELD THAT WHEN THERE IS SUSPICI ON ABOUT I.T.A. NO. 28/HYD/2011 SRI N. SAIBABA NAIDU =================== 6 ENTRIES REGARDING THE ALLEGED BORROWINGS OF SUBSTAN TIAL AMOUNTS, IT IS FOR THE ASSESSEE TO SHOW THAT THE ENTRIES ARE GE NUINE AND REPRESENTED BORROWINGS FROM A GENUINE CONCERN. IF THE ASSESSEE PRODUCES PRIMA FACIE EVIDENCE IN DISCHARGING THE BU RDEN, THE ONUS SHIFTS TO THE REVENUE TO MAKE OUT A CASE THAT THE E NTRIES WERE NOT GENUINE. THE AR ALSO RELIED ON THE JUDGMENT OF JU RISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. MOGHAL DURBAR (1 995) 216 ITR 301 AND ORDER OF THE TRIBUNAL, HYDERABAD BENCH IN T HE CASE OF HARISH KUMAR VS. DCIT (2003) 085 ITD 0366. 10. FURTHER THE AR SUBMITTED THAT THE ASSESSEE IS NOT R EQUIRED TO FILE BALANCE SHEET ALONG WITH THE RETURN OF INCO ME. HE RELIED ON THE PROVISIONS OF SECTION 139(C) OF THE ACT AND ALS O ON THE CIRCULAR OF THE CBDT BEARING NO. 3/2008 DATED 12.3.2008 WHER E THE CBDT CLARIFIED THAT IF THE ASSESSING OFFICER AT ANY TIME REQUIRES BALANCE SHEET OR ANY DOCUMENT, HE IS ENTITLED TO CALL FOR T HE SAME. FURTHER HE SUBMITTED THAT THE ASSESSEE HAS FURNISHED FULL D ETAILS OF THE LAND HOLDING DOCUMENTS, INCOME CERTIFICATE FROM TAH ASILDAR, PATTADAR PASSBOOK AND LAND HOLDING OF THE HUF WAS N OT DISPUTED BY THE DEPARTMENT. FURTHER HE SUBMITTED THAT THE H UF HAS FILED THE RETURNS OF INCOME FOR A.YS. 2008-09 AND 2009-1 0 WHEREIN THE DEPARTMENT ACCEPTED THE AGRICULTURAL INCOME. BEING SO, DUE WEIGHTAGE HAS TO BE GIVEN TOWARDS THE AGRICULTURAL INCOME OF THE HUF WHICH HAS BEEN USED FOR THE PURPOSE OF MAKING D EPOSITS. 11. ON THE OTHER HAND, THE LEARNED DR SUBMITTED THAT TH E ASSESSEE HAD NOT SHOWN THE FD OF RS. 36,64,000 IN T HE BALANCE SHEET FILED ALONG WITH THE RETURN OF INCOME. IT WA S ONLY WHEN THE ASSESSING OFFICER FOUND OUT OF THE SAID INVESTMENT FROM THE BANK ACCOUNT OF THE ASSESSEE THAT A FRESH BALANCE SHEET, SHOWING THE SAID FD WAS FILED. THE ASSESSEE TRIED TO EXPLAIN T HE INVESTMENT IN THE SAID FD BY INTRODUCING THE CONCEPT OF SRI N. SA I BABA NAIDU, HUF. HOWEVER, EVEN THOUGH THE SAID HUF FILED ITS R ETURN OF I.T.A. NO. 28/HYD/2011 SRI N. SAIBABA NAIDU =================== 7 INCOME FOR SUBSEQUENT YEARS, IT CANNOT BE DENIED TH AT IT HAD NOT FILED ANY RETURNS OF INCOME TILL THE ASSESSEE FELT THE NEED TO EXPLAIN THE SOURCE OF INVESTMENT BY TAKING REFUGE TO THE IN COME AND PAST SAVINGS OF THE FAMILY AND THE HUF. IT IS ALSO AN A DMITTED FACT THAT THE CONTENTION OF PAST SAVINGS WAS NOT BACKED BY AN Y DOCUMENTARY EVIDENCE. ADMITTEDLY, THE ASSESSEE HAD NOT MAINTAINED ANY RECORDS OF THE AGRICULTURAL INCOME O F THE HUF. ON THE OTHER HAND, HE HAD HIMSELF SHOWN MEAGRE AGRICUL TURAL INCOME IN HIS OWN RETURNS. EVEN THE FDS, CONTENTEDLY CONS OLIDATED DURING THE YEAR, HAD NOT BEEN SHOWN IN THE RETURNS OF INCOME. UNDER THE CIRCUMSTANCES, THE CONCLUSION OF THE ASSE SSING OFFICER THAT THE ASSESSEE COULD NOT EXPLAIN THE SOURCES OF CREDITS, CONTENTEDLY RECEIVED FROM THE HUF, AS ALSO THE CASH CREDITS APPEARING IN HIS BANK ACCOUNT TO BE CONFIRMED. 12. WE HAVE HEARD BOTH THE PARTIES AND CONSIDERED THE M ATERIAL ON RECORD. IN THIS CASE THE ASSESSEE IS NOT REQUIR ED TO FILE A BALANCE SHEET ALONG WITH THE RETURN OF INCOME. THE ORIGINAL BALANCE SHEET FILED WITH THE RETURN OF INCOME REFLE CTED AN AMOUNT OF RS. 36.64 LAKHS FD WITH THE AXIS BANK, AC GUARDS , HYDERABAD. ACCORDING TO THE ASSESSEE THE FD WAS MADE OUT OF SA VINGS FROM HUF INCOME. SIMILARLY, THERE WERE VARIOUS CREDITS IN THE AXIS BANK TO THE TUNE OF RS. 23,12,400. HE EXPLAINED TH E SAME AS FROM THE AGRICULTURAL INCOME OF HUF. THE LOWER AUTHORIT IES NOT ACCEPTED THE PLEA OF THE ASSESSEE. IN OUR OPINION, THE LAND HOLDING OF HUF AROUND 140 ACRES WAS NOT AT ALL DISPUTED BY THE DEPARTMENT. THE REVENUE RECORDS ALSO STRENGTHEN TH E CLAIM OF THE ASSESSEE. IN OUR OPINION, DUE WEIGHTAGE HAS TO BE GIVEN TO THE AGRICULTURAL INCOME EARNED BY THE HUF. MORE SO, TH E ENTRIES FOUND IN THE BANK ACCOUNT CANNOT BE CONSIDERED FOR ADDITION U/S. 68 OF THE ACT. FOR THIS PURPOSE WE PLACE RELIANCE ON THE JUDGEMENT OF BOMBAY HIGH COURT IN THE CASE OF CIT VS. BHAICHA ND H. GANDHI, 141 ITR 67, WHERE IT WAS HELD AS UNDER: I.T.A. NO. 28/HYD/2011 SRI N. SAIBABA NAIDU =================== 8 'WHEN MONEYS ARE DEPOSITED IN A BANK THE RELATIONSH IP THAT IS CONSTITUTED BETWEEN THE BANKER AND THE CUSTOMER IS ONE OF DEBTOR AND CREDITOR AND NOT OF TRUSTEE AND BENEFICIARY. THE PASS BOOK SUPPLIED BY THE BANK TO ITS CONSTITUENT IS ONLY A COPY OF THE CONST ITUENT'S ACCOUNT IN THE BOOKS MAINTAINED BY THE BANK. IT IS NOT AS IF THE PASS BOOK IS MAINTAINED BY THE BANK AS TH E AGENT OF THE CONSTITUENT NOR CAN IT BE SAID THAT TH E PASS BOOK IS MAINTAINED BY THE BANK UNDER THE INSTRUCTIO NS OF THE CONSTITUENT. HENCE, THE PASS BOOK SUPPLIED BY THE BANK TO THE ASSESSEE CANNOT BE REGARDED AS THE BOOK OF THE ASSESSEE, THAT IS, A BOOK MAINTAINED BY THE ASSESSEE OR UNDER HIS INSTRUCTIONS. THEREFORE, A C ASH CREDIT FOR THE PREVIOUS YEAR SHOWN IN THE ASSESSEE' S BANK PASS BOOK BUT NOT SHOWN IN THE CASH BOOK MAINTAINED BY THE ASSESSEE FOR THAT YEAR, DOES NOT FALL WITHIN THE AMBIT OF S. 68 OF THE I.T. ACT, 1961, AN D AS SUCH THE SUM SO CREDITED IS NOT CHARGEABLE TO TAX A S THE INCOME OF THE ASSESSEE OF THAT PREVIOUS YEAR.' 13. FURTHER WE ARE OF THE OPINION THAT PROFIT AND LOSS A/C. AND BALANCE SHEET CANNOT BE CONSIDERED AS BOOKS OF ACCO UNT OF THE ASSESSEE AS CONTEMPLATED U/S. 68 OF THE ACT EVEN I F THE ASSESSING OFFICER REJECTED THE EXPLANATION OFFERED BY THE ASS ESSEE REGARDING THE SOURCES OF INVESTMENT OR CREDITS. THE SAME COU LD NOT BE ASSESSED IN THE HANDS OF THE ASSESSEE BY INVOKING T HE PROVISIONS OF SECTION 68 OF THE ACT. FOR THIS PURPOSE, WE PLACE RELIANCE ON THE DECISION IN THE CASE OF CIT VS. TAJ BOREWELLS, 291 ITR 23 (MAD.) WHEREIN IT WAS HELD AS UNDER: 'THE P & L A/C OF A TRADE IS THE STATEMENT WHEREIN THE VARIOUS ITEMS OF PROFIT AND REVENUE ON THE ONE HAND AND THE LOSSES AND EXPENDITURE ON THE OTHER HAND, A RE COLLECTED AND OFFSET, THE ONE CLASS AGAINST THE OTH ER, THAT IS, IN COMPILING SUCH AN ACCOUNT BEING DEBIT A LL THE LOSSES, CREDIT ALL THE GAINS. THE RESULTING BALANC E OF THIS ACCOUNT REPRESENTS THE NET PROFITS OR THE NET LOSSES FOR THE PERIOD UNDER REVIEW. THE OBJECT OF P & L A /C IS TO ASCERTAIN THE INCOME OF A BUSINESS AND BY OFFSET TING THE EXPENSES OF EARNING THAT INCOME, TO ASCERTAIN T HE NET INCREASE (PROFIT) OR DECREASE (LOSS) IN THE TRA DERS' 'NET WORTH' FOR THE PERIOD. BALANCE SHEET LISTS TH E ASSETS AND LIABILITIES AND EQUITY ACCOUNTS OF THE COMPANY. IT IS PREPARED 'AS ON' A PARTICULAR DAY A ND THE ACCOUNTS REFLECT THE BALANCES THAT EXISTED AT T HE I.T.A. NO. 28/HYD/2011 SRI N. SAIBABA NAIDU =================== 9 CLOSE OF BUSINESS ON THAT DAY. THE P & L A/C AND T HE BALANCE SHEET ARE NOT THE BOOKS OF ACCOUNT AS CONTEMPLATED UNDER THE PROVISIONS OF THE ACT. S. RAJAGOPALA VANDAYAR VS. CIT (1990) 81 CTR (MAD) 195 : (1990) 184 ITR 450 (MAD) APPLIED.' 14. WITHOUT PREJUDICE TO THE ABOVE, CONSIDERING THE TO TALITY OF THE FACTS AND CIRCUMSTANCES, THE ASSESSING OFFICER SHALL ALLOW DUE WEIGHTAGE TO THE AGRICULTURAL INCOME ON THE BASIS O F INCOME DECLARED BY THE ASSESSEE IN SUBSEQUENT ASSESSMENT Y EARS AND ALSO ON THE BASIS OF CERTIFICATES FURNISHED FROM THE REV ENUE AUTHORITIES AND WE DO NOT FIND ANY REASON TO SUSTAIN THESE ADDI TIONS AND HENCE THE ADDITION IS DELETED. 15. THE NEXT GROUND IS WITH REGARD TO THE ADDITION OF RS.3,93,687/- AS FICTITIOUS LIABILITY. BRIEF FACTS OF THIS ISSUE ARE THAT THE ASSESSING OFFICER NOTED THAT IN THE ORIGIN AL BALANCE SHEET THE ASSESSEE HAD SHOWN A CROP LOAN OF RS. 9 LAKHS F ROM SYNDICATE BANK, TANGUTURU. FROM THE CROP LOAN ACCOUNT, HE FO UND THAT THE ASSESSEE HAD MORTGAGED HIS AGRICULTURAL LANDS. THE OPENING BALANCE THEREIN WAS RS.9,21,173/-, WHEREAS THE ASSE SSEE HAD REPAID RS. 9 LAKHS IN CASH ON 3-5-2006. AFTER SUBS EQUENT DEBITS, THE BALANCE THEREIN AS ON 31-3-2007 STOOD AT RS.5,0 6,313/-. THE ASSESSING OFFICER THEREFORE CONCLUDED THAT THE CLOS ING BALANCE OF THE LOAN WAS TAKEN AT RS.5,06,313/- ONLY AND THE RE MAINING AMOUNT OF RS.3,93,687/-, OUT OF THE TOTAL LOAN OF R S. 9 LAKHS WAS TO BE TREATED AS FICTITIOUS LIABILITY AND THE INCOM E OF THE ASSESSEE. 16. THE CONTENTION OF THE ASSESSEE IS THAT THERE W AS A MISTAKE IN PREPARATION OF BALANCE-SHEET AND THE ASSESSING O FFICER TREATED THE DIFFERENCE OF RS.3,93,687/- AS INCOME OF THE AS SESSEE IS TO BE DELETED. 17. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. AS WE HAVE HELD IN EARLIER PARA THAT THE ASSESSEES BALANCE-SHEET WHICH IS NOT REQUIRED TO FILE ALONG WITH RETURN OF INCOME AND HAVING FILED THE SAME, IT CAN NOT BE I.T.A. NO. 28/HYD/2011 SRI N. SAIBABA NAIDU =================== 10 CONSIDERED TO FASTEN ADDITIONAL TAX LIABILITY ON TH E ASSESSEE. HENCE, THIS GROUND OF THE ASSESSEE IS ALLOWED. 18. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS AL LOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 25 TH JANUARY, 2012. SD/ - (ASHA VIJAYARAGHAVAN) JUDICIAL MEMBER SD/- (CHANDRA POOJARI) ACCOUNTANT MEMBER HYDERABAD, DATED THE 25 TH JANUARY, 2012 COPY FORWARDED TO: 1. SRI N. SAIBABA NAIDU, C/O. SHRI MOHD AFZAL, ADVOCAT E, 11 - 5 - 465, FLAT NO. 402, SHERSON'S RESIDENCY, CRIMINAL CO URT ROAD, RED HILLS, HYDERABAD. 2. THE INCOME TAX OFFICER, WARD - 6(1), HYDERABAD. 3. THE CIT(A) - IV, HYDERABAD 4. THE CIT - III, HYDERABAD. 5 . THE DR A BENCH, ITAT, HYDERABAD TPRAO/JMR*