Sri G Satyanarayana, Sabbavaram V. The ITO, Ward-1, Anakapalle

ITA 423/VIZ/2009

• Counselvise Citation: [2010] 135 COUNSELVISE.COM (IT) 2771 (ITAT-VISAKHAPATNAM)
• Duration Of Justice: 1 year(s) 1 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-10-2010
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB
• Next Hearing Date: 30-09-2010
• Assessment Year: 2006-2007
• Appeal Filed On: 18-08-2009
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: T L PETER
• Keywords: Unexplained investment; Gift; Additional evidence; Bad and doubtful debts
• Section: 133A

Judgement Text

ITA NOS. 393 394 421 422 & 423 G SATYANARAYANA VISAKH APATNAM PAGE 1 OF 11 IN THE INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM BENCH, VISAKHAPATNAM BEFORE: SHRI SUNIL KUMAR YADAV, JUDICIAL MEMBER AND SHRI BR BASKARAN, ACCOUNTANT MEMBER ITA NOS.393 & 394/VIZAG/2009 ASSESSMENT YEAR: 2004-05 & 2006-07 ITO WARD-1, ANAKAPALLE VS. G. SATYANARAYANA, SABBAVARAM (APPELLANT) (RESPONDENT) PAN NO:AEUPG 7181 E ITA NOS.421, 422 & 423/VIZAG/2009 ASSESSMENT YEAR: 2004-05 TO 2006-07 G. SATYANARAYANA, SABBAVARAM VS. ITO WARD-1, ANAKAPALLE (RESPONDENT) PAN NO:AEUPG 7181 E (APPELLANT) ASSESSEE BY: SHRI G.V.N. HARI, CA DEPARTMENT BY: SHRI T.L. PETER, (DR) ORDER PER BENCH: THE APPEALS FILED BY BOTH THE PARTIES RELATE TO TH E ASSESSMENT YEARS 2004-05 AND 2006-07. BESIDES THE ABOVE, THE ASSESSE E HAS FILED THE APPEAL FOR THE ASSESSMENT YEAR 2005-06. ALL THESE APPEALS ARE DIRECTED AGAINST THE ORDERS PASSED BY LEARNED CIT (A) VISAKHAPATNAM. SIN CE CERTAIN ISSUES URGED IN THESE APPEALS ARE IDENTICAL IN NATURE, THE Y WERE HEARD TOGETHER AND ARE BEING DISPOSED OF BY THIS COMMON ORDER. 2. WE SHALL FIRST TAKE UP THE APPEALS PERTAINING TO THE ASSESSMENT YEAR 2004-05. THE ASSESSEE IS CONTESTING FOLLOWING ADDI TIONS SUSTAINED BY THE LEARNED CIT (A) IN THIS YEAR: A) ADDITION PERTAINING TO THE INVESTMENT IN MONEY L ENDING BUSINESS. B) ADDITION PERTAINING TO THE INCOME FROM MONEY LEN DING BUSINESS. C) ADDITION PERTAINING TO THE BAD DEBTS. ITA NOS. 393 394 421 422 & 423 G SATYANARAYANA VISAKH APATNAM PAGE 2 OF 11 3. THE REVENUE IS CONTESTING ON THE FOLLOWING ISSU ES IN THIS YEAR: A) REDUCTION OF INCOME FROM MONEY LENDING ESTIMATED BY THE ASSESSING OFFICER B) TELESCOPING OF ADDITION MADE TOWARDS DOMESTIC EX PENSES. 4. THE FACTS RELATING TO THE CASE ARE STATED IN BRI EF. THE ASSESSEE FILED HIS RETURN OF INCOME FOR THE ASSESSMENT YEAR 2004-0 5 ADMITTING AN INCOME OF RS.38,800/- AS INCOME FROM PLYING OF GOODS VEHIC LE, AS PER THE PROVISIONS OF SECTION 44AE OF THE ACT. A SURVEY OPERATION UND ER SECTION 133A OF THE ACT WAS CARRIED OUT IN THE BUSINESS PREMISES OF THE ASSESSEE AND IT WAS NOTICED THEN THAT THE ASSESSEE WAS CARRYING ON MONE Y LENDING AND CHIT BUSINESS UNDER THE NAME AND STYLE OF M/S KANAKA DU RGA CHITS & FINANCE. IT WAS NOTICED THAT THE ASSESSEE DID NOT MAINTAIN RE GULAR BOOKS OF ACCOUNT IN RESPECT OF THE SAID BUSINESS. HOWEVER, CERTAIN L OOSE SHEETS AND DAIRIES FOUND DURING THE COURSE OF SEARCH INDICATED THAT TH E ASSESSEE WAS IN RECEIPT OF INTEREST INCOME FROM MONEY LENDING BUSINESS. ACC ORDINGLY THE ASSESSMENT FOR THE ASSESSMENT YEAR 2004-05 WAS REOP ENED BY ISSUING A NOTICE UNDER SECTION 148. THE ASSESSING OFFICER COM PLETED THE ASSESSMENT AT RS.28.63 LAKHS AS DETAILED BELOW: 1. INCOME FROM VAN AS RETURNED IS ACCEPTED RS. 3 7,800 2. UNEXPLAINED INVESTMENT MADE IN MONEY RS.14,05, 238 LENDING BUSINESS 3. INCOME FROM MONEY LENDING RS.13,20,000 4. DOMESTIC EXPENSES RS. 1,00,000 TAXABLE INCOME RS.28,63,040 ============ THE APPEAL PREFERRED BY THE ASSESSEE BEFORE THE LEA RNED CIT (A) IN RESPECT OF THE ABOVE SAID ADDITIONS WAS PARTLY ALLOWED. AGG RIEVED BY THE ORDER OF THE LEARNED CIT (A), BOTH THE PARTIES ARE IN APPEAL BEFORE US. WE SHALL DEAL THE APPEALS ISSUE WISE. 5. THE FIRST ISSUE IN THE APPEAL OF THE ASSESSEE IS RELATED TO THE UNEXPLAINED INVESTMENT MADE IN THE MONEY LENDING BU SINESS. BASED UPON ITA NOS. 393 394 421 422 & 423 G SATYANARAYANA VISAKH APATNAM PAGE 3 OF 11 THE STATEMENT RECORDED FROM THE APPELLANT ON 14-12- 2006, THE ASSESSING OFFICER DETERMINED THE CIRCULATING CAPITAL EMPLOYED IN THE BUSINESS OF MONEY LENDING AT RS.55,00,000/-. THE SOURCES FOR TH E SAID INVESTMENT WERE EXPLAINED BY THE ASSESSEE AS UNDER: LOAN FROM FRIENDS AND RELATIVES - 36,69,762 OWN FUNDS - 18,55,000 AFTER MAKING NECESSARY VERIFICATION WITH REGARD TO THE LOANS, THE ASSESSING OFFICER ACCEPTED THE SAME. THE SOURCES FOR THE OWN FUNDS ARE EXPLAINED AS UNDER: A) AMOUNT RECEIVED ON SALE OF VEHICLES - RS.10,80, 000 B) PERSONAL LOAN FROM SBI - RS. 75,000 C) OD LOAN FROM SBI - RS. 3,50,000 D) RETIREMENT BENEFITS OF THE LATE FATHER - RS. 3 ,50,000 THE ASSESSING OFFICER ACCEPTED THE LOANS TAKEN FROM SBI AND DID NOT ACCEPT THE OTHER TWO SOURCES CLAIMED BY THE ASSESSEE. THUS THE ASSESSING OFFICER ACCEPTED THE SOURCES OF CIRCULATING CAPITAL TO THE EXTENT OF RS.40,94,762/- (RS.36,69,762 + RS.4,25,000/-). ACCORDINGLY THE AS SESSING OFFICER ADDED A SUM OF RS.14,05,238/- (RS.55,00,000 RS.40,94,762) AS THE UNEXPLAINED INVESTMENT MADE BY THE ASSESSEE. IN THE APPEAL PREF ERRED BY THE ASSESSEE, BASED ON THE CIRCUMSTANTIAL EVIDENCES FURNISHED IN RESPECT OF SALE OF SEVEN VEHICLES, THE LEARNED CIT (A) ACCEPTED A SUM OF RS. 5.00 LAKHS AS THE AMOUNT RECEIVED ON SALE OF VEHICLES. THE LEARNED C IT (A) DID NOT ACCEPT THE CLAIM REGARDING RECEIPT OF MONEY FROM THE FATHE R OF THE ASSESSEE. 5.1 IN SUPPORT OF HIS CONTENTION REGARDING RECEIPT O F RS.10,80,000/- ON SALE OF VEHICLES, THE ASSESSEE HAS FILED CERTAIN DO CUMENTS RELATING TO SALE OF 9 VEHICLES, WHICH CONSISTS OF COPIES OF AFFIDAVITS OBTAINED FROM THE BUYERS AND COPIES OF RECORD OBTAINED FROM THE RTO OFFICE. IN THE AFFIDAVIT, THE SALES VALUE OF THE VEHICLES HAS BEEN MENTIONED. TH E ASSESSEE HAS ALSO ATTACHED A WORKING SHEET DETAILING THEREIN THE AMOU NT LEFT WITH HIM ON SALE OF VEHICLES AFTER ADJUSTMENT OF THE OUTSTANDING LOA NS AGAINST EACH VEHICLE. THE ASSESSEE HAS ALSO MOVED A PETITION FOR ADMISSIO N OF THE SAID DOCUMENT AS ADDITIONAL EVIDENCES. THE LEARNED AUTHORISED RE PRESENTATIVE PRAYED THAT ITA NOS. 393 394 421 422 & 423 G SATYANARAYANA VISAKH APATNAM PAGE 4 OF 11 THESE ADDITIONAL EVIDENCES MAY BE ADMITTED AND THE MATTER MAY BE SET ASIDE TO THE FILE OF THE ASSESSING OFFICER FOR MAKI NG NECESSARY VERIFICATION. THE LEARNED DEPARTMENTAL REPRESENTATIVE ALSO DID NO T OBJECT TO THE REQUEST MADE BY THE ASSESSEE. 5.2 ON A CAREFUL PERUSAL OF THE ORDER OF THE LEARNE D CIT (A), WE NOTICE THAT THE ASSESSEE HAD OFFERED INCOME UNDER SECTION 44AE OF THE ACT IN RESPECT OF 12 VEHICLES FOR THE ASSESSMENT YEARS 200 2-03 AND 2003-04. HOWEVER, FOR THE ASSESSMENT YEAR 2004-05, THE ASSES SEE HAD OFFERED INCOME IN RESPECT OF 1 VEHICLE ONLY. ACCORDINGLY TH E LEARNED CIT (A) CAME TO THE CONCLUSION THAT THE ASSESSEE HAD DISPOSED OF CE RTAIN VEHICLES DURING THE PREVIOUS YEAR RELEVANT TO THE ASSESSMENT YEAR 2004- 05. THE ASSESSEE ALSO FILED CERTAIN DOCUMENTS OBTAINED FROM THE RTO WITH REGARD TO THE TRANSFER OF 7 VEHICLES. SINCE THERE WAS NO EVIDENCE REGARDIN G QUANTUM OF SALE CONSIDERATION, THE LEARNED CIT (A) ESTIMATED THE RE CEIPT OF THE SALE AMOUNT AT RS.5.00 LAKHS, WHICH WAS, IN OUR VIEW, REASONABL E. HOWEVER, BEFORE US, THE ASSESSEE HAS THE FILED DOCUMENTS STATED EARLIER , IN RESPECT OF SALE OF 9 VEHICLES. ACCORDING TO THE SAID DOCUMENTS, THE AMOU NT LEFT WITH THE ASSESSEE, AFTER ADJUSTMENT OF OUTSTANDING LOANS STA NDS AT RS.10.69 LAKHS, WHICH IS HIGHER THAN THE ESTIMATE MADE BY THE LEARN ED CIT (A). THUS ACCORDING TO THE LEARNED AUTHORISED REPRESENTATIVE, THE ASSESSEE SHOULD BE GRANTED ADDITIONAL RELIEF BASED UPON THE ADDITIONAL EVIDENCES FILED NOW. THE ASSESSEE HAS STATED IN THE PETITION FOR ADMISSI ON OF ADDITIONAL EVIDENCES THAT IT TOOK CONSIDERABLE TIME TO CONTACT THE BUYERS AND HENCE THESE DOCUMENTS COULD NOT FILED BEFORE THE ASSESSIN G OFFICER. IN VIEW OF THE REASONS STATED IN THE PETITION, WE ADMIT THE ADDITI ONAL EVIDENCES FILED BEFORE US. AS PRAYED BY BOTH THE PARTIES, WE SET A SIDE THIS ISSUE TO THE FILE OF THE ASSESSING OFFICER WITH A DIRECTION TO TAKE A PPROPRIATE DECISION FOR GRANTING ADDITIONAL RELIEF BY CONSIDERING THE ADDIT IONAL EVIDENCES REFERRED ABOVE. ITA NOS. 393 394 421 422 & 423 G SATYANARAYANA VISAKH APATNAM PAGE 5 OF 11 6. THE NEXT ISSUE IN THE APPEAL OF THE ASSESSEE REL ATE TO REJECTION OF RECEIPT OF GIFT FROM HIS FATHER. AS STATED EARLIER, THE ASSESSEE CLAIMED RECEIPT OF AN AMOUNT OF RS.3,50,000/- OUT OF THE RETIREMENT BENEFIT OF HIS LATE FATHER. IT IS BORNE OUT OF RECORD THAT THE ASSESSE ES FATHER RETIRED FROM VISAKHAPATNAM DOCK LABOUR BOARD AND GOT RETIREMENT BENEFIT OF RS.1,90,105/- IN JUNE, 1999. BEFORE THE ASSESSING OFFICER, THE ASSESSEE FILED CONFIRMATION LETTER OBTAINED FROM HIS MOTHER, SINCE HIS FATHER HAD EXPIRED BY THAT TIME. THE ASSESSING OFFICER DID NO T ACCEPT THE EXPLANATION IN THE ABSENCE OF CORROBORATING EVIDENCES. THE LEAR NED CIT (A) CONFIRMED THE ADDITION IN VIEW OF THE TIME GAP OF 4 YEARS. 6.1 ACCORDING TO THE LEARNED AUTHORISED REPRESENTA TIVE, THE AMOUNT OBTAINED ON RETIREMENT WAS UTILIZED FOR CARRYING OU T MONEY LENDING BUSINESS AND OUT OF THE AMOUNT SO ACCUMULATED, A SUM OF RS.3 ,50,000/- WAS GIVEN AS GIFT BY HIS FATHER TO THE ASSESSEE DURING THE FI NANCIAL YEAR RELEVANT TO THE ASSESSMENT YEAR 2004-05. HOWEVER, ACCORDING TO LEA RNED DEPARTMENTAL REPRESENTATIVE, THE SAID CLAIM OF THE ASSESSEE IS N OT SUPPORTED BY ANY EVIDENCE. 6.2 THERE IS NO DISPUTE WITH REGARD TO THE FACT THAT THE FATHER OF THE ASSESSEE OBTAINED A SUM OF RS.1,90,105/- IN JUNE 19 99 ON RETIREMENT, WHICH IS ALSO SUPPORTED WITH NECESSARY EVIDENCES. T HE CONTENTION OF THE LEARNED AUTHORISED REPRESENTATIVE IS THAT THE FAMIL Y IS IN THE BUSINESS OF MONEY LENDING AND HENCE THEY HAVE UTILIZED THE SAME FOR CARRYING ON MONEY LENDING BUSINESS. SINCE THE ASSESSEE IS CARR YING ON MONEY LENDING BUSINESS, THE SAID CLAIM COULD NOT BE DISCOUNTED AL TOGETHER. HOWEVER, THE ASSESSEE HAS NOT BROUGHT ANY MATERIAL TO SUPPORT TH E SAID CLAIM. IN SUCH A CASE, IT WILL NOT BE POSSIBLE TO ACCEPT THE CLAIM O F RECEIPT OF RS.3.50 LAKHS AND WE ARE FORCED TO ESTIMATE SUCH RECEIPT. ON A C ONSPECTUS OF THE MATTER, WE ARE OF THE VIEW THAT A SUM OF RS.2.00 LAKHS CAN BE TREATED AS RECEIVED BY THE ASSESSEE FROM HIS FATHER TOWARDS HIS CAPITAL AS AGAINST THE CLAIM OF ITA NOS. 393 394 421 422 & 423 G SATYANARAYANA VISAKH APATNAM PAGE 6 OF 11 RS.3.50 LAKHS AND IN OUR VIEW, THE SAID ESTIMATION WOULD MEET THE ENDS OF JUSTICE. WE ORDER ACCORDINGLY. 7. THE NEXT ISSUE, WHICH IS COMMON IN BOTH THE A PPEAL OF THE REVENUE AND THAT OF THE ASSESSEE, RELATES TO THE ESTIMATION OF INCOME FROM MONEY LENDING BUSINESS. ON THE CIRCULATING CAPITAL OF RS .55.00 LAKHS DETERMINED, THE ASSESSING OFFICER ESTIMATED THE INCOME FROM MON EY LENDING @ 2% PER MONTH. THE LEARNED CIT(A) REDUCED THE ESTIMATE TO 1% PER MONTH. 7.1 WE HAVE HEARD THE RIVAL CONTENTIONS ON THIS ISSUE. IN THE ASSESSMENT ORDER, THE ASSESSING OFFICER HAS OBSERVED AS UNDER IN SUPPORT OF HIS ESTIMATION OF INCOME AT 2% P.M. THE ASSESSEE HAS CATEGORICALLY STATED IN HIS STATE MENT THAT THE AMOUNTS BROUGHT BY HIM FROM THE OUTSIDERS FOR T HE PURPOSE OF BUSINESS WERE RANGING FROM INTEREST @ 2 TO 4% AND IN TURN HE WILL PAY THE LENDERS @ BETWEEN 2 TO 3%. ACCORDINGLY, THE NET INCOME OF THE ASSESSEE IS ESTI MATED @ 2% ON RS.55,00,000/- FOR THE FINANCIAL YEAR 2003-04 RELEVANT TO THE ASSESSMENT YEAR 2004-05 WHICH COMES TO RS.13,20,000/- THE SAID OBSERVATION OF THE ASSESSING OFFICER DOES NOT STAND TO REASONING. HOWEVER, THE LEARNED CIT(A) HAS CATEGORICALLY OBSER VED THAT THE ASSESSEE HAS STATED, IN THE STATEMENT RECORDED FROM HIM, ONL Y ABOUT THE INTEREST PAID BY HIM ON THE LOANS BORROWED AND THE ASSESSEE WAS N OT ASKED ABOUT THE RATE OF INTEREST CHARGED BY HIM ON THE LOANS ADVANC ED BY HIM. THUS CONSIDERING THE INTEREST EXPENDITURE AND OTHER EXPE NSES, THE LEARNED CIT(A) REDUCED THE ESTIMATE OF INCOME AT 1% P.M. 7.2 OUT OF THE CIRCULATING CAPITAL OF RS.55.00 LAKHS, THE OWN FUNDS STOOD AT RS.18.00 LAKHS AND THE LOAN FUNDS ARE ACCEPTED T O THE TUNE OF ABOUT RS.37.00 LAKHS. THUS, THE MAJOR PORTION OF THE CAP ITAL CONSISTS OF LOAN FUNDS. IT CANNOT BE DISPUTED THAT THE ASSESSEE HAD TO PAY HUGE AMOUNT AS INTEREST, WHICH IS STATED TO BE 2% TO 4%. THUS THE INTEREST SPAN ON LOAN FUNDS OF RS.37.00 LAKHS SHALL BE FAR LESSER THAN TH E INTEREST RECEIPTS ON OWN ITA NOS. 393 394 421 422 & 423 G SATYANARAYANA VISAKH APATNAM PAGE 7 OF 11 FUNDS. BESIDES THE ABOVE, THE ASSESSEE HAD TO INCU R CERTAIN EXPENSES TOWARDS SALARIES TO EMPLOYEES, TRAVELING, TELEPHONE , STATIONERY ETC. CONSIDERING ALL THESE FACTORS, WE ARE OF THE VIEW T HAT THE ESTIMATE OF NET INCOME, CLEAR OF ALL EXPENSES AT 9% P.A. WOULD MEET THE ENDS OF JUSTICE AND WE ORDER ACCORDINGLY. THE ORDER OF LEARNED CIT(A) IS MODIFIED TO THAT EXTENT. 8. THE NEXT ISSUE IN THE APPEAL OF THE ASSESSEE RE LATES TO THE DISALLOWANCE OF BAD DEBTS CLAIM OF RS.4,48,003/-. THE ASSESSEE S CLAIM OF BAD DEBTS WAS NOT ACCEPTED BY THE ASSESSING OFFICER FOR THE REASO N THAT THE ASSESSEE DID NOT SATISFY THE MAIN CONDITION PRESCRIBED IN THE AC T, I.E. THE DEBTS SHOULD HAVE BEEN WRITTEN OFF IN THE BOOKS OF ACCOUNT. THE ASSESSEE COULD NOT SATISFY THE SAID CONDITION SINCE HE DOES NOT MAINTA IN ANY BOOKS OF ACCOUNT. THE LEARNED CIT(A) ALSO AFFIRMED THE ACTION OF THE ASSESSING OFFICER. IN VIEW OF THE ABOVE, WE ALSO DO NOT FIND ANY INFIRMIT Y IN THE ORDER OF LEARNED CIT(A) ON THIS ISSUE. 9. THE FIRST ISSUE IN THE APPEAL OF THE REVENUE H AS BEEN ADJUDICATED IN PARA 7 (SUPRA). THE NEXT ISSUE RELATES TO THE DELE TION OF ADDITION MADE TOWARDS DOMESTIC EXPENSES. THE ASSESSING OFFICER A DDED A SUM OF RS.1.00 LAKH TOWARDS DOMESTIC EXPENSES. THE LEARNED CIT(A) TELESCOPED THE ADDITION MADE TOWARDS DOMESTIC EXPENSES AGAINST THE MONEY LENDING INCOME, WHICH IS BEING AGITATED BY THE REVENUE. 9.1 THE FACT REMAINS THAT THE ASSESSEE DID NOT MAINTAIN BOOKS OF ACCOUNT AND HENCE THE INCOME WAS ESTIMATED. IN THE ABSENCE OF MANNER OF UTILIZATION OF THE SAID INCOME, IN OUR VIEW, THE LE ARNED CIT(A) IS CORRECT IN TELESCOPING THE ADDITION MADE TOWARDS DOMESTIC EXPE NSES AGAINST THE MONEY LENDING INCOME. HENCE, WE DO NOT FIND ANY RE ASON TO INTERFERE WITH HIS DECISION ON THIS ISSUE. ITA NOS. 393 394 421 422 & 423 G SATYANARAYANA VISAKH APATNAM PAGE 8 OF 11 10. FOR ASSESSMENT YEAR 2005-06, THE ASSESSEE ALON E HAS FILED THE APPEAL CONTESTING FOLLOWING ADDITIONS SUSTAINED BY LEARNED CIT(A): A) ADDITION PERTAINING TO THE INCOME FROM MONEY LEN DING BUSINESS. B) ADDITION PERTAINING TO THE BAD DEBTS. C) ADDITION PERTAINING TO CHIT COMMISSION. 10.1 THE FIRST ISSUE RELATES TO THE ESTIMATE OF INCOME FROM MONEY LENDING BUSINESS. THE SAID INCOME WAS ESTIMATED AT 2% P.M BY THE ASSESSING OFFICER AND THE SAME WAS REDUCED BY LEARN ED CIT(A) TO 1% P.M. WE HAVE ALREADY DEALT WITH THIS ISSUE IN THE ASSESS MENT YEAR 2004-05 IN THE EARLIER PARAGRAPHS. CONSISTENT WITH THE DECISION TA KEN THEREIN, WE DIRECT THE ASSESSING OFFICER TO ESTIMATE THE INCOME FROM MONEY LENDING BUSINESS AT 9% P.A., CLEAR OF ALL EXPENSES. 10.2 THE NEXT ISSUE RELATES TO THE CLAIM OF BAD DEBTS. THE ASSESSEES CLAIM OF BAD DEBTS OF RS.2,22,113/- IN THIS YEAR AL SO WAS REJECTED BY BOTH THE TAX AUTHORITIES. WE HAVE DEALT WITH THIS ISSUE IN THE ASSESSMENT YEAR 2004-05 IN THE EARLIER PARAGRAPHS. CONSISTENT WITH THE DECISION TAKEN IN THE ASSESSMENT YEAR 2004-05 IN EARLIER PARAGRAPHS, WE D ISMISS THIS GROUND OF THE ASSESSEE. 10.3 THE NEXT ISSUE RELATES TO THE ESTIMATE OF CHIT COMMISSION INCOME. THE ASSESSING OFFICER ESTIMATED THE CHIT COMMISSION INCOME AT RS.63,000/- DURING THIS YEAR. BEFORE LEARNED CIT(A), THE ASSESS EE SOUGHT FOR DEDUCTION OF EXPENSES INCURRED FOR EARNING THE SAID INCOME. H OWEVER, HE COULD NOT FURNISH THE DETAILS OF THE EXPENSES. IN THE ABSENCE OF THE DETAILS, THE LEARNED CIT(A) ESTIMATED THE EXPENSES AT 20% OF THE CHIT COMMISSION INCOME AND DIRECT THE ASSESSING OFFICER TO ALLOW TH E SAME. STILL AGGRIEVED, THE ASSESSEE IS IN APPEAL BEFORE US. HOWEVER, THE ASSESSEE COULD NOT FILE THE DETAILS OF EXPENSES BEFORE US ALSO. HENCE WE D O NOT FIND ANY REASON TO INTERFERE WITH THE DECISION OF LEARNED CIT(A) ON TH IS ISSUE. ITA NOS. 393 394 421 422 & 423 G SATYANARAYANA VISAKH APATNAM PAGE 9 OF 11 11. WE SHALL NOW TAKE UP THE CROSS APPEALS PERTAIN ING TO THE ASSESSMENT YEAR 2006-07. THE ASSESSEE IS IN APPEAL BEFORE US IN RESPECT OF THE FOLLOWING ADDITIONS SUSTAINED BY THE LEARNED CIT(A) . A) ADDITION PERTAINING TO THE INCOME FROM MONEY L ENDING BUSINESS. B) ADDITION PERTAINING TO THE BAD DEBTS. C) ADDITION PERTAINING TO CHIT COMMISSION. D) ADDITION PERTAINING TO ASEEL BUSINESS. 11.1 THE FIRST ISSUE RELATES TO THE ESTIMATE OF INCOME FROM MONEY LENDING BUSINESS. THE SAID INCOME WAS ESTIMATED AT 2% P.M BY THE ASSESSING OFFICER AND THE SAME WAS REDUCED BY LEARN ED CIT(A) TO 1% P.M. WE HAVE ALREADY DEALT WITH THIS ISSUE IN THE ASSESS MENT YEAR 2004-05 IN THE EARLIER PARAGRAPHS. CONSISTENT WITH THE DECISION TA KEN THEREIN, WE DIRECT THE ASSESSING OFFICER TO ESTIMATE THE INCOME FROM MONEY LENDING BUSINESS AT 9% P.A., CLEAR OF ALL EXPENSES. 11.2 THE NEXT ISSUE RELATES TO THE CLAIM OF BAD DEBTS. THE ASSESSEES CLAIM OF BAD DEBTS OF RS.20,55,963/- IN THIS YEAR A LSO WAS REJECTED BY BOTH THE TAX AUTHORITIES. WE HAVE DEALT WITH THIS ISSUE IN THE ASSESSMENT YEAR 2004-05 IN THE EARLIER PARAGRAPHS. CONSISTENT WITH THE DECISION TAKEN IN THE ASSESSMENT YEAR 2004-05 IN EARLIER PARAGRAPHS, WE D ISMISS THIS GROUND OF THE ASSESSEE. 11.3 THE NEXT ISSUE RELATES TO THE ESTIMATE OF CHIT COMMISSION INCOME. THE ASSESSING OFFICER ESTIMATED THE CHIT COMMISSION INCOME AT RS.1,26,000/- DURING THIS YEAR. BEFORE LEARNED CIT( A), THE ASSESSEE SOUGHT FOR DEDUCTION OF EXPENSES INCURRED FOR EARNING THE SAID INCOME. HOWEVER, HE COULD NOT FURNISH THE DETAILS OF THE EXPENSES. IN THE ABSENCE OF THE DETAILS, THE LEARNED CIT(A) ESTIMATED THE EXPENSES AT 20% OF THE CHIT COMMISSION INCOME AND DIRECT THE ASSESSING OFFICER TO ALLOW THE SAME. STILL AGGRIEVED, THE ASSESSEE IS IN APPEAL BEFORE US. HO WEVER, THE ASSESSEE ITA NOS. 393 394 421 422 & 423 G SATYANARAYANA VISAKH APATNAM PAGE 10 OF 11 COULD NOT FILE THE DETAILS OF EXPENSES BEFORE US AL SO. HENCE WE DO NOT FIND ANY REASON TO INTERFERE WITH THE DECISION OF LEARNE D CIT(A) ON THIS ISSUE. 11.4 THE ASSESSEE WAS ALSO ENGAGED IN THE BUSINES S OF COLLECTIONS OF MARKET CESS (ASEEL). SINCE THE ASSESSEE DID NOT MA INTAIN ANY BOOKS, THE ASSESSING OFFICER ESTIMATED THE INCOME AT RS.5,400/ - FOR THIS YEAR AND THE SAME WAS ALSO CONFIRMED BY LEARNED CIT(A). BEFORE US, THE ASSESSEE COULD NOT ESTABLISH HOW THE INCOME SO ESTIMATED IS WRONG. HENCE WE DO NOT FIND ANY REASON TO INTERFERE WITH THE DECISION OF LEARNE D CIT(A) ON THIS ISSUE. 12. THE REVENUE HAS RAISED FOLLOWING ISSUES IN ITS APPEAL RELATED TO THE ASSESSMENT YEAR 2006-07. A) REDUCTION OF INCOME FROM MONEY LENDING ESTIMATED BY THE ASSESSING OFFICER B) TELESCOPING OF ADDITION MADE TOWARDS DOMESTIC EX PENSES. C) DELETION OF ADDITION RELATED TO THE INVES TMENT IN ASEEL BUSINESS. 12.1 THE FIRST ISSUE IS COVERED BY OUR DECISION RENDERED IN THE ASSESSMENT YEAR 2004-05 IN EARLIER PARAGRAPHS. CON SISTENT WITH THE VIEW TAKEN THEREIN, WE DISMISS THIS GROUND OF THE REVENU E. 12.2 THE NEXT ISSUE RELATES TO THE TELESCOPING OF THE ADDITION MADE TOWARDS DOMESTIC EXPENSES AGAINST THE MONEY LENDING INCOME. WE HAVE DEALT WITH THIS ISSUE ALSO IN THE APPEAL OF THE REV ENUE RELATING TO THE ASSESSMENT YEAR 2004-05. CONSISTENT WITH THE VIEW TAKEN THEREIN, WE DISMISS THIS GROUND ALSO. 12.3 THE NEXT ISSUE RELATES TO THE DELETION OF ADDITION MADE TOWARDS INVESTMENT IN THE ASEEL BUSINESS. THE ASSESSING OF FICER ESTIMATED THE INVESTMENT MADE BY THE ASSESSEE IN THE ASEEL COLLEC TION BUSINESS AT RS.67,375/- AND ADDED THE SAME. SINCE THE ASSESSEE WAS HAVING SUFFICIENT INCOME IN THE EARLIER TWO YEARS, THE LEARNED CIT(A) DELETED THE SAID ADDITION BY HOLDING THAT THE UNEXPLAINED INVESTMENT MADE IN THIS BUSINESS ITA NOS. 393 394 421 422 & 423 G SATYANARAYANA VISAKH APATNAM PAGE 11 OF 11 CAN BE TELESCOPED AGAINST THE UNDISCLOSED INCOME OF EARLIER TWO YEARS, MEANING THEREBY THE ASSESSEE WAS HAVING SOURCES FOR MAKING THE SAID INVESTMENT. IN VIEW OF THE AVAILABILITY OF FUNDS, WE ARE OF THE VIEW THAT THE LEARNED CIT(A) WAS RIGHT IN DELETING THE IMPUGNED A DDITION AND ACCORDINGLY WE UPHOLD THE SAME. 13. IN THE RESULT, THE APPEALS OF THE ASSESSEE F OR THE THREE YEARS ARE PARTLY ALLOWED AND BOTH THE APPEALS OF THE REVENUE ARE DISMISSED. PRONOUNCED IN THE OPEN COURT ON 8 TH OCTOBER, 2010. SD/- SD/- (SUNIL KUMAR YADAV) (B R BASKARAN) JUDICIAL MEMBER ACCOUNTANT MEMBER PVV/SPS VISAKHAPATNAM, DATE: 8-10-2010 COPY TO 1 THE INCOME TAX OFFICER, WARD-1, ANAKAPALLE 2 SHRI G. SATYANARAYANA, PROP. KANAKA DURGA CHITS & FINANCE, SABBAVARAM, VISAKHAPATNAM 3 4. THE CIT 1, VISAKHAPATNAM THE CIT(A), VISAKHAPATNAM 5 THE DR, ITAT, VISAKHAPATNAM. 6 GUARD FILE. BY ORDER SENIOR PRIVATE SECRETARY INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM