The ITO, Ward-1(2), Guntur V. M/s Sri Vamsi Krishna Genl. Traders, Guntur

ITA 470/VIZ/2010

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 50241 (ITAT-VISAKHAPATNAM)
• Duration Of Justice: 8 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-06-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 31-03-2011
• Assessment Year: 2005-2006
• Appeal Filed On: 20-09-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: Y SURYACHANDRA RAO
• Assessee Lawyers: NATHAN RAUL
• Keywords: Unexplained cash credit; Search and seizure; Revised return
• Section: 133A; 68; 132

Judgement Text

ITA NO475/V/2010 M/S.VAMSI KRISHNA GENERAL TRADERS, GUNTUR 1 IN THE INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM BENCH, VISAKHAPATNAM BEFORE: SHRI SUNIL KUMAR YADAV, JUDICIAL MEMBER AND SHRI BR BASKARAN, ACCOUNTANT MEMBER ITA NO.470/VIZAG/2010 ASSESSMENT YEAR : 2005 - 06 ITO WARD - 1(2) GUNTUR VS. M/S. SRI VAMSI KRISHNA GENERAL TRADERS GUNTUR (APPELLANT) (RESPONDENT) PAN NO.ABAFS 6669J ITA NO. 475 /VIZAG/ 20 10 ASSESSMENT YEAR : 2005 - 06 M/S. SRI VAMSI KRISHNA GENERAL TRADERS GUNTUR VS. ITO WARD - 1(2) GUNTUR (APPELLANT) (RESPONDENT) A PPELLANT BY: SHRI Y. SURYACHANDRA RAO, CA RESPONDENT BY: SHRI NATHAN RAUL, DR ORDER PER SHRI S.K. YADAV, JUDICIAL MEMBER:- THESE CROSS APPEALS ARE PREFERRED BY THE ASSESSEE AS WELL AS THE REVENUE AGAINST THE ORDER OF THE CIT(A). SINCE COM MON ISSUES ARE INVOLVED IN THESE APPEALS, THESE ARE BEING DISPOSED OF THROU GH THIS CONSOLIDATED ORDER FOR THE SAKE OF CONVENIENCE. 2. IN THE ASSESSEES APPEAL, THE ORDER OF THE CIT(A ) IS CHALLENGED ON FOLLOWING GROUNDS: 1. THE ORDER OF THE LD. CIT(A) IS CONTRARY TO THE FACT S AND ALSO THE LAW APPLICABLE TO THE FACTS OF THE CASE. 2. THE LD. CIT(A) OUGHT TO HAVE ANNULLED THE STATUS AS SESSED OF THE ASSESSEE AS PARTNERSHIP FIRM INSTEAD OF A.O.P. ITA NO475/V/2010 M/S.VAMSI KRISHNA GENERAL TRADERS, GUNTUR 2 3. THE LD. CIT(A) IS NOT JUSTIFIED IN NOT ALLOWING THE TOTAL ENTRIES IN THE SEIZED BOOKS. 4. THE LD. CIT(A) IS NOT JUSTIFIED IN NOT ACCEPTING TH E CAPITAL/LOANS INTRODUCED FROM THE MEMBERS OF A.O.P. AT RS.72,01,1 16/- FULLY INSTEAD OF ALLOWING RS.52,01,116/- PARTLY. 5. THE LD. CIT(A) IS NOT JUSTIFIED IN NOT ALLOWING FAR MER CREDITS TO THE TUNE OF RS.1,75,000/- THAT WERE RECORDED IN THE SEI ZED BOOKS. 6. ANY OTHER GROUNDS THAT MAY BE URGED AT THE TIME OF HEARING. 3. THE GROUND NOS.1 & 6 ARE GENERAL IN NATURE AND N EEDS NO INDEPENDENT ADJUDICATION. GROUND NO.2 RELATE TO THE STATUS OF THE ASSESSEE AND IN THIS REGARD IT IS NOTICED THAT BEFORE THE ASSESSING OFFI CER ASSESSEE HAS FILED HIS RETURN OF INCOME IN THE STATUS OF A REGISTERED FIRM AND IN THE SAME STATUS IT WAS ASSESSED. BEFORE THE ASSESSING OFFICER, THE AS SESSEE HAS NEVER RAISED A PLEA THAT ITS STATUS BE ASSESSED AS AN A.O.P. HE H AS TAKEN A PLEA FIRST TIME BEFORE THE CIT(A) AND THE CIT(A) REJECTED THE PLEA AFTER HEARING HIM AND ALSO IN THE LIGHT OF THE REMAND REPORT SUBMITTED BY THE ASSESSING OFFICER. NOW THE ASSESSEE IS BEFORE US AND REITERATED ITS CONTENTION S THAT THE ASSESSEE BE ASSESSED IN THE STATUS OF AN A.O.P. IN SUPPORT OF ITS CONTENTIONS, HE HAS SUBMITTED THAT BUSINESS OF THE ASSESSEE FIRM WAS BE ING RUN BY TEJASWI TRADERS, PROP: SMT. V. SAMPOORNA, SHRI P. SHANKAR R AO, PARTNER: M/S. VAMSHI KRISHNA GENERAL TRADERS, SHRI N. MURALI AND SHRI K. RAGHU. THEREFORE, THE ASSESSMENT SHOULD BE MADE IN THE HANDS OF THE A.O.P . AND NOT IN THE HANDS OF THE ASSESSEE FIRM M/S. VAMSHI KRISHNA GENERAL TR ADERS. 4. THE LD. D.R. ON THE OTHER HAND BESIDES PLACING A RELIANCE UPON THE ORDER OF THE CIT(A) HAS EMPHATICALLY ARGUED THAT TH E ASSESSEE HAS FILED ITS RETURN OF INCOME IN THE STATUS OF A FIRM AND DURING THE COURSE OF ASSESSMENT PROCEEDINGS, HE HAS NOT RAISED ANY PLEA WITH REGARD TO ITS STATUS OF THE FIRM. THE ASSESSING OFFICER HAVING EXAMINED THE MATERIAL FOUND DURING THE COURSE OF SURVEY PROCEEDINGS AND OTHER RELEVANT MATERIAL F RAMED THE ASSESSMENT IN THE HANDS OF THE REGISTERED FIRM. THEREFORE, IT IS NOT OPEN FOR THE ASSESSEE TO RAISE A CLAIM FOR A CHANGE OF STATUS. THE LD. D.R. FURTHER CONTENDED THAT THE ITA NO475/V/2010 M/S.VAMSI KRISHNA GENERAL TRADERS, GUNTUR 3 RETURN CAN ONLY BE REVISED UNDER THE RELEVANT PROVI SIONS OF THE ACT. IT IS NOT THE SWEET WILL OF THE ASSESSEE TO FILE A REVISED RE TURN AT ANY STAGE. 5. WE HAVE HEARD THE RIVAL SUBMISSIONS AND CAREFULL Y PERUSED THE MATERIAL AVAILABLE ON RECORD AND THE ORDER OF THE A UTHORITIES BELOW AND WE FIND THAT DURING THE COURSE OF SURVEY PROCEEDINGS C ONDUCTED U/S 133A AT THE ASSESSEES PREMISES, THE REVENUE AUTHORITIES HAS IM POUNDED VARIOUS DOCUMENTS. THEREAFTER, THE ASSESSEE HAS FILED THE RETURN OF INCOME IN THE STATUS OF THE REGISTERED FIRM. AFTER MAKING A DETA ILED ENQUIRY, THE ASSESSMENT WAS FRAMED IN THE HANDS OF THE ASSESSEE FIRM. NOWHERE THE ASSESSEE HAS RAISED ANY PLEA DURING THE COURSE OF A SSESSMENT PROCEEDINGS THAT THE ASSESSMENT SHOULD BE MADE IN THE HANDS OF THE A.O.P. FIRST TIME THE PLEA WAS RAISED BEFORE THE CIT(A). DURING THE COUR SE OF HEARING OF THIS APPEAL, A SPECIFIC QUERY WAS RAISED FROM THE ASSESS EE TO PLACE THE RELEVANT PROVISIONS OF THE ACT UNDER WHICH ASSESSEE IS AUTHO RIZED TO FILE A REVISED RETURN BEFORE THE FIRST APPELLATE AUTHORITIES WITH REGARD TO THE CHANGE OF ITS STATUS. BUT THE ASSESSEE FAILED TO POINT OUT ANY P ROVISIONS OF THE ACT OR ANY CASE LAW ON THE SUBJECT. WE HOWEVER, HAVE CAREFULL Y EXAMINED THE RELEVANT PROVISIONS OF THE ACT AND WE DO NOT FIND ANYTHING I N THE INCOME-TAX ACT WHICH EMPOWERS THE ASSESSEE OR GIVES A LIBERTY TO T HE ASSESSEE TO FILE A REVISED RETURN OR TO RAISE A REVISED CLAIM WITH REG ARD TO THE STATUS BEFORE THE FIRST APPELLATE AUTHORITY. THEREFORE, WE FIND NO M ERIT IN THE CLAIM OF THE ASSESSEES. WE HOWEVER HAVE CAREFULLY EXAMINED THE ORDER OF THE CIT(A) IN THIS REGARD AND WE FIND THAT HE HAS MINUTELY EXAMIN ED THIS ISSUE AND SINCE WE FIND NO INFIRMITY THEREIN, WE CONFIRM HIS ORDER. 6. THE GROUND NOS.3 & 4 OF THE ASSESSEES APPEAL AN D SOLE GROUND OF THE REVENUES APPEAL RELATE TO THE ADDITIONS MADE ON AC COUNT OF UNEXPLAINED CASH CREDIT. IN THIS REGARD, IT IS NOTICED FROM THE ORD ER OF THE LOWER AUTHORITIES THAT DURING THE COURSE OF SURVEY, CERTAIN DOCUMENTS AND BOOKS OF ACCOUNTS WERE FOUND WHICH WERE NOT DISCLOSED TO THE DEPARTMENT AN D THESE BOOKS OF ACCOUNTS WERE OWNED BY THE ASSESSEES AND FROM THE B OOKS OF ACCOUNTS IT ITA NO475/V/2010 M/S.VAMSI KRISHNA GENERAL TRADERS, GUNTUR 4 WAS NOTICED THAT THE LOAN OF RS.72,01,116/- WAS SHO WN AS TAKEN FROM SMT. V. SAMPOORNA AND HER RELATIVES. THE STATEMENT OF SMT. V. SAMPOORNA WAS RECORDED AND IN HER STATEMENT SHE DENIED THE LE NDING OR ADVANCING OF THE SAID MONEY TO THE ASSESSEES. SMT. SAMPOORNA WA S ALSO CROSS EXAMINED AND IN THE CROSS EXAMINATION ALSO SHE DENIED THE AD VANCING OF THIS AMOUNT TO THE ASSESSEE. THE A.O. ACCORDINGLY MADE AN ADDITIO N OF RS.73,76,116/- U/S 69 OF THE ACT. THE ASSESSEE PREFERRED AN APPEAL BE FORE THE CIT(A) WITH THE SUBMISSION THAT MANAGING PARTNER OF THE ASSESSEE FI RM SHRI P. SANKAR RAO HAD BEEN DOING BUSINESS AS A PARTNER WITH SMT. V. S AMPOORNA AND OTHERS UNDER THE NAME AND STYLE OF M/S. AGASTISWARA SWAMY & CO. WHICH WAS DISALLOWED DUE TO DISPUTE ARISING AMONGST THE PARTN ERS. IT WAS FURTHER CONTENDED THAT PRIOR TO RETIREMENT IN NOVEMBER, 200 4, THEY STARTED DOING BUSINESS UNDER THE LICENSE OF SMT. V. SAMPOORNA FRO M 1.10.2004. THE MANAGING PARTNER OF THE ASSESSEE FIRM HAD BECOME ME MBER OF A.O.P. WITHOUT ANY NAME CONSTITUTED OF FOUR MEMBERS WHICH WAS FORM ED W.E.F. 1.10.2004. HE FURTHER CONTENDED THAT THE BUSINESS WAS CARRIED ON BY THE A.O.P. IN THE PREMISES OF M/S. SHRI VAMSI KRISHNA GENERAL STORES, THE ASSESSEE AND SMT. V. SAMPURNA HAS ALSO ADMITTED THAT SHE WAS DOING BUSIN ESS WITH THE ASSESSEE AS SHE HAS ALLOWED HER LICENSE TO BE USED BY THE AS SESSEE TO CARRY ON THE BUSINESS. ALL THESE EXPLANATIONS OF THE ASSESSEE W ERE PROPERLY EXAMINED BY THE CIT(A) IN THE LIGHT OF VARIOUS JUDICIAL PRONOUN CEMENTS AND HE WAS OF THE VIEW THAT SINCE THE ASSESSEE HAS FAILED TO PROVE TH E GENUINENESS OF THE CREDITS, IT WAS RIGHTLY ADDED BY THE A.O. HE HOWEV ER, GRANTED A RELIEF OF RS.57,01,116/- WHICH WAS RECEIVED BY THE ASSESSEE P RIOR TO THE DATE OF INCORPORATION OF THE FIRM AND ACCORDINGLY, THE ADDI TION WAS RESTRICTED TO RS.22,75,000/-. THE RELEVANT OBSERVATIONS OF THE C IT(A) ARE EXTRACTED HEREUNDER: THE NEXT CONTENTION OF THE APPELLANT IS THAT, IF T HE BOOKS ARE TAKEN TO BE BELONGING TO THE APPELLANT, THEN THE RECORDINGS IN THE BOOKS HAVE TO BE TAKEN AS GENUINE. HOWEVER, THIS CONTENTION CANNOT BE ACCEPTED. EVEN IN THE CASE OF SEIZED MATERIAL, THE RIGORS OF SECTION 68 A RE NOT EASED. THE SAME CONDITIONS WHICH APPLY TO OTHER BOOKS OF ACCOUNTS, APPLY IN THE CASE OF SUCH SEIZED MATERIAL TOO. IN THE CASE OF DAYACHAND VS. CIT (250 ITR 327) THE DELHI HIGH COURT HAD HELD THAT- ITA NO475/V/2010 M/S.VAMSI KRISHNA GENERAL TRADERS, GUNTUR 5 SECTION 68 IS A SPECIFIC PROVISION ABOUT CASH CR EDITS AND THE BURDEN IS ON THE ASSESSEE TO EXPLAIN THE NATURE AND SOURCE OF CREDITS IN HIS BOOKS. THE ASSESSEE IS REQUIRED TO DISCHARGE THIS ONUS. SECTI ON 132(4A) DOES NOT OVERRIDE THESE SPECIFIC PROVISIONS. SECTION 132(4A ) WAS INTRODUCED BY THE TAXATION LAWS (AMENDMENT) ACT, 1975, WITH EFFECT FR OM OCTOBER 1, 1975. CLAUSE (II) THEREOF, ON WHICH RELIANCE WAS PLACED B Y THE ASSESSEE BEFORE THE AUTHORITIES, PROVIDES THAT THE CONTENTS OF SUCH BO OKS OF ACCOUNT AND OTHER DOCUMENTS ARE TRUE. THE EXPRESSION RELATES TO ANY BOOKS OF ACCOUNT OR OTHER DOCUMENTS, ETC., FOUND IN THE POSSESSION OR C ONTROL OF ANY PERSON IN THE COURSE OF A SEARCH. THE PRESUMPTION ARISES IN RESP ECT OF THE CONTENTS OF SUCH BOOKS OF ACCOUNT AND OTHER DOCUMENTS. SUCH PRESUMP TION ARISING UNDER SECTION 132(4A) IS CLEARLY LINKED WITH THE SEARCH A ND SEIZURE. SECTIONS 132A AND 132B OF THE ACT PROVIDE AN INTEGRATED SCHEME LA YING DOWN THE PROCEDURE FOR SEARCH AND SEIZURE AND THE POWER OF THE AUTHORI TIES MAKING THE SEARCH AND SEIZURE TO ORDER THE CONFISCATION OF ASSETS SEI ZED UNDER SECTION 132(4A) MUST BE HELD TO BE APPLICABLE ONLY IN RELATION TO T HE PROVISIONAL ADJUDICATION AS CONTEMPLATED UNDER SUB-SECTION (5) OF SECTION 13 2. THE PRESUMPTION CANNOT BE SAID TO HAVE THE EFFECT OF EXCLUDING THE OPERATION OF SECTION 68. THE QUESTION OF APPLICABILITY OF SECTION 68 ARISES ONLY IN THE COURSE OF REGULAR ASSESSMENT. IT PROVIDES THAT WHERE ANY SUM IS FOUN D CREDITED IN THE BOOKS OF AN ASSESSEE MAINTAINED FOR ANY PREVIOUS YEAR, AND T HE ASSESSEE OFFERS NO EXPLANATION ABOUT THE NATURE, AND SOURCE THEREOF OR THE EXPLANATION OFFERED IS NOT, IN THE OPINION OF THE ASSESSING OFFICER, SA TISFACTORY, THE SUM SO CREDITED MAY BE CHARGED TO INCOME-TAX AS THE INCOME OF THE ASSESSEE OF THAT PREVIOUS YEAR. THE PROVISION HAS GENERAL APPLICATI ON AND APPLIES TO ALL CASES OF REGULAR ASSESSMENT. SIMILARLY IN THE CASE OF PUSHKAR NARIN SARRAF VS. COMMISSIONER OF INCOME-TAX (183 ITR 388) THE ALLAHABAD HIGH COURT H ELD THAT THE PRESUMPTION ARISING UNDER SUB-SECTION (4A) OF SECTI ON 132 OF THE INCOME-TAX ACT, 1961, APPLIES ONLY IN RELATION TO THE PROVISIO NAL ADJUDICATION WHICH IS CONTEMPLATED UNDER SUB-SECTION (5) OF SECTION 132. SUB-SECTION (5) OF SECTION 132 PROVIDES FOR ESTIMATION OF THE UNDISCLO SED INCOME OR THE CALCULATION OF THE AMOUNT OF TAX ON THE INCOME SO E STIMATED AND THE DETERMINATION OF THE AMOUNT OF INTEREST PAYABLE OR THE AMOUNT OF PENALTY IMPOSABLE IN A SUMMARY MANNER. FOR THIS LIMITED PU RPOSE, THE LEGISLATURE HAS PROVIDED UNDER SECTION 132(4A) THAT THE BOOKS O F ACCOUNT, OTHER DOCUMENTS, MONEY, BILLION, JEWELLERY OR OTHER VALUA BLE ARTICLES SEIZED FROM THE POSSESSION OF THE ASSESSEE SHALL BE PRESUMED TO BEL ONG TO THE ASSESSEE IF THEY ARE FOUND IN THE POSSESSION OR CONTROL OF THE ASSESSEE IN THE COURSE OF THE SEARCH. A SIMILAR PRESUMPTION MAY ALSO BE MADE AS TO THE CORRECTNESS OF THE CONTENTS OF THE BOOKS OF ACCOUNT SO SEIZED. SO ALSO THE SIGNATURE AND EVERY OTHER PART OF THE BOOKS OF ACCOUNT MAY BE ASS UMED TO BE IN THE HANDWRITING OF THE PERSON BY WHOM IT IS PURPORTED T O HAVE BEEN WRITTEN. THIS PRESUMPTION CANNOT, HOWEVER, HAVE THE EFFECT O F EXCLUDING SECTION 68 ITA NO475/V/2010 M/S.VAMSI KRISHNA GENERAL TRADERS, GUNTUR 6 WHEN REGULAR ASSESSMENT IS MADE IN REGARD TO THE IN COME OF THE PERSON FROM WHOSE POSSESSION THOSE BOOKS OF ACCOUNT WERE SEIZED UNDER SECTION 132. IT DOES NOT OBVIATE THE NECESSITY TO ESTABLISH BY INDE PENDENT EVIDENCE THE GENUINENESS OF CASH CREDITS. THEREFORE, ALTHOUGH, THE RECORDINGS MAY BE FOUNDED IN MATERIAL THAT WAS IMPOUNDED, IT IS STILL THE APPELLANT/S ONUS TO ESTABLISH THE GENUINENESS OF THE CREDITS. IN THIS CASE, THE SO-CALLED CREDITORS HAVE DENIED ADVANCING ANY MONEYS AND NO CONFIRMATION HAS BEEN FILED. IN VIEW OF THIS, THE ASSESSING OFFICERS ACTION OF CONFIRMING THE CREDITS TO THE E XTENT THAT THEY COULD NOT BE ESTABLISHED AS GENUINE IS IN ORDER. HOWEVER, IT WAS ALSO POINTED OUT THAT SOME OF THES E AMOUNTS PRIOR TO THE INCORPORATION OF THE FIRM AND THE COMMENCEMENT OF ITS ACTIVITIES. THE JURISDICTIONAL VISAKHAPATNAM BENCH OF THE ITAT HAS HELD IN THE CASE OF M/S. M. VENKATESWARA RAO VS. ACIT (ITA NO.1853/1860/2012 /HYD/1996 DATED 9.7.2011), THAT AMOUNTS FOUND CREDITED BEFORE THE C OMMENCEMENT OF BUSINESS CANNOT BE BROUGHT TO TAX IN THE HANDS OF T HE FIRM. IN THAT CASE THE ITAT DISAGREED WITH THE ARGUMENTS OF THE DR WHO SUB MITTED THAT THE DECISION OF THE ALLAHABAD HIGH COURT IN THE CASE OF M/S. INDIA RICE MILLS VS. CIT (85 TAXMAN 227) WAS RENDERED WITH REFERENCE TO THE 1922 ACT, AND THE POSITION WITH REFERENCE TO SEC.68 UNDER THE 1961 AC T WAS DIFFERENT. THE ITAT, VIZAG BENCH HAS ALSO DISTINGUISHED THE FACTS OF THE APPELLANT IN THAT CASE FROM THE FACTS IN CIT VS. ASHOK TIMBER DEPOT ( 125 ITR 336) AND THAT OF BASIDHAR AGARWAL PANNA VS. CIT (148 ITR 523) OBSERV ING THAT IN ONE CASE, THE CREDIT WAS ONE MONTH AFTER COMMENCEMENT OF BUSI NESS AND IN ANOTHER, THE CREDITS WERE IN THE CASE OF AN ONGOING CONCERN. THE ITAT FURTHER HELD THAT:- AFTER CAREFULLY GOING THROUGH THE DECISIONS AS RE LIED ON BY THE LEARNED DR, WE ARE SURE AND CERTAIN THAT THE VIEWS EXPRESSE D BY THEIR LORDSHIPS HAVE TO BE ACCEPTED IN CASES WHERE THE BUSINESS IS A CON TINUING ONE AND FURTHER CAPITAL CONTRIBUTIONS HAVE BEEN MADE OR HAS TO BE A CCEPTED BY THE FIRM. BUT IN CASE LIKE THE ASSESSEE IN THE PRESENT CASE, WHER E AT THE VERY INITIAL INCEPTION OF THE BUSINESS AND THAT TOO AT THE STAGE OF ORIGINAL ADMISSION OF THE PARTNERS INTO THE PARTNERSHIP FIRM, IN NO CIRCU MSTANCES, CAN BE TREATED ALIKE THAT OF AN INDIVIDUAL ASSESSEE. BECAUSE NORM ALLY AT THE INITIAL INCEPTION STAGE TO AN ORIGINAL PARTNERSHIP, ADMISSION AS PART NER IS MADE ON THE BASIS OF SOME CAPITAL CONTRIBUTIONS MADE BY THE RESPECTIVE P ARTNERS. AT THAT POINT OF TIME, THERE IS NO SCOPE FOR THE FIRM TO EARN ANY IN COME SO AS TO ATTRACT TAX LIABILITY. THE ITAT, IN THE SAME CASE, ALSO CONSIDERED THE TA XABILITY OF VENDORS DEPOSITS TO THE APPELLANTS INCOME. HERE ALSO THE ITAT HELD ITA NO475/V/2010 M/S.VAMSI KRISHNA GENERAL TRADERS, GUNTUR 7 THE UNDISPUTED FACTS ARE THAT THE AMOUNT OF RS.1, 06,000/- REPRESENTED SECURITY DEPOSIT FROM AS MANY AS 335 RE TAIL SHOPS AND SUCH DEPOSITS WERE TAKEN BY THE ASSESSEE ON 31.8.1992 I. E., PRIOR TO THE COMMENCEMENT OF BUSINESS. IT IS ALSO NOT DISPUTED BY THE REVENUE THAT ALL SUCH DETAILS WERE FURNISHED BEFORE THE CIT(A). SIN CE THE AMOUNT REPRESENTED THE SECURITY DEPOSITS FROM RETAIL SHOPS AND THOSE W ERE DEPOSITED PRIOR TO COMMENCEMENT OF THE BUSINESS, NO ADDITION TO THE IN COME ON THIS COUNT IS POSSIBLE IN THE HANDS OF THE ASSESSEE-FIRM IN ABSEN CE OF ANY FINDING THAT THE SAID AMOUNT REPRESENTS THE UNDISCLOSED PROFIT OF TH E FIRM WHICH LEFT THE FIRM EARLIER AND RETURNED THROUGH THE INTERMEDIARY OF TH E DEPOSITORS. WE HOLD SO IN THE SAME ANALOGY AS DECIDED ABOVE IN RESPECT OF CAPITAL INVESTMENT MADE BY THE PARTNERS IN PARAGRAPH 5 SERIES IN THIS ORDER . FROM THE DETAILS FILED, IT IS SEEN THAT OUT OF THE TOTAL ADVANCES ADDED BACK BY THE ASSESSING OFFICER, AN AMOUNT OF RS.57,0 1,116/- WAS RECEIVED PRIOR TO THE DATE OF THE INCORPORATION OF THE FIRM. FOLLOWING THE DECISION OF THE ITAT, VIZAG BENCH IN THE CASE OF CITED SUPRA, T HE ADDITION MADE TO THIS EXTENT STANDS DELETED. THE DETAILS OF SUCH ADVANCES RECEIVED PRIOR TO THE DATE OF INCORPORATION OF THE FIRM AND COMMENCEMENT OF ITS B USINESS ARE AS UNDER:- (I) SRI V.K.N. SRINIVAS 1,00,000 (II) SMT. V. SAMPOORNA 45,01,116 (III) SMT. A. RATNA RANI 4,00,000 (IV) SMT. V. SARASWATHAMMA 1,00,000 -------------- TOTAL 51,01,116 -------------- THE BALANCE ADDITION TO THE EXTENT OF RS.22,75,000 /- SHOWN AS RECEIVED FROM SHRI V. SAMPOORNA AND HER RELATIVES I S CONFIRMED. 7. AGGRIEVED WITH THE ORDER OF THE CIT(A), THE ASSE SSEE AS WELL AS THE REVENUE HAVE PREFERRED THEIR APPEALS BEFORE THE TRI BUNAL. THE ASSESSEE CHALLENGED THE ADDITION SUSTAINED BY THE CIT(A) AND THE REVENUE DISPUTED THE RELIEF GRANTED BY THE CIT(A). BESIDES REITERATING ITS CONTENTIONS AS RAISED BEFORE THE CIT(A), THE LD. COUNSEL FOR THE ASSESSEE HAS SUBMITTED THAT WHATEVER ADDITIONS ARE SUSTAINED BY THE CIT(A), IT SHOULD HAVE BEEN MADE EITHER IN THE HANDS OF THE PARTNERS OR THE CREDITOR S, BECAUSE THE IMPUGNED ASSESSMENT YEAR IS THE FIRST YEAR OF THE INCORPORAT ION OF THE FIRM. ITA NO475/V/2010 M/S.VAMSI KRISHNA GENERAL TRADERS, GUNTUR 8 8. THE LD. D.R. BESIDES PLACING A RELIANCE UPON THE ORDER OF THE CIT(A) WITH REGARD TO THE ADDITIONS SUSTAINED BY THE CIT(A ) HAS SUBMITTED THAT SINCE THE ASSESSEE HAS INTRODUCED THE UNEXPLAINED CASH CR EDITS IN ITS BOOKS OF ACCOUNTS IN THE NAME OF V. SAMPOORNA, THE ENTIRE AM OUNT SHOULD HAVE BEEN ADDED INSTEAD OF RESTRICTING TO THE AMOUNT INTRODU CED AFTER THE INCORPORATION OF THE FIRM. 9. HAVING CAREFULLY GIVEN A THOUGHTFUL CONSIDERATIO N TO THE RIVAL SUBMISSIONS AND FROM A CAREFUL PERUSAL OF RECORD, W E FIND THAT THE ASSESSEE HAS INTRODUCED THE CREDITS IN ITS BOOKS OF ACCOUNTS IN THE NAME OF SMT. V. SAMPOORNA. DURING THE COURSE OF HEARING, THE LD. C OUNSEL FOR THE ASSESSEE HAS EMPHATICALLY ARGUED THAT IT IS THE FIRST YEAR O F ACCOUNT, THEREFORE, THE ADDITION CAN ONLY BE MADE IN THE HANDS OF SMT. V. S AMPOORNA THE CREDITOR AS THERE CANNOT BE A GENERATION OF FUNDS IN THE FIRST YEAR OF ACCOUNT. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, V. SAMPOORNA WAS EXAMINED BY THE A.O. AND SHE HAS EMPHATICALLY DENIED THE ADVANCING OF LO AN TO THE ASSESSEE FIRM. UNDER THESE CIRCUMSTANCES, THE ONUS LIES UPON THE A SSESSEE TO EXPLAIN AS TO FROM WHERE THE FUND HAS COME. THE ASSESSEES CONTE NTION CAN ONLY BE ACCEPTED IF THE CREDITORS COME FORWARD AND OWNS THE ADVANCEMENT OF THE LOAN TO THE ASSESSEE. BUT HERE IS A CASE WHERE THE CREDITOR HAS EMPHATICALLY DENIED THE ADVANCING OF LOAN TO THE ASSESSEE FIRM. UNDER THESE CIRCUMSTANCES, WE DO NOT FIND ANY MERIT IN THE CONT ENTION OF THE ASSESSEE THAT THIS ADDITION CAN ONLY BE CALLED FOR IN THE HA NDS OF THE CREDITOR AS IT WAS INTRODUCED IN THE FIRST YEAR OF ACCOUNT OF INCORPOR ATION OF THE FIRM. WE HAVE ALSO EXAMINED THE RELIEF GIVEN BY THE CIT(A) AND WE FIND THAT WHATEVER AMOUNT WAS INTRODUCED BEFORE THE INCORPORATION OF T HE FIRM, THE SAID AMOUNT WAS NOT ADDED BY THE CIT(A) AS AN UNEXPLAINED CREDI T. HE HAS ONLY RESTRICTED THE ADDITIONS WHICH WERE INTRODUCED IN THE BOOKS OF ACCOUNTS OF THE ASSESSEE AFTER ITS INCORPORATION. WE THEREFORE, FIND NO INF IRMITY IN THE ORDER OF THE CIT(A) AND WE CONFIRM THE SAME. ITA NO475/V/2010 M/S.VAMSI KRISHNA GENERAL TRADERS, GUNTUR 9 10. THE GROUND NO.5 IN ASSESSEES APPEAL RELATE TO THE ADDITION OF RS.1,75,000/- BUT IN THIS REGARD NEITHER A SPECIFIC GROUND WAS RAISED BEFORE THE CIT(A) NOR HE HAS GIVEN ANY FINDING IN HIS ORDE R. THEREFORE, THIS GROUND DOES NOT ARISE OUT OF THE ORDER OF THE CIT(A) AND W E ACCORDINGLY DECLINE TO ADJUDICATE THE SAME AND THE SAME IS DISMISSED. 11. IN THE RESULT, THE APPEALS OF THE ASSESSEE AS W ELL AS OF THE REVENUE ARE DISMISSED. PRONOUNCED IN THE OPEN COURT ON 3.6.2011 SD/- SD/- (BR BASKARAN) (SUNIL KUMAR YADAV) ACCOUNTANT MEMBER JUDICIAL MEMBER VG/SPS VISAKHAPATNAM, DATED 3 RD JUNE, 2011 COPY TO 1 Y. SURYA CHANDRA RAO, CHARTERED ACCOUNTANT, 49 - 27 - 4/1, 2 ND FLOOR, MADHURA NAGAR, VISAKHAPATNAM-530 016. 2 ITO WARD - 1(2), GUNTUR 3 THE CI T, GUNTUR 4 THE CIT (A) , GUNTUR 5 THE DR, ITAT, VISAKHAPATNAM. 6 GUARD FILE. BY ORDER SENIOR PRIVATE SECRETARY INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM