D.Nageswara Rao, Hyderabad V. DCIT, Hyderabad

ITA 529/HYD/2008

• Counselvise Citation: [2010] 119 COUNSELVISE.COM (IT) 5851 (ITAT-HYDERABAD)
• Duration Of Justice: 1 year(s) 11 month(s) 30 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-03-2010
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 04-02-2010
• Assessment Year: 2002-2003
• Appeal Filed On: 27-03-2008
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: NIVEDITA BISWAS
• Assessee Lawyers: V RAGHAVEENDRA RAO
• Keywords: Business income; Depreciation; Salary income

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH B, HYDERABAD BEFORE SHRI N.R.S.GANESAN, JUDICIAL MEMBER AND SHRI AKBER BASHA, ACCOUNTANT MEMBER ITA NO.529/HYD/08 ASST. YEAR 2002-03 SHRI D.NAGESWARA RAO, HYDERABAD (PAN - ACNPD 2262 M) (ASSESSEE) VS DY. COMMISSIONER OF INCOME TAX , CIR-6(1), HYDERABAD. (RESPONDENT) APPELLANT BY : SRI V.RAGHAVEENDRA RAO RESPONDENT BY : SMT. NIVEDITA BISWAS O R D E R PER AKBER BASHA, ACCOUNTANT MEMBER THIS APPEAL PREFERRED BY THE ASSESSEE IS DIRECTED AGAIN ST THE ORDER OF THE CIT(A) -IV HYDERABAD DATED 15.1.2008 FO R THE ASSESSMENT YEAR 2002-03. 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE, AN INDI VIDUAL, DERIVING INCOME FROM SALARY, HOUSE PROPERTY, CAPITAL GA INS AND OTHER SOURCES, FILED HIS RETURN OF INCOME FOR THE ASSESSMENT YEAR 2002-03 ON 4.10.2004 DECLARING AN INCOME OF RS.15,33,476. IN THE COURSE OF REGULAR ASSESSMENT THAT ENSUED, THE ASSESSING OFFICER NOTICED THAT THE ASSESSEE ADVANCED AN AMOUNT OF RS.2.04 CRORES TO M/S. DUKE AMICS 2 ELECTRONICS LTD. AND RECEIVED INTEREST OF RS.26,88,872 D URING THE YEAR. IN THE PROFIT & LOSS ACCOUNT OF M/S. X-DESIGN VENTURE, P ROPRIETARY CONCERN OF THE ASSESSEE, THE ASSESSEE HAS SHOWN AN AMOUNT OF RS.50,000 AS RECEIPTS FROM IT ENABLED SERVICES AND CLUBBED THE INTEREST RECEIPT OF RS.26,85,872 WITH IT. AS AGAINST THIS INCOME, THE ASSESSING OFFICER NOTED THAT THE ASSESSEE HAS CLAIMED HUGE EXPENDITU RE UNDER VARIOUS HEADS AS UNDER- (1) BUILDING MAINTENANCE RS.1,18,728 (2) ELECTRICAL MAINTENANCE RS. 41,215 (3) LABOUR CHARGES RS.2,53,225 (4) PRINTING AND STATIONERY RS.1,12,20 2 (5) REPAIRS AND MAINTENANCE RS.1,11,137 (6) SALARIES & WAGES RS.6,34,030 (7) CONVEYANCE CHARGES RS. 65,450 (8) INTEREST ON CAR LOAN RS. 48,364 (9)DEPRECIATION RS.1,55,984 AS THE ASSESSING OFFICER WAS OF THE VIEW THAT THE NATURE O F EXPENDITURE BOOKED WAS MORE OF A MANUFACTURING CONCERN AND DOES NO T HAVE ANY RELATION WITH THE I.T. ENABLED SERVICES, TO VERIFY THE GENUINENESS OF THE EXPENDITURE CLAIMED, THE ASSESSING OFFICER ASKED THE ASSESSEE TO PRODUCE BOOKS OF ACCOUNTS AND EXPLAIN THE NATURE OF EXPE NDITURE DEBITED UNDER THE HEADS LABOUR CHARGES, REPAIRS AND MA INTENANCE, BUILDING MAINTENANCE, ELECTRICAL MAINTENANCE AND SALARIE S AND WAGES.0 THE ASSESSING OFFICER NOTED THAT THOUGH THE ASSESSEE, IN RE SPONSE, CLAIMED THE EXPENDITURE TO BE OF GENUINE NATURE, COUL D NOT PRODUCE THE BOOKS OF ACCOUNT, OR BILLS AND VOUCHERS SO AS TO EXPLAIN TH E SAME 3 SATISFACTORILY. IN THAT VIEW OF THE MATTER AND IN TH E ABSENCE OF BOOKS OF ACCOUNT, BILLS AND VOUCHERS, THE ASSESSING OFFICER CONCLUDED THAT THE RECEIPT OF RS.50,000 AND EXPENDITURE OF RS.15,55,978 D OES NOT APPEAR TO BE GENUINE. HE ACCORDINGLY REJECTED THE PROFESSIONAL RECEIPT OFFERED FOR TAXATION AND EXPENDITURE CLAIMED IN RELATION THE RETO, AND BRINGING TO TAX THE ENTIRE INTEREST INCOME UNDER THE HEAD 'INCOME FROM OTHER SOURCES', COMPLETED THE ASSESSMENT ON A TOTAL INCOME OF RS.3 0,39,454, AS AGAINST THE RETURNED INCOME OF RS.15,33,476. 3. ON APPEAL, BEFORE THE CIT(A), ASSESSEE ASSERTED THA T THE ASSESSING OFFICER'S OBSERVATION REGARDING NON-PRODUCTION O F BOOKS OF ACCOUNT, ETC. WAS NOT FACTUALLY CORRECT AND IN RESPONSE TO ASSESSING OFFICER'S LETTER DATED 8.8.2006, THE SAME HAD BEEN PR ODUCED FOR VERIFICATION AND THAT THE ASSESSING OFFICER DID NOT FIND ANY DEFECTS THEREIN, BUT IGNORED THE SAME SIMPLY ON THE GROUND T HAT THE EXPENDITURE WAS HIGH IN REGARD TO ESTABLISHMENT, OFFICE MAINTENANCE, CONVEYANCE, ETC. WHEN COMPARED TO THE RECEIPTS, WHICH RESULTED IN LOSS. IN THIS VIEW OF THE MATTER AND CONSIDERING THE VARIOUS OTHER CONTENT IONS OF THE ASSESSEE JUSTIFYING THE HIGHER AMOUNTS OF EXPENDITURE UND ER VARIOUS HEADS AS AGAINST SMALL AMOUNT OF PROFESSIONAL RECEIPTS, THE CIT(A) RESTORED THE MATTER TO THE FILE OF THE ASSESSING OFFICER, CALLING FOR A REMAND REPORT. IN RESPONSE THERETO, THE ASSESSING OFFICER VIDE HIS REMAND REPORT DATED 28.3.2007, REITERATED THE NON-P RODUCTION OF THE BOOKS OF ACCOUNT BY THE ASSESSEE, DULY SUPPORTING HIS CONTE NTION WITH THE ORDER SHEET ENTRY MADE IN THAT BEHALF. IN THE SA ID REMAND REPORT, HE ALSO FOUND NO MERIT IN THE VARIOUS OTHER CONTENTION S OF THE ASSESSEE. THE CIT (A) THEREUPON FORWARDED THE SAID REMAND REPO RT TO THE ASSESSEE FOR HIS COMMENTS. IN RESPONSE, THE ASSESSEE VIDE LETTE R DATED 4 10.4.2007 REQUESTED FOR THE COPY OF THE ORDER SHEET NO TINGS MADE BY THE ASSESSING OFFICER, AND TAKING INTO THE SAME WHICH WAS FURNISHED BY THE CIT(A), THE ASSESSEE IN RESPONSE VIDE LETTER DATED 11 .6.2007 SUBMITTED THAT THE INFORMATION CALLED FOR IN TERMS OF NOTICE UNDER S.143(2) HAD BEEN FURNISHED BY WAY OF A COVERING LETT ER DATED 13.9.2006. IT WAS CONTENDED THAT IN THE SAID LETTER, IT WAS MENTIONED IN THE BOOKS OF ACCOUNT MAINTAINED BY THE ASSESSEE WERE SUBMIT TED BEFORE THE ASSESSING OFFICER FOR VERIFICATION AS ALSO VOUCHERS AND RELEVANT STATEMENTS TO SUPPORT THE EXPENSES. ATTENTION WAS ALSO DR AWN TO THE NOTING IN THE ORDER SHEET TO THE EFFECT 'MOST OF EXPEN DITURE WAS SELF MADE', AND IT PLEADED THAT THE CONCLUSION OF THE ASSESSING OFFICER WITH REGARD TO NON-PRODUCTION OF BOOKS IS NOT CORRECT. ASSESSEE ALSO SUBMITTED THAT RETURN WAS FILED ON THE BASIS OF BOOKS OF ACCOUNT MAINTAINED REGULARLY AND COMPLETELY AND THAT ALL THE EXPENDITURE WAS COMPLETELY VOUCHED AND PRODUCED BEFORE THE ASSESSING OFFI CER. IT WAS ALSO SUBMITTED BEFORE THE CIT(A) THAT THOUGH THE VOUCH ERS ARE PREPARED BY THE ASSESSEE ONLY, THEY ARE SIGNED BY THE PAYEES ONLY. IT WAS ALSO ASSERTED THAT THE VOUCHERS, THE EMPLOYEES AND WORKERS ARE ALL AVAILABLE FOR VERIFICATION. 4. A COPY OF THE LETTER OF THE ASSESSEE IN THAT BEHALF WAS ALSO FORWARDED BY THE CIT(A) TO ASSESSING OFFICER FOR HIS COMME NTS IN RESPECT OF THE FACTS NARRATED IN THE ASSESSEE'S LETTER DATED 13.9 .2006. THE ASSESSING OFFICER IN RESPONSE VIDE HIS LETTER DATED 13.11.2 007 SUBMITTED THAT THE SAID REPORT WAS BEING FURNISHED ON THE BASIS OF A RECONSTRUCTED FILE AS THE RECORD OF THE ASSESSMENT YEAR 2002-03 COULD N OT BE LOCATED. IT WAS SUBMITTED THAT IN VIEW OF THE LETTER DATED 13. 9.2006, IT WAS DIFFICULT TO COMMENT ON THE ASSESSING OFFICER'S FINDING TH AT THE BOOKS 5 WERE NOT PRODUCED. IT WAS HOWEVER, SUBMITTED THAT TH E VOUCHERS BEING SELF MADE, PRODUCTION OF BOOKS OF ACCOUNT MAY NOT HAVE M UCH BEARING. IN RESPONSE TO THE LETTER OF THE ASSESSING OFFICER DATED 1 3.11.2007, ASSESSEE FILED ANOTHER SUBMISSION DATED 10.12.2007 AND SUB MITTED THAT EVEN THE ASSESSING OFFICER HAD ADMITTED THAT INVOICES FOR PURCHASE OF FIXED ASSETS HAD BEEN PRODUCED AND THAT THE ASSESSING OFFICE R WAS SATISFIED ABOUT THE VALUE OF THE ASSETS FOR WHICH INVOIC ES/BILLS WERE PRODUCED BUT NOT ABOUT THE VOUCHERS FOR EXPENDITURE. HE THEREFORE CONTENDED THAT THE BASIS FOR ASSESSMENT THAT THE VOUCHERS W ERE NOT PRODUCED WAS NOT BORNE OUT OF THE RECORD. 5. IN VIEW OF THE SUBMISSIONS OF BOTH THE PARTIES DUR ING THE APPELLATE PROCEEDINGS, THE CIT (A) REQUIRED THE ASSESSEE' S AUTHORIZED REPRESENTATIVE TO PRODUCE FURTHER EVIDENCE REGARDING THE EXISTENCE OF BUSINESS DURING THE YEAR UNDER CONSIDERATION. IN RESPON SE, ASSESSEE FILED A LETTER DATED 13.12.2007, STATING THAT THAT W AS THE FIRST YEAR OF BUSINESS AND THEIR CONCERN HAD RECEIVED ORDERS FOR BUSINESS FROM M/S. SAI E.SEVA.COM. PVT. LTD., WITHOUT A WRITTEN AGREEM ENT, ON TRIAL BASIS AND THE WORK WAS DONE ACCORDINGLY. IT WAS SUBMITTED THA T HE CUSTOMER ENTERED INTO A NORMAL AGREEMENT IN SUBSEQUENT YEAR BA SED ON THE WORK DONE IN THE YEAR UNDER CONSIDERATION, AND FILED A COPY OF THE AGREEMENT DATED 20.1.2003 IN THAT BEHALF. ASSESSEE ALSO SUBMITTED STATEMENTS CONTAINING DETAILS OF EXPENDITURE INCLUDING THE LIST OF EMPLOYEES, ETC. AND IT WAS SUBMITTED THAT THE EXPENDITURE WAS INCURRED MOSTLY THROUGH CHEQUES AND CASH PAYMENTS WERE MADE ONLY WHERE IT BECAME NECESSARY IN PETTY CASES. IT WAS REITERATED THAT ALL SUCH EXPENDI TURE WAS SUPPORTED BY VOUCHERS. THOUGH THE ASSESSEE ALSO CONTEND ED THAT COPIES OF CDS WHICH HE HAD PREPARED FOR THE CUSTOMER WER E THEN AT 6 COIMBATORE, WHERE THE BUSINESS WAS DONE AND THAT THE S AME COULD BE SUBMITTED IN A COUPLE OF DAYS, THE SAME WERE SUBMITTED T HEREAFTER. THE CIT(A) ON EXAMINATION OF THE PROFIT & LOSS ACCOUNT PREP ARED BY THE ASSESSEE FOR THE YEAR ENDING 31.3.2002, NOTED THAT THE EXPENDITURE UNDER REFERENCE WAS DEBITED IN THE ACCOUNT OF M/S. X-D ESIGN VENTURES AGAINST INTEREST INCOME OF RS.26,85,872 AND THE RECEIP T FROM IT ENABLED SERVICES OF RS.50,000. HE NOTED THAT IT IS OBVIO US FROM THIS THAT THE ASSESSEE IN THE VERY FIRST STAGE MADE AN ATTEMPT TO P ROJECT THE INTEREST SO RECEIVED AS HIS BUSINESS INCOME AND ACCORDINGLY D EBITED THE VARIOUS EXPENSES MENTIONED AGAINST SUCH INCOME. IN THE SU CCEEDING YEAR ALSO, IT WAS NOTED THAT SUCH EXPENDITURE HAS BEEN CLAIMED AGAINST THE INTEREST INCOME AND THE INCOME OF THE PROPRIETARY CONCERN FROM BUSINESS, NET OF SUCH EXPENDITURE HAS BEEN REFLECTED IN THE COMPUTATION OF INCOME. HE CONCLUDED THEREFORE, THAT THERE IS NO ME RIT IN THE ADMISSION OF THE ASSESSEE MADE DURING THE APPELLATE PROCE EDING THAT THE INTEREST INCOME HAS TO BE CONSIDERED AS INCOME FROM OT HER SOURCES AND THE ASSESSEE CANNOT HAVE ANY DISPUTE IN THAT REGAR D. HE ALSO FOUND NO MERIT IN THE CONTENTIONS OF THE ASSESSEE WITH RE GARD TO THE RECEIPT OF RS.50,000 SHOWN FROM IT ENABLED SERVICES, AND ACCORDINGLY CONCURRED WITH THE ASSESSING OFFICER THAT IT IS NOT A GEN UINE RECEIPT HE ALSO UPHELD THE DISALLOWANCE OF EXPENDITURE CLAIMED A ND ASSESSMENT OF RECEIPT OF RS.50,000 UNDER THE HEAD INCOME FROM OTHER SOURCES. AGGRIEVED BY THE ORDER OF THE CIT (A), ASSESSEE IS IN SECO ND APPEAL BEFORE US. 6. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE IMPUGNED ORDER OF THE CIT (A) HAS THE EFFECT OF ENHAN CING THE ASSESSMENT IN SO FAR AS IT IS HELD THAT THE AMOUNT OF RS.50 ,000 IS 7 ASSESSABLE UNDER THE HEAD INCOME FROM OTHER SOURCES. IT I S ALSO SUBMITTED THAT THE CIT(A) HAVING HELD THAT THE AMOUN T OF RS.50,000 DOES NOT REPRESENT A GENUINE RECEIPT, CONTRADICTED HIMS ELF BY HOLDING THAT THE SAID AMOUNT IS ASSESSABLE UNDER THE HEAD 'OTHE R SOURCES'. HE FURTHER SUBMITTED THAT THE CIT(A) HAS UPHELD THE DISA LLOWANCE OF EXPENDITURE UNDER NINE SPECIFIED HEADS MERELY ON THE BASIS OF SURMISES AND CONJECTURES AND HAS FAILED TO APPRECIATE THAT THE EX PENDITURE IN QUESTION WAS INCURRED FOR BUSINESS PURPOSES. TAKING US THRO UGH PAGES 14 TO 19 OF THE PAPER-BOOK, HE SUBMITTED THAT THE CI T(A) HIMSELF NOTED THE EXISTENCE OF A CONTRACT OF AGREEMENT ENTERED INTO I N THE FOLLOWING YEAR WITH M/S. SAI E.SEVA.COM PVT. LTD., WHICH WAS FI LED BEFORE HIM. HE SUBMITTED THAT ONE OF THE REASONS FOR WHICH THE CIT(A) UPHELD THE DISALLOWANCE OF EXPENSES BY DOUBTING THE GENUINENESS OF T HE TRANSACTION WITH M/S.SAI-E. SEVA WAS THAT THE NAME OF THE CUSTOMER IN THE INVOICE WAS WRITTEN AS SAI E.SEVA .COM ONLY. IT IS SUBMITTED TH AT IT IS A VERY SPECIOUS DISTINCTION, AND A CLERICAL ERROR IN INVOICE IS SO UGHT TO BE MAGNIFIED TO PENALIZE THE ASSESSEE WITH A SUBSTANTIAL DIS ALLOWANCE. IT IS SUBMITTED THAT THE ORDER OF M/S. SAI.E.SEVA.COM WAS A SI NGLE PRELIMINARY ORDER PLACED WITH THE ASSESSEE ON TRIAL BASI S BEFORE ENTERING INTO REGULAR DEED. IT IS FURTHER SUBMITTED THAT THE CIT(A) DISBELIEVED THE SETTING UP OF BUSINESS BY THE ASSESSEE ONLY BECAUSE THE COMPU TERS WERE INSTALLED TOWARDS THE END OF THE YEAR AND THE ACTIVIT IES CLAIMED TO HAVE BEEN CARRIED ON WERE ALSO TOWARDS THE END OF THE PREVI OUS YEAR. REFERRING TO THE OBSERVATION OF THE CIT(A) THAT THE JOB OF CONVERSION OF PHYSICAL DATA INTO DIGITIZED FORMAT IS DONE ONLY IN A SET UP WHERE NET WORK COMPUTERS ARE AVAILABLE FOR ENTRY AND REVALIDATI ON OF DATA, HE SUBMITTED THAT THE SAID OBSERVATION OF THE CIT(A) IS N OT RELEVANT BECAUSE THE ASSESSEE EXECUTED THE FIRST ORDER WITH THE HELP OF A SINGLE 8 COMPUTER WHICH WOULD BE SUFFICIENT FOR THE LIMITED WOR K AND THE SET UP ETC. WERE LATER USED AFTER SATISFYING THE CUSTOMER. EXP LAINING WITH REGARD TO THE CONCLUSIONS OF THE CIT(A) BASED ON THE FA CTS THAT THE ASSESSEE HAS NOT SHOWN ANY BUILDING IN ITS ASSETS IN THE B ALANCE SHEET AND HAS ALSO NOT PAID ANY RENT; AND WHILE THE ASSESSEE IS IN HYDERABAD THE BUSINESS WAS CARRIED IN COIMBATORE, IT WAS SUBMITTED THAT THE ASSESSEE WAS NOT PAYING ANY RENT FOR THE OFFICE PREMISES IN COIMBATORE AS THE ASSESSEE'S MARRIED DAUGHTER, A QUALIFIED COMPUTER E NGINEER LIVES IN COIMBATORE AND IT IS FOR THAT REASON THAT THE ASSESSE E HAS BEEN CARRYING ON BUSINESS FROM COIMBATORE OFFICE AND ASSESSEE WA S NOT PAYING ANY RENT SINCE THE BUILDING, WHICH IS AN OLD ONE , BELONGS TO THE IMMEDIATE RELATIONS OF THE ASSESSEE'S SON-IN-LAW, AND AS SUCH THERE WAS THERE WAS NO AGREEMENT EITHER LEGAL OR FACTUAL TO PAY RENT, AND IT WAS GIVEN FOR USE RENT FREE. JUSTIFYING THE HUGENESS EXPE NDITURE INCURRED ON LABOUR, MAINTENANCE ETC. IT IS SUBMITTED THAT FOR CARRY ING ON MODERN BUSINESS IN SOFTWARE, PREMISES PROVIDE THE MAIN SHOW AND I T IS REQUIRED TO KEEP THE COMPUTERS AND THE BUILDING IN DUST FREE AN D POLLUTION FREE CONDITION. HE ALSO FURNISHED WRITTEN SUBMISSION REITERAT ING THESE CONTENTIONS, AND ALSO PLACED RELIANCE ON THE FOLLOWING DECISIONS- (A) CIT V/S. E.FUNDS INTERNATIONAL INDIA (2007)(162 TAXMAN 1) (DEL) (B) CIT V/S. INDIAN BANK LIMITED (56 ITR 77)-SC (C) CIT V/S. SARABHAVI MANAGEMENT LTD, (192ITR 51) 7. THE LEARNED DEPARTMENTAL REPRESENTATIVE, ON THE OTHER HAND, STRONGLY RELIED ON THE ORDERS OF THE LOWER AUT HORITIES AND MORE 9 SPECIFICALLY INVITED OUR ATTENTION TO PENULTIMATE PARA OF THE ASSESSMENT ORDER AND PARA 5 OF THE IMPUGNED ORDER OF THE CIT(A ), AND SUBMITTED THAT SINCE THE ASSESSEE HAS FAILED TO DISCHARGE THE ONUS THAT REMAINED ON HIM, TO SUBSTANTIATE THE CLAIMS INTER ALIA WITH REGARD TO THE EXPENDITURE CLAIMED, THE LOWER AUTHORITIES WERE JUSTIF IED IN DISALLOWING THE EXPENDITURE CLAIMED AND BRINGING TO TAX NOT ONLY THE PROFESSIONAL RECEIPT OF RS.50,000 AND ALSO INTEREST INCOME UNDER THE HEAD 'OTHER SOURCES'. 8. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED TH E MATERIAL AVAILABLE ON RECORD. WE FIND FROM THE ORDE RS OF THE LOWER AUTHORITIES THAT THE ASSESSEE HAD PURCHASED CERTAIN CONSUMA BLES BEING NET WORKING PARTS, LED BOARD, COMPUTERS AND ACCESSORIES ETC. , MOSTLY IN THE LAST WEEK OF THE FINANCIAL YEAR UNDER CONSIDERATION . IT IS ALSO NOTED THAT THE OTHER EXPENSES MAINLY PERTAINS TO BUILDING M AINTENANCE, ELECTRICAL MAINTENANCE AND LABOUR CHARGES ETC., AND MOST O F THE EXPENDITURES WERE INCURRED IN RESPECT OF THE PREMISES IN COIMBATORE. EVEN THE EXPENDITURE IN QUESTION WAS INCURRED ONLY DUR ING THE MONTHS OF FEB. AND MARCH, 2002. THE ASSESSEE CLAIMED THAT THE PREMISES AT COIMBATORE BELONG TO HIS SON-IN-LAWS AND HENCE THE B UILDING WAS GIVEN TO THE ASSESSEE FREE OF RENT. BUT IT IS DIFFICULT FOR US TO BELIEVE THAT THE ASSESSEE WAS RUNNING THE BUSINESS IN COIMBATORE IN A RENT FREE ACCOMMODATION. WE ALSO FIND FROM THE ORDER OF THE ASSE SSING OFFICER THAT THE ASSESSEE COULD NOT PRODUCE BEFORE THE ASSESSING OFFI CER THE BOOKS OF ACCOUNTS, BILLS AND VOUCHERS EXCEPT SAYING THAT TH E EXPENDITURE CLAIMED WAS GENUINE WHEREAS THE ASSESSEE CLAIMS THAT THE BO OKS OF ACCOUNTS HAD BEEN PRODUCED BEFORE THE ASSESSING OFFICER FOR VERIFICATION AND THE ASSESSING OFFICER DID NOT FIND ANY DEFECTS THEREIN AND SIMPLY 10 BECAUSE THE EXPENDITURE WAS HIGH WITH REGARD TO ESTABLI SHMENT EXPENDITURE COMPARED TO THE RECEIPTS, THE ASSESSING OFFICER HAS DISALLOWED THE SAME. WHEN THE ASSESSEE SET UP ITS BUSINESS W ITH THE HELP OF A SINGLE COMPUTER THAT TOO DURING THE MONTHS O F FEB. AND MARCH 2002, IT IS UNREASONABLE ON THE PART OF THE ASSESSEE TO CL AIM HUGE EXPENDITURE AMOUNTING TO RS.15,55,978. IT IS ALSO NOT ICED THAT THE EXPENDITURE UNDER QUESTION WAS DEBITED IN THE ACCOUNT O F M/S X DESIGN VENTURES AGAINST THE INTEREST INCOME AND RECEIPTS TOWARD S I.T. ENABLED SERVICES. HOWEVER, IN SPITE OF OUR OBSERVATIONS ABOVE, W E SEE MERIT IN THE CONTENTION OF THE LEARNED COUNSEL FOR THE ASSESSEE THA T THE CIT (A) HAD ENHANCED THE ASSESSMENT BY RS.50,000 WITHOUT GIVING A NY OPPORTUNITY TO THE ASSESSEE IN THIS REGARD. THE CIT (A) ALSO OBSERVED THAT THOUGH THE ASSESSEE CONTENDED THAT THE EVIDENCE WITH REGARD TO DISPATCH OF PHYSICAL BOOKS FROM CHENNAI AND ALSO THE DISP ATCH OF DIGITIZED DATA FROM THE ASSESSEE WOULD BE FURNISHED BUT NO SUCH EVIDENCE WAS FURNISHED BEFORE THE CIT (A) IN SPITE OF OPPORTUNITY GIVEN IN THIS REGARD. UNDER THESE CIRCUMSTANCES, WE FEEL IT PR OPER RESTORE THIS MATTER TO THE FILE OF THE CIT (A) TO REEXAMINE THE ENTIRE ISSUE IN THE LIGHT OF THE EVIDENCE CALLED FOR BY HIM AND ALSO FOR VERIFI CATION WITH REGARD TO CONTINUATION OF SUCH BUSINESS IN THE SUBSEQUENT YEAR. WE ALSO DIRECT THE ASSESSEE TO PRODUCE ALL THE EVIDENCES CALLED FOR BY THE CIT (A) IN THIS REGARD. 9. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS TR EATED AS ALLOWED FOR STATISTICAL PURPOSES. ORDER WAS PRONOUNCED IN THE OPEN COURT ON 26- 3-2010 SD/- (N.R.S.GANESAN) SD/- (AKBER BASHA) JUDICIAL MEMBER ACCOUNTANT MEMBER. DT/- 26TH MARCH, 2010. 11 COPY FORWARDED TO: 1. SHRI D.NAGESWARA RAO, 8-2-681/5, ROAD NO.12, BANJARA HILLS, HYDERABAD. 2. DCIT, CIR-6(1), HYDERABAD. 3. CIT, III, HYDERABAD. 4. CIT (A) IV,, HYDERABAD. 5. THE D.R., ITAT, HYDERABAD. JMR