Sai Prasanna Lakshmi finance corporation, Hyderabad V. ITO, Siddipet

ITA 547/HYD/2010

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 66217 (ITAT-HYDERABAD)
• Duration Of Justice: 2 year(s) 4 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-08-2012
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 29-06-2011
• Assessment Year: 2006-2007
• Appeal Filed On: 19-04-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: K VISWANATHAM
• Assessee Lawyers: S RAMA RAO
• Keywords: Business income; Opportunity of being heard; Bad and doubtful debts; Revised return

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH A, HYDERABAD BEFORE SHRI D.KARUNAKARA RAO, ACCOUNTANT MEMBER AND SHRI SAKTIJIT DEY, JUDICIAL MEMBER. ITA NO. ASSESSMENT YEAR APPELLANT RESPONDENT 540/HYD/2010 541/HYD/2010 542/HYD/2010 543/HYD/2010 544/HYD/2010 545/HYD/2010 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 M/S. SRI RAGHAVENDRA AUTO FINANCE CORPO- RATION, SIDDIPET. (PAN AARFS 9727 K) INCOME-TAX OFFICER, WARD-1, SIDDIPET 546/HYD/2010 547/HYD/2010 548/HYD/2010 2005-06 2006-07 2007-08 M/S. SAI PRASANNA LAKSHMI FINANCE CORPORATION, SIDDIPET. (PAN AAYES 5408 G) INCOME-TAX OFFICER, WARD-1, SIDDIPET 549/HYD/2010 550/HYD/2010 551/HYD/2010 552/HYD/2010 2004-05 2005-06 2006-07 2007-08 M/S. VENKATARAMANA FINANCE CORPORATION, SIDDIPET. (PAN AAYES 5408 G) INCOME-TAX OFFICER, WARD-1, SIDDIPET 553/HYD/2010 2007-08 M/S. JAYASREE AUTO FINANCE CORPORATION, SIDDPET. (PAN AABFJ 3328 H) INCOME - TAX OFFICER, WARD-1, SIDDIPET 967/HYD/2010 968/HYD/2010 969/HYD/2010 970/HYD/2010 971/HYD/2010 972/HYD/2010 973/HYD/2010 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 M/S. MAHALAXMI FINANCE CORPORATION, SIDDIPET. ( PAN AADFM 0063 A) INCOME - TAX OFFICER, WARD-1, SIDDIPET APPELLANTS BY : SHRI S.RAMA RAO RESPONDENT BY : SHRI K.VISWANATHAM DATE OF HEARING 18 . 7 .2012 DATE OF PRONOUNCEMENT 27.8.2012 ITA NO.540/HYD/10 & 20 OTHERS SRI RAGHAVENDRA AUTO FINANC E CORPORATION, SIDDIPET AN D FOUR OTHERS 2 O R D E R PER BENCH: THERE ARE TWENTY ONE APPEALS IN THIS BUNCH. THEY ARE FILED BY FIVE ASSESSEES, AGAINST DIFFERENT ORDERS OF THE CIT (A) III, HYDERABAD. DATED 25.2.2010. SINCE COMMON ISSUES ARE INVOLVED, THESE APPEALS ARE BEING DISPOSED OFF WITH THIS COMMON ORDER FOR THE S AKE OF CONVENIENCE. APPEALS OF M/S. MAHALAXMI FINANCE CORPORATION, SIDDIPET: ITA NOS.967 TO 973/HYD/2010. 2. THESE SIX APPEALS BY THE ASSESSEE ARE DIRECTED AGAINST THE COMMON ORDER OF THE CIT(A)-I, HYDERABAD DATED 25.2. 2010 FOR THE ASSESSMENT YEARS 2001-02 TO 2007-08. 3. GROUNDS OF THE ASSESSEE, COMMON IN THESE APPEAL S,, EXCEPTING FOR THE AMOUNTS INVOLVED, AS TAKEN FROM T HE APPEAL FOLDER FOR ASSESSMENT YEAR 2001-02, READ AS FOLLOWS- 1. THE ORDER OF THE COMMISSIONER OF INCOME- TAX(APPEALS) IS ERRONEOUS BOTH ON FACTS AND IN LAW. 2. THE LEARNED COMMISSIONER OF INCOME-TAX(APPEALS) ERRED IN CONFIRMING THE ACTION OF THE ASSESSING OFF ICER IN DETERMINING THE RECEIPTS FROM COMMISSION AND DOCUMENT CHARGES AT RS.10,88,573/-. 3. THE LEARNED COMMISSIONER OF INCOME-TAX(APPEALS) ERRED IN CONFIRMING THE ACTION OF THE ASSESSING OFF ICER IN REJECTING THE CLAIM FOR DEDUCTION OF ADDITIONAL EXPENDITURE BASED ON THE ENTRIES MADE IN THE IMPOUNDED BOOKS OF ACCOUNT. LEARNED COUNSEL FOR THE ASSESSEE HAS ALSO FILED A P ETITION SEEKING ADMISSION OF THE FOLLOWING TWO ADDITIONAL GROUNDS- ITA NO.540/HYD/10 & 20 OTHERS SRI RAGHAVENDRA AUTO FINANC E CORPORATION, SIDDIPET AN D FOUR OTHERS 3 1) THE LEARNED COMMISSIONER OF INCOME-TAX(APPEALS) ER RED IN HOLDING THAT THE MERCANTILE SYSTEM OF ACCOUNT IS APPLICABLE TO THE FACTS OF THE CASE AND THAT THE I NCOME IS TO BE DETERMINED BASED ON SUCH SYSTEM OF ACCOUNTING . 2) THE LEARNED COMMISSIONER OF INCOME-TAX(APPEALS) ERR ED IN CONFIRMING THE ACTION OF THE ASSESSING OFFICER IN T AXING THE INTEREST RECEIVABLE IN RESPECT OF THE DEBTS WHICH A RE DOUBTFUL AND COULD NOT BE RECOVERED FOR A PERIOD OF MORE THAN THREE MONTHS. WE ADMIT THE SAID ADDITIONAL GROUNDS, AS THE SAME A RISE OUT OF THE IMPUGNED ORDERS OF THE LOWER AUTHORITIES AND DO NOT CALL FOR ANY NEW INVESTIGATION OR ENQUIRY, AND PROCEED TO DISPOSE OF F THESE APPEALS ON ALL THE GROUNDS, INCLUDING THE ABOVE ADDITIONAL GROUNDS . 4. FACTS OF THE CASE IN BRIEF ARE THAT THE ASSESSE E HAS FILED RETURNS OF INCOME IN THE NORMAL COURSE, DISCLOSING VARIOUS AMOUNTS OF INCOME RANGING FROM RS.1,719 FOR ASSESSMENT YEAR 20 04-05 TO RS.4,860 FOR ASSESSMENT YEAR 2003-04, FOR THE YEARS UNDER AP PEAL. A SURVEY UNDER S.133A OF THE ACT WAS CONDUCTED IN THE CASE O F THE ASSESSEE ON 23.1.2008. DURING THE COURSE OF SUCH SURVEY, THE A SSESSING OFFICER FOUND THAT THE ASSESSEE HAS MAINTAINED DUPLICATE SET OF B OOKS OF ACCOUNTS FOR THE ASSESSMENT YEARS 2001-02 TO 2008-09. THE RESULT OF DUPLICATE SET OF ACCOUNTS ARE SUMMARIZED IN THE STATEMENT OF AFFAIRS REGISTER MAINTAINED BY THE ASSESSEE. THE FACT OF MAINTENANCE OF DUPLICA TE SET OF ACCOUNT BOOKS WAS ADMITTED BY THE PARTNER OF THE ASSESSEE-F IRM, WHOSE STATEMENT WAS RECORDED ON 23.1.2008. PARTICULARS O F CONCEALED INCOME, ARISING FROM UNDISCLOSED COMMISSION, DETECTED FROM THE IMPOUNDED MATERIAL, ARE EXTRACTED BY THE ASSESSING OFFICER IN THE IMPUGNED ASSESSMENT ORDERS. IT WAS NOTED BY THE ASSESSING OFFICER THAT THE ITA NO.540/HYD/10 & 20 OTHERS SRI RAGHAVENDRA AUTO FINANC E CORPORATION, SIDDIPET AN D FOUR OTHERS 4 PARTNER OF THE ASSESSEE FIRM HAS ALSO ADMITTED REGA RDING NON-DISCLOSURE OF TRUE INCOME OF VARIOUS ASSESSMENT YEARS IN THE RETURNS FILED EARLIER. SINCE THE ASSESSEE CONCEALED TRUE PARTICULARS OF IN COME, THE ASSESSING OFFICER REOPENED THE ASSESSMENTS FOR ASSESSMENT YEA RS 2001-02 TO 2007- 08 UNDER S.147 OF THE ACT, BY ISSUANCE OF NOTICE UN DER S.148 OF THE ACT ON 30.1.2008 FOR ALL THE YEARS UNDER APPEAL. IN RE SPONSE, THE ASSESSEE FILED RETURNS OF INCOME ON 9.7.2008 FOR ASSESSMENT YEARS 2001-02 AND 2002-03 DISCLOSING INCOME OF RS.1,14,510 FOR THE TW O ASSESSMENT YEARS. ON THE SAME DATE, IT HAS FILED RETURNS OF INCOME FO R THE ASSESSMENT YEARS 2003-04 AND 2004-05 SHOWING LOSS OF RS.56,895 AND R S.1,82,460 RESPECTIVELY. FOR THE ASSESSMENT YEARS 2005-06 AND 2006-07, IT HAS FILED RETURNS OF INCOME ON THE SAME DATE SHOWING INCOME O F RS.33,370 AND RS.33,1330 RESPECTIVELY. FOR THE ASSESSMENT YEAR 20 07-08, IT FILED RETURN OF INCOME ON 7.8.2008 SHOWING A LOSS OF RS.32,442. 5. DURING THE ASSESSMENT PROCEEDINGS, IN RESPONSE TO QUERIES RAISED BY THE ASSESSING OFFICER, THE ASSESSEE SUBMI TTED THAT IT HAS MAINTAINED BOOKS OF ACCOUNT FOLLOWING CASH SYSTEM O F ACCOUNTING. IT WAS FURTHER SUBMITTED THAT IT HAS TREATED INTEREST ON S TICKY LOANS TO SUSPENSE ACCOUNT AND THE ASSESSEE HAS TREATED SUCH DEBTS AS BAD AND DOUBTFUL AND DID NOT OFFER THE SAME IN THE RETURNS FILED UNDER S .148 OF THE ACT FOR THE ASSESSMENT YEARS 2001-02 TO 2007-08. IT WAS CLAIM ED THAT THE ASSESSEE HAS CREDITED THE ACTUAL INTEREST RECEIVED TO INTERE ST ACCOUNT. IT WAS FURTHER SUBMITTED THAT THE INTEREST WHICH WAS NOT R ECEIVED, THOUGH SUCH AMOUNTS HAVE BEEN DEBITED TO THE CONCERNED PARTIES ACCOUNTS, HAS NOT BEEN CONSIDERED FOR RECOGNIZING THE INCOME OF THE F IRM. 6. THE ASSESSING OFFICER HAS NOT ACCEPTED SUCH SUB MISSIONS OF THE ASSESSEE. HE NOTED THAT THE ASSESSEE WAS FOLLOW ING MERCANTILE SYSTEM OF ACCOUNTING AND HAS MAINTAINED BOOKS OF AC COUNT ON MERCANTILE SYSTEM AND THE SAME IS EVIDENT FROM THE FACT THAT T HE ASSESSEE ACCOUNTS ITA NO.540/HYD/10 & 20 OTHERS SRI RAGHAVENDRA AUTO FINANC E CORPORATION, SIDDIPET AN D FOUR OTHERS 5 FOR INTEREST PAYABLE TO PARTNERS ON THEIR CAPITAL A CCOUNTS ON ACCRUAL BASIS. HE FURTHER NOTED THAT THE ASSESSEE HAS MAINTAINED D UPLICATE SET OF ACCOUNTS AND THE UNDISCLOSED PROFITS WERE REGULARLY RECORDED IN THE STATEMENT OF AFFAIRS REGISTERS MAINTAINED BY IT FOR THE ASSESSMENT YEARS. HE ALSO NOTED THAT THE REGULAR BOOKS OF ACCOUNTS DO NOT CONTAIN ANY SUSPENSE ACCOUNT DEPICTING BAD AND DOUBTFUL DEBTS A ND INTEREST CREDITED IN SUSPENSE ACCOUNT. THE ASSESSING OFFICER THEREFOR E REJECTED THE CONTENTION OF THE ASSESSEE REGARDING MAINTENANCE OF BOOKS ON CASH METHOD AND HELD THAT IT WAS FOLLOWING MERCANTILE SY STEM OF ACCOUNT FOR ALL THE ASSESSMENT YEARS UNDER CONSIDERATION. HE SPECI FICALLY OBSERVED THAT THE ASSESSEE FOLLOWED MERCANTILE SYSTEM OF ACCOUNT IN THE ORIGINAL BOOKS AND THERE ARE NO REGULAR BOOKS OF ACCOUNT FOR SO CA LLED SUSPENSE ACCOUNT. HE FURTHER OBSERVED THAT THE CONTENTIO N OF THE ASSESSEE IN THIS BEHALF, IS NOTHING BUT AN AFTER-THOUGHT TO AVO ID PAYMENT OF TAX ON UNDISCLOSED INCOME FOR DIFFERENT ASSESSMENT YEARS W HICH WERE DETECTED DURING THE COURSE OF SURVEY. 7. THE ASSESSING OFFICER FURTHER NOTED THAT IN THE RETURNS FILED BY THE ASSESSEE FOR THE ASSESSMENT YEARS AFTER ISSUANC E OF NOTICE UNDER S.148 OF THE ACT, THE ASSESSEE HAS CLAIMED INCREASE D AMOUNTS UNDER DIFFERENT HEADS OF THE EXPENDITURE. HOWEVER, AS TH E ASSESSEE FAILED TO PRODUCE ANY DOCUMENTARY EVIDENCE IN SUPPORT OF SUCH CLAIM OF EXPENDITURE, THE ASSESSING OFFICER REJECTED SUCH PL EA EXCEPT FOR PAYMENT OF INTEREST ON CAPITAL AND REMUNERATION TO WORKING PARTNERS. UNDER THESE CIRCUMSTANCES, HAVING REGARD TO THE CLAIMS MADE UND ER DIFFERENT ITEMS, THE ASSESSING OFFICER DISALLOWED CERTAIN EXPENSES. SIMILARLY, STATING THAT THE ASSESSEE WAS FOLLOWING MERCANTILE SYSTEM OF ACC OUNTING, HE ESTIMATED THE GROSS BUSINESS RECEIPTS OF THE ASSESSEE FOR ASS ESSMENT YEARS 2001-02 TO 2007-08, AND AFTER ALLOWING DEDUCTION TOWARDS EX PENSES AND ADJUSTING FOR INCOME-TAX FOR THREE YEARS, COMPUTED THE TOTAL INCOME FOR EACH OF THE YEARS UNDER APPEAL, THE DETAILS OF WHICH IS TABULAT ED HEREUNDER- ITA NO.540/HYD/10 & 20 OTHERS SRI RAGHAVENDRA AUTO FINANC E CORPORATION, SIDDIPET AN D FOUR OTHERS 6 ASSESSMENT YEAR ESTIMATED GROSS BUSINESS RECEIPTS RS. AMOUNT ALLOWED TOWARDS EXPENSES RS. AMOUNT ADJUSTED TOWARDS INCOME- TAX RS. TOTAL INCOME COMPUTED RS. 2001-02 10,88,573 4,60,228 3,854 6,32,200 2002 - 03 8,95,058 4,99,644 3,95,410 2003004 9,61,000 4,07,982 5,53,020 2004 - 05 9,56,141 4,77,734 4,78,410 2005-06 15,82,975 4,64,032 11,18,940 2006007 15,65,295 5,20,938 1,362 10,46,260 2007-08 15,62,211 5,10,785 2,795 10,54,290 8. AGGRIEVED BY THE ASSESSMENTS, COMPLETED BY THE ASSESSING OFFICER UNDER S.143(3) READ WITH S.147 OF THE ACT, COMPUTING THE INCOME AS ABOVE, THE ASSESSEE PREFERRED APPEALS BEFORE THE CIT(A). 9. THE CIT(A), AFTER DETAILED CONSIDERATION OF TH E VARIOUS CONTENTIONS OF THE ASSESSEE BEFORE HIM, FOUND MERIT ONLY IN RELATION TO THE CLAIM OF THE ASSESSEE FOR DEDUCTION IN RESPECT OF E XPENDITURE RECORDED IN THE IMPOUNDED BOOKS OF ACCOUNT. HE ACCORDINGLY DI RECTED THE ASSESSING OFFICER TO ALLOW DEDUCTION FOR THE EXPENSES UNDER T HE ABOVE HEADS, I.E. MEETING EXPENSES AND GENERAL EXPENSES, WHICH ARE IN CLUDED IN THE CLAIM MADE BY THE ASSESSEE IN THE RETURNS OF INCOME FILED AFTER ISSUANCE OF NOTICE UNDER S.148 OF THE ACT FOR THE YEARS UNDER C ONSIDERATION. HE, HOWEVER, UPHELD THE VIEW TAKEN BY THE ASSESSING OFF ICER ON ALL THE OTHER ASPECTS. 10. STILL AGGRIEVED BY THE ORDER OF THE CIT(A), AS SESSEE PREFERRED THE PRESENT APPEALS BEFORE US. 11. LEARNED COUNSEL FOR THE ASSESSEE, REITERATING THE CONTENTIONS URGED BEFORE THE LOWER AUTHORITIES SUBMITTED THAT T HERE IS A MISTAKE IN WORKING OUT THE COMMISSION AND DOCUMENTATION CHARGE S AS PER THE BOOKS ITA NO.540/HYD/10 & 20 OTHERS SRI RAGHAVENDRA AUTO FINANC E CORPORATION, SIDDIPET AN D FOUR OTHERS 7 OF ACCOUNT IMPOUNDED. IT IS SUBMITTED THAT THE BOO KS OF ACCOUNT IMPOUNDED ARE MAINTAINED ON CALENDAR YEAR BASIS, FR OM JANUARY TO DECEMBER OF EACH YEAR. THE ASSESSING OFFICER FOR A RRIVING AT THE CORRECT AMOUNT OF COMMISSION AND DOCUMENTATION CHARGES RECO RDED IN THE IMPOUNDED BOOKS, ON FINANCIAL YEAR BASIS, HAS TO EX CLUDE THE AMOUNTS RELATING TO THE TRANSACTIONS OF THE FIRST THREE MON THS, WHICH FALL IN THE PRECEDING FINANCIAL YEAR AND INCLUDED THE AMOUNTS R ELATING TO TRANSACTIONS OF THE JANUARY TO MARCH OF THE SUCCEEDING YEAR WHIC H FALL IN THE FINANCIAL YEAR, VIZ. PREVIOUS YEAR OF THE RELEVANT ASSESSMENT YEAR. HE HAS GIVEN THE CORRECT AMOUNTS OF THE COMMISSION AND DOCUMENTA TION CHARGES ASSESSMENT YEAR WISE IN THE WRITTEN SUBMISSIONS FIL ED BY HIM, AND IT IS SUBMITTED THAT THE ASSESSING OFFICER SHOULD RECTIFY THE MISTAKE IN THE FIGURES OF GROSS RECEIPTS OF EACH YEAR ACCORDINGLY AND RECOMPUTE THE INCOME. 12. LEARNED COUNSEL FOR THE ASSESSEE FURTHER SUBMI TTED THAT THE DETAILS OF THE TOTAL EXPENDITURE CLAIMED UPTO THE E ND OF PREVIOUS YEAR, INCLUDING THE INTEREST AND REMUNERATION TO PARTNERS IS FAR HIGHER THAN THE AMOUNTS OF EXPENDITURE ACTUALLY ALLOWED BY THE ASSE SSING OFFICER, SINCE THE ASSESSING OFFICER WAS OF THE VIEW THAT ADDITION AL EXPENSES CLAIMED IN THE REVISED RETURNS OF INCOME CANNOT BE ALLOWED. EVEN THOUGH THE CIT(A) HELD THE VIEW THAT THE AMOUNTS RECORDED IN T HE IMPOUNDED BOOKS CAN BE ALLOWED, AND ALSO GAVE DIRECTION TO THE ASSE SSING OFFICER IN THAT BEHALF, THE LEARNED COUNSEL SUBMITTED THAT THE LOWE R AUTHORITIES DID NOT CONSIDER THE ACTUAL CLAIM OF THE EXPENDITURE AND AS TO WHY SUCH EXPENDITURE WAS NOT ALLOWABLE. IF THE AUTHORITIES ARE OF THE VIEW THAT THE BOOKS ARE TO BE MAINTAINED ON MERCANTILE SYSTEM, EV EN THE EXPENSES ARE TO BE CONSIDERED AS PER THE SAID SYSTEM AND NOT MER ELY ON BOOK ENTRIES. HE SUBMITTED THAT THERE IS NO OBSERVATION WHATSOEVE R BY THE LOWER AUTHORITIES THAT THE EXPENDITURE INCURRED IS NOT RE LATABLE TO THE BUSINESS OF THE ASSESSEE, AND THAT BEING SO, THERE IS NO JUS TIFICATION FOR ANY ITA NO.540/HYD/10 & 20 OTHERS SRI RAGHAVENDRA AUTO FINANC E CORPORATION, SIDDIPET AN D FOUR OTHERS 8 DISALLOWANCE OUT OF THE EXPENDITURE CLAIMED BY THE ASSESSEE IN THE REVISED RETURNS FILED IN RESPONSE TO NOTICE UNDER S .148 OF THE ACT FOR THESE YEARS. 13 IN THE CONTEXT OF THE FIRST ADDITIONAL GROUND R AISED BEFORE US, NOTED ABOVE, LEARNED COUNSEL FOR THE ASSESSEE REITE RATING THE CONTENTION THAT THERE IS NO BAR ON THE MAINTENANCE OF BOOKS OF ACCOUNT ON THE BASIS OF CASH SYSTEM, SUBMITTED THAT IF THERE IS ANY DEVI ATION IN THE BOOKS OF ACCOUNT ON THE BASIS OF THE SAID SYSTEM, IT IS ONLY THAT PARTICULAR ITEM IN RESPECT OF WHICH THERE WAS VARIATION, WHICH CALLS F OR AN ADDITION/DISALLOWANCE. IN ANY EVENT, HE SUBMITTED THAT INSOFAR AS INTEREST PAYABLE/PAID OR REMUNERATION PAID TO PARTNERS IS CO NCERNED, THIS IS A STATUTORY DEDUCTION ALLOWABLE IN VIEW OF PROVISIONS OF S.40(B) OF THE ACT. IT IS FURTHER POINTED OUT THAT THE ASSESSING OFFICE R DID NOT FIND ANY OTHER DEVIATION WITH REGARD TO ANY OTHER TRANSACTION ENTE RED INTO WITH OUTSIDERS. HE FURTHER SUBMITTED THAT IT IS CLEAR FROM THE WORD S REGULARLY EMPLOYED BY THE ASSESSEE EMPLOYED IN S.145 OF THE INCOME-T AX ACT THAT ONCE THE SYSTEM OF ACCOUNTING IS FOLLOWED BY THE ASSESSEE RE GULARLY, THE SAME HAS TO BE USED FOR COMPUTATION OF THE TOTAL INCOME. TH EREFORE, THE CHOICE OF CHOOSING THE SYSTEM IS THAT OF THE ASSESSEE AND NOT OF THE ASSESSING OFFICER AND THE ONLY REASON FOR WHICH THE ASSESSIN G OFFICER CAN REJECT THE SYSTEM OF ACCOUNTING IS WHEN HE IS NOT SATISFIED WI TH THE CORRECTNESS OR COMPLETENESS OF THE ACCOUNTS OF THE ASSESSEE. EVEN THEN, THE ASSESSING OFFICER CAN ONLY ARRIVE AT SUCH INCOME ON ESTIMATE BASIS. IN THE ABSENCE OF ANY OBSERVATION BY THE ASSESSING OFFICER THAT TH E ASSESSEE DID NOT MAINTAIN THE BOOKS OF ACCOUNT ON CASH SYSTEM, THE A SSESSING OFFICER OUGHT TO HAVE ACCEPTED THE METHOD ADOPTED BY THE AS SESSEE FOR RECOGNIZING THE INCOME FOR THE YEARS UNDER CONSIDER ATION. IT IS FURTHER CLARIFIED THAT THE JOURNAL ENTRIES MADE WITH REGARD TO THE AMOUNT NOT RECEIVED DO NOT INDICATE ANY DEVIATION FROM THE MET HOD OF ACCOUNTING FOLLOWED BY THE ASSESSEE, AND THEY WERE MADE ONLY I N THE SEPARATE ITA NO.540/HYD/10 & 20 OTHERS SRI RAGHAVENDRA AUTO FINANC E CORPORATION, SIDDIPET AN D FOUR OTHERS 9 ACCOUNTS MAINTAINED KNOWN AS SECOND SET OF BOOKS FO R THE PURPOSE OF ARRIVING AT THE INTEREST RECEIVABLE. THE SAME IS NOT TAKEN INTO ACCOUNT WHILE FILING THE RETURNS OF INCOME. HENCE, HE SUBM ITTED, IT CANNOT BE SAID THAT THE ASSESSEE MAINTAINED THE BOOKS OF ACCOUNT O N MERCANTILE SYSTEM OF ACCOUNTING. 14. WITH REGARD TO THE SECOND ADDITIONAL GROU ND, IT IS SUBMITTED THAT THE REVENUE RECOGNITION WITH REGARD TO INTERES T ON OVERDUE OUTSTANDING DEBTORS IS CONSIDERED BY THE INDIAN ACC OUNTING STANDARD 9. IT IS THEREFORE SUBMITTED THAT THE FIRST AMOUNT REC EIVABLE FROM THE PARTIES MENTIONED AT PAGES 33 TO 43 OF THE PAPER-BOOK WAS N OT ADMITTED. ACCORDINGLY, IT IS SUBMITTED THAT THE ASSESSING OFF ICER OUGHT TO HAVE CONSIDERED THAT INTEREST IN RESPECT OF DEBTS THE RE COVERY OF WHICH IS DOUBTFUL DID NOT ACCRUED TO THE ASSESSEE. IN SUPPO RT OF THIS CONTENTION, RELIANCE IS PLACED ON THE FOLLOWING DECISIONS- 1 CIT V/S. INDIAN EQUIPMENT LEASING LTD. (295 ITR 350) 2. CIT V/S. VASISTH CHAY VYAPAR LTD. (330 ITR 440) 3. UCO BANK V/S. CIT (237 ITR 889) 4. SOUTHERN TECHNOLOGIES LTD. V/S. JCIT (320 ITR 57 7)-SC PLACING FURTHER RELIANCE ON THE FOLLOWING DECISIONS , IT IS SUBMITTED THAT INCOME-TAX IS LEVIABLE ONLY ON THE REAL INCOME AND NOT THE FICTITIOUS INCOME- 1) CIT V/S. PIONEER ENGINEERING SYNDICATE(234 ITR503) 2) CIT V/S. BAVLA GOPALAK VIVIDH KARYAKARISAHAKARI MAN DLI LTD. (253 ITR 97)-GUJ. 3) GODHRA ELECTRICITY CO.LTD. VS. CIT( 225 ITR$ 746)-S C 4) PUNE ELECTRIC SUPPLY CO. LTD. V/S. CIT( 57 ITR 521) ITA NO.540/HYD/10 & 20 OTHERS SRI RAGHAVENDRA AUTO FINANC E CORPORATION, SIDDIPET AN D FOUR OTHERS 10 IT IS FURTHER SUBMITTED THAT THE ASSESSING OFFICER DID NOT CONSIDER WHETHER SUCH INCOME REALLY ACCRUED TO THE ASSESSEE OR NOT W ITH REFERENCE TO SUCH DEBTS. IT IS SUBMITTED THAT THE ENTIRE AMOUNT SHOW N AS INTEREST CANNOT BE CONSIDERED AS ACCRUED, AS A NUMBER OF PERSONS DID N OT PAY ANY AMOUNT FOR THE LONG PERIODS -IN SOME CASES EVEN FOR OVER 7 TO 8 YEARS. IT IS POINTED OUT THAT THE ASSESSING OFFICER DID NOT EXAM INE WHETHER THE AMOUNTS REALLY ARE COLLECTIBLE OR NOT AND WHETHER S UCH AMOUNTS ACCRUED OR NOT BUT TREATED THE AMOUNT AS THE INCOME OF THE ASSESSEE WITHOUT ADOPTING REAL INCOME THEORY. 15. THE LEARNED DEPARTMENTAL REPRESENTATIVE ON THE OTHER HAND, STRONGLY SUPPORTED THE IMPUGNED ORDERS OF THE LOWER AUTHORITIES. HE HOWEVER, SUBMITTED THAT SEVERAL ISSUES RAISED BY TH E ASSESSEE IN THE PRESENT APPEALS, NEED VERIFICATION AND RECONSIDERAT ION AT THE LEVEL OF THE ASSESSING OFFICER, AND IF AT ALL, ANY RELIEF IS BEI NG CONSIDERED FOR BEING GRANTED, THE MATTER SHOULD BE SET ASIDE TO THE FILE S OF THE ASSESSING OFFICER WITH SUITABLE DIRECTIONS FOR RE-EXAMINATION OF THE ENTIRE MATTER. 16. WE HEARD BOTH THE PARTIES AND PERUSE D THE MATERIAL AVAILABLE ON RECORD, INCLUDING THE WRITTEN SUBMISSIONS FILED BY THE ASSESSEE, WHEREIN THE ABOVE CONTENTIONS HAVE BEEN REITERATED. WE FIND MERIT IN THE CONTENTION OF THE LEARNED COUNSEL FOR THE ASSES SEE, INSOFAR AS THE INCORRECT FIGURES OF ESTIMATED GROSS RECEIPTS ADOPT ED BY THE ASSESSING OFFICER FOR DETERMINING THE INCOME OF THE ASSESSEE. WHEN THE GROSS RECEIPTS FOR A FINANCIAL YEAR HAVE TO BE WORKED OUT BASED ON THE ACCOUNTS MAINTAINED ON CALENDAR YEAR BASIS, THE FIGURES OF F IRST THREE MONTHS OF THE BOOKS MAINTAINED FOR THE RELEVANT YEAR HAVE TO BE E XCLUDED, AND TO THE RESULTANT FIGURE, THE FIGURES OF THE FIRST THREE MO NTHS OF THE SUCCEEDING CALENDAR YEAR HAVE TO BE ADDED. THAT DOES NOT APPE AR TO HAVE BEEN DONE BY THE ASSESSING OFFICER, IN THE INSTANT CASES. TH OUGH THE ASSESSEE HAS DONE THE NECESSARY WORKING AND PRESENTED THE CORREC TED FIGURES IN THE ITA NO.540/HYD/10 & 20 OTHERS SRI RAGHAVENDRA AUTO FINANC E CORPORATION, SIDDIPET AN D FOUR OTHERS 11 WRITTEN SUBMISSIONS, CORRECTNESS OF THE SAME NEEDS TO BE VERIFIED AT THE LEVEL OF THE ASSESSING OFFICER. SIMILARLY, WHEN TH E CLAIM OF THE ASSESSEE OF HAVING FOLLOWED CASH SYSTEM OF ACCOUNTANCY IS DISPU TED, AND THE INCOME OF THE ASSESSEE HAS BEEN WORKED OUT FOLLOWING MERCA NTILE SYSTEM OF ACCOUNTING, THE EXPENDITURE FOUND ENTERED IN THE IMPOUNDED BOOKS OF ACCOUNT SHOULD ALSO BE TAKEN INTO ACCOUNT, AND ALLO WED AS DEDUCTION, WHILE BRINGING TO TAX THE ADDITIONAL INCOME WORKED OUT FROM THE IMPOUNDED BOOKS. VARIOUS OTHER CONTENTIONS ADVANC ED BY THE LEARNED COUNSEL FOR THE ASSESSEE, DISCUSSED IN THE PRECEDIN G PARA, NEED VERIFICATION AND CONSIDERATION AT THE LEVEL OF THE ASSESSING OFFICER IN THE FIRST PLACE, AS CONTENDED BY THE LEARNED DEPARTMENT AL REPRESENTATIVE. IN THIS VIEW OF THE MATTER, WE SET ASIDE THE IMPUGNED ORDER OF THE CIT(A), AND RESTORE THE MATTER FOR ALL THE YEARS UNDER CONS IDERATION TO THE FILE OF THE ASSESSING OFFICER FOR DE-NOVO CONSIDERATION, IN ACCORDANCE WITH LAW AND AFTER GIVING REASONABLE OPPORTUNITY OF HEARING TO THE ASSESSEE. 17. THESE SEVEN APPEALS OF THE ASSESSEE ARE ACCORD INGLY ALLOWED FOR STATISTICAL PURPOSES. APPEALS OF SRI RAGHAVENDRA AUTO FINANCE CORPORATIO N, SIDDIPET: (ITA NOS.540 TO 545/HYD/2010 18. THESE SIX APPEALS OF THE ASSESSEE ARE DIRECTED AGAINST A COMMON ORDER OF THE CIT(A) III, HYDERABAD DATED 25. 2.2010 FOR THE ASSESSMENT YEARS 2002-03 TO 2007-08. ITA NO.540/HYD/2010 : ASSESSMENT YEAR 2002-03 19. IN THE APPEAL FOR ASSESSMENT YEAR 2002-03 (ITA NO.540/HYD/2010), THE FIRST EFFECTIVE GRIEVANCE OF THE ASSESSEE RELATES TO ADDITION ON ACCOUNT OF COMMISSION AND DOCUMENTAT ION CHARGES. THE SAID GROUND READS AS FOLLOWS - ITA NO.540/HYD/10 & 20 OTHERS SRI RAGHAVENDRA AUTO FINANC E CORPORATION, SIDDIPET AN D FOUR OTHERS 12 2. THE LEARNED CIT(A) ERRED IN CONFIRMING THE ACTI ON OF THE ASSESSING OFFICER IN DETERMINING THE GROSS COMMISSI ON AND DOCUMENT CHARGES AT RS.8,87,072/- AND FURTHER ERRED IN CONFIRMING THE EXPENDITURE ALLOWED BY THE ASSESSIN G OFFICER ONLY TO THE EXTENT OF RS.5,18,809/- WITHOUT CONSIDERING THE FACT THAT THE ASSESSING OFFICER DI D NOT ALLOW SUCH EXPENDITURE AS PER THE BOOKS OF ACCOUNT FOUND DURING THE COURSE OF SURVEY. 20. WE HEARD BOTH THE PARTIES AND PERUSED THE IMP UGNED ORDERS OF THE LOWER AUTHORITIES. WE FIND THAT THE ISSUE IN VOLVED IN THE ABOVE GROUND IS IDENTICAL TO GROUNDS CONSIDERED BY US IN THE CONTEXT OF APPEALS OF M/S. MAHALAXMI FINANCE CORPORATION, SIDDIPET ITA NO.967 TO 973/HYD/2009. HENCE, FOR THE DETAILED REASONS DISCU SSED IN THAT CONTEXT IN PARA-16 HEREINABOVE, WE SET ASIDE THE IMPUGNED O RDERS OF THE CIT(A) ON THIS ISSUE AND RESTORE THE MATTER TO THE FILE TO THE ASSESSING OFFICER WITH A DIRECTION TO REDETERMINE THE SAME IN THE LIG HT OF OUR OBSERVATIONS IN PARA-15 ABOVE AND IN ACCORDANCE THE LAW, BY PASS ING A SPEAKING ORDER IN ACCORDANCE WITH LAW, AFTER GIVING REASONABLE OPP ORTUNITY OF HEARING TO THE ASSESSEE. 21. GROUNDS NO.3 AND 4 OF THE ASSESSEE IN THIS APP EAL READ AS FOLLOWS- 3. THE LEARNED CIT(A) ERRED IN CONFIRMING THE ADDI TION OF RS.19,47,903/- MADE BY THE ASSESSING OFFICER AND FURTHER ERRED IN HOLDING THAT THE SAID AMOUNT OF RS.19,47,903/- WOULD BE TREATED AS MADE ON PROTECTIVE BASIS. 4. THE LEARNED CIT(A) OUGHT TO HAVE SEEN THAT THIS IS THE FIRST YEAR OF BUSINESS OF THE APPELLANT AND ALL THE PARTNERS ARE IDENTIFIABLE AND, THEREFORE, THE CIT(A) OUGHT NOT TO HAVE CONFIRMED T HE ADDITION MADE ON THE GROUND OF CAPITAL INTRODUCED. 22 BRIEF FACTS RELATING TO THE ISSUE INVOLVED IN THE ABOVE GROUNDS OF APPEAL ARE THAT THE ASSESSING OFFICER MADE AN AD DITION OF RS.19,47,903 ON THE GROUND OF DIFFERENCE IN THE INVESTMENTS BY T HE PARTNERS RECORDED BY THE ASSESSEE IN ITS REGULAR BOOKS OF ACCOUNT. W HILE DOING SO, THE ASSESSING OFFICER NOTED THAT AS PER THE ORIGINAL RE TURN OF INCOME, THE ITA NO.540/HYD/10 & 20 OTHERS SRI RAGHAVENDRA AUTO FINANC E CORPORATION, SIDDIPET AN D FOUR OTHERS 13 ASSESSEE DISCLOSED OPENING CAPITAL OF THE PARTNERS AT RS.9,50,000, WHEREAS IN THE REVISED RETURN, THE OPENING BALANCE REFLECTED IS RS.28,97,903. ON APPEAL, THE CIT(A) UPHELD THE SAI D ADDITION. 23. LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THA T THE DIFFERENCE IN THE OPENING BALANCES IN THE CAPITAL A CCOUNTS CANNOT BE BROUGHT TO TAX IN THE YEAR UNDER APPEAL, AND IN FAC T, THE ASSESSING OFFICER HAS NOT CONSIDERED WHETHER THE CAPITAL INTRODUCTION WAS OF EARLIER YEAR OR NOT, BEFORE MAKING THE IMPUGNED ADDITION IN THE YEA R UNDER APPEAL. HE SUBMITTED THAT SINCE THE PARTNERS ARE CLEARLY IDENT IFIABLE AND SINCE THE ADDITION MADE IS ON ACCOUNT OF CAPITAL INTRODUCED B Y THEM, NO ADDITION WHATSOEVER IS CALLED FOR IN THE HANDS OF THE ASSESS EE-FIRM. FURTHER, HE SUBMITTED THAT THE ASSESSING OFFICER HAS NOT EXAMIN ED THE PARTNERS, OR THEIR SOURCES, BUT SIMPLY MADE THE IMPUGNED ADDITIO N ON THE GROUND OF ALLEGED DISCREPANCY IN THE OPENING BALANCES IN THE CAPITAL ACCOUNTS OF THE PARTNERS. HE FURTHER SUBMITTED THAT WHILE THE ASSE SSING OFFICER MADE A PROTECTIVE ASSESSMENT, THE CIT(A) HELD IT TO BE SUB STANTIVE WITHOUT PROVIDING ANY OPPROTJN8ITY TO THE ASSESSEE. HE SUB MITTED THAT THE ASSESSING OFFICER AS WELL AS THE CIT(A) SHOULD HAVE PROVIDED OPPORTUNITY TO EXPLAIN THE SOURCE FOR INVESTMENT MADE BY THE PA RTNERS AND EXAMINED THE PARTNERS, BEFORE MAKING THE IMPUGNED ADDITION. 24. THE LEARNED DEPARTMENTAL REPRESENTATIVE ON THE OTHER HAND, STRONGLY SUPPORTED THE ORDERS OF THE LOWER AUTHORIT IES AND SUBMITTED THAT THE ADDITION MADE BY THE ASSESSING OFFICER IS LIABL E TO BE SUSTAINED. 25. WE HEARD BOTH THE PARTIES AND PERUSED THE MATE RIAL AVAILABLE ON RECORD. IT IS A FACT THAT THE ASSESSING OFFICER IN THE COURSE OF RE- ASSESSMENT PROCEEDINGS FOUND THAT WHILE IN THE ORI GINAL RETURN OF INCOME THE ASSESSEE HAD DISCLOSED OPENING CAPITAL OF THE P ARTNERS AT RS.9,50,000 IN THE RETURN FILED IN RESPONSE TO NOTICE UNDER S.1 48, OPENING BALANCE OF CAPITAL WAS DISCLOSED AT RS.28,97,903/-. THE ASSES SING OFFICER TREATED ITA NO.540/HYD/10 & 20 OTHERS SRI RAGHAVENDRA AUTO FINANC E CORPORATION, SIDDIPET AN D FOUR OTHERS 14 THE DIFFERENTIAL AMOUNT OF RS.19,47,903 AS UNEXPLAI NED INVESTMENT UNDER S.69 AND ADDED IT ON PROTECTIVE BASIS, BY SIMPLY O BSERVING THAT THE EXPLANATION OF THE ASSESSEE IS NOT SATISFACTORY. T HE CIT(A) HAS ALSO SUSTAINED SUCH ADDITION BY MAKING A SIMILAR OBSERVA TION THAT THE ASSESSEE HAS NOT FURNISHED ANY SATISFACTORY EXPLANATION. TH E CIT(A) FURTHER DIRECTED THE ADDITION TO BE MADE ON SUBSTANTIVE BAS IS. HOWEVER, FACT REMAINS THAT NEITHER THE ASSESSING OFFICER NOR THE CIT(A) HAVE DISCUSSED IN DETAIL WHY THE EXPLANATION FURNISHED BY THE ASSE SSEE WAS NOT SATISFACTORY. SINCE THE INVESTMENTS WERE CLAIMED T O HAVE BEEN MADE BY THE PARTNERS, THE GENUINENESS OF THE CLAIM COULD HA VE BEEN ASCERTAINED BY THE ASSESSING OFFICER BY CONDUCTING NECESSARY EN QUIRY WITH THE PARTNERS. IN THIS REGARD, THE ASSESSING OFFICER CO ULD HAVE EXAMINED THE PARTNERS AND FOUND OUT FOR HIMSELF REGARDING THE CL AIM OF CONTRIBUTION TOWARDS CAPITAL AND WHETHER THEY HAVE THE SOURCE TO MAKE THE INVESTMENT. SINCE PROPER ENQUIRY WAS NOT MADE BEFOR E MAKING THE ADDITION, WE ARE OF THE VIEW THAT THE ISSUE NEEDS T O BE RESTORED TO THE FILE OF THE ASSESSING OFFICER. WE DO SO ACCORDINGLY, BY SETTING ASIDE THE IMPUGNED ORDER OF THE CIT(A), AND DIRECT THE ASSES SING OFFICER TO CONDUCT NECESSARY ENQUIRY TO ASCERTAIN THE GENUINEN ESS OF THE INVESTMENTS CLAIMED TO HAVE BEEN MADE BY THE PARTNE RS. HE SHALL, OF COURSE, REDECIDE THIS ISSUE IN ACCORDANCE WITH LAW, BY PASSING A SPEAKING ORDER, AFTER GIVING REASONABLE OPPORTUNITY OF HEARI NG TO THE ASSESSEE. 26. THE NEXT GROUND OF THE ASSESSEE IN THIS APPEAL READS AS FOLLOWS- THE LEARNED CIT(A) ERRED IN ENHANCING THE ADDITION MADE BY THE ASSESSING OFFICER BY AN AMOUNT OF RS.2,48,781/-. 27. THE ISSUE INVOLVED IN THE ABOVE GROUND RELATES TO DISALLOWANCE OF INTEREST ON PARTNERS CAPITAL. THE ASSESSING OFFICER HAS ALLOWED INTEREST TO THE PARTNERS PROCEEDING ON THE BASIS OF THE OPENING BALANCE IN THE CAPITAL ACCOUNTS OF THE PARTNERS OF RS.28,97,903/-, AS PER ITA NO.540/HYD/10 & 20 OTHERS SRI RAGHAVENDRA AUTO FINANC E CORPORATION, SIDDIPET AN D FOUR OTHERS 15 THE REVISED RETURN FILED BY IT. SUCH AMOUNT HAS BE EN CLAIMED ON THE ENTIRE CAPITAL BALANCE OF RS.28,97,903 SHOWN IN THE SAID RETURN. SINCE OUT OF THE SAID AMOUNT, A SUM OF RS.19,47,903 HAS B EEN TREATED AS UNEXPLAINED INCOME IN THE HANDS OF THE ASSESSEE, AN D NOT CAPITAL INTRODUCED BY THE PARTNERS, THE CIT(A) ENHANCED THE INCOME BY AN AMOUNT OF RS.2,33,748 OBSERVING THAT INTEREST TO TH IS EXTENT IS NOT ALLOWABLE. 28. SINCE THE QUANTUM OF INTEREST ALLOWABLE ON TH E BALANCES IN THE CAPITAL ACCOUNTS OF THE PARTNERS IS LINKED TO T HE ISSUE INVOLVED IN THE PRECEDING TWO GROUNDS, VIZ. ADDITION ON ACCOUNT OF DISCREPANCY IN THE OPENING BALANCES IN THE CAPITAL ACCOUNTS OF THE PAR TNERS, IN CONSONANCE WITH THE VIEW WE HAVE TAKEN IN RELATION TO THIS GRO UNDS IN PARA 25 ABOVE, ON THIS ISSUE ALSO, WE SET ASIDE THE IMPUGNED ORDER OF THE CIT(A) AND RESTORE THE MAT5ER TO THE FILE OF THE ASSESSING OFF ICER FOR A FRESH DECISION IN CONSONANCE WITH THE VIEW THAT MAY BE TAKEN WITH REGARD TO GENUINENESS OF THE CAPITAL INTRODUCED BY THE PARTNE RS. HE SHALL OF COURSE, AFFORD REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE, BEFORE PASSING ANY ORDER ON THIS ISSUE. THIS GROUND OF TH E ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. 29. THE LEARNED COUNSEL FOR THE ASSESSEE HAS RAISE D TWO ADDITIONAL GROUNDS IN THESE APPEALS, WHICH ARE AS U NDER- 1. THE LEARNED COMMISSIONER OF INCOME-TAX(APPEALS) ERRED IN HOLDING THAT THE MERCANTILE SYSTEM OF ACCOUNTING IS APPLICABLE TO THE ACTS OF THE CASE AND THAT THE INC OME IS TO BE DETERMINED BASED ON SUCH SYSTEM OF ACCOUNTING. 2. THE LEARNED COMMISSIONER OF INCOME-TAX(APPEALS) ERRED IN CONFIRMING THE ACTION OF THE ASSESSING OFFICER IN T AXING THE INTEREST RECEIVABLE IN RESPECT OF THE DEBTS WHICH A RE DOUBTFUL DEBT COULD NOT BE RECOVERED FOR A PERIOD O F MORE THAN THERE MONTHS. ITA NO.540/HYD/10 & 20 OTHERS SRI RAGHAVENDRA AUTO FINANC E CORPORATION, SIDDIPET AN D FOUR OTHERS 16 WE ADMIT THE SAID ADDITIONAL GROUNDS, AS THE SAME A RISE OUT OF THE IMPUGNED ORDERS OF THE LOWER AUTHORITIES AND DO NOT CALL FOR ANY NEW INVESTIGATION OR ENQUIRY, AND PROCEED TO DISPOSE OF F THESE APPEALS ON ALL THE GROUNDS, INCLUDING THE ABOVE ADDITIONAL GROUNDS . 30. AS FOR THE FIRST ADDITIONAL GROUND OF APPEAL, WE FIND THAT THIS IS IDENTICAL TO THE GROUND RAISED BY THE ASSESSEE IN T HE CASE OF M/S. MAHALAXMI FINANCE CORPORATION, AND LINKED TO GROUND NO.2 OF THIS APPEAL. IN VIEW OF OUR DECISION ON GROUND NO.2, HEREINABOVE , THIS GROUND OF THE ASSESSEE NEEDS NO SEPARATE ADJUDICATION. READ WITH PARA 20 ABOVE, THIS ADDITIONAL GROUND OF THE ASSESSEE IS TREATED AS ALL OWED FOR STATISTICAL PURPOSES. 31. AT THE TIME OF HEARING, THE LEARNED COUNSEL D ID NOT PRESS FOR THE SECOND ADDITIONAL GROUND. THE SAME IS ACCORDING LY REJECTED AS NOT PRESSED. ITA NO.541 TO 545/HYD/2010 :ASSESSMENT YEARS 2003-04 TO 2007-08 32. THE ONLY EFFECTIVE GROUNDS OF THE ASSESSEE IN THESE APPEALS, WHICH ARE IDENTICAL EXCEPT FOR THE AMOUNTS INVOLVED , AS TAKEN FROM APPEAL FOR ASSESSMENT YEAR 2003-04 READ AS FOLLOWS- 1. 2. THE LEARNED CIT(A) ERRED IN CONFIRMING THE ACTIO N OF THE ASSESSING OFFICER IN ARRIVING AT THE GROSS COMMISSION AND DOC UMENT CHARGES AT RS.11,22,151/- WITHOUT CONSIDERING THE ACTUAL AM OUNT OF COMMISSION AND THE DOCUMENT CHARGES RECEIVED BY THE APPELLANT HEREIN. 3) THE LEARNED CIT(A) ERRED IN CONFIRMING THE ACTIO N OF THE ASSESSING OFFICER IN ALLOWING THE EXPENSES ONLY TO THE EXTENT OF RS.4,98,194/- AS AGAINST THE AMOUNT DEBITED IN THE BOOKS OF ACCO UNT FOUND DURING THE COURSE OF SURVEY. 4. THE LEARNED CIT(A) ERRED IN CONFIRMING THE ACTIO N OF THE ASSESSING OFFICER IN DETERMINING THE TOTAL INCOME AT RS.6,23, 960/-. ITA NO.540/HYD/10 & 20 OTHERS SRI RAGHAVENDRA AUTO FINANC E CORPORATION, SIDDIPET AN D FOUR OTHERS 17 33. FACTS AND CIRCUMSTANCES LEADING TO THE ADDITIO N ON ACCOUNT OF GROSS COMMISSION AND DOCUMENT CHARGES, AS WELL AS T HE DISALLOWANCE OF THE ADDITIONAL EXPENDITURE CLAIMED IN RELATION TO T HE ADDITIONAL INCOME BROUGHT TO TAX BASED ON THE BASIS OF IMPOUNDED BOOK S ACCOUNT, AS ALSO THE CONTENTIONS OF THE PARTIES BEFORE US IN RELATIO N THESE ISSUES, ARE IDENTICAL TO THE ONES CONSIDERED BY US, WHILE DEALI NG WITH THE CORRESPONDING GROUNDS RAISED IN THE CASES OF M/S. MAHALAXMI FINANCE CORPORATION, SIDDIPET, IN THE LIGHT OF CORRESPONDIN G ADDITIONS MADE IN THAT CASE ON THIS VERY BASIS. HENCE, FOR THE DETAILED REASONS DISCUSSED IN PARA-16 ABOVE IN THAT CONTEXT, WE SET ASIDE THE IMP UGNED ORDERS OF THE LOWER AUTHORITIES ON THESE ISSUES, AND RESTORE THES E MATTERS TO THE FILE OF THE ASSESSING OFFICER FOR FRESH EXAMINATION OF THE MATTER AND REDETERMINING THE ISSUES IN THE LIGHT OF OUR OBSERV ATIONS IN PARA 16 ABOVE, AND IN ACCORDANCE WITH LAW, OF COURSE, AFTER GIVING REASONABLE OPPORTUNITY OF HEARING TO THE ASSESSEE. CONSEQUENT LY, GROUNDS OF THE ASSESSEE IN THESE APPEALS ARE ALLOWED FOR STATISTIC AL PURPOSES. 34. IN THE RESULT, WHILE FIRST OF THESE APPEALS, ITA NO.540/HYD/2010 IS PARTLY ALLOWED FOR STATISTICAL P URPOSES, ITA NOS.541 TO 545/HYD/2010 ARE ALLOWED FOR STATISTICAL PURPOSE S. APPEALS OF SAI PRASANNA LAKSHMI FINANCE CORPORATION, SIDDIPET . ITA NOS.546 TO 548/HYD/2010 35. THESE THREE APPEALS BY THE ASSESSEE ARE DIRECTED AG AINST A COMMON ORDER OF THE CIT(A) III, HYDERABAD DATED 28. 1.2010 FOR THE ASSESSMENT YEARS 2005-06 TO 2007-08. ITA NO.546/HYD/2010 : ASSESSMENT YEAR 2005-06 36. FIRST THREE EFFECTIVE GROUNDS OF THE ASSESSEE IN THIS APPEAL READ AS FOLLOWS- ITA NO.540/HYD/10 & 20 OTHERS SRI RAGHAVENDRA AUTO FINANC E CORPORATION, SIDDIPET AN D FOUR OTHERS 18 2. THE LEARNED CIT(A) ERRED IN HOLDING THAT THE A DDITION MADE BY THE ASSESSING OFFICER OF RS.6,72,438/- IS JUSTIFIABLE A ND FURTHER ERRED IN ENHANCING THE ADDITION BY AN AMOUNT OF RS.39,001/-. 3) THE LEARNED CIT(A) OUGHT TO HAVE SEEN THAT EVEN AS PER THE SECOND SET OF BOOKS OF ACCOUNT FOUND DURING THE COURSE OF SURVEY THE CAPITAL WAS INITIALLY INTRODUCED FOR THE FINANCIAL YEAR 2003-04 RELEVANT TO THE ASSESSMENT YEAR 2004-05 AND IS NOT RELEVANT TO THE ASSESSMENT YEAR UNDER CONSIDERATION . 4) THE LEARNED CIT(A) OUGHT TO HAVE SEEN THAT EVEN IN THE SECOND SET OF BOOKS THE AMOUNTS INTRODUCED BY T HE RESPECTIVE PARTNERS HAVE BEEN MENTIONED IN THE BOOKS AND THE I NTRODUCTION WAS DURING THE INITIAL PERIOD OF BUSINESS AND, THER EFORE, OUGHT TO HAVE DIRECTED THAT THE ADDITION MADE BY THE ASSESSI NG OFFICER BE DELETED AND OUGHT NOT TO HAVE ENHANCED THE ADDITION BY AN AMOUNT OF RS.39,001/-. 37. THE ISSUE INVOLVED IN THE ABOVE GROUNDS OF APP EALS RELATES TO THE ADDITION MADE ON ACCOUNT OF DIFFERENCE BETWEEN THE CAPITAL AS PER THE DUPLICATE SET OF BOOKS OF ACCOUNT AND AS PER THE RE TURN OF INCOME FILED ORIGINALLY. THE ENHANCED ADDITION OF RS.39,001 MAD E BY THE CIT(A) ON THE BASIS OF INTEREST ALLOWABLE ON THE CORRECT AMOU NT OF CAPITAL, IS ALSO THE SUBJECT MATTER INVOLVED IN THESE GROUNDS OF APPEAL. 38. WE HEARD BOTH SIDES AND PERUSED THE IMPUGNED O RDERS OF THE LOWER AUTHORITIES AND OTHER MATERIAL AVAILABLE ON R ECORD, INCLUDING THE WRITTEN SUBMISSIONS FILED BY THE ASSESSEE BEFORE US . WE FIND THAT THE ISSUES INVOLVED IN THESE GROUNDS ARE IDENTICAL TO T HE ONES CONSIDERED BY US WHILE DEALING WITH CORRESPONDING GROUNDS IN THE APPEAL OF SRI RAGHAVENDRA AUTO FINANCE CORPORATION, SIDDIPET. FAC TS AND CIRCUMSTANCES LEADING TO THE ADDITIONS DISPUTED IN THESE GROUNDS, AS ALSO THE CONTENTIONS OF THE PARTIES IN RELATION TO THESE GROUNDS, BEING IDENTICAL TO THE ONES WE HAVE ALREADY CONSIDERED WHILE DEALIN G WITH THE ABOVE GROUNDS IN ITA NO.540/HYD/2010, IN THE CASE OF SRI RAGHAVENDRA AUTO FINANCE CORPORATION, SIDDIPET, FOR THE DETAILED REA SONS DISCUSSED IN PARA 25 AND 28 ABOVE, WE SET ASIDE THE IMPUGNED ORDER OF THE CIT(A) AND RESTORE THE MATTER TO THE FILE OF THE ASSESSING OFF ICER, WITH A DIRECTION TO ITA NO.540/HYD/10 & 20 OTHERS SRI RAGHAVENDRA AUTO FINANC E CORPORATION, SIDDIPET AN D FOUR OTHERS 19 REDETERMINE THE SAME KEEPING IN MIND OUR OBSERVATIO NS IN PARA 25 AND 28 ABOVE, IN ACCORDANCE WITH LAW AND BY PASSING SPE AKING ORDER AFTER GIVING REASONABLE OPPORTUNITY OF HEARING TO THE ASS ESSEE. 39. EFFECTIVE GROUNDS OF APPEAL NO.5 TO 7 OF THIS APPEAL READ AS FOLLOWS- 5. THE LEARNED CIT(A) ERRED IN CONFIRMING THE ACTI ON OF THE ASSESSING OFFICER IN ALLOWING THE EXPENSES ONLY TO THE EXTENT OF RS.2,93,939/- WITHOUT CONSIDERING THE FACT THAT THE ENTIRE EXPENDITURE DEBITED IN THE BOOKS OF ACCOUNT WAS FOU ND DURING THE COURSE OF SURVEY AND WOULD HAVE BEEN ALL OWED. 6, THE LEARNED CIT(A) OUGHT TO HAVE SEEN THAT IF TH E INCOME IS ESTIMATED BASED ON THE SECOND SET OF BOOKS OF ACCOU NT EVEN THE EXPENDITURE SHOULD HAVE BEEN ALLOWED AS PER THE SAME SET OF BOOKS ACCOUNT. 7) THE LEARNED CIT(A) OUGHT TO HAVE CONSIDERED THAT ALL THE ENTRIES MADE IN THE SECOND SET OF BOOKS WERE TO BE CONSIDERED IF THE RECEIPTS WERE TO BE CONSIDERED. THUS, THE DISPUTE INVOLVED IN THE ABOVE GROUNDS REL ATES TO NON-ALLOWANCE OF EXPENDITURE IN RELATION TO THE ADDITIONAL INCOME BROUGHT TO TAX ON THE BASIS OF THE SECOND SET OF BOOKS OF ACCOUNT. FACTS AND CIRCUMSTANCES LEADING TO THE DISALLOWANCE OF THE ADDITIONAL EXPEN DITURE CLAIMED IN RELATION TO THE ADDITIONAL INCOME BROUGHT TO TAX BA SED ON THE IMPOUNDED BOOKS ACCOUNT, AS ALSO THE CONTENTIONS OF THE PARTI ES BEFORE US IN RELATION THESE ISSUES, ARE IDENTICAL TO THE ONES CONSIDERED BY US, WHILE DEALING WITH THE CORRESPONDING GROUNDS RAISED IN ITA NOS.96 7 TO 973/HYD/2010 IN THE CASES OF M/S. MAHALAXMI FINANCE CORPORATION, SI DDIPET, IN THE LIGHT OF CORRESPONDING ADDITIONS MADE IN THAT CASE ON THIS V ERY BASIS. HENCE, FOR THE DETAILED REASONS DISCUSSED IN PARA-16 ABOVE IN THAT CONTEXT, WE SET ASIDE THE IMPUGNED ORDERS OF THE LOWER AUTHORITIES ON THESE ISSUES, AND RESTORE THE MATTER TO THE FILE OF THE ASSESSING OFF ICER FOR FRESH EXAMINATION OF THE SAME AND REDETERMINING THE ISSUE S IN THE LIGHT OF OUR OBSERVATIONS IN PARA 16 ABOVE, AND IN ACCORDANCE WI TH LAW, OF COURSE, AFTER GIVING REASONABLE OPPORTUNITY OF HEARING TO T HE ASSESSEE. ITA NO.540/HYD/10 & 20 OTHERS SRI RAGHAVENDRA AUTO FINANC E CORPORATION, SIDDIPET AN D FOUR OTHERS 20 CONSEQUENTLY, GROUNDS OF THE ASSESSEE ON THIS ISSUE ARE ALLOWED FOR STATISTICAL PURPOSES. 40. IN THE RESULT, ASSESSEES APPEAL ITA NO.546/HY D/2010 IS ALLOWED FOR STATISTICAL PURPOSES. ITA NOS.547 AND 548/HYD/2010: 41. EFFECTIVE GROUNDS OF THE ASSESSEE, COMMON IN B OTH THESE APPEALS, EXCEPTING FOR THE AMOUNTS INVOLVED, AS TAK EN FROM APPEAL ITA NO.547/HYD/2010, READ AS FOLLOWS- 2. THE LEARNED CIT(A) ERRED IN CONFIRMING THE ADDI TION M ADE BY THE ASSESSING OFFICER OF RS.2,42,078/- UNDER THE HE AD INCOME FROM OTHER SOURCES 3. THE LEARNED CIT(A) OUGHT TO HAVE SEEN THAT THE A SSESSING OFFICER ESTIMATED THE AMOUNT RECEIVABLE ON THE ADDI TIONAL CAPITAL AT 36% OF SUCH CAPITAL INTRODUCED WITHOUT CONSIDERING THE EXPENDITURE INVOLVED IN REALIZING T HE SAID INCOME AND ALSO WITHOUT CONSIDERING THE FACT THAT T HE ENTIRE AMOUNT COULD NOT HAVE BEEN ADVANCED FOR THE ENTIRE PERIOD OF THE YEAR. 4. THE LEARNED CIT(A) OUGHT TO HAVE CONSIDERED THAT ONLY THE NET INCOME AFTER ALLOWING EXPENDITURE HAS TO BE CONSIDERED. BUT FOR THE AMOUNT OF ADDITION STATED IN THE OTHER APPEAL, CORRESPONDING GROUNDS IN THE OTHER APPEAL ARE ALSO IDENTICAL. THE ADDITION CONTESTED IS THE INCOME DETERMINED AND ASSESSED UNDER THE HEAD OTHER SOURCES DISBELIEVING THE CAPITAL INTRODUCED BY THE PARTNERS BASED ON THE SECOND SET OF BOOKS OF ACCOUNT. WHILE THE FIRST GRIEVANCE OF THE ASSESSEE IN THESE APPEALS IS ON ACCOUNT OF ADDITIONAL INCOME BY WAY O F INTEREST BROUGHT TO TAX, BEING THE INCOME THAT MUST HAVE BEEN DERIVED B Y THE ASSESSEE ON ACCOUNT OF AVAILABILITY OF FUND IN THE FORM OF ADDI TIONAL CAPITAL CLAIMED TO HAVE BEEN INTRODUCED BY THE PARTNERS, THE SECOND GR IEVANCE OF THE ASSESSEE IS ON ACCOUNT OF NON-ALLOWANCE OF ADDITION AL EXPENDITURE IN RELATION TO SUCH ADDITIONAL INCOME BROUGHT TO TAX. ITA NO.540/HYD/10 & 20 OTHERS SRI RAGHAVENDRA AUTO FINANC E CORPORATION, SIDDIPET AN D FOUR OTHERS 21 42. WE HAVE HERE BOTH SIDES AND PERUSED THE ORDER S OF THE LOWER AUTHORITIES. WE HAVE ALSO PERUSED THE SEPARATE WRI TTEN SUBMISSIONS FILED BY THE ASSESSEE IN RESPECT OF EACH OF THESE APPEALS . AS FOR THE FIRST ISSUE RELATING TO ADDITIONAL INTEREST INCOME BROUGHT TO T AX, WE FIND THAT IN THE CONTEXT OF THE ASSESSEES GROUNDS IN THE PRECEDING YEAR, RELATING TO THE ACTION OF THE LOWER AUTHORITIES IN QUESTIONING THE VERY GENUINENESS OF THE CAPITAL INTRODUCED BY THE PARTNERS, THE MATTER HAS BEEN SET ASIDE TO THE FILE OF THE ASSESSING OFFICER FOR FRESH EXAMINATION , VIDE PARA 38 HEREINABOVE. IN THAT VIEW OF THE MATTER, IN OUR CO NSIDERED VIEW, THE ISSUE INVOLVING ADDITIONAL INCOME IN RELATION TO TH AT ADDITIONAL CAPITAL SHOULD ALSO BE SET ASIDE TO THE FILE OF THE ASSESSI NG OFFICER, FOR FRESH CONSIDERATION AND DISPOSAL IN CONSONANCE WITH THE V IEW THAT MAY BE TAKEN IN THAT BEHALF. WE DO SO ACCORDINGLY AND SET ASIDE THE MATTER TO THE FILE OF THE ASSESSING OFFICER, WHO SHALL REDECIDE THIS I SSUE IN ACCORDANCE WITH LAW AND AFTER GIVING REASONABLE OPPORTUNITY OF HEAR ING TO THE ASSESSEE. 43. AS FOR THE OTHER ISSUE RELATING TO NON-ALLOWA NCE OF ADDITIONAL EXPENDITURE, THUS, THE DISPUTE INVOLVED IN THE ABO VE GROUNDS RELATES TO NON-ALLOWANCE OF EXPENDITURE IN RELATION TO THE ADD ITIONAL INCOME BROUGHT TO TAX ON THE BASIS OF THE SECOND SET OF BOOKS OF A CCOUNT. FACTS AND CIRCUMSTANCES LEADING TO THE DISALLOWANCE OF THE AD DITIONAL EXPENDITURE CLAIMED IN RELATION TO THE ADDITIONAL INCOME BROUGH T TO TAX BASED ON THE IMPOUNDED BOOKS ACCOUNT, AS ALSO THE CONTENTIONS OF THE PARTIES BEFORE US IN RELATION THESE ISSUES, ARE IDENTICAL TO THE O NES CONSIDERED BY US, WHILE DEALING WITH THE CORRESPONDING GROUNDS RAISED IN ITA NOS.967 TO 973/HYD/2010 IN THE CASES OF M/S. MAHALAXMI FINANCE CORPORATION, SIDDIPET, IN THE LIGHT OF CORRESPONDING ADDITIONS M ADE IN THAT CASE ON THIS VERY BASIS. HENCE, FOR THE DETAILED REASONS DISCUSS ED IN PARA-16 ABOVE IN THAT CONTEXT, WE SET ASIDE THE IMPUGNED ORDERS OF T HE LOWER AUTHORITIES ON THESE ISSUES, AND RESTORE THE MATTER TO THE FILE OF THE ASSESSING OFFICER FOR FRESH EXAMINATION OF THE SAME AND REDETERMINING THE ISSUES IN THE ITA NO.540/HYD/10 & 20 OTHERS SRI RAGHAVENDRA AUTO FINANC E CORPORATION, SIDDIPET AN D FOUR OTHERS 22 LIGHT OF OUR OBSERVATIONS IN PARA 16 ABOVE, AND IN ACCORDANCE WITH LAW, OF COURSE, AFTER GIVING REASONABLE OPPORTUNITY OF HEAR ING TO THE ASSESSEE. CONSEQUENTLY, GROUNDS OF THE ASSESSEE ON THIS ISSUE ARE ALLOWED FOR STATISTICAL PURPOSES. 44. IN THE RESULT, ASSESSEES APPEAL ITA NO.546/H YD/2010 TO 547/HYD/2010 FOR ASSESSMENT YEARS 2005-06 TO 2007-0 8 ARE ALLOWED FOR STATISTICAL PURPOSES. APPEALS OF VENKATARAMANA FINANCE CORPORATION, SIDDIPET. (ITA NOS.549 TO 552/HYD/2010 45 THESE FOUR APPEALS BY THE ASSESSEE ARE DIRECTED AGAINST THE COMMON ORDER OF THE CIT(A)-III, DATED 11.2.2010 FOR ASSESSMENT YEARS 2004-05 TO 2007-08. ITA NO.549/HYD/2010 : ASSESSMENT YEAR 2004-05 46. EFFECTIVE GROUNDS OF THE ASSESSEE IN ITA NO.54 9/HYD/2010 READ AS FOLLOWS- 1. . 2. THE DL CIT(A) ERRED IN CONFIRMING THE ADDITION M ADE BY THE ASSESSING OFFICER OF RS.7,52,700/- AS REPRESENTING THE ADDITIONAL CAPITAL INTRODUCED BY THE PARTNERS. 3. THE LEARNED CIT(A) OUGHT TO HAVE SEEN THE FACT T HAT THIS IS THE FIRST YEAR OF ASSESSMENT OF THE APPELLANT AND THE SAID AMOUNT REPRESENTS THE CAPITAL INTRODUCED BY THE PAR TNERS EVEN AS PER THE BOOKS OF ACCOUNT. 4. THE LEARNED CIT(A) OUGHT TO HAVE CONSIDERED THE FACT THAT THE BOOKS OF ACCOUNT FOUND DURING THE COURSE OF SUR VEY REVEAL THE CAPITAL INTRODUCED BY THE RESPECTIVE PAR TNERS AND EACH OF THE PARTNER HAVE GOT SOURCE OF SUCH INVESTM ENT, AND THEREFORE, OUGHT NOT TO HAVE CONFIRMED THE ADDITION MADE IN THE ASSESSMENT OF THE APPELLANT HEREIN. 5) THE LEARNED CIT(A) ERRED IN CONFIRM ING THE ADDITION OF RS.2,63,908/- BEING GROSS COMMISSION AND DOCUM ENT CHARGES AS PER THE SECOND SET OF BOOKS OF ACCOUNT W ITHOUT ITA NO.540/HYD/10 & 20 OTHERS SRI RAGHAVENDRA AUTO FINANC E CORPORATION, SIDDIPET AN D FOUR OTHERS 23 CONSIDERING THE EXPENDITURE AS PER THE SAID SET OF BOOKS OF ACCOUNT. 6) THE LEARNED CIT(A) OUGHT TO HAVE DIRECTED THE AS SESSING OFFICER TO ALLOW THE EXPENSES AS RECORDED IN THE BO OKS OF ACCOUNT FOUND DURING THE COURSE OF SURVEY WHEN THE CIT IS OF THE VIEW THAT ALL OTHER ENTRIES IN THE SAID BOOK S ARE CORRECT. 7) THE LEARNED CIT(A) ERRED IN CONFIRMING THE ACTIO N OF THE ASSESSING OFFICER IN ALLOWING THE EXPENSES OF RS.2, 83,659/- AS AGAINST THE EXPENSES DEBITED IN THE BOOKS OF ACC OUNT FOUND DURING THE COURSE OF SURVEY. 8) 47. AS FOR GROUNDS 2 TO 4 ABOVE ARE CONCERNED, THE Y RELATE TO ADDITION MADE BY THE ASSESSING OFFICER REPRESENTING THE ADDITIONAL CAPITAL INTRODUCED BY THE PARTNERS. 48. WE HEARD BOTH SIDES AND PERUSED THE IMPUGNED O RDERS OF THE LOWER AUTHORITIES AND OTHER MATERIAL AVAILABLE ON R ECORD, INCLUDING THE WRITTEN SUBMISSIONS FILED BY THE ASSESSEE BEFORE US . WE FIND THAT THE ISSUE INVOLVED IN THESE GROUNDS ARE IDENTICAL TO TH E ONES CONSIDERED BY US WHILE DEALING WITH CORRESPONDING GROUNDS IN THE APP EAL OF SRI RAGHAVENDRA AUTO FINANCE CORPORATION, SIDDIPET. FAC TS AND CIRCUMSTANCES LEADING TO THE ADDITIONS DISPUTED IN THESE GROUNDS, AS ALSO THE CONTENTIONS OF THE PARTIES IN RELATION TO THESE GROUNDS, BEING IDENTICAL TO THE ONES WE HAVE ALREADY CONSIDERED WHILE DEALIN G WITH THE ABOVE GROUNDS IN ITA NO.540/HYD/2010, IN THE CASE OF SRI RAGHAVENDRA AUTO FINANCE CORPORATION, SIDDIPET, FOR THE DETAILED REA SONS DISCUSSED IN PARA 25 ABOVE, WE SET ASIDE THE IMPUGNED ORDER OF THE CI T(A) AND RESTORE THE MATTER TO THE FILE OF THE ASSESSING OFFICER, WITH A DIRECTION TO REDETERMINE THE SAME KEEPING IN MIND OUR OBSERVATIONS IN PARA 2 5 ABOVE, IN ACCORDANCE WITH LAW AND BY PASSING SPEAKING ORDER A FTER GIVING REASONABLE OPPORTUNITY OF HEARING TO THE ASSESSEE. ITA NO.540/HYD/10 & 20 OTHERS SRI RAGHAVENDRA AUTO FINANC E CORPORATION, SIDDIPET AN D FOUR OTHERS 24 49. AS FOR GROUND 5, IT RELATES TO ADDITION OF RS. 2,63,908/- BEING GROSS COMMISSION AND DOCUMENT CHARGES AS PER SET OF BOOKS OF ACCOUNT, WHICH HAS BEEN DONE WITHOUT CONSIDERING THE SAME A S PER THE SECOND SET OF BOOKS OF ACCOUNT FOUND DURING THE COURSE OF SURV EY. THE ISSUE INVOLVED IN THIS GROUND IS IDENTICAL TO THE CORRESP ONDING GROUNDS CONSIDERED BY US IN ITA NOS.967 TO 973/HYD/2010 THE CASES OF M/S. MAHALAXMI FINANCE CORPORATION. HENCE, FOR THE DETA ILED REASONS DISCUSSED IN PARA 16 ABOVE, WE SET ASIDE THE IMPUGN ED ORDER OF THE CIT(A), AND RESTORE THE MATTER TO THE FILE OF THE A SSESSING OFFICER, WITH A DIRECTION TO REDECIDE THE ISSUE INVOLVED IN THIS GR OUND, KEEPING IN MIND OUR OBSERVATIONS IN PARA 16 ABOVE, AND IN ACCORDANC E WITH LAW BY PASSING A SPEAKING ORDER, AFTER GIVING REASONABLE OPPORTUNI TY OF HEARING TO THE ASSESSEE. 50. AS FOR GROUNDS NO.6 AND 7, THEY RELATES TO ASS ESSEES CLAIM FOR ALLOWANCE OF EXPENSES AS RECORDED IN THE BOOKS OF ACCOUNT FOUND DURING THE SURVEY. THUS, THE DISPUTE INVOLVED IN T HE ABOVE GROUNDS RELATES TO NON-ALLOWANCE OF EXPENDITURE IN RELATION TO THE ADDITIONAL INCOME BROUGHT TO TAX ON THE BASIS OF THE SECOND SE T OF BOOKS OF ACCOUNT. FACTS AND CIRCUMSTANCES LEADING TO THE DISALLOWANCE OF THE ADDITIONAL EXPENDITURE CLAIMED IN RELATION TO THE ADDITIONAL I NCOME BROUGHT TO TAX BASED ON THE IMPOUNDED BOOKS ACCOUNT, AS ALSO THE C ONTENTIONS OF THE PARTIES BEFORE US IN RELATION THESE ISSUES, ARE IDE NTICAL TO THE ONES CONSIDERED BY US, WHILE DEALING WITH THE CORRESPOND ING GROUNDS RAISED IN ITA NOS.967 TO 973/HYD/2010 IN THE CASES OF M/S. MA HALAXMI FINANCE CORPORATION, SIDDIPET, IN THE LIGHT OF CORRESPONDIN G ADDITIONS MADE IN THAT CASE ON THIS VERY BASIS. HENCE, FOR THE DETAILED RE ASONS DISCUSSED IN PARA- 16 ABOVE IN THAT CONTEXT, WE SET ASIDE THE IMPUGNED ORDERS OF THE LOWER AUTHORITIES ON THESE ISSUES, AND RESTORE THE MATTER TO THE FILE OF THE ASSESSING OFFICER FOR FRESH EXAMINATION OF THE SAME AND REDETERMINING THE ISSUES IN THE LIGHT OF OUR OBSERVATIONS IN PARA 16 ABOVE, AND IN ITA NO.540/HYD/10 & 20 OTHERS SRI RAGHAVENDRA AUTO FINANC E CORPORATION, SIDDIPET AN D FOUR OTHERS 25 ACCORDANCE WITH LAW, OF COURSE, AFTER GIVING REASON ABLE OPPORTUNITY OF HEARING TO THE ASSESSEE. CONSEQUENTLY, GROUNDS OF THE ASSESSEE ON THIS ISSUE ARE ALLOWED FOR STATISTICAL PURPOSES. 51. IN THE RESULT, ASSESSEES APPEAL ITA NO.549/HY D/2010 FOR ASSESSMENT YEAR 20040-05 IS ALLOWED FOR STATISTICAL PURPOSES. ITA NOS.550 TO 552/HYD/2010 :ASSESSMENT YEARS 2005-06 TO 2007-08 52. THE ISSUES INVOLVED IN THESE THREE APPEALS ARE COMMON. EFFECTIVE GROUNDS OF APPEAL, AS TAKEN FROM APPEAL I TA NO.550/HYD/2010 FOR ASSESSMENT YEAR 2005-06, READ AS FOLLOWS- 1. . 2. THE LEARNED CIT(A) ERRED IN CONFIRMING THE ACTI ON OF THE ASSESSING OFFICER IN ARRIVING AT THE GROSS COMMISSI ON AND DOCUM ENT CHARGES AT RS.9,49,920/- WITHOUT CONSIDERING TH E ACTUAL AMOUNT OF COMMISSION AND THE DOCUM ENT CHARGES RECEIVED BY THE APPELLANT HEREIN. 3. THE LEARNED CIT(A) ERRED IN CONFIRMING THE ACTIO N OF THE ASSESSING OFFICER IN ALLOWING THE EXPENSES ONLY TO THE EXTENT OF RS.3,17,67/- AS AGAINST THE AMOUNT DEBITED IN TH E BOOKS OF ACCOUNT FOUND DURING THE COURSE OF SURVEY. 4. THE LEARNED CIT(A) ERRED IN CONFIRMING THE ACTIO N OF THE ASSESSING OFFICER IN DETERMINING THE TOTAL INCOME AT RS.6,32,250/- 5. .. BUT FOR THE AMOUNTS INVOLVED, GROUNDS TAKEN BY THE ASSESSEE IN THE APPEALS FOR THE SUCCEEDING TWO YEARS ARE IDENTICAL. 53. WE HEARD BOTH SIDES AND PERUSED THE ORDERS OF THE LOWER AUTHORITIES. WE HAVE ALSO PERUSED THE WRITTEN SUBM ISSIONS FILED BY THE ASSESSEE IN THESE MATTERS. AS FOR GROUND NO2, ABOV E THE ISSUE RELATES TO ITA NO.540/HYD/10 & 20 OTHERS SRI RAGHAVENDRA AUTO FINANC E CORPORATION, SIDDIPET AN D FOUR OTHERS 26 ADDITION MADE IN RELATION TO THE COMMISSION AND DOC UMENT CHARGES RECEIVED BY THE ASSESSEE. THE ISSUE INVOLVED IN TH IS GROUND IS IDENTICAL TO THE CORRESPONDING GROUNDS CONSIDERED BY US IN ITA N OS.967 TO 973/HYD/2010 THE CASES OF M/S. MAHALAXMI FINANCE CO RPORATION. HENCE, FOR THE DETAILED REASONS DISCUSSED IN PARA 16 ABOVE , WE SET ASIDE THE IMPUGNED ORDER OF THE CIT(A), AND RESTORE THE MATTE R TO THE FILE OF THE ASSESSING OFFICER, WITH A DIRECTION TO REDECIDE THE ISSUE INVOLVED IN THIS GROUND, KEEPING IN MIND OUR OBSERVATIONS IN PARA 16 ABOVE, AND IN ACCORDANCE WITH LAW BY PASSING A SPEAKING ORDER, AF TER GIVING REASONABLE OPPORTUNITY OF HEARING TO THE ASSESSEE. 54. THE NEXT ISSUE INVOLVED IN GROUND 3 HEREINABOV E RELATES TO THE DISALLOWANCE MADE BY THE ASSESSING OFFICER, BY RESTRICTING THE EXPENSES ONLY TO THE EXTENT CLAIMED ORIGINALLY, AS AGAINST THE AMOUNT DEBITED IN THE BOOKS OF ACCOUNT FOUND DURING THE CO URSE OF SURVEY, AND THEREBY NOT ALLOWING EXPENSES AS PER THE SAID BOOKS ACCORDING TO WHICH ADDITIONAL INCOME HAS BEEN BROUGHT TO TAX. THUS, T HE DISPUTE INVOLVED IN THE ABOVE GROUNDS RELATES TO NON-ALLOWANCE OF EXPEN DITURE IN RELATION TO THE ADDITIONAL INCOME BROUGHT TO TAX ON THE BASIS O F THE SECOND SET OF BOOKS OF ACCOUNT. FACTS AND CIRCUMSTANCES LEADING T O THE DISALLOWANCE OF THE ADDITIONAL EXPENDITURE CLAIMED IN RELATION TO T HE ADDITIONAL INCOME BROUGHT TO TAX BASED ON THE IMPOUNDED BOOKS ACCOUNT , AS ALSO THE CONTENTIONS OF THE PARTIES BEFORE US IN RELATION TH ESE ISSUES, ARE IDENTICAL TO THE ONES CONSIDERED BY US, WHILE DEALING WITH TH E CORRESPONDING GROUNDS RAISED IN ITA NOS.967 TO 973/HYD/2010 IN TH E CASES OF M/S. MAHALAXMI FINANCE CORPORATION, SIDDIPET, IN THE LIG HT OF CORRESPONDING ADDITIONS MADE IN THAT CASE ON THIS VERY BASIS. HEN CE, FOR THE DETAILED REASONS DISCUSSED IN PARA-16 ABOVE IN THAT CONTEXT, WE SET ASIDE THE IMPUGNED ORDERS OF THE LOWER AUTHORITIES ON THESE I SSUES, AND RESTORE THE MATTER TO THE FILE OF THE ASSESSING OFFICER FOR FRE SH EXAMINATION OF THE SAME AND REDETERMINING THE ISSUES IN THE LIGHT OF O UR OBSERVATIONS IN PARA ITA NO.540/HYD/10 & 20 OTHERS SRI RAGHAVENDRA AUTO FINANC E CORPORATION, SIDDIPET AN D FOUR OTHERS 27 16 ABOVE, AND IN ACCORDANCE WITH LAW, OF COURSE, AF TER GIVING REASONABLE OPPORTUNITY OF HEARING TO THE ASSESSEE. CONSEQUENT LY, GROUNDS OF THE ASSESSEE ON THIS ISSUE ARE ALLOWED FOR STATISTICAL PURPOSES. 55. IN THE RESULT, THESE THREE APPEALS OF THE ASSE SSEE ARE ALSO ALLOWED FOR STATISTICAL PURPOSES. APPEAL OF M/S. JAYA SREE AUTO FINANCE CORPORATION, SIDDIPET: ITA NO.553/HYD/2010 : ASSESSMENT YEAR 2007-08 56. THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINS T THE ORDER OF THE CIT(A) III HYDERABAD DATED 11.2.2010FOR THE AS SESSMENT YEAR 2007- 08. 57. EFFECTIVE GROUNDS OF THE ASSESSEE IN THIS APPE AL READ AS FOLLOWS- 1) . 2) THE DISALLOWANCE CIT(A) ERRED INCOME OF CONFIRMING THE ADDITION OF RS.5,90,000/- MADE BY THE ASSESSING O FFICER. 3) THE LEARNED CIT(A) OUGHT TO HAVE SEEN THAT THE AMOU NT OF RS.5,90,000 SHOULD NOT HAVE BEEN ADDED AS THE SAID AMOUNT WAS NEITHER PAID TO THE PARTNERS NOR REPRESENTS THE PROFITS MENTIONED BY THE ASSESSING OFFICER. 4) THE LEARNED CIT(A) OUGHT TO HAVE SEEN THAT THERE I S NO EVIDENCE TO SHOW THAT THE SAID AMOUNT OF RS.5,90,00 0 REPRESENTS THE PROFITS OF THE APPELLANT HEREIN FOR THE YEAR UNDER CONSIDERATION. 58. FACTS OF THE CASE IN BRIEF ARE THAT THE ASSESS EE, A PARTNERSHIP FIRM IS CONSTITUTED BY THIRTEEN PARTNERS. A SURVEY UNDER S.133A WAS CONDUCTED IN THE BUSINESS PREMISES OF THE ASSESSEE ON 23.1.2008. DURING THE SURVEY, A DOCUMENT WAS FOUND WHEREIN IT WAS PROPOSED TO DISTRIBUTE AN AMOUNT OF RS.5,90,000 AMONG ALL THE P ARTNERS. ON THE BASIS OF THE AFORESAID DOCUMENT, FOUND AT THE TIME OF SUR VEY, THE ASSESSING OFFICER IN THE COURSE OF ASSESSMENT PROCEEDINGS, AS KED THE ASSESSEE TO ITA NO.540/HYD/10 & 20 OTHERS SRI RAGHAVENDRA AUTO FINANC E CORPORATION, SIDDIPET AN D FOUR OTHERS 28 EXPLAIN AS TO WHY THE AMOUNT OF RS.5,90,000 SHOULD NOT BE TREATED AS THE PROFIT OF THE FIRM DISTRIBUTED AMONG THE PARTNERS, WITHOUT BEING REFLECTED IN THE BOOKS OF ACCOUNT. THE ASSESSEE IN ITS REPL Y SUBMITTED THAT THOUGH A FEW PARTENERS PROPOSED TO DISTRIBUTE THE SAID AMO UNT, THE PROPOSAL WAS NOT ACCEPTED BY ALL THE PARTNERS AND HENCE THE PROP OSAL WAS NOT ACTED UPON. THE ASSESSING OFFICER DID NOT FIND MERIT IN THE EXPLANATION OF THE ASSESSEE AND OBSERVED THAT AS PER THE TERMS OF THE PARTNERSHIP DEED, ALL THE PARTNERS ARE AUTOMATICALLY ELIGIBLE FOR PROFITS /LOSS DERIVED BY THE FIRM AND THE SAME WILL BE AUTOMATICALLY CREDITED TO THE CAPITAL ACCOUNT WITHOUT DEPENDING UPON A SEPARATE PROPOSAL FOR DISTRIBUTION OF PROFIT DERIVED FROM THE BOOKS OF ACCOUNT. THE ASSESSING OFFICER FURTHE R OBSERVED THAT THOUGH NO DUPLICATE SET OF BOOKS OF ACCOUNT WERE FOUND, TH E PROPOSAL RAISED BY THE MANAGING PARTNER TO ALL THE PARTNERS AND STATEM ENT SHOWING DISTRIBUTION OF RS.5,90,000 BY 31.3.2007 INDICATED ABOUT THE UNDISCLOSED INCOME OF THE ASSESSEE FOR THE ASSESSMENT YEAR 2007 -08. ON THE AFORESAID BASIS, THE ASSESSING OFFICER MADE IMPUGNE D ADDITIO0N OF RS.5,90,000 TO THE INCOME OF THE ASSESSEE, WHICH HA S BEEN SUSTAINED BY THE CIT(A) ON APPEAL. 59. LEARNED COUNSEL FOR THE ASSESSEE, REITERATING THE CONTENTIONS URGED BEFORE THE LOWER AUTHORITIES, SUBMITTED THAT THE AMOUNT OF RS.5,90,000 IS NEITHER THE PROFIT OF THE FIRM NOR T HE AMOUNT DISTRIBUTED AMONG THE PARTNERS AND THE PAPER FOUND AT THE TIME OF SEARCH WAS A MERE PROPOSAL OF THE MANAGING PARTNER, WHICH HAS NO T BEEN ACTED UPON ON ACCOUNT OF ABSENCE OF CONSENSUS AMONG ALL THE PA RTNERS. IN THE ABSENCE OF ANY CORROBORATIVE EVIDENCE BROUGHT ON RE CORD, HE SUBMITTED THAT THE IMPUGNED ADDITION IS NOT JUSTIFIED. 60. LEARNED DEPARTMENTAL REPRESENTATIVE ON THE OTH ER HAND, STRONGLY SUPPORTED THE ORDERS OF THE LOWER AUTHORIT IES. ITA NO.540/HYD/10 & 20 OTHERS SRI RAGHAVENDRA AUTO FINANC E CORPORATION, SIDDIPET AN D FOUR OTHERS 29 62. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND P ERUSED THE IMPUGNED ORDERS OF THE LOWER AUTHORITIES. WE HAVE ALSO GONE THROUGH THE WRITTEN SUBMISSIONS FILED BY THE LEARNED COUNSEL FO R THE ASSESSEE. ALL THAT THE REVENUE COULD LAY ITS HANDS ON, IS A PAPER FOUN D AT THE TIME OF SURVEY, WHICH, ACCORDING TO THE ASSESSEE IS ONLY A PROPOSAL FOR DISTRIBUTION OF AN AMOUNT OF RS.5,90,000 AMONG THE PARTNERS. IT IS THE CASE OF THE ASSESSEE THAT THE SAID PROPOSAL WAS NOT ACTED UPON, AS SOME OF THE PARTNERS DID NOT AGREE TO THE SAME. IN THE ABSENCE OF ANY CORROBORATIVE EVIDENCE BROUGHT ON RECORD, THE REVEN UE AUTHORITIES, IN OUR VIEW, THE ASSESSING OFFICER IS NOT JUSTIFIED IN STR AIGHT AWAY MAKING THE IMPUGNED ADDITION. THE ASSESSING OFFICER COULD HAV E AT LEAST EXAMINED THE PARTNERS OF THE ASSESSEE-FIRM TO ASCERTAIN THE CORRECTNESS OF THE ASSESSEES CLAIM THAT SOME OF THE PARTNERS HAVE NO T ACCEPTED THE PROPOSAL AND SO, IT WAS NOT ACTED UPON. THE ASSESSI NG OFFICER SHOULD ALSO HAVE BROUGHT SOME MORE CORROBORATIVE EVIDENCE, SUCH AS BANK STATEMENTS OF THE FIRM AS WELL AS THE PARTNERS, ETC ., TO ESTABLISH THE FACT THAT RS.5,90,000 WAS ACTUALLY PAID TO THE PARTNERS DURING THE RELEVANT PERIOD. CONSIDERING TOTALITY OF FACTS AND CIRCUMSTA NCES OF THE CASE, WE SET ASIDE THE IMPUGNED ORDER OF THE CIT(A), AND RESTORE THE MATTER TO THE FILE OF THE ASSESSING OFFICER WITH A DIRECTION TO REDECI DE THE ISSUE AFRESH, AFTER EXAMINING THE PARTNERS OF THE ASSESSEE FIRM AND BY BRINGING ON RECORD CORROBORATIVE EVIDENCE IN SUPPORT OF HIS CONCLUSION S., AND OF COURSE, AFTER GIVING REASONABLE OPPORTUNITY TO THE ASSESSEE TO SU BSTANTIATE ITS CLAIM. THE ASSESSING OFFICER SHALL THEREAFTER REDECIDE THE ISSUE IN ACCORDANCE WITH LAW BY PASSING A SPEAKING ORDER AFTER GIVING R EASONABLE OPPORTUNITY OF HEARING TO THE ASSESSEE. 63, IN THE RESULT, THIS APPEAL OF THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. ITA NO.540/HYD/10 & 20 OTHERS SRI RAGHAVENDRA AUTO FINANC E CORPORATION, SIDDIPET AN D FOUR OTHERS 30 64. TO SUM UP, (A) ALL THE SEVEN APPEALS, ITA NOS.967 TO 973/ HYD/ 2010 IN THE CASE OF M/S. MAHALAKSHMI FINANCE CORPORATION AR E ALLOWED FOR STATISTICAL PURPOSES. (B) OUT OF THE APPEALS OF M/S. RAGAHVENDRA AUTO FI NANCE CORPORATION, WHILE FIRST OF THESE APPEALS, ITA NO.540/HYD/2010 IS PARTLY ALLOWED FOR STATISTICAL PURPOSES; ITA NOS.541 TO 545/HYD/2010 ARE ALLOWED F OR STATISTICAL PURPOSES. (C ) ALL THE THREE APPEALS OF M/S. SAI PRASANNA LAK SHMI FINANCE CORPORATION, SIDDIPET, BEING ITA NOS. 546 T O 548/HYD/2010 ARE ALLOWED FOR STATISTICAL PURPOSES. (D) ALL THE FOUR APPEALS OF VENKATARAMANA FINANCE CORPORATION, SIDDIPET, BEING ITA NOS.549 TO 552./HYD/2010 ARE ALLOWED FOR STATISTICAL PURPOSES. (E) THE LONE APPEAL OF M/S. JAYA SREE AUTO FINANCE CORPORATION, SIDDIPET, BEING ITA NO.553/HYD/2010IS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE COURT ON 27 TH AUGUST, 2012 SD/- SD/- ( D.KARUNAKARA R AO ) (SAKTIJIT DEY) ACCOUNTANT MEMBER. JUDICIAL MEMBER. DT/- 27 TH AUGUST, 2012 COPY FORWARDED TO: 1. M/S. SRI RAGHAVENDRA AUTO FINANCE CORPORATION, SIDDIPET. C/O. SHRI S.RAMA RAO, ADVOCATE, FLAT NO.102, SHRIY AS RSIDENCY, STREET NO.9, HIMAYATNAGAR, HYDERABAD . 2. M/S. SAI PRASANNA LAKSHMI FINANCE CORPORATION, SIDD IPET. C/O. SHRI S.RAMA RAO, ADVOCATE, 1FLAT NO.102, SHRI YAS RSIDENCY, STREET NO.9, HIMAYATNAGAR, HYDERABAD 3. M/S. VENKATARAMANA FINANCE CORPORATION, SIDDIPET. C/O. SHRI S.RAMA RAO, ADVOCATE, 1FLAT NO.102, SHRI YAS RSIDENCY, ITA NO.540/HYD/10 & 20 OTHERS SRI RAGHAVENDRA AUTO FINANC E CORPORATION, SIDDIPET AN D FOUR OTHERS 31 STREET NO.9, HIMAYATNAGAR, HYDERABAD 4 . M/S. JAYASREE AUTO FINANCE CORPORATION, SIDDPET. C/O. SHRI S.RAMA RAO, ADVOCATE, FLAT NO.102, SHRIY AS RSIDENCY, STREET NO.9, HIMAYATNAGAR, HYDERABAD 5. M/S. MAHALAXMI FINANCE CORPORATION, SIDDIPET. C/O. SHRI S.RAMA RAO, ADVOCATE, FLAT NO.102, SHRIY AS RSIDENCY, STREET NO.9, HIMAYATNAGAR, HYDERABAD 6. INCOME-TAX OFFICER, WARD-1, SIDDIPET 7. COMMISSIONER OF INCOME-TAX(APPEALS) III, HYDERABAD 8. COMMISSIONER OF INCOME-TAX II, HYDERABAD 9. DEPARTMENTAL REPRESENTATIVE, INCOME - TAX APPELLAT E TRIBUNAL, HYDERABAD B.V.S.