VISHWANATH ACHARAYA, MUMBAI V. ASST CIT 11(1), MUMBAI

ITA 7976/MUM/2011

• Counselvise Citation: [2015] 134 COUNSELVISE.COM (IT) 1860 (ITAT-MUMBAI)
• Duration Of Justice: 4 year(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-12-2015
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: F
• Next Hearing Date: 18-11-2014
• Assessment Year: 2007-2008
• Appeal Filed On: 25-11-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: ADAGIRI
• Assessee Lawyers: SANJIV M SHAH
• Keywords: Unexplained cash credit; Deemed owner of house property; Business income; Depreciation; Business expenditure; Opportunity of being heard; Principle of natural justice; Source of fund; Additional evidence; Question of law; Block assessment; Notional interest
• Section: 143(3); 68; 145; 28; 144; 139

Judgement Text

F IN THE INCOME TAX APPELLATE TRIBUNAL F BENCH, MUMBAI BEFORE SHRI JOGINDER SINGH, JUDICIAL MEMBER AND SHRI RAMIT KOCHAR, ACCOUNTANT MEMBER ./ I.T.A. NO. 7976 /MUM/2011 ( / ASSESSMENT YEAR : 2007-08) MR. VISHWANATH ACHARAYA, 1701-A WING, BROOK HILL TOWERS, NEAR LOKHANDWALA COMPLEX, ANDHERI WEST, MUMBAI 400 058 / V. THE ASSISTANT COMMISSIONER OF INCOME TAX 11(1), AAYAKAR BHAVAN, M.K. ROAD, MUMBAI 400 020. ./ PAN : AAGPA 0144D ( / APPELLANT ) .. ( / RESPONDENT ) ASSESSEE BY SHRI SANJIV M. SHAH REVENUE BY : SHRI B. YADAGIRI / DATE OF HEARING : 29-9-2015 / DATE OF PRONOUNCEMENT : 16-12-2015 / O R D E R PER RAMIT KOCHAR, ACCOUNTANT MEMBER : THIS APPEAL, FILED BY THE ASSESSEE, BEING ITA NO. 7 976/MUM/2011, IS DIRECTED AGAINST THE ORDER DATED 31-10-2011 PASSED BY THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS)- 3, MUMBAI (HE REINAFTER CALLED THE CIT(A)), FOR THE ASSESSMENT YEAR 2007-08. 2. THE GROUNDS OF APPEAL RAISED BY THE ASSESSEE IN THE MEMO OF APPEAL FILED WITH THE TRIBUNAL READ AS UNDER:- ITA 7976/M/11 2 I. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. COMMISSIONER OF INCOME TAX (APPEALS) [HEREINAFTER R EFERRED TO AS LD CIT(A)] IN CONFIRMING THE ACTION OF THE LD ASSISTANT C OMMISSIONER OF INCOME-TAX-11(L),MUMBAI [HEREINAFTER REFERRED TO AS LD AO] IN RESPECT OF THE FOLLOWING PROPERTIES AS DEEMED TO BE LET OUT :- FLAT AT MALAD FLAT AT MILLAT NAGAR I 103 FLAT AT MILLAT NAGAR 1203 PLOT AT MHADA SHARIQ HALL AND CONFIRMING THE ASSESSMENT OF THE SAME UNDER THE H EAD INCOME FROM HOUSE PROPERTY. 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. CIT (A) ERRED IN CONFIRMING THE ACTION OF THE LD AO I N RESTRICTING THE CLAIM OF INTEREST TO RS.150,000/-. 3. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LA W THE LD CIT (A) ERRED IN CONFORMING THE ACTION OF THE LD AO I N HOLDING THAT FOR PROFESSIONAL INCOME 'APPELLANT IS LIABLE TO FOLLOW ME RCANTILE METHOD OF ACCOUNTING AND ACCORDINGLY ADDING A SUM OF RS.2,257 ,000/- IN RESPECT OF INCOME WHICH HAS ALREADY BEEN CONSIDERED AS INCO ME IN SUBSEQUENT ASSESSMENT YEAR. 4. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LA W THE LD CIT (A) ERRED IN CONFIRMING THE ACTION OF LD AO TO TH E EXTENT OF RS.10,00,000/- AS UNEXPLAINED CASH-CREDIT U/S 68 OF IT ACT. 5. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN L AW THE LD CIT (A) ERRED IN CONFORMING THE ACTION OF THE LD AO IN ADDING A SUM OF RS. L,419,000/- AS CASH DEPOSIT U/S 68 OF IT ACT. 6. THAT THE ORDERS OF LD CIT(A) AND LD AO ARE BAD IN LAW AND ON FACTS. 3. THE BRIEF FACTS OF THE CASE ARE THAT ASSESSEE IS A PROFESSIONAL DANCE DIRECTOR FOR CINEMATOGRAPH FILMS. BESIDES THIS, HE RUNS A DANCE ACADEMY BY THE NAME OF GANESH ACHARYA DANCE ACADEMY AND FILM P RODUCTION HOUSE BY THE NAME OF M/S PUSHPA KRISHNA CREATIONS. DURING TH E COURSE OF ASSESSMENT PROCEEDINGS U/S 143(3) READ WITH SECTION 143(2) OF THE INCOME TAX ACT, ITA 7976/M/11 3 1961(HEREINAFTER CALLED THE THE ACT), IT WAS OBSE RVED BY THE LEARNED ASSESSING OFFICER (HEREINAFTER CALLED THE A.O.) F ROM THE INDIVIDUAL BALANCE SHEET OF THE ASSESSEE THAT THE ASSESSEE OWNED SIX IMMOVABLE PROPERTIES, WHICH ARE AS UNDER:- SL NO. DESCRIPTION OF PROPERTY BOOK VALUE REMARKS 1 FLAT AT MALAD 5,42,902 2 FLAT AT YASHODEEP CHS LTD. 33,79,000 3 MHADA PREMISES 31,01,566 4 FLAT AT MILLAT NAGAR 1103 27,03,545 PURCHASED ON 19.5.2006 5 PLOT AT MILLAT NAGAR 1203 23,63,490 PURCHASED ON 17.5.2006 6 PLOT AT MHADA SHERIQ HALL 23,70,548 THE AO OBSERVED THAT THE ASSESSEE HAS NOT OFFERED A NY INCOME UNDER THE HEAD INCOME FROM HOUSE PROPERTY. THE ASSESSEE WA S SHOW CAUSED AS TO WHY NO INCOME HAS BEEN OFFERED UNDER THE HEAD INCO ME FROM HOUSE PROPERTY AFTER CLAIMING EXEMPTION WITH RESPECT TO ONE SELF OCCUPIED PROPERTY. IN REPLY, THE ASSESSEE SUBMITTED A LIST OF VARIOUS HOUSE PROPERTIES WITH THEIR CORRESPONDING USAGE AS UNDER:- SL NO. DESCRIPTION OF PROPERTY BOOK VALUE REMARKS 1 FLAT AT MALAD 5,42,902 2 FLAT AT YASHODEEP CHS LTD. 33,79,000 RESIDENCE 3 MHADA PREMISES 31,01,566 FOR BUSINESS OF M/S PUSHPA KRISHNA CREATIONS 4 FLAT AT MILLAT NAGAR 1103 27,03,545 5 FLAT AT MILLAT NAGAR 1203 23,63,490 PERSONAL OFFICE 6 PLOT AT MHADA SHERIQ HALL 23,70,548 GANESH ACHARYA DANCE ACADEMY ITA 7976/M/11 4 THE A.O. OBSERVED THAT THE ASSESSEE HAS CLAIMED FOU R OUT OF THE SIX HOUSE PROPERTIES TO BE USED FOR HIS BUSINESS PURPOSES WHI LE THE ASSESSEE IS NOT CLAIMING DEPRECIATION WITH RESPECT TO THESE FOUR PR OPERTIES STATED TO BE USED FOR BUSINESS PURPOSES AND SINCE NO EVIDENCE WERE SU BMITTED BY THE ASSESSEE TO SUBSTANTIATE ITS CLAIM OF USAGE OF ABOVE PROPERT IES FOR THE PURPOSE OF BUSINESS, THE A.O. AFTER GIVING BENEFIT OF ONE HOUS E PROPERTY FOR RESIDENTIAL PURPOSE AND ONE FOR THE PURPOSE OF BUSINESS, COMPUT ED THE INCOME UNDER THE HEAD INCOME FROM HOUSE PROPERTY BASED ON 10% OF T HE BOOK VALUE AS UNDER:- SL NO. DESCRIPTION OF PROPERTY BOOK VALUE 1 FLAT AT MALAD 5,42,902 2 FLAT AT MILLAT NAGAR 1103 27,03,545 3 FLAT AT MILLAT NAGAR 1203 23,63,490 4 PLOT AT MHADA SHERIQ HALL 23,70,548 TOTAL 79,80,485 TOTAL BOOK VALUE : 79,80,485 10% OF THE BOOK VALUE OF THE PROPERTY 7,98,048 LESS: 30% STANDARD DEDUCTION 2,39,414 5,58,634. THUS, RS. 5,58,634/- WAS ADDED TO THE INCOME OF THE ASSESSEE UNDER THE HEAD INCOME FROM HOUSE PROPERTY BY THE AO VIDE ASSESSM ENT ORDERS DATED 07-12- 2009 PASSED U/S 143(3) READ WITH SECTION 143(2) OF THE ACT. FURTHER, IT WAS OBSERVED BY THE A.O. THAT THE ASSESSEE HAS DEBITED IN HIS P&L ACCOUNT WITH INTEREST ON HOUSING LOAN OF RS. 8,77,110/- AND AS T HE HOUSE PROPERTIES WERE DEEMED TO BE LET OUT PROPERTIES, THE SAID AMOUNT OF INTEREST CANNOT BE ALLOWED AS BUSINESS EXPENSES AND ACCORDINGLY THE A.O. RESTR ICTED THE CLAIM OF INTEREST AGAINST THE HOUSE PROPERTY TO RS. 1,50,000/- BY VIR TUE OF SECTION 24(B) OF THE ITA 7976/M/11 5 ACT VIDE ASSESSMENT ORDERS DATED 07-12-2009 PASSED U/S 143(3) READ WITH SECTION 143(2) OF THE ACT. AGGRIEVED BY THE ASSESSMENT ORDERS DATED 07-12-2009 OF THE AO, THE ASSESSEE CARRIED THE MATTER BEFORE THE CIT(A) IN APPEAL AND SUBMITTED THAT THE ASSESSEE IS THE OWNER OF PLOT AT MHADA SHERIQ HALL WITHOUT SUPER STRUCTURE ON THE SAID PROPERTY ON WHICH A PARTNERSHIP FIRM NA MED M/S SING AND SWING (IN WHICH THE ASSESSEE IS 50% PARTNER IN THE CAPACI TY OF HUF) HAS CONSTRUCTED A DANCE REHEARSAL HALL NAMED AS SHERIQ HALL AND T HIS HALL IS BEING USED AS DANCE REHEARSAL HALL. THE ASSESSEE HAS FILED COPY OF PARTNERSHIP DEED, P&L ACCOUNT & BALANCE SHEET SHOWING THAT THE HALL WAS C ONSTRUCTED ON THE SAID PROPERTY AND THE PREMISES IS BEING USED AS DANCE RE HEARSAL HALL. THE ASSESSEE SUBMITTED THAT THE SAID DOCUMENTS WERE SUBMITTED TO THE AO DURING REMAND REPORT PROCEEDINGS AND NO ADVERSE COMMENTS HAS BEEN MADE BY THE AO WHILE ACCEPTING THE EVIDENCE. THE ASSESSEE IS ALSO USING A PART OF THE ABOVE SAID PROPERTY FOR RUNNING AS GANESH ACHARYA DANCE ACADEM Y. THE ASSESSEE SUBMITTED THAT THE ASSESSEE IS OWNER OF THE PLOT ON LY AND NOT THE OWNER OF THE BUILDING , HENCE PROVISIONS OF SECTION 22 OF THE AC T ARE NOT ATTRACTED WITH RESPECT TO THIS PROPERTY. SIMILARLY, THE ASSESSEE SUBMITTED THAT THE FLAT AT MALAD WAS USED AS GODOWN DURING THE PREVIOUS YEAR BUT ERRONEOUSLY THE USAGE WAS NOT INDICATED BEFORE THE AO AND HENCE IT BEING USED FOR BUSINESS PURPOSE , IT CANNOT BE BROUGHT TO TAX UNDER THE HEAD INCOME FROM HOUSE PROPERTY. T HE ASSESSEE FURTHER SUBMITTED THAT THE FLAT NO. 1103 AND 1203 AT MILLAT NAGAR ARE BEING USED BY THE ASSESSEE AS CHOREOGRAPHY AND FILM PRODUCTION BU SINESSES SEPARATELY AS THEY CANNOT BE USED IN CONJUNCTION WITH EACH OTHER DUE TO REQUIREMENTS OF BUSINESS NECESSITIES . THE ASSESSEE ALSO SUBMITTED THAT MHADA PREMISES WERE ACTUALLY SOLD DURING THE YEAR AND THE SALE CON SIDERATION OF RS. 15 LAKHS WAS SHOWN AS ADVANCE AGAINST MHADA PROPERTIES IN TH E BALANCE SHEET. THIS ITA 7976/M/11 6 PROPERTY WAS BEING USED FOR FILM PRODUCTION WHICH W AS LATER TRANSFERRED TO MILLAT NAGAR PREMISES AND NO INCOME CAN BE ASSESSE D IN RESPECT OF MILLAT NAGAR PREMISES.THE CIT(A) NOTED THAT THE AO HAS OBS ERVED THAT NO DEPRECIATION HAS BEEN CLAIMED BY THE ASSESSEE ON TH ESE PROPERTIES WHICH THE ASSESSEE REPLIED THAT EVEN IF NO DEPRECIATION IS CL AIMED BY THE ASSESSEE BUT THAT DOES NOT MEAN THAT BUSINESSES ARE NOT CARRIED BY THE ASSESSEE FROM THE SAID PREMISES. 4. THE CIT(A) AFTER CONSIDERING THE SUBMISSION OF T HE ASSESSEE OBSERVED THAT THE ASSESSEE HAS NOT CLAIMED ANY DEPRECIATION ON THE BUSINESS PREMISES. WITH RESPECT TO MHADA PROPERTY, THE CIT(A) HELD THA T THE ASSESSEE HIMSELF HAS SHOWN ADVANCE OF RS.15 LACS AND ALSO NOC FOR SALE O F PROPERTY BY THE SOCIETY WAS GIVEN ON 02/10/2007 WHICH MEANS THAT PROPERTY W AS NOT SOLD DURING THE PREVIOUS YEAR AND HENCE AMOUNT WAS SHOWN AS ADVANCE .THE CIT(A) HELD THAT THE AO HAS RIGHTLY TREATED THE SAID PROPERTY AS DEE MED LET OUT PROPERTY. WITH REGARD TO FLAT AT MALAD, THE CIT(A) HELD THAT THE ASSESSEE HAS HIMSELF STATED THAT THE FLAT AS VACANT DURING ASSESSMENT PR OCEEDINGS. THE ASSESSEE HAS NOT BROUGHT ANY EVIDENCE TO SUBSTANTIATE THAT T HE FLAT HAS BEEN USED FOR GODOWN NOR ANY DEPRECIATION IS CLAIMED AND HENCE TH E CLAIM OF THE ASSESSEE WAS REJECTED. WITH RESPECT TO CLAIM OF FLAT NO. 1103 AND 1203 , T HE CIT(A) OBSERVED THAT THESE ARE NEWLY ACQUIRED PROPERTIES DURING THE PREV IOUS YEAR. THE CLAIM OF THE ASSESSEE THAT THESE FLATS WERE USED FOR BUSINESSES WAS NOT SUPPORTED BY ANY DOCUMENTARY EVIDENCE AND THE FINDING OF THE AO WAS UPHELD . THE CIT(A) UPHELD THE CONTENTION OF THE ASSESSEE THAT THE FLAT WAS ACQUIRED IN MAY 2006 AND HENCE ALV SHOULD BE COMPUTED FOR THE PERIOD OF OCCUPATION OF FLAT TILL END OF FINANCIAL YEAR 2006-07. ITA 7976/M/11 7 WITH RESPECT TO THE CLAIM OF THE ASSESSEE THAT THE ASSESSEE IS ONLY THE OWNER OF THE PLOT AT MAHADA AND STRUCTURE THEREIN DO NOT BELONG TO THE ASSESSEE AS SAME WAS CONSTRUCTED BY PARTNERSHIP FIRM M/S SING & SWING , IT WAS HELD BY THE CIT(A) THAT THE ASSESSEE HAS NOT RAISED THE CLA IM BEFORE THE AO. THE CIT(A) REJECTED THE CONTENTION OF THE ASSESSEE THAT THE BUILDING ON THE PLOT WAS NOT OWNED BY THE ASSESSEE . THE CIT(A) ALSO HEL D THAT EVEN IF THE SAID PLOT WAS GIVEN TO THE AFORE-SAID PARTNERSHIP FIRM , NO RENT IS RECEIVED FROM THE PARTNERSHIP FIRM BY THE ASSESSEE AND NO COPY OF UTI LIZATION OF PLOT BY THE FIRM HAS BEEN FILED BY THE ASSESSEE. THE CIT(A) RELIED U PON THE DECISION IN THE CASE OF D M VAKIL V. CIT(BOM.) 14 ITR 298 , INDIAN CITY PROPERTIES LTD. V. CIT (CAL) 55 ITR 262, EAST INDIA HOUSING AND LAND DEVELOPMENT TRUST LIMITED V. CIT (SC) 42 ITR 49 WHEREIN IT IS HELD THAT THE OWNER OF PROPERTY IS LIABLE TO BE CHARGED TO HOUSE PROPERTY INCOME. THUS, THE CIT(A) UPHELD THE ORDERS OF THE AO. THE CIT(A) AFTER CONSIDERING THE SUBMISSION OF THE ASSESSEE, RESTRICTED THE DISALLOWANCE TO 8% OF MARKET VALUE OF THE PROPERTY AFTER REFERRING TO THE PROVISIONS OF SECTION 7(1) OF THE WEALTH TAX ACT, 1 957 READ WITH SCHEDULE III , FROM WHICH THE ASSESSEE WILL BE GRANTED DEDUCTION O F MUNICIPAL TAXES AND THE STANDARD DEDUCTION @30% AS PROVIDED UNDER THE ACT. SIMILARLY, THE CIT(A) RESTRICTED THE CLAIM OF INTER EST OF THE ASSESSEE TO RS. 1,50,000/- BY VIRTUE OF PROVISIONS OF SECTION 24(B) OF THE ACT AS IN THE OPINION OF THE CIT(A), THE PROPERTY WAS LYING VACANT DURING THE YEAR AND HAS BEEN RIGHTLY CONSIDERED TO BE DEEMED LET OUT PROPERTY BY THE A.O. 5. AGGRIEVED BY THE ORDERS OF THE CIT(A), THE ASSES SEE IS IN FURTHER APPEAL BEFORE THE TRIBUNAL. ITA 7976/M/11 8 6. THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ASSESSEE HAS FILED ADDITIONAL EVIDENCES BEFORE THE CIT(A) WHICH THE CIT(A) REFUSED TO ADMIT AND THE SAID EVIDENCES WERE NOT CONSIDERED BY THE CIT(A ). IT WAS SUBMITTED BEFORE US THAT THE NOTIONAL INCOME BASED UPON THE BOOK VAL UE/MARKET VALUE OF THE PROPERTY CANNOT BE BROUGHT TO TAX AS THESE IS NO SC HEME OR PROVISIONS IN THE ACT TO COMPUTE THE ANNUAL LETTING VALUE (ALV) TO CO MPUTE INCOME FROM HOUSE PROPERTY BASED UPON THE BOOK VALUE/MARKET VALUE OF THE PROPERTY. SIMILARLY , THE ASSESSEE SUBMITTED THAT SINCE THE PROPERTY AT MILLAT NAGAR WAS USED FOR BUSINESS PURPOSES, HENCE, THE INTEREST CANNOT BE RE STRICTED TO RS. 1,50,000/- AS THE AMOUNT HAS BEEN PAID BY THE ASSESSEE ON HOUS ING LOAN AVAILED FOR THE ACQUISITION OF MILLAT NAGAR PROPERTY AND THE SAID P ROPERTY IS BEING USED FOR BUSINESS PURPOSES. 6. THE LD. D.R., ON THE OTHER HAND, RELIED UPON THE ORDERS OF AUTHORITIES BELOW. 7. WE HAVE CONSIDERED THE RIVAL CONTENTIONS AND PER USED THE MATERIAL AVAILABLE ON RECORD. WE OBSERVED THAT THE HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT V. TIP TOP TYPOGRAPHY, (2014) 48 TAXMAN N.COM 191 (BOM) HAS LAID DOWN THE PRINCIPLES FOR COMPUTATION OF INCOME FROM HOUSE PROPERTY U/S 22 AND 23 OF THE ACT. THE RELEVANT EXTRACTS OF JUDG MENT OF HONBLE BOMBAY HIGH COURT ARE REPRODUCED AS UNDER : 43. IT ALSO APPEARS THAT BOTH, THE JUDGMENT IN THE CAS E OF SATYA CO. LTD. (SUPRA) RENDERED BY A DIVISION BENCH OF THE CA LCUTTA HIGH COURT AND THE JUDGMENT OF THIS COURT IN THE CASE OF J.K. INVE STORS (BOMBAY) LTD. (SUPRA) WERE CONSIDERED BY THE FULL BENCH OF T HE DELHI HIGH COURT ON WHICH DECISION HEAVY RELIANCE IS PLACED BY THE COUN SEL FOR THE ASSESSEE. THE FULL BENCH WAS CALLED UPON TO DECIDE AS TO HOW TO DETERMINE 'FAIR RENT' OF THE PROPERTY AND, THEN, TO FIND OUT AS TO WHETHER THE ACTUAL RENT ITA 7976/M/11 9 RECEIVED IS LESS OR MORE THAN THE 'FAIR RENT' SO TH AT HIGHER OF THE TWO IS TAKEN AS ANNUAL LETTING VALUE UNDER SECTION 23(1)(B ) OF THE INCOME-TAX ACT. 44. THE FACTUAL AND ADMITTED POSITION BEFORE THE DELHI FULL BENCH WAS IN ADDITION TO THE CONTRACTUAL RENT, SUBSTANTIAL AMOUN T BY WAY OF INTEREST FREE DEPOSIT IS GIVEN, THE SECURITY DEPOSIT IS MANY TIME MORE THAN THE ANNUAL RENT RECEIVED BY THE ASSESSEE. NONETHELESS, THE ANNUAL LETTING VALUE ARRIVED AT BY THE MUNICIPAL CORPORATION WAS L ESS THAN THE CONTRACTUAL RENT RECEIVED BY THE ASSESSEES. THE ASS ESSING OFFICER WHILE ARRIVING AT THE 'FAIR RENT' HAD ADDED NOTIONAL INTE REST ON THE SECURITY DEPOSIT TO THE ACTUAL RENT RECEIVED TO ARRIVE AT TH E ANNUAL LETTING VALUE. NONE OF THE CASES BEFORE THE FULL BENCH INVOLVED AP PLICABILITY OF THE DELHI RENT CONTROL ACT. THEREFORE, QUESTION OF FIXING STA NDARD RENT IN TERMS OF THIS ACT DID NOT ARISE. HOWEVER, IT WAS ADMITTED TH AT IF THE PROPERTY IS COVERED BY DELHI RENT CONTROL ACT THEN THE STANDARD RENT UNDER THE SAID ACT CAN BE TREATED AS 'FAIR RENT' IN VIEW OF VARIOU S JUDGMENTS. 45. IN THE ABOVE BACKDROP, THE FULL BENCH HELD AS UNDE R: 'WITH THIS, WE REVERT BACK TO THE MOOT QUESTION, VI Z., HOW TO DETERMINE THE 'FAIR RENT' OF THE PROPERTY AND THEN TO FIND OUT AS TO WHETHER ACTUAL RENT RECEIVED IS LESS OR MORE THAN THE 'FAIR RENT' SO TH AT HIGHER OF TWO IS TAKEN AS ANNUAL LETTING VALUE UNDER SECTION 23(1)(B) OF T HE ACT. FOR THIS PURPOSE, WE FIRST DISCUSS THE VALIDITY OF APPROACH TAKEN BY THE AO, VIZ., WHETHER IT IS PERMISSIBLE TO ADD NOTIONAL INTEREST OF INTEREST FREE SECURITY DEPOSIT AND ADD THE SAME TO THE ACTUAL RENT RECEIVED FOR ARRIVI NG AT ANNUAL LETTING VALUE. EVEN THE DIVISION BENCH WHILE MAKING REFEREN CE DID NOT COUNTENANCE THE AFORESAID FORMULA ADOPTED BY THE AO AS IS CLEAR FROM PARA 12 OF THE REFERENCE ORDER WHEREIN IT IS OBSERV ED AS UNDER: ITA 7976/M/11 10 '12. IN THIS BACKDROP, THE IMPORTANT QUESTION WHICH ARISES FOR DETERMINATION IS: WHAT IS THE FAIR RENT OF THE PROP ERTIES, WHICH WERE LET OUT IN THE INSTANT CASE? THE MISTAKE COMMITTED BY T HE AO WAS THAT HE DID NOT ADDRESS THIS ISSUE AND STRAIGHTWAY PROCEEDE D TO ADD NOTIONAL INTEREST ON THE INTEREST FREE SECURITY DEPOSIT. THE AFORESAID CONCLUSION IS CORRECT. WE MAY RECORD THAT PERMISSIBILITY OF ADDING NOTIONAL INTEREST INTO ACTUAL MARKET RENT RE CEIVED WAS NOT APPROVED BY THE CALCUTTA HIGH COURT IN THE CASE OFC IT V. SATYA CO. LTD. [1997] 140 CTR (CAL) 569] AND CATEGORICALLY RE JECTED IN THE FOLLOWING WORDS: 'THERE IS NO MANDATE OF LAW WHEREBY THE AO COULD CO NVERT THE DEPRESSION IN THE RATE OF RENT INTO MONEY VALUE BY ASSUMING THE MARKET RATE OF INTEREST ON THE DEPOSIT AS THE FURTHER RENT RECEIVED BY WAY OF BENEFIT OF INTEREST-FREE DEPOSIT. BUT SECTION 23, A S ALREADY NOTED, DOES NOT PERMIT SUCH CALCULATION OF THE VALUE OF THE BENEFIT OF INTEREST-FREE DEPOSIT AS PART OF THE RENT. THIS SITUATION IS, HOWEVER, FO RESEEN BY SCHEDULE III TO THE WT ACT AND IT AUTHORISES COMPUTATION OF PRESUMP TIVE INTEREST AT THE RATE OF 15 PER CENT AS AN INTEGRAL PART OF RENT TO BE ADDED TO THE OSTENSIBLE RENT. NO SUCH PROVISION, HOWEVER, EXISTS IN THE ACT. THAT BEING SO, THE ACT OF THE AO IN PRESUMING SUCH NOTIONAL IN TEREST AS INTEGRAL PART OF THE RENT IS ULTRA VIRES THE PROVISION OF SECTION 23(1) AND IS, THEREFORE, UNAUTHORISED. THOUGH WHAT HAS BEEN URGED ON BEHALF OF THE REVENUE IS NOT TO BE BRUSHED ASIDE AS IRRATIONAL, YET THE CONT ENTION IS NOT ACCEPTABLE AS THE LAW ITSELF COMES SHORT OF TACKLING SUCH FACT -SITUATION.' THIS VIEW OF THE CALCUTTA HIGH COURT HAS BEEN ACCEP TED BY A DIVISION BENCH OF THIS COURT AS WELL IN THE CASE OF CIT V. A SIAN HOTELS LTD. [2008] 215 CTR (DELHI) 84 HOLDING THAT THE NOTIONAL INTERE ST ON REFUNDABLE SECURITY, IF DEPOSITED, WAS NEITHER TAXABLE AS PROF IT OR GAIN FROM BUSINESS OR PROFESSION UNDER SECTION 28(IV) OF THE ACT OR IN COME FROM HOUSE ITA 7976/M/11 11 PROPERTY UNDER SECTION 23(1)(A) OF THE ACT. RATIONA LE GIVEN IN THIS BEHALF WAS AS UNDER (PAGE 493): 'A PLAIN READING OF THE PROVISIONS INDICATES THAT T HE QUESTION OF ANY NOTIONAL INTEREST ON AN INTEREST FREE DEPOSIT BEING ADDED TO THE INCOME OF AN ASSESSED ON THE BASIS THAT IT MAY HAVE BEEN EARN ED BY THE ASSESSEE IF PLACED AS A FIXED DEPOSIT, DOES NOT ARISE. SECTI ON 28(IV) IS CONCERNED WITH BUSINESS INCOME AND IS DISTINCT AND DIFFERENT FROM INCOME FROM HOUSE PROPERTY. IT TALKS OF THE VALUE OF ANY BENEFI T ON PERQUISITE, 'WHETHER CONVERTIBLE INTO MONEY OR NOT' ARISING FROM 'THE BU SINESS OR THE EXERCISE OF A PROFESSION.' IT HAS BEEN EXPLAINED BY THIS COURT IN RAVINDER SINGH THAT SECTION 28(IV) CAN BE INVOKED ONLY WHERE THE BENEFI T OR PERQUISITE IS OTHER THAN CASH AND THAT THE TERM 'BENEFIT OR AMENITY OR PERQUISITE' CANNOT RELATE TO CASH PAYMENTS. IN THE INSTANT CASE, THE AO HAS DETERMINED THE MONE TARY VALUE OF THE BENEFIT STATED TO HAVE ACCRUED TO THE ASSESSED BY A DDING A SUM THAT CONSTITUTED 18% SIMPLE INTEREST ON THE DEPOSIT. ON THE STRENGTH OF RAVINDER SINGH, IT MUST BE HELD THAT THIS RULES OUT THE APPLICATION OF SECTION 28(IV) OF THE ACT. SECTION 23(1)(A) IS RELEVANT FOR DETERMINING THE IN COME FROM HOUSE PROPERTY AND CONCERNS DETERMINATION OF THE ANNUAL L ETTING VALUE OF SUCH PROPERTY. THAT PROVISION TALKS OF 'THE SUM FOR WHIC H THE PROPERTY MIGHT REASONABLY BE EXPECTED TO LET FROM YEAR TO YEAR.' T HIS CONTEMPLATES THE POSSIBLE RENT THAT THE PROPERTY MIGHT FETCH AND NOT CERTAINLY THE INTEREST IN FIXED DEPOSIT THAT MAY BE PLACED BY THE TENANT W ITH THE LANDLORD IN CONNECTION WITH THE LETTING OUT OF SUCH PROPERTY. I T MUST BE REMEMBERED THAT IN A TAXING STATUTE IT WOULD BE UNSAFE FOR THE COURT TO GO BEYOND THE LETTER OF THE LAW AND TRY TO READ INTO THE PROVISIO N MORE THAN WHAT IS ALREADY PROVIDED FOR. THE ATTEMPT BY LEARNED COUNSE L FOR THE REVENUE TO DRAW AN ANALOGY FROM THE WEALTH-TAX ACT, 1957 IS AL SO TO NO AVAIL. IT IS ITA 7976/M/11 12 AN ADMITTED POSITION THAT THERE IS A SPECIFIC PROVI SION IN THE WEALTH-TAX ACT WHICH PROVIDES FOR CONSIDERING OF A NOTIONAL IN TEREST WHEREAS SECTION 23(1)(A) CONTAINS NO SUCH SPECIFIC PROVISION.' WE APPROVE THE AFORESAID VIEW OF THE DIVISION BENCH OF THIS COURT AND OPERATIVE WORDS IN SECTION 23 (1)(A) OF THE ACT ARE 'THE SUM FOR WHICH THE PROPERTY MIGHT REASONABLY BE EXPECTED TO LET FROM Y EAR TO YEAR'. THESE WORDS PROVIDE A SPECIFIC DIRECTION TO THE REVENUE F OR DETERMINING THE 'FAIR RENT'. THE ASSESSING OFFICER, HAVING REGARD TO THE AFORESAID PROVISION IS EXPECTED TO MAKE AN INQUIRY AS TO WHAT WOULD BE THE POSSIBLE RENT THAT THE PROPERTY MIGHT FETCH. THUS, IF HE FINDS THAT TH E ACTUAL RENT RECEIVED IS LESS THAN THE 'FAIR/MARKET RENT' BECAUSE OF THE REA SON THAT THE ASSESSEE HAS RECEIVED ABNORMALLY HIGH INTEREST FREE SECURITY DEPOSIT AND BECAUSE OF THAT REASON, THE ACTUAL RENT RECEIVED IS LESS TH AN THE RENT WHICH THE PROPERTY MIGHT FETCH, HE CAN UNDERTAKE NECESSARY EX ERCISE IN THAT BEHALF. HOWEVER, BY NO STRETCH OF IMAGINATION, THE NOTIONAL INTEREST ON THE INTEREST FREE SECURITY CAN BE TAKEN AS DETERMINATIV E FACTOR TO ARRIVE AT A 'FAIR RENT'. THE PROVISIONS OF SECTION 23(1)(A) DO NOT MANDATE THIS. THE DIVISION BENCH IN CIT V. ASIAN HOTELS LTD. [2010] 323 ITR 490 (DELHI) , THUS, RIGHTLY OBSERVED THAT IN A TAXING STATUTE IT WOULD BE UNSAFE FOR THE COURT TO GO BEYOND THE LETTER OF THE LAW AND TRY TO READ INTO THE PROVISION MORE THAN WHAT IS ALREADY PROVIDED FOR. WE MAY ALSO RECORD THAT EVEN THE BOMBAY HIGH COURT IN THE CASE OFCIT V. J.K. INV ESTORS (BOMBAY) LTD. [2001] 248 ITR 723 CATEGORICALLY REJECTED THE FORMULA OF ADDITION OF NOTIONAL INTEREST WHILE DETERMINING THE 'FAIR RENT' . IT IS, THUS, MANIFEST THAT VARIOUS COURTS HAVE HELD A CONSISTENT VIEW THAT NOTIONAL INTEREST CANNOT FORM PART OF ACTUAL RENT. HENCE, THERE IS NO JUSTIFICATION TO TAKE A DIFFERENT VIEW THAT WHAT HA S BEEN STATED IN CIT V. ASIAN HOTELS LIMITED [2010] 323 ITR 490/[2008] 168 TAXMAN 59 (DELHI) . ITA 7976/M/11 13 THE NEXT QUESTION WOULD BE AS TO WHETHER THE ANNUAL LETTING VALUE FIXED BY THE MUNICIPAL AUTHORITIES UNDER THE DELHI MUNICI PAL CORPORATION ACT CAN BE THE BASIS OF ADOPTING ANNUAL LETTING VALUE F OR THE PURPOSES OF SECTION 23 OF THE ACT. THIS QUESTION WAS ANSWERED I N AFFIRMATIVE BY THE CALCUTTA HIGH COURT IN CIT V. SATYA CO. LTD. [1997] 140 CTR (CAL.) 569 ON THE GROUND THAT THE PROVISIONS CONTAINED IN THE DEL HI MUNICIPAL CORPORATION ACT FOR FIXING ANNUAL LETTING VALUE IS IN PARI MATERIA WITH SECTION 23 OF THE ACT. THE COURT OPINED THAT THE FA IR RENT FIXED UNDER THE MUNICIPAL LAWS, WHICH TAKES INTO CONSIDERATION EVER YTHING, WOULD FORM THE BASIS OF ARRIVING AT ANNUAL VALUE TO BE DETERMI NED UNDER SECTION 23(1)(A) AND TO BE COMPARED WITH ACTUAL RENT AND NO TIONAL ADVANTAGE IN THE FORM OF NOTIONAL INTEREST ON INTEREST FREE SECU RITY DEPOSIT COULD NOT BE TAKEN INTO CONSIDERATION. IT IS CLEAR FROM THE FOLL OWING DISCUSSION THEREIN: '6. WITH REGARD TO QUESTION NOS. (5) AND (6) WHICH ARE ONLY FOR THE ASSESSMENT YEARS 1984-85 AND 1985-86 THE FURTHER IS SUE INVOLVED IS WHETHER ANY ADDITION TO THE ANNUAL RENTAL VALUE CAN BE MADE WITH REFERENCE TO ANY NOTIONAL INTEREST ON THE DEPOSIT M ADE BY THE TENANT. WHEN THE ANNUAL VALUE IS DETERMINED UNDER SUB-CLAUS E (A) OF SUB-SECTION (1) OF SECTION 23 WITH REFERENCE TO THE FAIR RENT T HEN TO SUCH VALUE NO FURTHER ADDITION CAN BE MADE. THE FAIR RENT, TAKES INTO CONSIDERATION EVERYTHING. THE NOTIONAL INTEREST ON THE DEPOSIT IS NOT ANY ACTUAL RENT RECEIVED OR RECEIVABLE. UNDER SUB-CLAUSE (B) OF SEC TION 23(1) ONLY THE ACTUAL RENT RECEIVED OR RECEIVABLE CAN BE TAKEN INT O CONSIDERATION AND NOT ANY NOTIONAL ADVANTAGE. THE RENT IS AN ACTUAL SUM O F MONEY WHICH IS PAYABLE BY THE TENANT FOR USE OF THE PREMISES TO TH E LANDLORD. ANY ADVANTAGE AND/OR PERQUISITE CANNOT BE TREATED AS RE NT. WHEREVER ANY SUCH PERQUISITE OR BENEFIT IS SOUGHT TO BE TREATED AS INCOME, SPECIFIC PROVISIONS IN THAT BEHALF HAVE BEEN MADE IN THE ACT BY INCLUDING SUCH BENEFIT, ETC., IN THE DEFINITION OF THE INCOME UNDE R SECTION 2(24) OF THE ACT. ITA 7976/M/11 14 SPECIFIC PROVISIONS HAVE ALSO BEEN MADE UNDER DIFFE RENT HEADS FOR ADDING SUCH BENEFITS OR PERQUISITES AS INCOME WHILE COMPUT ING INCOME UNDER THOSE HEADS, E.G., SALARY, BUSINESS. THE COMPUTATIO N OF THE INCOME UNDER THE HEAD 'HOUSE PROPERTY' IS ON A DEEMED BASIS. THE TAX HAS TO BE PAID BY REASON OF THE OWNERSHIP OF THE PROPERTY. EVEN IF ONE DOES NOT INCUR ANY SUM ON ACCOUNT OF REPAIRS, A STATUTORY DEDUCTIO N THEREFORE IS ALLOWED AND WHERE ON REPAIRS EXPENSES ARE INCURRED IN EXCES S OF SUCH STATUTORY LIMIT, NO DEDUCTION FOR SUCH EXCESS IS ALLOWED. THE DEDUCTIONS FOR MUNICIPAL TAXES AND REPAIRS ARE NOT ALLOWED TO THE EXTENT THEY ARE BORNE BY THE TENANT. HOWEVER, EVEN SUCH ACTUAL REIMBURSEM ENTS FOR MUNICIPAL TAXES, INSURANCE, REPAIRS OR MAINTENANCE OF COMMON FACILITIES ARE NOT CONSIDERED AS PART OF THE RENT AND ADDED TO THE ANN UAL VALUE. ACCORDINGLY, THERE CAN BE NO SCOPE OR JUSTIFICATION WHATSOEVER FOR MAKING ANY ADDITION FOR ANY NOTIONAL INTEREST FOR DETERMIN ING THE ANNUAL VALUE. WHATEVER BENEFIT OR ADVANTAGE WHICH IS DERIVED FROM THE DEPOSITS - WHETHER BY WAY OF SAVING OF INTEREST OR OF EARNING INTEREST OR MAKING PROFITS BY INVESTING SUCH DEPOSIT - THE SAME WOULD BE REFLECTED IN COMPUTING THE INCOME OF THE ASSESSEE UNDER OTHER HE ADS. IN OUR VIEW THERE IS NO SCOPE FOR MAKING ANY ADDITI ON ON ACCOUNT OF SO- CALLED NOTIONAL INTEREST ON THE DEPOSIT MADE BY THE TENANT, SINCE THERE IS NO PROVISION TO THIS EFFECT IN SECTION 22 OR 23 OF THE IT ACT, 1961.' IN FACT, THIS IS THE VIEW TAKEN EVEN BY THE SUPREME COURT IN THE CASE OF MRS. SHIELA KAUSHISH V. CIT [1981] 131 ITR 435 ON ACCOUNT OF SIMILARITY OF THE PROVISIONS UNDER THE MUNICIPAL EN ACTMENTS AND SECTION 23 OF THE ACT. IT IS ON THIS BASIS THAT IN THE PRESENT CASE, THE C OMMISSIONER OF INCOME TAX (APPEALS) GAVE PRIMACY TO THE RATEABLE VALUE OF THE PROPERTY FIXED BY THE MUNICIPAL CORPORATION OF DELHI VIDE ITS ASSESSM ENT ORDER DATED ITA 7976/M/11 15 DECEMBER 31, 1996 AND ON THIS BASIS, OPINED THAT TH E ACTUAL RENT WAS MORE THAN THE SAID RATEABLE VALUE AND THEREFORE, AS PER SECTION 23(1)(B), THE ACTUAL RENT WOULD BE THE INCOME FROM HOUSE PROP ERTY AND THERE COULD NOT HAVE BEEN ANY FURTHER ADDITIONS. SINCE THE PROVISIONS OF FIXATION OF ANNUAL RENT UND ER THE DELHI MUNICIPAL CORPORATION ACT ARE IN PARI MATERIA OF SECTION 23 O F THE ACT, WE ARE INCLINED TO ACCEPT THE AFORESAID VIEW OF THE CALCUT TA HIGH COURT IN SATYA CO. LTD. [1997] 140 CTR (CAL.) 569 THAT IN SUCH CIR CUMSTANCES, THE ANNUAL VALUE FIXED BY THE MUNICIPAL AUTHORITIES CAN BE A RATIONAL YARDSTICK. HOWEVER, IT WOULD BE SUBJECT TO THE COND ITION THAT THE ANNUAL VALUE FIXED BEARS A CLOSE PROXIMITY WITH THE ASSESS MENT YEAR IN QUESTION IN RESPECT OF WHICH THE ASSESSMENT IS TO BE MADE UN DER THE INCOME-TAX LAWS. IF THERE IS A CHANGE IN CIRCUMSTANCES BECAUSE OF PASSAGE OF TIME, VIZ., THE ANNUAL VALUE WAS FIXED BY THE MUNICIPAL A UTHORITIES MUCH EARLIER IN POINT OF TIME ON THE BASIS OF RENT THAN RECEIVED , THIS MAY NOT PROVIDE A SAFE YARDSTICK IF IN THE ASSESSMENT YEAR IN QUESTIO N WHEN ASSESSMENT IS TO BE MADE UNDER INCOME-TAX ACT. THE PROPERTY IS LE T-OUT AT A MUCH HIGHER RENT. THUS, THE ASSESSING OFFICER IN A GIVEN CASE C AN IGNORE THE MUNICIPAL VALUATION FOR DETERMINING ANNUAL LETTING VALUE IF H E FINDS THAT THE SAME IS NOT BASED ON RELEVANT MATERIAL FOR DETERMINING THE 'FAIR RENT' IN THE MARKET AND THERE IS SUFFICIENT MATERIAL ON RECORD F OR TAKING A DIFFERENT VALUATION. WE MAY PROFITABLY REPRODUCE THE FOLLOWIN G OBSERVATIONS OF THE SUPREME COURT IN THE CASE OF CORPORATION OF CALCUTT A V. SMT. PADMA DEBI, AIR 1962 SC 151, 153. 'A BARGAIN BETWEEN A WILLING LESSOR AND A WILLING L ESSEE UNINFLUENCED BY ANY EXTRANEOUS CIRCUMSTANCES MAY AFFORD A GUIDING T EST OF REASONABLENESS. AN INFLATED OR DEFLATED RATE OF REN T BASED UPON FRAUD, EMERGENCY, RELATIONSHIP AND SUCH OTHER CONSIDERATIO NS MAY TAKE IT OUT OF THE BOUNDS OF REASONABLENESS.' ITA 7976/M/11 16 THUS THE RATEABLE VALUE, IF CORRECTLY DETERMINED, U NDER THE MUNICIPAL LAWS CAN BE TAKEN AS ALV UNDER SECTION 23(1)(A) OF THE ACT. TO THAT EXTENT WE AGREE WITH THE CONTENTION OF THE LEARNED COUNSEL OF THE ASSESSEE. HOWEVER, WE MAKE IT CLEAR THAT RATEABLE VALUE IS NO T BINDING ON THE ASSESSING OFFICER. IF THE ASSESSING OFFICER CAN SHO W THAT RATEABLE VALUE UNDER MUNICIPAL LAWS DOES NOT REPRESENT THE CORRECT FAIR RENT, THEN HE MAY DETERMINE THE SAME ON THE BASIS OF MATERIAL/EVI DENCE PLACED ON RECORD. THIS VIEW IS FORTIFIED BY THE DECISION OF P ATNA HIGH COURT IN THE CASE OFKASHI PRASAD KATARUKA V. CIT [1975] 101 ITR 810 . THE ABOVE DISCUSSION LEADS TO THE FOLLOWING CONCLUS IONS: (I) ALV WOULD BE THE SUM AT WHICH THE PROPERTY MAY BE R EASONABLY LET OUT BY A WILLING LESSOR TO A WILLING LESSEE UNINFLU ENCED BY ANY EXTRANEOUS CIRCUMSTANCES. (II) AN INFLATED OR DEFLATED RENT BASED ON EXTRANEOUS CO NSIDERATION MAY TAKE IT OUT OF THE BOUNDS OF REASONABLENESS. (III) ACTUAL RENT RECEIVED, IN NORMAL CIRCUMSTANCES, WOUL D BE A RELIABLE EVIDENCE UNLESS THE RENT IS INFLATED/DEFLATED BY RE ASON OF EXTRANEOUS CONSIDERATION. (IV) SUCH ALV, HOWEVER, CANNOT EXCEED THE STANDARD RENT AS PER THE RENT CONTROL LEGISLATION APPLICABLE TO THE PROPERTY . (V) IF STANDARD RENT HAS NOT BEEN FIXED BY THE RENT CON TROLLER, THEN IT IS THE DUTY OF THE ASSESSING OFFICER TO DETERMIN E THE STANDARD RENT AS PER THE PROVISIONS OF RENT CONTROL ENACTMEN T. (VI) THE STANDARD RENT IS THE UPPER LIMIT, IF THE FAIR R ENT IS LESS THAN THE STANDARD RENT, THEN IT IS THE FAIR RENT WHICH SHAL L BE TAKEN AS ALV AND NOT THE STANDARD RENT. ITA 7976/M/11 17 WE WOULD LIKE TO REMARK THAT STILL THE QUESTION REM AINS AS TO HOW TO DETERMINE THE REASONABLE/FAIR RENT. IT HAS BEEN IND ICATED BY THE SUPREME COURT THAT EXTRANEOUS CIRCUMSTANCES MAY INFLATE/DEF LATE THE 'FAIR RENT'. THE QUESTION WOULD, THEREFORE, BE AS TO WHAT WOULD BE CIRCUMSTANCES WHICH CAN BE TAKEN INTO CONSIDERATION BY THE ASSESS ING OFFICER WHILE DETERMINING THE FAIR RENT. IT IS NOT NECESSARY FOR US TO GIVE ANY OPINION IN THIS BEHALF, AS WE ARE NOT CALLED UPON TO DO SO IN THESE APPEALS. HOWEVER, WE MAY OBSERVE THAT NO PARTICULAR TEST CAN BE LAID DOWN AND IT WOULD DEPEND ON FACTS OF EACH CASE. WE WOULD DO NOT HING MORE THAN TO EXTRACT THE FOLLOWING PASSAGE FROM THE SUPREME COUR T JUDGMENT IN THE CASE OF MOTICHAND HIRACHAND V. BOMBAY MUNICIPAL COR PORATION, AIR 1968 SC 441, 442 : 'IT IS WELL-RECOGNIZED PRINCIPLE IN RATING THAT BOT H GROSS VALUE AND NET ANNUAL VALUE ARE ESTIMATED BY REFERENCE TO THE RENT AT WHICH THE PROPERTY MIGHT REASONABLY BE EXPECTED TO LET FROM YEAR TO YE AR. VARIOUS METHODS OF VALUATION ARE APPLIED IN ORDER TO ARRIVE AT SUCH HYPOTHETICAL RENT, FOR INSTANCE, BY REFERENCE TO THE ACTUAL RENT PAID FOR THE PROPERTY OR FOR OTHERS COMPARABLE TO IT OR WHERE THERE ARE NO RENTS BY REF ERENCE TO THE ASSESSMENTS OF COMPARABLE PROPERTIES OR TO THE PROF ITS CARRIED FROM THE PROPERTY OR TO THE COST OF CONSTRUCTION.' 46. WE HAVE AND AFTER CAREFUL READING OF THE PROVISION IN QUESTION AND THE CONCLUSION OF THE FULL BENCH OF THE DELHI HIGH COURT COUNCLUDED THAT A DIFFERENT VIEW CANNOT BE TAKEN. WE RESPECTFULLY CON CUR WITH THE VIEW TAKEN IN THIS FULL BENCH DECISION OF THE DELHI HIGH COURT. 47. WE ARE OF THE VIEW THAT WHERE RENT CONTROL LEGISLA TION IS APPLICABLE AND AS IS NOW URGED THE TREND IN THE REAL ESTATE MA RKET SO ALSO IN THE COMMERCIAL FIELD IS THAT CONSIDERING THE DIFFICULTI ES FACED IN EITHER RETRIEVING BACK IMMOVABLE PROPERTIES IN METRO CITIE S AND TOWNS, SO ALSO THE TIME SPENT IN LITIGATION, IT IS EXPEDIENT TO EX ECUTE A LEAVE AND LICENSE ITA 7976/M/11 18 AGREEMENTS. THESE ARE USUALLY FOR FIXED PERIODS AND RENEWABLE. IN SUCH CASES AS WELL, THE CONCEDED POSITION IS THAT THE AN NUAL LETTING VALUE WILL HAVE TO BE DETERMINED ON THE SAME BASIS AS NOTED AB OVE. IN THE EVENT AND AS URGED BEFORE US, THE SECURITY DEPOSIT COLLEC TED AND REFUNDABLE INTEREST FREE AND THE MONTHLY COMPENSATION SHOWS A TOTAL MISMATCH OR DOES NOT REFLECT THE PREVAILING RATE OR THE ATTEMPT IS TO DEFLATE OR INFLATE THE RENT BY SUCH METHODS, THEN, AS HELD BY THE DELH I HIGH COURT, THE ASSESSING OFFICER IS NOT PREVENTED FROM CARRYING OU T THE NECESSARY INVESTIGATION AND ENQUIRY. HE MUST HAVE COGENT AND SATISFACTORY MATERIAL IN HIS POSSESSION AND WHICH WILL INDICATE THAT THE PARTIES HAVE CONCEALED THE REAL POSITION. HE MUST NOT MAKE A GUESS WORK OR ACT ON CONJECTURES AND SURMISES. THERE MUST BE DEFINITE AND POSITIVE M ATERIAL TO INDICATE THAT THE PARTIES HAVE SUPPRESSED THE PREVAILING RAT E. THEN, THE ENQUIRIES THAT THE ASSESSING OFFICER CAN MAKE, WOULD BE FOR A SCERTAINING THE GOING RATE. HE CAN MAKE A COMPARATIVE STUDY AND MAKE A AN ALYSIS. IN THAT REGARD, TRANSACTIONS OF IDENTICAL OR SIMILAR NATURE CAN BE ASCERTAINED BY OBTAINING THE REQUISITE DETAILS. HOWEVER, THERE ALS O THE ASSESSING OFFICER MUST SAFEGUARD AGAINST ADOPTING THE RATE STATED THE REIN STRAIGHTWAY. HE MUST FIND OUT AS TO WHETHER THE PROPERTY WHICH HAS BEEN LET OUT OR GIVEN ON LEAVE AND LICENSE BASIS IS OF A SIMILAR NATURE, NAMELY, COMMERCIAL OR RESIDENTIAL. HE SHOULD ALSO SATISFY HIMSELF AS TO W HETHER THE RATE OBTAINED BY HIM FROM THE DEALS AND TRANSACTIONS AND DOCUMENTS IN RELATION THERETO CAN BE APPLIED OR WHETHER A DEPART URE THEREFROM CAN BE MADE, FOR EXAMPLE, BECAUSE OF THE AREA, THE MEASURE MENT, THE LOCATION, THE USE TO WHICH THE PROPERTY HAS BEEN PUT, THE ACC ESS THERETO AND THE SPECIAL ADVANTAGES OR BENEFITS. IT IS POSSIBLE THAT IN A HIGH RISE BUILDING BECAUSE OF SPECIAL ADVANTAGES AND BENEFITS AN OFFIC E OR A BLOCK ON THE UPPER FLOOR MAY FETCH HIGHER RETURNS OR VICE VERSA. THEREFORE, THERE IS NO MAGIC FORMULA AND EVERYTHING DEPENDS UPON THE FACTS AND CIRCUMSTANCES IN EACH CASE. HOWEVER, WE EMPHASIZE THAT BEFORE THE ASSESSING OFFICER ITA 7976/M/11 19 DETERMINES THE RATE BY THE ABOVE EXERCISE OR SIMILA R PERMISSIBLE PROCESS HE IS BOUND TO DISCLOSE THE MATERIAL IN HIS POSSESS ION TO THE PARTIES. HE MUST NOT PROCEED TO RELY UPON THE MATERIAL IN HIS P OSSESSION AND DISBELIEVE THE PARTIES. THE SATISFACTION OF THE ASS ESSING OFFICER THAT THE BARGAIN REVEALS AN INFLATED OR DEFLATED RATE BASED ON FRAUD, EMERGENCY, RELATIONSHIP AND OTHER CONSIDERATIONS MAKES IT UNRE ASONABLE MUST PRECEDE THE UNDERTAKING OF THE ABOVE EXERCISE. AFTE R THE ABOVE ASCERTAINMENT IS DONE BY THE OFFICER HE MUST, THEN, COMPLY WITH THE PRINCIPLES OF FAIRNESS AND JUSTICE AND MAKE THE DIS CLOSURE TO THE ASSESSEE SO AS TO OBTAIN HIS VIEW. 48. WE ARE NOT IN AGREEMENT WITH SHRI CHHOTARAY THAT T HE MUNICIPAL RATEABLE VALUE CANNOT BE ACCEPTED AS A BONA FIDE RE NTAL VALUE OF THE PROPERTY AND IT MUST BE DISCARDED STRAIGHTWAY IN AL L CASES. THERE CANNOT BE A BLANKET REJECTION OF THE SAME. IF THAT IS TAKE N TO BE A SAFE GUIDE, THEN, TO DISCARD IT THERE MUST BE COGENT AND RELIAB LE MATERIAL. 49. WE ARE OF THE OPINION THAT MARKET RATE IN THE LOCA LITY IS AN APPROVED METHOD FOR DETERMINING THE FAIR RENTAL VALUE BUT IT IS ONLY WHEN THE ASSESSING OFFICER IS CONVINCED THAT THE CASE BEFORE HIM IS SUSPICIOUS, DETERMINATION BY THE PARTIES IS DOUBTFUL THAT HE CA N RESORT TO ENQUIRE ABOUT THE PREVAILING RATE IN THE LOCALITY. WE ARE O F THE VIEW THAT MUNICIPAL RATEABLE VALUE MAY NOT BE BINDING ON THE ASSESSING OFFICER BUT THAT IS ONLY IN CASES OF AFORE-REFERRED NATURE. IT IS DEFIN ITELY A SAFE GUIDE. 50. WE HAVE BROADLY AGREED WITH THE VIEW TAKEN BY THE FULL BENCH OF THE DELHI HIGH COURT. HENCE, THE ISSUE OF DETERMINATION OF THE 'FAIR RENTAL VALUE' IN RESPECT OF PROPERTIES NOT COVERED BY OR C OVERED BY THE RENT CONTROL ACT IS TO BE UNDERTAKEN IN TERMS OF THE LAW LAID DOWN IN THE FULL BENCH DECISION OF THE DELHI HIGH COURT. ITA 7976/M/11 20 51. WE QUITE SEE THE FORCE IN THE ARGUMENTS OF MS. VIS SANJEE THAT ORDINARILY THE LICENSE FEE AGREED BETWEEN THE WILLI NG LICENSOR OR A WILLING LICENSEE UNINFLUENCED BY ANY EXTRANEOUS CIRCUMSTANC ES WOULD AFFORD RELIABLE EVIDENCE OF WHAT THE LANDLORD MIGHT REASON ABLY BE EXPECT TO GET FROM A HYPOTHETICAL TENANT. SHE HAS IN MAKING THIS SUBMISSION, ANSWERED THE ISSUE AND SUMMED UP THE CONCLUSION AS WELL. THEN, IT IS BUT NATURAL AND LOGICAL THAT IN THE EVENT, THE TRAN SACTION IS INFLUENCED BY ANY EXTRANEOUS CIRCUMSTANCES OR VITIATED BY FRAUD, OR THE LIKE THAT THE ASSESSING OFFICER CAN ADOPT A 'FAIR RENT' BASED ON THE OPINION OBTAINED FROM RELIABLE SOURCES. THERE AS WELL, WE DO NOT SEE AS TO HOW WE CAN UPHOLD THE SUBMISSIONS OF MR. CHHOTARAY THAT THE NO TIONAL RENT ON THE SECURITY DEPOSIT CAN BE TAKEN INTO ACCOUNT AND CONS IDERATION FOR THE DETERMINATION. IF THE TRANSACTION ITSELF DOES NOT R EFLECT ANY OF THE AFORE STATED ASPECTS, THEN, MERELY BECAUSE A SECURITY DEP OSIT WHICH IS REFUNDABLE AND INTEREST FREE HAS BEEN OBTAINED, THE ASSESSING OFFICER SHOULD NOT PRESUME THAT THIS SUM OR THE INTEREST DE RIVED THEREFROM AT BANK RATE IS THE INCOME OF THE ASSESSEE TILL THE DE TERMINATION OR CONCLUSION OF THE TRANSACTION. THE ASSESSING OFFICE R OUGHT TO BE AWARE OF SEVERAL ASPECTS AND MATTERS INVOLVED IN SUCH TRANSA CTIONS. IT IS NOT NECESSARY THAT IF THE LICENSE IS FOR THREE YEARS TH AT IT WILL OPERATIVE AND CONTINUING TILL THE END. THERE ARE TERMS AND CONDIT IONS ON WHICH THE LEAVE AND LICENSE AGREEMENT IS EXECUTED BY PARTIES. THESE TERMS AND CONDITIONS ARE WILLINGLY ACCEPTED. THEY ENABLE THE LICENSE TO BE DETERMINED EVEN BEFORE THE STATED PERIOD EXPIRES. E QUALLY, THE LICENSEE CAN OPT OUT OF THE DEAL. A LEAVE AND LICENSE DOES N OT CREATE ANY INTEREST IN THE PROPERTY. THEREFORE, IT IS NOT AS IF THE SEC URITY DEPOSIT BEING MADE, IT WILL BE NECESSARILY REFUNDABLE AFTER THE THIRD Y EAR AND NOT OTHERWISE. EVERYTHING DEPENDS UPON THE FACTS AND CIRCUMSTANCES IN EACH CASE AND THE NATURE OF THE DEAL OR TRANSACTION. THESE ARE NO T MATTERS WHICH ABIDE BY ANY FIXED FORMULA AND WHICH CAN BE UNIVERSALLY A PPLIED. TODAY, IT ITA 7976/M/11 21 MAY BE COMMERCIALLY UNVIABLE TO ENTER INTO A LEASE AND, THEREFORE, THIS MODE OF INDUCTING A 'THIRD PARTY' IN THE PREMISES I S ADOPTED. THIS MAY NOT BE THE TREND TOMORROW, THEREFORE, WE DO NOT WISH TO CONCLUDE THE MATTER BY EVOLVING ANY RIGID TEST. 52. WE HAVE ALSO NOTED THE SUBMISSIONS OF SHRI AHUJA. WE ARE OF THE OPINION THAT EVEN IN THE CASES AND MATTERS BROUGHT BY HIM TO OUR NOTICE, IT IS EVIDENT THAT THE ASSESSING OFFICER CANNOT BRU SH ASIDE THE RENT CONTROL LEGISLATION, IN THE EVENT, IT IS APPLICABLE TO THE PREMISES IN QUESTION. THEN, THE ASSESSING OFFICER HAS TO UNDERTAKE THE EXERCISE CONTEMPLATED BY THE RENT CONTROL LEGISLATION FOR FIXATION OF STANDARD R ENT. THE ATTEMPT BY THE ASSESSING OFFICER TO OVERRIDE THE RENT CONTROL LEGI SLATION AND WHEN IT BALANCES THE RIGHTS BETWEEN THE PARTIES HAS RIGHTLY BEEN INTERFERED WITH IN THE GIVEN CASE BY THE APPELLATE AUTHORITY. THE A SSESSING OFFICER EITHER MUST UNDERTAKE THE EXERCISE TO FIX THE STANDARD REN T HIMSELF AND IN TERMS OF THE MAHARASHTRA RENT CONTROL ACT, 1999 IF THE SA ME IS APPLICABLE OR LEAVE THE PARTIES TO HAVE IT DETERMINED BY THE COUR T OR TRIBUNAL UNDER THAT ACT. UNTIL, THEN, HE MAY NOT BE JUSTIFIED IN A PPLYING ANY OTHER FORMULA OR METHOD AND DETERMINE THE 'FAIR RENT' BY ABIDING WITH THE SAME. IF HE DESIRES TO UNDERTAKE THE DETERMINATION HIMSELF, HE WILL HAVE TO GO BY THE MAHARASHTRA RENT CONTROL ACT, 1999. ME RELY BECAUSE THE RENT HAS NOT BEEN FIXED UNDER THAT ACT DOES NOT MEA N THAT ANY OTHER DETERMINATION AND CONTRARY THERETO CAN BE MADE BY T HE ASSESSING OFFICER. ONCE AGAIN HAVING RESPECTFULLY CONCURRED W ITH THE JUDGMENT OF THE FULL BENCH OF THE DELHI HIGH COURT, WE NEED NOT SAY ANYTHING MORE ON THIS ISSUE. 53. THUS, APART FROM THE THREE ASPECTS NAMELY OF A MUN ICIPAL VALUATION, OF OBTAINING INTEREST FREE SECURITY DEPOSIT AND THE PROPERTIES BEING COVERED BY THE MAHARASHTRA RENT CONTROL ACT BUT NO STANDARD RENT THEREUNDER IS FIXED, OUR ATTENTION HAS NOT BEEN INV ITED TO ANY OTHER CASE. ITA 7976/M/11 22 SUFFICE IT TO HOLD THAT IN THOSE CASES AND TO WHICH OUR ATTENTION IS NOT INVITED THE PRINCIPLES LAID DOWN IN THE DECISIONS O F THE HON'BLE SUPREME COURT AND REFERRED TO BY THE FULL BENCH OF THE DELH I HIGH COURT WOULD GOVERN THE ENQUIRY. 54. AS A RESULT OF THE ABOVE DISCUSSION, WE ARE OF THE OPINION THAT WHEREVER THE ASSESSING OFFICER HAS NOT ADHERED TO T HE ABOVE PRINCIPLES, AND HIS FINDING AND CONCLUSION HAS BEEN INTERFERED WITH, BY THE HIGHER APPELLATE AUTHORITIES, THE REVENUE CANNOT BRING THE MATTER TO THIS COURT AS NO SUBSTANTIAL QUESTION OF LAW CAN BE ARISING FO R DETERMINATION AND CONSIDERATION OF THIS COURT. THEN, THE FINDINGS BY THE LAST FACT FINDING AUTHORITY, NAMELY THE TRIBUNAL AND AGAINST THE REVE NUE SHALL HAVE TO BE UPHELD AS THEY ARE CONSISTENT WITH THE FACTS AND CI RCUMSTANCES BROUGHT BEFORE IT. IF THEY ARE NOT VITIATED BY ANY PERVERSI TY OR ERROR OF LAW APPARENT ON THE FACE OF THE RECORD, THE APPEALS OF THE REVENUE CANNOT BE ENTERTAINED. THEY WOULD HAVE TO BE ACCORDINGLY DISM ISSED. WE HAVE ALSO OBSERVED THAT THE A.O. HAS NOT MADE AN Y ENQUIRY WITH RESPECT TO THE COMPUTATION OF THE INCOME FROM HOUSE PROPERTY W ITH RESPECT TO THE RESPECTIVE PROPERTIES IN ACCORDANCE WITH SECTION 22 AND 23 OF THE ACT AND THE PRINCIPLES LAID DOWN BY THE HONBLE BOMBAY HIGH COU RT IN THE CASE OF TIP TOP TYPOGRAPHY (SUPRA) TO DETERMINE THE PREVAILING MARK ET RENT OF THESE PROPERTIES AND RATHER COMPUTED ALV BASED ON NOTIONA L RENT BASED ON COST OF PROPERTIES. DURING THE HEARING , THE LD. COUNSEL OF THE ASSESSEE ALSO CONTENDED THAT THE ASSESSEE HAS PRODUCED ADDITIONAL EVIDENCES BEFORE THE AUTHORITIES BELOW WHICH HAS NOT BEEN CONSIDERED BY THE AUTHORITIES AND PRINCIPLES OF NATURAL JUSTICE ARE VITIATED. IN VIEW OF THE ABOVE, WE ARE OF THE CONSIDERED VIEW THAT THE MATTER WITH RESPECT TO GRO UND NO 1 AND 2 RAISED BY THE ASSESSEE IN MEMO OF APPEAL NEEDS TO BE SET ASID E TO THE FILE OF THE A.O. FOR RE-DETERMINATION OF THE INCOME FROM HOUSE PROPERTIE S IN ACCORDANCE WITH THE ITA 7976/M/11 23 PROVISIONS OF SECTION 22 AND 23 OF THE ACT AND THE PRINCIPLES LAID DOWN BY THE HONBLE BOMBAY HIGH COURT IN THE CASE OF TIP TOP TY POGRAPHY (SUPRA) AFTER CONSIDERING THE ADDITIONAL EVIDENCES FILED BY THE A SSESSEE IN HIS DEFENSE. ACCORDINGLY WE SET ASIDE THE ORDER OF CIT(A) AND RESTORE BACK THE ISSUE TO THE FILE OF A.O. WITH THE ABOVE DIRECTIONS AND TO DECID E THE ISSUE DE-NOVO AS PER LAW. THE A.O. SHALL ALSO AFFORD SUFFICIENT OPPORTUN ITY OF BEING HEARD TO THE ASSESSEE IN ACCORDANCE WITH PRINCIPLES OF NATURAL J USTICE. GROUND NO. 1 & 2 ARE ACCORDINGLY TREATED AS ALLOWED FOR STATISTICAL PURPOSES. 8. GROUND NO. 3 RELATES TO THE ADDITION OF RS. 22,5 7,000/- MADE BY THE A.O. ON THE GROUND THAT IN CASE OF PROFESSIONAL INC OME, THE ASSESSEE IS LIABLE TO FOLLOW MERCANTILE METHOD OF ACCOUNTING IN RESPEC T OF INCOME WHICH HAS ALREADY BEEN CONSIDERED AS INCOME IN THE SUBSEQUENT ASSESSMENT YEAR BASED ON CASH BASIS OF ACCOUNTING CONSISTENTLY FOLLOWED B Y THE ASSESEE. DURING THE ASSESSMENT PROCEEDINGS U/S 143(3) READ WITH SECTION 143(2) OF THE ACT, THE A.O. OBSERVED THAT THE ASSESSE IS FOLLOWING CASH SY STEM OF ACCOUNTING FOR INDIVIDUAL TRANSACTIONS AND MERCANTILE SYSTEM OF AC COUNTING FOR TRANSACTIONS IN HIS PROPRIETORSHIP CONCERN M/S PUSHPA KRISHNA CR EATIONS. AS PER SECTION 145 OF THE ACT, METHOD OF ACCOUNTING SHOULD BE EITH ER CASH OR MERCANTILE TO BE FOLLOWED BY THE ASSESSEE AND SINCE THE ASSESSEE IS FOLLOWING MERCANTILE SYSTEM OF ACCOUNTING IN VIEW OF THE COMPULSORY REQU IREMENTS OF RULE 9A & 9B OF THE INCOME TAX RULES, 1962 , IT WAS SHOW CAUSED TO THE ASSESSEE BY THE A.O. THAT WHY MERCANTILE SYSTEM OF ACCOUNTING SHOUL D NOT BE FOLLOWED BY THE ASSESSEE WITH RESPECT TO HIS OTHER INDIVIDUAL TRANS ACTIONS. THE A.O. ASKED FOR THE AGREEMENT PURSUANT TO WHICH THE RECEIPTS ARE CR EDITED IN THE P&L ACCOUNT. THE ASSESSEE IN REPLY SUBMITTED THAT THE ASSESSEE IS AN INDIVIDUAL AND ALLOWED TO FOLLOW CASH METHOD OF ACCOUNTING FOR HIS VARIOUS BUSINESS OR PROFESSIONS AS PER SECTION 145 OF THE ACT. HOWEVER, FOR THE PURPOSE OF FILM PRODUCTION BUSINESS, METHOD OF ACCOUNTING AS PRESCR IBED IN RULE 9A AND 9B IS FOLLOWED. THUS, THE ASSESSEE SUBMITTED BEFORE T HE AO THAT THE ASSESSEE ITA 7976/M/11 24 HAS FOLLOWED THE PROVISIONS OF THE INCOME TAX ACT I N BOTH THE CASES. THE ASSESSEE ALSO SUBMITTED THAT WITH RESPECT TO HIS PR OFESSIONAL RECEIPT , THERE ARE NO WRITTEN AGREEMENTS AS ALL THE CONTRACTS ARE ORAL. THE A.O. ASKED THE ASSESSEE TO SUBMIT THE DETAILS OF PROFESSIONAL RECE IPTS PARTY WISE FOR THE FINANCIAL YEAR 2007-08 AND 2008-09 AGAINST WHICH TH E ASSESSEE SUBMITTED THE DETAILS FOR FINANCIAL YEAR 2007-08 FROM WHOM HE HAS RECEIVED THE PROFESSIONAL INCOME AS UNDER:- SL NO. NAME TDS GROSS AMOUNT 1 REAL GOOD FILMS 41,475 7.83,000 2 SHABBO ARTS - 6,00,000 3 HIMESH RESHAMMIYA MOVIE CULTURE 44,598 8,74,000 SINCE THE ASSESSEE DID NOT PROVIDED THE WRITTEN AGR EEMENTS WITH RESPECT TO PROFESSIONAL INCOME , THE A.O. ADDED THE ABOVE STAT ED RECEIPT OF RS. 22,57,000/- RECEIVED BY THE ASSESSEE IN THE FINANCI AL YEAR 2007-08 , AS ACCRUED INCOME OF THE ASSESSEE IN THE FINANCIAL YEA R 2006-07 ITSELF WHICH IN THE OPINION OF A.O. WAS DONE TO ARRIVE AT THE CORRE CT TOTAL INCOME OF THE ASSESSEE WITHOUT REJECTING THE BOOKS OF ACCOUNT OF THE ASSESSEE. 9.AGGRIEVED BY THE ORDERS OF THE AO, THE ASSESSEE C ARRIED THE MATTER BEFORE THE CIT(A) IN APPEAL AND SUBMITTED THAT INCOME FRO M PRODUCTION OF FILMS HAVE BEEN ACCOUNTED FOR ON ACCRUAL BASIS SINCE ACCO RDING TO THE NATURE OF BUSINESS , IN THE OPINION, IT WAS THE MOST APPROPRI ATE METHOD OF ACCOUNTING. THE ASSESSEE SUBMITTED THAT THE ASSESSEE COMPUTED T HE INCOME SEPARATELY FOR BOTH THE BUSINESS BASED ON DIFFERENT METHODS OF ACC OUNTING AND NO MISTAKE HAS BEEN POINTED BY THE A.O. AND THERE WAS NO INTE NTION OF THE ASSESSEE OF SHOWING INCORRECT INCOME. THE ASSESSEE SUBMITTED T HAT THE CHOICE OF FOLLOWING METHOD OF ACCOUNTING LIES WITH THE ASSESS EE AND NOT WITH THE REVENUE IN ACCORDANCE WITH THE PROVISIONS OF SECTIO N 145 OF THE ACT. THE ITA 7976/M/11 25 ASSESSEE SUBMITTED THAT AS PER RULE 9A OF THE ACT W HICH GOVERN THE AMORTIZATION OF COST OF PRODUCTION OF THE FILM BUSI NESS, THE ASSESSEE CAN ONLY FOLLOW MERCANTILE SYSTEM OF ACCOUNTING. THE ASSESS EE SUBMITTED THAT IF THE AO WANTED TO FOLLOW MERCANTILE SYSTEM OF ACCOUNTING FOR HIS OTHER PROFESSIONAL INCOME, THE AO CANNOT DO IT ON PIECEME AL BASIS AND THE AO SHOULD COMPUTE THE INCOME AFRESH BY RECASTING THE T OTAL INCOME AND EXPENDITURE. THE ASSESSEE RELIED UPON THE CASE OF A CIT V. NANA G PATEKAR, 27 SOT 8 (MUM) WHEREIN IT WAS HELD THAT REJECTION OF B OOKS OF ACCOUNT U/S 145 WHILE ACCEPTING BOOKS AS CORRECT AND COMPLETE WAS INVALID. THE ASSESSEE SUBMITTED THAT THIS PROFESSIONAL INCOME OF RS. 22.5 7 LAKHS HAS ALREADY BEEN OFFERED TO TAX AND DUE TAXES HAVE BEEN PAID TO THE REVENUE IN THE ASSESSMENT YEAR 2008-09 AND THE SAME INCOME CANNOT BE TAXED TW ICE AND IF IT BE SO ADDED THEN EQUIVALENT CREDIT OF INCOME SHOULD BE GI VEN IN THE ASSESSMENT YEAR 2008-09 . HOWEVER, THE CIT(A) REJECTED THE CO NTENTIONS OF THE ASSESSEE AND HELD THAT AS PER SECTION 145(1) OF THE ACT , TH E INCOME CHARGEABLE TO PROFITS AND GAINS OF BUSINESS OR PROFESSION SHALL S UBJECT TO PROVISIONS OF SECTION 145(1) BE COMPUTED IN ACCORDANCE WITH EITHE R CASH OR MERCANTILE SYSTEM OF ACCOUNTING REGULARLY EMPLOYED BY THE ASSE SSEE. THE CIT(A) HELD THAT THE ASSESSEE FALLS UNDER THE CLASS OF CHOREOGR APHER, FILM PRODUCERS AND HENCE THE ASSESSEE FALLS UNDER THE SPECIFIC CLASS O F ASSESSEE FOR WHICH RULE 9A AND 9B HAS BEEN MADE APPLICABLE AND THE ASSESSEE WO ULD BE REQUIRED TO FOLLOW THE MERCANTILE SYSTEM OF ACCOUNTING FOR HIS PROFESSION. HE HELD THAT THE A.O. WAS CORRECT IN APPLYING THE MERCANTILE SYS TEM OF ACCOUNTING FOR HIS PROFESSIONAL INCOME AS SECTION 145 OF THE ACT WAS A MENDED TO PROHIBIT USE OF HYBRID SYSTEM OF ACCOUNTING. THE CIT(A) HELD THAT THE ASSESSEE ALSO DID NOT PRODUCED THE AGREEMENT ENTERED INTO WITH REAL GOODS , SHABOO ART AND HIMESH RESHAMIYA MOVIE CULTURE BEFORE THE AO AND EV EN DURING THE APPELLATE PROCEEDINGS BEFORE THE CIT(A) , THEREFORE , IT IS DIFFICULT TO ASCERTAIN AS TO WHAT METHOD THE ASSESSEE HAS ACTUALLY EMPLOYE D AND ACCORDINGLY THE ACTION OF THE A.O. WAS UPHELD. WITH RESPECT TO THE INCLUSION OF THE SAID ITA 7976/M/11 26 INCOME BY THE ASSESSEE IN THE INCOME OF THE ASSESSE E IN THE ASSESSMENT YEAR 2008-08 LEADING TO TAXING THE SAME INCOME TWICE, TH E CIT(A) HELD THAT THIS IS NOT THE SUBJECT MATTER OF APPEAL AND THE ASSESSEE I S FREE TO APPROACH THE AO DURING ASSESSMENT PROCEEDINGS FOR THE ASSESSMENT YE AR 2008-09 FOR APPROPRIATE RELIEF . 10.AGGRIEVED BY THE ORDERS OF THE CIT(A), THE ASSES SEE IS IN FURTHER APPEAL BEFORE THE TRIBUNAL. 11. THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ASSESSEE IS A CHOREOGRAPHER WHICH FALLS UNDER THE DEFINITION OF FILM ARTIST AS PROFESSIONAL DEFINED IN RULE 6F OF INCOME TAX RULES, 1962 , WHER EBY THE ASSESSEE IS ALLOWED TO FOLLOW CASH SYSTEM OF ACCOUNTING WHICH H AS BEEN CONSISTENTLY AND REGULARLY FOLLOWED BY THE ASSESSEE AND ALLOWED BY T HE REVENUE IN THE EARLIER YEARS. THE LD. COUNSEL SUBMITTED THAT IT PRODUCED FILMS UNDER THE BANNER OF HIS PROPRIETARY CONCERN PUSHPA KRISHNA CREATION AND FOR THE FILM PRODUCTION BUSINESS THE ASSESSEE FOLLOWED PRESCRIBED RULE 9A & 9B OF THE INCOME TAX RULES, 1962 AND FOR THIS BUSINESS OF FILM PRODUCTIO N THE MERCANTILE METHOD OF ACCOUNTING IS ADOPTED . THUS, IN NUT-SHELL, THE IN COME FROM PROFESSION OF CHOREOGRAPHY WAS ACCOUNTED FOR ON CASH BASIS CONSIS TENTLY AND REGULARLY FOR SEVERAL YEARS WHICH WAS ACCEPTED BY THE REVENUE AND FOR THE FILM PRODUCTION BUSINESS, RULE 9A & 9B WAS MANDATORY AND WAS FOLLOW ED BY ASSESSEE WHEREBY MERCANTILE METHOD OF ACCOUNTING WAS FOLLOWE D . THE LD. COUNEL SUBMITTED THAT THE A.O. HAS DIRECTED THE ASSESSEE T O FOLLOW ACCRUAL BASIS OF ACCOUNTING FOR CHOREOGRAPHY BUSINESS ALSO BECAUSE A S PER THE AO, THE ASSESSEE BY FOLLOWING BOTH CASH AND MERCANTILE BASI S OF ACCOUNTING FOR DIFFERENT SOURCES OF INCOME IS FOLLOWING HYBRID SYS TEM OF ACCOUNTING WHICH IS NOT PERMITTED BY LAW AS PER THE AMENDED PROVISIONS OF SECTION 145 OF THE ACT. THE ASSESSEE RELIED UPON THE JUDGMENT IN THE CASE O F ABDULGAFAR A NADIADWALA V. ACIT (2004)267 ITR 488 (BOM. HC). TH E ASSESSEE SUBMITTED ITA 7976/M/11 27 THAT AS PER SECTION 28 OF THE ACT, THE ASSESSEE HAS FOLLOWED RULE 9A & 9B OF INCOME TAX RULES,1962 TO COMPUTE THE INCOME CHARGEA BLE UNDER THE HEAD PROFITS AND GAINS FROM BUSINESS OR PROFESSION IN ACCORDANCE WITH SECTION 28. THE ASSESSEE SUBMITTED THAT THE A.O. HAS BROUGHT TO TAX IN THE IMPUGNED ASSESSMENT YEAR, THE INCOME OF RS. 22,57,000/- WHIC H WAS EARNED IN THE FINANCIAL YEAR 2007-08 AND ALREADY SUBJECTED TO TAX IN ASSESSMENT YEAR 2008- 09 AND DUE TAXES HAVE BEEN PAID TO THE REVENUE AND NO PREJUDICE IS CAUSED TO REVENUE WHILE BRINGING TO TAX THE SAME IN THE IM PUGNED ASSESSMENT YEAR, THE ASSESSEE IS PREJUDICED AS THE SAME INCOME IS TA XED TWICE ONCE IN THE ASSESSMENT YEAR 2007-08 BY ACTION OF AO AND SECONDL Y IN ASSESSMENT YEAR 2008-09 BY ASSESSEES OWN ACTION OF VOLUNTARILY OFF ERING THE SAME TO TAX IN THE RETURN OF INCOME FILED U/S 139 OF THE ACT. 13. ON THE OTHER HAND, THE LD. D.R. SUBMITTED THAT THE ASSESSEE IS FOLLOWING HYBRID SYSTEM OF ACCOUNTING WHEREBY THE ASSESSEE FO LLOWING CASH BASIS OF ACCOUNTING FOR CHOREOGRAPHY BUSINESS AND MERCANTILE SYSTEM OF ACCOUNTING FOR FILM PRODUCTION BUSINESS WHICH METHOD OF ACCOUN TING IS NOT ALLOWABLE AS PER THE ACT AS PER SECTION 145 OF THE ACT. THE LD. D.R. SUBMITTED THAT THE A.O. MAY BE DIRECTED TO VERIFY THE SYSTEM OF ACCOUN TING CONSISTENTLY FOLLOWED BY THE ASSESSEE WITH RESPECT TO CHOREOGRAPHY BUSINE SS WHEREBY CASH SYSTEM OF ACCOUNTING IS FOLLOWED FOLLOWING RULE 6F OF INCO ME TAX RULES,1962 WHILE FOR FILM PRODUCTION MERCANTILE SYSTEM OF FOLLOWED AS PE R RULE 9A AND 9B OF INCOME TAX RULES, 1962 IS CONCERNED. 14. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PE RUSED THE MATERIAL AVAILABLE ON RECORD. WE HAVE OBSERVED THAT THE ASS ESSEE IS FOLLOWING CASH BASIS OF ACCOUNTING FOR INCOME ARISING FROM HIS PRO FESSION . ON THE OTHER HAND, THE ASSESSEE IS FOLLOWING MERCANTILE SYSTEM O F ACCOUNTING BY FOLLOWING RULE 9A & 9B OF INCOME TAX RULES ,1962 FOR INCOME A RISING FROM FILM PRODUCTION BUSINESS UNDER THE PROPRIETARY CONCERN PUSHPA KRISHNA CREATION ITA 7976/M/11 28 WHICH IN THE OPINION OF THE AO IS MANDATORY. THE AB OVE FACTS ARE ADMITTED BY THE AO IN HIS ASSESSMENT ORDERS U/S 143(3) OF THE A CT DATED 07-12-2009 . THE CIT(A) HAS OBSERVED THAT THE CHOREOGRAPHER, FILM PR ODUCER HAS TO FOLLOW RULE 9A AND 9B OF INCOME TAX RULES, 1962 WHICH IN OUR H UMBLE OPINION IS NOT CORRECT AS THE RULE 6F OF THE INCOME TAX RULES, 196 2 PROVIDES THAT FILM ARTIST INCLUDE DANCE DIRECTOR AND ARE PROFESSIONALS VIDE E XPLANATION (C) TO SUB-RULE 2 TO RULE 6F OF INCOME TAX RULES,1962 WHILE RULE 9A A ND 9B OF THE INCOME TAX RULES , 1962 DEALS WITH FILM PRODUCTION AND DISTRIB UTION RIGHTS OF FEATURE FILM, THUS THE FINDING OF THE CIT(A) THAT CHOREOGRAPHER I .E. DANCE DIRECTORS HAVE TO COMPULSORILY FOLLOW RULE 9A AND 9B OF INCOME TAX RU LES, 1962 IS HUMBLY REJECTED. THE WHOLE CONTROVERSY REVOLVES AROUND TH E ACTION OF THE AO WHEREBY THE AO HELD THAT THE ASSESSEE CANNOT FOLLOW CASH BA SIS OF ACCOUNTING FOR INCOME ARISING FROM HIS PROFESSION AND AT THE SAME TIME FOLLOW MERCANTILE SYSTEM OF ACCOUNTING FOR FILM PRODUCTION BUSINESS, WHICH IN THE OPINION OF AO IS NOT PERMISSIBLE IN VIEW OF THE AMENDMENT IN SECT ION 145 OF THE ACT BY FINANCE ACT , 1995 AS IT LEADS TO FOLLOWING HYBRID SYSTEM OF ACCOUNTING BECAUSE THE ASSESSEE WITH RESPECT TO BOTH THE SOURC ES OF INCOME IS THE SAME BEING AN INDIVIDUAL I.E. MR. VISHWANATH ACHARYA. TH E AO HAS TAKEN A VIEW THAT INCOME FROM PROFESSION HAS TO BE COMPUTED IN A CCORDANCE WITH MERCANTILE SYSTEM OF ACCOUNTING INSTEAD OF CASH SYS TEM OF ACCOUNTING FOLLOWED BY THE ASSESSEE BECAUSE FOR THE FILM PRODU CTION BUSINESS CARRIED ON BY THE ASSESSEE , RULE 9A AND 9B OF INCOME TAX RUL ES, 1962 IS MANDATORY AND HAS TO BE COMPULSORILY FOLLOWED AND HENCE INCOM E FROM PROFESSION ALSO NEED TO BE COMPUTED FOLLOWING MERCANTILE SYSTEM OF ACCOUNTING SO THAT MANDATE OF AMENDED SECTION 145 OF THE ACT IS COMPLI ED WITH WHICH DO NOT PERMIT THE ASSESSEE TO FOLLOW HYBRID SYSTEM OF ACCO UNTING. WE HAVE OBSERVED THAT THE A.O. HAS ADDED RS. 22,57,000/- TO THE INCO ME OF THE ASSESSEE FROM THE PROFESSION FOR THE IMPUGNED PREVIOUS YEAR BY FO LLOWING MERCANTILE SYSTEM OF ACCOUNTING ALTHOUGH THE ASSESSEE WAS CONSISTENTL Y AND REGULARLY FOLLOWING CASH SYSTEM OF ACCOUNTING FOR THE SAID PROFESSION , BY ASSUMING THAT THE ITA 7976/M/11 29 INCOME OF RS.22,57,000/- WHICH WAS RECEIVED IN THE NEXT FINANCIAL YEAR 2007- 08 HAS ACTUALLY ACCRUED IN THE IMPUGNED PREVIOUS YE AR I.E. 2006-07 MERELY ON THE PRETEXT THAT THE ASSESSEE HAS NOT PRODUCED THE AGREEMENTS WITH THE THREE PARTIES NAMELY REAL GOODS, SHABOO ART AND HIMESH RE SHAMIYA MOVIE CULTURE FROM WHOM THE INCOME OF RS.22,57,000/- WAS RECEIVED IN THE NEXT FINANCIAL YEAR 2007-08 WITHOUT BRINGING ON RECORD COGENT MATE RIAL OR EVIDENCE TO JUSTIFY THAT THIS INCOME OF RS. 22,57,000/- HAS ACTUALLY AC CRUED IN THE PREVIOUS YEAR 2006-07 TO FASTEN LIABILITY OF TAX ON THE ASSESSEE WHILE ON THE OTHER HAND THE ASSESSEE CONTENDED THAT THE AGREEMENT WITH THESE PA RTIES WERE ORAL AND THE SAID PROFESSIONAL INCOME OF RS.22,57,000/- HAS ALR EADY SUFFERED TAXATION ON RECEIPT BASIS AS INCOME FOR THE ASSESSMENT YEAR 200 8-09 AND DUE TAXES PAID TO THE REVENUE , RATHER THE WHOLE PREMISE OF THE RE VENUE TREATING THE INCOME OF RS.22,57,000/- TO HAVE ACCRUED IN THE IMPUGNED P REVIOUS YEAR 2006-07 IS BASED ON CONJECTURES, SURMISES AND ASSUMPTIONS NOT BACKED WITH ANY COGENT MATERIAL OR EVIDENCE WHICH IS NOT PERMISSIBLE UNDER THE ACT TO BRING IT WITHIN THE AMBIT OF TAXABILITY TO FASTEN LIABILITY ON THE ASSESSEE AND MORE SO THE SAID AMOUNT OF RS.22,57,000/- HAS ALREADY SUFFERED TAX I N THE IMMEDIATELY SUCCEEDING ASSESSMENT YEAR 2008-09 AND DUE TAXES PA ID TO REVENUE. THE CONTENTION OF THE AO IS THAT THE ASSESSEE IN TH E INSTANT CASE BY FOLLOWING CASH SYSTEM OF ACCOUNTING FOR INCOME FROM PROFESSI ON AND BY FOLLOWING MERCANTILE SYSTEM OF ACCOUNTING FOR FILM PRODUCTION BUSINESS , HAS IN-FACT FOLLOWED HYBRID SYSTEM OF ACCOUNTING WHICH IS NOT P ERMITTED BY SECTION 145 OF THE ACT AFTER AMENDMENT BY FINANCE ACT, 1995 WHICH IN OUR CONSIDERED VIEW IS AGAIN DEVOID OF MERITS . IT IS IMPORTANT TO REF ER TO AMENDED SECTION 145 OF THE ACT WHICH WAS AMENDED BY FINANCE ACT,1995 AS AP PLICABLE TO RELEVANT ASSESSMENT YEAR WHICH READS AS UNDER: [ METHOD OF ACCOUNTING. ITA 7976/M/11 30 145. (1) INCOME CHARGEABLE UNDER THE HEAD PROFITS AND G AINS OF BUSINESS OR PROFESSION OR INCOME FROM OTHER SOURC ES SHALL, SUBJECT TO THE PROVISIONS OF SUB-SECTION (2), BE COMPUTED IN ACCORDANCE WITH EITHER CASH OR MERCANTILE SYSTEM OF ACCOUNTING REGULARLY EMPLOYED BY THE ASSESSEE. (2) THE CENTRAL GOVERNMENT MAY NOTIFY IN THE OFFICI AL GAZETTE FROM TIME TO TIME ACCOUNTING STANDARDS TO BE FOLLOWED BY ANY CLA SS OF ASSESSEES OR IN RESPECT OF ANY CLASS OF INCOME. (3) WHERE THE ASSESSING OFFICER IS NOT SATISFIED AB OUT THE CORRECTNESS OR COMPLETENESS OF THE ACCOUNTS OF THE ASSESSEE, OR WH ERE THE METHOD OF ACCOUNTING PROVIDED IN SUB-SECTION (1) OR ACCOUNTIN G STANDARDS AS NOTIFIED UNDER SUB-SECTION (2), HAVE NOT BEEN REGUL ARLY FOLLOWED BY THE ASSESSEE, THE ASSESSING OFFICER MAY MAKE AN ASSESSM ENT IN THE MANNER PROVIDED IN SECTION 144 .] THE SECTION 145 OF THE ACT , INTER-ALIA, STIPULATE THAT THE INCOME CHARGEABLE TO TAX UNDER THE HEAD PROFITS AND GAINS OF BUSINESS OR INCOME FROM OTHER SOURCES SHALL BE COMPUTED IN ACCORDANCE WITH CASH OR MERCANTILE SYSTEM OF ACCOUNTING REGULARLY EMPLOYED BY THE ASSESSEE AND W HERE THE ABOVE METHOD OF ACCOUNTING IS NOT REGULARLY FOLLOWED BY THE ASSE SSEE, THE AO MAY MAKE AN ASSESSMENT IN THE MANNER PROVIDED IN SECTION 144 OF THE ACT. PRIOR TO AMENDMENT , SECTION 145 OF THE ACT DID NOT RESTRICT METHOD OF ACCOUNTING TO ONLY CASH OR MERCANTILE SYSTEM OF ACCOUNTING AND TH E ASSESSEES WERE ALSO ALLOWED TO FOLLOW HYBRID SYSTEM OF ACCOUNTING WHICH WAS LEADING TO DISTORTION OF INCOME WHEREBY CORRECT INCOME CHARGEABLE TO TAX WAS NOT REFLECTED IN HYBRID SYSTEM OF ACCOUNTING . THE RATIONALE OF INTR ODUCTION OF AMENDMENT OF SECTION 145 OF THE ACT BY FINANCE ACT,1995 AS STIPU LATED THEREIN WAS AS UNDER: ITA 7976/M/11 31 METHODS OF ACCOUNTING AND ACCOUNTING STANDARDS FOR COMPUTING INCOME 44.1 SECTION 145(1) OF THE INCOME-TAX ACT PRIOR TO ITS AMENDMENT BY THE FINANCE ACT, 1995, PROVIDED FOR COMPUTATION OF INCO ME FROM BUSINESS OR PROFESSION OR INCOME FROM OTHER SOURCES IN ACCORDAN CE WITH THE METHOD OF ACCOUNTING REGULARLY EMPLOYED BY THE ASSESSEE. INCO ME IS GENERALLY COMPUTED BY FOLLOWING ONE OF THE THREE METHODS OF A CCOUNTING, NAMELY, ( I ) CASH OR RECEIPTS BASIS, ( II ) ACCRUAL OR MERCANTILE BASIS, AND ( III ) MIXED OR HYBRID METHOD WHICH HAS ELEMENTS OF BOTH THE AFORES AID METHODS. IT WAS NOTICED THAT MANY ASSESSEES ARE FOLLOWING THE HYBRI D METHOD IN A MANNER THAT DOES NOT REFLECT THE CORRECT INCOME. TH E FINANCE ACT, 1995, HAS AMENDED SECTION 145 OF THE INCOME-TAX ACT TO PR OVIDE THAT INCOME CHARGEABLE UNDER THE HEAD PROFITS AND GAINS OF BUS INESS OR PROFESSION OR INCOME FROM OTHER SOURCES SHALL BE COMPUTED ON LY IN ACCORDANCE WITH EITHER THE CASH OR THE MERCANTILE SYSTEM OF ACCOUNT ING, REGULARLY EMPLOYED BY AN ASSESSEE. THE FIRST PROVISO TO SUB-S ECTION (1) OF SECTION 145 HAS BEEN DELETED. THE HONBLE RAJASTHAN HIGH COURT IN THE CASE OF (20 08) 215 CTR 51(RAJ) CIT V. VTC LEASING AND FINANCE LIMITED HAS HELD AS UNDE R: 5. SO FAR AS THE FIRST QUESTION IS CONCERNED, OF COURS E, IT HAS COME THAT THE ASSESSEE WAS MAINTAINING BOOKS OF ACCOUNTS BY B OTH MANNERS VIZ., BY RECEIPT BASIS, AND ON MERCANTILE BASIS AS WELL, INASMUCH AS, WITH RESPECT TO ACCRUAL OF LEASE INCOME, MERCANTILE SYST EM WAS ADOPTED. HOWEVER, FOR LEASE AND HIRE INCOME, THE RECEIPT BAS IS WAS ADOPTED. TRUE IT ALSO IS THAT BY VIRTUE OF SECTION 145, AS AMENDE D, THE INCOME CHARGEABLE UNDER THE HEAD 'PROFITS AND GAINS OF BUS INESS OR PROFESSION' OR 'INCOME FROM OTHER SOURCES' IS, SUBJECT TO PROVI SIONS OF SUB-SECTION (2), ITA 7976/M/11 32 TO BE COMPUTED IN ACCORDANCE WITH EITHER CASH OR ME RCANTILE SYSTEM OF ACCOUNTING, REGULARLY EMPLOYED BY THE ASSESSEE. EAR LIER THE PROVISION WAS THAT SUCH INCOME WAS TO BE COMPUTED IN ACCORDAN CE WITH THE METHOD OF ACCOUNTING REGULARLY EMPLOYED BY THE ASSE SSEE. IN THE PRESENT CASE, THE LEARNED TRIBUNAL HAS FOUND THAT THIS IS U NDISPUTED AND SETTLED PRINCIPLE OF FISCAL LAW, THAT ONLY THE REAL INCOME IS TO BE TAXED, AND THAT THE SAME INCOME CANNOT BE TAXED TWICE. IT WAS ALSO TAKEN TO BE SETTLED PRINCIPLE OF LAW, THAT REALITIES OF LIFE HAVE TO BE CONSIDERED WHILE ARRIVING AT THE TAXABLE INCOME. IT WAS NOTICED THAT AMENDMEN T IN SECTION 145 HAS BEEN CARRIED OUT WITH THE SOLE AIM OF CHECKING THE ESCAPEMENT OF INCOME, WHICH OCCURRED DUE TO HETEROGENEOUS SYSTEM OF ACCOU NTING FOLLOWED BY THE ASSESSEE. THE MANDATE OF INCOME TAX ACT, 1961 IS TO COLLECT C ORRECT TAXES AT THE CORRECT APPLICABLE TAX RATES FROM THE CORRECT ASSES SEE FOR THE CORRECT ASSESSMENT YEAR ON THE CORRECT INCOME TO BE COMPUTE D IN ACCORDANCE WITH THE PROVISIONS OF THE ACT . THUS, THE METHOD OF ACCOUNTING REGULARLY EMPLOYED BY THE ASSESSEE SHOULD ENABLE THE REVENUE TO COMPUTE CORRECT /REAL INCOME OF THE ASSESSEE AS PER PROVISIONS OF THE ACT . PRIOR TO AMENDMENT IN SECTION 145 OF THE ACT BY FINANCE ACT,1995, THE INC OME WAS GENERALLY COMPUTED BY FOLLOWING ONE OF THE THREE METHODS OF A CCOUNTING, NAMELY, ( I ) CASH OR RECEIPTS BASIS, ( II ) ACCRUAL OR MERCANTILE BASIS, AND ( III ) MIXED OR HYBRID METHOD WHICH HAS ELEMENTS OF BOTH THE AFORES AID METHODS. IT WAS NOTICED BY THE REVENUE THAT MANY ASSESSEES ARE FOLL OWING THE HYBRID METHOD OF ACCOUNTING IN A MANNER THAT DOES NOT REFLECT THE CORRECT INCOME. POST AMENDMENT TO SECTION 145 OF THE ACT BY FINANCE ACT 1995, THE INCOME CHARGEABLE UNDER THE HEAD PROFITS AND GAINS OF BUS INESS OR PROFESSION OR INCOME FROM OTHER SOURCES SHALL BE COMPUTED ONLY IN ACCORDANCE WITH EITHER THE CASH OR THE MERCANTILE SYSTEM OF ACCOUNTING, RE GULARLY EMPLOYED BY AN ASSESSEE.THUS, IN NUTSHELL THE OBJECTIVE OF NOT ALL OWING HYBRID OR MIXED ITA 7976/M/11 33 METHOD OF ACCOUNTING WHICH HAD ELEMENT OF BOTH THE METHODS OF ACCOUNTING VIZ. CASH AND MERCANTILE METHOD OF ACCOUNTING , WAS THAT MANY ASSESSEES WERE FOLLOWING THE HYBRID METHOD OR MIXED METHOD OF ACCOUNTING IN A MANNER THAT WAS NOT REFLECTING THE CORRECT INCOME AS PER T HE ACT AND HENCE THE MANDATE OF THE ACT WAS DEFEATED AND TO CORRECT THE SITUATION SO THAT CORRECT INCOME COULD BE COMPUTED AND CORRECT TAXES CAN BE C OLLECTED , THE PARLIAMENT IN ITS WISDOM PERMITTED ,BY MAKING AMENDMENT TO SEC TION 145 OF THE ACT BY FINANCE ACT,1995 EITHER OF TWO METHODS OF ACCOUNTIN G VIZ. CASH BASIS OF ACCOUNTING OR MERCANTILE BASIS OF ACCOUNTING REGULA RLY EMPLOYED BY THE ASSESSEE TO COMPUTE THE CORRECT TAXES AS PER PROVISIONS OF T HE ACT. AT THIS STAGE IT IS IMPORTANT TO UNDERSTAND CASH METHOD OF ACCOUNTING, MERCANTILE METHOD OF ACCOUNTING AND HYBRID OR MIXED METHOD OF ACCOUNTING TO PROCEED FURTHER : 1. CASH METHOD OF ACCOUNTING (CASH BASIS OF ACCOUNT ING): UNDER THIS METHOD, ALL INCOMES ARE CONSIDERED TO BE EARNED ONLY WHEN THEY ARE ACTUALLY RECEIVED IN CASH. SIMILARLY, EXPE NSES ARE DEEMED TO BE INCURRED ONLY WHEN THEY ARE ACTUALLY PAID IN CASH. 2. ACCRUAL BASIS OF ACCOUNTING (MERCANTILE BASIS OF ACCOUNTING): UNDER THIS METHOD, ALL INCOMES ARE RECORDED OR CRE DITED TO THE PERIOD IN WHICH THEY ARE EARNED IRRESPECTIVE OF THE FACT T HAT WHETHER THE SAME HAS ACTUALLY BEEN RECEIVED OR NOT. SIMILARLY, EXPEN SES ARE CHARGED TO THE PERIOD IN WHICH THEY RELATE IRRESPECTIVE OF THE FACT THAT THEY HAVE ACTUALLY BEEN PAID OR NOT. ITA 7976/M/11 34 THUS, AS COULD BE SEEN THE MAJOR DIFFERENCE BETWEEN THE CASH METHOD OF ACCOUNTING AND ACCRUAL BASIS OF ACCOUNTING IS THE T IMING DIFFERENCE IN THE RECOGNITION OF EXPENSES AND INCOME. 3. HYBRID OR MIXED METHOD OF ACCOUNTING: UNDER THIS METHOD, BOTH CASH BASIS AND ACCRUAL BASI S ARE FOLLOWED. INCOMES ARE RECORDED ON CASH BASIS WHEREAS EXPENSES ARE TAKEN ON ACCRUAL BASIS. THE NET INCOME IS ASCERTAINED BY MAT CHING EXPENSES ON ACCRUAL BASIS WITH INCOME ON CASH BASIS. THIS IS THE MOST CONSERVATIVE BASIS OF ASCERTAINING INCOME BECAUSE ALL POSSIBLE EXPENSES RELATING TO THE PERIOD WHETHER AC TUALLY PAID OR NOT ARE CONSIDERED WHEREAS INCOME ONLY RECEIVED IN CASH IS TAKEN INTO CONSIDERATION AS WE HAVE SEEN ABOVE HYBRID OR MIXED METHOD OF ACC OUNTING POSTULATE COMBINING OF BOTH THE CASH AND ACCRUAL METHOD OF AC COUNTING WHEREBY INCOME ARE RECORDED ON RECEIPT BASIS WHILE EXPENSES ARE BOOKED ON ACCRUAL BASIS WHICH WAS LEADING TO DISTORTION OF COMPUTATIO N OF CORRECT INCOME FOR BRINGING TO CHARGE TO TAX AS PER THE PROVISIONS OF THE ACT AND THE FINANCE ACT,1995 AMENDED THE SECTION 145 OF THE ACT WHEREBY THE HYBRID OR MIXED METHOD OF ACCOUNTING WAS NOT PERMITTED TO BE ALLOWE D FOR COMPUTING INCOME UNDER THE ACT. HOWEVER, THE LAWMAKERS STILL LEFT TH E CHOICE OF REGULARLY EMPLOYING EITHER OF THE TWO METHODS VIZ. CASH METH OD OF ACCOUNTING OR MERCANTILE METHOD OF ACCOUNTING FOR COMPUTING INCOM E CHARGEABLE TO TAX AS PER THE PROVISIONS OF THE ACT. THUS, AS WE HAVE SEE N ABOVE THE MAJOR ITA 7976/M/11 35 DIFFERENCE BETWEEN THE CASH METHOD OF ACCOUNTING AN D ACCRUAL BASIS OF ACCOUNTING IS THE TIMING DIFFERENCE IN THE RECOGNIT ION OF EXPENSES AND INCOME. IN THE INSTANT CASE, THE ASSESSEE HAS TWO SOURCES O F INCOME WITHIN THE HEAD PROFIT AND GAINS OF BUSINESS VIZ. INCOME FROM PRO FESSION AND SECONDLY INCOME FROM FILM PRODUCTION. THE ASSESSEE IS EMPLO YING CASH BASIS OF ACCOUNTING REGULARLY AND CONSISTENTLY FOR HIS ONE S OURCE (UNDER THE HEAD INCOME FROM BUSINESS OR PROFESSION) I.E. INCOME FR OM PROFESSION WHICH WAS ACCEPTED BY THE REVENUE IN THE EARLIER YEARS WHILE FOR THE SECOND SOURCE (AGAIN UNDER THE HEAD INCOME FROM BUSINESS OR PROF ESSION ) I.E. INCOME FROM FILM PRODUCTION, THE ASSESSEE IS EMPLOYING MERCANTI LE METHOD OF ACCOUNTING AND BOTH THE METHODS ARE ALLOWED BY SECTION 145 OF THE ACT TO ENABLE REVENUE TO COMPUTE CORRECT INCOME CHARGEABLE TO TAX AS PER PROVISIONS OF THE ACT. THE ASSESSEE HAS NOT EMPLOYED HYBRID OR MIXED METHOD OF ACCOUNTING AS ENVISAGED BY LAWMAKERS AT THE TIME OF AMENDING SECT ION 145 OF THE ACT VIDE FINANCE ACT, 1995 , WHICH WAS LEADING TO DISTORTION IN COMPUTATION OF CORRECT INCOME CHARGEABLE TO TAX . THE LAW HAS GIVEN FREEDO M TO THE ASSESSEE TO REGULARLY EMPLOY EITHER CASH BASIS OF ACCOUNTING OR MERCANTILE BASIS OF ACCOUNTING TO COMPUTE CORRECT INCOME CHARGEABLE TO TAX AND THE PLAIN , SIMPLE AND NATURAL LANGUAGE AND WORDS USED IN THE S ECTION 145 OF THE ACT DOES NOT , IN OUR HUMBLE OPINION, CAST ANY BAR ON T HE ASSESSEE TO FOLLOW REGULARLY EITHER CASH BASIS OR MERCANTILE BASIS OF ACCOUNTING BY THE ASSESSEE HAVING MORE THAN ONE SOURCE OF INCOME WITH IN THE HEAD OF INCOME FROM PROFIT AND GAINS OF BUSINESS OR PROFESSION OR IN COME FROM OTHER SOURCES AS IN THE INSTANT CASE THE ASSESSEE HAS TWO STREAM AND SOURCES OF INCOME UNDER THE HEAD OF INCOME FROM PROFIT AND GAINS OF BUSINE SS OR PROFESSION VIZ. HIS PROFESSIONAL INCOME AND ALSO INCOME FROM PRODUCTION OF FILMS BECAUSE BY ITA 7976/M/11 36 FOLLOWING EITHER OF THE TWO METHOD OF ACCOUNTING RE GULARLY , THERE IS NOT LIKELY TO BE DISTORTION IN COMPUTATION OF CORRECT INCOME A S PER THE PROVISIONS OF THE ACT AND IT WILL BE ONLY TIMING DIFFERENCE WHICH WE HAVE SEEN ABOVE DUE TO FOLLOWING THE ABOVE METHODS OF ACCOUNTING AND NO PR EJUDICE WILL BE CAUSED TO THE REVENUE . THE SAID INCOME OF RS.22,57,000/- FR OM THE PROFESSION IS ALSO STATED TO HAVE BEEN OFFERED FOR TAX BY THE ASSESSEE IN THE YEAR OF RECEIPT I.E. IMMEDIATELY SUCCEEDING FINANCIAL YEAR 2007-08 BY FO LLOWING CONSISTENTLY AND REGULARLY CASH BASIS OF ACCOUNTING FOR HIS SOURCE O F INCOME FROM PROFESSION . THUS, WE HOLD THAT THE ASSESSEE IS NOT FOLLOWING HY BRID OR MIXED METHOD OF ACCOUNTING AND THE ASSESSEE IS FOLLOWING CASH SYSTE M OF ACCOUNTING FOR HIS INCOME FROM PROFESSION AND MERCANTILE SYSTEM OF ACC OUNTING FOR HIS INCOME FROM FILM PRODUCTION WHICH ARE PERMITTED BY SECTION 145 OF THE ACT. BASED ON OUR DISCUSSIONS AND REASONING GIVEN HERE-INABOVE , WE ORDER DELETION OF THE ADDITION OF RS.22,57,000/- MADE TO THE INCOME OF TH E ASSESSEE BY THE AO BY SETTING ASIDE THE ORDERS OF THE CIT(A) AND DELETING THE ADDITION OF RS.22,57,000/- MADE TO THE INCOME OF THE ASSESSEE B Y THE AO. WE ORDER ACCORDINGLY. 15. GROUND NO. 4 RELATES TO ADDITION OF UNEXPLAINED CASH CREDIT OF RS. 10 LACS U/S 68 OF THE ACT. THE AO OBSERVED THAT THE A SSESSEE RECEIVED RS. 15 LAKHS AS ADVANCE AGAINST MHADA PROPERTIES AS REFLEC TED IN THE BALANCE SHEET OF THE ASSESSEE UNDER THE HEAD CURRENT LIABILITIES . THE ASSESSEE WAS ASKED TO SUBMIT THE AGREEMENT AGAINST WHICH THE SAID ADVA NCE WAS RECEIVED BY THE ASSESSEE. HOWEVER, NO REPLY WAS SUBMITTED BY THE A SSESSEE BEFORE THE A.O. AND ADDITION OF RS. 15 LAKHS WAS MADE TO THE INCOME OF THE ASSESSEE AS UNEXPLAINED CASH CREDIT U/S 68 OF THE ACT UNDER THE HEAD INCOME FROM OTHER SOURCES. ITA 7976/M/11 37 16.AGGRIEVED BY THE ORDERS OF THE AO, THE ASSESSEE CARRIED THE MATTER BEFORE THE CIT(A) IN APPEAL. THE CIT(A) ASKED FOR THE RE MAND REPORT FROM A.O. AND IN THE REMAND REPORT DATED 8 TH AUGUST, 2011 THE A.O. SUBMITTED THAT THE DOCUMENT PRODUCED DURING REMAND REPORT PROCEEDINGS ARE NEW DOCUMENTS WHICH WERE NOT PRODUCED DURING THE ASSESSMENT PROCE EDINGS. THE ASSESSEE MADE SUBMISSION VIDE LETTER DATED 7-3-2011 CLAIMING THAT THE ASSESSEE, HIS MOTHER AND SISTER HAS SOLD ADJOINING ACCOMMODATION LOCATED AT LOVELY CHS, VERSOVA, ANDHERI (W), MUMBAI FOR A TOTAL CONSIDERAT ION OF RS. 15 LAKHS, I.E. RS. 5 LAKHS EACH FOR EACH ACCOMMODATION BEARING NO. C-18, C-19 AND C-20. THE REGISTERED SALE DEED OF FLAT NO. C-18 & C20 IS IN THE NAME OF MOTHER AND SISTER WHILE THE FLAT NO C-19 IS OWNED BY THE ASSES SEE FOR WHICH NO REGISTERED SALE DEED WAS PRODUCED BEFORE THE CIT(A) . THE ASS ESSEE SUBMITTED BEFORE THE CIT(A) THAT WITH RESPECT TO THE TWO PROPERTIES I.E. ACCOMMODATION NO. C-18 AND C-20, ASSESSEES MOTHER AND SISTER ARE REGISTER ED OWNERS BUT IT WAS ESSENTIALLY ASSESSEES FUNDS UTILIZED FOR PURCHASE OF ALL THE THREE PROPERTIES. IT WAS ALSO SUBMITTED BY THE ASSESSEE THAT IN THE BLOC K ASSESSMENT ORDER PASSED IN THE CASE OF THE ASSESSEE, THE FUNDS UTILI ZED FOR PURCHASE OF AFORESAID PROPERTIES WERE ASSESSED AS UNDISCLOSED INCOME OF T HE ASSESSEE. IT IS THE ASSESSEE ONLY IN WHOSE INCOME THE CAPITAL GAIN/LOSS ARISING FROM TRANSFER OF THE AFORESAID PROPERTIES SHOULD BE INCLUDED. THE A SSESSSEE SUBMITTED THAT THESE ACCOMODATIONS WERE PURCHASED IN SEPTEMBER 199 4 IN ABOVE THREE NAMES AND THE PURCHASE OF THE SAME HAS BEEN DULY DE ALT WITH IN THE ORDER OF THE A.O. PASSING THE BLOCK ASSESSMENT ORDER IN THE CASE OF ASSESSEE. ACCORDINGLY THE ASSESSEE SUBMITTED THAT THE A.O. BE DIRECTED TO ASSESS CAPITAL GAINS IN THE HANDS OF THE ASSESSEE AND DELETE THE A DDITION MADE U/S 68 OF THE ACT. THE CIT(A) AFTER CONSIDERING THE FACTS, GAVE RELIEF TO THE ASSESSEE WITH RESPECT TO THE ACCOMMODATION NO. C-19 AS THE SAME W AS OWNED BY THE ASSESSEE WHILE THE ADDITION WITH RESPECT TO ACCOMMO DATION C-18 AND C-20 OF RS.10 LACS BEING ADVANCE RECEIPT IN RESPECT OF MOTH ER AND SISTER OF THE ITA 7976/M/11 38 ASSESSEE IS CONFIRMED IN THE HANDS OF THE ASSESSEE AS THE MHADA PROPERTIES STOOD IN THE NAME OF MOTHER AND SISTER OF THE ASSES SEE.THE CIT(A) ALSO HELD THAT THE NOC FROM SALE OF THE ABOVE PROPERTIES WERE GIVEN BY SOCIETY ON 2/10/2007 WHICH MEANS THAT THE PROPERTY WAS NOT SOL D DURING THE YEAR UNDER CONSIDERATION AND HENCE THE AMOUNT WAS SHOWN AS ADVANCE. 17.AGGRIEVED BY THE ORDERS OF THE CIT(A), THE ASSE SSEE IS IN FURTHER APPEAL BEFORE THE TRIBUNAL. 18. THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE PURCHASES WITH RESPECT TO THREE ACCOMMODATIONS C-18, C-19 & C20 HA S ALREADY ASSESSED TO TAX IN THE HANDS OF THE ASSESSEE AS UNDISCLOSED INC OME VIDE THE BLOCK ASSESSMENT ORDER FRAMED BY THE REVENUE,. THE LD. C OUNSEL SUBMITTED THAT WHEN THESE ASSETS HAVE ALREADY BEEN ASSESSED TO TAX IN THE ASSESSEES HANDS BY THE REVENUE IN THE BLOCK ASSESSMENT ORDER FRAMED AGAINST THE ASSESSEE THEN THE INCOME ARISING FROM THE SALE OF THESE ACCO MMODATIONS BEING CAPITAL GAIN SHOULD BE TAXED IN THE HANDS OF THE ASSESSEE O NLY AS THE REVENUE HAS ACCEPTED THAT THESE ACCOMMODATIONS ARE PURCHASES OU T OF UNDISCLOSED INCOME OF THE ASSESSEE. THE BLOCK ASSESSMENT ORDER DATED 30 TH JULY 2001 WAS PLACED BEFORE THE LD. CIT(A) AND IS ALSO PLACED IN PAPER BOOK PAGE NO. 187 TO 194 BEFORE US. THE ASSESSEE SUBMITTED THAT THE UNDI SCLOSED INCOME W.R.T. THESE ACCOMMODATIONS WERE ALSO BEEN PART OF PROCEED INGS BEFORE SETTLEMENT COMMISSION WHICH ARE ALSO PLACED IN THE PAPER BOOK FILED BEFORE US PAGE 195- 218 . THE LD COUNSEL SUBMITTED THAT ALL DUE TAXES W ERE PAID TO THE REVENUE WHILE OFFERING UNDISCLOSED INCOME UTILIZED FOR PURC HASE OF THESE ACCOMMODATIONS IN THE NAME OF MOTHER AND SISTER OF THE ASSESSEE BEING CLOSE FAMILY MEMBERS. 19. THE LD. D.R., ON THE OTHER HAND, RELIED ON THE ORDERS OF AUTHORITIES BELOW. ITA 7976/M/11 39 20. WE HAVE CONSIDERED THE RIVAL SUBMISSION AND ALS O PERUSED THE MATERIAL ON RECORD. IT IS STATED BY THE ASSESSEE THAT THE AC COMMODATIONS ARE ACQUIRED OUT OF UNDISCLOSED INCOME OF THE ASSESSEE WHICH HAS BEEN BROUGHT TO TAX AS UNDISCLOSED INCOME IN THE HANDS OF THE ASSESSEE VID E BLOCK ASSESSMENT ORDER DATED. 31 ST JULY, 2001 AND ORDERS OF THE SETTLEMENT COMMISSION FRAMED AGAINST THE ASSESSEE WITH DUES TAXES PAID TO THE RE VENUE. IT IS STATED BY THE ASSESSEE THAT THESE ACCOMMODATIONS HAVE BEEN SOLD ( C-18 & C20) WITH RESPECT TO WHICH ADDITION OF RS. 10 LAKHS HAVE BEEN MADE. IN OUR CONSIDERED OPINION, ONCE THE INCOME IS STATED TO BE ASSESSED I N THE HANDS OF THE ASSESSEE AND THE SAID ACCOMMODATIONS C-18 AND C-20 HAVE BEEN STATED TO BE ACQUIRED OUT OF UNDISCLOSED INCOME AND TREATED AS OWN PROPER TY BY THE ASSESSEE , WHICH HAS BEEN BROUGHT TO TAX IN THE HANDS OF THE A SSESSEE AND DUE TAXES PAID TO REVENUE , THEN THE CAPITAL GAINS ARISING ON SALE OF THESE ACCOMMODATIONS C-18 AND C-20 OWNED BY THE ASSESSEE AND HELD BY THE ASSESSEE IN THE NAME OF CLOSE FAMILY MEMBERS BEING SISTER AND MOTHER SHALL BE CHARGEABLE TO TAX IN THE HANDS OF THE ASSESSEE A LTHOUGH THE ACCOMMODATIONS ARE TECHNICALLY HELD IN THE NAME OF CLOSE FAMILY MEMBERS I.E. MOTHER AND SISTER OF THE ASSESSEE AND HENCE WE ORDE R DELETION OF ADDITION OF RS.10 LACS BEING ADVANCE ON SALE OF THESE ACCOMMODA TIONS AS MADE BY THE AO AND AS CONFIRMED BY THE CIT(A) WITH THE DIRECTI ON TO THE AO TO COMPUTE CAPITAL GAINS ARISING OUT OF THESE TWO ACCOMMODATIO NS AS PER ACT WHICH SHALL BE BROUGHT TO TAX IN THE HANDS OF THE ASSESSEE IN A CCORDANCE WITH LAW AFTER DULY VERIFYING AND AUTHENTICATING THE CLAIM OF THE ASSESSEE WITH RESPECT TO ACQUISITION AND OWNERSHIP OF THE ABOVE ACCOMMODATIO NS C-18 AND C-20 OUT OF UNDISCLOSED INCOME OF THE ASSESSEE WHICH HAS BEE N BROUGHT TO TAX AND DUE TAXES PAID TO REVENUE AS ASSERTED BY THE ASSESSEE A ND THE ASSESSEE IS DIRECTED TO APPEAR BEFORE THE A.O. AND FILE THE NEC ESSARY EVIDENCES BEFORE THE AO TO SUPPORT ITS CLAIM AND ASSERTIONS FOR VERIFICA TION AND AUTHENTICATION BY THE AO . NEEDLESS TO SAY THAT PROPER AND ADEQUATE O PPORTUNITY AS PER LAW ITA 7976/M/11 40 SHALL BE GIVEN BY THE AO TO THE ASSESSEE IN ACCORDA NCE WITH THE PRINCIPLES OF NATURAL JUSTICE . WE ORDER ACCORDINGLY. 21. GROUND NO. 5 RELATES TO CONFIRMING THE ACTION OF A.O. IN ADDING A SUM OF RS. 14,19,000/- AS CASH DEPOSIT U/S 68 OF THE AC T. FROM THE ITS DETAILS, THE A.O. OBSERVED THAT CASH DEPOSIT OF RS. 14.19 LA KHS WAS MADE BY THE ASSESSEE IN THE BANK ACCOUNT DURING THE FINANCIAL Y EAR 2006-07. THE ASSESSEE WAS ASKED TO SUBSTANTIATE THE SAME BUT NO REPLY WAS FILED BY THE ASSESSEE AND CASH DEPOSIT OF RS. 14.19 LAKHS WAS AD DED TO THE INCOME OF THE ASSESSEE U/S 68 OF THE ACT. A REMAND REPORT WAS CA LLED BY THE CIT(A) DURING THE FIRST APPELLATE PROCEEDINGS AND IN THE REMAND R EPORT DATED 8-8-2011 THE A.O. STATED THAT THE DOCUMENT PRODUCED ARE NEW AND THE SAME WERE NOT PRODUCED DURING THE ASSESSMENT PROCEEDINGS DESPITE SUFFICIENT OPPORTUNITY BEEN PROVIDED TO THE ASSESSEE AND THE EXPLANATION N OW PROVIDED DURING APPELLATE PROCEEDINGS IS AN AFTERTHOUGHT. THE ASSES SEE SUBMITTED BEFORE THE CIT(A) THAT ASSESSEE HAS INCOME FROM PRODUCTION OF FILM UNDER THE NAME OF PUSHPA KRISHNA CREATION, GANESH ACHARYA DANCE ACADE MY BUSINESS OF CONDUCTING DANCE AND CHOREOGRAPHY DIRECTION IN FILM S IN THE NAME OF VISHWANATH ACHARYA. THE CASH RECEIPT OF RS. 25.81 LAKHS INCLUDING OPENING CASH BALANCE OF ABOVE THREE CONCERNS AND FURTHER TH E ASSESSEE WITHDREW CASH OF RS. 28 LAKHS FROM BANK. THUS , THERE WAS INFLOW OF CASH OF RS. 53.81 LAKHS OUT OF WHICH THE CASH OF RS. 14.91 LAKHS WAS NOT RE QUIRED FOR BUSINESS PURPOSE WHICH WAS DEPOSITED IN THE BANK. THE ASSES SEE ALSO FILED THE COPY OF CASH BOOK AND BANK STATEMENT OF ALL THE CONCERNED E NTITIES. THE CIT(A), HOWEVER, REJECTED THE CONTENTIONS OF THE ASSESSEE A ND HELD THAT THE SUFFICIENT OPPORTUNITIES WAS GIVEN BY THE AO DURING ASSESSMENT PROCEEDINGS AND EVEN IN REMAND REPORT PROCEEDINGS AND ASSESSEE IS NOW N OT ENTITLED TO SUBMIT THE ADDITIONAL EVIDENCES WHICH WAS NOT ADMITTED BY THE CIT(A). THE CIT(A) HELD THAT THE CASH BOOK ETC. WERE NOT PRODUCED BEFORE TH E A.O. AND THE ASSESSEE HAS NOT RECONCILED AS TO HOW THE AMOUNT REFLECTED I N CASH BOOK AND HOW IS ITA 7976/M/11 41 ACCOUNTED FOR IN THE VARIOUS CONCERNS AS THESE SO C ALLED CASH BOOKS WERE NOT PRODUCED BEFORE THE AO. 22.AGGRIEVED BY THE ORDERS OF THE CIT(A), THE ASSES SEE IS IN FURTHER APPEAL BEFORE THE TRIBUNAL. 23. THE LD. COUNSEL OF THE ASSESSEE SUBMITTED THAT THE ASSESSEE HAS SUBMITTED ADDITIONAL EVIDENCES BEFORE THE CIT(A) WH ICH ARE NOT ADMITTED BY THE CIT(A) . THE ASSESSEE HAS ALSO SUBMITTED IN HI S WRITTEN SUBMISSIONS FILED BEFORE THE AUTHORITIES BELOW THAT THE ASSESSEE ORIG INALLY HAILED FROM VERY LOWER STRATA OF SOCIETY. WITH LOT OF HARD WORK, DI FFICULTY AND MORAL SUPPORT FROM THE FAMILY , THE ASSESSEE HAS COME SO FAR IN H IS PROFESSION OF CHOREOGRAPHY. DUE TO LACK OF FINANCIAL SUPPORT, TH E ASSESSEE COULD NOT EVEN COMPLETE HIS BASIC EDUCATION AND AS SUCH HE IS NOT WELL VERSED WITH THE TERMS OF ACCOUNTANCY, TAX AND OTHER LAWS AND REGULATIONS. THE ASSESSEE HAS ONCE AGAIN HIT AS HE HAD INCURRED HUGE LOSSES IN THE FIL M BUSINESS. THE ASSESSEES ACCOUNTANT ALSO LEFT THE JOB WITHOUT EVEN HANDING O VER THE CHARGE OF THE BOOKS OF ACCOUNT. THE ASSESSEE WAS NOT HAVING THE PROPER INFORMATION ABOUT THE BOOKS OF ACCOUNT AND ASSESSEE WAS TRAVELING WHI LE ASSESSMENT PROCEEDINGS ARE GOING ON WHICH WAS THE MAIN REASON THE ASSESSEE COULD NOT PRODUCE THE EVIDENCE BEFORE THE A.O. AND HENCE THER E WAS SUFFICIENT CAUSE FOR NOT PRODUCING THE EVIDENCE DURING THE ASSESSMEN T PROCEEDINGS AND ACCORDINGLY PRAYED BEFORE THE CIT(A) FOR ADMITTING THE ADDITIONAL EVIDENCE WHICH THE CIT(A) DECLINED TO ADMIT THE SAME. WE FI ND THAT THERE WAS SUFFICIENT CAUSE SHOWN BY THE ASSESSEE WHICH PREVEN TED THE ASSESSEE FROM PRODUCING THE ADDITIONAL EVIDENCE DURING THE ASSESS MENT PROCEEDINGS, HENCE, WE DIRECT THE ADMISSION OF THE ADDITIONAL EVIDENCE S BY THE AO . IN OUR CONSIDERED OPINION, THE INTEREST OF JUSTICE WILL B E BEST SERVED, IF THE ORDERS OF AUTHORITIES BELOW ARE SET ASIDE AND THE MATTER IS RESTORED BACK TO THE FILE OF A.O. WITH A DIRECTION TO ADMIT AND EXAMINE THE ADDI TIONAL EVIDENCE FILED BY ITA 7976/M/11 42 THE ASSESSEE AND DECIDE THE ISSUE AFRESH ON MERITS AFTER GIVING SUFFICIENT OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. GROUND NO. 5 IS ALSO TREATED AS ALLOWED FOR STATISTICAL PURPOSE. 10. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE COMPANY IS PARTLY ALLOWED FOR STATISTICAL PURPOSE. ORDER PRONOUNCED IN THE OPEN COURT ON 16 TH DECEMBER, 2015. # $% &' 16-12-2015 ( ) SD/- SD/- (JOGINDER SINGH) (RAMIT KOCHAR) JUDICIAL MEMBER ACCOUNTANT MEMBER $ MUMBAI ; & DATED 16-12-2015 [ .9../ R.K. R.K. R.K. R.K. , EX. SR. PS !'#$%&%# / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. : ( ) / THE CIT(A)- CONCERNED, MUMBAI 4. : / CIT- CONCERNED, MUMBAI 5. =>( 99?@ , ?@ , $ / DR, ITAT, MUMBAI H BENCH 6. (BC D / GUARD FILE. / BY ORDER, = 9 //TRUE COPY// / ( DY./ASSTT. REGISTRAR) , $ / ITAT, MUMBAI