M/s Srinivasa Auto Finanaciers,, Ponnuru v. THE DICIT,, Vijayawada

ITA 152/VIZ/2014 | 2007-2008
Pronouncement Date: 30-09-2016 | Result: Partly Allowed

Appeal Details

RSA Number 15225314 RSA 2014
Assessee PAN AATFS5240B
Bench Visakhapatnam
Appeal Number ITA 152/VIZ/2014
Duration Of Justice 2 year(s) 5 month(s) 4 day(s)
Appellant M/s Srinivasa Auto Finanaciers,, Ponnuru
Respondent THE DICIT,, Vijayawada
Appeal Type Income Tax Appeal
Pronouncement Date 30-09-2016
Appeal Filed By Assessee
Order Result Partly Allowed
Bench Allotted DB
Tribunal Order Date 30-09-2016
Assessment Year 2007-2008
Appeal Filed On 25-04-2014
Judgment Text
ITA NOS.533 TO 540/VIZAG/2013 & 150 TO 154/VIZAG/20 14 SRINIVASA AUTO FINANCIERS & LAKSHMI AUTO FINANCIERS PONNUR VIJAYAWADA 1 IN THE INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM BENCH VISAKHAPATNAM . . $ BEFORE SHRI V. DURGA RAO JUDICIAL MEMBER & SHRI G. MANJUNATHA ACCOUNTANT MEMBER ./I.T.A.NOS.533 & 534/VIZAG/2013 ( / ASSESSMENT YEARS: 2004-05 & 2005-06) ./I.T.A.NOS.151 TO 154/VIZAG/2014 ( / ASSESSMENT YEARS: 2006-07 TO 2009-10 RESPECTIVEL Y) M/S. SRINIVAS A AUTO FINANCIERS PONNURU GUNTUR DIST. VS. DCIT CENTRAL CIRCLE VIJAYAWADA [PAN: AATFS5240B ] ( % / APPELLANT) ( &'% / RESPONDENT) ./I.T.A.NOS.535 TO 540/VIZAG/2013 ( / ASSESSMENT YEARS: 2004-05 2005-06 2006-07 2008 -09 2009-10 & 2010-11 RESPECTIVELY) ./I.T.A.NOS.150/VIZAG/2014 ( / ASSESSMENT YEARS: 2007-08) M/S. LAKSHMI AUTO FINANCIERS PONNURU GUNTUR DIST. VS. DCIT CENTRAL CIRCLE VIJAYAWADA [PAN: AATFL96789N ] ( % / APPELLANT) ( &'% / RESPONDENT) / APPELLANT BY : SHRI D.L. NAR ASIMHA RAO A R / RESPONDENT BY : SHRI G. GURUSAMY DR ITA NOS.533 TO 540/VIZAG/2013 & 150 TO 154/VIZAG/20 14 SRINIVASA AUTO FINANCIERS & LAKSHMI AUTO FINANCIERS PONNUR VIJAYAWADA 2 / DATE OF HEARING : 22.09.2016 / DATE OF PRONOUNCEMENT : 30.09.2016 / O R D E R PER G. MANJUNATHA ACCOUNTANT MEMBER: THESE ARE APPEALS FILED BY TWO DIFFERENT ASSESSEE S AGAINST SEPARATE BUT IDENTICAL ORDERS OF THE CIT(A) GUNTU R FOR THE ASSESSMENT YEARS 2004-05 TO 2010-11. SINCE THE FACTS ARE IDE NTICAL AND ISSUES ARE COMMON THEY ARE HEARD TOGETHER AND DISPOSED OFF B Y WAY OF THIS COMMON ORDER FOR THE SAKE OF CONVENIENCE. 2. THE BRIEF FACTS EXTRACTED FROM ITA NO.533/VIZAG/ 2013 ARE THAT THE ASSESSEE IS A PARTNERSHIP FIRM WHICH IS ENGAGED IN THE BUSINESS OF AUTO FINANCING FILED ITS RETURN OF INCOME UNDER THE PRO VISIONS OF SECTION 139(1) OF THE INCOME TAX ACT 1961 (HEREINAFTER CAL LED AS 'THE ACT') FOR THE RESPECTIVE ASSESSMENT YEARS. A SEARCH AND SEIZ URE OPERATION WAS CONDUCTED IN ASSESSEES CASE AS PART OF MOVVA GROU P PONNUR ON 15.10.2009. DURING THE COURSE OF SEARCH OPERATION INCRIMINATING DOCUMENTS FOUND AND SEIZED REVEALS THAT THE ASSESSE E HAS UNDISCLOSED INCOME IN THE FORM OF INTEREST ON LOANS AND ADVANCE S. THE ASSESSEE VIDE ITS STATEMENT U/S 132(4) OF THE ACT HAS AGREE D FOR OFFERING ADDITIONAL INCOME. SUBSEQUENTLY THE CASE HAS BEEN NOTIFIED TO CENTRAL ITA NOS.533 TO 540/VIZAG/2013 & 150 TO 154/VIZAG/20 14 SRINIVASA AUTO FINANCIERS & LAKSHMI AUTO FINANCIERS PONNUR VIJAYAWADA 3 CIRCLE VIJAYAWADA AND ACCORDINGLY THE ASSESSING O FFICER HAS ISSUED NOTICES U/S 153A OF THE ACT FOR THE SIX ASSESSMENT YEARS IMMEDIATELY PRECEDING THE ASSESSMENT YEAR IN WHICH THE SEARCH W AS CONDUCTED ASKING ASSESSEE TO FILE THE RETURN OF INCOME. IN R ESPONSE TO THE NOTICES THE ASSESSEE FIRM FILED ITS RETURN OF INCOME FOR TH E ASSESSMENT YEAR 2004-05 TO 2010-11 ON 14.3.2011 DECLARING ADDITION AL INCOME OFFERED DURING THE COURSE OF SEARCH. THE CASE HAS BEEN SELE CTED FOR SCRUTINY AND ACCORDINGLY NOTICES U/S 143(2) & 142(1) OF THE ACT WERE ISSUED. IN RESPONSE TO NOTICES THE AUTHORIZED REPRESENTATIVE OF THE ASSESSEE APPEARED FROM TIME TO TIME AND FILED NECESSARY EVID ENCES ALONG WITH WRITTEN SUBMISSIONS. THE A.O. AFTER CONSIDERING TH E EXPLANATIONS OF THE ASSESSEE HAS COMPLETED ASSESSMENT U/S 143(3) R.W.S . 153A OF THE ACT AND DETERMINED TOTAL INCOME BY MAKING ADDITIONS TOW ARDS DISALLOWANCE OF INTEREST PAYMENTS U/S 40(A)(IA) OF THE ACT FOR NON-DEDUCTION OF TAX AT SOURCE U/S 194A OF THE ACT UNEXPLAINED CASH CREDIT S U/S 68 OF THE ACT INTEREST ON UNEXPLAINED CASH CREDITS ADVANCES PAID TO PARTNERS OF THE FIRM AND CREDITS IN CAPITAL ACCOUNT OF THE PARTNERS . 3. AGGRIEVED BY THE ASSESSMENT ORDER THE ASSESSEE HAS PREFERRED AN APPEAL BEFORE THE CIT(A). BEFORE THE CIT(A) THE AS SESSEE HAS REITERATED THE SUBMISSIONS MADE BEFORE THE A.O. THE CIT(A) FO R THE REASONS ITA NOS.533 TO 540/VIZAG/2013 & 150 TO 154/VIZAG/20 14 SRINIVASA AUTO FINANCIERS & LAKSHMI AUTO FINANCIERS PONNUR VIJAYAWADA 4 RECORDED IN HIS ORDER HAS UPHELD THE DISALLOWANCE M ADE BY THE A.O. U/S 40(A)(IA) OF THE ACT TOWARDS INTEREST PAYMENT UNEX PLAINED CASH CREDIT TOWARDS SUNDRY CREDITORS U/S 68 OF THE ACT AND INTE REST ON UNEXPLAINED CREDITS HOWEVER ALLOWED RELIEF TOWARDS ADDITIONS TOWARDS ADVANCES GIVEN TO PARTNERS BY DIRECTING THE A.O. TO ALLOW TH E BENEFIT OF SET OFF TOWARDS ADDITIONAL INCOME OFFERED BY THE PARTNERSHI P FIRM TOWARDS INTEREST ON LOANS TO THE EXTENT INVESTMENT IS COVER ED BY ADDITIONAL INCOME OFFERED IN THE HANDS OF FIRM. AGGRIEVED BY THE CIT(A) ORDER THE ASSESSEE IS IN APPEAL BEFORE US. 4. THE ASSESSEE HAS FILED COMMON GROUNDS FOR ALL TH E ASSESSMENT YEARS. FROM THESE GROUNDS OF APPEALS THE ASSESSEE HAS AGITATED FIVE ISSUES AS FOLLOWS: I. DISALLOWANCE OF INTEREST ON LOANS U/S 40(A)(IA) OF THE ACT. II. CONFIRMATION OF ADDITION TOWARDS UNEXPLAINED CASH C REDIT U/S 68 OF THE ACT. III. ADDITION SUSTAINED BY THE CIT(A) TOWARDS INTEREST O N UNEXPLAINED CASH CREDITS. IV. ADDITIONS SUSTAINED BY THE CIT(A) TOWARDS ADVANCES GIVEN TO PARTNERS. V. ADDITION SUSTAINED BY THE CIT(A) TOWARDS UNEXPLAINE D INVESTMENT IN PARTNERS CAPITAL ACCOUNT. 5. THE ASSESSEE ALSO ARGUED A LEGAL ISSUE WITHOUT R AISING ANY SPECIFIC GROUND IN ANY OF THE YEARS IN RELATION TO VALIDITY OF ASSESSMENT ORDER PASSED BY THE A.O. THE LD. A.R. FOR THE ASSESSEE S UBMITTED THAT THE ITA NOS.533 TO 540/VIZAG/2013 & 150 TO 154/VIZAG/20 14 SRINIVASA AUTO FINANCIERS & LAKSHMI AUTO FINANCIERS PONNUR VIJAYAWADA 5 A.O. WAS ERRED IN MAKING ADDITIONS WITHOUT SEIZED M ATERIALS FOR THE COMPLETED ASSESSMENT YEARS. THE A.R. REFERRED TO TH E PROVISIONS OF SECTION 153A AND SUBMITTED THAT IN CASE OF COMPLETE D ASSESSMENTS THE A.O. HAS NO JURISDICTION TO MAKE ADDITIONS WITHOUT ANY SEIZED MATERIALS. IN CASE OF ABATED ASSESSMENT THE A.O. HAS JURISDIC TION TO ASSESS THE TOTAL INCOME INCLUDING UNDISCLOSED INCOME FOUND AS A RESULT OF SEARCH. IN THE PRESENT CASE THE A.O. MADE ADDITIONS TO RETURN ED INCOME WITHOUT ANY SEIZED MATERIALS THEREFORE THE ASSESSMENT ORD ERS PASSED BY THE A.O. IS INVALID CONSEQUENTLY ADDITION ARE LIABLE T O BE DELETED. HAVING CONSIDERED THE ARGUMENTS AND HAVING CONSIDERED MATE RIALS ON RECORD WE FIND THAT THERE IS NO MERITS IN THE ARGUMENTS OF THE LD. A.R. FOR THE ASSESSEE AS THE ASSESSEE DID NOT RAISED THIS LEGAL GROUND BEFORE US OR EVEN BEFORE THE CIT(A). HENCE THE LEGAL ARGUMENTS PUT-FOURTH BY THE LD. A.R. IS REJECTED. 6. HAVING SAID THAT LET US DISCUSS THE ISSUES ON M ERITS. THE FIRST ISSUE THAT CAME UP FOR OUR CONSIDERATION IS DISALLOWANCE OF INTEREST ON CREDITORS U/S 40(A)(IA) OF THE ACT FOR NON-DEDUCTI ON OF TAX AT SOURCE UNDER THE PROVISIONS OF SECTION 194A OF THE ACT. TH E FACTS RELATING TO ISSUE ARE THAT THE ASSESSEE IS INTO THE BUSINESS OF AUTO FINANCE HAS PAID INTEREST ON CREDITORS HOWEVER FAILED TO DEDUCT TD S UNDER THE PROVISIONS ITA NOS.533 TO 540/VIZAG/2013 & 150 TO 154/VIZAG/20 14 SRINIVASA AUTO FINANCIERS & LAKSHMI AUTO FINANCIERS PONNUR VIJAYAWADA 6 OF SECTION 194A OF THE ACT. THE A.O. OBSERVED THAT AS PER THE PROVISIONS OF SECTION 194A OF THE ACT ANY PERSON MAKING PAYME NT OF INTEREST IN EXCESS OF ` 5 000/- TAX HAS TO BE DEDUCTED AT SOURCE AT THE R ATE APPLICABLE UNDER THE PROVISIONS AT THE TIME OF CRED IT OR PAYMENT TO THE CONCERNED PAYEE. THE A.O. FURTHER OBSERVED THAT TH OUGH INTEREST PAYMENTS EXCEEDS ` 5 000/- IN EACH CASE THE ASSESSEE HAS FAILED TO DEDUCT TDS AS REQUIRED UNDER THE LAW THEREFORE IS SUED A SHOW CAUSE NOTICE AND ASKED TO EXPLAIN WHY THE INTEREST PAYMEN T SHALL NOT BE DISALLOWED UNDER THE PROVISIONS OF SECTION 40(A)(IA ) OF THE ACT FOR NON- DEDUCTION OF TAX AT SOURCE. IN RESPONSE TO SHOW CAU SE NOTICE THE ASSESSEE VIDE ITS REPLY DATED 12.12.2011 SUBMITTED THAT IT HAD COLLECTED AMOUNT FROM FARMERS AND THE CREDITORS ARE NOT ASSES SED TO INCOME TAX AS THEY DO NOT HAVE ANY OTHER TAXABLE INCOME EXCEPT INTEREST INCOME. SINCE THE CREDITORS DO NOT HAVE TAXABLE INCOME AND ALSO ON THE REQUEST OF THE CREDITORS IT HAS NOT DEDUCTED TDS U/S 194A OF THE ACT. 7. THE A.O. AFTER CONSIDERING THE EXPLANATIONS OF T HE ASSESSEE HELD THAT THOUGH ASSESSEE CLAIMS TO HAVE RECEIVED ADVANC ES FROM FARMERS THE ASSESSEE FAILED TO FURNISH FORM NO.15G AS REQUI RED UNDER THE ACT FROM CONCERNED PERSONS. THE A.O. FURTHER OBSERVED T HAT INTEREST PAYMENT IN EACH CASE HAS EXCEEDED ` 5 000/- AND AS PER THE PROVISIONS OF SECTION 194A OF THE ACT THE ASSESSEE OUGHT TO H AVE DEDUCTED TDS ITA NOS.533 TO 540/VIZAG/2013 & 150 TO 154/VIZAG/20 14 SRINIVASA AUTO FINANCIERS & LAKSHMI AUTO FINANCIERS PONNUR VIJAYAWADA 7 BUT IT HAS FAILED TO DEDUCT TDS THEREFORE IN VIE W OF THE CLEAR PROVISIONS SET OUT IN THE PROVISIONS OF SECTION 40(A)(IA) OF T HE ACT ANY EXPENDITURE IN THE NATURE OF INTEREST PAID WITHOUT DEDUCTION OF TAX AT SOURCE IS NOT ALLOWABLE AS DEDUCTION IN COMPUTING PROFITS AND GAI NS OF BUSINESS. WITH THESE OBSERVATIONS MADE ADDITIONS TOWARDS INTEREST PAYMENT UNDER THE PROVISIONS OF SECTION 40(A)(IA) OF THE ACT. THE AS SESSEE CARRIED MATTER IN APPEAL BEFORE THE CIT(A) BUT COULD NOT SUCCEED IN ITS ATTEMPT. THE CIT(A) CONFIRMED THE ADDITIONS MADE BY THE A.O. BY HOLDING THAT THE ASSESSEE HAS FAILED TO DEDUCT TDS AS REQUIRED UNDER THE LAW AND ALSO FAILED TO FILE FORM NO.15G FROM THE RECIPIENTS DECL ARING THAT THEY DO NOT HAVE TAXABLE INCOME. THE CIT(A) FURTHER HELD THAT T HOUGH ASSESSEE CLAIMS THAT NO DISALLOWANCE CAN BE MADE TOWARDS THE AMOUNTS WHICH WERE PAID WITHIN THE FINANCIAL YEAR BY REFERRING T O THE SPECIAL BENCH DECISION OF ITAT VISAKHAPATNAM IN THE CASE OF MERI LYN SHIPPING & TRANSPORTS VS. ACIT 136 ITD 23 BUT THE FACT IS THA T THE JURISDICTIONAL HIGH COURT HAS SUSPENDED THE OPERATION OF SPECIAL B ENCH DECISION. IN VIEW OF THIS THERE IS NO MERIT IN THE CONTENTION O F THE ASSESSEE THAT NO DISALLOWANCE CAN BE MADE FOR THE AMOUNTS WHICH WERE PAID WITHIN THE FINANCIAL YEAR. 8. THE LD. A.R. FOR THE ASSESSEE SUBMITTED THAT TH E A.O. WAS ERRED IN DISALLOWING INTEREST ON CREDITORS UNDER THE PROV ISIONS OF SECTION ITA NOS.533 TO 540/VIZAG/2013 & 150 TO 154/VIZAG/20 14 SRINIVASA AUTO FINANCIERS & LAKSHMI AUTO FINANCIERS PONNUR VIJAYAWADA 8 40(A)(IA) OF THE ACT AS THE ASSESSEE HAS PAID INTE REST TO THE CREDITORS HAVING TAXABLE INCOME BELOW THE TAX BRACKET. THE AS SESSEE FURTHER SUBMITTED THAT AS FAR AS THE ASSESSMENT YEAR 2004-0 5 IS CONCERNED THE A.O. WAS COMPLETELY ERRED IN DISALLOWING INTEREST U NDER THE PROVISIONS OF SECTION 40(A)(IA) OF THE ACT AS THE SAID SECTION W AS INTRODUCED TO THE STATUTE FROM THE ASSESSMENT YEAR 2005-06 ONWARDS A S SUCH NO DISALLOWANCE CAN BE MADE FOR THE ASSESSMENT YEAR 20 04-05 FOR NON- DEDUCTION OF TAX AT SOURCE. AS REGARDS THE ASSESSM ENT YEAR 2005-06 TO 2010-11 THE ASSESSEE HAS PAID THE INTEREST WITHIN THE SAME FINANCIAL YEAR THEREFORE IN VIEW OF THE SPECIAL BENCH DECIS ION OF ITAT VISAKHAPATNAM IN THE CASE OF MERILYN SHIPPING & TRA NSPORTS (SUPRA) NO DISALLOWANCE CAN BE MADE U/S 40(A)(IA) OF THE ACT IF THE AMOUNTS HAVE BEEN PAID DURING THE SAME FINANCIAL YEAR. 9. ON THE OTHER HAND THE LD. D.R. SUBMITTED THAT T HE A.O. HAS RIGHTLY DISALLOWED INTEREST PAYMENT FOR NON-DEDUCTI ON OF TAX AT SOURCE AS THE ASSESSEE HAS FAILED TO DEDUCT TDS DESPITE I NTEREST PAYMENTS EXCEEDS ` 5 000/- IN EACH CASE. THE LD. D.R. FURTHER SUBMIT TED THAT AS PER THE PROVISIONS OF SECTION 194A OF THE ACT ANY PERSON MAKING PAYMENT OF INTEREST IN EXCESS OF ` 5 000/- HE SHALL DEDUCT TDS AT THE RATE APPLICABLE EITHER AT THE TIME OF CREDIT OR PAY MENT TO THE RESPECTIVE PAYEE ACCOUNT. THERE IS NO MERIT IN THE ARGUMENTS OF THE ASSESSEE THAT ITA NOS.533 TO 540/VIZAG/2013 & 150 TO 154/VIZAG/20 14 SRINIVASA AUTO FINANCIERS & LAKSHMI AUTO FINANCIERS PONNUR VIJAYAWADA 9 IT HAD PAID INTEREST TO FARMERS AND THE CREDITORS D OES NOT HAVE TAXABLE INCOME AS THE ASSESSEE REQUIRED TO OBTAIN FORM NO. 15G FROM THE CONCERNED PERSONS AS REQUIRED UNDER RULE 29C OF THE INCOME TAX RULES 1962 HOWEVER THE ASSESSEE FAILED TO OBTAIN SUCH F ORMS THEREFORE THE A.O. WAS RIGHTLY DISALLOWED INTEREST AND HIS ORDER SHOULD BE UPHELD. 10. WE HAVE HEARD BOTH THE PARTIES PERUSED THE MATE RIALS AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHOR ITIES BELOW. THE A.O. DISALLOWED INTEREST PAID TO CREDITORS UNDER TH E PROVISIONS OF SECTION 40(A)(IA) OF THE ACT FOR FAILURE TO DEDUCT TDS U/S 194A OF THE ACT. THE A.O. WAS OF THE OPINION THAT THE ASSESSEE FAILED TO DEDUCT TDS U/S 194A OF THE ACT DESPITE INTEREST PAYMENT EXCEEDS ` 5 000/- IN EACH CASE. IT IS THE CONTENTION OF THE ASSESSEE THAT THE A.O. WAS NOT CORRECT IN DISALLOWING INTEREST PAYMENT U/S 40(A)(IA) OF THE A CT FOR THE ASSESSMENT YEAR 2004-05 AS THE SAID PROVISIONS HAS BEEN INSER TED TO THE STATUTE W.E.F ASSESSMENT YEAR 2005-06 ONWARDS. THE ASSESSEE FURTHER CONTENDED THAT IN RESPECT OF ASSESSMENT YEAR 2005-0 6 TO 2010-11 IT IS COVERED BY SPECIAL BENCH DECISION OF ITAT VISAKHAP ATNAM IN THE CASE OF MERILYN SHIPPING & TRANSPORTS (SUPRA) WHEREIN THE ITAT HAS HELD THAT NO DISALLOWANCE CAN BE MADE U/S 40(A)(IA) OF THE AC T IF AMOUNTS HAVE BEEN PAID WITHIN THE FINANCIAL YEAR. WE FIND FORCE I N THE ARGUMENTS OF THE ASSESSEE FOR THE REASON THAT THE PROVISIONS OF SECTION 40(A)(IA) WAS ITA NOS.533 TO 540/VIZAG/2013 & 150 TO 154/VIZAG/20 14 SRINIVASA AUTO FINANCIERS & LAKSHMI AUTO FINANCIERS PONNUR VIJAYAWADA 10 INSERTED BY THE FINANCE NO.(2) ACT 2004 W.E.F. 1.4 .2005 AND ACCORDINGLY THE DISALLOWANCES PROVIDED UNDER THE S AID PROVISIONS IS APPLICABLE FROM THE ASSESSMENT YEAR 2005-06 ONWARDS . THEREFORE WE ARE OF THE VIEW THAT THE A.O. WAS ERRED IN DISALLOW ING INTEREST UNDER THE PROVISIONS OF SECTION 40(A)(IA) OF THE ACT FOR NON -DEDUCTION OF TAX AT SOURCE FOR THE ASSESSMENT YEAR 2004-05. 11. IN SO FAR AS ASSESSMENT YEAR 2005-06 TO 2010-11 WE FIND THAT THE COORDINATE BENCH OF THIS TRIBUNAL IN THE CASE OF M ERILYN SHIPPING & TRANSPORTS (SUPRA) HAS EXAMINED THE ISSUE OF DISALL OWANCE OF EXPENDITURE SPECIFIED UNDER THE SAID PROVISIONS FOR NON-DEDUCTION OF TAX AT SOURCE UNDER RESPECTIVE PROVISIONS. THE COORDIN ATE BENCH HELD THAT NO DISALLOWANCE CAN BE MADE U/S 40(A)(IA) OF THE AC T IF THE AMOUNTS HAVE BEEN PAID BEFORE THE END OF FINANCIAL YEAR. T HEREFORE WE ARE OF THE VIEW THAT THE A.O. WAS NOT CORRECT IN DISALLOWI NG INTEREST UNDER THE PROVISIONS OF SECTION 40(A)(IA) OF THE ACT FOR NON -DEDUCTION OF TAX AT SOURCE. AS REGARDS THE LD. D.R. ARGUMENTS THAT THE DEPARTMENT HAS NOT ACCEPTED THE DECISION OF MERILYN SHIPPING & TRANSPO RTS (SUPRA) WE FIND THAT THE COORDINATE BENCH OF THIS TRIBUNAL IN THE CASE OF MUKUNDARA ENGINEERS AND CONTRACTORS VS. ACIT (SUPRA) HAS CONS IDERED THE ISSUE AND AFTER CONSIDERING THE REVENUE OBJECTION WITH RE GARD TO THE SPECIAL BENCH DECISION OF M/S. MERILYN SHIPPING & TRANSPORT S (SUPRA) AND ALSO ITA NOS.533 TO 540/VIZAG/2013 & 150 TO 154/VIZAG/20 14 SRINIVASA AUTO FINANCIERS & LAKSHMI AUTO FINANCIERS PONNUR VIJAYAWADA 11 CONSIDERING THE RATIO OF HONBLE A.P. HIGH COURT I N THE CASE OF JANAPRIYA ENGINEERING SYNDICATE (SUPRA) DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE. THE RELEVANT PORTION IS REPRODUCED HEREU NDER: WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED THE RECORD. CONSISTENT WITH THE VIEW TAKEN BY THE ITAT SPECIAL BENCH VISAKHAPATNAM AND ALSO IN THE LIGHT OF THE VIEW EXP RESSED BY THE HONBLE A.P. HIGH COURT IN THE CASE OF JANAPRIYA ENGINEERIN G SYNDICATE WE ARE OF THE OPINION THAT THE PROVISIONS OF SECTION 40A(IA) OF THE ACT CANNOT BE MADE APPLICABLE IN RESPECT OF THE AMOUNTS ALREADY P AID BEFORE 31 ST MARCH. IN OTHER WORDS THE A.O. IS DIRECTED TO RESTRICT THE DISALLOWANCE TO THE AMOUNTS PAYABLE AFTER 31 ST MARCH. WITH THESE OBSERVATIONS GROUND NO.3 OF THE ASSESSEE IS TREATED AS PARTLY ALLOWED. 12. IN THIS VIEW OF THE MATTER AND ALSO RESPECTFULL Y FOLLOWING THE RATIO OF THE COORDINATE BENCH WE ARE OF THE VIEW THAT NO DISALLOWANCE CAN BE MADE U/S 40(A)(IA) OF THE ACT FOR THE AMOUNTS WHIC H HAVE BEEN PAID DURING THE FINANCIAL YEAR. HOWEVER THE ASSESSEE H AS FAILED TO FILE NECESSARY EVIDENCES WITH REGARD TO PAID AND PAYABLE . THEREFORE WE SET ASIDE THE ISSUE TO THE FILE OF THE A.O. AND DIRECT THE A.O. TO EXAMINE THE ISSUE PAID AND PAYABLE WITH REFERENCE TO BOOKS OF A CCOUNTS OF THE ASSESSEE AND IF INTEREST HAS BEEN PAID WITHIN THE E ND OF FINANCIAL YEAR THEN THE A.O. IS DIRECTED TO DELETE ADDITIONS MADE U/S 40(A)(IA) OF THE ACT. IN OTHER WORDS THE A.O. IS DIRECTED TO RESTRI CT THE DISALLOWANCES TO THE EXTENT AMOUNTS REMAINING PAYABLE AT THE END OF THE FINANCIAL YEAR. IN THE RESULT THE GROUND RAISED BY THE ASSESSEE FO R ALL THE ASSESSMENT YEARS IS ALLOWED FOR STATISTICAL PURPOSE. ITA NOS.533 TO 540/VIZAG/2013 & 150 TO 154/VIZAG/20 14 SRINIVASA AUTO FINANCIERS & LAKSHMI AUTO FINANCIERS PONNUR VIJAYAWADA 12 13. THE NEXT ISSUE THAT CAME UP FOR OUR CONSIDERATI ON IS ADDITIONS TOWARDS UNEXPLAINED CASH CREDITS AND INTEREST ON UN EXPLAINED CASH CREDIT U/S 68 OF THE ACT. DURING THE COURSE OF ASS ESSMENT PROCEEDINGS THE A.O. OBSERVED THAT IN THE BALANCE SHEET FILED A LONG WITH RETURN U/S 153A OF THE ACT THE ASSESSEE HAS ADMITTED SUNDRY C REDITORS AND RELATED INTEREST IS SHOWN TO HAVE PAID TO THE CREDITORS. TO ASCERTAIN THE CORRECTNESS OF THE CLAIM THE A.O. ISSUED A SHOW CA USE NOTICE AND ASKED TO FILE THE DETAILS OF CREDITORS ALONG WITH CONFIRM ATION LETTERS. THE ASSESSEE FILED A LIST OF CREDITORS WITHOUT ANY ADDR ESSES AND CONFIRMATION LETTERS TO PROVE THE IDENTITY GENUINENESS OF THE T RANSACTIONS AND CREDITWORTHINESS OF THE PARTIES. SINCE THE ASSESSE E HAS FAILED TO FILE NECESSARY EVIDENCES TO PROVE THE CREDITORS THE A.O . HAS MADE ADDITIONS TOWARDS CREDITORS AND RELATED INTEREST UNDER THE PR OVISIONS OF SECTION 68 OF THE ACT. THE ASSESSEE CARRIED THE MATTER IN APP EAL BEFORE THE CIT(A) AND THE CIT(A) HAS CONFIRMED THE ADDITIONS MADE BY THE A.O. BY HOLDING THAT IT IS WELL SETTLED LAW THAT THE ONUS O F PROVING GENUINENESS OF CREDITS IS ON THE ASSESSEE WHO HAS TO PROVE THE SA ME BY ESTABLISHING THE IDENTITY OF THE CREDITORS CAPACITY/CREDITWORTH INESS OF THE CREDITOR AND GENUINENESS OF THE TRANSACTIONS. ALL THE 3 ING REDIENTS ARE ABSENT AND HENCE THE A.O. HAS RIGHTLY MADE ADDITIONS TOWA RDS CREDITORS AND RELATED INTEREST UNDER THE PROVISIONS OF SECTION 68 OF THE ACT. ITA NOS.533 TO 540/VIZAG/2013 & 150 TO 154/VIZAG/20 14 SRINIVASA AUTO FINANCIERS & LAKSHMI AUTO FINANCIERS PONNUR VIJAYAWADA 13 14. THE LD. A.R. FOR THE ASSESSEE SUBMITTED THAT T HE A.O. WAS ERRED IN TREATING THE CREDITORS APPEARING IN THE BALANCE SHEET AS UNEXPLAINED AS THE ASSESSEE COULD NOT FILE CONFIRMATION LETTERS AS SOUGHT BY THE A.O. AT THE TIME OF ASSESSMENT HOWEVER THE FACT REMAIN S THAT ALL THE CREDITORS HAVE BEEN ACCEPTED BY CHEQUE AND THE SAME HAS BEEN REPAID BY WAY OF CHEQUE IN THE SUBSEQUENT FINANCIAL YEARS. THE ASSESSEE FURTHER SUBMITTED THAT THE ASSESSEE COULD NOT FURNI SH CONFIRMATION LETTERS IN SUPPORT OF ABOVE CREDITORS AT THE TIME O F ASSESSMENT AS AFTER THE SEARCH A SITUATION HAS DEVELOPED AROUND ASSESSE E AND EVERY PERSON WAS TRYING TO AVOID THE ASSESSEE SO THAT THEY WON T COME TO THE ADVERSE NOTICE OF THE DEPARTMENT CONSEQUENTLY THE PERSONS WHO HAVE LENT THE AMOUNT TO THE ASSESSEE ARE NOT WILLING TO CONFIRM THE SAME IN WRITING. THE ASSESSEE FURTHER SUBMITTED THAT DURING THE COURSE OF SEARCH IT HAS AGREED ADDITIONAL INCOME TO MAKE GOO D THE DEFICIENCIES CONTAINED IN THE BOOKS OF ACCOUNTS TO THE SATISFACT ION OF THE AUTHORITIES AND WHEN SUCH DISCLOSURE IS ACCEPTED BY THEM AND AL SO WHEN THERE IS NO INCRIMINATING MATERIALS TO ESTABLISH THAT THE CREDI TS ARE FICTITIOUS IN THE NATURE IT DOES NOT APPEAR REASONABLE TO ADD BACK T HE SAME ON SOME TECHNICAL REASONS ENFORCING THE PROVISIONS CONTAINE D IN SECTION 68 OF THE ACT AND SUCH REJECTION OF CREDITS ON A PRESUMPTIVE BASIS MAY TANTAMOUNT TO MAKING OF EVERY ASSESSMENT WHICH IS N OT PERMITTED BY ITA NOS.533 TO 540/VIZAG/2013 & 150 TO 154/VIZAG/20 14 SRINIVASA AUTO FINANCIERS & LAKSHMI AUTO FINANCIERS PONNUR VIJAYAWADA 14 LAW. THE A.R. REFERRED TO THE CBDT INSTRUCTIONS NO. 574 DATED 27.7.1973 AND SUBMITTED THAT THE CBDT HAS DIRECTED THAT THE A SSESSMENTS HAVE TO BE MADE IN REASONABLE AND FAIR MANNER AFTER CONSIDE RING ALL THE RELEVANT CIRCUMSTANCES OF THE CASE THAT IF UNJUSTIFIED OVER ASSESSMENT ARE AVOIDED THIS WILL INTER-ALIA THE FUTURE OF EXAGGERA TED DEMAND WHICH UNNECESSARILY INFERRED ARREARS FIGURES. THE ASSESS EE FURTHER SUBMITTED THAT ADDITIONS MADE BY THE A.O. IS NOT BASED ON ANY SEIZED MATERIALS AND THE A.O. HAS MADE ADDITIONS BASED ON BOOKS OF A CCOUNTS AND BALANCE SHEET FILED ALONG WITH RETURN OF INCOME AND THE CREDITORS WERE APPEARED IN THE FINANCIAL STATEMENTS FILED IN THE R ETURN OF INCOME FILED U/S 139(1) OF THE ACT FOR THE RESPECTIVE ASSESSMENT YEARS. THEREFORE THE A.O. WAS COMPLETELY ERRED IN MAKING ADDITIONS T OWARDS UNEXPLAINED CREDITS AND INTEREST ON SUCH CREDITS. 15. ON THE OTHER HAND THE LD. D.R. STRONGLY SUPPOR TED THE ORDER OF CIT(A). THE D.R. FURTHER SUBMITTED THAT THE ASSESS EE HAS FAILED TO DISCHARGE INITIAL ONUS CAST UPON IT BY FURNISHING I DENTITY GENUINENESS OF THE TRANSACTIONS AND CREDITWORTHINESS OF THE PARTIE S WHICH IS THE BASIC REQUIREMENT OF THE PROVISIONS OF SECTION 68 OF THE ACT. THE ASSESSEE NEITHER FURNISHED CONFIRMATION LETTERS NOR PROVED T HE CREDITORS BY FILING THE IDENTITY THEREFORE THE A.O. HAS RIGHTLY MADE ADDITIONS AND HIS ORDER SHOULD BE UPHELD. ITA NOS.533 TO 540/VIZAG/2013 & 150 TO 154/VIZAG/20 14 SRINIVASA AUTO FINANCIERS & LAKSHMI AUTO FINANCIERS PONNUR VIJAYAWADA 15 16. WE HAVE HEARD BOTH THE PARTIES PERUSED THE MATE RIALS AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHOR ITIES BELOW. THE A.O. MADE ADDITIONS U/S 68 OF THE ACT TOWARDS UNEX PLAINED CREDITS BEING LOAN CREDITORS AND RELATED INTEREST PAYMENT T O SUCH CREDITORS. THE A.O. WAS OF THE OPINION THAT THE ASSESSEE HAS NOT P ROVED THE IDENTITY GENUINENESS OF THE TRANSACTIONS AND CREDITWORTHINES S OF THE PARTIES. THE A.O. FURTHER WAS OF THE OPINION THAT THE ASSESS EE HAS FAILED TO FILE THE DETAILS OF LOAN CREDITORS AND ALSO FAILED TO FU RNISH ANY CONFIRMATION LETTERS. THEREFORE OPINED THAT THE ASSESSEE HAS F AILED TO DISCHARGE INITIAL BURDEN CAST UPON IT AS REQUIRED UNDER THE P ROVISIONS OF SECTION 68 OF THE ACT. IT IS THE CONTENTION OF THE ASSESSEE TH AT ALL THE CREDITORS HAVE BEEN ACCEPTED BY CHEQUE AND THE SAME HAVE BEEN REPA ID BY CHEQUE IN THE SUBSEQUENT YEARS THEREFORE THE A.O. WAS NOT C ORRECT IN DOUBTING THE GENUINENESS OF THE TRANSACTIONS. THE ASSESSEE FURTHER CONTENDED THAT IT COULD NOT FILE CONFIRMATION LETTERS BECAUSE AFTER THE SEARCH THE LOAN CREDITORS REFUSED TO GIVE ANY CONFIRMATION LET TERS IN WRITING THEREFORE JUST BECAUSE THE CONFIRMATION LETTERS AR E NOT FILED IT CANNOT BE HELD THAT THE ENTIRE TRANSACTIONS ARE NOT GENUIN E. IT IS FURTHER SUBMITTED THAT THE A.O. MADE ADDITIONS BASED ON THE BALANCE SHEET FILED ALONG WITH RETURN OF INCOME WITHOUT REFERENCE TO AN Y SEIZED MATERIALS ITA NOS.533 TO 540/VIZAG/2013 & 150 TO 154/VIZAG/20 14 SRINIVASA AUTO FINANCIERS & LAKSHMI AUTO FINANCIERS PONNUR VIJAYAWADA 16 THEREFORE THE A.O. WAS NOT CORRECT IN MAKING ADDIT IONS TOWARDS CREDITORS AND RESULTANT INTEREST IN THE ABSENCE OF ANY SEIZED MATERIALS. 17. SECTION 68 OF THE ACT PROVIDES FOR ADDITION WH ERE ANY SUM IS FOUND CREDITED IN THE BOOKS OF AN ASSESSEE MAINTAI NED FOR THE PREVIOUS YEAR AND THE ASSESSEE OFFERS NO EXPLANATION ABOUT T HE NATURE AND SOURCE THERE OF OR EXPLANATIONS OFFERED BY THE ASSE SSEE ARE NOT IN THE OPINION OF THE A.O. SATISFACTORY THEN SUM SO CREDI TED MAY BE CHARGED TO INCOME TAX AS THE INCOME OF THE ASSESSEE OF THAT PR EVIOUS YEAR. A PLAIN READING OF SECTION 68 OF THE ACT MAKES IT CLEAR TH AT ANY SUM FOUND CREDITED IN THE BOOKS OF ACCOUNTS OF THE ASSESSEE IT IS THE DUTY OF THE ASSESSEE TO PROVE TO THE SATISFACTION OF THE A.O. T HAT THE CREDITS ARE GENUINE. IT IS THE RESPONSIBILITY OF THE ASSESSEE TO PROVE THE IDENTITY GENUINENESS OF THE TRANSACTIONS AND CREDITWORTHINES S OF THE PARTIES. ONCE ASSESSEE DISCHARGES INITIAL BURDEN CAST UPON I T THEN BURDEN SHIFTS TO THE REVENUE TO PROVE OTHERWISE BUT THE ASSESSEE NEEDS TO DISCHARGE INITIAL BURDEN BY FILING NECESSARY DETAILS TO THE S ATISFACTION OF THE A.O. TO PROVE THE IDENTITY GENUINENESS OF THE TRANSACTIONS AND CREDITWORTHINESS OF THE PARTIES. 18. IN THE PRESENT CASE ON HAND ON PERUSAL OF THE FACTS AVAILABLE ON RECORD WE FIND THAT THE ASSESSEE HAS FAILED TO FIL E DETAILS OF CREDITORS WITH THEIR ADDRESSES AND ALSO CONFIRMATION LETTERS TO PROVE THE IDENTITY ITA NOS.533 TO 540/VIZAG/2013 & 150 TO 154/VIZAG/20 14 SRINIVASA AUTO FINANCIERS & LAKSHMI AUTO FINANCIERS PONNUR VIJAYAWADA 17 GENUINENESS OF THE TRANSACTIONS AND CREDITWORTHINES S OF THE PARTIES. THOUGH ASSESSEE CLAIMS THAT AT THE TIME OF SEARCH P ROCEEDINGS THE CREDITORS DID NOT COME FORWARD TO OWN UP THE LOANS AND SUBSEQUENTLY THEY WERE UNWILLING TO APPEAR BEFORE THE DEPARTMENT IS UNACCEPTABLE AS IT IS THE DUTY OF THE ASSESSEE TO DISCHARGE THE BUR DEN TO PROVE THE CREDITORS TO THE SATISFACTION OF THE A.O. SINCE T HE ASSESSEE FAILED TO DISCHARGE INITIAL ONUS CAST UPON IT THE A.O. HAS R IGHTLY MADE ADDITIONS TOWARDS CREDITORS AND RELATED INTEREST U/S 68 OF TH E ACT. THE CIT(A) AFTER CONSIDERING THE RELEVANT DETAILS UPHELD THE A DDITIONS MADE BY THE A.O. WE DO NOT SEE ANY ERROR OR INFIRMITY IN THE ORD ER PASSED BY THE CIT(A). HENCE WE INCLINED TO UPHOLD THE CIT(A) OR DER AND REJECT THE GROUND RAISED BY THE ASSESSEE FOR ALL THE ASSESSMEN T YEARS. 19. THE NEXT ISSUE THAT CAME UP FOR OUR CONSIDERATI ON IS ADDITIONS TOWARDS LOANS AND ADVANCES GIVEN TO THE PARTNERS OF THE ASSESSEE. DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE A. O. NOTICED THAT THE MANAGING PARTNER OF THE FIRM SRI R.C. RAO ADMITTED TO HAVE MADE CERTAIN ADVANCES TO RELATED PARTIES WHICH WERE NOT EARLIER ENTERED IN THE BOOKS OF ACCOUNTS ORIGINALLY PREPARED. THE A.O. FU RTHER OBSERVED THAT THE ASSESSEE CLAIMED TO HAVE UTILIZED ADVANCES RECE IVED FROM M/S. SRINIVASA AUTO FINANCIERS TO INVEST IN UNACCOUNTED PROPERTY/ADVANCES. THE ASSESSEE FURTHER CLAIMED THAT IT HAS ADVANCED L OANS TO PARTNERS AND ITA NOS.533 TO 540/VIZAG/2013 & 150 TO 154/VIZAG/20 14 SRINIVASA AUTO FINANCIERS & LAKSHMI AUTO FINANCIERS PONNUR VIJAYAWADA 18 THE SOURCES FOR THE LOANS AND ADVANCES ARE OUT OF A DDITIONAL INTEREST INCOME ADMITTED U/S 132(4) OF THE ACT IN THE HANDS OF PARTNERSHIP FIRMS. THE ASSESSEE FURTHER CLAIMED THAT BOTH ADVANCES GIV EN TO PARTNERS AND INTEREST RECEIPTS OF PARTNERSHIP FIRM WERE OUTSIDE THE BOOKS OF ACCOUNTS BOTH TRANSACTIONS WERE INCORPORATED IN THE BOOKS OF ACCOUNTS WHILE FILING REVISED RETURNS. DURING THE COURSE OF ASSESSMENT P ROCEEDINGS THE A.O. ASKED ASSESSEE FIRM TO FILE DATE WISE REALIZATION O F ADDITIONAL INTEREST IN ORDER TO VERIFY WHETHER ON DAYS OF INVESTMENT AND U NACCOUNTED ADVANCES TO PARTNERS THE FIRM IS HAVING SUFFICIENT SOURCES. IN RESPONSE TO NOTICE THE ASSESSEE VIDE ITS REPLY DATED 12.12. 2011 STATED THAT IT IS NOT POSSIBLE TO FURNISH DETAILS OF DATE- WISE REALI ZATION OF ADDITIONAL INTEREST. HOWEVER FACTS REMAINS THAT IT HAS UNACC OUNTED INTEREST INCOME IN THE HANDS OF PARTNERSHIP FIRM WHICH WAS O FFERED TO TAX IN THE HANDS OF THE FIRM U/S 132(4) OF THE ACT AND THE SAM E HAS BEEN UTILIZED TO GIVE ADVANCES IN THE HANDS OF PARTNERS. 20. THE A.O. AFTER CONSIDERING THE EXPLANATIONS OF THE ASSESSEE HELD THAT THE ASSESSEE HAS FAILED TO LINK THE RECEIPT OF INTEREST INCOME IN THE HANDS OF PARTNERSHIP FIRM AND RELATED ADVANCES GIVE N IN THE HANDS OF PARTNERS. THOUGH THE ASSESSEE HAD DECLARED SUBSTAN TIAL ADDITIONAL INCOME IN THE HANDS OF FIRM TO COVER UP THE AMOUNTS CLAIMED TO HAVE USED IN PARTNERS INDIVIDUAL CAPACITY THE ASSESSEE FAILED TO FILE NECESSARY ITA NOS.533 TO 540/VIZAG/2013 & 150 TO 154/VIZAG/20 14 SRINIVASA AUTO FINANCIERS & LAKSHMI AUTO FINANCIERS PONNUR VIJAYAWADA 19 EVIDENCES TO MATCH THE SOURCES OF INCOME IN THE HAN DS OF FIRM AND CORRESPONDING ADVANCES GIVEN BY THE PARTNERS. THE LAW OF EVIDENCE MANDATES THAT IF THE BEST EVIDENCE IS NOT PLACED BE FORE THE COURT AN ADVERSE INFERENCE CAN BE DRAWN AGAINST THE PERSON W HO OUGHT TO HAVE PRODUCED IT. IN THE PRESENT CASE ASSESSEE FAILED TO DISCHARGE ITS ONUS. IN THESE CIRCUMSTANCES ONLY INFERENCE THAT CAN BE DRAWN IS THAT ASSESSEE FIRM DO NOT HAVE SUFFICIENT DISCLOSED SOUR CE TO MAKE ADVANCES. THEREFORE TOTAL UNEXPLAINED ADVANCES ADDED TO THE TOTAL INCOME OF THE ASSESSEE. 21. AGGRIEVED BY THE ASSESSMENT ORDER THE ASSESSEE PREFERRED AN APPEAL BEFORE THE CIT(A). BEFORE THE CIT(A) THE A SSESSEE REITERATED THE SUBMISSIONS MADE BEFORE THE A.O. THE ASSESSEE FURTHER SUBMITTED THAT THE FIRM HAS RECEIVED ADDITIONAL INTEREST FROM THE DEBTORS WHICH WAS NOT RECORDED IN THE BOOKS OF ACCOUNTS ORIGINALLY AN D THE PARTNERS HAVE WITHDRAWN THE AMOUNT WHICH IS THE SOURCE OF INVESTM ENT IN THEIR INDIVIDUAL CAPACITY. SINCE UNACCOUNTED INTEREST IN COME AND INVESTMENTS MADE BY THE PARTNERS ARE OUTSIDE THE BOOKS OF ACCOU NTS IT IS APPROPRIATE TO TELESCOPE THE ADDITIONAL INCOME DECL ARED U/S 132(4) OF THE ACT TO THE UNACCOUNTED ADVANCES IN THE HANDS OF THE PARTNERS. THE CIT(A) AFTER CONSIDERING THE EXPLANATIONS OF THE AS SESSEE HELD THAT THE TELESCOPING TO UNACCOUNTED EXPENDITURE AGAINST UNAC COUNTED INCOME ITA NOS.533 TO 540/VIZAG/2013 & 150 TO 154/VIZAG/20 14 SRINIVASA AUTO FINANCIERS & LAKSHMI AUTO FINANCIERS PONNUR VIJAYAWADA 20 OFFERED TO TAX IN THE COURSE OF SEARCH PROCEEDINGS IS ACCEPTABLE UNLESS THERE IS EVIDENCE TO THE CONTRARY. TELESCOPING OF EXPENDITURE/INVESTMENTS AGAINST ADDITIONAL INCOME D ISCLOSED IS A WELL ESTABLISHED PRACTICE. IT IS SEEN THAT THE ASSESSEE HAS ADMITTED ADDITIONAL INCOME BEING INTEREST RECEIPTS IN THE HA NDS OF PARTNERSHIP FIRM U/S 132(4) OF THE ACT WHICH WAS NOT DISCLOSED IN T HE ORIGINAL RETURN OF INCOME. THE ASSESSEE STATED THAT THE ADVANCES GIVE N TO PARTNERS HAVE NOT BEEN RECORDED IN THE BOOKS OF ACCOUNTS ORIGINAL LY AND THE ADVANCES WERE PARTLY SOURCED OUT OF ADDITIONAL INTEREST INCO ME OFFERED TO TAX U/S 132(4) OF THE ACT. SINCE BOTH UNACCOUNTED INTEREST INCOME AND UNACCOUNTED ADVANCES IN THE PARTNERS ACCOUNT ARE OU TSIDE THE BOOKS OF ACCOUNTS IT IS APPROPRIATE TO TELESCOPE THE SOURCE S AVAILABLE IN THE FORM OF UNACCOUNTED INCOME TO THE UNACCOUNTED EXPENDITUR E/INVESTMENTS TO THE EXTENT OF SOURCE AVAILABLE IN THE FORM OF ADDIT IONAL INCOME DECLARED U/S 132(4) OF THE ACT. WITH THESE OBSERVATIONS DIR ECTED THE A.O. TO VERIFY THE CLAIM OF THE APPELLANT AND IF IT IS ESTA BLISHED THAT BOTH ADDITIONAL INTEREST AND ADVANCES GIVEN HAVE NOT BEE N RECORDED IN THE BOOKS OF ACCOUNTS AS PER THE ORIGINAL RETURN OF INC OME THEN THE A.O. IS DIRECTED TO GIVEN THE BENEFIT OF TELESCOPING TO THE SAID ADVANCE TO THE EXTENT OF SOURCE AVAILABLE. ITA NOS.533 TO 540/VIZAG/2013 & 150 TO 154/VIZAG/20 14 SRINIVASA AUTO FINANCIERS & LAKSHMI AUTO FINANCIERS PONNUR VIJAYAWADA 21 22. THE LD. A.R. FOR THE ASSESSEE SUBMITTED THAT TH E CIT(A) WAS ERRED IN NOT CONSIDERING TOTAL SOURCES AVAILABLE IN THE F ORM OF ADDITIONAL INCOME OFFERED IN THE HANDS OF THE PARTNERSHIP FIRM AND ALSO ADDITIONAL INCOME OFFERED BY THE PARTNERS IN THEIR INDIVIDUAL CAPACITY TO COVER UP THE UNACCOUNTED ADVANCES GIVEN TO THIRD PARTIES. TH E A.R. FURTHER SUBMITTED THAT THE ASSESSEE HAS FILED A CASH FLOW S TATEMENT FOR THE ASSESSMENT YEAR 2004-05 TO 2010-11 WHEREIN IT HAS EXPLAINED THE SOURCES OF ITS INCOME AND THE INVESTMENTS WHEREIN THE ASSESSEE IS HAVING SUFFICIENT SOURCE OF INCOME TO COVER UP THE INVESTMENTS. THEREFORE THE A.O. WAS NOT CORRECT IN MAKING ADDIT IONS TOWARDS ADVANCES GIVEN TO PARTNERS. THE A.R. FURTHER SUBMIT TED THAT THE ASSESSEE HAS ADMITTED ADDITIONAL INCOME TOWARDS INT EREST ON LOANS WHICH IS ADVANCED TO THE PARTNERS AND BOTH INTEREST INCOME AND ADVANCE TO PARTNERS ARE OUTSIDE THE BOOKS OF ACCOUNTS. WHEN SUCH IS BEING THE CASE IT IS THE DUTY OF THE A.O. TO TELESCOPE INVES TMENTS MADE BY THE PARTNERS TO THE SOURCES AVAILABLE IN THE HANDS OF T HE FIRM WHICH IS DRAWN BY THE PARTNERS. ON THE OTHER HAND THE LD. D .R. STRONGLY SUPPORTED THE ORDER OF CIT(A) AND SUBMITTED THAT TH E CIT(A) HAS ELABORATELY DISCUSSED AND ALLOWED RELIEF TO THE ASS ESSEE TO THE EXTENT OF SOURCES AVAILABLE IN THE FORM OF ADDITIONAL INCOME DECLARED IN THE HANDS OF FIRM ON WHICH THE DEPARTMENT IS NOT IN APPEAL. T HE REMAINING ADDITION ITA NOS.533 TO 540/VIZAG/2013 & 150 TO 154/VIZAG/20 14 SRINIVASA AUTO FINANCIERS & LAKSHMI AUTO FINANCIERS PONNUR VIJAYAWADA 22 CONFIRMED BY THE CIT(A) IS NOT COVERED BY SUFFICIEN T SOURCE OF INCOME AND THE ASSESSEE HAS FAILED TO OFFER ANY EXPLANATIO N WITH REGARD TO THE SOURCES OF INVESTMENTS IN THE HANDS OF PARTNERS. T HEREFORE THE CIT(A) HAS RIGHTLY CONFIRMED ADDITIONS AND HIS ORDER SHOUL D BE UPHELD. 23. WE HAVE HEARD BOTH THE PARTIES PERUSED THE MATE RIALS AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHOR ITIES BELOW. THE A.O. MADE ADDITIONS TOWARDS ADVANCES GIVEN TO PARTN ERS BY STATING THAT THE ASSESSEE DOES NOT HAVE SUFFICIENT SOURCE OF INC OME TO COVER UP THE ADVANCES GIVEN TO THE PARTNERS. THE A.O. FURTHER O BSERVED THAT THOUGH ASSESSEE CLAIMS TO HAVE UTILIZED UNACCOUNTED INTERE ST INCOME TO GIVE ADVANCE TO PARTNERS THE ASSESSEE FAILED TO LINK UP THE UNACCOUNTED INTEREST RECEIPTS TO THE DATE-WISE ADVANCES GIVEN T O THE PARTNERS. IN THE ABSENCE OF SPECIFIC DETAILS A GENERAL CONCLUSION C AN BE DRAWN THAT THE ASSESSEE IS NOT HAVING SUFFICIENT SOURCE OF INCOME TO GIVE ADVANCE TO THE PARTNERS. IT IS THE CONTENTION OF THE ASSESSEE THA T THE PARTNERS HAVE DRAWN AMOUNT FROM THE PARTNERSHIP FIRM OUT OF UNACC OUNTED INTEREST INCOME WHICH IS THE SOURCE OF INVESTMENT IN THEIR I NDIVIDUAL CAPACITY. THE ASSESSEE FURTHER CONTENDED THAT BOTH UNACCOUNTE D INTEREST INCOME AND ADVANCES GIVEN TO PARTNERS ARE OUTSIDE THE REGU LAR BOOKS OF ACCOUNTS WHEN SUCH BEING THE CASE THE A.O. HAS TO TELESCOPE THE SOURCES AVAILABLE TO THE INVESTMENTS/EXPENDITURE. W E FIND FORCE IN THE ITA NOS.533 TO 540/VIZAG/2013 & 150 TO 154/VIZAG/20 14 SRINIVASA AUTO FINANCIERS & LAKSHMI AUTO FINANCIERS PONNUR VIJAYAWADA 23 ARGUMENTS OF THE ASSESSEE FOR THE REASON THAT TELES COPING OF UNACCOUNTED EXPENDITURE AGAINST UNACCOUNTED INCOME OFFERED TO TAX IN COURSE OF SEARCH PROCEEDINGS IS ACCEPTABLE UNLESS THERE IS AN EVIDENCE TO THE CONTRARY. TELESCOPING OF EXPENDITURE/INVESTM ENTS AGAINST ADDITIONAL INCOME DISCLOSED U/S 132(4) OF THE ACT I S WELL ESTABLISHED PRACTICE. 24. IN THE PRESENT CASE ON HAND ON PERUSAL OF FACT S AVAILABLE ON RECORDS WE FIND THAT THE ASSESSEE HAS OFFERED ADDI TIONAL INCOME IN THE FORM OF INTEREST INCOME IN THE HANDS OF PARTNERSHIP FIRM. WE FURTHER OBSERVED THAT THE PARTNERS HAVE MADE CERTAIN INVEST MENTS IN THEIR INDIVIDUAL CAPACITY AND CLAIMS THAT THE SOURCE FOR THE INVESTMENT IS OUT OF THE AMOUNT DRAWN FROM THE PARTNERSHIP FIRM. SINC E BOTH UNACCOUNTED INCOME OFFERED IN THE HANDS OF PARTNERS HIP FIRM AND ADVANCES GIVEN TO PARTNERS IS OUTSIDE THE REGULAR B OOKS OF ACCOUNTS WHILE FILING THE REVISED RETURN THE ASSESSEE HAS R ECORDED BOTH INTEREST INCOME AND ADVANCES GIVEN TO PARTNERS TO COVER UP T HE INVESTMENTS IN THE HANDS OF PARTNERS. THEREFORE WE ARE OF THE VIE W THAT THE CIT(A) HAS RIGHTLY ALLOWED TELESCOPING BENEFIT TO THE EXTENT O F ADDITIONAL INCOME OFFERED U/S 132(4) OF THE ACT TO THE ADVANCES GIVE N TO THE PARTNERS BY THE FIRM. THE A.O. BASED ON THE DIRECTIONS OF THE CIT(A) HAS ALLOWED THE BENEFIT OF TELESCOPING TO THE ADVANCES GIVEN TO THE PARTNERS TO THE ITA NOS.533 TO 540/VIZAG/2013 & 150 TO 154/VIZAG/20 14 SRINIVASA AUTO FINANCIERS & LAKSHMI AUTO FINANCIERS PONNUR VIJAYAWADA 24 EXTENT OF SOURCES AVAILABLE IN THE FORM OF ADDITION AL INCOME OFFERED DURING THE COURSE OF SEARCH. IN SO FAR AS REMAINING AMOUNT SUSTAINED BY THE CIT(A) THE ASSESSEE FAILED TO OFFER ANY EXPLAN ATIONS WITH REGARD TO SOURCES OF INVESTMENTS. THOUGH THE ASSESSEE CLAIM S TO HAVE SOURCES ON PERUSAL OF THE CASH FLOW STATEMENT FILED BY THE ASSESSEE WE FIND THAT THE ASSESSEE CLAIMED NUMBER OF RECEIPTS WITHOUT THE RE BEING ANY EVIDENCES TO SUPPORT THE SOURCES OF INCOME. THEREF ORE WE ARE OF THE VIEW THAT THE ASSESSEE HAS FAILED TO EXPLAIN THE SO URCES OF INCOME TOWARDS INVESTMENTS AND ACCORDINGLY UPHELD THE CIT (A) ORDER AND REJECT THE GROUND RAISED BY THE ASSESSEE. 25. THE NEXT ISSUE THAT CAME UP FOR OUR CONSIDERATI ON IS ADDITIONS TOWARDS UNEXPLAINED CREDITS IN CAPITAL ACCOUNT OF P ARTNERS. DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE ASSESSING OFF ICER NOTICED THAT THERE ARE SOME CREDITS IN PARTNERS CAPITAL ACCOUNT . TO ASCERTAIN THE NATURE AND SOURCE OF CREDIT IN CAPITAL ACCOUNT THE A.O. ASKED ASSESSEE TO FURNISH THE SOURCES IN THE HANDS OF THE PARTNERS . IN RESPONSE TO NOTICES THE ASSESSEE SUBMITTED THAT THE PARTNERS H AVE SUFFICIENT SOURCE OF INCOME AND THEY HAVE GIVEN AMOUNT OUT OF THEIR A GRICULTURAL INCOME AND ALSO SALE PROCEEDS OF AGRICULTURAL LAND. THE A. O. AFTER CONSIDERING THE DETAILS FILED BY THE ASSESSEE HELD THAT THE AS SESSEE FAILED TO ADDUCE ANY EVIDENCES IN SUPPORT OF SALE OF AGRICULTURAL LA NDS AND ALSO FAILED TO ITA NOS.533 TO 540/VIZAG/2013 & 150 TO 154/VIZAG/20 14 SRINIVASA AUTO FINANCIERS & LAKSHMI AUTO FINANCIERS PONNUR VIJAYAWADA 25 PROVE AGRICULTURAL INCOME WITH NECESSARY EVIDENCES. THE ASSESSEE FAILED TO FILE EITHER PATTADAR PASS BOOK OR DETAILS OF AGR ICULTURAL LAND EXTENT CROPS GROWN AND INCOME EARNED PER ACRE ETC. IN VI EW OF THE FACT THAT THE PARTNERS ARE NOT ASSESSED TO TAX AND PURPORTED SOURCE OF ABOVE CREDITS ARE BY SALE OF AGRICULTURAL LAND THE BURDE N OF THE ASSESSEE FIRM IN EXPLAINING CREDITS APPEARING IN THE PARTNERS CA PITAL ACCOUNT IS NOT DISCHARGED. THE ASSESSEE FIRM FAILED TO DISCHARGE I TS ONUS IN FILING EVIDENCE TO PROVE AVAILABILITY OF FUNDS IN THE HAND S OF PARTNERS GENUINENESS OF THE TRANSACTIONS BY FILING CONCERNED DOCUMENTS THEREFORE THE ASSESSEE FIRM HAS NOT DISCHARGED ITS INITIAL BURDEN AS STIPULATED U/S 68 OF THE ACT. THEREFORE CREDITS I NTRODUCED BY THE PARTNERS HAS BEEN TREATED AS UNEXPLAINED CASH CREDI TS AND BROUGHT TO TAX U/S 68 OF THE ACT. 26. AGGRIEVED BY THE ORDER THE ASSESSEE PREFERRED APPEAL BEFORE THE CIT(A) AND SUBMITTED THAT THE PARTNERS HAVE SUFFICI ENT SOURCE OF INCOME TO COVER UP THE CREDITS IN THE CAPITAL ACCOUNT. TH E ASSESSEE FURTHER SUBMITTED THAT THE PARTNERS HAVE SOLD CERTAIN AGRIC ULTURAL LANDS WHICH IS THE SOURCE OF INCOME AND ALSO THEY ARE HAVING AGRIC ULTURAL INCOME WHICH IS SUFFICIENT TO EXPLAIN THE INVESTMENTS IN PARTNER SHIP FIRM. TO THIS EFFECT FURNISHED COPIES OF SALE DEEDS AND PATTADAR PASS BOOKS ETC. DURING THE COURSE OF APPELLATE PROCEEDINGS THE CIT (A) FORWARDED ITA NOS.533 TO 540/VIZAG/2013 & 150 TO 154/VIZAG/20 14 SRINIVASA AUTO FINANCIERS & LAKSHMI AUTO FINANCIERS PONNUR VIJAYAWADA 26 EVIDENCES FILED BY THE ASSESSEE TO THE A.O. FOR HIS COMMENTS. THE ASSESSING OFFICER IN HIS REMAND REPORT HAS ACCEPTED THE SOURCE IN THE HANDS OF M. POORNA CHANDRA RAO AND SMT. M. B. RATNA M IS GENUINE WHILE IN THE CASE OF HARIBABU OUT OF RS.9 LAKHS T O THE EXTENT OF RS.8 LAKHS IS EXPLAINED. THE CIT(A) AFTER CONSIDERING T HE EVIDENCES FILED BY THE ASSESSEE AND TAKEN INTO ACCOUNT THE REMAND REPO RT OF THE A.O. HELD THAT THE ASSESSEE HAS FILED EVIDENCES TO THE EXTENT OF RS.15 50 000/- AND FOR THE REMAINING AMOUNT OF RS.7 LAKHS THE ASS ESSEE HAS FAILED TO DISCHARGE SOURCES. WITH THESE OBSERVATIONS DIRECTE D THE A.O. TO DELETE ADDITIONS TO THE EXTENT OF RS.15 50 000/- AND CONFI RMED THE BALANCE AMOUNT OF RS.7 LAKHS. 27. THE LD. A.R. SUBMITTED THAT THE CIT(A) WAS ERRE D IN CONFIRMING ADDITIONS OF RS.7 LAKHS DESPITE THE A.O. IN HIS RE MAND REPORT ADMITTED THAT THE ASSESSEE HAS PROVED SOURCES OF INVESTMENT. THE A.R. FURTHER SUBMITTED THAT THE CIT(A) HAS ONLY CONSIDERED SALE DEED WHEREAS THE ASSESSEE HAS RECEIVED AMOUNT WHICH IS RECORDED IN T HE SALE AGREEMENT HOWEVER THE CIT(A) HAS IGNORED THE SALE AGREEMENT FILED BY THE ASSESSEE BY STATING THAT THE SALE AGREEMENT IS UNRE GISTERED. BUT THE FACT IS THAT THE ASSESSEE HAS RECEIVED CASH WHICH I S THE SOURCE FOR INVESTMENT IN CAPITAL ACCOUNT THEREFORE THE CIT(A ) WAS ERRED IN IGNORING THE EVIDENCES FILED TO CONFIRM THE ADDITIO NS. ON THE OTHER ITA NOS.533 TO 540/VIZAG/2013 & 150 TO 154/VIZAG/20 14 SRINIVASA AUTO FINANCIERS & LAKSHMI AUTO FINANCIERS PONNUR VIJAYAWADA 27 HAND THE LD. D.R. STRONGLY SUPPORTED THE CIT(A) OR DER. THE D.R. FURTHER SUBMITTED THAT THE CIT(A) HAS RECORDED CATE GORICAL FINDING IN HIS ORDER TO THE EFFECT THAT WHEREVER THE ASSESSEE HAS PROVED SOURCES WITH EVIDENCES HE HAD ACCEPTED AND THE REMAINING AMOUNT HAS BEEN CONFIRMED WITH THE OBSERVATION THAT THE ASSESSEE HA S FAILED TO PROVE SOURCES FOR CREDITS IN CAPITAL ACCOUNT THEREFORE THE ORDER OF CIT(A) SHOULD BE UPHELD. 28. WE HAVE HEARD BOTH THE PARTIES PERUSED THE MATE RIALS AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHOR ITIES BELOW. THE A.O. MADE ADDITIONS TOWARDS CREDITS IN PARTNERS CA PITAL ACCOUNT FOR THE REASON THAT THE PARTNERS DOES NOT HAVE SUFFICIENT S OURCE OF INCOME TO EXPLAIN CREDITS IN CAPITAL ACCOUNT. THE A.O. OBSER VED THAT THE PARTNERS ARE NOT ASSESSED TO INCOME TAX AND THEY DO NOT HAVE SUFFICIENT SOURCE OF INCOME TO COVER UP THE CREDITS IN CAPITAL ACCOUNT. THE A.O. FURTHER WAS OF THE OPINION THAT THOUGH THE ASSESSEE CLAIMS TO HAVE SOLD CERTAIN AGRICULTURAL LAND AND ALSO EARNED AGRICULTURAL INCO ME FAILED TO FURNISH EVIDENCES TO JUSTIFY THE SALE OF AGRICULTURAL LAND AND EARNING OF AGRICULTURAL INCOME. IT IS THE CONTENTION OF THE A SSESSEE THAT THE PARTNERS HAVE SUFFICIENT SOURCE OF INCOME IN AS MU CH THEY HAVE SOLD CERTAIN AGRICULTURAL LANDS AND ALSO HAVING REGULAR AGRICULTURAL INCOME. THE ASSESSEE FURTHER CONTENDED THAT IT HAS FURNISHE D COPIES OF SALE ITA NOS.533 TO 540/VIZAG/2013 & 150 TO 154/VIZAG/20 14 SRINIVASA AUTO FINANCIERS & LAKSHMI AUTO FINANCIERS PONNUR VIJAYAWADA 28 DEEDS ALONG WITH SALE AGREEMENTS AND ALSO PATTADAR PASS BOOKS TO PROVE THE SOURCES OF AGRICULTURAL INCOME AND ALSO SALE OF AGRICULTURAL LAND. HOWEVER THE CIT(A) HAS IGNORED THE EVIDENCES FILED IN THE FORM OF SALE AGREEMENT BY STATING THAT SALE AGREEMENT IS UNREGIS TERED. BUT THE FACT IS THAT WHETHER THE SALE AGREEMENT IS REGISTERED OR UNREGISTERED THE ASSESSEE HAS RECEIVED AMOUNT WHICH WAS NOT DISPUTED BY THE A.O. THEREFORE THE CIT(A) WAS ERRED IN NOT CONSIDERING THE EVIDENCES FILED AND CONFIRM THE ADDITIONS. 29. HAVING HEARD BOTH THE SIDES WE DO NOT FIND ANY MERITS IN THE ARGUMENTS OF THE ASSESSEE FOR THE REASON THAT THE C IT(A) HAS RECORDED HIS CATEGORICAL FINDING TO THE EFFECT THAT WHEREVER THE ASSESSEE HAS FURNISHED EVIDENCES HE HAD ACCEPTED AND DIRECTED T HE A.O. TO DELETE THE ADDITIONS. IN RESPECT OF ADDITIONS CONFIRMED B Y THE CIT(A) THE ASSESSEE HAS FAILED TO PROVE THE SOURCES FOR INVEST MENT IN CAPITAL ACCOUNT WITH NECESSARY EVIDENCES. THE ASSESSEE CLA IMS THAT IT HAS RECEIVED CASH TOWARDS SALE OF AGRICULTURAL LAND HO WEVER THE PROPERTY WAS REGISTERED FOR A CONSIDERATION OF RS.1 20 000/- EACH BUT IN THE SALE AGREEMENT RS.4 LAKHS CONSIDERATION HAS BEEN SHOWN. THE CIT(A) HAS EXAMINED THE SALE AGREEMENT COPIES FILED BY THE ASS ESSEE AND FINDS THAT THE SALE AGREEMENTS ARE UNREGISTERED AND THE CONSID ERATION IS RECEIVED IN CASH. WHEN THE SALE AGREEMENTS ARE UNREGISTERED AND CONSIDERATION ITA NOS.533 TO 540/VIZAG/2013 & 150 TO 154/VIZAG/20 14 SRINIVASA AUTO FINANCIERS & LAKSHMI AUTO FINANCIERS PONNUR VIJAYAWADA 29 RECEIVED IN CASH THE GENUINENESS OF THE TRANSACTIO NS IS DEFINITELY DOUBTFUL. THEREFORE WE ARE OF THE VIEW THAT THE CI T(A) HAS RIGHTLY REJECTED THE EVIDENCES FILED BY THE ASSESSEE AND CO NFIRMED THE ADDITIONS. WE DO NOT SEE ANY REASON TO INTERFERE W ITH THE ORDER OF THE CIT(A) HENCE WE INCLINED TO UPHOLD THE CIT(A) ORDE R AND REJECT THE GROUND RAISED BY THE ASSESSEE. 30. THE NEXT ISSUE THAT CAME UP FOR OUR CONSIDERATI ON FOR THE ASSESSMENT YEAR 2010-11 IS ADDITION TOWARDS INTERES T INCOME OF RS.19 LAKHS. THE FACTS RELATES TO THE ISSUE ARE THAT DUR ING THE COURSE OF SEARCH PROCEEDINGS IN THE STATEMENT U/S 132(4) OF THE ACT THE ASSESSEE HAS ADMITTED ADDITIONAL INCOME OF RS.25 LAKHS TOWARDS U NACCOUNTED INTEREST FOR A.Y. 2010-11. HOWEVER WHILE FILING THE RETURN OF INCOME U/S 153A OF THE ACT THE ASSESSEE HAS ADMITTED RS.6 LAKHS AND N OT DECLARED BALANCE AMOUNT OF RS.19 LAKHS WHICH WAS OFFERED TO TAX U/S 132(4) OF THE ACT. DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE A. O. MADE ADDITIONS OF RS.19 LAKHS BEING DIFFERENCE BETWEEN INCOMES ADM ITTED DURING THE COURSE OF SEARCH U/S 132(4) OF THE ACT AND INCOME A DMITTED BY THE ASSESSEE IN THE REVISED RETURN FILED U/S 153A OF TH E ACT. THE A.O. WAS OF THE OPINION THAT THE ASSESSEE HAS RETRACTED ITS ADM ISSION WITHOUT VALID GROUNDS. THE ASSESSING OFFICER HAD RELIED ON SEVERA L CASE LAWS WHICH REITERATED THAT ADMISSION OF INCOME U/S 132(4) OF T HE ACT BEFORE THE ITA NOS.533 TO 540/VIZAG/2013 & 150 TO 154/VIZAG/20 14 SRINIVASA AUTO FINANCIERS & LAKSHMI AUTO FINANCIERS PONNUR VIJAYAWADA 30 INCOME TAX AUTHORITIES CANNOT BE RETRACTED UNLESS THERE ARE COGENT AND CONVINCING REASONS FOR THE SAME. 31. AGGRIEVED BY THE ASSESSMENT ORDER THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE CIT(A). BEFORE THE CIT (A) THE ASSESSEE SUBMITTED THAT ADDITIONS CANNOT BE MADE BASED ON AD MISSION ALONE AND ADMISSION MADE BY THE ASSESSEE U/S 132(4) OF THE AC T FOR THE ASSESSMENT YEAR 2010-11 HAS BEEN SPLIT INTO INCOME UP TO THE DATE OF SEARCH AND SUBSEQUENT TO THE DATE OF SEARCH. THE A SSESSEE HAS MAINTAINED REGULAR BOOKS OF ACCOUNTS AND DETERMINED TOTAL INCOME WHICH IS SEPARATELY ASSESSED BY THE A.O. THEREFORE THE A.O. WAS NOT CORRECT IN MAKING ADDITIONS BASED ON THE ADMISSIONS U/S 132(4) OF THE ACT. THE ASSESSEE FURTHER SUBMITTED THAT ADMISSION U/S 132(4) OF THE ACT SHOULD BE TAKEN TO MEAN COVERING THE UNDISCLOSED IN COME OF THE PERIOD TILL THE DATE OF SEARCH AND TO GO BACK INTO BOOKS O F ACCOUNTS AND PROPOSING FURTHER ADDITIONS ON THE BASIS OF ENTRIES IN BOOKS OF ACCOUNTS WILL RESULT IN UNJUST DOUBLE JEOPARDY TO THE ASSESS EE FOR THE REASON THAT MISTAKES/OMISSIONS IN THE BOOKS IS THE DIRECT SOURC E OF UNDISCLOSED INCOME. TO SUPPORT HIS ARGUMENTS RELIED UPON THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF SUTLUZ COTTON MILLS VS . CIT 116 ITR 1 AND ALSO THE DECISION OF BOMBAY HIGH COURT IN THE CASE OF CIT VS. GOPAL PUROHIT 336 ITR 287. THE CIT(A) AFTER CONSIDERING T HE SUBMISSIONS OF ITA NOS.533 TO 540/VIZAG/2013 & 150 TO 154/VIZAG/20 14 SRINIVASA AUTO FINANCIERS & LAKSHMI AUTO FINANCIERS PONNUR VIJAYAWADA 31 THE ASSESSEE HELD THAT THE ASSESSEE HAS FAILED TO OFFER ANY COGENT REASONS FOR NOT DISCLOSING THE ADDITIONAL INCOME AD MITTED DURING THE COURSE OF SEARCH PROCEEDINGS IN THE STATEMENT RECOR DED U/S 132(4) OF THE ACT. IN FACT THE ASSESSEE FOR THE EARLIER YE ARS HAS OFFERED TO TAX THE INCOME DISCLOSED U/S 132(4) OF THE ACT IN THE R ETURN OF INCOME FILED SUBSEQUENTLY THEREBY IMPLYING THAT THE DECLARATION MADE IN THE COURSE OF SEARCH PROCEEDINGS HAS BEEN DONE CORRECTLY AND T HERE IS NO BASIS FOR RETRACTION OF THE SAME. WHEN THE ASSESSEE ITSELF HA S THUS OFFERED TO TAX THE INCOME DISCLOSED U/S 132(4) OF THE ACT FOR THE EARLIER YEARS THERE IS NO JUSTIFICATION FOR IT NOT TO DO LIKEWISE FOR THE CURRENT YEAR WITHOUT ANY COGENT REASONS. WITH THESE OBSERVATIONS UPHELD THE ADDITIONS MADE BY THE A.O. 32. THE LD. A.R. FOR THE ASSESSEE SUBMITTED THAT TH E CIT(A) ERRED IN SUSTAINING ADDITIONS OF RS.19 LAKHS WITHOUT CONSIDE RING THE ASSESSEES CLAIM THAT THE DECLARATION MADE BY THE ASSESSEE U/S 132(4) OF THE ACT WAS NOT LIABLE TO BE ACTED UPON IN VIEW OF THE RET RACTION MADE ON VALID GROUNDS. THE ASSESSEE FURTHER SUBMITTED THAT THE A SSESSEE HAS QUANTIFIED UNDISCLOSED INCOME OF RS.6 LAKHS UP TO T HE DATE OF SEARCH AND REMAINING PERIOD IS COVERED UNDER REGULAR ASSESSMEN T WHEREIN THE ASSESSEE HAS MAINTAINED BOOKS OF ACCOUNTS AND DETER MINED CORRECT INCOME. THEREFORE THE A.O. WAS NOT CORRECT IN MAKI NG ADDITIONS TOWARDS ITA NOS.533 TO 540/VIZAG/2013 & 150 TO 154/VIZAG/20 14 SRINIVASA AUTO FINANCIERS & LAKSHMI AUTO FINANCIERS PONNUR VIJAYAWADA 32 INCOME AS PER REGULAR RETURN AND ALSO TOWARDS ADMIS SIONS MADE U/S 132(4) OF THE ACT WHICH RESULTS DOUBLE ADDITIONS. THE D.R. ON THE OTHER HAND STRONGLY SUPPORTED THE ORDER OF CIT(A). 33. WE HAVE HEARD BOTH THE PARTIES PERUSED THE MATE RIALS AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHOR ITIES BELOW. THE FACTUAL MATRIX OF THE ISSUE IS THAT DURING THE COUR SE OF SEARCH PROCEEDINGS THE ASSESSEE HAS ADMITTED ADDITIONAL I NCOME OF RS.25 LAKHS TOWARDS UNACCOUNTED INCOME FOR THE ASSESSMENT YEAR 2010-11. HOWEVER WHILE FILING THE RETURN OF INCOME THE ASS ESSEE HAS ADMITTED AN AMOUNT OF RS.6 LAKHS AND THE BALANCE AMOUNT OF R S.19 LAKHS HAS NOT BEEN ADMITTED AS AGREED U/S 132(4) OF THE ACT. THE A.O. MADE ADDITIONS OF RS.19 LAKHS ON THE GROUND THAT THE ASS ESSEE HAS NOT OFFERED ANY COGENT REASONS FOR NOT ADMITTING THE INCOME AS AGREED AT THE TIME OF SEARCH. THE A.O. HAS GIVEN HIS OWN REASONS AND ALSO RELIED UPON CERTAIN JUDICIAL PRECEDENTS WHEREIN IT WAS HELD TH AT THE ASSESSEE CANNOT RETRACT ITS ADMISSIONS WITHOUT ANY COGENT REASONS. 34. IT IS THE CONTENTION OF THE ASSESSEE THAT IT HA S RETRACTED ITS ADMISSIONS WITH VALID REASONS AS THE ASSESSEE HAS ADMITTED ADDITIONAL INCOME FOR THE ASSESSMENT YEAR 2010-11 FOR THE WHOL E YEAR. HOWEVER IT HAS QUANTIFIED AN AMOUNT OF RS. 6 LAKHS FOR THE PERIOD UP TO THE DATE OF SEARCH AND THE REMAINING PERIOD IT HAS MAINTAIN ED NORMAL BOOKS OF ITA NOS.533 TO 540/VIZAG/2013 & 150 TO 154/VIZAG/20 14 SRINIVASA AUTO FINANCIERS & LAKSHMI AUTO FINANCIERS PONNUR VIJAYAWADA 33 ACCOUNTS AND DETERMINED TOTAL INCOME WHICH WAS SEPA RATELY ASSESSED. THE A.O. HAS MADE ADDITIONS AS PER THE INCOME ADMIT TED BY THE ASSESSEE IN THE BOOKS OF ACCOUNTS AND ALSO MADE ADD ITIONS TOWARDS ADMISSIONS MADE U/S 132(4) OF THE ACT. ACCORDING T O THE ASSESSEE THE ADDITIONS MADE BY THE A.O. AMOUNTS TO DOUBLE ADDITI ONS AS IT HAS GIVEN DECLARATION OF RS.25 LAKHS FOR THE WHOLE YEAR. SIN CE IT HAS SEPARATED INCOME FOR THE YEAR UP TO THE DATE OF SEARCH AND SU BSEQUENT TO DATE OF SEARCH THE A.O. WAS NOT CORRECT IN MAKING SEPARATE ADDITION TO THE REGULAR INCOME DECLARED BY THE ASSESSEE. WE DO NOT FIND ANY MERITS IN THE ARGUMENTS OF THE ASSESSEE FOR THE REASON THAT THE ASSESSEE HAS ADMITTED ADDITIONAL INCOME OF RS.25 LAKHS AT THE TI ME OF SEARCH IN THE STATEMENT RECORDED U/S 132(4) OF THE ACT. THE ASSE SSEE HAS NOT OFFERED ANY REASONS FOR NOT DISCLOSING THE AMOUNT AS AGREED AT THE TIME OF SEARCH. THOUGH ASSESSEE CLAIMS TO HAVE STATED THA T IT HAS AGREED INCOME OF RS.25 LAKHS FOR THE WHOLE PERIOD IN VIEW OF THE FACT THAT THE ASSESSEE HAS ADMITTED ADDITIONAL INCOME OFFERED DUR ING THE COURSE OF SEARCH IN THE EARLIER YEARS THEREBY IMPLYING THAT THE DECLARATION MADE IN THE COURSE OF SEARCH PROCEEDINGS HAS BEEN DONE CORR ECTLY AND THERE WAS NO BASIS FOR RETRACTION OF THE SAME. WHEN THE ASSESS EE ITSELF HAS OFFERED ADDITIONAL INCOME AND AGREED TO DISCLOSE U/S 132(4) OF THE ACT THERE IS NO JUSTIFICATION FOR THE ASSESSEE FOR NOT DISCLOSIN G THE AMOUNT FOR THE ITA NOS.533 TO 540/VIZAG/2013 & 150 TO 154/VIZAG/20 14 SRINIVASA AUTO FINANCIERS & LAKSHMI AUTO FINANCIERS PONNUR VIJAYAWADA 34 CURRENT ASSESSMENT YEAR. THE CIT(A) AFTER CONSIDER ING THE RELEVANT SUBMISSIONS OF THE ASSESSEE HAS RIGHTLY UPHELD THE ADDITIONS MADE BY THE A.O. WE DO NOT SEE ANY REASONS TO INTERFERE WIT H THE ORDER OF THE CIT(A) AND HENCE WE INCLINED TO UPHELD THE CIT(A) ORDER AND REJECT THE GROUND RAISED BY THE ASSESSEE. 35. IN THE RESULT THE APPEALS FILED BY BOTH THE AS SESSEES IN ITA NOS.533 & 534/VIZAG/2013 151 TO 154/VIZAG/2014 53 5 TO 540/VIZASG/2013 & 150/VIZAG/2014 ARE PARTLY ALLOWED FOR STATISTICAL PURPOSES. THE ABOVE ORDER WAS PRONOUNCED IN THE OPEN COURT ON 30 TH SEPT16. SD/- SD/- ( . ) ( . ) (V. DURGA RAO) (G. MANJUNATHA) /JUDICIAL MEMBER /ACCOUNTANT MEMBER /VISAKHAPATNAM: $ /DATED : 30.09.2016 VG/SPS & ' /COPY OF THE ORDER FORWARDED TO:- 1. / THE APPELLANT M/S. SRINIVASA AUTO FINANCIERS 14-11-117 RAMNAGAR GBC ROAD PONNURU GUNTUR DIST. 1. / THE APPELLANT M/S. LAKSHMI AUTO FINANCIERS 14 -11-117 RAMNAGAR GBC ROAD PONNURU GUNTUR DISTRICT. 3. / THE RESPONDENT THE DCIT CENTRAL CIRCLE VIJAY AWADA 4. ( / THE CIT(CENTRAL) HYDERABAD ITA NOS.533 TO 540/VIZAG/2013 & 150 TO 154/VIZAG/20 14 SRINIVASA AUTO FINANCIERS & LAKSHMI AUTO FINANCIERS PONNUR VIJAYAWADA 35 5. ( ( ) / THE CIT (A) GUNTUR 6. ( ( ) / THE CIT (A) VIJAYAWADA 7. + + / DR ITAT VISAKHAPATNAM 8 . / GUARD FILE / BY ORDER // TRUE COPY // ./ + (SR.PRIVATE SECRETARY) + / ITAT VISAKHAPATNAM