Syndicate Realtors, Hyderabad v. ITO, Hyderabad

ITA 186/HYD/2009 | 2003-2004
Pronouncement Date: 29-01-2010 | Result: Allowed

Appeal Details

RSA Number 18622514 RSA 2009
Assessee PAN NAAWF8337C
Bench Hyderabad
Appeal Number ITA 186/HYD/2009
Duration Of Justice 11 month(s) 19 day(s)
Appellant Syndicate Realtors, Hyderabad
Respondent ITO, Hyderabad
Appeal Type Income Tax Appeal
Pronouncement Date 29-01-2010
Appeal Filed By Assessee
Order Result Allowed
Bench Allotted A
Tribunal Order Date 29-01-2010
Date Of Final Hearing 13-01-2010
Next Hearing Date 13-01-2010
Assessment Year 2003-2004
Appeal Filed On 09-02-2009
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH A HYDERABAD BEFORE SHRI N.R.S. GANESAN JUDICIAL MEMBER AND SHRI CHANDRA POOJARI ACCOUNTANT MEMBER ITA NO.186/HYD/2009 : ASSTT. YEAR 2 003-04 ITA NO.187/HYD/2009 : ASSTT. YEAR 2 004-05 ITA NO.188/HYD/2009 : ASSTT. YEAR 2 005-06 M/S SYNDICATE REALTORS HYDERABAD (PAN AAWF 8337 C) VS ITO WARD 5 (3) HYDERABAD (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI A. SRINIVAS RESPONDENT BY : SHRI G. MALLIGARJUNA DR O R D E R PER CHANDRA POOJARI ACCOUNTANT MEMBER: THESE THREE APPEALS PREFERRED BY THE ASSESSEE ARE DIRE CTED AGAINST THE DIFFERENT ORDERS PASSED BY THE CIT(A)-V HY DERABAD AND PERTAINS TO THE ASSESSMENT YEARS 2003-04 2004-05 AND 20 05-06. SINCE COMMON ISSUES ARE INVOLVED IN THESE APPEALS THEY AR E CLUBBED TOGETHER HEARD TOGETHER AND DISPOSED OF BY THE COMMON ORDER FOR THE SAKE OF CONVENIENCE. 2. NOW WE WILL TAKE UP THE APPEAL OF THE ASSESSEE IN I TA NO.188/HYD/2009. 3. THE ASSESSEE RAISED THE FOLLOWING GROUNDS: THE CIT(A) IN HOLDING THAT THE STOCK OF LAND IS TO BE VALUED AT MARKET PRICE AGAINST THE VALUE ADOPTED BY THE ASSESSEE FIR M. THE ASSESSEE SUBMITS THAT THE RATIO LAID DOWN BY TH E HONBLE ANDHRA PRADESH HIGH COURT IN THE CASE OF RAJLAXMI TRADING CO. VS. CIT (250 ITR 581) IS NOT APPLICABLE TO THE CASE OF THE ASSESSEE. THE CASE BEFORE THE HONBLE JURISDICTIONAL COURT IS U/S 45(4) AND WITH RESPECT TO CAPITAL 2 ASSETS AND HAS NO APPLICATION TO STOCK IN TRADE WH ICH IS NOT A CAPITAL ASSET. THE ASSESSEE SUBMITS THAT THE BUSINESS OF THE FIRM IS CONTINUED BY THE PARTNER AND THAT THE ASSESSEE FIRM HAS TAKEN THE VA LUE PROPERTY AND THE SAME IS IN MUTUAL UNDERSTANDING BETWEEN THE PAR TNERS WHICH FACT SHOULD HAVE BEEN APPRECIATED BOTH BY THE ASSESSING OFFICER AS WELL AS THE FIRST APPELLATE AUTHORITY. 4. BRIEF FACTS OF THE CASE ARE THAT THE ADDITION OF RS.80 06 803 MADE TOWARDS UNDER VALUATION OF THE CLOSING STOCK. THE A SSESSEE IS A FIRM WHICH WAS ENGAGED IN BUSINESS IN REAL ESTATE. FOR THE ASSESSMENT YEARS 2005-06 IT HAS FILED RETURN OF INCOME ON 1.11.2 005 SHOWING INCOME OF RS.4 16 280. THE SAME WAS PROCESSED U/S 143(1) OF THE ACT. THERE WAS A SURVEY CONDUCTED IN THE CASE OF THE ASSESSEE ON 21.10.2005 AND THEREFORE THE CASE WAS SELECTED FOR SCRUTI NY OF ASSESSMENT. DURING SCRUTINY THE ASSESSING OFFICER NOTICED T HAT THERE WAS DISSOLUTION OF THE FIRM AT THE END OF ACCOUNTING YEA R AND FOLLOWING CLOSURE OF THE BUSINESS OF THE FIRM ON 31.3.2005 THE AS SETS INCLUDING THE CLOSING STOCK IN TRADE WAS TRANSFERRED TO THE CAPITA L ACCOUNT OF ONE OF THE PARTNERS VIZ. THE MANAGING PARTNER MR. S. IB RAHIM. IN THE BALANCE SHEET FILED WITH THE RETURN THE VALUE OF CLOSI NG STOCK OF THE PLOTS/LANDS STYLED AS WORK IN PROGRESS WAS SHOWN AT RS.20 1 4 197. SINCE THERE WAS DISSOLUTION OF THE FIRM AT THE END OF T HE ACCOUNTING YEAR IN THE OPINION OF THE ASSESSING OFFICER THE ASSESSEE OUGHT TO HAVE VALUED THE CLOSING STOCK OF THE LANDS WHICH WERE TRANSFER RED TO THE MANAGING PARTNER AT THEIR FAIR MARKET VALUE. 4.1. THE ASSESSEE HAD UNDERTAKEN TWO VENTURES VIZ. (I ) SYNDICATE DREAM CITY (II) SYNDICATE DREAM CITY PHASE-I . THE TOTAL AREA OF THE PLOTS IN SQ. YARDS AT THE BEGINNING AS ON 1.4.2 001 IN BOTH THE VENTURES WERE AT 23 787 AND 21.879 SQ. YARDS RESPECTIVE LY. AFTER SALE OF PLOTS MADE DURING FINANCIAL YEARS 2001-02 TO 2004-0 5 THE BALANCE UNSOLD PLOTS IN BOTH THE VENTURES AS ON 31.3.2004 REMAI NED AT 1 040 AND 8 981 SQ. YARDS RESPECTIVELY TOTALING TO 10 021 SQ. YARDS. DURING 3 THE PREVIOUS YEAR 2004-05 THE ASSESSEE HA SOLD PLOTS MEASUR ING 6 705 SQ. YARDS IN BOTH THE VENTURES FOR A TOTAL CONSIDERATIO N OF 67 04 727 WHICH GIVES AN AVERAGE SELLING PRICE OF RS.1000 SQ YARD. SINCE THERE WAS DISSOLUTION OF THE FIRM AT THE END OF THE ACCOUNTING YEAR AFTER REFERRING TO THE DECISION OF THE HONBLE SUPREME COUR T IN THE CASE OF ALA FIRM VS. CIT (1991) (189 ITR 285) AND OF THE HON BLE AP HC IN THE CASE OF RAJLAXMI TRADING CO.VS. CIT AND ANOTHER (2001) (250 ITR 581) THE ASSESSING OFFICER VIDE LETTER DATED 20.12.2007 HAS ASKED THE ASSESSEE TO EXPLAIN AS TO WHY THE CLOSING STOCK OF PLOTS AS O N 31.3.2005 SHOULD NOT BE VALUED AT THEIR MARKET RATE AND THUS CONSEQUENTIAL ADDITION SHOULD NOT BE MADE TO THE INCOME IN THE HAND S OF THE ASSESSEE FIRM. IN RESPONSE TO THIS THE ASSESSEE HAS SUBMITTED THA T THOUGH THERE HAS BEEN DISSOLUTION OF THE FIRM ON RETIREMENT OF PART NERS THERE IS NO DISCONTINUANCE OF THE BUSINESS. THE SAME IS BEING CARRIED O N BY THE MANAGING PARTNER IN HIS INDIVIDUAL CAPACITY. STATING THAT THERE IS NO CESSATION OF THE BUSINESS THE ASSESSEE CONTENDED THAT THERE I S NO QUESTION OF TAKING ANY OTHER VALUE FOR THE STOCK IN T RADE AND CONSIDER THE SAID VALUE FOR THE PURPOSE OF DETERMINATION OF TA X FOR THIS ASSESSMENT YEAR. IN THIS REGARD THE ASSESSEE RELIED ON THE DECISION IN THE CASE OF SAKTHI TRADING CO. VS. CIT (2001) (250 ITR 871 HE NOTED THAT IN THAT CASE ON DEATH OF A PARTNER THE FIRM WAS D ISSOLVED AND THE SAME WAS RECONSTITUTED WITH EFFECT FROM THE NEXT DAY WIT H THE REMAINING PARTNERS. HE CLEARLY MENTIONED THAT IN THE CASE OF ASSESSE E THERE WAS DISSOLUTION AND DISCONTINUANCE OF THE BUSINESS OF THE FIRM . HE FURTHER NOTED THAT THE FACTS IN THE CASE OF THE ASSESSEE ARE SIMIL AR TO THAT IN THE CASE OF RAJLAXMI TRADING CO. VS. CIT CITED SUPRA DECIDED BY THE HONBLE JURISDICTIONAL HC. WITH THESE OBSERVATIONS AFTER REFERRI NG TO THE PROVISIONS OF SECTION 45(4) OF THE ACT DEFINITION OF F AIR MARKET VALUE AS PER CLAUSE (22B) OF SECTION 2 OF THE ACT AND RELYING O N THE DECISION OF THE HONBLE SC IN THE CASE OF ALA FIRM HE HELD THAT TH E CLOSING STOCK OF PLOTS MEASURING 10 021 SQ. YARDS ARE TO BE VALUED AT TH EIR MARKET RATE 4 FOR THE PURPOSE OF DETERMINATION OF THE PROFIT AND THUS THE TAXABLE INCOME WHICH IS TO BE ASSESSED IN THE HANDS OF THE ASSESSEE FOR THE ASSESSMENT YEARS. ADOPTING THE AVERAGE SELLING RATE OF 1 000 PER SQ. YARD AS THE FAIR MARKET VALUE AS ON 31.3.2005 HE DET ERMINED THE VALUE OF THE CLOSING STOCK OF THE PLOTS AT RS.80 06 803. SINCE THE ASSESSEE HAS SHOWN THE VALUE OF THE CLOSING STOCK OF LAND AT 20 14 197 THE ASSESSING OFFICER ADDED THE DIFFERENTIAL AMOUNT OF RS.80 06 803 TOWARDS UNDER VALUATION OF CLOSING STOCK TO THE INCOME OF THE ASSE SSEE AND THUS COMPLETED THE ASSESSMENT ON A TOTAL INCOME OF RS.85 96 110 VIDE ORDER DATED 28.12.2007 PASSED U/S 143(3) OF THE ACT. BEING AGGRIEVED BY THE ASSESSMENT THE ASSESSEE HAS FILED THIS APPEAL CONTESTING THE A BOVE ADDITION. 5. ON APPEAL TO CIT(A) OBSERVED THAT THERE WAS DI SSOLUTION OF THE FIRM ON RETIREMENT OF THE PARTNERS AT THE END OF THE ACCOUNTING YEAR. UPON SUCH DISSOLUTION AND CLOSURE OF BUSINESS OF THE FIRM O N 31.3.2005 THE ASSETS INCLUDING THE STOCK IN TRADE CLOSING STOCK OF PL OTS WERE TRANSFERRED TO SRI S.IBRAHIM WHO WAS EARLIER THE MAN AGING PARTNER OF THAT FIRM. SINCE THERE WAS DISSOLUTION TWO OTHER VENTUR ES UNDERTAKEN BY THE ASSESSEE VIZ. SYNDICATE DREAM CITY AND SYNDICATE DRE AM CITY PHASE-I SEIZED TO EXIST AND THE BUSINESS OF S. IBRAIM AFT ER DISSOLUTION OF FIRM BY TAKING ALL THE ASSETS OF THE ERSTWHILE STOCK ENTR Y INCLUDING THE NEW FIRM SAID TO BE DISTINGUISHED AND SEPARATE FROM TH E EARLIER FIRM. UNDER THE CIRCUMSTANCES CIT(A) APPLIED THE RATIO LAID DOWN BY THE HONBLE SUPREME COURT IN THE CASE OF A L A FIRM VS. C IT (189 ITR 285) AND ALSO OF THE HONBLE ANDHRA PRADESH HIGH COURT IN THE CASE OF RAJALAXMI TRADING COMPANY VS. CIT (250 ITR 581) WHER EIN IT WAS HELD THAT THE CLOSING STOCK OF PLOTS ARE TO BE VALUED AT THE MARKET RATE FOR THE PURPOSE OF DETERMINATION OF THE PROFIT AND THUS THE TAXABLE INCOME WHICH IS TO BE ASSESSED IN THE HANDS OF THE ASSESSEE FOR THIS A SSESSMENT YEAR. AGGRIEVED BY THIS THE ASSESSEE IS IN APPEAL BEFO RE US. 5 6. THE AUTHORIZED REPRESENTATIVE OF THE ASSESSEE SUBMI TTED THAT THERE IS NO DISCONTINUANCE OF THE BUSINESS IN THE A SSESSEES CASE AND ONE OF THE PARTNER CONTINUING THE BUSINESS OF THE FIRM AS SUCH THE RATIO LAID DOWN BY THE JUDGEMENT OF THE OF THE SUPR EME COURT IN THE CASE OF A L A FIRM AND OF THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF RAJALAKSHMI TRADING COMPANY CITED SUPRA IS NOT AP PLICABLE TO THE ASSESSEES CASE AND HE CONTENDED THAT THE CLOSING STOCK O F ASSETS TO BE VALUED ON MARKET PRICE/COST PRICE WHICHEVER WAS LOWER ON THE BASIS OF THE ESTABLISHED PRINCIPLES OF COMMERCE AND ACCOUNTANCY. HE PLACED RELIANCE ON THE GUJARAT HC IN THE CASE OF QUALITY STEEL SUPPLIERS VS. CIT (271 ITR 40) WHEREIN IT WAS HELD: THAT ONCE THE POSITION WAS ACCEPTED THAT THE BUSIN ESS CONTINUED THE RATIO ENUNCIATED BY A L A FIRM (189 ITR 285) APPLY WITH FULL FORCE AND THE CLOSING STOCK HAD TO BE VALUED AT THE COST OR MARKE T PRICE WHICHEVER WAS LOWER ON THE BASIS OF THE ESTABLISHED PRINCIPLES O F COMMERCE AND ACCOUNTANCY. HENCE THE TRIBUNAL WAS NOT RIGHT IN LAW IN UPHOLDING THE EXERCISE OF REVISIONAL JURISDICTION U/S 263 OF THE ACT. THE TRIBUNAL WAS ALSO NOT RIGHT IN LAW IN HOLDING THAT THE CLOSING STOCK HAD TO BE VALUE AT MARKET PRICE ON THE BASIS OF THE RATIO OF THE DECISION OF THE SUPREME COURT IN A L A FIRM THOUGH THE BUSINESS WAS CONTINUED AFTER THE DI SSOLUTION OF THE FIRM. 7. THE DR RELIED ON THE ORDER OF THE CIT(A). 8. WE HAVE HEARD FROM BOTH THE PARTIES AND PERUSED THE MATERIAL ON RECORD. ADMITTEDLY IN THIS CASE THERE WA S DISSOLUTION OF THE FIRM ON RETIREMENT OF PARTNERS AT THE END OF THE ACCOU NTING YEAR RELEVANT TO ASSESSMENT YEAR 2005-06. UPON SUCH DISSOLUTION AND CLOSU RE OF THE BUSINESS OF THE FIRM ON 31.3.2005 THE ASSETS INCLUDING TH E STOCK IN TRADE I.E. CLOSING STOCK OF PLOTS WERE TRANSFERRED TO SRI S. IBRAHIM WHO WAS EARLIER THE MANAGING PARTNER IN THAT FIRM. ACCORD ING TO THE ASSESSEE THIS IS CONTINUATION OF BUSINESS OF THE FIRM. 6 8.1. THE HONBLE SUPREME COURT IN THE CASE OF ALA FI RM VS. CIT HAVE HELD THAT ON DISSOLUTION OF THE FIRM VALUATION OF STOCK IN TRADE HAS TO BE MADE AT MARKET PRICE FOR MUTUAL ADJUSTMENT OF P ARTNERS SHARES AND SURPLUS IS PROFIT LIABLE TO TAX. THE RELEVANT DECI SIONS OF THE HONBLE SUPREME COURT IN THIS CASE IS HELD AS UNDER: THERE CAN BE NO MANNER OF DOUBT THAT IN TAKING ACC OUNTS FOR PURPOSES OF DISSOLUTION THE FIRM AND THE PARTNERS BEING COMME RCIAL MEN WOULD VALUE THE ASSETS ONLY ON REAL BASIS AND NOT AT THE COST OR AT THEIR OTHER VALUE APPEARING IN THE BOOKS. THE REAL RIGHTS OF THE PARTNERS CANN OT BE MUTUALLY ADJUSTED ON ANY OTHER BASIS. 8.2. IN THE CASE OF SAKTHI TRADING CO. VS. CIT (250 I TR 871) THERE WAS A DISSOLUTION OF THE FIRM FOLLOWING DEATH O F ONE PARTNER. HOWEVER AS THE FIRM HAS BEEN RECONSTITUTED WITH THE REM AINING PARTNERS AND THERE WAS NO DISCONTINUANCE OF BUSINESS OF THE FIRM THE HONBLE SC HAVE HELD THAT THE CLOSING STOCK OF THE FIRM HAS TO BE VALUED AT THE COST OR MARKET PRICE WHICHEVER IS LOWER. HOWEVE R IT IS PERTINENT TO MENTION HERE THAT IN THIS CASE THE HONBLE SC WHILE INDIRECTLY APPROVING THE DECISION IN THE ALA FIRMS CASE HAVE CLEAR LY NOTED THAT THE FACTS IN THEIR EARLIER DECISION IN ALA FIRMS CASE IS D IFFERENT. IN THIS CONTEXT IT IS PERTINENT TO REPRODUCE THE FOLLOWING OB SERVATIONS MADE IN THE SAID DECISION: FROM THE ABOVE IT IS EVIDENT THAT IN A L A FIRMS CASE (189 ITR 285) THE COURT WAS CONSIDERING THE QUESTION OF VALUATION OF CLOSING STOCK AT MARKET VALUE IN A CASE WHERE THERE WAS DISSOLUTION AND ALS O DISCONTINUANCE OF THE BUSINESS OF THE FIRM. IN THAT CASE AFTER DISSOLUTI ON TWO GROUPS WERE CARRYING ON SEPARATE BUSINESSES WITH THE ASSETS AND LIABILIT IES WHICH FELL TO THEIR SHARES FROM THE DISSOLUTION OF THE FIRM. 8.3. IN THE CASE OF RAJLAXMI TRADING CO. VS. CIT CITE D SUPRA WHICH WAS BEFORE THE HONBLE JURISDICTIONAL HC THE ASSESS EE WHICH WAS A REGISTERED FIRM WAS DISSOLVED ON 31.8.1990. UPON SUCH DISSOLUTION ONE OF THE PARTNERS TOOK OVER ITS ASSETS AT THE BOOK VA LUE OF RS.2 17 555. APPLYING THE PROVISIONS OF S.45(4) OF T HE ACT THE 7 ASSESSING OFFICER HELD THAT THE FAIR MARKET VALUE OF THE TRANSFERRED PROPERTY HAS TO BE TAKEN INTO ACCOUNT AS DETERMINED BY THE DISTRICT REGISTRAR AT RS.5 36 100. HE THUS ADDED THE DIFFERENT AMOUNT OF RS.3 18 545 IN THE HANDS OF THE ASSESSEE FIRM AS SHORT TER M CAPITAL GAINS. THE SAID ASSESSMENT WAS UPHELD BOTH BY THE CIT( A) AND HONBLE ITAT. ON FURTHER APPEAL BY THE ASSESSEE THE HONBLE JU RISDICTIONAL HIGH COURT HELD THAT THE TRIBUNAL WAS RIGHT IN TAKING THE MARKET VALUE AS THE FULL VALUE OF THE CONSIDERATION RECEIVED OR ACCRUING FOR THE PURPOSE OF COMPUTING THE CAPITAL GAINS AND THUS UPHELD THE ADDITI ON MADE IN THE ASSESSMENT. THE DECISION OF THE HONBLE JURISDICTIONAL HIGH COURT AS PER THE HEAD NOTE IS AS HELD UNDER: THAT THE PROVISIONS OF SECTION 45(4) CLEARLY SHOW THAT ON DISTRIBUTION OF CAPITAL ASSETS AS A RESULT OF DISSOLUTION OF THE F IRM FOR THE PURPOSE OF SECTION 48 THE FAIR MARKET VALUE OF THE ASSET ON THE DATE OF TRANSFER SHOULD BE TAKEN AS THE FULL VALUE OF CONSIDERATION RECEIVED OR ACCR UING AS A RESULT OF TRANSFER. THEREFORE THE TRIBUNAL WAS RIGHT IN TAKING THE MAR KET VALUE AS DETERMINED BY THE DISTRICT REGISTRAR AS THE FULL VALUE OF THE CON SIDERATION RECEIVED OR ACCRUING FOR THE PURPOSE OF COMPUTING THE CAPITAL G AIN. 8.4. THE ASSESSEES COUNSEL TRIED TO DISTINGUISH THE ABOV E JUDGEMENTS STATING THAT THERE IS NO DISCONTINUANCE IN ASSESSE ES BUSINESS. THIS ARGUMENT IS TOTALLY MISCONSTRUED BECAUSE O N DISSOLUTION OF ASSESSEE FIRM THE FIRM SEIZED TO EXIST AND ITS OPERATI ONS WERE STOPPED. THE PROPRIETORSHIP CONCERN OF THE S. IBRAHIM CANNOT BE EQUATED WITH THE ASSESSEES PARTNERSHIP FIRM. THE CARRYIN G ON THE BUSINESS BY SHRI S. IBHARIM AS A PROPRIETOR DOES NOT AMO UNTS TO CARRYING ON BUSINESS OF THE ASSESSEES FIRM. THE ASSESSEE COU NSEL STRONGLY RELIED ON THE JUDGEMENTS OF THE HONBLE GUJA RAT HIGH COURT IN THE CASE OF KWALITY STEE L SUPPLIERS VS. CIT (271 ITR 40). IN THAT CASE HONBLE GUJARAT HIGH COURT DEALING WITH THE SIMILAR ISSUE PASSED U/S 263 OF THE ACT. WHEREIN IT WAS CATEGORICALLY OBSERVED BY TH E HIGH COURT THAT IT IS NOT POSSIBLE TO STAY THAT ORDER OF THE ASSESSING OFFI CER WAS IN ANY MANNER PREJUDICIAL TO THE INTEREST OF THE REVENUE THE RE BEING NO ERROR IN THE ASSESSMENT ORDER. IN VIEW OF THIS IT IS NOT POSSIBL E TO STATE THAT 8 THE VIEW TAKEN BY THE ASSESSING OFFICER IS UNSUSTAINABLE I N LAW. EVEN IF THE STAND OF THE REVENUE THAT OF THE DECISION IN TH E CASE OF A LA FIRM REPRESENTS THE VIEW OF THE REVENUE IS CONSIDERED THE RE IS ANOTHER VIEW AS CANVASSED BY THE DECISION OF THE ASSESSEE ON THE BASIS OF THE DECISION IN THE CASE OF SAKTHI TRADING COMPANY. IF TH AT BE SO THE RESPONDENT COULD NOT HAVE EXERCISED REVISIONAL JURISDICT ION U/S 263 OF THE ACT. CONSIDERING THE ENTIRE FACTS AND CIRCUMSTANCES O F THE CASE THE HONBLE HIGH COURT HELD THAT THE TRIBUNAL ACCEPTS THE FACT THAT THE BUSINESS HAS BEEN CONTINUED BUT MISDIRECTS ITSELF IN LAW BY HARPING UPON AUTOMATIC DISSOLUTION OF THE FIRM AND GOES ON TO HOLD THAT MERE FACT THAT BUSINESS HAS BEEN CONTINUED CANNOT LEAD TO THE IN FERENCE THAT THERE HAS BEEN ONLY A CHANGE IN THE CONSTITUTION. FURT HER THERE IS A JURISDICTIONAL HIGH COURT JUDGEMENT IN THE CASE OF RAJAL AKSHMI TRADING COMPANY CITED SUPRA WHICH IS AGAINST THE ASSESSEE HENCE WE ARE OF THE OPINION THAT WHEN THE FIRM WAS DISSOLVED THEREAFT ER ONE OF THE PARTNERS TAKING ALL THE ASSETS AND LIABILITIES OF THE FI RM THE VALUATION OF CLOSING STOCK OF THE BUSINESS TAKEN OVER BY THE ONE OF THE PARTNER TO BE VALUED AT MARKET PRICE ONLY. ACCORDINGLY WE CONFIRM TH E ORDER OF THE CIT(A) AND HENCE THE APPEAL OF THE ASSESSEE IN ITA NO.1 18/HY/ STANDS DISMISSED. 9. NOW COMING TO ITA NO.187/HYD/2009 THE ASSESSEE RAISE D THE FOLLOWING GROUNDS: 1. THE CIT(A) ERRED BOTH ON FACTS AND IN LAW IN SU STAINING THE ADDITION OF RS.1 81 278 ON ACCOUNT OF GIFT MADE TO THE SON OF M ANAGING PARTNER AND ADDITION OF RS.4 64 400 (BEING AGGREGATE OF TWO AMO UNTS I.E. RS.3 59 800/- AND 1 03 600). THE AGGREGATE OF THE ADDITIONS MADE IS RS.6 44 528/-. 2. THE ASSESSEE SUBMITS THAT THE GIFT HAVING MADE T O THE PARTNERS SON AND DEBIT TO THE EXTENT OF THE STATED VALUE HAVING BEEN GIVEN TO THE CREDIT OF THE PARTNERS CAPITAL ACCOUNT NO FURTHER ADDITION IS CAL LED FOR IN THIS REGARD AS THIS IN REALITY IS NOT A SALE BUT A DRAWING BY A PARTNER . 3. THE ASSESSEE SUBMITS THAT THE GIFT MADE TO PARTN ERS FROM OUT OF THE STOCK OF THE BUSINESS THE CLOSING STOCK IN THE BUSINESS W OULD BE REDUCED TO THAT EXTENT WITH A DEBIT TO THE PARTNERS CAPITAL ACCOUN T AND THE CIT(A) OUGHT TO HAVE DEDUCTED THE SAID SUM OF RS.1 81 278 FROM THE VALUE OF CLOSING STOCK 9 DECLARED BY THE ASSESSEE RATHER THAN SUSTAINING THE ADDITION OF THE SAID AMOUNT AS UNDERSTATEMENT OF SALE. THE ASSESSEE SUB MITS THAT THERE HAS BEEN ACTUALLY OVERSTATEMENT OF INCOME TO THAT EXTENT ORI GINALLY ITSELF. 4. THE CIT(A) ERRED IN OBSERVING THAT THE SALE DEE D PRODUCED BEFORE HIM IS OF NO EVIDENTIARY VALUE BECAUSE THE SAID 500 SQUARE YA RDS COMPRISES OF TWO SALE DEEDS OF 200 SQUARE YARDS EACH A FACT THAT HAS BEE N BROUGHT TO THE NOTICE OF THE CIT(A) IN THE COURSE OF THE APPELLATE PROCEEDIN GS. THE LEARNED FIRST APPELLATE AUTHORITY FAILED TO APPRECIATE THE EVIDEN CE ON RECORD. 5. THE CIT(A) TO OBSERVE THAT THERE IS NO DOCUMENT ARY EVIDENCE IN SUPPORT OF THE SALE DESPITE THE PRESENCE OF THE SALE DEED IN R ESPECT OF THE SALES. 6. THE CIT(A) SUSTAINED THE ADDITION BY REMARKING T HAT IT HAS TO BE CONSTRUED THAT THE ASSESSEE HAS ACTUALLY SOLD THOSE PLOTS/LAN DS AT THE RATE OF RS.524 PER SQ. YARD WHICH IS BASELESS. 7. THE CIT(A) IN SUSTAINING THE SAME MISSED THE FAC T THAT THE ASSESSEE IN HIS REVISED RETURN OFFERED AN ADDITIONAL INCOME OF RS.2 9 LAKHS AND ASSUMING THAT THERE IS IN FACT UNDERSTATEMENT OF SALES THE SAME S HOULD HAVE BEEN TAKEN AS COVERED IN THE SAID ADDITIONAL INCOME. 8. ON THE BASIS OF THE ABOVE GROUNDS THE ADDITIONA L GROUNDS IF ANY THAT MAY BE PERMITTED TO BE FILED IN THE COURSE OF THE APPEL LATE PROCEEDINGS THE ASSESSEE PRAYS THAT THE ADDITION OF RS.6 44 528/- B E DELETED. 10. BRIEF FACTS OF THE CASE ARE THE ASSESSEE IS A FIRM A ND IT DERIVES INCOME FROM BUSINESS IN REAL ESTATE. FOR THE ASSESSM ENT YEARS 2004-05 IT HAS FILED THE RETURN OF INCOME SHOWING IN COME OF RS.2 20 200. THE SAME WAS PROCESSED U/S 143(1) OF THE ACT . LATTER A SURVEY OPERATION U/S 133A OF THE ACT WAS CONDUCTED IN THE BUSINESS PREMISES OF THE ASSESSEE ON 21.10.2005. AFTER THE SURVEY OPERATION THE ASSESSEE HAS FILED A REVISED RETURN ON 30.11.2005 SHOW ING INCOME OF RS.31 20 200. DURING THE ASSESSMENT PROCEEDINGS THE ASSESSING OFFICER NOTICED THAT THE CLAIM MADE UNDER OFFICE EXPENSE S INCLUDES A SUM OF RS.5000 PAID AS DONATION WHICH IS NOT ALLOWABLE. HE THUS DISALLOWED THE SAID AMOUNT. ON GROUND OF PERSONAL ELEMENT INVOL VED IN THE USER OF THE TELEPHONE HE DISALLOWED A SUM OF RS.9 529/- UNDER TELEPHONE EXPENSES. THE ASSESSING OFFICER FURTHER DISALLOWED A SUM O F RS.42 297 TOWARDS EXCESS CLAIM MADE UNDER PARTNERS REMUNERATION. F URTHER HERE WAS SALE OF PLOTS MADE DURING THE PREVIOUS YEAR SHOWIN G THE EXTENT OF LAND SOLD IN SQUARE YARDS RATE PER SQUARE YARD AND TO TAL SALE 10 CONSIDERATION RECEIVED FROM EACH TRANSACTION. THE ASSESSING O FFICER NOTICED IN THAT TWO INSTANCES PLOTS MEASURING 1400SQ. Y ARDS AND 400 SQ YARDS ARE SHOWN AS SOLD AT THE RATES OF RS.267 PER SQ. Y ARD AND RS.265 SQ. YARD RESPECTIVELY. THE ASSESSEE FURTHER SHOWN SA LE OF LAND MEASURING 1119 SQ. YARDS ON TWO INSTANCES AT A RATE OF RS. 130 PER SQ. YARD. THE ASSESSING OFFICER FURTHER NOTICED THAT THE ASSESSE E HAS VALUED THE CLOSING STOCK OF LAND/PLOTS AT RS.292 PER SQ. YARD. A S PER THE STATEMENT THE ASSESSEE HAS SHOWN SALE OF PLOTS AT A VERY LOW RATE DURING THE ASSESSMENT PROCEEDINGS THE ASSESSING OFFICER HAS ASK ED THE ASSESSEE TO EXPLAIN THE REASONS FOR THE SAME ALONG WITH D OCUMENTARY EVIDENCES FOR THE SAME. HOWEVER AS NOTED BY THE ASSESSING OFFICER IN RESPONSE TO SUCH QUERY THE ASSESSEE COULD NOT FURNISH ANY CO GENT DOCUMENTARY EVIDENCES FOR SHOWING SALE OF THOSE PLOTS AT LESSER RATES. HE NOTED THAT THE PLOTS SHOWN HAVE BEEN SOLD TO ONE MOH D. YASIN WHO IS THE SON OF THE MANAGING PARTNER OF THE ASSESSEE FIRM. F OR THE OTHER TWO INSTANCES OF SALES THE ASSESSEE MERELY FURNISHED THE NAMES AN D ADDRESS OF THE CONCERNED TWO PERSONS. IT COULD NOT FURNISH ANY DOCUMENTARY EVIDENCE IN SUPPORT OF CLAIM OF SALE AT LOW ER RATES. SINCE LAND MEASURING 1119 SQ. YARDS HAVE BEEN SOLD TO THE SON OF THE MANAGING PARTNER AT A RATE LESS THAN THE COST PRICE PER SQ. YARD THE ASSESSING OFFICER ESTIMATED THE UNDERSTATEMENTS IN SALE CONSI DERATION IN RESPECT OF THOSE TWO PLOTS AT RS.1 81 278. (RS.292 130 X 1119 SQ. YARDS). 10.1. IN THE ABSENCE OF ANY DOCUMENTARY EVIDENCE FURNI SHED BY THE ASSESSEE IN RESPECT OF THE OTHER TWO SALES AFTER TAKIN G INTO ACCOUNT THE MINIMUM SALE PRICE OF LAND SHOWN AT RS.524 PER SQ. YARD THE ASSESSING OFFICER COMPUTED THE UNDERSTATEMENT IN SALE CONSIDE RATION IN RESPECT OF SUCH SALE OF LAND MEASURING 1400 SQ. YARDS AT RS. 3 59 800 (1400 X (524 - 267). SIMILARLY ADOPTING THE SAME SALE PRICE OF RS.524 HE COMPUTED THE UNDERSTATEMENT IN SALE CONSIDERATION IN RESPECT OF THE 11 OTHER SALE OF LAND MEASURING 400 SQ. YARDS AT RS.1 03 60 0 (400 X (524 265). HE THUS COMPUTED THE TOTAL UNDERSTATEMENT IN SALE CONSIDERATION AT RS.6 44 528. AGAINST THE ADDITION OF RS.6 44 528/- THE ASSESSEE IS IN APPEAL BEFORE US. 11. THE CONTENTION OF THE ASSESSEE COUNSEL IS THAT THE A SSESSING OFFICER ERRED IN ADDING BACK AN AMOUNT OF RS.4 64 250 AS UNDERSTATEMENT IN SALES MERELY BECAUSE THE RATES OF THOSE PLOTS WERE LESSER THAN THE RATES FOR THE OTHER PLOTS. IT WAS STATED THAT THE ASSESSEE HAD TO SELL THOSE PLOTS AT A LOWER RATE DUE TO CERTAIN OUTSIDE PRESSURES AND THE PLACE WHERE THOSE PLOTS ARE SITUATED WERE ALSO N OT GOOD. IT WAS FURTHER SUBMITTED THAT THE LOWER RATES WERE ON A SMALL PORTION OF THE TOTAL SALES. ANY BUSINESS WILL ENTAIL GIVEN DISCOUNTS AND CONCESSIONS ON CERTAIN TRANSACTIONS. THESE ARE BUSINESS DECISIONS AND CAN NOT BE TAKEN AS UNDERSTATEMENT OF SALES. THE ASSESSEE HAS TRANSFERRED UND ER GIFT 1119 SQ. YARDS TO THE SON OF THE MANAGING PARTNER AND THE RATE TAKEN FOR THE SAME SHOULD NOT BE TREATED AS UNDERSTATEMENT OF SALES. HE ALSO FURNISHED A PHOTO COPY OF THE SALE DEED DATED 29.10.2 004 FOR PLOT NO.91 MEASURING 200 SQ. YARDS AND A COPY OF THE GIFT SETTLEMEN T DEED EXECUTED ON 14.7.2003. HE DREW OUR ATTENTION TO T HE LETTER DATED 14.7.2003 WHEREIN SHRI IBHARIM SOLD LAND MEASURING 1 119 SQ.Y TO S. MOHD. YASEEN WHO HAPPENS TO BE THE SON OF THE MANAGING DIRECTOR OF THE ASSESSEE COMPANY. THERE WAS ENDORSEMENT AT THE BACK OF THE GIFT DEED STATING THAT MARKET VALUE OF THE PROPERTY ESTIMA TED AT RS.1 45 500 FOR THE PURPOSE OF STAMP DUTY. THE SAID GIFT DEED BE ARING NO.8848/03 DATED 14.7.2003 WAS REGISTERED AT THE DISTRICT REGISTRA R OFFICE R.R DISTRICT. 12. THE DR RELIED ON THE ORDER OF THE CIT(A). 12 13. WE HAVE HEARD BOTH PARTIES AND PERUSED THE MAT ERIAL ON RECORD. THE ASSESSEE SOLD LAND MEASURING 1119 SQ. YARDS TO MOHD. YASEEN SON OF THE MANAGING DIRECTOR OF THE ASSESSEE COMP ANY AT A LOWER RATE OF 130 SQ YARD. THE COST PRICE OF THE LAND RS.292 PER SQ. YARD AS EVIDENT FROM THE VALUATION OF THE CLOSING STOCK AS ON 31.3.2004 FURNISHED BY THE LOWER AUTHORITIES. THE ASSESSEE ITSELF H AS ESTIMATED THE VALUE OF THE SAID PROPERTY MEASURING 1119 SQ. YARD S AT RS.292 PER SQ. YARDS. HOWEVER THERE WAS NO REASON GIVEN BY THE A SSESSEE FOR VALUING THE PROPERTY AT SUCH LOWER RATE WHEN ASSESSEE IT SELF VALUED THE PROPERTY OF THE CLOSING STOCK VALUATION AT RS.292 PER SQ . YARD. HENCE IN OUR OPINION IN THE ABSENCE OF VALID REASONS THE VALUAT ION OF THE PROPERTY CONSIDERED BY THE LOWER AUTHORITIES AT 292.SQ YARD IS CONFIRMED. THE ASSESSING OFFICER NOT ADOPTED ANY OUTSIDE VALUE THE VALUE ADOPTED BY THE ASSESSING OFFICER IS AS PER THE VALUA TION OF THE CLOSE STOCK AS ON DATED 31.3.2004 AND THE ASSESSEE FAILED TO PRODUCE ANY COGENT DOCUMENTARY EVIDENCE IN SUPPORT OF HIS CLAIM OF SALE MADE AT A VERY LOW AT RS. 130 SQ YARDS. HENCE WE ARE INCLINE D TO UPHOLD ORDER OF THE CIT (A). FURTHER REGARDING THE SALE V ALUE OF PROPERTY AT S.NO.8 MEASURING 1400 SQ. YARDS AT RS.267 PER SQ. YARDS AND OTHER PROPERTY AT SL. NO.18 MEASURING 400 SQ. YARDS AT RS.26 5 THE ASSESSEE HAS NOT FILED ANY DOCUMENTARY EVIDENCE IN SUPPORTS OF HI S CLAIM. THE COPY OF SALE DEED FURNISHED BY THE ASSESSEE BEFORE THE LO WER AUTHORITIES DATED 29.10.2004 I.E. AFTER EXPIRY OF THE PREVIOUS Y EAR 31.3.2004 AND THIS SALE DEED PERTAINS TO SALE OF PLOT MEASURING 200 SQ . YARDS ONLY WHEREAS THE AREA OF THE PLOT OF LAND SHOWN AT SL.NO.1 8 OF THE LIST REPRODUCED BY THE ASSESSING OFFICER AT PAGE NO.4 OF THE A SSESSMENT ORDER IS 400 SQ. YARDS. SINCE THE ASSESSEE FAILED TO FURNI SH ANY EVIDENCE TO SHOW THAT IT HAS ACTUALLY SOLD THOSE TWO PLOTS AT SUCH LOWER RATES IN OUR OPINION THE LOWER AUTHORITIES JUSTIFIED IN CONSID ERING AT RS.524 PER SQ. YARDS. ACCORDINGLY THE ADDITION OF RS.3 59 800 AND RS.1 03 600 13 TOWARDS UNDERSTATEMENT OF SALE CONSIDERATION IN RESPECT OF PROPERTY AT SL.NO.8 AND 18 CONFIRMED. 14. NOW WE WILL TAKE UP THE CASE IN ITA NO.186/HYD/2 009 15. THE ASSESSEE RAISED THE FOLLOWING GROUNDS: 1. THE CIT(A) OUGHT TO HAVE DELETED THE ADDITION O F RS.3 00 000 MADE BY THE ASSESSING OFFICER UNDER SECTION 69 OF THE INCOM E TAX ACT 1961. 2. THE CIT(A) OUGHT TO HAVE APPRECIATED THAT THE AMOUN T OF RS.75 000 EACH INTRODUCED BY THE PARTNERS IS REASONABLE IN TE RMS OF SAVINGS CONSIDERING THE AGE AND STATUS OF THE PARTNERS AND PARTICULARLY IN THE CASE OF THE TWO LADIES IN WHOSE CASE THE SPOUSES WH O ARE IN SENIOR POSITIONS OF EMPLOYMENT HAVE GIVEN CONFIRMATION LET TERS. 3. THE CIT(A) AS WELL AS THE ASSESSING OFFICER WAS EXP LANATION WITH RESPECT TO A CASH CREDIT IN THE BOOKS OF ASSESSEE F IRM AND THIS BEING SO TAXING THE SAME AFTER EXPLANATIONS HAVE BEEN PROVID ED BY THE ASSESSEE FIRM AS UNEXPLAINED INVESTMENT UNDER SECTI ON 69 IS ERRONEOUS AND OUGHT TO BE DELETED. 4. FOR THE ABOVE AND FOR FURTHER GROUNDS THAT MAY BE P ERMITTED TO BE RAISED IN THE COURSE OF ASSESSEE PROCEEDINGS THE AS SESSEE PRAYS THAT THE ADDITION OF RS.3 00 000 MADE UNDER SECTION 69 F OR THE ASSESSMENT YEARS 2003-04 BE DELETED. 16. THE AR SUBMITTED THAT DURING THE ASSESSMENT THE ASSESSING OFFICER NOTICED THAT THERE WERE CAPITAL INTRODUCTION TH E PARTNERS ACCOUNTS AGGREGATING TO RS.12 05 000 WHICH INCLUDES SUM OF RS.75 0 00 EACH SHOWN IN THE NAMES OF RS.4 PARTNERS NAMELY VIZ. SRI IBNE SATTAR SRI MOH. MASEBUDDIN JAWEED SMT. T. SARASWATI AND SMT J. RAJA LATHA. DURING THE ASSESSMENT PROCEEDINGS THE ASSESSING OFFICER HAS ASK ED THE ASSESSEE TO EXPLAIN THE SOURCE OF SUCH CAPITAL INTRODUCED IN THE ACCOUNTS OF THESE PARTNERS WITH SUPPORTING EVIDENCES. THE ASSESSEE COULD NOT FURNISH ANY CONFIRMATION NOR FURNISH ANY EXPLANATION W ITH REGARD TO CAPITAL INTRODUCED IN THE ACCOUNTS OF SRI IBNE SATTAR AN D SRI MD. MASEBUDDIN JAWEED. UNDER THE CIRCUMSTANCES HE THUS HELD THAT THE AMOUNTS SHOWN IN THEIR ACCOUNTS SHALL BE ADDED TO THE INCO ME OF THE ASSESSEE TREATING THE SAME AS UNEXPLAINED INVESTMENT U/S 69 OF THE ACT. AS REGARDS THE CAPITAL AMOUNT SHOWN IN THE ACCOUNTS OF SM T. T 14 SARASWATHI AN SMT. J. RAJA LATHA ARE CONCERNED THOUGH THE ASSESSEE HAS FILED CONFIRMATIONS FROM THEM THE ASSESSING OFFICER NO TED THAT THE SAID LETTERS DO NOT INDICATE THE SOURCES AND MANNER IN WH ICH THE AMOUNTS WERE INVESTED IN THE FIRM. SUBSEQUENTLY THOUG H THE ASSESSEE HAS FILED FURTHER CONFIRMATION LETTERS FROM THE SPOUSES O F THESE TWO LADY PARTNERS IN ABSENCE OF ANY COPY OF BANK ACCOUNT FILED BY SRI VARA PRASAD HUSBAND OF SMT. RAJA LATHA AND SINCE FROM THE CO PY OF BANK ACCOUNT FURNISHED BY SRI T. MANGAPATHI RAO HUSBAND OF SMT. T. SARASWATHI THE ASSESSING OFFICER FOUND THAT ONLY SMALL A MOUNTS WERE WITHDRAWN FOR MAINTENANCE OF HIS FAMILY HE HELD THA T NO CREDENCE CAN BE GIVEN TO SUCH STATEMENTS. HE THUS REJECTED THE CONTE NTION OF THE ASSESSEE AND ADDED THE AMOUNT OF RS.75 000 EACH SHOWN IN T HE ACCOUNTS OF THE SAID LADY PARTNERS TREATING THE SAME AS U NEXPLAINED INVESTMENT U/S 69 OF THE ACT. THE ASSESSING OFFICER THUS MA DE TOTAL ADDITION OF RS.3 00 000 TOWARDS UNEXPLAINED INVESTMENT S IN THE ACCOUNTS OF THE PARTNERS AND COMPLETED THE ASSESSMENT ACCORDI NGLY. 17. ON APPEAL THE CIT(A) CONFIRMED THE SAME. 18. WE HAVE HEARD FROM BOTH THE PARTIES AND PERUSE D THE MATERIAL ON RECORD. IN THE PRESENT CASE FOUR PARTNE RS VIZ. SRI IBNE SATTAR SRI MOH. MASEBUDDIN JAWEED SMT. T. SARASWATI AND SMT J. RAJA LATHA HAVE INVESTED RS.75 000 EACH IN THE ASSESSEE COMPANY. DURING THE ASSESSMENT PROCEEDINGS THEY WERE ASKED TO EXPLAIN THE SOURCE OF SUCH CAPITAL INTRODUCED IN THE ACCOUNTS OF THESE PARTNERS WI TH SUPPORTING EVIDENCES. THE ASSESSEE COULD FURNISH ANY CONFIRMATION NOR COULD FURNISH ANY EXPLANATION WITH REGARD TO CAPITAL INTROD UCED IN THE ACCOUNTS OF SRI IBE SATTAR AND SRI MD. MASEBUDDIN JAWEED. HEN CE THE ASSESSING OFFICER ADDED TREATING THE AMOUNT AS UNEXPLAINED INVE STMENT IN THEIR ACCOUNTS U/S 69 OF THE ACT 1961. HOWEVER IN THE CASE O F SMT. T. SARASWATHI AND SMT J. RAJA LATHA THE ASSESSEE HAS FILED CONFIRMATION 15 LETTERS RECEIVED FROM THE SPOUSES OF THE TWO LADY PARTNE RS COPY OF THE BANK ACCOUNT FURNISHED BY SRI J. VARA PRASAD HUSBAND OF SMT. J. RAJA LATHA AND SRI T. MANGAPATHI RAO HUSBAND OF T. SARA SWATHI. SINCE THESE TWO PARTNERS HAVE CONFIRMED INVESTMENT IN THE FIR M IN THE FORM OF CAPITAL OF RS.75 000/- EACH THE ADDITION CANNOT BE MAD E EITHER U/S68 OR U/S 69 OF THE ACT. HOWEVER IN THE CASE OF OTHER TWO PAR TNERS THERE IS NO CONFIRMATION HENCE THE ASSESSING OFFICER MADE ADDITION U/S 69 OF THE ACT SINCE THE ONUS ON THE ASSESSEE NOT DISCHARGED TO EXPLAIN TH E NATURE AND SOURCE OF SUCH CREDIT IN A SATISFACTORY MANNER. THERE IS NO DISTINCTION BETWEEN A CREDIT ENTRY APPEARING IN THE CA PITAL ACCOUNT OF A PARTNER AND THE CREDIT ENTRY IN THE ACCOUNT OF THIRD PARTY IN THE BOOKS OF THE FIRM AS FAR AS SECTION 68 IS CONCERNED. AS SUCH THE F IRM HAS TO PROVE THE CAPACITY OF THE PARTNER CONCERNED TO GIVE THE AMOUNT IN QUESTION AND ALSO GENUINENESS OF THE TRANSACTIONS. HENCE IN THE CASE OF A FIRM WHEN THERE IS NO SATISFACTORY EXPLANATION REGA RDING THE CREDIT APPEARING IN THE CAPITAL ACCOUNTS OF THE PARTNER OR TH E EXPLANATION OFFERED IS NOT SUPPORTED BY THE REQUISITE EVIDENCE SUCH CREDITS MAY BE CHARGED TO TAX U/S 68 AS INCOME OF THE FIRM. IF SUCH A CASE IT CANNOT BE SAID THAT THE CASH CREDIT SHOULD BE CONSIDERED ONLY IN THE HANDS OF THE PARTNERS FOR WHICH REASON THAT THE PARTNERS ARE NOT PRO VED TO HAVE OWNED THE FUNDS SO CREDITED. HOWEVER SECTION 69 IS NO T ATTRACTED IN SUCH CIRCUMSTANCES. IN THE PRESENT CASE THE ADDITION HA S BEEN MADE BY THE LOWER AUTHORITIES BY INVOKING THE SECTION 69 O F THE ACT. THE PROVISIONS OF SECTION 68 AND S.69 ARE MUTUALLY EXCLUSIVE LY IN THEIR OPERATION PRIMA FACIE. S. 68 IS APPLICABLE ONLY WHE RE ANY SUM IS FOUND CREDITED IN THE BOOKS MAINTAINED BY THE ASSESSEE. SECTION 69 APPLY IN RESPECT OF INVESTMENTS NOT RECORDED IN THE BOOKS IF ANY M AINTAINED BY THE ASSESSEE. WHERE THE BOOKS OF ACCOUNT MAINTAINED AND A N INVESTMENT APPEARS THEREON THERE IS NO QUESTION OF APP LICATION OF SECTION 69. THE ASSESSING OFFICER HAS TO PROCEED U/S 68 AS R EGARDS THE CASH CREDITS IF ANY COVERING THE SOURCE OF SUCH INVESTMENTS O R HAS TO 16 PROCEED U/S 69B IF NEED BE. WHERE SECTION 68 IS APPLICAB LE THE UNEXPLAINED CASH CREDIT WOULD BE THE INCOME OF THE PRE VIOUS YEAR IN WHICH THE CREDIT APPEARS IN THE BOOKS MAINTAINED. THE UNEXPLAINED INVESTMENT COMING WITHIN THE CLUTCHES OF THE SECTION 69 WO ULD BE TREATED AS THE INCOME OF THE FINANCIAL YEAR IMMEDIATE LY PRECEDING ASSESSMENT YEAR IN WHICH THE SAID INVESTMENTS HAVE BEEN M ADE A CLAUSE READING OF BOTH THESE SECTIONS MAKE IT CLEAR THAT I N SECTION 68 THERE SHOULD BE A CREDIT ENTRY IN THE BOOKS OF ACCOUNT WHEREAS IN SECTION 69 THERE MAY NOT BE AN ENTRY IN THE BOOKS OF ACCOUNT. THIS IS THE FUNDAMENTAL DIFFERENCE BETWEEN THESE TWO PROVISIONS. I N CASE SECTION 69 ONLY WHERE INVESTMENT HAS BEEN MADE BUT HAS NOT BE EN SATISFACTORILY EXPLAINED THE INCOME SHOULD BE TREATED TO THE INCOME OF THE ASSESSEE. WHEREAS IN SECTION 68 THERE SHOULD BE A BO OK ENTRY IF THAT BOOK ENTRY IS NOT SATISFACTORILY EXPLAINED THEN IT SHOULD BE TREATED AS INCOME OF THE ASSESSEE. HENCE IN OUR OPINION INVOKING S ECTION 69 IN RESPECT OF THE IMPUGNED CREDIT IS NOT JUSTIFIED AND THE SAME IS DELETED. 19. IN THE RESULT THE APPEALS OF THE ASSESSEE IN ITA NOS.187 & 188/HYD/2009 ARE DISMISSED AND IN ITA NO.186/HYD/2009 IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 29.1.2010 SD/- SD/- N.R.S. GANESAN CHANDRA POOJARI JUDICIAL MEMBER ACCOUNTANT MEMBER DATED THE 29 TH JANUARY 2010 17 COPY FORWARDED TO: 1. SHRI MAMU & RAVI CAS 814 8 TH FLOOR RAGAVENDRA TOWERS CHIRAG ALI LANE HYDERABAD-500 001. 2. ITO WARD NO.5 (3) HYDERABAD 3. CIT(A)-V HYDERABAD. 4. CIT HYDERABAD 5. THE D.R. ITAT HYDERABAD. NP