P.K. MEHTA, A.M. assessee, firm, is in appeal for asst. yr. 1983-84 against order of CIT dt. 5th Aug., 1986 passed under s. 263 of IT Act, 1961. CIT cancelled assessment order of ITO dt. 17th Jan., 1984 and directed him to frame assessment afresh after adding interest income earned on "four R.D. Accounts in joint name of said four partners and their wives to taxable income of assessee for asst. yr. 1983-84." assessee is aggrieved with order of CIT and has come in further appeal. 2 . Certain relevant facts are now stated. assessee is firm, which dealt in Diesel Engines and Tractors and Auto spares in accounting year ended on 31st March, 1984. It consisted of four partners, two of whom Shri B.L. Kalra and Shri A.L. Kalra were brothers and other two Shri Sudesh Kumar Sharma and Randhir Chand Rana were not related to them. On 24th Jan., 1978, all four partners opened Recurring Deposit Accounts with Central Bank of India, Phagwara of Rs. 1,000 per month for period of 61 months. accounts were in joint names of partner and his wife. These Recurring Deposit accounts matured on 1st March, 1983, date falling in asst. yr. 1983-84, and on maturity, lumpsum payment of Rs. 79,740, Rs. 61,000 monthly contributions plus interest Rs. 18,740 became payable to each deposit- holder. It is undisputed that monthly contributions made by all four partners through Home Savings Fund Account No. 1660 with Central Bank of India in names of all four partners of firm and before Tribunal assessee did not dispute fact that account in names of four partners was account of firm. In other words, monthly contribution for R.D. account came from funds of firm lying in aforementioned joint account of four partners. It may further be stated that in firm's books account was opened for each partner styled as 'B.L. Kalra R.D. Account' and similarly in names of other three partners. These accounts figured in balance sheet of assessee-firm on assets side and copies of these balance-sheets for five relevant assessment years are included in assessee's paper book. In balance sheet for asst. yr. 1983-84 there was no question of these amounts appearing in balance sheet as accounts had matured. At time of maturity, principal amount of Rs. 61,000 was adjusted in R.D. accounts of partners and interest amount of Rs. 18,740 was transferred to capital accounts of each of partners. assessee has also referred to undisputed position that for asst. yrs. 1980-81 to 1983-84 interest income accruing for each of these assessment years had been disclosed by partners in their individual returns on accrual basis and assessments had been duly made on partners on interest income disclosed for each year. It is also fact that obviously on account of limitation CIT has passed order under s. 263 for last year of running of R.D. accounts, which falls in asst. yr. 1983- 84 and that CIT had both in show cause notice and in para 3 of his order has expressed opinion that whole of interest income of Rs. 74,960 belonged to assessee and interest income constituted its income for asst. yr. 1983-84. assessee's counsel, Shri N.K. Sud, also stated at hearing that ITO had framed assessment after order of CIT including whole income of Rs. 74,960 in firm's assessment of year 1983-84. 3. Shri N.K. Sud, learned counsel of assessee, contended that action of CIT under s. 263 was unjustified in facts and circumstances of case. He pointed out that R.D. account in name of each partner was, in fact, account of partner himself and this being so, it was second account of each partner regarding withdrawals made by each for deposit in R.D. account in his name with Central Bank of India, Phagwara. He next pointed out that entries in books of firm may show some mistake in description at worse but this will not change intention of partners, which has to be gathered from all relevant facts and circumstances. He stated that partners were fully entitled to withdraw amounts from firm and withdrawals made from firm for deposit in R.D. account were, in fact, put in joint account of partner and his wife. It was submitted that this circumstance showed intention of each partner to hold R.D. accounts for their own benefit and not for benefit of firm. Next it was submitted that partners disclosed income from interest on accrual basis in their individual returns and were taxed by ITO accordingly. This conduct of partners it was pointed out also showed intention of partners in respect of R.D. accounts opened. Finally, it was pointed out that on maturity of accounts interest earned was credited to capital account of each partner. Reliance was placed on Andhra Pradesh High Court decision in case of CIT vs. Jethalal Nanji & Bros. (1987) 59 CTR (AP) 52 : (1987) 167 ITR 191 (AP) in which High Court had gone by intention of partners and reference was made to observations at pages 690 and 691. Attention was also invited to facts of that case and facts of assessee's case being comparable. Another argument in alternative was also raised that entire amount of interest could not be included in assessment of assessee firm for asst. yr. 1983-84 when system of accounting followed by assessee was mercantile and interest income was being disclosed by partners on accrual basis. It was contended that CIT had no material to over-ride system of accounting followed. Finally, it was contended that Revenue could reject stand of partners of assessee-firm in first year and not in last year and thus inflict double taxation by charging interest income firstly in hands of partners and then charging same income in total in one year in assessment of firm. It was submitted that Department cannot back out from position obtaining for earlier assessment year and then suddenly resort to double taxation while making assessment of firm for year when Recurring Deposit accounts of partners matured. Shri Sud also explained position that about fifth point taken by CIT in para 5 of his order about funds coming from sister concern namely, M/s Associated Industries. It was explained that all four partners of this firm were partners in sister concern and thus partners in assessment years earlier than 1983- 84 had made withdrawals from that concern and introduced amounts withdrawn through their capital accounts in assessee-firm. It was submitted that amounts withdrawn from account of sister concern were rightly credited to capital accounts of partners and these having been contributed as capital for use of firm funds undisputedly became that of firm and it is these funds which have been also utilised to make deposits in R.D. accounts. It was also stated that assessee is no longer disputing fact that Home Savings Fund Account No. 1660 with Central Bank of India in names of four partners was account of firm and had funds belonging to firm. It was argued that considering issue in proper perspective no inference adverse to assessee can be possibly drawn. 4. departmental representative relied on reasons given in order of CIT. He particularly emphasised that any asset appearing on asset side of balance sheet of firm was apparently property of firm and since R.D. accounts of partners figured on asset side these belonged to firm. Secondly, it was submitted that admittedly funds for making payments in R.D. accounts had flowed from firm through its joint account No. 1660 and funds being property of firm, interest income would also belong to firm. In other words, it was submitted that interest will belong to person to whom principal amount contributed belonged. It was also submitted finally that interest on maturity of R.D. accounts was assessable on cash basis. 5. We have given careful consideration to arguments of both sides and looked into papers included in assessee's paper book. Revenue is mainly relying on fact that amounts withdrawn from firm's funds were not debited to capital accounts of partners and these were allowed to stand in books of firm by opening R.D. accounts in name of each partner and firm funds showing these on asset side of balance sheet. entries of this nature are no doubt relevant to determine true nature of transaction but these cannot be held to be conclusive on question of intention of partners and real ownership of transaction in dispute. assessee by suitable evidence and conduct can establish that entries in books of firm may not be truly reflecting intention of partners. test of intention of partners is real and correct test and Andhra Pradesh High Court in decision cited by assessee CIT vs. Jethalal Nanji & Bros. (supra) has applied same test to evidence brought on record. In instant case, we find force in submissions of assessee's counsel noted above, which bring out relevant facts and conduct of partners of assessee-firm to show that R.D. accounts were intended by partners to belong to them personally and not to firm. It is significant that R.D. accounts were opened by each partner not only in his own name but in joint names of himself and his wife. partners had no intention to show act as benami of firm or to act on behalf of firm to open these R.D. accounts. benami of firm or to act on behalf of firm to open these R.D. accounts. CIT in para 6 of his order is wrong when he observes that apparent is to be taken as real state of affairs by merely taking note of entries in books of firm. He ignored that primary transaction was that of opening recurring deposit account by each partner in bank and that account was opened in joint names of each partner and his wife. entries in books of firm are secondary for purpose of applying test of apparent is real. apparent is title of R.D. account opened with bank. It is Revenue which asserts that account apparently in names of partner and his wife is in reality account of firm and for that purpose it is relying on entries in books. We have already referred to above value to be attached to entries in books of firm. We are, therefore, inclined to accept line of reasoning of assessee's counsel that intention of partners was to hold R.D. account for themselves and not on behalf of their firm. conduct of partners in disclosing income from interest on accrual basis in their returns of income certainly support stand of assessee. ITO had taxed partners on basis of their stand. Further, entry for interest accrued has undisputedly been passed to capital accounts of partners. Consequently, it becomes clear that intention of partners is what assessee's counsel claims. He has also given sound reasons to challenge action of CIT in terminal year instead of first year of transactions and thus inflict double taxation. position of double taxation as far as possible has to be avoided as it is contrary to scheme of Income-tax law. CIT, in our opinion, without any sufficient reasons has assumed that income in R.D. accounts would not accrue from year to year and assessee could not choose that course. course actually chosen is offering of interest income on accrual basis as is apparent from conduct of partners while filing their individual returns of income which conduct has been accepted by Revenue in case of partners. Considering entirety of facts and circumstances of case, we are not inclined to uphold action of CIT (A) and set aside his order under s. 263 of Act and restore assessment order of ITO dt. 17th Aug., 1984. 6. appeal of assessee is allowed. *** AJANTA TRADING CORPORATION v. INCOME TAX OFFICER