Shri Vijaykumar D.Gupta, Ahmedabad V. The ACIT.,Cent.Circle-1(1), Ahmedabad

CO 275/AHD/2011

• Counselvise Citation: [2013] 122 COUNSELVISE.COM (IT) 8859 (ITAT-AHMEDABAD)
• Duration Of Justice: 1 year(s) 8 month(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 23-08-2013
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 27-06-2013
• Assessment Year: 2005-2006
• Appeal Filed On: 23-12-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Unexplained investment; Sale consideration of property below Jantri Value; Capital asset; Business income; Cost of acquisition; Date of conversion; Fair market value; Valuation report; Validity of assessment
• Section: 45(2); 143(3); 50C; 153A; 69; 132

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, AHMEDABAD BEFORE SHRI MUKUL KR. SHRAWAT, JUDICIAL MEMBER AND SHRI A.K. GARODIA, ACCOUNTANT MEMBER ITA NO. 606/AHD/2011 & CO 275/AHD/2011 A.Y: 2005-06 ITA NO. 607/AHD/2011 & CO 276/AHD/2011 A.Y: 2007-08 ITA NO. 608/AHD/2011 & CO 277/AHD/2011 A.Y: 2008-09 ITA NO. 609AHD/2011 & CO 278/AHD/2011 A.Y: 2009-10 ITA NO. 47/AHD/2013 A.Y: 2000-01 ACIT, CENTRAL CIRCLE 1(1) AHMEDABAD VS VIJAY KUMAR D. GUPTA, 8 PRATIMA SOCIETY, NR. DADASAHEBS PAGLA, NAVRANGPURA, AHMEDABAD. PAN: AANPG 7703R (REVENUE) (ASSESSEE) REVENUE BY : SHRI SUBHASH BAINS, CIT- D.R. ASSESSEE(S) BY : SHRI S.N. SOPARKAR AND SMT. URVASHI SHODHAN / // / DATE OF HEARING : 26/06/2013 / DATE OF PRONOUNCEMENT: 23/08/2013 / O R D E R PER SHRI MUKUL KR. SHRAWAT, JUDICIAL MEMBER : IN ALL, THERE ARE FIVE APPEALS OF THE REVENUE DEPAR TMENT AND FOUR CROSS OBJECTIONS FILED BY THE RESPONDENT ASSESSEE; HEREBY CONSOLIDATED AND DECIDED BY THIS COMMON ORDER. ITA NO.606, 607, 608, 609/AHD/2011, 47/AHD/13 & C.O. NO. 275, 276, 277, 278/AHD/11 ACIT, VS. VIJAY KUMAR D. GUPTA A.Y. 2005 TO 10 - 2 - A. ASSESSMENT YEAR 2007-08 (ITA NO.607/AHD/2011) (R EVENUES APPEAL). 1. THE REVENUE HAS FILED THE APPEAL EMANATING FROM THE ORDER OF LEARNED CIT(A)-I, AHMEDABAD DATED 22.09.2011 AND TH E ONLY ISSUED IS AS PER THE FOLLOWING TWO GROUNDS:- THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN DE LETING THE ADDITION OF RS.1,15,80,000/- BEING CAPITAL GAIN ON SALE OF LAND UNDER SECTION 50C OF THE ACT. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) OUGHT TO HAVE UPHELD THE ENTIRE ADDITION OF RS.1,15,80,000/- BEING CAPITAL GAIN ON SALE OF LAND UNDER SECTION 50C OF THE ACT. 2. FACTS IN BRIEF AS EMERGED FROM THE CORRESPONDING ASSESSMENT ORDER PASSED UNDER SECTION 143(3) READ WITH SECTION 153A DATED 29.12.2010 WERE THAT A SEARCH UNDER SECTION 132 WAS CONDUCTED ON THE GROUP OF GUJARAT AMBUJA ON 1.9.2008. CONSEQUENT THEREUPON A NOTICE UNDER SECTION 153A WAS ISSUED AND IN COMPLIANCE THE ASSES SEE HAD DECLARED AN INCOME OF RS.59,89,660/-. DURING THE COURSE OF SEAR CH PROCEEDINGS CERTAIN DOCUMENTS WERE SEIZED AND THEREIN EXISTED A SALE DEED OF A NON- AGRICULTURAL LAND. THE SAID LAND WAS FOUND TO BE LO CATED AT GATA NO.689 ADMEASURING 9.64 HECTARE SITUATED AT KANHERI VILLAG E, TALUKA BALAPUR, DISTRICT AKOLA. IT WAS NOTED BY THE REVENUE DEPARTM ENT THAT THE SAID LAND WAS PURCHASED BY THE ASSESSEE ON 22 ND OF JANUARY, 2004 FOR A CONSIDERATION OF RS.46,01,000/-. IT WAS FURTHER NOT ED BY AO THAT SUBSEQUENTLY THIS VERY LAND WAS SOLD BY THE ASSESSE E TO M/S. GUJARAT AMBUJA EXPORT LIMITED ON 8 TH OF JANUARY, 2007 ON THE SAME PRICE, I.E., 46,01,000/-. BECAUSE DATE OF SALE TO GUJARAT AMBUJA EXPORT WAS 8 TH OF JANUARY, 2007, THEREFORE, THE ISSUE OF DETERMINATIO N OF THE SALE ITA NO.606, 607, 608, 609/AHD/2011, 47/AHD/13 & C.O. NO. 275, 276, 277, 278/AHD/11 ACIT, VS. VIJAY KUMAR D. GUPTA A.Y. 2005 TO 10 - 3 - CONSIDERATION UNDER THE PROVISION OF SECTION 50C HA D FALLEN WITHIN THE ACCOUNTING PERIOD UNDER CONSIDERATION, I.E., A.Y. 2 007-08. IT WAS NOTED BY THE AO THAT THE STAMP DUTY WAS LEVIED ON THE MAR KET VALUE OF THE LAND; WHICH WAS DETERMINED BY THE GOVERNMENT AT RS.1,61,8 1,000/-. SINCE, THE SALE CONSIDERATION AS PER THE DOCUMENT OF THE ASSES SEE WAS LESS THAN THE VALUE OF THE LAND DETERMINED BY STAMP VALUATION AU THORITY, THEREFORE THE AO HAD ATTRACTED THE PROVISION OF SECTION 50C O F THE IT ACT. THE SHOW CAUSE NOTICE WAS ISSUED WHEREIN THE AO HAS REF ERRED THE PURCHASE AND SALE OF LAND AS UNDER:- 'MR. VIJOYKWNAR GUPTA HAD EFFECTED SALE OF NON-AGRI CULTURAL LAND LOCATED IN AKOLA DISTRICT, DETAILS OF WHICH ARE GIVEN AS UNDER ; LAND-GAT NO.689 OF 9.64 HA SITUATED IN KANHERI VILL AGE, TAL. BALAPUR, DIST. AKOLA FROM THE VERIFICATION OF RETURN OF INCOME, IT WAS F OUND THAT NO CAPITAL GAIN ARISING OUT OF SALE OF NON-AGRICULTURAL LAND WAS OF FERED TO TAX. IT WAS ALSO NOTED FROM THE DETAILS OF 'FIXED AND OTHER BUSINESS ASSET S' SHOWN IN THE BALANCE SHEET OF SHRI VIJAYKUMAR GUPTA, LAND BEING SOLD HAS NOT B EEN DISCLOSED IN ANY OF THE RELEVANT ASSESSMENT YEAR. (A) PLEASE CLARIFY WHETHER THE INCOME ARISING OUT O F THE ABOVE TRANSACTIONS HAS BEEN OFFERED TO TAX. (B) PLEASE JUSTIFY THE SALE PRICE OF LAND SOLD BY Y OU TO GUJARAT AMBUJA EXPORTS LIMITED. 2.1 THE ASSESSEE HAS INFORMED THAT THE COMPANY GUJA RAT AMBUJA EXPORTS LIMITED WANTED TO SET UP A SOLVENT EXTRACTI ON PLANT AND OIL REFINERY AT AKOLA. THE LAND WAS PURCHASED IN THE NA ME OF THE CHAIRMAN SELLER BUYER DATE OF PURCHASE DATE OF SALE SATE CONSIDERATION GOVERNMENT VALUATION DIFFERENCE VIJAYKUMAR GUPTA GAEL 22.01.04 08.01.2007 46,01,000 1,61,81,000 1,15,80,000 ITA NO.606, 607, 608, 609/AHD/2011, 47/AHD/13 & C.O. NO. 275, 276, 277, 278/AHD/11 ACIT, VS. VIJAY KUMAR D. GUPTA A.Y. 2005 TO 10 - 4 - OF THE COMPANY, NAMELY, SRI VIJAY KUMAR GUPTA ALONG WITH AN EMPLOYEE OF THE COMPANY, NAMELY, SRI VIPUL SHAH. IT WAS CLAI MED THAT THE INITIAL PAYMENT WAS MADE BY THE COMPANY. A SOLVENT EXTRACTI ON PLANT WAS SET UP IN FINANCIAL YEAR 2004-05. THE COMPANY HAD MORTG AGED THE AKOLA LAND TO BANKERS AS PER JOINT DEED OF HYPOTHECATION SIGNED ON 23 RD OF NOVEMBER, 2004. AGAINST THE SAID LAND A COMPANY WAS REGISTERED WITH THE REGISTRAR OF COMPANIES AS PER FORM-8 DATED 22 ND OF DECEMBER, 2004. THEREAFTER THE LAND WAS TRANSFERRED IN THE NAME OF THE COMPANY THROUGH A SALE DEED AT THE COST PRICE BY SRI VIJAY KUMAR GUPT A, CHAIRMAN AND SRI VIPUL SHAH, AN EMPLOYEE OF THE COMPANY, ON 8 TH OF JANUARY, 2007, HOWEVER, STAMP DUTY WAS PAID AS PER THE GOVERNMENT VALUATIONS RATE. THE LAND WAS ALWAYS UNDER OWNERSHIP, OF M/S. GUJARA T AMBUJA EXPORT LIMITED, ARGUED BEFORE AO. THE AO WAS NOT CONVINCED ON THE CONTENTION OF THE ASSESSEE THAT THE ASSESSEE WAS MERELY NAME-L ENDER AND THAT THE LAND HAD ACTUALLY BELONGED TO THE COMPANY. ACCORDIN G TO THE AO, THE LAND WAS REGISTERED ON 22 ND OF JANUARY, 2004 IN THE NAME OF THE ASSESSEE. THEREFORE, THE ASSESSEE HAD BECOME THE SOLE OWNER O F THE LAND. LEGALLY THE COMPANY HAD ONLY FINANCED FOR THE PURCHASE OF T HE LAND. ALL THE RIGHTS OF THE OWNERSHIP OVER THE LAND WERE VESTED W ITH MR. GUPTA. THE ASSESSEE WAS NOT MERELY A NAME LENDER. HAD THE AS SESSEE WAS ONLY A NAME LENDER THEN WHY THERE WAS A NEED TO SUBSEQUENT LY TRANSFER THE LAND IN THE NAME OF THE COMPANY? IN THE OPINION OF THE A O A CAPITAL ASSET WAS TRANSFERRED ON 8 TH OF JANUARY, 2007, THEREFORE, THE DIFFERENCE BETWEE N THE GOVERNMENT VALUATION AND THE SALE CONSIDERATION WAS TO BE TAXED AS CAPITAL GAINS IN THE HANDS OF THE ASSESSEE. FINALLY BY ATTRACTING THE ITA NO.606, 607, 608, 609/AHD/2011, 47/AHD/13 & C.O. NO. 275, 276, 277, 278/AHD/11 ACIT, VS. VIJAY KUMAR D. GUPTA A.Y. 2005 TO 10 - 5 - PROVISIONS OF SECTION 50C OF THE ACT, THE DIFFERENC E OF RS.1,15,18,000/- WAS TAXED IN THE HANDS OF THE ASSESSEE. 3. BEING AGGRIEVED THE MATTER WAS CARRIED BEFORE TH E FIRST APPELLATE AUTHORITY. BEFORE CIT(A) THOSE FACTS WERE REITERATE D AND THE REPLY SUBMITTED TO THE AO WAS REPRODUCED IN THE IMPUGNED ORDER. ON DUE APPRECIATION OF THOSE FACTS LEARNED CIT(A) HAS AGRE ED WITH THE VIEW OF THE ASSESSEE AND THE FOLLOWING REASONS WERE ASSIGNE D:- (A) IT IS SEEN THAT THE APPELLANT IS RESIDING AT AH MEDABAD AND IS DIRECTOR OF M/S. GUJARAT AMBUJA EXPORTS LTD., THE COMPANY IS IN THE BUSINESS OF SOLVENT EXTRACTION HAVING PLANTS AT KADI IN GUJARAT AND PITHAMPUR IN MADHYA PRADESH. THE COMPANY HAS PURCHASED LAND AT VILLAGE: KANHERI, TALUKA: BALAPUR, DISTRICT- AKOLA, MAHARASHTRA FOR SETUP OF ONE MORE SOLVENT PLANT. (B) AS THE AGRICULTURAL LAND CANNOT BE PURCHASED IN THE NAME OF COMPANY AS PER LAWS OF MAHARASHTRA, THE COMPANY PASSED RESO LUTION AND ACQUIRED LAND IN THE NAME OF DIRECTOR, SH. VIJAY KUMAR GUPTA , THE APPELLANT. THE PURCHASE PRICE AND OTHER COSTS ARE PAID BY COMPANY, SUCH PAYMENTS ARE DULY RECORDED IN THE BOOKS OF THE COMPANY. (C) THE APPELLANT FURNISHED LETTERS OF VARIOUS GOVE RNMENT DEPARTMENTS, WHICH SHOWS THAT THE LAND IS USED BY COMPANY FOR IT S SOLVENT EXTRACTION PLANT AT VILLAGE:KANHERI. HENCE, THE LAND IS PURCHASED BY THE COMPANY AND THE APPELLANT IS MERELY A FACILITATOR, AS DIRECTOR OF T HE COMPANY. (D) IN SALE DEED EXECUTED FOR TRANSFER OF LAND TO T HE COMPANY, THE PURCHASE PRICE IS MENTIONED, THE GOVERNMENT VALUATI ON IS FOR COLLECTING STAMP DUTY AND OTHER CHARGES BY REGISTERING AUTHORI TY AT CURRENT RATE AND NO CONSIDERATION IS TRANSFERRED/PAID TO ANYONE, AS THE EXECUTION OF SUCH DEED WAS A FORMALITY TO ENTER THE NAME OF REAL OWNER IN THE LAND RECORDS. (E) AS NO CONSIDERATION IS RECEIVED OR ACCRUING TO THE APPELLANT, AS A RESULT OF SUCH TRANSFER, EXECUTION OF SUCH SALE DEE D IS FOR MERELY CHANGE OF NAME IN THE REVENUE RECORDS, THEREFORE PROVISION OF SECTION 50C ARE NOT ATTRACTED TO SUCH ACT. 3.1 LEARNED CIT(A) HAS CONCLUDED THAT THE EXECUTION OF A SALE DEED IN FAVOUR OF THE COMPANY WAS MERELY A FORMALITY TO ENT ER THE NAME OF THE REAL OWNER OF THE LAND. NO CONSIDERATION WAS RECEIV ED AS A RESULT OF THAT TRANSFER THEREFORE THE PROVISION OF SECTION 50C COU LD NOT BE ATTRACTED. HE ITA NO.606, 607, 608, 609/AHD/2011, 47/AHD/13 & C.O. NO. 275, 276, 277, 278/AHD/11 ACIT, VS. VIJAY KUMAR D. GUPTA A.Y. 2005 TO 10 - 6 - HAS CONCLUDED THAT THE DIFFERENCE BETWEEN THE GOVER NMENT VALUATION AND THE SALE CONSIDERATION WERE WRONGLY CONSIDERED AS I NCOME OF THE ASSESSEE. IN THE RESULT THE MAIN ADDITION WAS DELET ED. AGAINST THIS RELIEF NOW THE REVENUE IS BEFORE US. 4. FROM THE SIDE OF THE REVENUE, LEARNED CIT, D.R., MR. SUBHASH BAIN APPEARED. HE HAS VEHEMENTLY OPPOSED THE GRANT OF RELIEF BY LEARNED CIT(A). LEARNED D.R. HAS ARGUED THAT THE OWNERSHIP OF AN IMMOVABLE PROPERTY IS TRANSFERRED THROUGH THE DOCUMENTATION O F SALE DEED. ONCE IT WAS AN UNDISPUTED FACT THAT THE LAND IN QUESTION GO T TRANSFERRED IN THE NAME OF THE ASSESSEE ON 22 ND OF JANUARY, 2004 THROUGH A REGISTERED DOCUMENT THEN THERE WAS QUESTION TO HOLD THAT THE A SSESSEE WAS MERELY A NAME LENDER. LEARNED D.R. HAS PLACED RELIANCE ON THE PROVISION OF SECTION 50C OF IT ACT AND ARGUED THAT THE AO WAS DU TY BOUND TO ASSESS THE CAPITAL GAIN ON THE VALUE OF THE LAND DETERMINE D BY THE STATE GOVERNMENT FOR THE PURPOSE OF STAMP DUTY. ADMITTEDL Y THE CONSIDERATION RECEIPT AS A RESULT OF THE TRANSFER OF A CAPITAL AS SET WAS LESS THAN THE VALUE FIXED BY THE STAMP VALUATION AUTHORITY FOR THE PU RPOSE OF PAYMENT OF STAMP DUTY; THUS LEARNED D.R. HAS PLEADED THAT IN T HE ABSENCE OF ANY OBJECTION FROM THE ASSESSEE, THE AO WAS DUTY BOUND TO APPLY THE VALUE OF THE LAND AS FIXED FOR STAMP DUTY PURPOSE AND TO COM PUTE THE CAPITAL GAIN TAX ACCORDINGLY. RATHER HE HAS REFERRED SUB SECTION 3 OF SECTION 50C THAT WHERE THE VALUE IS ASCERTAINED THEN THAT VALUE SHOU LD BE TAKEN AS FULL VALUE OF THE CONSIDERATION BY THE AO. HE HAS CONCLU DED THAT THE LEARNED CIT(A) HAS NOT APPRECIATED THE CORRECT LEGAL POSITI ON AND WRONGLY ALLOWED THE RELIEF TO THE ASSESSEE. ITA NO.606, 607, 608, 609/AHD/2011, 47/AHD/13 & C.O. NO. 275, 276, 277, 278/AHD/11 ACIT, VS. VIJAY KUMAR D. GUPTA A.Y. 2005 TO 10 - 7 - 5. FROM THE SIDE OF THE RESPONDENT ASSESSEE, LEARNE D AR, SHRI S.N. SOPARKAR AND SMT. URVASHI SHODHAN APPEARED AND SUPP ORTED THE ORDER OF CIT(A). CERTAIN EVIDENCES SUCH AS THE POSITION OF T HE ACCOUNTS OF THE COMPANY, SALE DEEDS IN QUESTION, MORTGAGED DOCUMENT S, ETC. HAVE BEEN REFERRED. HE HAS ALSO MENTIONED THAT THE COMPANY HA D INSTALLED A MANUFACTURING UNIT ON THE LAND IN THE YEAR 2004-05. HE HAS PLEADED THAT THE VIEW TAKEN BY THE LEARNED CIT(A) IS TO BE UPHEL D. 6. WE HAVE HEARD BOTH THE SIDES AT SOME LENGTH. WE HAVE CAREFULLY PERUSED THE ORDERS OF THE AUTHORITIES BELOW IN THE LIGHT OF THE COMPILATION FILED. FACTS OF THE CASE HAVE REVEALED THAT THE COM PANY VIZ, GUJARAT AMBUJA EXPORT LIMITED IS IN THE BUSINESS OF MANUFAC TURING AND EXPORT OF SOYA. THE COMPANY IS ALSO MANUFACTURING SOYA REF INED OIL AT KADI (GUJARAT) AND IN OTHER STATES SUCH AS RAJASTHAN AND MADHYA PRADESH. THE COMPANY WAS PROCURING SEED FROM THE WESTERN PART OF MAHARASTRA. WITH A VISION OF FUTURE EXPANSION AND TO SAVE COST OF PROC UREMENT OF RAW MATERIAL AS WELL AS TO PROMOTE THE MARKET OF REFINE D OIL IN MAHARASTRA IT WAS DECIDED BY THE SAID COMPANY TO SET UP A SOLVENT EXTRACTION PLANT AND OIL REFINERY AT AKOLA, MAHARASHTRA. THE LAND IN QUE STION WAS ORIGINALLY AN AGRICULTURAL LAND WHICH COULD NOT BE PURCHASED I N THE NAME OF A COMPANY. WE HAVE BEEN INFORMED THAT LATER ON THE LA ND IN QUESTION WAS CONVERTED INTO NON-AGRICULTURAL LAND. WE HAVE ALSO BEEN INFORMED THAT THE SAID AGRICULTURAL LAND WAS, THEREFORE, PURCHASE D IN THE NAME OF THE CHAIRMAN, NAMELY, SRI VIJAY KUMAR GUPTA, THE RESPON DENT ASSESSEE. HOWEVER, IT IS DEMONSTRATED BEFORE US THAT A RESOLU TION WAS PASSED BY THE ITA NO.606, 607, 608, 609/AHD/2011, 47/AHD/13 & C.O. NO. 275, 276, 277, 278/AHD/11 ACIT, VS. VIJAY KUMAR D. GUPTA A.Y. 2005 TO 10 - 8 - BOARD OF DIRECTORS OF THE COMPANY ON 31 ST DAY OF OCTOBER, 2003, WHEREIN IT WAS DECIDED THAT THE COMPANY HAD PROPOSE D TO ACQUIRE SOME AGRICULTURAL LAND AT AKOLA IN THE NAME OF ONE SRI V IPUL SHAH AND SRI VIJAY KUMAR GUPTA ON BEHALF OF THE COMPANY FOR SETT ING UP SOLVENT EXTRACTION AND REFINERY PLANT IN AKOLA. IN THE SAID RESOLUTION, IT WAS PROPOSED THAT THE LAND WAS LATER ON TO BE TRANSFERR ED IN THE NAME OF COMPANY AFTER THE COMPLETION OF NECESSARY FORMALITI ES REQUIRED FOR CHANGE OF AGRICULTURAL LAND TO NON AGRICULTURAL LAN D. ON THE BASIS OF THE SAID RESOLUTION THE LAND WAS PURCHASED FOR A CONSID ERATION OF RS.46,01,000/- ON 22 ND OF JANUARY, 2004 AND A STAMP DUTY OF RS.30,400/- WAS PAID AS PER THE CHALLAN ISSUED BY THE REGISTRAR FOR REGISTRATION OF THE SALE DEED. IN THE SAID SALE DEED THERE IS A DESCRIP TION OF PAYMENT OF THE CONSIDERATION THROUGH BANKERS CHEQUES/DEMAND DRAFT . DURING THE COURSE OF HEARING, WE HAVE RAISED AN INQUIRY ABOUT THE SOU RCE OF PAYMENT. IN THE COMPILATION, OUR ATTENTION HAS BEEN DRAWN ON A LEDG ER ACCOUNT OF THE COMPANY WHEREIN BY SHOWING CERTAIN ENTRY IT WAS TRI ED TO DEMONSTRATE THAT THE PAYMENTS WERE MADE DIRECTLY BY GAEL IN THE NAME OF THE VENDORS THROUGH ACCOUNT PAYEE CHEQUES AND DRAFTS. S INCE, COMPANY HAD BORNE THE EXPENDITURE, THEREFORE, THE STAMP DUTY HA S ALSO BEEN DEBITED IN THE SAID ACCOUNT OF THE GAEL. OUR ATTENTION HAS ALS O BEEN DRAWN ON AN ANOTHER VITAL EVIDENCE, I.E., INDENTURE OF MORTGAGE DATED 8 TH OF NOVEMBER, 2004. IT IS EXPLAINED THAT AFTER THE PURCHASE IN JA NUARY, 2004, THE LAND IN QUESTION WAS MORTGAGED AND AN INDENTURE WAS EXECUTE D IN FAVOUR OF CERTAIN BANKS. IN THE COMPILATION, THE RESPONDENT A SSESSEE HAS ALSO PLACED THE ANNUAL REPORT OF THE SAID COMPANY FOR THE PERIO D 2004-05 TO DEMONSTRATE THAT THE PURCHASE OF LAND WAS DULY ENTE RED IN THE SCHEDULE OF ITA NO.606, 607, 608, 609/AHD/2011, 47/AHD/13 & C.O. NO. 275, 276, 277, 278/AHD/11 ACIT, VS. VIJAY KUMAR D. GUPTA A.Y. 2005 TO 10 - 9 - FIXED ASSETS OF THE COMPANY. WE HAVE BEEN INFORME D THAT AFTER THE CHANGE IN THE STATUS OF THE LAND FROM AGRICULTURE T O NON-AGRICULTURE, IT WAS TRANSFERRED IN THE NAME OF THE COMPANY ON 8 TH OF JANUARY, 2007. A REGISTERED DOCUMENT WAS EXECUTED BY THE ASSESSEE IN FAVOUR OF THE COMPANY. THE DESCRIPTION OF THE LAND WAS THE SAME H OWEVER IT WAS REFERRED AS NON-AGRICULTURAL LAND. THE CONSIDERATIO N OF THE LAND REMAINED THE SAME, HENCE, NOTED RS.45,01,000/-. ALTHOUGH, WE HAVE NOTICED THAT THERE WAS A MENTION OF PAYMENT OF THE SAID AMOUNT O F CONSIDERATION BY THE PURCHASER BY CHEQUE BUT THE CONTENTION WAS THAT THE ASSESSEE HAD NOT RECEIVED ANY CONSIDERATION AND IT WAS STATED TO BE MERELY ADJUSTMENT ENTRIES IN THE ACCOUNTS. OUR ATTENTION HAS ALSO BEE N DRAWN THAT ON THE SAID LAND THE COMPANY HAD INSTALLED SOLVENT EXTRACTION U NIT (AKOLA UNIT) AND THE COMPANY HAS ANNOUNCED THE INSTALLATION OF THE E XTRACTION PLANT AS PER THEIR ANNUAL REPORT. THE OBJECTION OF THE REVENUE D EPARTMENT IS THAT AT THE TIME OF TRANSFER OF THE LAND BY THE ASSESSEE IN THE NAME OF THE COMPANY ON 8 TH OF JANUARY, 2007 THE VALUE OF THE LAND FOR THE PUR POSE OF REGISTRATION OF THE SAID SALE DEED WAS DETERMINED B Y THE STAMP VALUATION OFFICER AT RS. 1, 61,81,000/-. ACCORDINGLY, STAMP DUTY OF RS. 6,47,240/- WAS PAID. IN THIS REGARD, THE ARGUMENT OF LD. D.R. IS THAT THE PROVISIONS OF SECTION 50C WERE RIGHTLY INVOKED BY THE A.O. HOWEVE R, THE FUNDAMENTAL QUESTION IS THAT WHETHER THE ASSESSEE HAD ACTUALLY SOLD THE LAND AND IN LIEU RECEIVED THE CONSIDERATION. TO EXAMINE THIS ASPECT, IT IS NECESSARY TO LOOK INTO THE SURROUNDING FACTS AND CIRCUMSTANCES OF EAC H CASE. AS FAR AS THE INVESTMENT IN THE PROPERTY IS CONCERNED, WE HAVE NO TED THAT THERE ARE SEVERAL EVIDENCE ON RECORD TO DEMONSTRATE THAT THE PAYMENT WAS MADE THROUGH ACCOUNT PAYEE CHEQUES AND DRAFTS BY THE SAI D COMPANY. IT IS ALSO ITA NO.606, 607, 608, 609/AHD/2011, 47/AHD/13 & C.O. NO. 275, 276, 277, 278/AHD/11 ACIT, VS. VIJAY KUMAR D. GUPTA A.Y. 2005 TO 10 - 10 - NOT IN DISPUTE THAT THE LAND IN QUESTION WAS MORTGA GED BY THE COMPANY AND IN SUPPORT THE INDENTURE OF MORTGAGED DATED 8 TH NOVEMBER, 2004 IS ALSO ON RECORD. IN THIS SITUATION WHEN THE COMPANY HAD PASSED A RESOLUTION AND THEN DECIDED TO PURCHASE THE IMPUGNE D LAND IN THE NAME OF ITS DIRECTOR AND THAT IT IS ALSO NOT IN DISPUTE THAT THE PAYMENTS HAVE BEEN MADE BY THE COMPANY THROUGH BANKING CHANNEL; T HEN CONSIDERING ALL THESE SURROUNDINGS CIRCUMSTANCES AND CORROBORAT IVE EVIDENCES IT IS PRACTICALLY DIFFICULT FOR US TO HOLD OTHERWISE. NEV ERTHELESS, THE COMPANY HAD SHOWN THIS ASSET IN ITS BALANCE SHEET. THE COMP ANY HAD INSTALLED A MANUFACTURING UNIT AND FOR THAT GOT THE CENTRAL EXC ISE REGISTRATION FOR THE SAID ADDRESS. CERTAIN OTHER SURROUNDING EVIDENCES S UCH AS ELECTRICITY CONNECTION IN THE NAME OF THE COMPANY AND NO OBJEC TION LETTER FROM CERTAIN AUTHORITIES WERE ALSO IN THE NAME OF THE CO MPANY MENTIONING THE SAID ADDRESS OF THE LAND. OTHER EVIDENCES SUCH AS M AHARASHTRA POLLUTION CONTROL BOARD, RECORDS OF THE PROVIDENT FUND, REGIS TRATION WITH DISTRICT CIVIL SUPPLY OFFICER ALL HAVE REVEALED THE ADDRESS OF THE LAND AND THUS STRONGLY SUPPORTS THE CONTENTION OF THE ASSESSEE. A LL THESE DOCUMENTS ARE THIRD PARTY EVIDENCES DULY CORROBORATING THAT THE L AND IN QUESTION WAS USED BY THE SAID COMPANY IN THE CAPACITY OF A OWNER SINCE INCEPTION. WE, THEREFORE, HOLD THAT THIS IS NOT A CASE OF FINANCE BY THE COMPANY BECAUSE THE COMPANY HAD ENJOYED THE SAID ASSET. RATHER THE COMPANY HAD THE CONTROL AS WELL AS DOMAIN OVER THE LAND IN QUESTION . THE SUBSEQUENT TRANSFER THUS CANNOT BE CONSIDERED AS SALE CONSIDER ATION FOR THE PURPOSE OF THE INVOCATION OF THE PROVISION OF SECTION 50C O F THE IT ACT. IT IS DIFFICULT TO HOLD THAT THE LAND IN QUESTION WHICH W AS PURCHASED IN THE YEAR 2004 WAS SOLD IN THE YEAR 2007 THAT TOO ON THE EXAC T SAME AMOUNT OF SALE ITA NO.606, 607, 608, 609/AHD/2011, 47/AHD/13 & C.O. NO. 275, 276, 277, 278/AHD/11 ACIT, VS. VIJAY KUMAR D. GUPTA A.Y. 2005 TO 10 - 11 - CONSIDERATION. THIS FACT ITSELF INDICATES THAT THIS IS NOT A CASE OF SIMPLE TRANSFER OF LAND BETWEEN TWO PARTIES. THE QUESTION OF LEVY OF CAPITAL GAIN THUS REQUIRED TO BE ANSWERED IN THE LIGHT OF THE PE CULIAR FACTS OF EACH CASE. FOR PRACTICAL PURPOSE THE LAND IN QUESTION WA S POSSESSED BY THE COMPANY AND THE COMPANY HAS EXERCISED ITS DOMAIN IN ITS OWN RIGHTS. 7. WE, THEREFORE, HOLD THAT THIS IS NOT A CASE OF S IMPLE APPLICATION OF THE PROVISIONS OF SECTION 50C OF IT ACT. CONSIDERING TH E NATURE OF THE TRANSACTION; WE HEREBY APPROVE THE FINDINGS OF LEAR NED CIT(A). IN THE RESULT, WE FIND NO FORCE IN THIS GROUND OF THE REVE NUE HENCE HEREBY DISMISSED. B. CO NO.276/AHD/2011 (A.Y. 2007-08) (ASSESSEES C. O.) 8. THE ASSESSEE HAS FILED THE CROSS OBJECTION. 9. FROM THE SIDE OF THE CROSS-OBJECTOR, LEARNED AR HAS STATED WITH FULL SENSE OF RESPONSIBILITY THAT THE ASSESSEE IS NOT IN TERESTED TO PURSUE THIS CROSS OBJECTION. LEARNED A.R. HAS NOT INTERESTED TO PURSUE THE CROSS- OBJECTION. LEARNED AR HAS THEREFORE WITHDRAWN THIS CROSS-OBJECTION IN WRITING AS NOT PRESSED. RESULTANTLY, THIS CROSS-OBJ ECTION IS HEREBY DISMISSED BEING NOT PRESSED. C. FOR A.Y. 2008-09 (ITA NO.608/AHD/2011) (REVENUE S APPEAL ) 10. MAIN GROUNDS OF THE REVENUE ARE GROUND NOS. 1 A ND 2; REPRODUCED BELOW:- ITA NO.606, 607, 608, 609/AHD/2011, 47/AHD/13 & C.O. NO. 275, 276, 277, 278/AHD/11 ACIT, VS. VIJAY KUMAR D. GUPTA A.Y. 2005 TO 10 - 12 - THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN DEL ETING THE ADDITION OF RS.1,70,299/- OUT OF TOTAL ADDITION OF RS.3,34,2 71/- MADE AN ACCOUNT OF UNEXPLAINED INVESTMENT IN RESIDENTIAL PROPERTY. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) OUGHT TO HAVE UPHELD THE ENTIRE ADDITION OF RS.3,34,271/- MA DE ON ACCOUNT OF UNEXPLAINED INVESTMENT IN HOUSE PROPERTY. 11. CONSEQUENCE UPON A SEARCH UNDER SECTION 132 DAT ED 1.9.2008 THE PROCEEDINGS FOR A.Y. 2008-09 HAVE BEEN INITIATED AN D THE FACTS IN RESPECT OF THESE GROUNDS AS EMERGED FROM THE CORRESPONDING ASSESSMENT ORDER PASSED UNDER SECTION 143(3) R.W.S. 153A DATED 29.12 .2010 WERE THAT THE ASSESSEE OWNS A RESIDENTIAL PROPERTY AT PRATEEMA SO CIETY, VIJAY CHAR RASTA, AHMEDABAD. THE INVESTMENT IN THE PROPERTY AS PER THE BOOKS OF ACCOUNTS WERE STATED TO BE RS.75,04,458/-. THE MATT ER FOR VALUATION WAS REFERRED TO THE VALUATION OFFICER AS PER THE PROVIS IONS OF SECTION 142A OF THE IT ACT. VIDE D.V.O. REPORT DATED 20 TH OF DECEMBER, 2010, THE INVESTMENT IN THE PROPERTY WAS VALUED AT RS.98,14,5 58/-. THE DIFFERENCE BETWEEN THE VALUE RECORDED IN THE BOOKS AND THE VAL UE AS DETERMINED BY THE DVO WAS THEREFORE WORKED FOR RESPECTIVE YEARS. FACTS OF THE CASE HAVE FURTHER REVEALED THAT THE INVESTMENTS AND THE DATES OF CONSTRUCTION IN THE SAID BUILDING WERE RELATED TO DIFFERENT FINANCI AL YEARS. THEREFORE, THE YEAR-WISE INVESTMENT AND THE ESTIMATION WAS MADE BY THE DVO AS UNDER:- 'THE DVO HAS ESTIMATED COST OF CONSTRUCTION OF THE BUILDING FOR THE PERIOD 2003-04 TO 2008-09, THE WORKINGS ARE AS UNDER: COST OF CONSTRUCTION THE BUILDING AS S.NO. FINANCIAL YEAR DECLARED BY THE ASSESSEE(RS.) ESTIMATED BY THIS OFFLCE(RS:) 1 2002-03 - - 2 2003-04 - - 3 2004-05 3234651 4312375 ITA NO.606, 607, 608, 609/AHD/2011, 47/AHD/13 & C.O. NO. 275, 276, 277, 278/AHD/11 ACIT, VS. VIJAY KUMAR D. GUPTA A.Y. 2005 TO 10 - 13 - 4 2005-06 - - 5 2006-07 . - 6 2007-08 1127436 1461707 7 2008-09 3142371 4040476 TOTAL 7504458 9814558 11.1 FACTS OF THE CASE HAVE FURTHER REVEALED THAT A CCORDING TO THE ASSESSEE THE CONSTRUCTION OF THE BUNGALOW WAS COMPL ETED ON 6.6.1989, WHEREAS THE SEARCH UNDER SECTION 132 WAS CARRIED OU T ON 1.9.2008, STATED TO BE AFTER 19 YEARS OF COMPLETION OF THE CONSTRUCT ION. IT HAS ALSO BEEN STATED THAT EARLIER THERE WAS ALSO A SEARCH AND AT THAT TIME OF SEARCH IN 1989, THE ASSESSEE HAD OFFERED UNEXPLAINED INVESTME NT IN BUNGALOW AT RS.17,00,000/- AS IS EVIDENT FROM AN ORDER OF THE S ETTLEMENT COMMISSION DATED 26.6.1997. BEFORE AO, IT WAS CONTENDED THAT T HE DVO HAD ESTIMATED THE YEAR-WISE VALUATION WITHOUT ANY REASO NING. THE ASSESSEE HAD OTHERWISE MADE THE PAYMENTS AS PER THE BOOKS OF ACCOUNTS. THE AO WAS NOT CONVINCED. IN HIS OPINION, A REPORT OF THE DVO GOT THE SANCTITY OF LAW. ONCE THE MATTER WAS REFERRED TO THE DVO UNDER SECTION 142A THEN THE VALUATION AS DETERMINED BY THE DVO HAS TO BE FO LLOWED BY THE AO. IN THIS REGARD, THE AO HAD RELIED UPON A DECISION OF CIT VS. MEERUT CEMENT COMPANY 150 TAXMAN 7 (ALLAHABAD) FOR THE LEGAL PROPOSITION THAT THE AO CAN REFER THE MATTER TO VALUATION CELL FOR DETERMINATION OF THE COST OF CONSTRUCTION. THE AO HAS TO RELY UPON S UCH REPORT AS AN EVIDENCE. RESULTANTLY, THE YEAR-WISE DIFFERENCE AMO UNT WAS TAXED. FOR A.Y. 2008-09 (F.Y. 2007-08) THE VALUE AS PER THE AS SESSEE WAS AT RS.11,27,436/-, WHEREAS THE VALUE AS ESTIMATED BY D VO WAS ITA NO.606, 607, 608, 609/AHD/2011, 47/AHD/13 & C.O. NO. 275, 276, 277, 278/AHD/11 ACIT, VS. VIJAY KUMAR D. GUPTA A.Y. 2005 TO 10 - 14 - RS.14,61,707/-; THEREFORE THE DIFFERENCE OF RS.3,34 ,271/- WAS ASSESSED AS UN-EXPLAINED INVESTMENT IN THE HANDS OF THE ASSESSE E. 11.2 LEARNED CIT(A) HAS GIVEN CERTAIN REASONS FOR A CCEPTING THE CASE OF THE ASSESSEE IN THE FOLLOWING MANNER:- I HAVE CAREFULLY CONSIDERED THE FACTS OF THE CASE, SUBMISSIONS OF THE APPELLANT, THE ASSESSMENT ORDER, CASE LAWS CITED AN D I AGREE WITH THE APPELLANTS VIEW FOR THE FOLLOWING REASONS:- (A) IT IS SEEN THAT THE REFERENCE TO THE DVO D IDN'T EMANATE FROM ANY EVIDENCE / MATERIAL FOUND / SEIZED DURING THE COURS E OF SEARCH. THE AO HAS ALSO NOT REJECTED BOOKS OF ACCOUNTS. (B) THE APPELLANT CLAIMED THAT DVO ESTIMATED COST OF MARBLE FLOORING, ITALIAN MARBLE FLOORING, DHOLPUR STONE ELIDING ON T HE BASIS OF BILLS OF POLISHING, COST OF THESE ITEMS WERE INCURRED BY APP ELLANT AT THE TIME OF CONSTRUCTION OF BUNGALOW IN 1989 AND NOW AS SHINING OF THE MARBLE AND DECORATIVE STONES REQUIRED DUE TO LAP OF PERIOD / O LD CONSTRUCTION, THE POLISHING EXPENSES ARE INCURRED. I HAVE VERIFIED TH E DETAILS FROM THE BILLS PRODUCED AND COMPARED WITH DVO'S REPORT, I AM NOT AGREEING WITH THE APPELLANT REGARDING COST OF MARBLE FLOORIN G AND ITALIAN MARBLE FLOORING, THESE CAN BE REPLACED EASILY AT THE TIME OF RENOVATION, HOWEVER, I FIND FORCE IN THE APPELLANT'S SUBMISSION WITH REGARD TO DHOLPUR STONE ELIDING, WHICH ARE FIXED ON THE FRONT WALL OF THE BUNGALOW AND THE SAME REQUIRE POLISHING FROM TIME-T O-TIME, CONSIDERING THE FACT COST OF DHOLPUR STONE ELIDING OF RS. 3,06,650/- IS ESTIMATED BY DVO ON THE BASIS OF POLISHING BILL. (C) THE APPELLANT CLAIMED THAT DVO ESTIMATED CO ST OF GLASS SHUTTERS, GLASS SLIDING SHUTTERS, GLASS CEILINGS AT RS. 84,58 9/-, AT THE SAME TIME, DVO ALSO ADDED THE BILLS OF GLASS PURCHASES OF RS. 2,79,760/-, THIS AMOUNTS TO DOUBLE ADDITION OF RS. 84,5897-. I HAVE VERIFIED THE DETAILS FROM THE BILLS PRODUCED AND COMPARED WITH DVO'S REP ORT, I FIND FORCE IN THE APPELLANT'S SUBMISSION THAT THE DVO HAS ADDE D AMOUNT FROM THE BILLS FOR GLASS PURCHASES, AT THE SAME TIME ALSO ES TIMATED COST OF ITEMS MADE WITH THE GLASSES, CONSIDERING THE FACT, COST O F GLASS ITEMS OF RS. 84,589/- ADDED BY DVO TWO TIME. (D) THE APPELLANT CLAIMED THAT DVO ESTIMATED CO ST OF PLY PANELING, WOODEN CUPBOARDS, PLY SHUTTERS AT RS. 2,49,497/-, A T THE SAME TIME, DVO ALSO ADDED THE BILLS OF PLYWOOD PURCHASES OF RS . 1,94,392/-, THIS AMOUNTS TO DOUBLE ADDITION OF RS. 1,94,392/--. I HA VE VERIFIED THE DETAILS FROM THE BILLS PRODUCED AND COMPARED WITH DVO'S REP ORT, I FIND FORCE ITA NO.606, 607, 608, 609/AHD/2011, 47/AHD/13 & C.O. NO. 275, 276, 277, 278/AHD/11 ACIT, VS. VIJAY KUMAR D. GUPTA A.Y. 2005 TO 10 - 15 - IN THE APPELLANT'S SUBMISSION THAT THE DVO HAS ADDE D AMOUNT FROM THE BILLS FOR PLYWOOD PURCHASES, AT THE SAME TIME ALSO ESTIMATED COST OF ITEMS MADE WITH THE PLYWOOD, CONSIDERING THE FACT, COST OF PLYWOOD OF RS. 1,94,3927- ADDED BY DVO TWO TIMES. (E) THE APPELLANT CLAIMED THAT DVO WORKED OUT COST OF SANITARY MATERIALS AT RS.3,71,344/--, AND ALSO ADDED THE BIL LS OF SANITARY MATERIALS IN SEPARATE HEAD UNDE'R OTHER SANITARY MA TERIAL AND PLUMBING MATERIAL OF RS. 4,92,162/-- ON THE BASIS OF BILLS P RODUCED, THIS AMOUNTS TO DOUBLE ADDITION OF RS. 3,71,344/-. I HAVE VERIFI ED THE DETAILS FROM THE BILLS PRODUCED AND COMPARED WITH DVO'S REPORT, I FI ND FORCE IN THE APPELLANT'S SUBMISSION THAT THE DVO HAS ADDED BILLS FOR PURCHASES OF SANITARY AND PLUMBING MATERIAL IN ITEM B(B)(1) AS W ELL AS IN ITEM B(B)(2) I.E. UNDER BOTH THE HEADS, CONSIDERING THE FACT, BILLS FOR PURCHASES OF SANITARY AND PLUMBING MATERIAL OF RS. 3,71,344/-- ADDED BY DVO TWO TIME. (F) THE APPELLANT CLAIMED THAT DVO ESTIMATED ARCHITECT FEE OF RS.2,88,074/-, WHEREAS THE REPAIRS AND RENOVATION W ORK IS CARRIED OUT BY PETTY LABOUR CONTRACTORS OF DIFFERENT FIELDS, AS IN SUCH WORK, NO ARCHITECT IS REQUIRED, I FIND FORCE IN THE APPELLAN T'S SUBMISSION THAT THE RENOVATION AND REPAIR WORK CARRIED OUT IN THREE DIF FERENT YEARS, WORK IS CARRIED OUT BY PETTY CONTRACTORS. THE ARCHITECTS DO NOT ACCEPT SUCH SMALL RENOVATION JOBS OF REPAIRING NATURE, I FIND F ORCE IN THE APPELLANT'S SUBMISSION THAT THE ARCHITECT FEE ESTIMATED BY DVO IS NOT REQUIRED IN SUCH PETTY JOBS. (G) IN VIEW OF MY ABOVE FINDINGS, THE APPELLAN T GETS RELIEF IN THE COST OF VARIOUS ITEMS, THE YEAR-WISE RELIEFS ON VARIOUS ITEMS ARE AS UNDER: ITEMS IN DVO'S REPORT ASST. YEAR TOTAL 2005-06 2008-09 2009-10 DHOLPUR STONE CLIDING 306650 0 0 306650 GLASSES ITEMS 84589 0 0 84589 PLYWOOD ITEMS 27843 117277 49272 194392 SANITARY ITEMS 354014 10118 7212 371344 ARCHITECT FEES 126576 42904 118594 288074 TOTAL RELIEF 899672 170299 175078 1245049 ITA NO.606, 607, 608, 609/AHD/2011, 47/AHD/13 & C.O. NO. 275, 276, 277, 278/AHD/11 ACIT, VS. VIJAY KUMAR D. GUPTA A.Y. 2005 TO 10 - 16 - 11.3 IN THE LIGHT OF THE ABOVE REASONS, LEARNED CIT (A) HAS HELD THAT THE YEAR UNDER CONSIDERATION, I.E., A.Y. 2008-09 THE AS SESSEE IS ENTITLED FOR A RELIEF OF RS.1,70,299/-. ACCORDINGLY, THE GROUND OF THE ASSESSEE WAS PARTLY ALLOWED. IT IS WORTH TO MENTION THAT OUT OF THE TOTAL ADDITION OF RS.3,34,271/- FOR THE YEAR UNDER CONSIDERATION, THE LEARNED CIT(A) HAS GRANTED RELIEF OF RS.170,299/-, THEREFORE, THE BALA NCE AMOUNT OF RS.1,63,972/- WAS CONFIRMED FOR WHICH THE RESPONDEN T ASSESSEE HAS FILED A CROSS OBJECTION. 12. THE OBJECTION OF THE ASSESSEE WAS THAT NOT A SI NGLE UNACCOUNTED PAPER IN RESPECT OF THE CONSTRUCTION OF THE BUNGALO W WAS FOUND OR SEIZED BY THE REVENUE DEPARTMENT DURING THE COURSE OF SEAR CH. IT WAS INFORMED THAT BOOKS OF ACCOUNTS WERE AVAILABLE WITH THE ASSE SSEE AND THE HUGE AMOUNT OF CASH WITHDRAWAL HAVE ALSO BEEN SHOWN IN T HE BOOKS OF ACCOUNTS WHICH WAS UTILIZED FOR ELECTRIC FETTER AND FITTINGS, PAINTING WORKS, FURNISHING, ETC. THE AO WAS NOT CONVINCED AN D HELD THAT ONCE THE MATTER WAS REFERRED TO THE DVO THEN THE SAID VALUAT ION HAS TO BE ACCEPTED BY THE AO. THE REPORT OF THE DVO HAS GOT EVIDENTIAR Y VALUE AS PER AO. THE AO HAD FURTHER OPINED THAT THE REPORT OF THE DV O WAS A SCIENTIFIC REPORT PREPARED BY TECHNICAL PERSON, THEREFORE, THE VALUE DETERMINED THEREIN OUGHT TO BE ACCEPTED FOR TAX PURPOSE. CASE LAW CITED WAS MEERUT CEMENT COMPANY 150 TAXMAN, PAGE 7 (ALLD.). SINCE, T HE ASSESSEE HAD ALREADY DECLARED A SUM OF RS.31,42,371/- (F.Y. 2008 -09) IN THE BOOKS OF ACCOUNTS AS AGAINST THE VALUATION FOR THIS YEAR WAS MADE BY THE DVO AT RS. 40,40,476/- (F.Y. 2008-09), THEREFORE, THE DIFF ERENCE BETWEEN THE ITA NO.606, 607, 608, 609/AHD/2011, 47/AHD/13 & C.O. NO. 275, 276, 277, 278/AHD/11 ACIT, VS. VIJAY KUMAR D. GUPTA A.Y. 2005 TO 10 - 17 - TWO, I.E., RS.8,98,105/- WAS TAXED IN THE HANDS OF THE ASSESSEE. LIKEWISE THE SAME RECOURSE WAS ADOPTED BY THE AO RESPECTIVEL Y FOR OTHER YEARS. WHEN THE MATTER WAS CARRIED BEFORE THE FIRST APPELL ATE AUTHORITY, THE ASSESSEE HAS IDENTIFIED CERTAIN MISTAKES IN THE VAL UATION REPORT. THE ASSESSEE HAD OBJECTED THE MANNER IN WHICH THE DVO H AD VALUED MARBLE FLOORING, DHOLPUR STONE, GLASS SHUTTER, SANITARY MA TERIAL, LIFTS, ETC. IT WAS ALSO PLEADED THAT IN THE CASE OF CIT VS. MEERUT CEMENT COMPANY, 105 TAXMAN, PAGE 7 (ALLD) , IT WAS HELD THAT IF IN CASE ASSESSEES BOOKS OF ACCOUNT ARE DOUBTED THEN AO CAN REFER THE MATTER TO DVO FOR DETERMINATION OF COST OF CONSTRUCTION; BUT IT IS OP EN TO ASSESSEE TO CHALLENGE THE CORRECTNESS OF SUCH VALUATION REPORT. IF IT IS ESTABLISHED THAT SUCH REPORT IS NOT CORRECT AND RELIABLE; THEN EXPEN DITURE SHOWN ON THE CONSTRUCTION AS PER BOOKS OF ACCOUNT IS TO BE ACCEP TED. THE IMPUGNED ADDITION UNDER SECTION 69B WAS MADE ONLY ON THE BAS IS OF THE DVOS REPORT. AN ANOTHER CASE LAW OF CIT VS. GANESH RICE MILLS, 208 ITR 409 (PUNJAB AND HARYANA) HAS ALSO BEEN CITED FOR THE LEGAL PROPOSITION THAT SUCH AN ADDITION IS NOT SUSTAINABLE IF MERELY MADE ON ACCOUNT OF DIFFERENCE BETWEEN THE COST OF CONSTRUCTION ARRIVED AT BY THE DVO AND THAT THE COST OF CONSTRUCTION SHOWN IN THE BOOKS OF ACCOUNT IF THERE IS NO MATERIAL WHATSOEVER OTHERWISE WARRANTING SUCH ADDIT ION. LEARNED CIT(A) HAS ASSIGNED CERTAIN REASONS TO AGREE WITH THE CONT ENTIONS OF THE ASSESSEE. 12.1. ADMITTED FACTUAL POSITION IS THAT THE AO HAD NOT REFERRED ANY INCRIMINATING EVIDENCE WHICH WAS FOUND DURING THE C OURSE OF SEARCH. ALTHOUGH THE REVENUE DEPARTMENT HAD FOUND THE EXIST ENCE OF A BUILDING ITA NO.606, 607, 608, 609/AHD/2011, 47/AHD/13 & C.O. NO. 275, 276, 277, 278/AHD/11 ACIT, VS. VIJAY KUMAR D. GUPTA A.Y. 2005 TO 10 - 18 - BUT THERE WAS NO EVIDENCE THAT THE ASSESSEE HAD IN FACT INCURRED EXPENDITURE ON CONSTRUCTION OF THE SAID PROPERTY OV ER AND ABOVE THE AMOUNT ALREADY DECLARED IN THE BOOKS OF ACCOUNTS. T HIS IS NOT AN ASSESSMENT WHICH WAS MADE IN THE ORDINARY COURSE OF PROCEEDINGS BUT ADMITTEDLY A SEARCH UNDER SECTION 132 WAS CARRIED T HEREFORE IT IS EXPECTED THAT THE ADDITION CONSEQUENT THEREUPON SHOULD BE CO RROBORATED WITH EVIDENCE DETECTED AT THE TIME OF SEARCH. AS FAR AS THE BOOKS OF ACCOUNTS OF THE ASSESSEE AND THE RECORDING OF THE INVESTMENT IN THE CONSTRUCTION OF THE HOUSE WERE CONCERNED, THE AO HAD NOT FOUND ANY DISCREPANCY. FOR THIS LEGAL PROPOSITION, A DECISION OF JURISDICTIONA L HIGH COURT PRONOUNCED IN THE CASE OF GOODLUCK AUTOMOBILES, 26 TAXMAN.COM 254 HAS BEEN CITED WHEREIN THE COURT HAS HELD THAT UNLESS THE BO OKS OF ACCOUNTS ARE REJECTED THE AO CANNOT MAKE A REFERENCE TO THE VALU ATION OFFICER. AN ANOTHER CASE LAW RELIED UPON WAS SARGAM CINEMA, 197 TAXMAN 203 [328 ITR 513 (SC)] . OUR ATTENTION HAS AGAIN BEEN DRAWN ON FEW CASE LAWS WHICH WAS REFERRED BEFORE LEARNED CIT(A), VIZ. , BAJRANGLAL BANSAL, 241 ITR 64 (DEL.), USHAKANT N. PATEL VS. CIT 282 IT R 553 (GUJ) . IN THE LIGHT OF THESE CASE LAWS AND CONSIDERING THE TO TALITY OF THE FACTS AND CIRCUMSTANCES OF THE CASE, WE ARE OF THE CONSIDERED OPINION THAT LEARNED CIT(A) HAS NOT CONSIDERED THE FUNDAMENTAL QUESTIONS AS POINTED OUT BY THE ASSESSEE THAT THERE WAS NO MATERIAL, WHAT TO SA Y AN INCRIMINATING MATERIAL, IN THE POSSESSION OF THE REVENUE DEPARTME NT, THEREFORE, THE ENTIRE ADDITION BEING MERELY BASED UPON THE ESTIMAT ION OF DVO WAS BASELESS; HENCE, DESERVES TO BE DELETED. WE HOLD AC CORDINGLY. THE PART ADDITION SUSTAINED BY LEARNED CIT(A) IS HEREBY DELE TED. ITA NO.606, 607, 608, 609/AHD/2011, 47/AHD/13 & C.O. NO. 275, 276, 277, 278/AHD/11 ACIT, VS. VIJAY KUMAR D. GUPTA A.Y. 2005 TO 10 - 19 - D. FOR A.Y. 2008-09 (CO NO.277/AHD/2011) (ASSESSEE S C.O.) 13. IN THIS CO, GROUND NOS.1, 2 AND 3 ARE IN RESPEC T OF THE VALIDITY OF ASSESSMENT FRAMED UNDER SECTION 153A OF IT ACT. THE SE THREE GROUNDS HAVE NOT BEEN CHALLENGED BEFORE US HENCE HEREBY DIS MISSED BEING WITHDRAWN. 13.1 GROUND NOS.4 & 5 ARE REPRODUCED BELOW: THE LD. CIT(A) HAS ERRED IN LAW AND ON THE FACTS OF THE CASE IN CONFIRMING THE ACTION OF LD. AO IN REFERRING THE VALUATION OF RESI DENT OF THE APPELLANT TO THE DVO EVEN AFTER HOLDING THAT NO EVIDENCE / MATERIAL WAS FOUND / SEIZED DURING THE COURSE OF SEARCH WHICH MAY INDICATE THE UNDISCL OSED OR UNRECORDED INCOME OF THE APPELLANT AND THEREFORE ALSO THE LD. CIT(A) ERRED IN LAW IN NOT QUASHING THE ASSESSMENT ORDER. ALTERNATIVELY AND WITHOUT PREJUDICE TO ABOVE, THE L D. CIT(A) HAS ERRED IN LAW AND ON THE FACTS OF THE CASE IN CONFIRMING THE ADDI TION OF RS.1,63,972/- OUT OF TOTAL ADDITION OF RS.3,34,271/- MADE BY THE LD. AO U/S. 69B OF THE ACT. 13.3 IN THE LIGHT OF THE DISCUSSION MADE HEREINABOV E THESE TWO GROUNDS AS RAISED BY THE CROSS-OBJECTOR ARE CONNECTED WITH THE GROUNDS ALREADY DISCUSSED HEREINABOVE. HENCE, ON THE SAME LINES THE SE TWO GROUNDS ARE HEREBY DECIDED AND THE PART ADDITION AS SUSTAINED B Y LEARNED CIT(A) IS HEREBY DELETED. THESE GROUNDS OF THE CROSS OBJECTIO N ARE HEREBY ALLOWED. E. FOR A.Y. 2009-10 (ITA NO.609/AHD/2011) (REVENUE S APPEAL) 14. FIRST ISSUE IS IN RESPECT OF UNEXPLAINED SILVER RAISED BY REVENUE AS PER THE FOLLOWING GROUNDS: THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN DEL ETING THE ADDITION OF RS.60,12,240/- MADE ON ACCOUNT OF UNEXPLAINED SILVE R. ITA NO.606, 607, 608, 609/AHD/2011, 47/AHD/13 & C.O. NO. 275, 276, 277, 278/AHD/11 ACIT, VS. VIJAY KUMAR D. GUPTA A.Y. 2005 TO 10 - 20 - ON FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. CIT (A) OUGHT TO HAVE UPHELD THE ADDITION OF RS.60,12,240/- MADE ON ACCOUNT OF U NEXPLAINED SILVER. 15. CONSEQUENCE UPON A SEARCH UNDER SECTION 132 DAT ED 1.9.2008, THE IMPUGNED ORDER FOR A.Y.2009-10 WAS PASSED UNDER SEC TION 143(3) DATED 29.12.2010. THE ASSESSEE HAD FILED A RETURN DECLARI NG INCOME OF RS.4,20,87,690/-. THE OBSERVATION OF THE AO IN RESP ECT OF THE UNEXPLAINED SILVER WAS THAT IN THE COURSE OF SEARCH PROCEEDINGS AT THE RESIDENCE CERTAIN SILVER UTENSILS AND ARTICLES WERE FOUND AND INVENTORIES WERE MADE AS PER THE PANCHNAMA DATED 3.9.2008. THE QUANTITY OF THE SILVER UTENSILS / ARTICLES WERE FOUND AT 545 KG, WH ICH WAS VALUED AT RS.1,06,27,500/-. FURTHER FROM AN ANOTHER RESIDENCE SILVER ARTICLES WEIGHING 23.96 KG WERE FOUND THUS THE TOTAL SILVER ARTICLES / UTENSILS FOUND FROM THE FAMILY OF THE ASSESSEE WERE 568.96 K G . AS AGAINST THAT, AS PER THE CLAIM OF THE ASSESSEE, THE TOTAL SILVER UTE NSILS, ETC. ALREADY DECLARED WERE AS FOLLOWS: SL. NO NAME SILVER ARTICLES / UTENSILS (IN KGS) 1 VIJAYKUMAR GUPTA 221.87 2 MANISH V. GUPTA 17.08 3 MOHIT V. GUPTA 21.68 TOTAL 260.64 15.1 THEREFORE A QUERY HAS BEEN RAISED IN RESPECT O F THE EXCESS SILVER WEIGHING 308.32 (568.96-260.64). IT WAS INFORMED TO THE AO THAT DURING THE COURSE OF SEARCH THE SILVER WHICH WAS FOUND, WA S ONLY 244.378 KG ONLY. IT WAS FURTHER INFORMED THAT THE SILVER ARTIC LES FOUND DURING THE COURSE OF SEARCH WERE KEPT IN THE BED ROOM OF THE A SSESSEE UNDER PROHIBITORY ORDER UNDER SECTION 132(3) OF I.T. ACT. WHEN THE ASSESSEE ITA NO.606, 607, 608, 609/AHD/2011, 47/AHD/13 & C.O. NO. 275, 276, 277, 278/AHD/11 ACIT, VS. VIJAY KUMAR D. GUPTA A.Y. 2005 TO 10 - 21 - WITH HIS WIFE RETURNED HOME AFTER SEARCH AND VERIFI ED THE CONTENTS OF THE PANCHNAMA, THEN IT WAS NOTICED THAT THERE WAS A GRO SS DISCREPANCY IN THE WEIGHMENT OF THE SILVER ARTICLES. AN OBJECTION WAS RAISED IMMEDIATELY THEREAFTER. ONE OF THE OBJECTION WAS THAT A DOMESTI C WEIGHING SCALE WAS USED, THEREFORE, THE WEIGHT WAS TAKEN ON APPROXIMAT E BASIS. IT WAS ALSO OBJECTED ABOUT THE VALUE TAKEN AT RS.19,500/- PER K G BECAUSE THAT WAS THE RATE OF PURE SILVER. THE ASSESSEE HAS ALSO FURNISHE D THE DETAILS OF THE ARTICLES OF THE SILVER, VALUATION REPORT AND THE WE ALTH TAX RETURN WHERE THE MEMBERS OF THE FAMILY HAVE DISCLOSED THE SILVER WEI GHING 260.642 KG. IT WAS ALSO RECORDED BY THE AO THAT ON 26 TH OF SEPTEMBER, 2008 THE PROHIBITORY ORDERS IN RESPECT OF THE SAID BEDROOM W ERE REVOKED. ON THE OPENING OF THE SEAL OF THE SAID BEDROOM A NEW REGIS TERED VALUER, NAMELY, MR. AMRISH KOTHARI WAS APPOINTED; WHO HAD AGAIN TAK EN THE WEIGHT OF THE SILVER ARTICLES. WEIGHMENT WAS TAKEN IN THE PRE SENCE OF ADIT AND PANCHAS. AT THAT TIME THE CORRECT WEIGHT WAS 219. 510 KG HAVING LIST OF 33 ITEMS. THE ARTICLES WERE VALUED @ RS.16,000/- PE R KG WHICH WAS WORKED OUT AT RS.35,12,160/-. AFTER FINDING SUCH A GROSS NEGLIGENCE ON THE PART OF THE VALUER SRI DARSHAN KOTHARI, ADIT CA LLED HIM. THE WEIGHT OF ALL THE ITEMS WERE RECHECKED AND IT WAS FOUND TH AT INITIALLY THERE WAS INCORRECT WEIGHT MEASURED BY THE SAID VALUER. IN TH IS CONNECTION THE SUBMISSION OF THE ASSESSEE BEFORE THE AO WAS AS UND ER: AFTER FINDING SUCH A GROSS NEGLIGENCE ON PART OF R EGISTERED VALUER, SHRI DARSHAN KOTHARI ON 01.09.08, THE ADIT UNIT I(I) CAL LED HIM, WHEN SUCH HUGE DIFFERENCE IN THE WEIGHT AND VALUE WAS FOUND ON RE- VALUATION. ON THE REVOCATION IN PRESENCE OF REGISTERED VALUER, SHRI A MRISH KOTHARI, THE FIRST VALUER SHRI DARSHAN KOTHARI RECHECKED WEIGHT OF ALL ITEMS AND FOUND CORRECT, IN THIS REGARD, YOUR GOODSELF CAN CALL FOR SHRI AMR ISH KOTHARI, REGISTERED VALUER APPOINTED BY ADIT UNIT I(I) FOR RE-VALUATION TO FIND THE TRUTH THAT THERE WAS A TOUGH FIGHT BETWEEN ADIT AND SHRI DARSH AN KOTHARI ON WRONG WEIGHT AND VALUATION OF SILVER ARTICLES/UTENSILS. ITA NO.606, 607, 608, 609/AHD/2011, 47/AHD/13 & C.O. NO. 275, 276, 277, 278/AHD/11 ACIT, VS. VIJAY KUMAR D. GUPTA A.Y. 2005 TO 10 - 22 - IT WAS QUITE SURPRISING THAT THE REGISTERED VALUER, SHRI DARSHAN KOTHARI WRONGLY WEIGHTED THE SILVER ARTICLES / UTENSILS AT 545 KG. WITH THE HELP OF DOMESTIC WEIGHING SCALE, TAKEN RTE @ RS.19,500/- PE R KG AND VALUED THE OVERALL VALUE OF SILVER ARTICLES / UTENSILS AT RS. 106,27,500/- AND HAD NOT PREPARED DETAILED LIST OF ARTICLES IN THE INVENTORY DATED 01-09-2008 (EXB 1, PG.). AS STATED EARLIER, THE SEARCH PARTY KEPT SILV ER ARTICLES / UTENSILS WEIGHING 545 KG IN THE MASTER BEDROOM OF SHRI VIJAYKUMAR GUP TA PLACING PROHIBITORY ORDERS AND AGAIN REVOKING THE PROHIBITORY ORDERS FI NDING THE SEAL PLACED ON THE MAST ROOM INTACT THEREBY CLEARLY SHOWS THAT THE VARIATION IN THE WEIGHMENT IS ONLY DUE TO THE ERRONEOUS WEIGHMENT TA KEN ON THE DAY OF SEARCH ON ADHOC BASIS, WHICH WAS DULY FOUND OUT AND CORREC TED WHEN WEIGHMENT WAS AGAIN TAKEN AND REVALUED BASED ON SCIENTIFIC METHOD S. THOUGH THE DEPARTMENT HAS NOT TAKEN ANY ACTION AGAINST HIM. 15.2 THE TOTAL SILVER ARTICLES OF THE GUPTA FAMILY WAS STATED TO BE AS UNDER:- SILVER ARTICLES / ORNAMENTS 7 UTENSILS FOUND EXPLAINED PREMISES (WTKG) AMT BELONGING TO (WT.KG) RESIDENCE-8, PRATIMA SOCIETY, NAVRANGPURA, AHMEDABAD 219.510 3512160 SH. VIJAYKUMAR GUPTA 221.871 RESIDENCE-304, SAKAR TERRACE, 2/2, NEW J'ALASIA, INDORE 21.968 498533 SH. MOHIT GUPTA 21.682 15.3 THEREFORE THE IMPUGNED ARGUMENT OF THE ASSESSE E WAS THAT THE SILVER ARTICLES FOUND WAS WEIGHING 244.378KG AT THE TIME OF SEARCH, WHEREAS THE EXPLAINED SILVER ARTICLES WERE WEIGHING 260.642 KG. IT WAS PRAYED THAT THERE WAS NO EXCESS SILVER ARTICLES FOU ND DURING THE COURSE OF SEARCH. HOWEVER, THE AO WAS NOT CONVINCED AND ARRIV ED AT THE CONCLUSION THAT THE TOTAL JEWELLERY WHICH WAS RECOR DED AT THE TIME OF SEARCH WAS 568.96 KG, HOWEVER THE ASSESSEE HAD EXPL AINED AS PER THE WEALTH TAX RETURN THE SILVER ARTICLES TO THE EXTENT OF RS.260.46 KG OF SILVER ITA NO.606, 607, 608, 609/AHD/2011, 47/AHD/13 & C.O. NO. 275, 276, 277, 278/AHD/11 ACIT, VS. VIJAY KUMAR D. GUPTA A.Y. 2005 TO 10 - 23 - ONLY. THEREFORE THE DIFFERENCE BETWEEN THE TWO, I.E ., 308.32 KG WAS HELD AS UNEXPLAINED ASSET IN THE HANDS OF THE ASSESSEE A ND THE VALUE OF THE SAME WAS WORKED OUT AT RS.60,12,240/- WHICH WAS TAX ED IN THE HANDS OF THE ASSESSEE. 16. BEING AGGRIEVED THE MATTER WAS CARRIED BEFORE T HE FIRST APPELLATE AUTHORITY. BEFORE LEARNED CIT(A), THE FACTS WERE RE ITERATED AND ON APPRECIATION OF THOSE FACTS LEARNED CIT(A) HAS OPIN ED THAT ON LIFTING OF THE PO PROCEEDINGS A GOVERNMENT APPROVED VALUER HAD CONFIRMED THE CORRECT WEIGHT OF THE SILVER ARTICLE. CONSIDERING T HOSE FACTS AND EVIDENCES, HE HAS HELD THAT THE AO WAS NOT JUSTIFIE D IN MAKING THE IMPUGNED ADDITION. SINCE THE ADDITION HAS BEEN DELE TED, HENCE THE REVENUE IS IN APPEAL. 17. WE HAVE HEARD BOTH THE SIDES. WE HAVE PERUSED T HE RELEVANT EVIDENCES PLACED IN THE COMPILATION. OUR ATTENTION HAS BEEN DRAWN ON TWO LETTERS OF THE ASSESSEE THROUGH WHICH THE ASSES SEE HAD VEHEMENTLY OBJECTED THE MANNER IN WHICH THE SILVER ARTICLES WE RE MEASURED BY THE FIRST VALUER. WHEN THE PROHIBITORY ORDERS WERE REVO KED ON 26 TH OF SEPTEMBER, 2008 THE SILVER ARTICLES WERE AGAIN MEAS URED BY AN ANOTHER VALUER IN THE PRESENCE OF PANCHAS. THAT VALUATION REPORT HAS ALSO BEEN PLACED ON RECORD. ACCORDING TO WHICH THE TOTAL WEIG HT OF THE SILVER ARTICLES WAS ONLY 219.105 KG INSTEAD OF 545 KG. OUR T ATTENTION HAS ALSO BEEN DRAWN ON A STATEMENT OF THE ASSESSEE WHICH WAS RECORDED DURING THE LIFTING OF THE PO PROCEEDINGS. AS PER QUESTION NO.5 IT WAS CATEGORICALLY MENTIONED THAT THERE WERE TWO GOVERNMENT APPROVED V ALUERS, NAMELY, ITA NO.606, 607, 608, 609/AHD/2011, 47/AHD/13 & C.O. NO. 275, 276, 277, 278/AHD/11 ACIT, VS. VIJAY KUMAR D. GUPTA A.Y. 2005 TO 10 - 24 - MR. AMRISH KOTHARI AND MR. DARSHAN KOTHARI WHO WERE PRESENT AND WEIGHED THE SILVER CONTENTS ON ACTUAL BASIS. A QUES TION WAS ASKED WHETHER THE ASSESSEE HAD AGREED ON THE SAID CORRECT VALUATION AND THE ASSESSEE HAD ANSWERED IN AFFIRMATIVE. A QUESTION HA S ALSO BEEN ASKED IN RESPECT OF THE RATE OF THE SILVER PER KG FOR DETERM INING THE VALUE OF THE ARTICLES AND THAT TOO WAS CONFIRMED BY THE ASSESSEE . SO AS PER P.O. PROCEEDINGS DATED 26.09.2008 THE ADIT UNIT HAS CORR ECTED THE MISTAKE. AS PER QUESTION NO.9, IT WAS FURTHER CLARIFIED: QN. 9 AS PER YOUR OWN CLAIM YOUR FAMILY OWNS ONLY 260.642 KGS. WHEREAS AS PER INVENTORY OF SILVER UTENSILS MADE ON 01/09/08 IS 545 KGS. WHY SILVER UTENSILS FOUND TODAY SHOULD NOT BE SEIZED AS SAME IS IN EXCESS OF YOUR OWN EXPLAINED S ILVER UTENSILS. AN. 9 WEIGHT TAKEN BY THE VALUER ON 01/09/08 WAS WRONG AN D ALSO VALUE TAKEN WAS WRONG. IT WAS ONLY 220 KGS, WHICH I S SEIZED BY YOU TODAY I.E. 26.09.2008. 17.1 CONSIDERING ALL THESE EVIDENCES AND TOTALITY O F THE FACTS AND CIRCUMSTANCES OF THE CASE ONCE THE ADMITTED FACTUAL POSITION WAS THAT INITIALLY THERE WAS AN ERROR IN THE WEIGHMENT OF TH E SILVER ARTICLES THEREFORE THAT WAS NOT RELIABLE. AT THE FIRST INSTA NCE ON OBJECTION, NATURALLY, THOSE ARTICLES WERE REQUIRED TO BE RECHE CKED WHEN THE SEALED ROOM WAS OPENED CONSEQUENT THEREUPON THE LIFTING OF THE PROHIBITORY ORDER. ACCORDING TO US, THE REVENUE DEPARTMENT HAS FAIRLY PROCEEDED IN THIS REGARD AND NATURALLY THEREAFTER ARRIVED AT THE CORRECT WEIGHT AND SILVER ARTICLES. SINCE, THE ASSESSEE HAD ALREADY DISCLOSED THE SILVER ARTICLES IN THE WEALTH TAX RETURNS ALONG WITH HIS FAMILY MEMBERS AN D THERE WAS NO EXCESSIVE SILVER WAS DETECTED, HENCE, THE RELIEF WA S RIGHTLY GRANTED BY THE ITA NO.606, 607, 608, 609/AHD/2011, 47/AHD/13 & C.O. NO. 275, 276, 277, 278/AHD/11 ACIT, VS. VIJAY KUMAR D. GUPTA A.Y. 2005 TO 10 - 25 - LEARNED CIT(A). WE FIND NO FORCE IN THIS GROUND OF THE REVENUE; THEREFORE, DISMISSED. 18. GROUNDS NO.3 AND 4 ARE REPRODUCED BELOW: THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN DE LETING THE ADDITION OF RS.1,75,058/- OUT OF TOTAL ADDITION OF RS.8,98,105/ - MADE ON ACCOUNT OF UNEXPLAINED INVESTMENT IN RESIDENTIAL PROPERTY. ON FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. CIT (A) OUGHT TO HAVE UPHELD THE ENTIRE ADDITION OF RS.8,98,105/- MADE ON ACCOUN T OF UNEXPLAINED INVESTMENT IN RESIDENTIAL PROPERTY. 18.1 FOR THIS YEAR AS WELL IN THE IDENTICAL MANNER, THE A.O. NOTED THAT THE ASSESSEE IS THE OWNER OF A RESIDENTIAL PROPERTY SITUATED AT 8 PRATEEMA SOCIETY, VIJAY CHAR RASTA, AHMEDABAD. THE INVESTMEN T IN THE PROPERTY DURING THE A.Y. 2009-10 WAS RECORDED IN THE BOOKS O F ACCOUNTS AT RS.31,42,371. THE AO HAD REFERRED THE MATTER OF VAL UATION OF THE PROPERTY TO A VALUATION OFFICER. THE DVO SUBMITTED ITS REPORT AND ESTIMATED THE COST OF INVESTMENT FOR A.Y. 2009-10 A T RS.40,40,476/- THE YEAR-WISE VALUATION OF THE COST OF CONSTRUCTION AS PER THE ASSESSEE AND AS PER THE DVO HAS ALREADY BEEN REPRODUCED ABOVE. WHEN THE MATTER REACHED TO LEARNED CIT(A) ONLY A RELIEF OF RS.1,75, 058/- WAS GRANTED; AGAINST THE ADDITION OF RS.8,98,105/-; WHICH MEANS AN ADDITION OF RS.7,23,027/- WAS SUSTAINED. THE ADDITION SO SUSTAI NED HAD NO FACTUAL OR LEGAL BASIS AS DISCUSSED IN ABOVE PARAGRAPH, THEREF ORE, THAT VIEW OF THE CIT(A) HAS ALREADY BEEN REVERSED. RESULTANTLY, THIS GROUND OF THE REVENUE IS DISMISSED. F. FOR A.Y. 2009-10 (CO NO.278/AHD/2011 ) (ASSESSEE S C.O.) ITA NO.606, 607, 608, 609/AHD/2011, 47/AHD/13 & C.O. NO. 275, 276, 277, 278/AHD/11 ACIT, VS. VIJAY KUMAR D. GUPTA A.Y. 2005 TO 10 - 26 - 19. IN THIS CROSS-OBJECTION, GROUND NOS.1, 2 AND 3 ARE NOT PRESSED. HENCE DISMISS. 20. GROUND NOS.4 AND 5 IS IN RESPECT OF THE PART RE LIEF GRANTED BY LEARNED CIT(A) IN RESPECT OF THE VALUATION OF THE R ESIDENTIAL HOUSE, REPRODUCED BELOW: THE LEARNED CIT(A) HAS ERRED IN LAW AND ON THE FACT S OF THE CASE IN CONFIRMING THE ACTION OF LD. AO IN REFERRING THE VA LUATION OF RESIDENT OF THE APPELLANT TO THE DVO EVEN AFTER HOLDING THAT NO EVI DENCE / MATERIAL WAS FOUND / SEIZED DURING THE COURSE OF SEARCH WHICH MA Y INDICATE THE UNDISCLOSED OR UNRECORDED INCOME OF THE APPELLANT AND THEREFORE ALSO THE LD. CIT(A) ERRED IN LAW IN NOT QUASHING THE ASSESSMENT ORDER. ALTERNATIVELY AND WITHOUT PREJUDICE TO ABOVE, THE L D. CIT(A) HAS ERRED IN LAW AND ON FACTS OF THE CASE IN CONFIRMING THE ADDITION OF RS.7,23,027/- OUT OF TOTAL ADDITION OF RS.8,98,105/- MADE BY THE LD. AO U/S 69 B OF THE ACT. 20.1 A VIEW HAS ALREADY BEEN TAKEN IN FAVOUR OF THE ASSESSEE AS PER THE FOREGOING PARAGRAPHS, THEREFORE, THE PART ADDITION SUSTAINED BY THE LEARNED CIT(A) IS HEREBY REVERSED AND THIS GROUND O F THE ASSESSEES CROSS OBJECTION IS HEREBY ALLOWED. G. FOR A.Y. 2005-06 (ITA NO.606/AHD/2011) (REVENUE S APPEAL) 21. THE REVENUE HAS RAISED ONE ISSUE OF UNEXPLAINED INVESTMENT IN THE HOUSE PROPERTY AS FOLLOWS:- THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN DE LETING THE ADDITION OF RS.8,99,672/- OUT OF TOTAL ADDITION OF RS.10,77,724 /- MADE ON ACCOUNT OF UNEXPLAINED INVESTMENT IN HOUSE PROPERTY. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) OUGHT TO HAVE UPHELD THE ENTIRE ADDITION OF RS.10,77,724/- MADE O N ACCOUNT OF UNEXPLAINED INVESTMENT IN HOUSE PROPERTY. ITA NO.606, 607, 608, 609/AHD/2011, 47/AHD/13 & C.O. NO. 275, 276, 277, 278/AHD/11 ACIT, VS. VIJAY KUMAR D. GUPTA A.Y. 2005 TO 10 - 27 - 22. THE IMPUGNED ORDER BY THE AO HAS BEEN PASSED UN DER SECTION 143(3) R.W.S. 153A OF I.T. ACT AND ON THE SAME LINE S THE UNEXPLAINED INVESTMENT IN THE SAID RESIDENTIAL HOUSE WAS MADE F OR THE YEAR UNDER CONSIDERATION ON THE BASIS OF THE DVOS REPORT AT R S.10,77,724/- I.E. THE DIFFERENCE IN COST OF CONSTRUCTION AS DECLARED BY T HE ASSESSEE AT RS.32,34,65/- AND AS ESTIMATED BY DVO AT RS.43,12,3 75/-. WHEN THE MATTER WAS CARRIED BEFORE LEARNED CIT(A) A PART REL IEF OF RS.8,99,672/- WAS GRANTED, AS PER THE CHART ALREADY REPRODUCED AB OVE. WHILE DECIDING THE OTHER YEARS, WE HAVE ALREADY REVERSED THE VIEW OF THE LEARNED CIT(A), THEREFORE, ON THE SAME LINES THE PART RELIEF IS NOT APPROVED AND DISMISSED THIS GROUND OF THE REVENUE. APPEAL OF THE REVENUE I S DISMISSED. H. FOR A.Y. 2005-06 (C.O. NO.275/AHD/2011) (ASSESSE ES C.O.) 23. GROUND NOS.1, 2 AND 3 ARE NOT PRESSED. HENCE DISMISSED. 24. GROUND NOS.4 AND 5 ARE IN RESPECT OF THE INVESTMENT IN THE RESIDENTIAL PROPERTY, REPRODUCED BELOW: THE LEARNED CIT(A) HAS ERRED IN LAW AND ON THE FACT S OF THE CASE IN CONFIRMING THE ACTION OF LD. AO IN REFERRING THE VA LUATION OF RESIDENT OF THE APPELLANT TO THE DVO EVEN AFTER HOLDING THAT NO EVI DENCE / MATERIAL WAS FOUND / SEIZED DURING THE COURSE OF SEARCH WHICH MA Y INDICATE THE UNDISCLOSED OR UNRECORDED INCOME OF THE APPELLANT AND THEREFORE ALSO THE LD. CIT(A) ERRED IN LAW IN NOT QUASHING THE ASSESSMENT ORDER. ALTERNATIVELY AND WITHOUT PREJUDICE TO ABOVE, THE L D. CIT(A) HAS ERRED IN LAW AND ON THE FACTS OF THE CASE IN CONFIRMING THE ADDI TION OF RS.1,78,052/- OUT OF TOTAL ADDITION OF RS.10,77,724/- MADE BY THE LD. AO U/S 69B OF THE ACT. ITA NO.606, 607, 608, 609/AHD/2011, 47/AHD/13 & C.O. NO. 275, 276, 277, 278/AHD/11 ACIT, VS. VIJAY KUMAR D. GUPTA A.Y. 2005 TO 10 - 28 - 24.1 IN THE LIGHT OF THE ABOVE DISCUSSION, ON THE S AME LINES, FACTS BEING IDENTICAL, WE HEREBY DIRECT TO DELETE THE ADDITION FOR THIS YEAR AS WELL; HENCE THIS GROUND OF THE CROSS OBJECTION IS ALLOWED . I. FOR A.Y. 2000-01 (ITA NO.47/AHD/2013) (REVENUES APPEAL) 25. GROUND NO.1 IS AS UNDER:- THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN DIR ECTING THE ASSESSING OFFICER TO DELETE THE DISALLOWANCE MADE U/S. 36(1)( III) OF RS.16,83,861/- WITHOUT APPRECIATING THE FACT THAT THE A.O. HAD EST ABLISHED THAT THE ASSESSEE HAD DIVERTED THE INTEREST BEARING FUNDS FOR NON-BUS INESS PURPOSE. 26. FACTS IN BRIEF AS EMERGED FROM THE CORRESPONDIN G ASSESSMENT ORDER PASSED UNDER SECTION 143(3) R.W.S. 263 DATED 29.12. 2010 WERE THAT THE AO HAS NOTICED THAT THE ASSESSEE HAD SHOWN DEBIT BA LANCE OF RS.4,38,82,105/- IN HIS CAPITAL ACCOUNT. IT WAS ALS O NOTICED THAT THE ASSESSEE HAD SHOWN LOANS AND DEPOSITS OF RS.23,26,6 1,071/- ON WHICH INTEREST OF RS.89,27,765/- WAS DEBITED TO P & L ACC OUNT. ACCORDING TO AO THE DEBIT BALANCE IN THE CAPITAL ACCOUNT WAS IN THE NATURE OF INTEREST FREE LOAN / ADVANCE TO THE PROPRIETOR. IN THE OPINI ON OF THE AO, IT WAS A DIVERSIFICATION OF INTEREST BEARING FUND FOR NON-BU SINESS PURPOSES, THEREFORE, ATTRACTED THE PROVISIONS OF SECTION 36(1 )(III) OF IT ACT. AN ANOTHER ALLEGATION HAS ALSO BEEN MADE BY THE AO THA T THE ASSESSEE HAD MADE HUGE INVESTMENT IN FIXED ASSETS OF RS.1,54,21, 548, AS PER THE LIST MADE OUT BY THE AO. FINALLY, THE AO HAD WORKED OUT A PROPORTIONATE DISALLOWANCE OF RS.16,83,861/- IN THE HANDS OF THE ASSESSEE. 27. WHEN THE MATTER WAS CARRIED BEFORE THE FIRST AP PELLATE AUTHORITY, LEARNED CIT(A) HAS GRANTED RELIEF AS FOLLOWS:- ITA NO.606, 607, 608, 609/AHD/2011, 47/AHD/13 & C.O. NO. 275, 276, 277, 278/AHD/11 ACIT, VS. VIJAY KUMAR D. GUPTA A.Y. 2005 TO 10 - 29 - 3.3 I HAVE GONE THROUGH THE ASSESSMENT ORDER AND THE SU BMISSIONS OF THE A.R. CAREFULLY. IT IS SEEN THAT THE ASSESSING OFFIC ER HAS MADE THE DISALLOWANCE ON THE GROUND THAT THE ASSESSEE HAS LOANS AND ADVAN CES OF RS.23,26,61,071/- ON WHICH INTEREST OF RS.89,27,765/- HAS BEEN PAID A ND THE CAPITAL ACCOUNT OF THE APPELLANT SHOWED A DEBIT BALANCE OF RS.4,38,82, 105/-. IT IS SEEN THAT THE ASSESSING OFFICER HAS APPORTIONED THE INTEREST TOWA RDS THE ENTIRE DEBIT BALANCES WITHOUT ANY EFFORTS TO PROVE WHAT AMOUNT O F DEBIT BALANCES WHERE A RESULT OF INVESTMENT MADE DURING THE YEAR FOR NON-B USINESS PURPOSES. THE ASSESSING OFFICER HAS ALSO FAILED TO CONSIDER THE F ACTS THAT THE OPENING BALANCE OF THE CAPITAL IN THIS CASE WAS ALSO A DEBI T BALANCE OF RS.24,04,098/-. HE HAS ALSO FAILED TO NOTICE THAT THE SHARE CAPITAL HAS REDUCED FROM (-) RS.24,04,098/- TO (-) RS.4,40,20,816/- PRIMARILY DU E TO LOSSES IN THE BUSINESS FOR THE YEAR AMOUNTING TO RS.3,97,05,755/-. THE ASS ESSING OFFICER HAS ALSO NOT TAKEN COGNIZANCE OF THE FACT THAT THE CONSECUTIVE L OSSES IN THE LAST 3 YEARS ARE F.Y. 1997-98 OF RS.80.53 LACS, F.Y. 1998-99 OF RS.7 3.01 LACS AND IN F.Y. 1999-2000 OF RS.397.06 LACS. THUS, THE LOSSES IN TH E BUSINESS IN THE LAST 3 YEARS WERE MORE THAN RS.550 LACS. 3.3 THE REFERENCE MADE BY THE ASSESSING OFFICER IN THE ASSESSMENT TO THE HUGE INVESTMENTS IN THE FIXED ASSETS HAS BEEN EXPLAINED BY THE A.R. OF THE APPELLANT TO BE VERY OLD AND ARE NOT INVESTMENT MADE DURING T HE YEAR. IN FACT THE A.R. OF THE APPELLANT HAS EXPLAINED THAT THE INVESTMENTS AR E RELATED TO VERY OLD PERIOD ARE AS UNDER :- PARTICULARS F.Y. 1999-00 REMARKS PROPERTY AT PATNA (1/3 SHARE) 100000 SHARE IN PROPERTY, VERY OLD PRIOR TO 1980 BUNGALOW AT 8, PRATIMA SOCIETY 7589937 FURNITURE AT 8, PRATIMA SOCIETY 1220881 BUNGALOW CONSTRUCTED IN 1989- 90, ALONG WITH FURNITURE & FIXTURE LAND AT VRINDAVAN 109140 VERY OLD PRIOR TO 1980 + 1995- 96 GOLD ORNAMENTS & JEWELLERY 6394090 GOLD ORNAMENTS & JEWELLERY, SHOWN IN THE WEALTH TAX OF A.Y. 1996-97 T.V.SET 7500 ACQUIRED AT THE TIME OF ASIAD IN 1982 TOTAL 15421548 THUS, IT CANNOT BE SAID THAT THE MONEY BORROWED WAS UTILISED FOR MAKING THESE INVESTMENTS. 3.5 MOREOVER, THE ASSESSING OFFICER HAS NOT TAKEN N OTICE OF THE FACT THAT THE APPELLANT HAS RECEIVED INCOME TO THE TUNE OF RS .43,15,0617- DURING THE ITA NO.606, 607, 608, 609/AHD/2011, 47/AHD/13 & C.O. NO. 275, 276, 277, 278/AHD/11 ACIT, VS. VIJAY KUMAR D. GUPTA A.Y. 2005 TO 10 - 30 - YEAR BUT HAS OUTGOINGS OF ONLY RS.8,76,895/- DURING THE YEAR AS POINTED OUT BY THE A.R. THE ASSESSING OFFICER HAS ALSO NOT REFUTED THIS. 3.6 THUS, THE ASSESSING OFFICER WAS NOT JUSTIFIED I N STATING THAT MONEY BORROWED ON INTEREST WERE UTILISED IN MAKING INVEST MENTS WHICH WERE NOT USED FOR THE PURPOSE OF BUSINESS. HAVING NOT PROVED THE ABOVE FACT, THE ASSESSING OFFICER WAS NOT JUSTIFIED IN DISALLOWING THE INTERE ST CLAIMED BY THE APPELLANT U/S.36(L)(III) OF THE I.T. ACT, 1961. THE ADDITION MADE IS HENCE DELETED. 28. HAVING HEARD THE SUBMISSIONS OF BOTH THE SIDES. WE ARE OF THE CONSIDERED OPINION THAT THE INVOCATION OF SECTION 3 6(1)(III) BY THE AO WAS MERELY ON CERTAIN ASSUMPTION THAT THE BORROWED INTEREST BEARING FUNDS HAVE BEEN DIVERSIFIED TOWARDS NON-INTEREST BE ARING INVESTMENT. OUR ATTENTION HAS BEEN DRAWN ON CERTAIN FACTS SUCH AS T HAT THE AO HAD MISUNDERSTOOD THE ENTRIES MADE IN THE CAPITAL ACCOU NT. A DEBIT BALANCE WAS BECAUSE OF THE LOSSES IN THE BUSINESS SUFFERED IN THE PART AS ALSO DURING THE YEAR. AO HAS ALSO NOT APPRECIATED THE FA CT THAT CERTAIN INVESTMENTS WERE NOT RELATED TO THE YEAR UNDER CONS IDERATION BUT THOSE WERE OLD INVESTMENTS. THEREFORE, IN OUR OPINION, LE ARNED CIT(A) HAS CORRECTLY APPRECIATED ALL THOSE FACTS AND DELETED T HE ADDITION. RESULTANTLY, WE FIND NO FORCE IN THE GROUND OF THE REVENUE; HENC E DISMISSED. 29. GROUND NO.2 IS REPRODUCED BELOW: THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN DIR ECTING THE A.O. TO DELETE THE ADDITION OF RS.1,29,87,469/- ON ACCOUNT OF UNDE R VALUATION OF CLOSING STOCK WITHOUT APPRECIATING THE FACT THAT THE ASSESS EE HAD CONVERTED INVESTMENT INTO STOCK IN TRADE WHICH IS TRANSFER U/S 2(47) AND THE VALUATION DONE NOW IS RELEVANT FOR DETERMINATION OF CAPITAL GAINS IN A.Y. 2005-06 WHEN THE SAID STOCK-IN-TRADE WAS SOLD BY THE ASSESSEE. ITA NO.606, 607, 608, 609/AHD/2011, 47/AHD/13 & C.O. NO. 275, 276, 277, 278/AHD/11 ACIT, VS. VIJAY KUMAR D. GUPTA A.Y. 2005 TO 10 - 31 - 29.1 IT WAS NOTED BY THE AO THAT THE ASSESSEE HAD C ONVERTED ITS INVESTMENT IN SHARES AMOUNTING TO RS.1,75,50,634/- TO STOCK IN TRADE. DUE TO THIS REASON, IT WAS SHOWN AS STOCK IN TRADE IN T HE CLOSING STOCK FOR THE ASSESSMENT YEAR 2000-01. ACCORDING TO THE AO, AS PE R THE PROVISIONS OF SECTION 45(2) OF I.T. ACT, THE ASSESSEE WAS REQUIRE D TO SHOW THE VALUE OF THE CLOSING STOCK AT THE FAIR MARKET VALUE ON THE D ATE ON WHICH IT WAS CONVERTED. THE AO HAS OBJECTED THAT THE ASSESSEE HA D UNDER VALUED THE CLOSING STOCK. THE ASSESSEES REPLY WAS THAT THE IN VESTMENT IN THE SHARES OF GUJARAT AMBUJA EXPORT LIMITED WAS CONVERTED FROM INVESTMENT TO STOCK IN TRADE. THOSE SHARES WERE IN POSSESSION OF THE ASSESSEE SINCE 31.3.2000. ASSESSEE HAS PLEADED THAT NEITHER THERE WAS ANY PROFIT NOR ANY LOSS SINCE THE SHARES BELONGED TO THE GROUP COMPANI ES WHICH HAVE MERGED WITH OTHER GROUP COMPANIES. ACCORDING TO AO, SECTION 45(2) PROVIDES THAT FOR THE PURPOSE OF COMPUTATION CAPITA L GAIN IN THE CASE OF THE CONVERSION OF THE CAPITAL ASSET INTO STOCK TRAD E, THE FAIR MARKET VALUE OF THE CAPITAL ASSET ON THE DATE OF WHICH IT WAS CO NVERTED WILL BE DEEMED TO BE THE FULL VALUE OF THE CONSIDERATION RECEIVED ON TRANSFER. AS PER AO THIS SECTION PRESCRIBES THAT THE YEAR OF TAXABILITY IS THE YEAR IN WHICH SUCH CONVERTED STOCKING TRADE IS SOLD OR OTHERWISE TRANS FERRED. THE AO HAS THEREAFTER WORKED OUT THE UNDER VALUATION OF THE CL OSING STOCK IN THE FOLLOWING MANNER:- HOWEVER, THE ASSESSEE HAS NOT DONE SO, WHICH RESUL TED IN UNDERVALUATION OF CLOSING STOCK TO THE EXTENT OF RS .L ,29,87,469/- AS UNDER: RS.L 7550634X389* FAIR MARKET VALUE OF CLOSING STOCK = ------ = RS.3,05,38,103/- 223** COST INFLATION INDEX OF 1999-2000 ITA NO.606, 607, 608, 609/AHD/2011, 47/AHD/13 & C.O. NO. 275, 276, 277, 278/AHD/11 ACIT, VS. VIJAY KUMAR D. GUPTA A.Y. 2005 TO 10 - 32 - COST INFLATION INDEX OF 92-93 WHEN THE S HARES WERE ACQUIRED AS AGAINST FAIR MARKET VALUE OF CLOSING STOCK OF RS .3,05,38,103/-, THE ASSESSEE HAS SHOWN CLOSING STOCK AT RS.L,75,50,634/ -. THEREFORE, THE ASSESSEE HAS UNDERVALUED THE STOCK TO THE EXTENT OF RS.L,29,87,469/-. THEREFORE, ADDITION OF RS.L,29,87,469/- IS MADE TO THE TOTAL INCOME ON ACCOUNT OF UNDERVALUATION OF CLOSING STOCK. PENALTY PROCEEDINGS U/S 271(L)(C) OF THE ACT ARE SEPARATELY INITIATED FOR F URNISHING INACCURATE PARTICULARS OF INCOME. 30. WHEN THE MATTER WAS CARRIED BEFORE THE FIRST AP PELLATE AUTHORITY. IT WAS PLEADED THAT THERE WAS NO ACTUAL TRANSFER OR SA LE OF SHARES. THOSE VERY SHARES WHICH WERE EARLIER HELD AS INVESTMENT, WERE CONVERTED INTO STOCK IN TRADE, THAT TO THROUGH BOOK ENTRY. THE ASS ESSEE HAD NOT EARNED ANY INCOME ON SUCH CONVERSION, PLEADED BY THE ASSES SEE. THE ASSESSEE HAS ALSO FURNISHED THE FAIR MARKET VALUE OF THOSE S HARES. AS PER THE SAID CHART HE HAS TRIED TO ESTABLISH THAT THE FAIR MARKE T VALUE WAS LESSER THAN THE VALUE SHOWN BY THE ASSESSEE. THE ASSESSEE HAS C OMPUTED THE FAIR MARKET VALUE OF THOSE SHARES AT RS.85,75,333/-. HOW EVER, THE COST AS PER THE LIST WAS RS.1,71,07,364/- THEREFORE ACCORDING T O THE ASSESSEE THERE WAS NO UNDER VALUATION. LEARNED CIT(A) HAS GRANTED RELIEF BUT BY ASSIGNING ALTOGETHER DIFFERENT REASONING AS FOLLOWS :- 4.3. FOR THE PURPOSE OF VALUATION OF STOCK AT THE CURRENT MARKET VALUE, THE ASSESSING OFFICER HAS ADOPTED COMPLETELY ERRONEOUS METHOD. HE HAS INFACT TREATED THE COST AND ARRIVED AT THE INDEX COST USIN G INDEXATION METHOD FOR DETERMINING THE SHARE MARKET VALUE. THIS METHOD IS COMPLETELY ERRONEOUS IN SO FAR AS IT IS NOT PRESCRIBED BY THE ACT UNDER ANY CIRCUMSTANCES. IN FACT AS PER THE ACT INDEXATION IS ONLY USED TO COMPUTE THE INDEXED COST OF ACQUISITION FOR THE PURPOSE OF CAPITAL GAINS UNDER THE ACT. WHA T THE ASSESSING OFFICER SHOULD HAVE DONE WAS TO COMPARE THE FAIR MARKET VAL UE OF EACH OF THESE SHARES BASED ON QUOTATION IN THE CASE LIMITED COMPA NIES AND ON THE BASIS OF THE PROFITABILITY OF THE OTHER COMPANIES. IN THIS C ASE, IT IS SEEN THAT IN THE CASE OF GUJARAT AMBUJA EXPORT LTD. WHICH AMALGAMATED COM PANY OF THE FOLLOWING AMALGAMATIONS COMPANIES (I) GUJARAT AMBUJA PROTEINS LTD. ITA NO.606, 607, 608, 609/AHD/2011, 47/AHD/13 & C.O. NO. 275, 276, 277, 278/AHD/11 ACIT, VS. VIJAY KUMAR D. GUPTA A.Y. 2005 TO 10 - 33 - (II) GUJARAT AMBUJA FINSTOCK LTD. (III) GUJARAT AMBUJA FOOD LTD. (IV) GUJARAT AMBUJA STEEL LTD. MAJOR PART OF THE SHARE HELD BY THE APPELLANT PERTA INS TO THIS COMPANY. 4.4 AS PER SCHEDULE-E OF THE BALANCE-SHEET, THE COS T PRICE OF SHARES OF GUJARAT AMBUJA EXPORTS LTD. IS RS.1,42,93,603/- WHE REAS THE TOTAL PRICE OF ALL THE OTHER SHARES IS LESS THAN RS.40,00,000/-. THE S HARE PRICE OF GUJARAT AMBUJA EXPORTS LTD. IN THE DATE OF CONVERSION WAS R S.9/-. THUS, THE FAIR MARKET VALUE OF THE SHARES OF THIS COMPANY HELD BY THE ASSESSEE WERE RS.57,20,220/- AS AGAINST THE PURCHASE PRICE OF RS. 1,42,93,603/-. THE LOSSES IN RESPECT OF THIS SHARE ITSELF WOULD OFFSET THE GAINS IF ANY IN THE FAIR MARKET VALUE OF ANY OF THE OTHER SHARES HELD BY THE APPELLANT. 4.5 IN VIEW OF THE ABOVE, IT IS CLEAR THAT THERE IS NO UNDER VALUATION OF STOCK AS MENTIONED BY THE ASSESSING OFFICER IN HIS ORDER. IN VIEW OF THE ABOVE, THE ADDITION MADE BY THE ASSESSING OFFICER IS NOT J USTIFIED. THE SAME IS HENCE, DELETED. 31. WE HAVE HEARD THE PARTIES. RECORDS OF THE CASE HAVE BEEN PERUSED. PRIMA FACIE, ITSELF THE VIEW TAKEN BY LEARNED CIT(A ) APPEARS TO BE CORRECT. UNDISPUTEDLY, THE INVESTMENT IN THE SHARES HAVE BEEN CONVERTED INTO STOCK-IN-TRADE, BUT THERE WAS NO ACTUAL SALE OR GENERATION OF REVENUE DURING THE YEAR. ACCORDING TO US, THE FUNDA MENTAL MISTAKE COMMITTED BY THE AO WAS THAT HE HAS COMPUTED THE FA IR MARKET VALUE BY APPLYING THE COST INFLATION INDEX FORMULA, WHICH IS APPLICABLE ONLY FOR THE PURPOSE OF COMPUTATION OF CAPITAL GAIN. THIS IS NOT THE FORMULA PROVIDED IN THE ACT FOR THE PURPOSE OF DETERMINATIO N OF FAIR MARKET VALUE OF SHARES. THE FAIR MARKET VALUE OF THE SHARES CAN BE DETERMINED AS PER THE RATES DECLARED ON DAILY BASIS BY A STOCK EXCHAN GE. A FAIR MARKET VALUE AS DEFINED OF 2(22B) MEANS THE PRICE AND CAPITAL AS SET WOULD ORDINARILY FETCH ON DATE IN THE OPEN MARKET ON THE RELEVANT DA TE. THE INCOME TAX RULES HAVE PROVIDED THAT IN CASE OF QUOTED SHARES T HE FAIR MARKET VALUE ITA NO.606, 607, 608, 609/AHD/2011, 47/AHD/13 & C.O. NO. 275, 276, 277, 278/AHD/11 ACIT, VS. VIJAY KUMAR D. GUPTA A.Y. 2005 TO 10 - 34 - SHALL BE AS RECORDED IN SUCH STOCK EXCHANGE. BECAUS E OF THIS REASON, THE ACTION OF THE AO IS HEREBY REVERSED. 32. NEXT REASON IN THAT AS PER SECTION 45(2) THE PR OFIT ARISING BY WAY OF CONVERSION OF A CAPITAL ASSET INTO STOCK-IN-TRAD E SHALL BE CHARGEABLE TO INCOME TAX AS HIS INCOME OF THE PREVIOUS YEAR IN WH ICH SUCH STOCK-IN- TRADE IS SOLD. THIS SECTION HAS FURTHER CLARIFIED T HAT FOR THE PURPOSE OF SECTION 48, THE FAIR MARKET VALUE OF THE ASSET ON T HE DATE OF SUCH CONVERSION SHALL BE DEEMED TO BE THE FULL VALUE OF THE CONSIDERATION RECEIVED AS A RESULT OF THE TRANSFER OF THE CAPITAL ASSET. AT THIS JUNCTURE, AT THE MOST, WE CAN DIRECT THAT THE AO SHOULD KEEP IN MIND THESE RELATED PROVISIONS AT THE TIME WHOM THESE SHARES SHALL BE S OLD BY THE ASSESSEE. WE HOLD ACCORDINGLY. 33. OUR VIEW GETS SUPPORT FROM AN ORDER OF CIT VS. BAI SHIRINBAI K. KOOKA, 46 ITR 86 (SC), WHEREIN IT WAS HELD THAT WHERE THE ASSESSEE HELD SHARES AS INVESTMENT WHICH WERE CONVERTED INTO STOCK-IN-TRADE AND SUBSEQUENTLY SOLD, THEN THE DIFFERENCE BETWEEN ACTU AL PRICE PROCEEDS AND MARKET VALUE ON DATE OF CONVERSION WOULD BE ASSESSA BLE AS BUSINESS INCOME. THIS VIEW OF OURS IN FURTHER BUTTRESSED BY A DECISION OF ITAT, BOMBAY IN THE CASE OF ACIT VS. SMT. SHANTIDEVI SARAF, 51 ITD 83 (BOM), WHEREIN SHARES WERE SOLD WHICH WERE CONVERTE D FROM INVESTMENT TO STOCK-IN-TRADE. ON THE QUESTION OF COMPUTATION O F CAPITAL GAIN, IT WAS HELD THAT THE CAPITAL GAIN IS TO BE COMPUTED AND TA XED IN RESPECT OF EXCESS OF CONVERSION PRICE OVER COST PRICE OF SHARES SOLD. THE BALANCE SURPLUS LEFT AFTER THE COMPUTATION OF THE CAPITAL GAIN IN T HE BUSINESS PROFIT. TO ITA NO.606, 607, 608, 609/AHD/2011, 47/AHD/13 & C.O. NO. 275, 276, 277, 278/AHD/11 ACIT, VS. VIJAY KUMAR D. GUPTA A.Y. 2005 TO 10 - 35 - SUM UP WE HEREBY HOLD THAT IN A SITUATION WHEN THER E WAS NO SALE EXECUTED IN THE YEAR UNDER CONSIDERATION THEN THERE WAS NO JUSTIFICATION TO ASSESS THE INCOME IN THE HANDS OF THE ASSESSEE. IN THE RESULT, THE VIEW TAKEN BY LEARNED CIT(A) IS HEREBY APPROVED AND THE GROUND OF THE REVENUE IS DISMISSED. 34. TO SUM UP, THE COMBINED RESULT IN THAT THE APPE ALS FILED BY THE REVENUE ARE HEREBY DISMISSED AND THE CROSS OBJECTIO NS OF THE ASSESSEE ARE PARTLY ALLOWED. SD/- SD/- (A.K. GARODIA) ( MUKUL KR. SHRAWAT ) ACCOUNTANT MEMBER JUD ICIAL MEMBER AHMEDABAD; DATED 23/08/2013 PRABHAT KR. KESARWANI, SR. P.S. TRUE COPY / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. !' / THE RESPONDENT. 3. #$#% ' '& / CONCERNED CIT 4. ' '&() / THE CIT(A)-III, AHMEDABAD 5. )*' %, ' ' % , ,-$ / DR, ITAT, AHMEDABAD 6. *./ 0 / GUARD FILE. / BY ORDER, 1 11 1/ // /,' #2 ,' #2 ,' #2 ,' #2 ( DY./ASSTT.REGISTRAR) ' ' % ' ' % ' ' % ' ' % , , , , ,-$ ,-$ ,-$ ,-$ / ITAT, AHMEDABAD