The DCIT, Circle-2, Surat V. Shri Mafatlal Nathalal Patel, Surat

ITA 1239/AHD/2012

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 1934 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 9 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-04-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 10-02-2016
• Assessment Year: 2008-2009
• Appeal Filed On: 07-06-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: JAMES KUREIN
• Assessee Lawyers: RAMESH MAL
• Keywords: Unexplained investment; Sale consideration of property below Jantri Value; Value adopted by valuation officer; Capital asset; Business income; Source of fund; Valuation report; Competent authority; Assessment record
• Section: 50C

Judgement Text

, C IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, AHMEDABAD BEFORE SHRI RAJPAL YADAV, JUDICIAL MEMBER AND SHRI MANISH BORAD, ACCOUNTANT MEMBER ./ ITA.NO.1239/AHD/2012 / ASSTT. YEAR: 2008-2009 DCIT, CIR.2 SURAT. VS SHRI MAFATLAL NATHALAL PATEL PLOT NO.96, SURAT INDUSTRIAL SOCIETY NR.KIRAN MOTOR WORK SHOP MAMROLI ROAD SURAT 395 017. PAN : ABZPP 0470 H ! / (APPELLANT) '# ! / (RESPONDENT) REVENUE BY : SHRI JAMES KUREIN, SR.DR ASSESSEE BY : SHRI RAMESH MALPANI / DATE OF HEARING : 10/02/2016 / DATE OF PRONOUNCEMENT: 01/04/2016 $%/ O R D E R PER RAJPAL YADAV, JUDICIAL MEMBER: THE ASSESSEE IS IN APPEAL BEFORE US AGAINST THE ORD ER OF THE LD.CIT(A)-II, SURAT DATED 23.3.2012 FOR THE ASSTT.Y EAR 2008-09. 2. THE GROUND NO.1 OF THE APPEAL PROJECTS THE GRIEV ANCE OF THE ASSESSEE AS UNDER: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E, THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS.39, 49,320/-MADE ON ACCOUNT OF DIFFERENCE IN ESTIMATED VALUE OF SHOPS A ND ACTUAL RECEIPT , WITHOUT APPRECIATING THE FACT THAT ON ONE HAND ASSE SSEE HAS ITA NO.1239/AHD/2012 2 DISSOLVED FIRM AND DISTRIBUTED SHOP TO PARTNERS AND THE ASSESSEE SOLD THESE SHOPS, THE DIFFERENCE OF PROFIT SHOULD BE TRE ATED AS INCOME OF THE ASSESSEE. 3. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE HA S FILED HIS RETURN OF INCOME ON 9.1.2009 DECLARING TOTAL INCOME AT RS.5,0 0,674/-. THE CASE OF THE ASSESSEE WAS SELECTED FOR SCRUTINY ASSESSMENT A ND NOTICE UNDER SECTION 143(2) OF THE INCOME TAX WAS ISSUED ON 27.8 .2009, WHICH WAS DULY SERVED UPON THE ASSESSEE. ON SCRUTINY OF THE ACCOUNTS, IT REVEALED TO THE AO THAT THE ASSESSEE HAS SOLD SEVEN SHOPS FO R A CONSIDERATION OF RS.25,83,750/-. ACCORDING TO THE AO, THE SHOPS ARE SITUATED IN THE HEART OF SURAT CITY, AND THE PRICES SHOWN BY THE ASSESSEE ARE NOMINAL. THE ASSESSEE MUST HAVE RECEIVED MUCH HIGHER CONSIDERATI ON THEN THE ONE DISCLOSED BY HIM. THEREFORE, HE CONFRONTED THE ASS ESSEE AS TO WHY THE RECEIPT FROM THE FOUR SHOPS SHOULD NOT BE ESTIMATED AT RS.60,00,000/- INSTEAD OF RS.25,83,750/- SHOWN BY THE ASSESSEE. I N RESPONSE TO THE QUERY OF THE AO, THE ASSESSEE CONTENDED THAT HE WAS PARTNER IN M/S. SHRI RANG DEVELOPERS (PARTNERSHIP FIRM). THE SAID FIRM WAS ENGAGED IN THE BUSINESS OF DEVELOPMENT OF PROJECT KNOWN AS 21 ST CENTURY BUSINESS CENTRE AT SURVEY NO.3, WARD NO.2, NR.WORLD TRADE C ENTRE, RING ROAD, SURAT. THE FIRM WAS DISSOLVED ON AND FROM 1 ST APRIL, 2006. AT THE TIME OF DISSOLUTION, THERE WERE CERTAIN ASSETS AND LIABI LITIES INCLUDING THE UNREALIZED STOCK, I.E. OFFICE/SHOPS. IN ORDER TO C LOSE THE BOOKS OF ACCOUNTS OF THE FIRM ON ITS DISSOLUTION, IT WAS DEC IDED BY THE PARTNERS TO DEBIT UNREALIZED AMOUNT OF STOCK TO THE CAPITAL ACC OUNT OF VARIOUS PARTNERS WITH AN UNDERSTANDING THAT AS AND WHEN THE AMOUNT WILL BE REALIZED IN FUTURE, FOR THIS STOCK, THE SAME WILL B E PAID TO THE PARTNERS WITH THIS UNDERSTANDING, A SUM OF RS.25,83,750/- WA S DEBITED BY THE ITA NO.1239/AHD/2012 3 FIRM TO THE ASSESSEES CAPITAL ACCOUNT BEING UNREAL IZED AMOUNT OF OFFICE NO.601, 602, 609 AND 610. WHEN THE SHOPS WERE SOLD , THE ENTRIES REVERSE AND THE ASSESSEE HAS SHOWN SALE CONSIDERATION. THE LD.AO WAS NOT SATISFIED WITH THE EXPLANATION OF THE ASSESSEE. HE HARBOURED A BELIEF THAT THE RATE IN THIS AREA MUST BE AROUND RS.2,500 PER S Q.FEET. ADOPTING THIS RATE, HE CALCULATED THE VALUES OF THE SHOPS AND MAD E AN ADDITION OF RS.1,63,16,250/-. 4. ON APPEAL, THE LD.CIT(A) HAS DELETED THE ADDITIO N BY OBSERVING THAT THE ASSETS IN THE HANDS OF THE ASSESSEE WERE C APITAL ASSETS. THE ONLY CAPITAL GAIN CAN BE LEVIED IN HIS HAND. THE LD.CIT (A) WAS OF THE OPINION THAT ONCE THE FIRM WAS DISALLOWED, THEN, ASSETS WIL L BE DISTRIBUTED TO THE PARTNERS, AND AT THAT VERY MOMENT, THE STOCK CEASED TO BE BUSINESS ASSET. THE LD.FIRST APPELLATE AUTHORITY EXAMINED THE VALUE S OF THESE SHOPS WITH HELP OF SECTION 50C. IN OTHER WORDS, AS PER S ECTION 50C, IF THE CONSIDERATION RECEIVED OR ACCRUED, AS A RESULT OF T RANSFER BY AN ASSESSEE OF A CAPITAL ASSET, BEING LAND OR BUILDING OR BOTH, IS LESS THAN THE VALUE ADOPTED BY AN AUTHORITY OF A STATE GOVERNMENT FOR T HE PURPOSE OF PAYMENT OF STAMP DUTY, THEN THE CONSIDERATION RECEI VED OR ACCRUING AS A RESULT OF SUCH TRANSFER WOULD BE DEEMED EQUIVALENT TO THE VALUE ADOPTED FOR THE PURPOSE OF STAMP DUTY PAYMENT. BY ADOPTING THIS METHOD, THE LD.CIT(A) HAS OBSERVED THAT THE VALUE OF ALL THE PR OPERTIES FOR THE PURPOSE OF STAMP DUTY WAS OF RS.27,52,800/-. THE A SSESSEE HAS SHOWN SALE VALUE OF RS.25,83,750/- AND THE DIFFERENCES DE SERVES TO BE ADDED FOR THE PURPOSE OF COMPUTATION OF CAPITAL GAIN. THE FI NDING RECORDED BY THE LD.CIT(A) IS WORTH TO NOTE. IT READ AS UNDER: ITA NO.1239/AHD/2012 4 5. I HAVE CONSIDERED THE FACTS OF THE CASE, BASIS GIVEN BY AO FOR MAKING ADDITION AND ARGUMENTS OF THE APPELLANT. THE AO HAS MADE ADDITION ON THE GROUND THAT THE APPELLANT HAS MADE THE SALE TRANSACTIONS AT VERY LOW VALUE BELOW THE MARKET PRI CE PREVALENT IN THAT AREA. THEREFORE HE ESTIMATED THE MAR KET PRICE OF THE SHOPS AT RS.2,500/- PER SQ. FT. ON THE BASIS THAT THE RATE OF RS.2,500/- IS MOST CONSERVATIVE PRICE AS THE COMPLE X IS SITUATED IN THE HEART OF SURAT CITY. FURTHER, JANTRI PRICE OF THIS AREA BASED ON SCIENTIFIC STUDY ON 01.04.2008 I S NEAR TO RS.3,200/- PER SQ. FT. AND SALE PRICE IN MLLENNIUM TEXTILE MARKET DURING THE YEAR UNDER ASSESSMENT IS NEAR TO RS.3,500/- PER SQ. FT. AND THE BUILDING OF APPELLANT IS LOCATED AT VERY ADVANTAGEOUS PLACE ON THE SAME ROAD ON WHICH MLLENN IUM TEXTILE MARKET IS SITUATED. HOWEVER, TO ASCERTAIN THE MARKE T VALUE, PROPERTY WAS REFERRED BY AO TO VALUATION AUTHORITY U/S.55A OF I.T. ACT, BUT THE REPORT COULD NOT BE RECEIVED IN THE OF FICE OF AO BEFORE THE COMPLETION OF ASSESSMENT. ON THE BASIS OF THESE FACTS, AO ESTIMATED MARKET PRICE OF SHOPS AT RS.2,500 /- PER SQ. FT. AND MADE ADDITION OF RS.1,63,16,250/- AS UNDISCLOSED PROFIT UNDER THE HEAD BUSINESS INCOME. 5.1 FROM THE FINDING GIVEN BY AO, IT IS CLEAR THAT HE HAS COMPUTED BUSINESS INCOME OUT OF SALE OF SHOPS BY TREATING TH EM AS BUSINESS ASSETS. THOUGH IN THE CONCLUDING PARA OF ASSESSMENT ORDER IT IS NOT MENTIONED THAT INCOME IS BEING ASSESSED AS BUSINESS INCOME BUT THE SHOW CAUSE NOTICE ISSUED AS WELL AS THE HEADING IN THE ASSESSMENT ORDER REFLECT THAT INCOME ON ACCOUNT OF SALE OF SHOPS HAVE BEEN ASSESSED AS BUSINESS INCOME. NOW THE QUES TION ARISES WHETHER ANY BUSINESS ASSET CAN BE VALUED ON MARKET PRICE OPPOSED TO WHAT THE ASSESSEE HAS SHOWN IN THE COMPUTATION O F INCOME OR PROFIT AND LOSS ACCOUNT. IN MY OPINION, THERE IS NO PROVISION IN THE STATUTE TO DETERMINE THE MARKET VALUE OF ANY BUSINE SS ASSET OTHER THAN SHOWN IN BOOKS OF ACCOUNT, IN ABSENCE OF ANY C OGENT MATERIAL IN POSSESSION OF AO. IN SOME EXCEPTIONAL CIRCUMSTAN CES, SUCH AS DISSOLUTION OF FIRM, DISCONTINUATION OF BUSINESS ET C. MARKET VALUE OF THE BUSINESS ASSETS CAN BE DETERMINED BUT THAT ALSO ON THE BASIS OF MATERIAL AVAILABLE WITH THE AO OR IN THE BOOKS OF A CCOUNT OF THE ASSESSEE. IN THE STATUTE, MARKET VALUE OR FULL VALU E OF CONSIDERATION IS DETERMINED MOSTLY FOR THE PURPOSE OF VALUATION O F CAPITAL ASSET. ITA NO.1239/AHD/2012 5 IN THE CASE OF APPELLANT, ONCE THE SHOPS HAVE BEEN TERMED AS BUSINESS ASSET, THE VALUATION OF SHOPS CANNOT BE MA DE ON THE BASIS OF JANTRI RATES AS IT BECOMES OUT OF THE PURVIEW OF SECTION 50C OF I.T. ACT. BEING BUSINESS ASSET, IT CANNOT BE REFERR ED TO VALUATION AUTHORITY ALSO U/S. 55A OF I.T. ACT. HAD THE AO TRE ATED THESE SHOPS AS CAPITAL ASSET, THE PROVISIONS OF SECTION 50C AND 55A OF I.T. ACT COULD HAVE BEEN APPLIED. AS IT WAS HELD IN THE CASE CIT VS. THIRUVENGADAM INVESTMENTS (P) LTD (320 ITR 345 ) BY HON'BLE MADRAS HIGH COURT THAT SINCE THE PROPERTY WAS TREAT ED AS BUSINESS ASSET AND NOT AS CAPITAL ASSET IN THE HANDS OF ASSE SSEE, PROVISION OF SECTION 50C COULD NOT BE INVOKED AND AO WAS NOT JUS TIFIED IN TAKING THE SALE CONSIDERATION AS DETERMINED BY SUB REGISTRAR AGAINST ACTUAL SALE CONSIDERATION SHOWN BY ASSESSEE . SIMILARLY, HON'BLE DELHI HIGH COURT IN THE CASE OF CIT VS. SM T. NILOFER I. SINGH (309 ITR 233), FOLLOWING THE JUDGMENTS OF HO N'BLE SUPREME COURT IN THE CASES CIT VS. GILLENDERS ARBUTHNOT A ND CO. (87 ITR 407) AND CIT VS. GEORGE HENDERSON AND C O. LTD (66 ITR 622) HAS HELD THAT IN THE CASE OF SALE PRICE OF ASS ET, THERE WOULD BE NO QUESTION OF ANY MARKET VALUE AND ALL THAT ONE HA S TO SEE THAT WHAT IS THE CONSIDERATION BARGAINED FOR. IN VIEW OF THESE LEGAL PROVISIONS, IF A PROPERTY HAS BEEN HELD AS BUSINESS ASSET NOT THE CAPITAL ASSET, IT CAN'T BE ASSESSED AS PER THE PROV ISIONS OF SECTION 50C OR 45 OF I.T. ACT AND PROFIT AND GAINS HAS TO B E COMPUTED ON THE BASIS OF ACTUAL SALE CONSIDERATION RECEIVED OR ACCRUING TO THE SELLER AS PER SALE DOCUMENT. 5.2 SO FAR AS REFERENCE TO VALUATION AUTHORITY U/S. 55A OF IT. ACT IS CONCERNED, AO HAS MENTIONED IN THE ASSESSMEN T ORDER THAT AFTER REFERENCE, VALUATION REPORT FROM VALU ATION OFFICER COULD NOT BE RECEIVED TILL THE COMPLETION OF AS SESSMENT PROCEEDINGS. IN THIS REGARD, APPELLANT HAS MENTIONE D THAT HE HAD OBJECTED THE REFERENCE ON THE GROUND THAT THE REFER ENCE TO VALUATION OFFICER WAS MADE BY AO MUCH AFTER THE COM PLETION OF ASSESSMENT PROCEEDINGS. AS POINTED OUT BY APPELLANT IN THE APPELLATE PROCEEDINGS, REFERENCE TO VALUATION OFFIC ER WAS MADE ON 27.07.2011 BY AO WHEREAS THE ASSESSMENT ORDER WA S34 PASSED ON 29.12.2010 FOR-THE YEAR UNDER CONSIDERATION. IT HAS ALSO BEEN POINTED OUT BY APPELLANT THAT HE HAD WRITTEN A LETTER TO COMMISSIONER OF INCOME TAX-1, SURAT ON 07.11.2011 O BJECTING THE ITA NO.1239/AHD/2012 6 REFERENCE ON THE GROUND THAT REFERENCE HAD BEEN MAD E MUCH AFTER THE COMPLETION OF ASSESSMENT PROCEEDINGS AND PASSIN G OF ORDER AND AS SUCH THERE WAS NO PROCEEDING PENDING IN HIS CASE. IT HAS FURTHER BEEN INFORMED BY APPELLANT THAT THERE AFTER NO VALUATION OF THE SAID PROPERTY HAS BEEN DONE. HOWEVER, THESE FAC TS HAVE BEEN VERIFIED BY ME FROM THE ASSESSMENT RECORDS AND FOUN D CORRECT. IN VIEW OF THESE FACTS, IT IS CLEAR THAT AO WAS NOT HA VING THE VALUATION FROM COMPETENT AUTHORITY TO ESTIMATE THE MARKET VAL UE OF ASSETS IN CONSIDERATION. 5.3 ONE MORE BASIS GIVEN BY AO FOR ESTIMATING THE M ARKET PRICE OF SHOPS IS THAT THE COMPLEX WHEREIN THESE SHOPS ARE S ITUATED IS ON THE RING ROAD FROM WHERE FLYOVER STARTS AND NEAR TO MILLENNIUM TEXTILE MARKET, THEREFORE SITUATED AT VERY ADVANTAG EOUS PLACE. HOWEVER, THE AO HAS NOT GIVEN ANY COMPARABLE RATES PREVALENT IN ADJOINING SHOPS OR MARKET. HE HAS JUST DESCRIBED TH E LOCATION OF THE SHOPS WITHOUT GIVING SPECIFIC INSTANCE. THE APP ELLANT HAS SUBMITTED THAT COMPARISON OF SHOPS WITH THE MILLENN IUM MARKET IS WRONG AND MISPLACED AS THE MILLENNIUM MARKET IS VER Y WELL KNOWN AND ONE OF THE COSTLIEST TEXTILE MARKETS OF THE COU NTRY. MOREOVER, THE SHOPS ARE SOLD THERE ON PER SHOP BASIS NOT ON P ER SQ. FT. BASIS. IT IS FURTHER SUBMITTED BY APPELLANT THAT HIS SHOPS ARE HALF KILOMETER AWAY FROM THE MILLENNIUM MARKET. THEREFOR E, THERE IS NO COMPARABILITY BETWEEN THE TWO. MOREOVER, THE STR UCTURE AND DESIGN OF SHOPS OF BOTH THE MARKETS ARE TOTALLY DIF FERENT. HOWEVER, THESE ARGUMENTS GIVEN BY APPELLANT DURING THE ASSES SMENT PROCEEDINGS, HAVE NOT BEEN CONTROVERTED BY AO. SINC E THE LOCATION OF COMPLEXES, STRUCTURE AND BUSINESS VIABILITY OF S HOPS BEING BUSINESS- ASSETS ARE DIFFERENT AND NO COMPARISON CA N BE MADE, THE RATES APPLIED TO THE SHOPS OF MILLENNIUM MARKET CAN NOT BE APPLIED TO THE SHOPS OF APPELLANT. 5.4 IN VIEW OF THE ABOVE DISCUSSION, IT IS HELD THA T THE MARKET RATE I.E. @ RS.2,500/- PER SQ. FT. APPLIED BY AO IS PRES UMPTIVE, WITHOUT ANY BASIS AND MISPLACED. HE IS NOT HAVING ANY CREDI BLE EVIDENCE TO ASCERTAIN THE RATES OF SHOPS AT SUCH HIGH RATE IN A BSENCE OF VALUATION REPORT OF THE DEPARTMENTAL VALUATION OFFI CER OR STAMP VALUATION OFFICER OR ANY OTHER STATUTORY AUTHORITY FOR THAT MATTER. HE IS NOT EVEN HAVING THE COMPARABLE RATES OF ADJOI NING SHOPS OR ITA NO.1239/AHD/2012 7 ANY CREDIBLE EVIDENCE IN HIS POSSESSION TO SHOW THA T THE APPELLANT HAS RECEIVED ANY AMOUNT OVER AND ABOVE THE SUMS DIS CLOSED IN THE RETURN OF INCOME. IN SUCH SITUATION, ESTIMATING THE RATES OF SHOPS AT RS. 2,500/- PER SQ. FT. IS PRESUMPTIVE, UNREASONABL E AND WITHOUT ANY BASIS. IN MY OPINION, SHOPS OF APPELLANT, BEING BUILDING, ARE CAPITAL ASSETS WHICH ATTRACT THE PROVISIONS OF SECT ION 50C OF I.T. ACT. SINCE, THE REFERENCE TO VALUATION OFFICER TO V ALUE THE MARKET PRICE OF THE PROPERTY COULD NOT REACH TO THE CONCLU SION AND PROCEEDINGS WERE DROPPED WITHOUT MAKING VALU ATION OF PROPERTY, THE RATES DETERMINED BY STAMP VALUATION AUTHORITY OF THOSE VERY SHOPS ARE TO BE TAKEN IN TO CONSIDERATION FOR COMPUTING THE CAPITAL GAINS. THERE ARE COURT DE CISIONS WHICH SAY THAT IN ABSENCE OF VALUATION BY DEPARTMENTAL VA LUATION AUTHORITY, VALUE ADOPTED BY STAMP VALUATION OFFICER HAS TO BE TAKEN AS FULL VALUE OF CONSIDERATION RECEIVED OR AC CRUING AS RESULT OF TRANSFER OF PROPERTY. IN THE CASE AMBATTUR CLOTH ING CO. LTD VS. ACIT (326 ITR 245), HON'BLE MADRAS HIGH COURT HAS H ELD THAT AO WAS JUSTIFIED IN TREATING THE VALUE ADOPTED BY S TAMP VALUATION AUTHORITY AS THE DEEMED SALE CONSIDERATION RECEIVED / ACCRUING AS A RESULT OF TRANSFER. HON'BLE BOMBAY HIGH COURT IN THE CASE BHATIA NAGAR PREMISES CO-OPERATIVE SOCIETY LTD VS. UNION OF INDIA AND OTHERS (334 ITR 145), HELD THAT SECTION 5 0C IS MEASURE PROVIDED TO BRIDGE THE GAP AS IT WAS FOUND THAT ASS ESSEES WERE NOT CORRECTLY DECLARING THE FULL VALUE OF CONSIDERATION OR RESORTING TO THE PRACTICE OF UNDER VALUATION AND VALUE ADOPTED O R ASSESSED BY THE STAMP VALUATION AUTHORITY IS ONLY A MEASURE OF TAX U/S.50C OF IT. ACT. 5.5 IN VIEW OF ABOVE, IT IS HELD THAT THE SHOPS IN CONSIDERATION ARE ACTUALLY CAPITAL ASSETS AND GOVERN BY PROVISION OF SECTION 50C OF IT. ACT AND COMPUTATION OF CAPITAL GAIN ON TRANSFER OF THESE ASSETS WOULD BE MADE ACCORDINGLY. 5. WITH THE ASSISTANCE OF THE LD. REPRESENTATIVES, WE HAVE GONE THROUGH THE RECORD CAREFULLY. WE FAILED TO UNDERSTA ND HOW THE REVENUE HAS MADE A MENTION OF RS.39,49,320/- IN ITS GROUN D OF APPEAL. IT MUST BE A TYPOGRAPHIC ERROR. THE REVENUE HAS FILED STAT EMENT OF FACTS ALSO. ITA NO.1239/AHD/2012 8 IN THAT ALSO, THEY HAVE MENTIONED THIS FIGURE APART FROM THE FIGURE OF RS.1,83,16,250/-. PROBABLY, THIS AMOUNT HAS BEEN M ENTIONED IN THE GROUND, BECAUSE, THE ASSESSEE HAS SHOWN SALE OF FOU R SHOPS AT RS.20,50,680/-. THE AO HAS CONFRONTED THE ASSESSEE TO SHOW THE REASONS AS TO WHY THE VALUE OF THESE FOUR SHOPS SHOULD NOT BE ESTIMATED AT 1,60,00,000/-, MEANING THEREBY, RS.60,00,000/- MINU S RS.20,50,680 IS EQUAL TO RS.39,49,320/-. IN THE FIRST SHOW CAUSE N OTICE, THE AO HAS ASKED THE EXPLANATION OF THE ASSESSEE AS TO WHY THI S ESTIMATED ADDITION SHOULD NOT BE MADE, AND DUE TO THIS REASON, IN THE GROUND OF APPEAL, THE REVENUE HAS RESTRICTED THE CHALLENGE TO RS.39,49,32 0/-. THOUGH, ULTIMATELY IN THE COMPUTATION OF THE INCOME, THE AO HAS NOT RESTRICTED HIMSELF FOR THE ADDITION TO THAT EXTENT HE HAS ISSU ED SHOW CAUSE NOTICE. HE MADE ADDITION OF RS.1,61,16,250/-. WE HAVE MADE THE ABOVE OBSERVATION ONLY IN ORDER TO EXPLAIN AS TO HOW THE AMOUNT MENTIONED IN THE GROUND OF APPEAL HAS BEEN GIVEN AT RS.39,49,320 /-. 6. ON DUE CONSIDERATIONS OF THE FACTS AND CIRCUMSTA NCES, WE FIND THAT THE LD.CIT(A) HAS EXAMINED THE ISSUE LUCIDLY AND TH AT TOO OF ALL POSSIBLE ANGLES. THE FIRM WAS DISALLOWED W.E.F. 1-4-2006. ON DISSOLUTION OF THE FIRM, ASSETS MUST HAVE BEEN DISTRIBUTED. UNSOL D STOCKS REPRESENTED SHOPS/OFFICES SPACE FALLEN TO THE ASSESSEE. THE MO MENT THE FIRM WAS DISSOLVED, THIS STOCK WAS CONVERTED INTO CAPITAL AS SETS OF THE PARTNERS. THE AO COULD HAVE TAKEN ACTION AS PER SECTION 45(4) OF THE INCOME TAX ACT AGAINST THE FIRM ON ITS DISSOLUTION IN THAT ASS ESSMENT YEAR. THE LD.FIRST APPELLATE AUTHORITY HAS EXAMINED THIS ASPE CT IN THE FINDING EXTRACTED (SUPRA). ONCE IT IS HELD AS CAPITAL ASSE T, THEN, THE CAPITAL GAIN WOULD ACCRUE TO THE ASSESSEE AND IT CAN BE ENHANCED WITH THE HELP OF ITA NO.1239/AHD/2012 9 SECTION 50C ONLY. THE LD.CIT(A) HAS ALSO DONE THAT . THIS ACTION OF THE LD.CIT(A) HAS NOT BEEN CHALLENGED BY THE REVENUE IN ITS GROUNDS OF APPEAL. THEREFORE, WE DO NOT FIND ANY ERROR IN THE ORDER OF THE LD.CIT(A) ON THIS ISSUE. THE GROUND NO.1 IS REJECTED. 7. IN THE GROUND NO.2, THE GRIEVANCE OF THE REVENUE IS THAT THE LD.CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS. 15,65,000/-. 8. BRIEF FACTS OF THE CASE ARE THAT THE AO HAS ALLE GED THAT THE ASSESSEE HAS GIVEN ADVANCES TO SOME AGRICULTURISTS IN CASH A GGREGATING TO RS.15,65,000/-. ACCORDING TO THE AO, THESE ADVANCE S WERE GIVEN WITHOUT ENTERING INTO ANY AGREEMENT. HE HARBOURED A BELIEF THAT THIS MUST BE UNACCOUNTED INVESTMENTS, AND ACCORDINGLY MA DE ADDITION. 9. ON APPEAL, THE LD.CIT(A) DELETED THE ADDITION BY OBSERVING AS UNDER: 6.3 I HAVE CONSIDERED THE FACTS OF THE CASE AND A RGUMENTS GIVEN BY THE APPELLANT. THE BASIS OF ADDITION MADE BY AO IS THAT THERE WAS NO AGREEMENT EXECUTED BY APPELLANT FOR ADVANCIN G THE MONEY, NO CONFIRMATION OR PROOF WAS SUBMITTED BY APPELLANT IN RESPECT OF MONEY ADVANCED AND THE DEBTORS WERE NOT PRODUCED IN PERSON BEFORE HIM. HOWEVER, APPELLANT- HAS SUBMITTED THAT HE HAD FILED THE COPIES OF CONFIRMATIONS, CASH BOOK AND THE BALA NCE SHEET TO THE AO AND THESE DOCUMENTS CLEARLY SHOW THAT THESE ADVA NCES WERE DULY ACCOUNTED FOR AND REFLECTED IN HIS ACCOUNTS. I T IS ALSO SUBMITTED BY APPELLANT THAT THERE IS NO NEED OF ENT ERING INTO AGREEMENTS FOR GIVING SUCH ADVANCES AND THE SOURCE OF FUNDS STANDS EXPLAINED AS THESE ARE REFLECTED IN THE ACCO UNTS OF THE APPELLANT. 6.4 IN VIEW OF THE ABOVE FACTS, I DO NOT SEE ANY ME RIT IN THE CASE OF AO. THE SOURCE OF MONEY ADVANCED TO THREE PARTIES I S EXPLAINED AS ITA NO.1239/AHD/2012 10 THE SAME IS DULY ACCOUNTED FOR AND REFLECTED IN THE ACCOUNTS OF THE APPELLANT AND THIS FACT IS NOT DISPUTED BY AO. UNLE SS THE SOURCE OF SUMS CREDITED IN THE BALANCE SHEET ARE HELD UNEXPLA INED, THE APPLICATION OF THOSE FUNDS CANNOT BE HELD AS UNEXPL AINED. IN THIS CASE, AO HAS NOT DOUBTED THE SOURCE OF FUNDS CREDIT ED TO ACCOUNTS OF APPELLANT RATHER APPLICATION OF FUND HAS BEEN TR EATED AS UNEXPLAINED. THIS IS AGAINST THE SETTLED PRINCIPLE OF ACCOUNTANCY AS WELL AS PROVISIONS OF LAW. THE OTHER REASON GIVEN B Y AO THAT THERE WAS NO AGREEMENT ENTERED INTO FOR ADVANCING THE FUN DS ALSO HAS NO BASIS. THERE IS NO SUCH LEGAL REQUIREMENT IN THE PR OVISIONS OF LAW TO TREAT SUCH ADVANCES AS UNEXPLAINED. MOREOVER, TH E APPELLANT HAS ALSO FURNISHED THE CONFIRMATIONS OF THESE PERSO NS TO PROVE THEIR IDENTITY AND, IN THE SUBSEQUENT YEARS, THESE ADVANCES WERE RECEIVED BACK BY THE APPELLANT. IN SUCH SITUATION, THE ADDITION MADE BY AO HAS NO MERIT AND DESERVES TO BE DELETED. 10. ON DUE CONSIDERATION OF THE FACTS AND CIRCUMSTA NCES AND THE FINDING OF THE LD.CIT(A) VIS--VIS THAT OF THE AO, WE DO NOT FIND ANY MERIT IN THIS GROUND OF APPEAL RAISED BY THE REVENU E. THE ASSESSEE HAS EXPLAINED THAT THE SOURCE OF MONEY HAS DULY BEEN AC COUNTED FOR IN HIS BOOKS. THE AO HAS NOT DOUBTED THIS SOURCE OF MONEY . THEREFORE, HE CANNOT MAKE THE ADDITION. IN VIEW OF THE ABOVE DET AILED DISCUSSION MADE BY THE LD.CIT(A), THIS GROUND OF APPEAL IS REJ ECTED. 11. IN THE RESULT, THE APPEAL OF THE REVENUE IS DIS MISSED. ORDER PRONOUNCED IN THE COURT ON 1 ST APRIL, 2016 AT AHMEDABAD. SD/- SD/- (MANISH BORAD) ACCOUNTANT MEMBER (RAJPAL YADAV) JUDICIAL MEMBER AHMEDABAD; DATED 01/04/2016