Shri Shannti Swaroop Goyal, Agra V. DCIT, Bharatpur

ITA 393/JPR/2002

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 60113 (ITAT-AGRA)
• Duration Of Justice: 9 year(s) 7 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-04-2012
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 16-03-2012
• Assessment Year: 1997-1998
• Appeal Filed On: 26-08-2002
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: SHRI
• Assessee Lawyers: A K SHARMA
• Keywords: Unexplained investment; Capital asset; Business income; Cost of acquisition; Fair market value; Speculation loss
• Section: 234B

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AGRA BENCH, AGRA BEFORE SHRI BHAVNESH SAINI, JUDICIAL MEMBER AND SHRI A.L. GEHLOT, ACCOUNTANT MEMBER ITA NO.376/JP/2002 ASSESSMENT YEAR: 1997-98 DY. COMMISSIONER OF INCOME TAX, VS. SHRI SHANTI SW ARUP GOYAL, BHARATPUR. PROP. M/S AGRA OIL & GENERAL INDUSTRIES, HATHRAS ROAD, AGRA. (PAN/GIR NO. S-710/AC). ITA NO.393/JP/2002 ASSESSMENT YEAR: 1997-98 SHRI SHANTI SWARUP GOYAL, VS. DY. COMMISSIONE R OF INCOME TAX, PROP. M/S AGRA OIL & GENERAL CIRCLE, BHARATPUR. INDUSTRIES, HATHRAS ROAD, AGRA. (PAN/GIR NO. S-710/AC). (APPELLANTS) (RESPONDENTS) ASSESSEE BY : SHRI A.K. SHARMA, JR. D.R. REVENUE BY : SHRI PANKAJ GARGH, ADVOCATE DATE OF HEARING : 16.03.2012 DATE OF PRONOUNCEMENT : 13.04.2012 ORDER PER A.L. GEHLOT, ACCOUNTANT MEMBER: ITA NOS.376 & 393/JP/2002 A.Y. 1997-98 2 THESE ARE CROSS APPEALS FILED BY THE REVENUE AND AS SESSEE AGAINST THE ORDER DATED 06.06.2002 PASSED BY THE LD. CIT(A), ALWAR FO R THE ASSESSMENT YEAR 1997- 98. ITA NO.393/JP/2002 BY THE ASSESSEE FOR A.Y. 1997-98 2. THE GROUNDS RAISED BY THE ASSESSEE IN ITS APPEAL ARE AS UNDER :- 1. BECAUSE THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) HAS WRONGLY, ILLEGALLY AND ARBITRARILY CONFIRMED THE WO RKING OF CAPITAL GAIN OF RS.1335050/- ON THE SALE OF KOSI KALAN LAND . 2. BECAUSE THE LEARNED COMMISSIONER OF INCOME-TAX ( APPEALS) HAS ALSO WRONGLY AND ILLEGALLY REJECTED THE APPELLANTS SUBMISSION THAT THE VALUE OF LEASE RIGHTS, WHICH WERE ALSO GOT TRANSFER RED ON SALE OF LAND, SHOULD HAVE BEEN CONSIDERED TO WORK OUT THE INDEXED COST. 3. BECAUSE THE LOSSES OF RS.45250/- AND OF RS.41017 /- HAS BEEN WRONGLY AND ILLEGALLY CONFIRMED BY THE COMMISSIONER OF INCOME-TAX (APPEALS) AS SPECULATION LOSSES. THESE LOSSES ARE SHORT TERM CAPITAL LOSSES. 4. BECAUSE THE LEARNED COMMISSIONER OF INCOME-TAX ( APPEALS) HAS ALSO WRONGLY AND ILLEGALLY DETERMINED THE CAPITAL G AIN OF RS.250000/- ON THE SALE OF BHARATPUR LAND WHILE ACCORDING TO EV IDENCE ON RECORD THERE IS CAPITAL LOSS OF RS.629717/- WHICH SHOULD H AVE BEEN ACCEPTED. 5. BECAUSE THE LEARNED COMMISSIONER OF INCOME-TAX ( APPEALS) HAS ALSO WRONGLY AND ILLEGALLY HELD THAT INTEREST U/S.2 34B HAS BEEN LEGALLY AND CORRECTLY CHARGED. 3. THAT GROUND NOS.1 & 2 RAISED IN ASSESSEES AP PEAL ARE ON ISSUE RELATING TO COMPUTATION OF CAPITAL GAIN ON SALE OF KOSI KALAN L AND. THE BRIEF FACTS OF THE ISSUE ITA NOS.376 & 393/JP/2002 A.Y. 1997-98 3 ARE THAT THE APPELLANT OWNED A LAND MEASURING 2.75 BIGHA (1/4TH SHARE OF 11.05 BIGHA) AT VILLAGE KOSI KALAN NEAR AGRA.THIS LAND WAS SOLD BY THE ASSESSEE ON 7.10.96 TO SHRI RAJESH GOSWAMI AND RAJENDRA PRASAD S AGARWAL AT RS.14,50,000/-. THIS LAND WAS PURCHASED BY THE APPELLANT ON 3.8.91 ALONGWITH HIS THREE BROTHERS FOR AN AMOUNT OF RS.3 LACS. THE APPELLANT PAID RS.75,00 0/- FOR PURCHASING IT AS HIS 1/4TH SHARE OF THE PURCHASE CONSIDERATION. THE ASSE SSING OFFICER ASSESSED THE INCOME FROM CAPITAL GAINS BY SALE OF THIS LAND BY T AKING THE COST OF ACQUISITION AT RS.75,000/- AND ADDING COST INDEX VALUE DETERMINED FROM THE DATE OF PURCHASE TO THE DATE OF SALE TO IT. THE COST OF ACQUISITION SO DETERMINED BY THE ASSESSING OFFICER CAME TO RS.1,14,950/-. DEDUCTING THIS COST OF ACQUISITION FROM THE SALE PRICE OF RS.1450000/- THE CAPITAL GAIN WORKED OUT T O RS.13,35,050/- WHICH WAS TAXED AS LONG TERM CAPITAL GAINS. 4. THE APPELLANT PLEADED THAT THE ASSESSING OFFICER SHOULD HAVE DETERMINED THE COST OF ACQUISITION BY TAKING THE FAIR MARKET PRICE OF THE LAND IN QUESTION AS ON 1.4.81 AND THEN ALLOWING THE COST INDEX BENEFIT ON IT TILL THE DATE OF SALE. THE APPELLANT ALSO PLEADED THAT THE LAND WAS ACTUALLY S OLD BY WAY OF 23 SALE DEEDS. TWELVE SALE DEEDS FOR A TOTAL AMOUNT OF RS.7,64,000 /- WERE EXECUTED IN FINANCIAL YEAR 96-97 AND REMAINING ELEVEN SALE DEEDS WERE EXE CUTED FOR A TOTAL AMOUNT OF RS.7,41,000/- IN F.Y. 97-98. THE APPELLANT ACCORDIN GLY WORKED OUT THE CAPITAL ITA NOS.376 & 393/JP/2002 A.Y. 1997-98 4 GAINS FOR F.Y. 96-97 AT RS.3,38,796/- AND FOR F.Y. 97-98 AT RS.2,87,132/-. THUS THE TOTAL CAPITAL GAINS OFFERED BY THE APPELLANT FOR TA XATION IN TWO FINANCIAL YEARS WAS RS.6,25,928/- . IT WAS PLEADED THAT THE ASSESSING O FFICER SHOULD HAVE ACCEPTED THE WORKING OF THE LONG TERM CAPITAL GAINS GIVEN BY THE APPELLANT AND SHOULD HAVE FIXED THE CAPITAL GAINS ACCORDINGLY. IT WAS ALSO PL EADED THAT WHILE DETERMINING THE COST OF ACQUISITION OF THE LAND, THE AO SHOULD HAVE CONSIDERED THE FACT THAT THE LEASE RIGHTS ON THE SAID PROPERTY WERE RECEIVED BY THE FATHER OR THE APPELLANT IN 1960 AND THESE RIGHTS ON HIS PORTION OF THE LAND WE RE ACQUIRED BY THE APPELLANT ON THE DEATH OF HIS FATHER BY WAY OF SUCCESSION. 5. THE ASSESSING OFFICER, ON THE OTHER HAND, FOUND THAT THE 23 SALE DEEDS EXECUTED IN F.Y. 96-97 WERE THE BETWEEN THE SECOND PARTY I.E. SHRI RAJESH GOSWAMI AND SHRI RAJENDRA PRASAD AGARWAL AND THE UL TIMATE PURCHASERS WITH WHICH THE APPELLANT IS NOT CONCERNED. ACCORDING TO THE ASSESSING OFFICER AS PER THE AGREEMENTS DATED 07.10.1996 AND POWER OF ATTORNEY D ATED 09.10.96 THE APPELLANT HAD GIVEN ENTIRE AND ABSOLUTE CONTROL ON THIS LAND AND ALL THE RIGHTS TO SHRI RAJESH GOSWAMI AND SHRI RAJENDRA PRASAD AGARWAL. THIS AGRE EMENT ALONGWITH THE GENERAL POWER OF ATTORNEY GIVEN BY THE APPELLANT TO THESE TWO PERSONS EFFECTIVELY MEANT THAT THE PROPERTY WAS TRANSFERRED TO THEM FOR AN AMOUNT OF RS.14,50,000/- WHICH WAS PAID BEFORE THE EXECUTION OF THE AGREEMEN T. THE LANGUAGE OF THE ITA NOS.376 & 393/JP/2002 A.Y. 1997-98 5 AGREEMENT ACCORDING TO THE ASSESSING OFFICER CLEARL Y MEANT THAT ALL THE RIGHTS OF THE LAND INCLUDING THE RIGHTS TO POSSESS AND SELL T HE LAND WERE TRANSFERRED TO SHRI RAJESH GOSWAMI AND SHRI RAJENDRA AGARWAL ON 07.10.1 996 ITSELF. THEN THE GENERAL POWER OF ATTORNEY MADE THIS TRANSFER COMPLE TE IN ALL REGARDS ON 09.10.96 BECAUSE IT GAVE THE ENTIRE AND ABSOLUTE RIGHTS IN R EGARD TO THIS LAND TO THESE TWO PERSONS. THE ASSESSING OFFICER, THEREFORE, HELD THA T THE TRANSFER OF THIS LAND WAS COMPLETED ON 09.10.96 ITSELF. THE ASSESSING OFFICER REFERRED TO THE DEFINITION OF THE WORD TRANSFER AS CONTAINED IN SECTION 2(47)(V) OF THE IT ACT WHICH SAYS THAT, ANY TRANSACTION INVOLVING THE ALLOWING OF POSSESSI ON OF IMMOVABLE PROPERTY TO BE TAKEN OR RETAINED IN PART PERFORMANCE OF A CONTACT OF THE NATURE REFERRED TO U/S 53A OF THE TRANSFER OF PROPERTY ACT 1882 SHALL BE REGAR DED AS TRANSFER FOR THE PURPOSE OF CAPITAL GAINS UNDER THE IT ACT. AGREEMENT DATED 07.10.96 HAD PASSED ON ALL THE RIGHTS OF THE LAND IN QUESTION AND THE CONTROL OF I T TO THE SECOND PARTY AND THEREFORE THE PURPOSES OF INCOME TAX ACT IT WOULD BE DEEMED T O BE A TRANSFER EVEN THROUGH THE REGISTERED CONVEYANCE DEED HAD NOT BEEN EXECUTE D BETWEEN THE PARTIES CONCERNED. THE ASSESSEE HAD CONTENDED THAT BECAUSE OF THIS LEASE AGREEMENT ENTERED IN 1960 THE LAND WAS ACQUIRED BY HIS FATHER AND ON DEATH OF HIS FATHER ON 16.11.88. 1/4TH SHARE OF THIS LAND WAS RECEIVED BY THE APPELLANT BY WAY OF SUCCESSION. THE APPELLANT FURTHER CONTENDED THAT BE CAUSE OF THIS FACT THE COST OF ACQUISITION OF LAND SHOULD BE TAKEN AT THE FAIR MAR KET PRICE PREVALENT ON 01.04.1981 ITA NOS.376 & 393/JP/2002 A.Y. 1997-98 6 AND THE ASSESSEE IS ENTITLED TO A COST INDEX BENEFI T FROM F.Y. 81-82 TILL F.Y. 97-98. THE A.O. DID NOT AGREE TO THIS CONTENTION OF THE AP PELLANT FOR THE REASON THAT THE APPELLANT COULD NOT PRODUCE ANY LEASE AGREEMENT ENT ERED INTO BETWEEN HIS FATHER AND THE OWNERS OF THE LAND. APPELLANT COULD NOT EVE N PRODUCE ANY EVIDENCE WHATSOEVER TO ESTABLISH THAT HE HAD ACQUIRED THIS L AND BY WAY OF SUCCESSION ON THE DEATH OF HIS FATHER ON 16.11.88. A WILL OF HIS FATH ER EXECUTED ON 05.11.88 WAS PRODUCED BEFORE THE AO BUT IN IT THERE WAS NO MENTI ON OF THIS LAND AT KOSI KALAN BEING GIVEN TO THE APPELLANT. IT HAD SIMPLY MENTION ED IN GENERAL THAT ALL MOVEABLE AND IMMOVABLE PROPERTIES SHALL BE DISTRIBUTED AMONG HIS FOUR SONS UPON HIS DEATH IN EQUAL PROPORTION. EVEN IN THE BALANCE SHEET FILE D BY THE APPELLANT IN HIS RETURNS FOR THE RELEVANT PERIOD THIS LAND WAS NEVER SHOWN. THE AO THEREFORE HELD THAT THE LEASE RIGHT ON THE LAND AT KOSI KALAN WAS NEVER HEL D BY THE FATHER OF THE APPELLANT AT ANY TIME TILL HIS DEATH ON 16.11.88 AND HENCE TH ERE IS NO QUESTION OF THE APPELLANT ACQUIRING IT BY WAY OF SUCCESSION AS CLAI MED BY HIM. THE AO FURTHER HELD THAT THIS LAND WAS ACQUIRED FOR THE FIRST TIME BY THE APPELLANT AND HIS BROTHERS ON 03.08.91 WHEN IT WAS PURCHASED BY THEM FROM THE OWNERS THROUGH TWO DIFFERENT TRANSFER DEEDS FOR A TOTAL AMOUNT OF RS.3 LACS. SIN CE THE APPELLANT'S FATHER COULD NOT BE ESTABLISHED TO BE THE OWNER OF THE LEASE RIG HT OF THIS LAND AT ANY POINT OF TIME BY MEANS OF EVIDENCES, THE AO HELD THAT PROVISIONS OF SECTION 49(1)(III)(A) OF THE IT ACT WOULD NOT BE APPLICABLE FOR DETERMINING THE COST OF ACQUISITION OF THIS LAND. ITA NOS.376 & 393/JP/2002 A.Y. 1997-98 7 6. THE CIT (A) HELD AS UNDER:- I HAVE CONSIDERED THE ARGUMENTS OF THE APPELLANT R AISED BEFORE THE AO AND BEFORE ME IN THE APPELLATE PROCEEDINGS, THE CONTENTIONS OF THE AO ON THE VARIOUS ISSUES RELATED TO THE TAXABIL ITY OF THE LONG TERM CAPITAL GAINS ON SALE OF THE KOSI KALAN LAND, THE F ACTS ON THE CASE, THE RELEVANT PROVISIONS OF THE AGREEMENT DATED 07.10.96 , POWER OF ATTORNEY DATED 09.10.96 AND THE PROVISIONS OF INCOM E TAX ACT AS WELL AS THE TRANSFER OF PROPERTY ACT. ON CONSIDERED EXAM INATION OF ALL THESE, I FIND THAT THE AO WAS JUSTIFIED IN HOLDING THE FOLLOWING IN REGARD TO THE PURCHASE AND SALE OF THIS LAND. (A) THE APPELLANT'S FATHER COULD NOT BE ESTABLISHED TO BE THE OWNER OF THE LEASE RIGHTS OF THIS LAND AT KOSI KALAN AT A NY POINT OF TIME BEFORE HIS DEATH ON 16.11.88. THE APPELLANT COULD N OT EVEN SUBSTANTIATE HIS CLAIM THAT HIS FATHER HAD ACQUIRED THE LEASE HOLD RIGHT OF THIS LAND IN 1960. SIMPLY THE MENTION OF THIS FA CT IN THE PURCHASE DEED OF THIS LAND DATED 04.08.91 CANNOT TAKE PLACE OF THE CONTEMPORARY EVIDENCE IN THE SHAPE OF LEASE DEED. A LL OTHER EVIDENCES FURNISHED ARE NOT ACCEPTABLE AS NONE OF THEM SPECIF ICALLY MENTIONS THIS FACT INCLUDING THE WILL OF THE FATHER OF THE A PPELLANT AND THEY ARE ALSO NOT CONTEMPORARY. (B) THE APPELLANT HAS NEVER ACQUIRED ANY RIGHT WHAT SOEVER IN REGARD TO THE KOSI KALAN LAND ON DEATH OF HIS FATHE R ON 16.11.88 BY WAY OF SUCCESSION. AND HENCE THERE IS NO QUESTION O F THE APPLICABILITY OF THE PROVISIONS OF SECTION 49(1)(III)(A) OF THE I T ACT TO DETERMINE COST OF ACQUISITION AS FAIR MARKET VALUE AS ON 01.04.198 1. (C) THAT THE KOSI KALAN LAND WAS ACQUIRED BY THE AP PELLANT AND HIS BROTHERS FOR THE FIRST TIME ON 03.08.1991 BY WAY OF A CONVEYANCE DEED EXECUTED IN THEIR FAVOUR FOR AN AMOUNT OF RS.3 LACS . AS PER THIS CONVEYANCE DEED THE APPELLANT HAD 1/4TH SHARE IN TH IS LAND. AND HENCE THE COST OF ACQUISITION OF THIS LAND IN THE HANDS O F THE APPELLANT WOULD RESPECTIVELY BE RS.75000/- AND 03.08.91. (D) THAT THE COST INDEX BENEFIT HAS TO GIVEN TO THE APPELLANT FOR F.Y. 91-92 TILL 96-97 ONLY BECAUSE THE LAND WAS ACTUALLY SOLD BY THE APPELLANT BY THE AGREEMENT DATED 07.10.96 AND THE P OWER OF ATTORNEY DATED 09.10.96 AND IN VIEW OF THE PROVISIONS OF SEC TION 2(47)(V) OF THE ITA NOS.376 & 393/JP/2002 A.Y. 1997-98 8 IT ACT BECAUSE ALL THE RIGHTS ON THIS LAND AND THE POSSESSION OF IT WERE GIVEN TO SHRI RAJESH GOSWAMI AND SHRI RAJENDRA PRAS AD AGARWAL BY THESE TWO DOCUMENTS IN PART PERFORMANCE OF A CONTRA CT TO SELL IT. IT IS NOT MATERIAL THAT LATER ON THIS LAND WAS PLOTTED BY SHRI RAJESH GOSWAMI AND SHRI RAJENDRA PRASAD AGARWAL AND SOLD B Y WAY OF 23 SALE DEEDS TO DIFFERENT PERSONS IN F.Y. 96-97 AND 9 7-98. THE SALE CONSIDERATION OF THIS LAND IN THE HANDS OF THE APPE LLANT IS THE AMOUNT OF RS.14,50,000/- WHICH WAS RECEIVED BY THE APPELLA NT IN PURSUANCE OF THE AGREEMENT DATED 07.10.96. AN ALTERNATIVE CONTENTION WAS PUT BEFORE ME STATING THAT THE LEASE HOLD RIGHT ON THE KOSI KALAN LAND SHOULD BE TAKEN A S ACQUIRED BY HIS FATHER IN 1960 AND BY THE APPELLANT AT THE TIME OF THE DEATH OF HIS FATHER ON 16.11.88 BY WAY OF SUCCESSION AND THE OTH ER RIGHTS CAN BE TAKEN AS ACQUIRED BY THE APPELLANT BY WAY OF PURCHA SE DEED DATED 03.08.91. ACCORDINGLY IT WAS PRAYED THAT THE COST O F ACQUISITION OF LEASE RIGHTS COULD BE DETERMINED SEPARATELY AS PER THE REPORT OF THE PETITION WRITER SHRI RAMESH CHAND. THIS CONTENTION OF THE APPELLANT IS NOT AT ALL ACCEPTABLE BECAUSE THE FACTUM OF THE APP ELLANTS FATHER RECEIVING THE LEASE RIGHT OF THE LAND IN 1960 HAS N OT BEEN ESTABLISHED AND ALSO BECAUSE SHRI RAMESH CHAND HAS ARBITRARILY VALUED THE COST OF ACQUISITION OF THE LEASE HOLD RIGHT AT RS.27 LAC S. ACTUALLY EVEN IF THE THEORY OF LEASE IS BELIEVED THE TOTAL LEASE REN TALS PURPORTEDLY PAID BY THE FATHER OF THE APPELLANT COMES TO RS.90X28 = RS.2,520/- ONLY TILL HIS DEATH. THIS CONTENTION OF THE APPELLANT IS THER EFORE LIABLE TO BE REJECTED. IN SUCH A SITUATION, THEREFORE, I CONFIR M THE ORDER OF THE AO ON THIS POINT IN ALL THE REGARDS. 7. WE HAVE HEARD THE LD. REPRESENTATIVES OF THE PAR TIES AND RECORDS PERUSED. AS STATED ABOVE THAT THE OBJECTION OF THE ASSESSEE RAI SED IN GROUND NOS.1 & 2 IS IN RESPECT OF BENEFIT OF COST INDEX FOR THE PURPOSE OF COMPUTATION OF CAPITAL GAIN. THE CLAIM OF THE ASSESSEE THAT THE IMPUGNED LAND WAS IN HERITED TO THE ASSESSEE FROM ASSESSEES FATHER AND ASSESSEES FATHER WAS HAVING LEASE RIGHT ON THE SAID PROPERTY SINCE 1960. THEREFORE, FOR THE PURPOSE OF CALCULAT ION OF CAPITAL GAIN THE ACQUISITION ITA NOS.376 & 393/JP/2002 A.Y. 1997-98 9 COST SHOULD BE TAKEN FAIR MARKET PRICE OF THE LAND AS ON 01.04.1981. THE ASSESSING OFFICER AND CIT(A) REJECTED THE ASSESSEES CONTENTI ON ON THE GROUND THAT THE ASSESSEE FAILED TO FURNISH ANY EVIDENCE IN SUPPORT OF THE CONTENTION THAT ASSESSEES FATHER WAS THE LEASE HOLDER SINCE 1960. IT WAS HEL D THAT MERE MENTIONING IN THE PURCHASE DEED THAT THE ASSESSEES FATHER ACQUIRED T HE LEASE HOLD RIGHT OF THE LAND IN 1960 IS NOT SUFFICIENT UNLESS THE ASSESSEE FURNISHE S CERTAIN EVIDENCE AND PROOF IN THIS REGARD. SINCE THE TRANSACTIONS RELATED TO IMM OVABLE PROPERTY AND FOR THAT PURPOSE TO HOLD THAT THE ASSESSEES FATHER WAS HOLD ING LEASE HOLD RIGHT MUST BE SUPPORTED BY COGENT DOCUMENT WHICH HAS BEEN EXECUTE D UNDER THE RELEVANT LAW. CONTRARY TO THAT FACT THE MOST IMPORTANT ADMITTED F ACT THAT THE ASSESSEE PURCHASED THE LAND ALONG WITH HIS 3 BROTHERS ON 03.08.1991. THIS FACT OF PURCHASING OF LAND IS SUPPORTED BY A REGISTERED DOCUMENT. IN THE LIGHT O F THESE ADMITTED FACTS AND IN ABSENCE OF ANY SUBSTANTIAL MATERIAL SUBMITTED BY TH E ASSESSEE, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF CIT(A) IN REJECTING THE A SSESSEES CLAIM FOR TAKING ACQUISITION COST AT FAIR MARKET VALUE AS ON 01.04.1 981. ORDER OF CIT(A) IS CONFIRMED ON THE ISSUE. 8. THE ASSESSEE DID NOT TAKE ANY OTHER SPECIFI C GROUND/ARGUMENTS AGAINST THE ORDER OF CIT(A) LIKE DETERMINATION OF SALE CONSIDER ATION IN TWO FINANCIAL YEARS I.E. F.Y. 1996-97 & 1997-98 AND OTHER ISSUES NOR THE LD. AUTHORISED REPRESENTATIVE ITA NOS.376 & 393/JP/2002 A.Y. 1997-98 10 HAS ARGUED SUCH ISSUE BEFORE US. UNDER THE CIRCUMS TANCES, THE EFFECTIVE GROUNDS RAISED VIDE GROUND NOS.1 & 2 ARE ONLY IN RESPECT OF TAKING FAIR MARKET VALUE AS ON 01.04.1981 OR FROM THE DATE OF PURCHASE OF PLOT/PRO PERTY BY THE ASSESSEE. THEREFORE, THE GROUNDS 1 AND 2 ARE DECIDED ACCORDIN GLY. 9. GROUND NO.3 RAISED IN ASSESSEES APPEAL HAS NOT BEEN PRESSED BY THE LD. AUTHORISED REPRESENTATIVE. THEREFORE, THE SAME IS DISMISSED AS NOT PRESSED. 10. GROUND NO.4 RAISED IN ASSESSEES APPEAL IS IN RESPECT OF CALCULATION OF CAPITAL GAIN ON THE SALE OF BHARATPUR LAND WHICH IS COMMON GROUND RAISED IN REVENUES APPEAL VIDE GROUND NO.(F). SINCE THIS IS A COMMON GROUND, THEREFORE, THIS GROUND IS DECIDED ALONGWITH APPEAL OF THE REVENUE. 11 GROUND NO.5 IS IN RESPECT OF CHARGING OF IN TEREST UNDER SECTION 234B WHICH IS CONSEQUENTIAL, THE ASSESSING OFFICER IS DIRECTED ACCORDINGLY. ITA NO.376/JP/2002 BY THE REVENUE FOR A.Y. 1997-98 12. THE GROUNDS RAISED BY THE REVENUE IN ITS APPEAL ARE AS UNDER :- THE CIT(A), ALWAR HAS ERRED IN ALLOWING RELIEF TO THE ASSESSEE ON THE FOLLOWING POINTS WITHOUT APPRECIATING THE FACTS : ITA NOS.376 & 393/JP/2002 A.Y. 1997-98 11 A) DIRECTED TO TREAT THE DISALLOWANCE OF LOSSES OF RS.73749/- ON SALE OF OLD SHARES AS GENUINE LONG TERM CAPITAL LOS SES AND ALLOW THEM TO BE SET OFF AGAINST CAPITAL PROFIT. B) DELETED ADDITION OF RS.77776/- ON ACCOUNT OF UND ER VALUATION OF SOME SHARE AVAILABLE AS ON 31.03.1997. C) DELETED ADDITION OF RS.235605/- ON ACCOUNT OF UN DISCLOSED INVESTMENT IN BONUS SHARES OF CERTAIN COMPANIES. D) DELETED ADDITION OF RS.138417/- AS PROFIT ON SAL E OF SHARES OUT OF THE BOOKS OF ACCOUNTS. E) DELETED ADDITION OF RS.600690/- ON ACCOUNT OF EX CESS INTEREST CLAIMED. F) DELETED ADDITION OF RS.41039/- ON ACCOUNT OF LON G TERM CAPITAL GAIN ON SALE OF LAND BY ALLOWING INDEXATION. 13. THE GROUND NO. A) IS IN REGARD TO DISALLOWANCE OF LOSSES ON SALE OF OLD SHARES AMOUNTING TO RS.73,749/-. THE ASSESSING OFFICER HAS DISALLOWED THESE LOSSES ON THE GROUND THAT DATE OF PURCHASE/SALE OF THESE SHAR ES WAS NOT FURNISHED AND THEREFORE THE LOSSES COULD NOT BE VERIFIED. THE ASS ESSING OFFICER FOUND THAT IN ABSENCE OF THESE DETAILS IT COULD NOT BE ASCERTAINE D AS TO WHETHER THE ASSESSEE HAS SOLD THESE SHARES AT PREVALENT MARKET VALUE OR NOT. IT WAS ALSO NOT POSSIBLE ASCERTAIN AS TO THE TRANSACTION RESULTED INTO LONG TERM OR SH ORT TERM CAPITAL LOSSES. THE ASSESSING OFFICER, THEREFORE, HELD THAT THE APPELLA NT FAILED TO ESTABLISH THE GENUINENESS OF THESE LOSSES AND THEREFORE, HE DISAL LOWED THESE LOSSES. ITA NOS.376 & 393/JP/2002 A.Y. 1997-98 12 14. THE APPELLANT ON THE OTHER HAND PLEADED THAT TH E BASIC DETAILS IN REGARD TO THESE LOSSES WERE GIVEN BY HIM TO THE ASSESSING OFF ICER. IN FACT THERE WERE MANY SALES OF OLD SHARES WHICH RESULTED INTO BOTH PROFIT OR RS.6,50,406/- AS WELL LOSSES OF RS.73,749/-. FULL DETAILS OF THESE TRANSACTIONS WER E GIVEN TO THE ASSESSING OFFICER BY WAY OF PROVIDING THE SHARE LEDGER ACCOUNT FOR EA CH SHARE SEPARATELY. IN THESE ACCOUNTS THE DATE OF ACQUISITION OF THE SHARES AS W ELL AS THE DATE OF SALES AS RECEIVED FROM THE BROKERS WAS NOTED. PHOTO COPY OF THE LEDGER ACCOUNTS OF ALL THE SHARES WERE PROVIDED TO THE ASSESSING OFFICER BUT T HE ASSESSING OFFICER CHOSE TO ACCEPT THE PROFITS AND REJECT THE LOSSES. THIS APPR OACH OF THE ASSESSING OFFICER WAS ENTIRELY NOT JUSTIFIED AND WAS DISCRIMINATORY. IT W AS THEREFORE PLEADED THAT THIS LOSS ON SALE OF SHARES SHOULD BE ALLOWED AS A LONG TERM CAPITAL LOSS. 15. BEFORE THE CIT(A) DETAILS REGARDING THE SALES O F THESE SHARES FURNISHED BEFORE THE ASSESSING OFFICER WERE GIVEN AT PAGE NO. 12 TO 16 OF THE PAPER BOOK FILED BEFORE THE CIT(A) AND IN ADDITION A DUPLICATE COPY OF ALL THE BILLS OF THE SALE OF THESE SHARES WERE ALSO GIVEN AT PAGE NO.32 TO 36 OF THE PAPER BOOK. THESE EVIDENCES WERE SENT TO THE ASSESSING OFFICER FOR HI S COMMENTS BY THE CIT(A). THE CIT(A) NOTED THAT IN THE REMAND REPORT THE ASSESSI NG OFFICER HAS JUST STATED THAT NOW THE SALE BILLS FURNISHED REQUIRES INVESTIGATION . IF THIS WAS SO THEN THESE BILLS WERE MADE AVAILABLE TO THE ASSESSING OFFICER BY THE CIT(A)WITH HIS LETTER DATED ITA NOS.376 & 393/JP/2002 A.Y. 1997-98 13 02.11.2000 AND THE REMAND REPORT HAS BEEN SENT BY T HE ASSESSING OFFICER ON 04.10.2001.THE CIT (A) NOTED THAT IN THIS PERIOD TH E ASSESSING OFFICER SHOULD HAVE VERIFIED THEM. IN FACT THE ASSESSING OFFICER W AS REQUIRED TO DO THIS ONLY IN HIS REMAND REPORT WHICH HE HAS FAILED TO DO. IN SUCH A SITUATION THE EVIDENCES FURNISHED BY THE APPELLANT HAD TO BE ACCEPTED AND THE LOSSES INCURRED ARE THEREFORE ESTABLISHED TO BE GENUINE LOSSES. IT IS THEREFORE H ELD BY THE CIT(A) THAT THE ASSESSING OFFICER WAS NOT JUSTIFIED IN TREATING ONL Y THE PROFITS AMOUNTING TO RS.650406/- ON THE SALE OF SHARES AS GENUINE AND TO TREAT THE LOSSES AMOUNTING TO RS.73,749/- AS NON GENUINE. THE CIT(A) DIRECTED ASS ESSING OFFICER TO TREAT THESE LOSSES AS GENUINE LONG TERM CAPITAL LOSSES AND TO C OMPUTE THEM AND ALLOW THEM TO BE SET OFF AS PER RULES. 16. WE HAVE HEARD THE LD. REPRESENTATIVES OF THE PA RTIES AND RECORDS PERUSED. THE BRIEF FACTS OF THE ISSUE ARE THAT THE ASSESSING OFFICER DISALLOWED THE LOSS ON SALE OF OLD SHARES ` 73,749/- ON THE GROUND THAT THE ASSESSEE DID NOT F URNISH NECESSARY DETAILS. THEREFORE, WHETHER THE ASSESSEE HAS SOLD THESE SHARES OF PREVAILING MARKET VALUE OR NOT REMAINED UNVERIFIED. THE ASSESSING OFFICER DISALLOWED THE SAID LOSS OF ` 73,749/-. THE CIT(A), AFTER OBTAINING REMAND REPO RT FROM THE ASSESSING OFFICER, ALLOWED THE CLAIM OF TH E ASSESSEE ON THE GROUND THAT INSPITE OF THE RELEVANT MATERIALS AVAILABLE WITH TH E ASSESSING OFFICER AT THE TIME OF ITA NOS.376 & 393/JP/2002 A.Y. 1997-98 14 SUBMITTING REMAND REPORT BUT THE ASSESSING OFFICER FAILED TO VERIFY THE MATERIAL FILED BY THE ASSESSEE. THE CIT(A) NOTED THAT WHEN THE ASSESSING OFFICER HAS FAILED TO CARRY OUT VERIFICATION IN REMAND REPORT UNDER SU CH CIRCUMSTANCES THE EVIDENCE FURNISHED BY THE ASSESSEE HAS TO BE ACCEPTED. THE ABOVE FACTUAL POSITION NOTED BY THE CIT(A) IS STILL THERE AND THE REVENUE DID NOT P OINT OUT THAT WHATEVER THE EVIDENCE FURNISHED BY THE ASSESSEE BEFORE THE CIT(A ) WAS INCORRECT OR IRRELEVANT. IN ABSENCE OF ANY CONTRARY MATERIAL AGAINST THE FIN DING OF CIT(A) AVAILABLE ON RECORD NOR POINTED OUT BY THE REVENUE BEFORE US, UN DER THESE CIRCUMSTANCES, WE UPHOLD THE ORDER OF CIT(A). 17. GROUND NO. B) IS IN REGARD TO ADDITION OF RS.77 ,776/- ON ACCOUNT OF UNDER VALUATION OF SOME SHARES AVAILABLE WITH THE APPELLA NTS AS ON 31.03.97. THE AO HAS MADE THIS ADDITION ONLY BECAUSE OF THE FACT THAT HE HAS TREATED THE INCOME FROM SALE OF SHARES IN THE HANDS OF THE APPELLANT AS BUSINESS INCOME. THE ENTIRE CONTROVERSY CENTERS AROUND THE VALUATION OF THE CLOSING STOCK O N COST BASIS. THE APPELLANT HAS CLAIMED THAT HE HAS FOLLOWED THE FIFO METHOD FOR VA LUATION OF THIS STOCK WHEREAS THE ASSESSING OFFICER HAS FOUND THAT THIS METHOD HA S NOT BEEN CONSISTENTLY FOLLOWED BY THE APPELLANT. THE APPELLANT ALSO SUBMI TTED THAT HE HAS NOT OFFERED THE INCOME FROM THE SALE OF SHARES AS BUSINESS INCOME B UT HAS OFFERED IT AS INCOME FROM CAPITAL GAINS AND THEREFORE THERE IS NO NECESS ITY OF VALUING THE SHARES ITA NOS.376 & 393/JP/2002 A.Y. 1997-98 15 REMAINING WITH HIM ON THE LAST DAY OF THE ACCOUNTIN G PERIOD AS STOCK IN TRADE. IT WAS PLEADED THAT THE FIFO METHOD HAS BEEN FOLLOWED BY THE APPELLANT ONLY TO CORRECTLY CALCULATE THE CAPITAL GAINS ON SALE OF TH ESE SHARES. 18. THE CIT (A) HAS HELD AS UNDER:- I HAVE CONSIDERED THE RIVAL SUBMISSIONS. UNDER THE FACTS OF THE CASE I HAVE ALREADY HELD THAT THE INCOME ON THE SAL E OF SHARES IN THE HANDS OF THE APPELLANT IS TO BE TAXED AS INCOME FRO M CAPITAL GAINS EXCEPT THE INCOME/LOSS INCURRED BY THE APPELLANT TH ROUGH SPECULATIVE DEALS. BECAUSE OF THIS FINDING OF MINE THE ENTIRE C ONTROVERSY OF TREATING THE STOCK HOLDING OF THE APPELLANT ON THE CLOSING DATE OF THE ACCOUNTING PERIOD AS STOCK IN TRADE AND VALUING IT ON COST BASIS BECOMES IRRELEVANT. THEREFORE, THE ADDITION MADE BY THE AO ON ACCOUNT OF DIFFERENCE IN THE VALUATION OF THE CLOSI NG STOCK ALSO BECOMES UNJUSTIFIED AND HENCE IT IS DETECTED. 19. WE HAVE HEARD THE LD. REPRESENTATIVES OF THE PA RTIES AND RECORDS PERUSED THE BRIEF FACTS OF THE ISSUE ARE THAT THE ASSESSING OFFICER MADE ADDITION OF RS.77,776/- ON ACCOUNT OF UNDER VALUATION OF SOME S HARES AS ON 31.03.1997. THE CIT(A) HELD THAT INCOME ON SALE OF SHARES IN THE HA NDS OF THE ASSESSEE IS TO BE TAXED AS INCOME FROM CAPITAL GAIN EXCEPT THE INCOME /LOSS INCURRED BY THE ASSESSEE THROUGH SPECULATIVE DEALS. SINCE PROFIT ON SALE OF SHARES HAS BEEN TAKEN AS CAPITAL GAIN, THEREFORE, THERE IS NO QUESTION OF VALUATION OF THE CLOSING SOCK. THE ISSUE TO BE EXAMINED IN THIS GROUND IS CONSEQUENTIAL TO THE ISSUE WHETHER INCOME ON SALE OF SHARES IN THE HANDS OF THE ASSESSEE IS TAKEN AS BUS INESS INCOME OR INCOME FROM ITA NOS.376 & 393/JP/2002 A.Y. 1997-98 16 CAPITAL GAIN. SINCE THE SALE OF SHARES HAS BEEN TA KEN INTO CONSIDERATION FOR CALCULATION OF CAPITAL GAIN WHICH IS UNDISPUTED FAC T, UNDER THE CIRCUMSTANCES, WE FIND THAT THE CIT(A) HAS RIGHTLY HELD THAT WHEN THE SALE CONSIDERATION OF SHARES HAS BEEN CONSIDERED FOR THE PURPOSE OF CAPITAL GAIN, TH ERE IS NO ISSUE FOR VALUATION OF CLOSING STOCK OF SHARES. THE REVENUE DID NOT POINT OUT ANY CONTRARY MATERIAL TO THE FINDING OF THE CIT(A) NOR THE SAME IS AVAILABLE ON RECORD. UNDER THE CIRCUMSTANCES, WE CONFIRM THE ORDER OF THE CIT(A) O N THE ISSUE. 20. GROUND NO. C) IS IN REGARD TO ADDITION OF RS.2, 35,605/- ON ACCOUNT OF UNDISCLOSED INVESTMENT IN BONUS SHARES OF CERTAIN C OMPANIES. THIS ADDITION HAS BEEN MADE BY THE AO BECAUSE THE ASSESSEE COULD NOT ESTABLISH THE ACQUISITION OF THE FOLLOWING SHARES BY WAY OF BONUS DECLARED BY TH E COMPANIES. (A) MAHINDRA & MAHINDRA 618 SHARES (B) COLGATE PALMOLIVE 660 SHARES (C) TELCO LTD. 871 SHARES (D) NESTLE 842 SHARES 21. THE ADDITION WAS MADE ALSO BECAUSE THERE WAS NO PROPER ENTRY IN REGARD TO RECEIPT OF THESE SHARES IN THE STOCK LEDGER FURNISH ED BY THE APPELLANT, MAKESHIFT ENTRIES WERE MADE IN THE REGISTER REGARDING THESE S HARES WITHOUT MENTIONING ANY ITA NOS.376 & 393/JP/2002 A.Y. 1997-98 17 DETAILS SUCH AS DATE OF ACQUISITION ETC. AND NO EVI DENCE IN SUPPORT OF THE DECLARATION AND RECEIPT OF THESE BONUS SHARES WERE GIVEN TO THE ASSESSING OFFICER. THE ASSESSING OFFICER MADE VERIFICATION FROM THE COMPAN IES DIRECTLY AND FOUND CERTAIN DISCREPANCIES IN REGARD TO THE NUMBER AND DATES OF ACQUISITION OF THESE SHARES. THESE DISCREPANCIES ARE MENTIONED IN THE ASSESSMENT ORDER IN DETAILS MADE THE ABOVE ADDITION. 22. THE CIT(A) HELD AS UNDER:- BEFORE ME THE APPELLANT SUBMITTED FULL DETAILS IN REGARD TO THE ACQUISITION OF THESE SHARES FROM TIME TO TIME AND T HE EXPLANATION IN REGARD TO THE DISCREPANCIES POINTED OUT BY THE AO I N THE ASSESSMENT ORDER. THESE EVIDENCES/DETAILS AND EXPLANATIONS WER E MADE AVAILABLE TO THE PRESENT ASSESSING OFFICER FOR HIS REMARKS. I N HIS REMAND REPORT, HOWEVER, THE AO HAS ONLY REITERATED THE FINDINGS OF THE AO IN THE ASSESSMENT ORDER. I HAVE CONSIDERED THE CONTENTIONS OF THE APPELLANT AS WELL AS AO. I FIND THAT THE APPELLANT HAS PRODUC ED ALL THE NECESSARY EVIDENCES TO PROVE THE OWNERSHIP OF THE SHARES ON W HICH THE BONUS SHARES WERE DECLARED BY THE VARIOUS COMPANIES AND T HE ACQUISITION OF THE REQUIRED NUMBER OF BONUS SHARES BY THE APPELLAN T PRIOR TO 01.04.96 AND THEREFORE, THERE IS NOTHING AGAINST TH E APPELLANT TO HOLD THAT THESE SHARES WERE ACQUIRED BY HIM NOT BY WAY O F BONUS BUT BY WAY OF UNEXPLAINED INVESTMENT. AS PER THESE EVIDENC ES 621 SHARES OF MAHINDRA & MAHINDRA WERE ACQUIRED BY THE APPELLANT BY WAY OF ALLOTMENT ON HIS HOLDING OF 932 SHARES, BY ALLOTMEN T LETTER DATED 23.01.96. THE ORIGINAL HOLDING OF THESE SHARES WAS ACQUIRED BY THE APPELLANT ON 13.03.90 FROM HIS FATHER LATE SHRI RAT TAN LAL JI AS PER THE COURT'S ORDER. THE 660 BONUS SHARES OF COLGATE PALMOLIVE INDIA LTD. WERE ACQUIRED BY THE APPELLANT AS UNDER:- 60 BONUS SHARES LETTER DATED 30.12.1991 RECEIVED ON SHARE HOLDING OF 100 SHARES ITA NOS.376 & 393/JP/2002 A.Y. 1997-98 18 120 BONUS SHARES LETTER DATED 30.12.1991 RECEIVED ON 200 SHARES WHICH WERE RECEIVED FROM LALA RATTAN LAL JEE 160 BONUS SHARES LETTER DATED 29.01.1994 RECEIVED ON SHARE HOLDING OF 160 (100+60 BONUS) SHARES 320 BONUS SHARES LETTER DATED 29.01.1994 RECEIVED ON 320 SHARES (200+120 BONUS) SHARES. 871 BONUS SHARES OF TELCO WERE ACQUIRED BY THE APPE LLANT ON 352 DEBENTURES RECEIVED BY HIM FROM HIS FATHER AS PER T HE COURT'S ORDER AND 1100 SHARES ACQUIRED BY IT BY WAY OF PURCHASE. IN THIS WAY THE APPELLANT HELD A TOTAL OF 1452 SHARES OF THIS COMPA NY ON THE DATE WHEN THE BONUS WAS DECLARED ON DECEMBER 1995, AND T HE APPELLANT RECEIVED 871 SHARES BY WAY OF BONUS. THE APPELLANT HOWEVER, SHOWED 250 DEBENTURES AND 621 SHARES IN THE SHARE LEDGER R EGISTER WHEREAS ALL OF THEM WERE BONUS SHARES ONLY. 842 BONUS SHARES OF NESTLE INDIA WERE RECEIVED BY T HE APPELLANT AS UNDER:- 425 BONUS SHARES ON 850 SHARES HELD ORIGINALLY IN 1993. 317 BONUS SHARES ON 1275 (850+425 SHARES) IN 1996. THEREFORE, IT CAN BE SEEN FROM THE ABOVE THAT THE E NTIRE ACQUISITION OF THE BONUS SHARES OF THE FOUR COMPANI ES UNDER CONSIDERATION HAS BEEN SATISFACTORILY EXPLAINED ALO NGWITH THE DISCREPANCIES IN THIS REGARD POINTED OUT BY THE AO IN THE ASSESSMENT ORDER. ON THE BASIS OF THESE EXPLANATIONS AND THE S UPPORTING EVIDENCES ADDUCED, IT IS CLEAR THAT THE AO WAS NOT JUSTIFIED IN MAKING THE ADDITION OF RS.2,35,605/- TO THE INCOME OF THE APPELLANT BY WAY OF UNEXPLAINED INVESTMENT IN ACQUISITION OF BONUS SHAR ES OF THE FOUR COMPANIES. THIS ADDITION IS THEREFORE DELETED. 23. WE HAVE HEARD THE REPRESENTATIVES OF THE PARTIE S AND RECORDS PERUSED. THE ISSUE RAISED IN THIS GROUND IS IN RESPECT OF ADDITI ON OF RS.2,35,605/- ON ACCOUNT OF UNDISCLOSED INVESTMENT IN BONUS SHARES. WE NOTICED THAT THE CIT(A) AFTER ITA NOS.376 & 393/JP/2002 A.Y. 1997-98 19 CONSIDERING THE REMAND REPORT FROM THE ASSESSING OF FICER FOUND THAT THE ASSESSING OFFICER WAS NOT JUSTIFIED IN MAKING ADDITION OF RS. 2,35,605/-. THE CIT(A) EXAMINED THE ISSUE IN DETAILS IN RESPECT OF BONUS S HARES OF EACH COMPANY. THE CIT(A) NOTED THE FACT THAT THE ASSESSEE HAS PRODUCE D ALL THE NECESSARY EVIDENCES TO PROVE THE OWNERSHIP OF THE SHARES ON WHICH THE BONU S SHARES WERE DECLARED BY VARIOUS COMPANIES AND ACQUISITION OF REQUIRED NUMBE R OF BONUS SHARES BY THE ASSESSEE. THE DETAILED FINDING OF CIT(A) HAS ALREA DY BEEN REPRODUCED ABOVE. WE NOTICE THAT THE FINDING OF CIT(A) IS BASED ON MATER IAL EVIDENCE FURNISHED BY THE ASSESSEE. THE REVENUE DID NOT POINT OUT ANY CONTRA RY MATERIAL TO THE FINDING OF THE CIT(A) NOR THE SAME IS AVAILABLE ON RECORD. UNDER THE CIRCUMSTANCES, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF CIT(A). THE ORD ER OF THE CIT(A) IS CONFIRMED ON THE ISSUE. 24. GROUND NO. D) IS IN REGARD TO ADDITION OF RS.1, 38,417/- ON ACCOUNT OR PROFIT ON SALE OF SHARES OF NESTLE INDIA LTD. OUT OF THE B OOKS OF ACCOUNTS. THIS ADDITION HAS BEEN MADE BY THE ASSESSING OFFICER ONLY BECAUSE THE STOCK HOLDING OF THE APPELLANT IN REGARD TO THE SHARES OF THIS COMPANY W AS NOT TALLYING. THE ASSESSING OFFICER VERIFIED FROM THE DELHI STOCK EXCHANGE THAT THE APPELLANT HAS RECEIVED BONUS SHARES AT THE RATE OF 2 SHARES PER ONE SHARE HELD BY THE APPELLANT IN 1996 WHICH WERE 1500 IN NUMBER WHEREAS IN THE STOCK REGI STER HE HAS RECORDED THE ITA NOS.376 & 393/JP/2002 A.Y. 1997-98 20 RECEIPT OF ONLY 842 BONUS SHARES, THE ASSESSING OFF ICER THEN PRESUMED THAT THE BALANCE SHARES 658 IN NUMBER WERE SOLD BY THE APPEL LANT OUTSIDE THE BOOKS OF ACCOUNT @ RS.210.36 PER SHARE THEREBY MAKING AN ADD ITION OF AN AMOUNT OF RS.1,38,417/- TO THE TOTAL INCOME OF THE APPELLANT. 25. THE ASSESSEE EXPLAINED THAT THE ASSESSING OFFIC ER GOT CONFUSED IN THE RATIO OF ALLOTMENT OF BONUS SHARES WHICH WAS ACTUALLY ONE SHARE FOR TWO SHARES EACH HELD BY THE APPELLANT AND NOT TWO SHARES FOR ONE SHARE H ELD BY THE APPELLANT. THIS FACT HAS BEEN MADE CLEAR FROM THE LETTER OF DELHI STOCK EXCHANGE WHICH IS AVAILABLE ON THE RECORD OF THE ASSESSING OFFICER. THEREFORE ON T HE SHARE HOLDING OF 750 SHARES OF THE APPELLANT HE SHOULD HAVE GOT ONLY 375 SHARES BY WAY OF BONUS INSTEAD OF 1500 SHARES WRONGLY PRESUMED BY THE ASSESSING OFFIC ER. HOWEVER, IN REALITY THE APPELLANT HAD 850 SHARES ON THE DATE OF DECLARATION OF BONUS @ 1.2 IN 1993 AND HE RECEIVED 425 BONUS SHARES ON THEM. BUT IN THE SHARE LEDGER BY MISTAKE STOCK HOLDING OF ONLY 750 SHARES WAS SHOWN WHICH RESULTED INTO THE DISCREPANCY IN THE NUMBER OF SHARES HELD AND RECEIVED ON BONUS. LATER ON HE RECEIVED 317 BONUS SHARES ON THE 1275 (850+425) SHARES IN 1996. THUS T OTAL NUMBER OF BONUS SHARES RECEIVED WAS 842 (425+317) ONLY AND NOT 1500 AS PRE SUMED BY THE AO. 26. THE CIT(A) HAS HELD AS UNDER:- ITA NOS.376 & 393/JP/2002 A.Y. 1997-98 21 I HAVE VERIFIED THE RIVAL SUBMISSIONS AND THE EVIDE NCES ADDUCED IN REGARD TO THEM. I FIND THAT THE EXPLANAT ION OFFERED BY THE APPELLANT IS CORRECT AND WELL EVIDENCED. THE AO WAS THEREFORE NOT JUSTIFIED IN HOLDING THAT THE APPELLANT SOLD 658 SH ARES OF NESTLE INDIA RECEIVED BY WAY OF INVESTMENT MADE OUTSIDE THE BOOK S OF ACCOUNT AND WAS ALSO NOT JUSTIFIED IN MAKING THE ADDITION OF RS .1,38,417/- ON THIS ACCOUNT. THIS ADDITION IS THEREFORE DELETED. 27. WE HAVE HEARD THE REPRESENTATIVES OF THE PARTIE S AND RECORDS PERUSED. THE BRIEF FACTS OF THE GROUND RELATING TO ADDITION OF R S.1,38,417/- ON ACCOUNT OF PROFIT ON SALE OF SHARES OF NESTLE INDIA LIMITED OUT OF TH E BOOKS OF ACCOUNTS. THE ASSESSING OFFICER MADE ADDITION OF THE SAID AMOUNT AS DETAILS WERE NOT TALLYING WITH THE DELHI STOCK EXCHANGE AS THE ASSESSEE HAS R ECEIVED BONUS SHARES. THE ADDITION MADE BY THE ASSESSING OFFICER HAS BEEN DEL ETED BY THE CIT(A) AFTER VERIFYING THE EVIDENCE FURNISHED BY THE ASSESSEE AN D NOTED THAT EXPLANATION FURNISHED BY THE ASSESSEE WAS CORRECT. THE CIT(A), BEFORE DELETING THE ADDITION, MADE A DETAILED DISCUSSION WHICH IS REPRODUCED ABOV E. THE CIT(A) NOTED THAT THE ASSESSEE HAS EXPLAINED THAT THE ASSESSING OFFICER GOT CONFUSED IN THE RATIO OF ALLOTMENT OF BONUS SHARES WHICH WAS ACTUALLY ONE SH ARE FOR TWO SHARES EACH HELD BY THE APPELLANT AND NOT TWO SHARES FOR ONE SHARE H ELD BY THE ASSESSEE. WE NOTICE THAT THE ISSUE UNDER CONSIDERATION IS FACTUALLY VER IFICATION. THE CIT(A) AFTER VERIFYING THE FACTUAL ASPECT OF THE ISSUE FOUND THA T THE EXPLANATION OF THE ASSESSEE FURNISHED WAS CORRECT AND THE ASSESSING OFFICER WAS NOT JUSTIFIED IN HOLDING THAT THE ASSESSEE SOLD 650 SHARES OF NESTLE INDIA LIMITE D OUT OF BOOKS OF ACCOUNTS. THE ITA NOS.376 & 393/JP/2002 A.Y. 1997-98 22 CIT(A) DELETED THE ADDITION AFTER VERIFYING THE REL EVANT FACTS. THE REVENUE DID NOT POINT OUT ANY CONTRARY MATERIAL TO THE FINDING OF T HE CIT(A) NOR THE SAME IS AVAILABLE ON RECORD. IN THE LIGHT OF THE FACTS, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE CIT(A). ORDER OF CIT(A) IS CONFIRMED ON THE ISSUE. 28. GROUND NO. E) IS IN REGARD TO DISALLOWANCE OF A N AMOUNT OF RS.6,60,698/- FROM THE INTEREST PAID BY THE APPELLANT ON THE GROU ND THAT THE INTEREST HAS BEEN PAID @18% PER ANNUM ON LOANS OBTAINED WHEREAS INTEREST H AS BEEN CHARGED ONLY @ 12% ON THE FUNDS ADVANCED BY THE APPELLANT. THE AO HAS MADE THE DISALLOWANCE FOR THE FOLLOWING REASONS:- A) AS DETAILED IN ANNEXURE-D TO THE ASSESSMENT ORDE R THE APPELLANT HAS PAID INTEREST ON BORROWINGS MADE BY HIM @ 18% TO 77% PER ANNUM WHICH IS INORDINATELY HIGH EVEN AS COMPARED TO THE PREVALENT MARKET RATE OF INTEREST. B) THE ASSESSEE HAS ADVANCED MONEY TO ITS SISTER CO NCERNS LIKE M/S. COMMERCIAL AUTO PRODUCTS (P) LTD. AND M/S. AGRA OIL AND GENERAL INDUSTRIES LTD. AND HAS RECEIVED INTEREST AMOUNTING TO RS.9,84,680/- DURING THE YEAR BUT HAS CHARGED INTEREST FROM THEM ONLY @ 12% PER ANNUM. ITA NOS.376 & 393/JP/2002 A.Y. 1997-98 23 C) AN AMOUNT OF RS.1,15,000/- HAS BEEN GIVEN TO REL ATIVE SHRI KUMAR KISHAN GOYAL FREE OF INTEREST. D) THE APPELLANT HAS PAID LOANS WORTH RS.48,62,593/ - DURING THE YEAR WHEREAS HE HAS OBTAINED LOANS WORTH RS.23,78,110/- ONLY WHI CH SHOWS THAT THE APPELLANT HAD SPARE MONEY WITH HIM AND THERE WAS NO GENUINE NEED OF ACCEPTING FRESH LOANS AT VERY HIGH INTEREST RATES. 29. THE APPELLANT ON THE OTHER HAND HAS CONTENDED T HAT THE ASSESSING OFFICER MADE THE DISALLOWANCE ONLY ON THE PRESUMPTION THAT ALL THE PAYMENTS OF INTEREST HAVE BEEN MADE AT THE RATE OF 18% AND ALL THE INTER ESTS RECEIVED HAVE BEEN CHARGED AT THE RATE OF 12% PER ANNUM WHEREAS THIS IS NOT TH E FACT. THE AVERAGE RATE OF INTEREST PAID ON THE BORROWINGS MADE BY THE APPELLA NT DURING THE YEAR COMES TO RS.12.5% ONLY AND NOT 18%. INTEREST FROM M/S. AGRA OIL AND GENERAL INDUSTRIES HAS BEEN CHARGED AT 15% AND NOT 12%. INTEREST AT TH E RATE OF 12% HAS BEEN CHARGED ONLY FROM M/S. COMMERCIAL AUTO PRODUCTS (P) LTD. DU RING THE ASSESSMENT YEAR IN QUESTION FRESH LOANS RECEIVED ARE OF RS.32,78,110/- WHILE THE REPAYMENT OF LOANS DURING THE YEAR ARE OF RS.38,62,593/-. THEREFORE TH ERE IS NO QUESTION OF THE DIVERSION OF THE LOANS OBTAINED EITHER TOWARDS INTE REST FREE LOANS TO THE RELATIVES/OTHERS OR LESS INTEREST FREE LOANS TO THE RELATIVES/OTHERS OR LESS INTEREST ITA NOS.376 & 393/JP/2002 A.Y. 1997-98 24 LOANS TO THE RELATIVES/OTHERS. ACTUALLY THE INTERES T PAYMENT ON THE RATE IN EXCESS OF 15% DURING THE ACCOUNTING PERIOD COMES TO RS.27,339 /- ONLY. A STATEMENT OF THE RATES OF INTEREST CHARGED ON FRESH LOANS HAS BEEN F URNISHED AT PAGE NO. 52 AND 53 OF THE PAPER BOOK FROM WHICH IT CAN BE SEEN THAT THE R ATE OF INTEREST PAID IS NOT AS HIGH AS 77% AS MENTIONED IN ANNEXURE-D BUT IS ONLY 16 TO 18%. THE ASSESSING OFFICER COMMITTED THE MISTAKE TO WRONGLY CALCULATING THE PE RIOD FOR WHICH THE INTEREST WAS PAID. THIS WORKING OF INTEREST SHOWS THAT THE INTER EST PAID IN EXCESS OF 15% IS ONLY RS.27,339/-. IT WAS ALSO PLEADED BY THE APPELLANT T HAT ANY PART OF THE INTEREST PAID ON BORROWED FUNDS CAN BE DISALLOWED ONLY IF THE AO IS ABLE TO ESTABLISH THE FACT THAT THE BORROWED FUNDS HAVE BEEN ACTUALLY UTILIZED TO GIVE INTEREST FREE LOANS OR LESS INTEREST LOANS. RELIANCE HAS BEEN PLACED ON TH E FOLLOWING DECISIONS IN THIS REGARD. 30. THE CIT (A) HAS HELD AS UNDER:- I HAVE CONSIDERED THE RIVAL SUBMISSIONS AND I FIND THAT THE TOTAL BORROWED CAPITAL IN THE BEGINNING OF THE YEAR WAS 1,43,33,716/- AND AT THE END OF THE YEAR IT WAS 1,45,51,356/-. T HE TOTAL INTEREST PAYMENTS THE APPELLANT MADE DURING THE YEAR ARE OF RS.18,02,003/-. THE APPELLANT HAS WORKED OUT THE AVERAGE BORROWED C APITAL AT 12.5%. FRESH LOANS TAKEN DURING THE PREVIOUS YEAR ARE OF R S.32,78,110/- WHEREAS THE REPAYMENTS OF LOAN DURING THE YEAR ARE OF RS.38,62,593/-. THE OWN CAPITAL OF THE APPELLANT AS ON 01.04.96 WAS OF RS.86,19,446/- AND AT THE END OF THE FINANCIAL YEAR IT WAS RS.1,01 ,46,655/-. THE INVESTMENT IN SHARES AND DEBENTURES AS ON 31.03.96 WAS OF RS.67,61,048/- AND AS ON 31.03.97 IT WAS 75,79,163/ -. THE APPELLANT HAS CLAIMED BEFORE ME THAT THE ENTIRE INVESTMENT OF RS.75,79,163/- IN ITA NOS.376 & 393/JP/2002 A.Y. 1997-98 25 PURCHASING SHARES AND DEBENTURES WAS MADE OUT OF TH E OWN CAPITAL ONLY. THIS CLAIM IS SUPPORTED BY THE FACT THAT THE OWN CAPITAL OF THE APPELLANT IS CONSIDERABLY MORE THAN THE OWN CAPITAL OF THE APPELLANT BOTH AT THE BEGINNING OF THE ACCOUNTING PERIOD AS W ELL AS IN THE END. THE APPELLANT HAS FURTHER CLAIMED THAT THE MAJORITY OF THE INVESTMENT IN SHARES IS VERY OLD AND A SIGNIFICANT PART OF HIS SHARE HOLDING HAS BEEN ACQUIRED THROUGH INHERITANCE FROM HIS FATHER. THESE FACTS ARE ALSO SUPPORTED BY THE EVIDENCES SUBMITTED IN REGARD TO THE ACQUISITION OF SHARES. THEREFORE, THERE ARE SUFFICIENT REASONS TO BELIEVE THAT THE INVESTMENT MADE BY THE APPELLANT IN SHARES AND DEBE NTURES HAS COME OUT OF HIS OWN CAPITAL. THEREFORE, THERE IS NO QUES TION OF ALLOWING ANY INTEREST PAID BY THE APPELLANT OUT OF THE INCOME UN DER THE HEAD CAPITAL GAINS ON SALE OF SHARES. NOW COMING TO THE QUESTION OF DISALLOWANCE MADE BY THE AO OF RS.6,00,698/- THE CONTENTION OF THE APPELLANT THAT NO SUCH DISALLOWANCE CAN BE MADE UNLESS THE AO ESTABLISHES THE NEXUS BETWEEN THE BORROWED FUNDS AND THE MONEY GIVEN ON I NTEREST FREE AND LESS INTEREST LOANS IS LEGALLY CORRECT. THERE IS A CONSISTENT JUDICIAL OPINION IN FAVOUR OF THE APPELLANT ON THIS ISSUE. T HE FOUR CASE LAWS CITED BY THE APPELLANT PROPOUND THIS LEGAL MAXIM. T HE AO IS THEREFORE NOT JUSTIFIED IN DISALLOWING THIS AMOUNT OF RS.6,00 ,698/- ONLY BY PRESUMING THAT THE INTEREST EXPENSES WERE CLAIMED A T THE RATE OF 18% AND THE INTEREST INCOME HAS BEEN OFFERED AT THE RAT E OF 12%. IN FACT AS POINTED OUT BY THE APPELLANT THE INTEREST EXPENSES CLAIMED OF 18,02,093/- ON THE TOTAL BORROWED CAPITAL AT THE BE GINNING OF THE FINANCIAL YEAR OF RS.1,43,33,716/- COMES ONLY AT TH E RATE OF 12.5% AND NOT AT THE RATE OF 18%. THEREFORE, EVEN IF THE RATE OF 12% IS CONSIDERED REASONABLE THEN ALSO NO DISALLOWANCE IS WARRANTED. MOREOVER, THE APPELLANT HAS CLAIMED BEFORE ME THAT THE INTEREST HAS BEEN CHARGED BY THEM FROM AGRA OIL & GENERAL INDUST RIES AT 15% AND NOT AT 12% AND INTEREST FROM RATAN PRAKASHAN MA NDIR HAS BEEN CHARGED AT 18% AND NOT 15%. THE INTEREST @ 12% HAS BEEN CHARGED ONLY FROM COMMERCIAL AUTO PRODUCTS (P) LTD. THIS IN TEREST IS AMOUNTING TO RS.3,30,838/-. AS PER THE LAW, THE AO CAN MAKE THE DISALLOWANCE ONLY IF IT IS PROVED THAT BORROWED MON EY AT HIGHER RATE OF INTEREST WAS DIVERTED TOWARDS LOANS GIVEN TO COM MERCIAL AUTO PRODUCTS (P) LTD. HOWEVER, THE AO HAS FAILED TO EST ABLISH THIS NEXUS. IT HAS BEEN FOUND THAT HE APPELLANT HAS PAID ONLY AN A MOUNT OF RS.27,339/- AS INTEREST @ EXCEEDING 15% DURING THIS FINANCIAL YEAR. IT ITA NOS.376 & 393/JP/2002 A.Y. 1997-98 26 HAS ALSO BEEN FOUND THAT THE CALCULATION OF INTERES T MADE BY THE AO IN ANNEXURE-D OF THE ORDER IS BASED ON WRONG FIGURES O F THE PERIOD OF INVESTMENT. THE APPELLANT HAS GIVEN THE CORRECT WOR KING OF THE RATE OF INTEREST ON THESE ADVANCES AT PAGE NO.53 OF THE PAP ER BOOK. IT CAN BE SEEN THAT THE RATE OF INTEREST PAID VARIED FROM 16% TO 18% ONLY. UNDER THESE FACTS IT CANNOT BE HELD THAT THE APPELL ANT ACCEPTED LOANS AT HIGH RATE OF INTEREST EVEN WHEN HE WAS NOT IN TH E NEED OF FUNDS AND JUST TO DELIBERATELY DECREASE HIS TAXABLE INCOME. I , THEREFORE, HOLD THAT THE AO WAS NOT AT ALL JUSTIFIED IN DISALLOWING THE INTEREST AMOUNTING TO RS.6,00,698/- FOR THE REASONS MENTIONED ABOVE AND T HIS DISALLOWANCE IS THEREFORE DELETED. 31. WE HAVE HEARD THE LD. REPRESENTATIVES OF THE PA RTIES AND RECORDS PERUSED. THE ASSESSING OFFICER MADE ADDITION OF ` 6,60,698/- BY DISALLOWING INTEREST CLAIM OF THE ASSESSEE ON THE GROUND THAT THE ASSESSEE PAI D INTEREST @ 18% ON LOAN OBTAINED, WHEREAS THE ASSESSEE CHARGED INTEREST ONL Y AT 12% ON THE FUNDS ADVANCED BY THE ASSESSEE. WE NOTICED THAT THE CIT(A) RELIED UPON CERTAIN DECISION WHICH ARE NOTED IN HIS ORDER AND FOUND THAT THE ASSESSEE WAS HAVING SUFFICIENT OWN FUNDS. THE CIT(A) AFTER VERIFYING THE FACT FOUND THAT THE ASSESSEE WAS HAVING SUFFICIENT OWN FUND. THEREFORE, THERE IS NO QUESTION OF DISAL LOWANCE OF INTEREST. IN RESPECT OF SHARES AND DEBENTURES PURCHASED OUT OF OWN CAPITAL, THE CIT(A) HAS ALSO EXAMINED THE ASPECT OF CHARGING OF RATE OF INTEREST AND FOUN D THAT RATE OF INTEREST VARIED FROM 16% TO 18%. IN OTHER WORDS, THE CHARGING OF INTERE ST IS ON THE BASIS OF MARKET RATE. THEREFORE, WE AGREE WITH THE FINDING OF CIT(A) THAT THERE IS NO JUSTIFICATION FOR DISALLOWING THE INTEREST. IN THE LIGHT OF DETAILED DISCUSSION MADE BY THE CIT(A) AFTER VERIFYING THE RELEVANT FACTS, WE UPHOLD THE O RDER OF THE CIT(A) AS THE ITA NOS.376 & 393/JP/2002 A.Y. 1997-98 27 REVENUE HAS FAILED TO POINT OUT ANY CONTRARY MATERI AL TO THE FINDING OF CIT(A) NOR ANY SUCH MATERIAL IS AVAILABLE ON RECORD. ORDER OF THE CIT(A) IS CONFIRMED 32. GROUND NO.F) IS IN REGARD TO SALE OF LAND AT BH ARATPUR. IN THE RETURN OF INCOME THE APPELLANT HAS OFFERED CAPITAL GAIN ON SA LE OF THIS LAND AS UNDER :- SALE PROCEEDS OF THE LAND RS.3,00,000/- LESS : COST INDEX BENEFIT BY ESTIMATE RS.50,000/- CAPITAL GAINS RS.2,50,000/- THIS LAND WAS SOLD BY WAY OF THREE SALE DEEDS MENTI ONED AS UNDER: SOLD AREA SALE CONSIDERATION SHRI MOHAN & GHANSHYAM 2 BIGHA 1,25,000/- SHRI PAVAN KUMAR MOHAN & GHANSHYAM 85.53 SQ.YDS 50,000/- SMT. MEENU AGARWAL 2 BIGHA 1.3 BISWA 1,25,000/- 33. FROM THE ABOVE FIGURES IT CAN BE SEEN THAT THE LAND IN QUESTION HAS BEEN SOLD TO PAVAN KUMAR, MOHAN AND GHANSHYAM @ 584.59 PER SQ UARE YARD WHEREAS IT HAS BEEN SOLD TO MOHAN AND GHANSHYAM AND SMT. MEENU AGA RWAL @ 24.39 PER SQUARE YARD ONLY. THIS WIDE VARIATION IS INEXPLICABLE. TH E ASSESSEE HAS CONTENDED THAT ONE PIECE OF THIS LAND MEASURING 4200 SQ. FTS. WAS SOLD BY THE APPELLANT ON 04.12.80 FOR RS.15,000/- @ 32.14 PER SQUARE YARD. ITA NOS.376 & 393/JP/2002 A.Y. 1997-98 28 34. THE CIT(A) HELD AS UNDER:- IT CANNOT BE UNDERSTOOD AS TO HOW WHEN THE LAND WA S SOLD AT THE RATE OF RS.32.14 PER SQUARE YARD IN 1980 WHY IT WAS SOLD ONLY @ RS.24.39 PER SQUARE YARD IN 1996. THE APPELLANT HAS NOT PRODUCED THE SALE DEED OF THE LAND IN QUESTION SOLD ON 04.12.198 0. HE HAS PRODUCED ONLY A LETTER WHICH CANNOT BE ACCEPTED AS EVIDENCE. BESIDES, THE APPELLANT HIMSELF HAS VALUED THIS LAND IN HIS I NDIVIDUAL BALANCE SHEET AT AN AMOUNT OF RS.8961/- ONLY AS ON 31.03.19 96 AND HAS CLAIMED INDEXED COST OF IT IN HIS RETURN OF INCOME OF RS.50,000/-ONLY. THEREFORE, THE CLAIM OF THE APPELLANT MADE BEFORE T HE AO THAT THE COST INDEX BENEFIT ON THIS LAND SHOULD ACTUALLY BE WORKE D OUT ON THE BASIS OF THE SALE PRICE OF RS.32.14 ON 04.12.80 CANNOT BE ACCEPTED AND IT ALSO CANNOT BE ACCEPTED THAT THE SALE OF LAND HAS A CTUALLY RESULTED INTO CAPITAL LOSS OF RS.6,29,717/- . HOWEVER, THE CONTEN TION OF THE AO THAT THE CAPITAL GAIN ON THIS LAND SHOULD BE TAXED AS PE R PROVISIONS OF SECTION 50 OF THE IT ACT IS ALSO NOT ACCEPTABLE BEC AUSE SECTION 50 OF THE IT ACT IS APPLICABLE ONLY IN REGARD TO DEPRECIA BLE ASSETS AND LAND IS NOT A DEPRECIABLE ASSET. THE APPELLANT HAS SHOWN THIS LAND IN HIS INDIVIDUAL BALANCE SHEET AND NOT AS A BUSINESS ASSE TS IN THE BALANCE SHEET OF HIS BUSINESS. THEREFORE, I HOLD THAT THE A O WAS NOT JUSTIFIED IN TAKING THE CAPITAL GAINS AT A FIGURE OF RS.2,91,039 /- BUT HE SHOULD HAVE TAXED IT U/S 45 OF THE IT ACT AFTER DEDUCTING FROM THE SALE CONSIDERATION, THE COST OF ACQUISITION OF RS.8961/- PLUS THE COST INDEX BENEFIT SINCE THE DATE OF ITS ACQUISITION TILL THE DATE OF ITS SALE. THIS LAND WAS ACQUIRED BY THE APPELLANT BY WAY OF SUCCES SION BUT IN ABSENCE OF EXACT DETAILS IN THIS REGARD THE ESTIMAT E INDEXED COST OF RS.50,000/- CAN REASONABLY BE ACCEPTED AS THE INDEX ED COST OF THIS LAND. THE AO IS THEREFORE DIRECTED TO TAX CAPITAL G AINS ON THIS LAND AT AN AMOUNT OF RS.2,50,000/- AS OFFERED BY THE APPELL ANT. RELIEF WOULD BE GRANTED ACCORDINGLY. 35. WE HAVE HEARD THE LD. REPRESENTATIVES OF THE PA RTIES AND RECORDS PERUSED. THE BRIEF FACTS OF THIS GROUND ARE THAT DURING THE ASSESSMENT PROCEEDINGS THE ASSESSING OFFICER NOTICED THAT THE ASSESSEE HAS SOL D LAND AT BHARATPUR AND OFFERED CAPITAL GAIN ON SALE OF THIS LAND. THE ASSESSING O FFICER DID NOT ACCEPT THE ITA NOS.376 & 393/JP/2002 A.Y. 1997-98 29 CALCULATION OF THE COST OF INDEX CALCULATED BY THE ASSESSEE. THE ASSESSING OFFICER WAS OF THE VIEW THAT THE CAPITAL GAIN ON SALE OF LA ND SHOULD BE TAXED AS PER PROVISIONS OF SECTION 50 OF THE ACT. THE ASSESSING OFFICER RECALCULATED THE CAPITAL GAIN OF ` 2,91,039/- AS AGAINST DECLARED BY THE ASSESSEE ` 2,50,000/-. THE CIT(A) DELETED THE ADDITION OF ` 41,039/- (2,91,039 - 2,50,000) HOLDING THAT THE ASS ESSING OFFICER IS NOT CORRECT IN INVOKING SECTION 50 OF TH E ACT AS THE SAME IS APPLICABLE IN RESPECT OF DEPRECIABLE ASSETS AND LAND IS NOT DEPRE CIABLE ASSET. THE LAND WAS ACQUIRED BY THE ASSESSEE BY WAY OF SUCCESSION AND I N ABSENCE OF ANY DETAILS IN THIS REGARD, THE ESTIMATED INDEX COST OF ` 50,000/- WAS REASONABLE AND ACCEPTABLE AS THE INDEX COST OF THE LAND. WE FIND THAT THE FINDING O F CIT(A) WHICH IS REPRODUCED ABOVE IS BASED ON APPRECIATION OF FACTS AND VERIFIC ATION OF THE RELEVANT FACTS. THE REVENUE DID NOT POINT OUT ANY CONTRARY MATERIAL TO THE FINDING OF THE CIT(A) NOR THE SAME IS AVAILABLE ON RECORD. IN THE CIRCUMSTAN CES, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF CIT(A) ON THE ISSUE. ORDER OF THE CIT(A) IS CONFIRMED. 36. AS STATED ABOVE, IN THE ASSESSEES APPEAL THAT THIS IS A COMMON GROUND RAISED IN CROSS APPEALS, THE ASSESSEE CHALLENGED THE FINDI NG OF CIT(A) IN GROUND NO.4 OF ASSESSEES APPEAL THAT THE CIT(A) SHOULD ALLOW CAPI TAL LOSS OF ` 6,29,717/- IN RESPECT OF SALE OF BHARATPAUR LAND INSTEAD OF CAPIT AL GAIN OF ` 2,50,000/-. THE CIT(A) REJECTED THE ASSESSEES CONTENTION FOR ACCEP TING CAPITAL LOSS OF ` 6,29,717/- ITA NOS.376 & 393/JP/2002 A.Y. 1997-98 30 ON ACCOUNT OF SALE OF BHARATPUR LAND ON THE GROUND THAT THE ASSESSEE DID NOT PRODUCE THE SALE DEED OF THE LAND IN QUESTION SOLD ON 04.12.1980. THE ASSESSEE PURCHASED ONLY A LETTER WHICH CANNOT BE ACCEPTED AS EVIDENCE. FURTHER THE CIT(A) NOTED THAT THE ASSESSEE HIMSELF HAS VALUED THIS LAN D IN HIS INDIVIDUAL BALANCE SHEET AT AN AMOUNT OF ` 8,961/- AS ON 31.03.1996 AND CLAIMED INDEX COST OF IT IN HIS RETURN OF INCOME AT ` 50,000/-. THE CIT(A) THEREFORE HELD THAT THE CLAIM OF THE ASSESSEE MADE BEFORE THE ASSESSING OFFICER THAT THE COST INDEX BENEFIT ON THIS LAND SHOULD ACTUALLY BE WORKED OUT ON THE BASIS OF SALE PRICE OF ` 32.14 ON 04.12.1980 CANNOT BE ACCEPTED AND IT ALSO CANNOT BE ACCEPTED T HAT THE SALE OF LAND HAS ACTUALLY RESULTED INTO CAPITAL LOSS OF ` 6,29,717/-. AS NOTED ABOVE, THE FINDING OF CIT(A) IS BASED ON MATERIAL FACT AVAILABLE WITH HIM. THE ASS ESSEE HIMSELF CLAIMED INDEX COST IN HIS RETURN OF INCOME AT ` 50,000/- CALCULATED CAPITAL GAIN OF ` 2,50,000/-. THE ASSESSEE WANT TO REDUCE RETURNED INCOME BY ` 2,50,000/-. WE FIND THAT THE CIT(A) RIGHTLY REJECTED THE ASSESSEES CLAIM AS THE ASSESS EE FAILED TO FURNISH THE EVIDENCE OF SALE DEED OF THE LAND IN QUESTION SOLD ON 04.12. 1980. APART FROM THE FACT THAT THE ASSESSEE HIMSELF HAS SHOWN ACQUISITION COST OF ` 50,000/- IN THE BOOKS OF ACCOUNTS AS WELL AS IN THE RETURN OF INCOME, THE AS SESSEES CLAIM THAT BENEFIT OF COST INDEX SHOULD BE WORKED OUT ON THE BASIS OF SALE PRI CE AS ON 04.12.1980 WHEN THE LAND WAS SOLD. IN OTHER WORDS, THE ASSESSEES WANT REVERSE CALCULATION OF BENEFIT OF COST INDEX WHICH IS NOT PERMISSIBLE IN ACCORDANCE W ITH LAW. THE FINDING OF CIT(A) ITA NOS.376 & 393/JP/2002 A.Y. 1997-98 31 IS BASED ON MATERIAL ON FACT AS STATED ABOVE. WE, THEREFORE, DO NOT FIND ANY INFIRMITY IN THE ORDER OF CIT(A). THUS, ASSESSEES GROUND NO.4 IS ALSO DISMISSED. 37. IN THE RESULT, APPEALS OF THE ASSESSEE AND REVE NUE BOTH ARE DISMISSED. (ORDER PRONOUNCED IN THE OPEN COURT ON 13.04.2012) SD/- SD/- (BHAVNESH SAINI) (A.L. GEHLOT) JUDICIAL MEMBER ACCOUNTANT MEMBER DATE: 13 TH APRIL, 2012 PBN/* COPY OF THE ORDER FORWARDED TO: APPELLANT RESPONDENT CIT CONCERNED CIT (APPEALS) CONCERNED D.R., ITAT AGRA BENCH, AGRA GUARD FILE. BY ORDER ASSISTANT REGISTRAR INCOME-TAX APPELLATE TRIBUNAL, AGRA TRUE COPY