ACIT, New Delhi V. M/s. Bharat Export, New Delhi

ITA 4746/DEL/2012

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 8019 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 8 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-05-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 18-02-2016
• Assessment Year: 2009-2010
• Appeal Filed On: 06-09-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S L ANURAGI
• Keywords: Sale consideration of property below Jantri Value; Cost of acquisition; Competent authority; Revised return
• Section: 50C

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH A NEW DELHI BEFORE SHRI S.V. MEHROTRA, ACCOUNTANT MEMBER AND SHRI SUDHANSHU SRIVASTAVA, JUDICIAL MEMBER ITA NO. 4747/DEL/2012 AY: 20 08-09 ITA NO. 4746/DEL/2012 AY: 2009-10 ACIT, VS BHARAT EXPORT, CIRCLE 20(1), 293. DHAKKA JOHAR, ROOM NO. F-308, DR. MUKHARJEE NAGAR, VIKAS BHAWAN, NEW DELHI.-110009 NEW DELHI. (PAN: AAAFB6979M) (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI S.L. ANURAGI DR RESPONDENT BY : SHRI C.S. ANAND, ADV. DATE OF HEARING: 18.02.2016 DATE OF PRONOUNCEMENT: ORDER PER SUDHANSHU SRIVASTAVA, JUDICIAL MEMBER BOTH THE APPEALS ARE PREFERRED BY THE DEPARTMENT. I.T.A. 4746 PERTAINS TO ASSESSMENT YEAR 2009-10 AND HAS BE EN PREFERRED AGAINST THE ORDER PASSED BY THE LD. CIT ( A)-XXII, NEW DELHI DATED 28.06.2012. I.T.A. 4747 PERTAINS TO AS SESSMENT YEAR 2008-09 AND THE IMPUGNED ORDER IS DATED 21.06.2012 PASSED BY THE LD. CIT (A)-XXII, NEW DELHI. SINCE BOTH THE AP PEALS WERE HEARD TOGETHER, THEY ARE BEING DISPOSED OF BY THIS COMMON ORDER. I.T.A. NOS. 4747 & 4746/D/2012 ASSESSMENT YEARS 2008-09, 09-10 2 I.T.A. NO. 4747/DEL/2012 2. THE ASSESSEE IS SAID TO BE ENGAGED IN THE MANUFA CTURE AND SALE OF STAINLESS STEEL CUTLERY/UTENSILS. THE ORIG INAL RETURN DECLARING NIL INCOME WAS FILED ON 30.09.2008 AND A REVISED RETURN DECLARING A TOTAL INCOME OF R.S 67,85,297/- WAS FIE LD ON 5.1.2009. IN THIS YEAR, THE ASSESSEE HAD DISCLOSED GROSS PROF IT @9.58% OF THE TURNOVER. IT WAS THE OBSERVATION OF THE ASSESS ING OFFICER THAT THERE WAS A MUCH HIGHER LEVEL OF SCRAP GENERATION I N THE MANUFACTURING PROCESS OF THE ASSESSEE AS AGAINST TH E NORMS OF THE CENTRAL EXCISE AUTHORITIES. THE ASSESSING OFFI CER ALSO RECORDED A FINDING THAT NO DAY TO DAY RECORD WAS MA INTAINED IN RESPECT OF RAW MATERIAL CONSUMED AT VARIOUS STAGES OF PRODUCTION OF GOODS AND OF DIFFERENT CATEGORIES OF CUTLERY/KIT CHENWARE PRODUCED. THE ASSESSING OFFICER ALSO HELD THAT THE PURCHASES OF RAW MATERIAL AND SALE OF FINISHED GOODS COULD NOT B E SAID TO BE COMPLETELY VERIFIABLE. THE ASSESSING OFFICER PROCE EDED TO CALCULATE EXCESS TURNOVER BY REDUCING THE PERCENTAG E OF WASTAGE AND THEREAFTER, BY APPLYING THE GP RATIO OF 9.56%, WORKED OUT THE DIFFERENCE IN GP ON ESTIMATED ENHANCED TURNOVER AT RS.53,65,284/- WHICH WAS ADDED TO THE INCOME OF THE ASSESSEE. ALSO RS. 1,09,830/- BEING 1/6 TH OF THE VEHICLE RUNNING EXPENSES I.T.A. NOS. 4747 & 4746/D/2012 ASSESSMENT YEARS 2008-09, 09-10 3 WAS ADDED BACK TO THE INCOME ON ACCOUNT OF PERSONAL USE. FURTHER, DURING THE YEAR UNDER CONSIDERATION, THE A SSESSEE HAD SOLD A FACTORY SITUATED AT PLOT NO. 89, KUNDLI, DIS TT. SONEPAT, HARYANA FOR A SUM OF RS. 1,51,65,000/- ON 28.11.200 7. THE FACTORY HAD BEEN PURCHASED BY THE ASSESSEE FOR RS.2 2,10,000/- ON 12.09.2002 AND THE ASSESSEE DECLARED LONG TERM C APITAL GAIN (LTCG) OF RS. 79,57,158/- ON THE SAME. DEDUCTION U /S 54G OF THE INCOME TAX ACT, 1961 (THE ACT IN BRIEF) IN RE SPECT OF THE FULL AMOUNT OF LTCG WAS CLAIMED ON THE GROUND OF SHIFTIN G THE INDUSTRIAL UNDERTAKING FROM URBAN AREA TO A NON-URB AN AREA. HOWEVER, THE ASSESSING OFFICER WAS OF THE OPINION T HAT NEITHER THE ASSESSEES UNDERTAKING WAS SHIFTED FROM AN URBA N AREA, NOR THE TRANSFER OF THE FACTORY AT KUNDLI WAS EFFECTED IN THE COURSE OF, OR IN CONSEQUENCE OF SHIFTING THE UNDERTAKING TO A NON-URBAN AREA GIVEN THE FACT THAT NEITHER THE MANUFACTURING UNIT NOR THE ESTABLISHMENT WERE SHIFTED TO A NON-URBAN AREA AND THAT THE ASSESSEE CONTINUED TO OPERATE FROM D-14, SMA INDUST RIAL ESTATE, G.T. KARNAL ROAD, DELHI. THE ASSESSING OFFICER WAS OF THE OPINION THAT AS THE BASIC CONDITION LAID DOWN IN SE CTION 54G OF THE ACT FOR THE CLAIM OF EXEMPTION OF LTCG WAS NOT SATISFIED, THE CLAIM OF EXEMPTION U/S 54G WAS NOT ALLOWABLE. CONS EQUENTLY, I.T.A. NOS. 4747 & 4746/D/2012 ASSESSMENT YEARS 2008-09, 09-10 4 THE ASSESSING OFFICER DETERMINED THE SURPLUS ON SAL E OF FACTORY AT RS.1,32,53,275/- AND ALLOCATED IT BETWEEN LAND AND BUILDING IN THE RATIO OF LAND AND THE TOTAL COVERED AREA. THE ASSESSING OFFICER DETERMINED THE SHORT TERM CAPITAL GAIN (STC G) ON SURPLUS ATTRIBUTABLE TO BUSINESS AT RS. 76,44,306/- AND LTCG ON SURPLUS ATTRIBUTABLE TO LAND AT RS. 33,65,983/-. 3. AGGRIEVED, THE ASSESSEE APPROACHED THE LD. FIRS T APPELLATE AUTHORITY WHO DELETED THE ENTIRE ADDITION OF RS.53, 65,284/- ON ACCOUNT OF GROSS PROFIT ON ENHANCED SALES ON THE BA SIC REASONING THAT THE ASSESSING OFFICER HAD PROCEEDED TO SUBSTIT UTE HIS OWN ESTIMATE FOR THE INCOME COMPUTED ON THE BASIS OF BO OKS OF ACCOUNT WITHOUT EVEN REJECTING THE BOOKS OF ACCOUNT OR INVOKING THE PROVISIONS OF SECTION 145(3) OF THE ACT. 4. THE SECOND ADDITION OF RS.1,09,830/- BEING DISAL LOWANCE OF VEHICLE RUNNING EXPENSES WAS, HOWEVER, CONFIRMED AS NO LOG BOOKS WERE BEING MAINTAINED BY THE ASSESSEE. 5. AS FAR AS THE ISSUE OF DENIAL OF EXEMPTION U/S 5 4G OF THE ACT WAS CONCERNED, THE ASSESSEE DID NOT RAISE THIS ISSU E BEFORE THE LD. FIRST APPELLATE AUTHORITY AT ALL. HOWEVER, THE QUANTUM OF LONG TERM CAPITAL GAINS AND SHORT TERM CAPITAL GAIN WAS I.T.A. NOS. 4747 & 4746/D/2012 ASSESSMENT YEARS 2008-09, 09-10 5 RECOMPUTED BY THE LD. CIT (A). LTCG WAS ENHANCED B Y RS. 52,75,539/- AND THE ASSESSEE WAS GIVEN RELIEF OF RS .82,08,161/- IN STCG BY TAKING INTO ACCOUNT THE CIRCLE RATE IN F ORCE AT THAT POINT OF TIME. NOW, THE DEPARTMENT IS IN APPEAL BE FORE US AND HAS RAISED THE FOLLOWING GROUNDS:- 1. WHETHER LD. CIT (A) HAS ERRED IN FACT AND LAW I N DELETING THE ADDITION IN GP BY IGNORING THE INPUT-O UTPUT NORMS AS ISSUED BY THE CENTRAL EXCISE AUTHORITIES W HICH WAS FOLLOWED BY THE A.O.? 2. WHETHER LD. CIT (A) WAS CORRECT IN DELETING THE G.P. ADDITION BY A.O. DESPITE THE FACT THAT THE ASS ESSEE HAS NOT BEEN MAINTAINING BAY STOCK REGISTER? * 3. WHETHER LD. CIT (A) IS CORRECT IN VALUATION OF LONG TERM CAPITAL GAIN AND SHORT TERM CAPITAL GAIN BY ADOPTING THE DIFFERENT METHODS OF CALCULATING THE S AME? 4. WHETHER LD. CIT (A) IS CORRECT IN VALUATION OF LONG TERM CAPITAL GAIN AND SHORT TERM CAPITAL GAIN BY IGNORING THE ACTUAL SALE CONSIDERATION AND VALUE OF LAND AT WHICH BUILDING WAS BUILT? 5. WHETHER LD. CIT (A) HAS ERRED IN IGNORING FACT THAT TAKING CIRCLE RATE OF RS.9000/- PER SQUARE FEET ATTRACTS A PPLICABILITY OF SECTION 50C OF INCOME TAX ACT, 1961. 6. THE APPELLANT CRAVES LEAVES TO AMEND OR ALTER AL L OR ANY OF THE AFORESAID GROUNDS OF APPEAL AND AMEND, ALTER OR ADD ANY OTHER GROUND OF APPEAL. I.T.A. 4746/DEL/2012 6. IN THIS APPEAL, THE ONLY DISPUTE IS REGARDING GR OSS PROFIT ADDITION ON ESTIMATED ENHANCED SALES. IN THE YEAR UNDER CONSIDERATION, THE ASSESSEE HAD DISCLOSED A G.P. RA TE OF 9.37% ON I.T.A. NOS. 4747 & 4746/D/2012 ASSESSMENT YEARS 2008-09, 09-10 6 THE TURNOVER. THE ASSESSING OFFICER RELIED ON THE FINDINGS OF THE ASSESSING OFFICER IN THE IMMEDIATELY PRECEDING YEAR I.E. ASSESSMENT YEAR 2008-09 IN THE ASSESSEES CASE AND APPLIED THE RATIO OF SCRAP PRODUCTION @41.17% OF TOTAL PRODUCTI ON AND ON THAT BASIS CALCULATED THE TOTAL PRODUCTION OF SCRAP AT 4,08,605.75 KG AS AGAINST 4,84,110 KG SHOWN BY THE ASSESSEE AND TREATED THE BALANCE OF 75,504.25 KG AS UNACCOUNTED PRODUCTION O F FINISHED GOODS. THE UNACCOUNTED SALE WAS WORKED AT RS. 20,9 90,181.50 AND BY APPLYING THE GP RATE OF 9.37% OF GROSS PROFI T OF RS.19,66,780/- WAS WORKED OUT AND ADDED BACK TO THE INCOME OF THE ASSESSEE. IN APPEAL, THE LD. CIT (A) DELETED T HE ENTIRE ADDITION BY HOLDING THAT IN ABSENCE OF ADVERSE MATE RIAL/EVIDENCE, ANY ADDITION BASED ON AN ALTERNATE CALCULATION, IGN ORING THE BOOKS OF ACCOUNTS AND EVEN WITHOUT REJECTING THE BO OKS OF ACCOUNT OF INVOKING THE PROVISIONS OF SECTION 145(3 ) OF THE ACT COULD NOT BE SUSTAINED. AGGRIEVED, THE DEPARTMENT IS NOW IN APPEAL BEFORE US AND HAS RAISED THE FOLLOWING GROUN DS OF APPEAL:- 1. WHETHER LD. CIT(A) HAS ERRED IN FACT AND LAW IN DELETING THE ADDITION IN GP BY IGNORING THE INPUT-O UTPUT NORMS AS ISSUED BY THE CENTRAL EXCISE AUTHORITIES WHICH WAS FOLLOWED BY THE A.O.? 2. WHETHER LD. CIT (A) WAS CORRECT IN DELETING THE G.P. ADDITION BY A.O. DESPITE THE FACT THAT THE ASSESSEE HAS NOT BEEN MAINTAINING DAY TO DAY STOCK REGISTER? I.T.A. NOS. 4747 & 4746/D/2012 ASSESSMENT YEARS 2008-09, 09-10 7 3. THE APPELLANT CRAVES LEAVES TO AMEND OR ALTER A LL OR ANY OF THE AFORESAID GROUNDS OF APPEAL AND AMEND, ALTER OR ADD ANY OTHER GROUND OF APPEAL . 7. THE LD. DR IN HIS ARGUMENTS PLACED HEAVY RELIANC E ON THE ASSESSMENT ORDERS AND SUBMITTED THAT IN VIEW OF THE DETAILED OBSERVATIONS AND FINDINGS OF THE ASSESSING OFFICER, THE LD. CIT(A) WAS PATENTLY WRONG IN DELETING THE ADDITIONS AND TH AT THE ASSESSMENT ORDERS OUGHT TO BE RESTORED. 8. THE LD. AR SUBMITTED THAT AS FAR AS THE G.P. ADD ITION WAS CONCERNED THAT THE ASSESSEE FIRM WAS ENGAGED IN THE BUSINESS OF MANUFACTURE & SALE OF VARIOUS ITEMS OF STAINLESS ST EEL CUTLERY / UTENSILS. MAIN RAW MATERIAL WAS S.S PATTA/PATTI AND THE FINISHED PRODUCTS WERE STAINLESS STEEL CUTLERY/UTENSILS (E.G . KNIFE, SPOON, FORK, LADLE, SERVER, TONG, TURNER ETC.). THE ASSESS EE HAD BEEN MAINTAINING CASH BOOK, LEDGER, SALES BILLS, PURCHAS E BILLS / VOUCHERS, STOCK REGISTER & OTHER SUPPORTING DOCUMEN TS. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSEE HAD FILED THE REQUIRED INFORMATION, DETAILS, DOCUMENTS ETC. AND P RODUCED THE RELEVANT RECORDS. THE AR FURTHER SUBMITTED THAT THE EXCISE & TAXATION DEPTT. OF HARYANA HAD ACCEPTED THE PURCHAS ES & SALES DECLARED BY THE ASSESSEE FOR THE YEARS UNDER CONSID ERATION. THE TRADING RESULTS AS DECLARED BY THE ASSESSEE WERE AC CEPTED BY THE I.T.A. NOS. 4747 & 4746/D/2012 ASSESSMENT YEARS 2008-09, 09-10 8 INCOME TAX DEPTT. VIDE SCRUTINY ASSESSMENT ORDERS F OR A.Y.2005- 06 A.Y. 2006-07. THE LD. AR EMPHASISED THAT IT WAS ONLY AFTER CAREFULLY EXAMINING THE FACTS OF THE CASE, THE CONT ENTS OF THE ASSESSMENT ORDER AND THE SUBMISSIONS / EXPLANATION MADE BY THE ASSESSEE, THAT THE LD. CIT (A) HAD OBSERVED THAT TH E ASSESSEE HAD BEEN MAINTAINING STOCK RECORDS ON DAY TO DAY BASIS. HE ALSO SUBMITTED THAT THE LD. CIT (A), HAD APPRECIATED THE ASSESSEE'S CONTENTION THAT MAINTAINING ITEM-WISE, SHAPE-WISE, SIZE-WISE & USAGE-WISE STOCK OF RAW MATERIAL CONSUMED AND GOODS PRODUCED, ON DAY TO DAY BASIS, WAS NOT FEASIBLE. 9. ON THE ISSUE OF CAPITAL GAINS, THE LD. AR SUBMIT TED THAT DURING THE YEAR UNDER CONSIDERATION, THE ASSESSEE H AD SOLD ITS IMMOVABLE PROPERTY, BUILT ON PLOT NO. 89, KUNDLI, D ISTT SONEPAT (ALONG WITH VARIOUS OTHER ASSETS/FIXTURES), VIDE SA LE DEED DT 28.11.2007, AGAINST TOTAL CONSIDERATION OF RS. 1,51 ,65,000/-. THE ASSESSEE HAD DECLARED PROFIT ON SALE OF THE SAI D FIXED ASSETS, IN ITS P&L A/C FOR THE YEAR UNDER CONSIDERATION, AT RS. 84,38,234/-( RS. 83,80,517/- + RS. 57,717/-). FURTH ER, THE ASSESSEE HAD TREATED THE AMOUNT OF RS. 83,80,877/- AS LONG- TERM CAPITAL GAIN, ON THE PLEA THAT IT IS THE LAND ONLY WHICH APPRECIATED WITH THE PASSAGE OF TIME. THE LD. AR SU BMITTED THAT I.T.A. NOS. 4747 & 4746/D/2012 ASSESSMENT YEARS 2008-09, 09-10 9 THE A.O. HAD WORKED OUT THE COMPOSITE VALUE OF LAND & BUILDING AT RS. 1,32,53,275/-, BY DEDUCTING AN AMOUNT OF RS. 19,11,725/- REPRESENTING THE WDV OF OTHER ASSETS (R S. 26,84,700/-) & ELECTRIC POWER SECURITY AMOUNT (RS. 7,72,775/-). THEREAFTER, THE A.O. HAD ALLOCATED RS. 56,08,969/- TOWARDS LAND & RS.76,44,306/- TOWARDS BUILDING (AGGREGATING AT RS.1,32,53,275/-), AS PER THE FOLLOWING CHART :- LAND AREA ADMEASURING BUILDING AREA ADMEASURING SURPLUS ALLOCATED TO LAND 1,32,53,275 X 1196/2825.9946 SURPLUS ALLOCATED TO BUILDING 1,32,53,275X 1629.9946/2825.9946 1196.0000 SQ YARDS 1629.9946 SQ YARDS 2825.9946 SQ YARDS RS. 56,08,969 RS. 76,44,306 RS. 1,32,53,275 10. THE LD. AR SUBMITTED THAT THE A.O. HAD WORKED O UT THE LONG-TERM CAPITAL GAIN AND SHORT-TERM CAPITAL GAIN AS PER THE FOLLOWING CHART - I.T.A. NOS. 4747 & 4746/D/2012 ASSESSMENT YEARS 2008-09, 09-10 10 11. THE LD. AR SUBMITTED THAT THE LD. CIT (A) HAD F ORMED A VIEW THAT THE METHOD ADOPTED BY THE A.O. FOR APPORTIONME NT OF THE VALUE BETWEEN LAND & BUILDING, WAS NOT PROPER. DURI NG THE FIRST APPELLATE PROCEEDINGS, THE ASSESSEE HAD INFORMED TH E LD. CIT(A) THAT THE CIRCLE RATE FOR INDUSTRIAL LAND LOCATED AT HSIDC, KUNDLI, SONEPAT WAS RS. 9,000/- PER SQ. YRD. IN ORDER TO AR RIVE AT A CONCLUSION IN THIS REGARD, THE LD. CIT (A) HAD REQU IRED THE JCIT, SONEPAT (HARYANA) TO COLLECT THE INFORMATION REGARD ING THE PRESCRIBED RATES / CIRCLE RATES / MINIMUM RATES FOR REGISTRATION OF PROPERTIES IN SONEPAT DURING F.Y. 2007-08, PARTICUL ARLY AS ON 28.11.2007 [DATE OF SALE] FOR INDUSTRIAL PLOT LOCAT ED AT HSIDC, KUNDLI, SONEPAT AND CONSTRUCTED AREA ON INDUSTRIAL PLOT FROM THE COMPETENT AUTHORITY AND THE LD. CIT(A) HAD BEEN INF ORMED BY THE JCIT, SONEPAT VIDE HIS LETTER DT. 04.05.2012 THAT T HE CIRCLE RATE FOR INDUSTRIAL PLOT LOCATED AT HSIDC, KUNDLI SONEPA T WAS RS. LONQ - TERM CAPITAL GAIN 56,08,969 SALE CONSIDERATION LESS: INDEXED COST OF ACQUISITION 22.42.986 18.19.628 X 551 33.65.933 447 SHORT-TERM CAPITAL GAIN (I) ON SALE OF BUILDING SALE CONSIDERATION 76,44,306 LESS: WDV 0 76,44,306 (II)ON SALE OF OTHER ASSETS 19,11,725 NIL LESS: WDV 19.11.725 76.44.306 I.T.A. NOS. 4747 & 4746/D/2012 ASSESSMENT YEARS 2008-09, 09-10 11 9000/- PER SQ. YRD AND ALSO THAT NO RATE FOR CONSTR UCTED AREA WAS PRESCRIBED. 12. THE LD. AR SUBMITTED THAT BASED ON THESE CIRCL E RATES, THE LD. CIT(A) HAD REACHED A CONCLUSION THAT THE SALE CONSIDERATION FOR LAND BE ADOPTED AT RS. 1,07,64,000/- (1196 SQ. YDS X RS. 9,000/-) AND THE SALE CONSIDERATION FOR BUILDING & OTHER ASSETS, BE ADOPTED AT RS.44,01,000/- (BEING THE DIFFERENCE OF RS. 1,51,65,000/- & RS. 1,07,64,000/-) . THE LD. AR ALS O SUBMITTED THAT THE LD. CIT(A) HAD VERIFIED THE ASSESSEE'S CLA IM THAT THE A.O. HAD NOT ALLOWED THE DEDUCTION ON ACCOUNT OF CO ST OF ACQUISITION OF BUILDING AND OTHER ASSETS, WHOSE WDV WAS RS. 49,64855/- AND THAT THE LD. CIT(A) HAD FOUND SUCH C LAIM OF THE ASSESSEE IN ORDER. THE LD. AR ALSO SUBMITTED THAT T HE SUB- REGISTRAR / STAMP VALUATION AUTHORITY HAD ACCEPTED THE VALUATION OF THE ABOVE REFERRED PROPERTY DECLARED A T RS. 1,51,65,000/- BY THE ASSESSEE AS SELLER AND SMT. JY OTI KUKREJA AS PURCHASER. ACCORDINGLY, THE SUB REGISTRAR HAD CH ARGED STAMP DUTY OF RS. 6,06,600/-, @ 4% OF THE TOTAL SAL E VALUE OF RS.1,51,65,000/-. THE LD. AR PLACED RELIANCE ON THE ORDERS OF THE LD. CIT (A) AND SUBMITTED THAT THE SAME SHOULD BE UPHELD. I.T.A. NOS. 4747 & 4746/D/2012 ASSESSMENT YEARS 2008-09, 09-10 12 13. WE HAVE HEARD THE RIVAL SUBMISSIONS AND HAVE GI VEN THEM DUE CONSIDERATION. ALSO THE RECORDS HAVE BEEN PERU SED. A PERUSAL OF THE IMPUGNED ORDERS SHOWS THAT BOTH THE ISSUES HAVE BEEN DEALT AT LENGTH BY THE LD. CIT (A). AS FAR AS THE ISSUE OF G.P. IS CONCERNED, THE SAME IS DISCUSSED IN GREAT DETAIL IN PARAS 8.1 TO 8.9 OF THE IMPUGNED ORDER FOR ASSESSMENT YEAR 2008- 09 AS UNDER:- 8.1 AFTER PERUSAL OF THE ASSESSMENT ORDER AND THE SUBMISSIONS OF THE ASSESSEE DURING THE COURSE OF ASSESSMENT PROCEEDINGS, IT IS SEEN THAT THE ASSESSI NG OFFICER HAS PRIMARILY RELIED UPON THE LETTER ISSUED BY THE CENTRAL EXCISE AUTHORITIES TO M/S JAGDAMBA EXPORTS, AS PER WHICH THE INPUT-OUTPUT NORMS FOR KITCHENWARE (CUTLERY) HAVE BEEN FIXED TO SPECIFY THAT AS AGAINS T INPUT OF 1.700 THERE SHOULD BE AN OUTPUT OF 1.000. THIS F IXATION OF INPUT- OUTPUT NORMS AS PER THE LETTER TO M/S JAG DAMBA EXPORTS IS STATED BY THE COUNSEL OF THE ASSESSEE TO BE SPECIFICALLY FOR THAT CONCERN AND ONLY FOR CALCULAT ION OF FISCAL INCENTIVES. THOUGH, EVEN IF THE NORMS ARE FO R CALCULATION OF FISCAL INCENTIVES, THEY CANNOT ENTIR ELY BE BRUSHED ASIDE, AS THEY BEING ISSUED BY THE CENTRAL EXCISE DEPARTMENT TO AN ASSESSEE ENGAGED IN A SIMIL AR LINE OF TRADE, GIVE AN INDICATION OF THE INPUT-OUTP UT RATIO EXPECTED IN THIS LINE OF TRADE; BUT THEY CANNOT BE BLINDLY FOLLOWED FOR EVERY ASSESSEE AND DEFINITELY CANNOT B E USED TO REJECT THE BOOKS OF ACCOUNTS WITHOUT ANY DISCREPANCY BEING FOUND IN THE BOOKS OF ACCOUNTS OR ANY ADVERSE EVIDENCE OR MATERIAL BEING FOUND AGAINST TH E PURCHASES, PRODUCTION OR SALES OF THE ASSESSEE. THE RESULTS SHOWN BY ANY ASSESSEE IN THE SAME LINE OF T RADE CAN BE COMPARED WITH THESE NORMS AND THE BOOKS OF ACCOUNTS CAN BE EXAMINED IN CASE THERE IS ANY DEVIA TION. HOWEVER, EVEN IN THE CASE OF SIGNIFICANT DEVIATION FROM THESE NORMS, THE INCOME SHOWN BY ANY ASSESSEE CAN B E DISTURBED ONLY AFTER SOME EVIDENCE OR MATERIAL IS F OUND AGAINST THE PURCHASES, PRODUCTION OR SALES, OR ACCO UNTING I.T.A. NOS. 4747 & 4746/D/2012 ASSESSMENT YEARS 2008-09, 09-10 13 BY THE ASSESSEE. THESE NORMS, THOUGH THEY MAY BE USEFUL TO RESTRICT FISCAL BENEFITS BY THE CENTRAL E XCISE AUTHORITIES; CANNOT BE USED TO REJECT THE BOOKS OF ACCOUNTS OF THE ASSESSEE, AND TO SUBSTITUTE THE INCOME AS PE R THE BOOKS OF ACCOUNTS, BY THE INCOME ESTIMATED BY THE ASSESSING OFFICER, USING THESE NORMS, WITHOUT ANY ADVERSE EVIDENCE OR MATERIAL AT ALL. 8.2 THE ASSESSING OFFICER HAS MENTIONED IN PARA 5 OF THE ASSESSMENT ORDER THAT THE ASSESSEE HAS CLAIMED TO H AVE MAINTAINED COMPLETE RECORD RELATING TO PRODUCTION, STOCK ETC. IT HAS BEEN FURTHER ADMITTED BY THE ASSESSING OFFICER THAT THE ASSESSEE HAS PRODUCED AN ITEM REGISTER, WH ICH GIVES CHRONOLOGICAL DETAILS OF PURCHASES OF SS PATT A/ PATTI, DETAILS OF QUANTITY SENT FOR MANUFACTURE OF CUTLERY AND DETAILS OF QUANTITY LEFT. REGARDING THE FINISHE D / SEMI FINISHED GOODS, THE ASSESSING OFFICER HAS STATED TH AT THE ASSESSEE HAS FURNISHED DETAILS OF QUANTITY WISE PURCHASES AND SALES. TO COUNTER THE CLAIM OF THE ASSESSEE THAT COMPLETE RECORD RELATING TO PRODUCTIO N AND STOCK ETC. HAS BEEN KEPT, THE ASSESSING OFFICER HAS STATED THAT:- (I) THE ASSESSEE HAS MAINTAINED ONLY COMPUTER GENERATED DETAILS AND NO PRIMARY/MANUAL RECORD HAS BEEN PRODUCED IN SUPPORT OF THESE COMPUTERIZED DETA ILS, (II) THAT NO DAY TO DAY PRODUCTION OF DIFFERENT CATEGORIES OF CUTLERY OR UTENSILS HAVE BEEN MAINTAI NED, AND (III) THE DETAILS OF QUANTITY WISE PURCHASE AND SALES HAVE BEEN PREPARED ON BASIS OF VARIOUS VOUCHE RS ENTERED IN THE BOOKS. 8.3 THE ABOVE THREE OBSERVATIONS/OBJECTIONS OF THE ASSESSING OFFICER AGAINST THE BOOKS OF ACCOUNTS AND ACCOUNTING BY THE ASSESSEE ARE DISCUSSED BELOW:- (I) THE BOOKS OF ACCOUNTS CANNOT BE REJECTED MERELY ON THE BASIS THAT THEY ARE COMPUTER GENERATE D OR THAT THE BOOKS OF ACCOUNTS ARE DIRECTLY MAINTAINED ON COMPUTER. NO DOUBT, VERY OFTEN MANUAL RECORDS ARE MAINTAINED FOR THE PRIMARY ENTRIES AND THEREAFTER T HE I.T.A. NOS. 4747 & 4746/D/2012 ASSESSMENT YEARS 2008-09, 09-10 14 ENTRIES ON THE COMPUTER ARE LATER DONE BY THE COMPU TER OPERATOR, BUT THIS DOES NOT MEAN THAT FOR COMPUTERI ZED RECORDS, A PARALLEL SET OF MANUAL RECORDS HAVE TO B E MAINTAINED BY EVERY ASSESSEE. IT MAY BE POSSIBLE TH AT A PARTICULAR ASSESSEE MAKES THE ENTRIES DIRECTLY ON COMPUTER AND THIS CANNOT BE A BASIS FOR REJECTION O F THE COMPUTERIZED BOOKS OF ACCOUNTS. IT WOULD HAVE BEEN ANOTHER CASE IF THERE WAS ANY EVIDENCE OR MATERIAL TO SHOW THAT THE ASSESSEE MAINTAINS MANUAL BOOKS ALSO AND THOSE ARE NOT BEING PRODUCED BEFORE THE ASSESSI NG OFFICER, BUT THIS IS NOT THE CASE HERE. (II) THE ASSESSEE HAS NOT MAINTAINED THE DAY TO DAY PRODUCTION OF DIFFERENT CATEGORIES OF CUTLERY O R UTENSILS AND FOR THIS THE COUNSEL OF THE ASSESSEE H AS STATED DURING THE APPELLATE PROCEEDINGS THAT THERE ARE A VERY LARGE NUMBER OF CUTLERY ITEMS OF DIFFERENT DES IGNS, SIZES, SHAPES ETC. AND HAS CLAIMED THAT MAINTAINING ITEM WISE, DESIGN WISE, SHAPE WISE, SIZE WISE AND USAGE WISE STOCK RECORD WAS NOT PRACTICALLY FEASIBLE. IN FACT, IF THE ASSESSING OFFICER HAD A DOUBT THAT THE ASSESSEE WAS RESORTING TO SOME MANIPULATION IN THE PRODUCTION OF DIFFERENT ITEMS BY INFLATING THE PRODUCTION OF SOME ITEMS AND SUPPRESSING THE PRODUCTION OF OTHER ITEMS, HE S HOULD HAVE SPECIFICALLY MENTIONED THAT AND SHOULD HAVE INVESTIGATED ON THOSE LINES. HOWEVER, EVEN IF THERE IS INCREASE IN THE PRODUCTION OF ONE ITEM AND DECREASE IN THE PRODUCTION OF ANOTHER, THE OVERALL POSITION WILL NO T CHANGE. IN ANY CASE, NON MAINTENANCE OF DAY TO DAY PRODUCTI ON OF DIFFERENT CATEGORIES OF CUTLERY OR UTENSILS WAS AT BEST AN ISSUE WHICH COULD HAVE BEEN INVESTIGATED FURTHER IF THE ASSESSING OFFICER HAD ANY DOUBT REGARDING MANIPULAT IONS BEING DONE IN INTER SE PRODUCTION OF ITEMS. HOWEVER , NEITHER THE ASSESSING OFFICER HAS DONE INVESTIGATIO N IN THIS REGARD, NOR ANY DOUBT FOR ANY SUCH MANIPULATIO NS HAVE BEEN EXPRESSED, AND THIS ISSUE HAS JUST BEEN U SED AS AN EXCUSE TO BRUSH ASIDE THE RESULTS ON THE BASI S OF THE BOOKS OF ACCOUNTS OF THE ASSESSEE, WITHOUT ANY EVIDENCE OR MATERIAL TO THE CONTRARY. (III) THE ASSESSING OFFICER HAS ALSO COMMENTED THAT THE ASSESSEE HAS FURNISHED THE DETAILS OF QUANTITY WISE PURCHASE AND SALES PREPARING THEM ON THE BASIS OF I.T.A. NOS. 4747 & 4746/D/2012 ASSESSMENT YEARS 2008-09, 09-10 15 VOUCHERS ENTERED IN THE BOOKS. NO ADVERSE INFERENCE CAN AGAIN BE DRAWN FROM THIS OBSERVATION AND IN FACT TH IS OBSERVATION OF THE ASSESSING OFFICER RATHER SUPPORT S THE CASE OF THE ASSESSEE THAT THE QUANTITIES OF PURCHAS ES AND SALES TALLY WITH THE VOUCHERS ENTERED IN THE BOOKS. 8.4 THUS THE ABOVE ANALYSIS OF PARA 5 OF THE ASSESSMENT ORDER IN WHICH THE ASSESSING OFFICER HAS COMMENTED UPON THE ACCOUNTING BY THE ASSESSEE SHOWS THAT THERE IS NOTHING IN THESE COMMENTS TO COME TO AN ADVERSE CONCLUSION AGAINST THE ASSESSEE. 8.5 IN PARA 6.3 TO 6.8 ABOVE, THE COMMENTS OF THE ASSESSING OFFICER REGARDING THE SURVEY CONDUCTED ON THE BUSINESS PREMISES OF THE ASSESSEE ON 28.09.2010 (RELEVANT TO A.Y. 2011-12), AND THE STATEMENT OF SH . JAVINDER SINGH (PARTNER) RECORDED ON 29.09.2010 (REPRODUCED ON PAGE 3 TO 5 OF THE ASSESSMENT ORDER) HAVE BEEN DISCUSSED. IT IS SEEN THAT THE SURVEY AND THE STATEMENT OF SH. JAVINDER SINGH WAS RELEVANT FOR ASSESSMENT YEAR 2011-12, WHEREAS THE ASSESSING OFFI CER WAS ASSESSING THE CASE OF THE ASSESSEE FOR ASSESSME NT YEAR 2008-09. THERE IS NOTHING IN THE ASSESSMENT OR DER OR THE STATEMENT OF SH. JAVINDER SINGH TO SHOW THAT THERE WAS ANY RELEVANCE OF THE SURVEY OR THE STATEMENT FO R THE RELEVANT ASSESSMENT YEAR I.E. A.Y. 2008-09. FURTHER , THE ONLY QUESTIONS IN THE STATEMENT WHICH CAN HAVE ANY RELEVANCE FOR STOCK AND ACCOUNTING BY THE ASSESSEE ARE QUESTIONS NUMBER 3 AND 4, AS MENTIONED IN PARA 6.5 ABOVE. AS ALREADY MENTIONED IN THAT PARA 6.5, IT IS OBVIOUS FROM THE REPLY OF SH. JAVINDER SINGH THAT H E IS REPLYING FOR ANY STOCK RECORDS IN ADDITION TO THE COMPUTERIZED RECORDS WHICH INCLUDE THE STOCK RECORD S, AND WHEN HE SAYS THAT THERE IS NO STOCK REGISTER IN REPLY TO QUESTION 3, IT IS EVIDENT THAT HE IS REFERRING T O STOCK RECORDS SEPARATE FROM THE COMPUTERIZED STOCK RECORD S, AS IN THE SAME REPLY, HE MENTIONS THAT THE STOCK DETAI LS ON COMPUTER HAVE ALREADY BEEN PROVIDED TO THE QUESTION ER. AGAIN, AS MENTIONED IN PARA 6.5 ABOVE, IN REPLY TO QUESTION 4, SH. JAVINDER SINGH STATES THAT THERE IS NO STOCK REGISTER OR RECORD SEPARATELY REGARDING THE V ARIOUS STAGES OF MANUFACTURE OF GOODS, WHICH DOES NOT IMPL Y THAT ANY STOCK RECORDS ARE NOT BEING MAINTAINED, BU T ONLY THAT THE STOCK RECORDS ON THE COMPUTER ARE BEING RE LIED UPON BY THE ASSESSEE, AND THAT THE ASSESSEE IS NOT I.T.A. NOS. 4747 & 4746/D/2012 ASSESSMENT YEARS 2008-09, 09-10 16 MAINTAINING ANY STOCK RECORDS FOR THE VARIOUS STAGE S OF MANUFACTURING. HOWEVER, AS DISCUSSED IN PARA 8.3 (I I), ABOVE, NON MAINTENANCE OF DAY TO DAY PRODUCTION OF DIFFERENT CATEGORIES OF CUTLERY OR UTENSILS WAS AT BEST AN ISSUE WHICH COULD HAVE BEEN INVESTIGATED FURTHER IF THE ASSESSING OFFICER HAD ANY DOUBT REGARDING MANIPULAT IONS BEING DONE IN INTER SE PRODUCTION OF ITEMS. HOWEVER , NEITHER THE ASSESSING OFFICER HAS DONE INVESTIGATIO N IN THIS REGARD, NOR ANY DOUBT FOR ANY SUCH MANIPULATIO NS HAVE BEEN EXPRESSED, AND THIS ISSUE HAS JUST BEEN U SED AS AN EXCUSE TO BRUSH ASIDE THE RESULTS ON THE BASI S OF THE BOOKS OF ACCOUNTS OF THE ASSESSEE, WITHOUT ANY EVIDENCE OR MATERIAL TO THE CONTRARY. 8.6 THUS IT IS ALSO SEEN FROM AN ANALYSIS OF PARA 5.1 OF THE ASSESSMENT ORDER AND THE STATEMENT OF SH . JAVINDER SINGH, REPRODUCED ON PAGE 3 TO 5 OF THE ASSESSMENT ORDER THAT THERE IS NOTHING FOR ANY ADVE RSE CONCLUSION REGARDING THE STOCK OR THE ACCOUNTING BY THE ASSESSEE. 8.7 IN PARA 5.3 OF THE ASSESSMENT ORDER (REP RODUCED ABOVE IN PARA 6.9 OF THIS ORDER), THE ASSESSING OFF ICER HAS CONCLUDED THAT THE PURCHASES OF RAW MATERIAL AND SALE OF FINISHED GOODS CANNOT BE SAID TO BE COMPLETELY VERIFIABLE. THE ASSESSING OFFICER HAS COME TO THIS CONCLUSION WITHOUT ANY ADVERSE INFERENCE OR FINDING AGAINST THE PURCHASES OF RAW MATERIAL AND SALE OF FINISHED GOODS BY THE ASSESSEE. IN FACT THERE IS NO ADVERSE EVIDENCE OR MATERIAL AT ALL REGARDING THE PURCHASES OR SALES OF THE ASSESSEE. THE ASSESSING O FFICER HAS DOUBTED THE VERIFIABILITY OF THE PURCHASES AND SALES MERELY ON THE BASIS OF HIS COMMENTS REGARDING THE N ORMS BY THE CENTRAL EXCISE AUTHORITIES, THE METHOD OF ACCOUNTING BY THE ASSESSEE (INCLUDING THE NON MAINTENANCE OF STOCK RECORDS FOR DIFFERENT STAGES A ND CATEGORIES OF GOODS) AND THE SURVEY CONDUCTED AT TH E ASSESSEES PREMISES IN F.Y. 2010-11 (RELEVANT TO A. Y. 2011-12) AND THE STATEMENT OF SH. JAVINDER SINGH (PARTNER), WHICH ALL HAVE BEEN DISCUSSED AND ANALYS ED ABOVE, AND IT IS CLEAR THAT THE ASSESSING OFFICER H AS NOT AT ALL BEEN ABLE TO BRING ANYTHING ON RECORD FROM WHIC H ADVERSE CONCLUSION AGAINST THE BOOKS OF ACCOUNTS OF THE I.T.A. NOS. 4747 & 4746/D/2012 ASSESSMENT YEARS 2008-09, 09-10 17 ASSESSEE OR THE PURCHASES, PRODUCTION OR SALES BY T HE ASSESSEE CAN BE DRAWN. 8.8 THE ASSESSING OFFICER FURTHER MENTIONED IN PARA 5.3 OF THE ASSESSMENT ORDER THAT A FAIR ESTIMATE OF PRODUCTION OF GOODS, CAN BE MADE ON THE BASIS OF DE TAILS OF SCRAP GENERATED AS PER THE ASSESSEES RECORDS AN D KEEPING IN VIEW THE NORMS OF INPUT/OUTPUT LAID DOWN BY THE CENTRAL EXCISE AUTHORITIES. HOWEVER, AS ALREADY MENTIONED ABOVE IN PARA 8.1, THE NORMS GIVE AN INDICATION OF THE INPUT-OUTPUT RATIO EXPECTED IN TH IS LINE OF TRADE; BUT THEY CANNOT BE BLINDLY FOLLOWED FOR EVER Y ASSESSEE. THE RESULTS SHOWN BY ANY ASSESSEE IN THE SAME LINE OF TRADE CAN BE COMPARED WITH THESE NORMS AND THE BOOKS OF ACCOUNTS CAN BE EXAMINED IN CASE THERE IS ANY DEVIATION. HOWEVER, EVEN IN THE CASE O F SIGNIFICANT DEVIATION FROM THESE NORMS, THE INCOME SHOWN BY ANY ASSESSEE CAN BE DISTURBED ONLY AFTER SOME EVIDENCE OR MATERIAL IS FOUND AGAINST THE PURCHASES, PRODUCTION OR SALES, OR ACCOUNTING BY TH E ASSESSEE. THESE NORMS, THOUGH THEY MAY BE USEFUL TO RESTRICT FISCAL BENEFITS BY THE CENTRAL EXCISE AUTH ORITIES, CANNOT BE USED TO REJECT THE BOOKS OF ACCOUNTS OF T HE ASSESSEE, AND TO SUBSTITUTE THE INCOME AS PER THE B OOKS OF ACCOUNTS, BY THE INCOME ESTIMATED BY THE ASSESSI NG OFFICER, USING THESE NORMS, WITHOUT ANY ADVERSE EVIDENCE OR MATERIAL AT ALL. THE ASSESSING OFFICER HAS PROCEEDED IN PARA 5.4 AND PARA 5.5 OF THE ASSESSMEN T ORDER TO ESTIMATE AND ENHANCE THE PURCHASES AND SAL ES AND INCOME OF THE ASSESSEE ON THE BASIS OF THESE NO RMS, WITHOUT ANY ADVERSE EVIDENCE OR MATERIAL AGAINST TH E PURCHASES, PRODUCTION OR SALES OF THE ASSESSEE, AND HAS ENHANCED THE GROSS PROFIT BY ESTIMATE BY AN AMOUNT OF RS.53,65,284/- TO THE TOTAL INCOME OF THE ASSESSEE. IT IS OBVIOUS THAT THIS ACTION OF THE ASSESSING OFFICER C ANNOT BE SUSTAINED AS THERE IS NO EVIDENCE OR MATERIAL AG AINST THE PURCHASES, PRODUCTION OR SALES BY THE ASSESSEE; AND ALSO THE COMMENTS OF THE ASSESSING OFFICER REGARDIN G THE ABOVE NORMS, THE ACCOUNTING BY THE ASSESSEE, AND TH E SURVEY AND STATEMENT IN F.Y. 2010-11, DISCUSSED IN THE ASSESSMENT ORDER, HAVE ALL BEEN ANALYSED ABOVE AND SEEN TO CONCLUDE NOTHING ADVERSE AGAINST THE ASSESS EE. FURTHER, IT IS ALSO SEEN THAT THE ASSESSING OFFICER HAS SUBSTITUTED HIS OWN ESTIMATE FOR THE INCOME COMPUTE D ON I.T.A. NOS. 4747 & 4746/D/2012 ASSESSMENT YEARS 2008-09, 09-10 18 THE BASIS OF BOOKS OF ACCOUNTS OF THE ASSESSEE, WIT HOUT EVEN REJECTING THE BOOKS OF ACCOUNTS OR INVOKING TH E PROVISIONS OF SECTION 145(3). IT HAS ALREADY BEEN DISCUSSED ABOVE THAT THERE WAS NO EVIDENCE OR MATER IAL TO REJECT THE BOOKS OF ACCOUNTS OF THE ASSESSEE. 8.9 IN VIEW OF THE ABOVE, THE ADDITION OF RS.53,6 5,284/- TO THE INCOME ON THE BASIS OF ENHANCEMENT OF GROSS PROFIT OF THE ASSESSEE, CANNOT BE SUSTAINED, AND IS HEREBY DELETED . (DELETED: RS.53,65,284/-) 14. FOR ASSESSMENT YEAR 2009-10 ALSO, A SIMILAR REA SONING AND DETAILED DISCUSSION IS FOUND ON PAGES 3 TO 18 OF TH E IMPUGNED ORDER. IN VIEW OF THE DETAILED ANALYSIS AND ADJUDI CATION OF THE LD. CIT (A) AND ALSO IN VIEW OF THE FACT THAT THE DEPAR TMENT COULD NOT NEGATE THE FINDINGS OF THE LD. CIT (A) ON THE ISSUE BEFORE US ALSO, WE FIND NO REASON TO INTERFERE AND WE ACCORDINGLY D ISMISS GROUND NOS. 1 AND 2 IN I.T.A. NO. 4746 AND GROUND NO. 2 AN D 3 IN I.T.A. NO. 4747 AND UPHOLD THE FINDINGS OF THE LD. CIT (A) . 15. AS FAR AS THE ISSUE OF CAPITAL GAINS IS CONCERN ED IT IS AGAIN SEEN THAT THE LD. CIT (A) HAS ARRIVED AT A REASONED CONCLUSION AFTER A DETAILED DISCUSSION WHICH IS FOUND IN PARAS 13.1 TO 13.9 OF THE IMPUGNED ORDER. THE RELEVANT PARAGRAPHS ARE BE ING REPRODUCED HERE FOR A READY REFERENCE:- I.T.A. NOS. 4747 & 4746/D/2012 ASSESSMENT YEARS 2008-09, 09-10 19 13.1 AS AGAINST INCOME FROM CAPITAL GAINS ON SALE OF FACTORY BEING DISCLOSED AT NIL BY THE ASSESSEE IN THE RETUR N OF INCOME, THE ASSESSING OFFICER HAS ASSESSED THE LONG TERM CAPITA L GAINS AT RS.33,65,983/- AND THE SHORT TERM CAPITAL GAINS ON SALE OF FACTORY AT RS.76,44,306/-, AGAINST WHICH THE ASSESS EE IS IN APPEAL AS PER GROUNDS OF APPEAL 1 (C) AND 1 (D). 13.2 THE ASSESSING OFFICER HAS APPLIED AN AD-HOC S YSTEM OF BIFURCATION OF THE SALE CONSIDERATION BETWEEN THE L AND AND BUILDING AND HAS TAKEN THE TOTAL AREA OF LAND AND A DDED TO IT THE TOTAL COVERED AREA AND HAS ARRIVED AT THE TOTAL OF 2S25.9946 SQ. YARD, FROM WHICH THE SURPLUS HAS BEEN ALLOCATED BY THE ASSESSING OFFICER. THIS IS NOT AT ALL A PROPER METHOD FOR APP ORTIONMENT OF THE VALUE BETWEEN LAND AND BUILDING AND CANNOT BE ACCEP TED PARTICULARLY WHEN THERE ARE ALTERNATE AND LOGICAL M ETHODS AVAILABLE FOR THE VALUATION. IN FACT THE DM/DC/COLL ECTOR OF EACH DISTRICT DECLARES THE CIRCLE RATES AND EVEN IF NO O THER RATES ARE AVAILABLE, AT LEAST THE CIRCLE RATES DECLARED BY TH E COLLECTOR OF THE DISTRICT CAN BE USED FOR VALUATION RATHER THAN VALU ATION ON THE BASIS OF AD-HOC METHODS SUCH AS THAT APPLIED BY THE ASSESSING OFFICER. THE ASSESSEE INFORMED THAT THE CIRCLE RATE S FOR INDUSTRIAL PLOT IN KUNDLI, SONEPAT WAS RS.9,000/- PER SQ. YARD . THE JOINT COMMISSIONER OF INCOME TAX, SONEPAT, HARYANA WAS RE QUIRED TO COLLECT THE INFORMATION REGARDING THE PRESCRIBED RA TES/ CIRCLE RATES / MINIMUM RATES FOR REGISTRATION OF PROPERTIES IN S ONEPAT DURING THE FINANCIAL YEAR 2007-08, PARTICULARLY AS ON 28.1 1.2007 (DATE OF SALE OF FACTORY), FOR THE FOLLOWING:- 1. HSIDC INDUSTRIAL ESTATE, KUNDLI, SONEPAT (FOR INDUS TRIAL PLOT) 2. CONSTRUCTED AREA IN INDUSTRIAL PLOT (IF ANY) THE OFFICE OF THE JOINT COMMISSIONER OF INCOME TAX, SONEPAT RANGE, SONEPAT VIDE THEIR LETTER DATED 04.05.12 HAV E ENCLOSED THE COLLECTOR RATE OF HSIDC, KUNDLI FOR THE PERIOD 2007 -08 AS RECEIVED FROM SUB REGISTRAR SONEPAT, AS PER WHICH THE RATE F OR HSIDC INDUSTRIAL PLOT, KUNDLI IS RS.9,000/- PER SQ. YARD. THE LETTER DATED 04.05.2012 ALSO INFORMS THAT NO RATE FOR CONSTRUCTE D PLOT IS PRESCRIBED BY THE LOCAL AUTHORITY. 13.3 AS THE MINIMUM RATES FOR INDUSTRIAL PLOT IN H SIDC KUNDLI HAVE BEEN FIXED AT RS.9,000/- PER SQ. YARD, THERE I S NO LOGIC IN TAKING THE VALUE OF LAND AS ON DATE OF SALE AT A MU CH LOWER RATE, WHICH HAS BEEN DONE BY THE ASSESSING OFFICER ON AN AD-HOC BASIS WITHOUT ANY PROPER JUSTIFICATION. IT HAS BEEN INFOR MED FROM THE I.T.A. NOS. 4747 & 4746/D/2012 ASSESSMENT YEARS 2008-09, 09-10 20 OFFICE OF JCIT SONEPAT RANGE THAT NO RATE HAS BEEN PRESCRIBED FOR THE CONSTRUCTED PLOT. IN NORMAL SITUATIONS THE VALU E OF LAND APPRECIATES WHEREAS THE VALUE OF THE CONSTRUCTION U PON IT DEPRECIATES. HENCE, THE BEST OPTION IS TO TAKE THE MINIMUM PRESCRIBED RATES FOR INDUSTRIAL LAND AND AFTER DETE RMINING THE VALUE OF THE LAND THE BALANCE CAN BE APPORTIONED TO THE CONSTRUCTION. IT IS WELL KNOWN THAT IN CASES WHERE THE PROPERTY INCLUDES BOTH LAND AND BUILDING, NORMALLY IT IS THE LAND WHOSE VALUE APPRECIATES AND HENCE THE PRIMARY FOCUS HAS T O BE ON THE VALUATION OF THE LAND AND ONLY SECONDARILY ON THE C ONSTRUCTION WHICH STANDS UPON IT, UNLESS THERE IS SOME SPECIAL FEATURE IN THE CONSTRUCTION DUE TO WHICH THERE IS DEVIATION FROM T HIS COMMON SITUATION. THERE IS NOTHING TO SHOW THAT THE CONSTR UCTION UPON THE LAND WAS THE REAL REASON FOR APPRECIATION IN VALUE AND NOT THE LAND ITSELF. ACCORDINGLY, THE VALUE ATTRIBUTED TO T HE LAND IS WORKED OUT AT RS. 1,07,64,000/- (1196 SQ. YARDS X RS.9,000 /-). SINCE THE ENTIRE CONSIDERATION IS RS. 1,51,65,000/- AND THE M INIMUM VALUATION OF LAND WORKS OUT TO RS. 1,07,64,000/-, T HE BALANCE LEFT FOR APPORTIONMENT TO BUILDING AND OTHER DEPRECIABLE ASSETS IS RS.44,01,000/-. THE LD. COUNSEL OF THE ASSESSEE SUB MITTED THAT THE ASSESSING OFFICER HAS NOT ALLOWED THE DEDUCTION FOR COST OF ACQUISITION FOR BUILDING AND OTHER ASSETS WHOSE WDV SHOULD BE TAKEN AT RS.49,64,855/-. 13.4 AS PER THE ORDERSHEET ENTRY DATED 26.04.\2 T HE ASSESSEE WAS REQUIRED TO EXPLAIN AS TO WHY THE LONG TERM CAP ITAL GAIN BE NOT ADOPTED AT RS.86,41,522/- AND THE SHORT TERM CA PITAL GAIN ON SALE OF FACTORY BE TAKEN AT RS.5,63,855/- (LOSS). S INCE AN ENHANCEMENT WAS PROPOSED IN THE LONG TERM CAPITAL G AIN ASSESSED BY THE ASSESSING OFFICER, WHO ASSESSED IT AT RS.33,65,983/-, THE ASSESSEE WAS INFORMED THAT THIS MAY BE TREATED AS OPPORTUNITY U/S 251(2) OF THE I.T. ACT F OR SHOWING CAUSE AGAINST ENHANCEMENT OF INCOME FROM LONG TERM CAPITA L GAIN. THE RELEVANT ORDERSHEET ENTRY DATED 26.04A2 IS AS UNDER :- IT IS SEEN THAT THE AO HAS APPLIED AN AD-HOC SYSTE M OF BIFURCATION OF SALE CONSIDERATION BETWEEN LAND AND BUILDING ON A AREA PROPORTIONATE BASIS AND HAS NOT AT ALL ALLOWED DEDU CTION ON ACCOUNT OF COST OF ACQUISITION WHILE COMPUTING SHOR T TERM CAPITAL GAIN. LD. COUNSEL HAS SUBMITTED THAT WHEN THE CIRCL E RATE FOR LAND IS AVAILABLE AT RS.9,000/- PER SQ. YARD FOR IN DUSTRIAL LAND AT HSIDC, KUNDLI, ONLY THAT RATE CAN BE APPLIED BY THE AO FOR I.T.A. NOS. 4747 & 4746/D/2012 ASSESSMENT YEARS 2008-09, 09-10 21 CALCULATING THE SALE CONSIDERATION FOR LAND AND THE REMAINING CONSIDERATION IS TO GO TOWARDS BUILDING ETC. HOWEVER, IT IS OBSERVED THAT APPLYING A RATE OF RS. 9,000/- PER SQUARE YARD FOR LAND, THE SALE CONSIDERATION ALLOWA BLE TO LAND WORKS OUT TO RS. 1,07,64,000/-. AS AGAINST THIS, AO HAS ADOPTED A FIGURE OF RS.56,08,969/- AND WORKED OUT LONG TERM C APITAL GAIN AT RS.33,65,983/-. THE COUNSEL FOR THE ASSESSEE IN HIS SUBMISSION DATED 24.02.12, HAS WORKED OUT THE LONG TERM CAPITAL GAIN AT RS.85,21,013/- TAKING SALE CONSIDER ATION OF LAND AT RS. 1,07,64,000/- AND COST OF ACQUISITION OF LAN D AT RS. 18,19,628/-, WHICH AFTER INDEXATION HAS BEEN TAKEN AT RS.22,42,986/-. PERUSAL OF THE PURCHASE DEED REVEAL S THAT THE LAND WAS PURCHASED FOR RS. 14,35,200/- (ON 12.9.200 2) AND STAMP DUTY OF RS.2,76,250/- WAS PAID FOR BOTH LAND & BUILDING (PURCHASED FOR RS.7,74,000/-). THUS THE STAMP DUTY PAID FOR LAND ON A PROPORTIONATE BASIS WORKS OUT TO ONLY RS. 1,79 ,397/- (AS THE COST OF LAND IS 64.94% OF TOTAL PURCHASE CONSIDERAT ION). AFTER APPLYING INDEXATION, THE COST OF ACQUISITION OF LAND WORKS OUT TO RS.21,22,478/-, AS UNDER: (RS. 14,3 5,200/- PURCHASE CONSIDERATION RS. 1,07,268/- PAYMENT TO HSIDC FOR LAND TRANSFER (FOR PLOT) RS. 1,79,397/- STAMP DUTY COST FOR LAND. RS. 17,21,865/- X 551 = RS.21,22,478/-). 447 PLEASE EXPLAIN WHY THE LONG TERM CAPITAL GAIN FOR L AND BE NOT ADOPTED AT RS.86,41,522/- (RS. 1,07,64,000 - RS .21,22,478); AS AGAINST RS.33,65,983/- TAKEN BY THE A.O.; SHOWN AT RS.79,57,158/- IN COMPUTATION OF INCOME BY ASSESSEE , AND REDUCED TO NIL, CLAIMING EXEMPTION U/S 54G; AND WOR KED OUT AT RS.85,21,013/- IN THE WRITTEN SUBMISSIONS DATED 24. 02.12. THIS MAY BE TREATED AS AN OPPORTUNITY U/S 251(2) OF THE I.T. ACT FOR SHOWING CAUSE AGAINST ENHANCEMENT OF INCOME FROM LO NG TERM CAPITAL GAIN. THE LD. COUNSEL HAS ADMITTED THAT THE ASSESSEE HAS NOT RAISED ANY GROUND FOR EXEMPTION U/S 54G. FOR SHORT TERM CAPITAL GAIN AFTER TAKING THE CIRCLE I.T.A. NOS. 4747 & 4746/D/2012 ASSESSMENT YEARS 2008-09, 09-10 22 RATE FOR LAND AT RS. 1,07,64,000/- THE BALANCE LEFT FOR APPORTIONMENT TO BUILDING & OTHER DEPRECIABLE ASSET S IS RS.44,01,000/-. THE LD. \ COUNSEL HAS SUBMITTED THA T THE AO HAS NOT ALLOWED THE DEDUCTION FOR COST OF ACQUIS ITION FOR BUILDING, WHOSE WDV SHOULD BE TAKEN AT RS.49,64,855/- TO WORK OUT THE SHORT TERM CAPITAL G AIN / LOSS AT RS.5,63,855/- (LOSS). TO SUBMIT EVIDENCE FO R WDV CLAIM. 13.5 IN THE REPLY DATED 03.05.2012, THE LD. COUNSEL HAS BY AND LARGE ADMITTED THE WORKING BY THE UNDERSIGNED BUT HAS CLAIMED THAT IF THE PROPORTIONATE STAMP DUTY AMOUNT IS TAKE N OUT FROM THE COST OF ACQUISITION IN RESPECT OF LAND, THEN TH E SAME AMOUNT DESERVES TO BE APPORTIONED TOWARDS THE COST OF ACQU ISITION IN RESPECT OF BUILDING. HOWEVER, THE WDV OF THE BUILDI NG AND OTHER ASSETS CLAIMED AT RS.49,64,855/- ALREADY INCLUDE TH IS AMOUNT AND HENCE NO FURTHER ALLOWANCE CAN BE MADE. FURTHER , IN THE REPLY DATED 19.06.2012 THE ASSESSEE HAS CLAIMED THA T THE WDV OF BUILDING AND OTHER ASSETS WAS CLAIMED AT RS.41,9 2,079.67/-, WHICH IS TAKEN FROM THE DETAILS OF FIXED ASSETS AS ON 31.03.2008 (FORMING PART OF ANNUAL AUDITED ACCOUNTS FOR F.Y. 2 007-08), WHICH WAS AVAILABLE WITH THE AO DURING THE COURSE O F ASSESSMENT PROCEEDINGS. THE ASSESSING OFFICER HAS N OTED IN PARA 7 OF THE ASSESSMENT ORDER THAT AS PER THE PURC HASE DEED DATED 12.09.2002, THE COVERED AREA MEASURED 6750 SQ . FEET WHICH IS A FACT, BUT HAS FAILED TO TAKE INTO ACCOUN T THE FACT THAT THE SALE DEED DATED 28.11.2007 MENTIONS THE COVERED AREA AS 14669.50 SQ. FEET ON PAGE 3 OF THAT SALE DEED. FURT HER, FROM PARA 8 OF THE ASSESSMENT ORDER, IT IS SEEN THAT THE WDV OF BUILDINGS IS AT RS.22,80,155/-, SECURITY DEPOSIT IS FOR RS.7,72,775/- AND THE WDV OF OTHER ITEMS IS RS.L 9, 11,925/- (OTHER ITEMS AFTER INCLUSION OF SECURITY DEPOSIT AD D UPTO RS.26,84,700/-). THESE ITEMS ARE IN ADDITION TO THE LAND TRANSFERRED. THE ASSESSING OFFICER HAS TAKEN INTO A CCOUNT THE WDV OF OTHER ITEMS AT RS.L 9,11,925/- AND HAS REJEC TED THE CLAIM OF THE ASSESSEE REGARDING SECURITY DEPOSIT OF RS.7, 72,775/-, BUT HAS FAILED TO TAKE INTO ACCOUNT THE WDV OF BUILDING WHICH IS SEEN TO BE RS.22,80,155/- FROM PARA 8 OF THE ASSESS MENT ORDER, WITHOUT ANY DISCUSSION OR MENTIONING ANY REASON, AN D HENCE THE EXCLUSION OF WDV OF BUILDING AMOUNTING TO RS.20,80, 155/- CANNOT BE ACCEPTED AND HAS TO BE INCLUDED IN THE WD V FOR CALCULATION OF CAPITAL GAIN. 13.6 REGARDING THE SECURITY DEPOSIT, THE ASSESSING OFFI CER HAS MENTIONED IN PARA 8.2 OF THE ASSESSMENT ORDER THAT THERE IS NO I.T.A. NOS. 4747 & 4746/D/2012 ASSESSMENT YEARS 2008-09, 09-10 23 SPECIFIC MENTION IN THE SALE DEED REGARDING THE REL EVANT SECURITY DEPOSIT HAVING BEING TRANSFERRED IN THE NAME OF THE PURCHASER. REGARDING THE SECURITY DEPOSIT AMOUNT, IT HAS BEEN CLAIMED BY THE ASSESSEE THAT THE ASSESSEE HAD BEEN HAVING SECU RITY DEPOSIT OF RS.7,72,775/- FOR POWER CONNECTION INSTALLED IN ITS FACTORY BUILDING LOCATED AT KUNDLI, AND THAT DURING THE YEA R UNDER CONSIDERATION, THE SAID AMOUNT OF RS.7,72,775/- HAD BEEN TRANSFERRED TO FACTORY BUILDING (KUNDLI) ACCOUNT. P ERUSAL OF THE COPY OF BALANCE SHEET OF M/S BHARAT EXPORTS AS ON 3 1.03.2007 SHOWS THAT AS PER ANNEXURE IX, THE SECURITY DEPOSIT FOR RS.7,72,775/- APPEARED UNDER THE HEAD ELECTRIC UHBV NL 89- KUR, WHICH DOES NOT APPEAR IN THE BALANCE SHEET (AN NEXURE IX) OF M/S BHARAT EXPORTS AS ON 31.03.2008. THE COUNSEL HA S ALSO DRAWN ATTENTION TO THE SALE DEED DATED 28.11.2007 I N WHICH IT HAS BEEN MENTIONED THAT THE SALE INCLUDES THE ELECT RICAL CONNECTION AND SECURITY DEPOSIT ALSO. PERUSAL OF TH E SALE DEED DATED 28.11.2007 SHOWS THAT IT IS MENTIONED ON PAGE 3 THAT THE SALE IS TOWARDS THE INDUSTRIAL PLOT OF 1196 SQ. YAR DS ALONGWITH 14,669.50 SQ FT. COVERED AREA ALONGWITH CONNECTION AND FITTINGS FOR BIJLI (ELECTRICITY), PANI, SEVERAGE ETC. ALONGW ITH BOUNDRY WALL, MAIN GATE ETC. PAGE 4 OF THE SALE DEED MENTIONS THA T THE SELLER HAS NO OBJECTION TO THE PURCHASER GETTING THE OWNER S NAMES CHANGED FOR THE PROPERTY AND ALSO THE CONNECTION FO R BIJLI, PANI, SEVERAGE ETC. THUS IT IS QUITE CLEAR THAT THE ELECT RICITY CONNECTION FOR THE FACTORY ALONGWITH THE SECURITY DEPOSIT OF R S.7,72,775/- HAS ALSO BEEN TRANSFERRED ALONGWITH THE FACTORY, AN D HAS TO BE TAKEN ALONGWITH THE WDV FOR THE BUILDING AND OTHER ASSETS. THUS THE CLAIM OF THE ASSESSING OFFICER IN PARA 8.2 OF T HE ASSESSMENT ORDER THAT THERE IS NO SPECIFIC MENTION IN THE SALE DEED REGARDING THE TRANSFER OF THE RELEVANT SECURITY DEPOSIT TO TH E PURCHASER IS NOT CORRECT. FURTHER IN THE SAME PARA 8.2 THE ASSES SING OFFICER HAS FURTHER CLAIMED THAT THE VERY NATURE OF THE IT EM IS SUCH THAT THE SAME CANNOT BE ALLOWED AS COST OF ACQUISITION O F THE FACTORY OR IMPROVEMENT TO THE SAME. THIS ASSERTION OF THE ASSESSING OFFICER IS AGAIN WITHOUT ANY BASIS AND CANNOT BE AC CEPTED. THUS THE WDV FOR THE BUILDING AND OTHER ASSETS (OTHER TH AN LAND) HAS TO BE TAKEN AT RS.49,64,855/- (22,80,155 + 19,11,92 5 + 7,72,775). 13.7 TAKING INTO ACCOUNT THE ABOVE DISCUSSION, THE LONG TERM CAPITAL GAIN AND SHORT TERM CAPITAL GAIN ON SALE OF FACTORY IS WORKED OUT AS UNDER:- 13.7 LONG TERM CAPITAL GAIN I.T.A. NOS. 4747 & 4746/D/2012 ASSESSMENT YEARS 2008-09, 09-10 24 THE LONG TERM CAPITAL GAIN ON TRANSFER ON LAND IS W ORKED BUT AT RS.86,41,522/- AS UNDER:- VALUE OF INDUSTRIAL LAND (1196 SQ. YARDS @ RS.9,000 /-: 1,07,64,000/- AFTER APPLYING INDEXATION, THE COST OF ACQUISITION OF LAND WORKS OUT TO RS.21,22,478/-, AS UNDER: RS.14,35,200/- PURCHASE CONSIDERATION RS. 1,07,268/- PAYMENT TO HSIDC FOR LAND TRANSFER ( FOR PLOT) RS. 1,79,397/- STAMP DUTY COST FOR LAND. RS. 17.21.865/- X 551 = RS.21,22,478/-. 447 LONG TERM CAPITAL GAIN ON LAND = RS.86,41,522/- (1, 07,64,000 - 21,22,478). SHORT TERM CAPITAL GAIN (LOSS) THE SHORT TERM LOSS ON TRANSFER OF BUILDING AND OTH ER ASSETS IS WORKED OUT AT RS.5,63,855/- (LOSS) AS UNDERVALUE OF BUILDING AND OTHER ASSETS (RS. 1,51,65,000 - 1,07,64,000) = 44,01,000/-. WDV OF BUILDING AND OTHER ASSETS (RS.41,92,079.67 + RS.7,72,775) = RS.49,64,855/-. SHORT TERM CAPITAL GAIN (LOSS) ON BUILDING AND OTHE R ASSETS = RS.5,63,855/- (LOSS) (RS.44,01,000 - RS.49,64,855). 13.8 THE LONG TERM CAPITAL GAIN ON LAND IS TO BE TA KEN AS RS.86,41,522/- AND THE SHORT TERM CAPITAL GAIN (LOS S) ON BUILDING AND OTHER ASSETS IS TO BE TAKEN AS RS.5,63 ,855/- (LOSS). AS ALREADY DISCUSSED ABOVE IN PARA 11.2, THE ASSESS EE IS NOT ENTITLED FOR ANY EXEMPTION U/S 54G OF THE L.T. ACT, 1961. THUS THERE IS ENHANCEMENT IN THE LONG TERM CAPITAL GAIN WHICH WAS TAKEN AT RS.33,65,983/- BY THE ASSESSING OFFICER, B Y RS.52,75,539/- AND RELIEF IN THE SHORT TERM CAPITAL GAIN WHICH WAS TAKEN AT RS.76,44,306/- BY THE ASSESSING OFFICE R, BY RS.82,08,161/-. THE CAPITAL GAINS ON SALE OF FACTOR Y ARE WORKED OUT AT RS.80,77,667/- (RS.86,41,522 - RS.5,63,855). THIS IS IN ADDITION TO THE SHORT TERM CAPITAL GAIN OF RS.57,35 7/- MENTIONED BY THE ASSESSING OFFICER ON PAGE 11 OF THE ASSESSME NT ORDER. 13.9 HERE, IT IS WORTH MENTION THAT IT WAS HELD BY THE HONBLE ITAT I.T.A. NOS. 4747 & 4746/D/2012 ASSESSMENT YEARS 2008-09, 09-10 25 DELHI IN THE CASE OF HONDA SIEL CARS INDIA LTD. VS. ACIT 109 ITD 1, THAT NO STATUTORY NOTICE IS PRESCRIBED U/S 251(2 ) FOR ENHANCEMENT OF INCOME AND THAT IF THE ASSESSEE IS M ADE AWARE OF THE PROPOSED ENHANCEMENT AND THE EXPLANATION OBT AINED DURING THE COURSE OF HEARING AND CONSIDERED, THEN T HE ENHANCEMENT IS PROPER. IN THE PRESENT CASE THE ASSE SSEE WAS MADE AWARE OF THE PROPOSED ENHANCEMENT IN THE LONG TERM CAPITAL GAIN ON LAND THROUGH ORDERSHEET ENTRY AND T HE EXPLANATION OF THE ASSESSEE WAS OBTAINED AND CONSID ERED. (ENHANCEMENT IN LTCG BY RS.52,75,539/-; RELIEF IN S TCG, RS.82,08,161/-). 16. ON THIS ISSUE ALSO, THE DEPARTMENT COULD NOT SU PPORT ITS CHALLENGE BEFORE US BY ANY COGENT REASON OR EVIDENC E SO AS TO NEGATE THE FINDINGS OF THE LD. CIT(A) AND HENCE IN VIEW OF THE REASONING/CALCULATION ADOPTED BY THE LD. CIT(A), WE HAVE NO HESITATION IN UPHOLDING HIS ACTION. WE ACCORDINGLY DISMISS GROUND NOS. 3, 4 & 5 IN I.T.A. NO. 4747. 27. IN THE RESULT, BOTH THE APPEALS OF THE DEPARTME NT ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 18.05.2016. SD/- SD/- (S.V. MEHROTRA) (SUDHANSHU SRIVASTAVA) ACCOUNTANT MEMBER JUDICI AL MEMBER DATED: THE 18 TH OF MAY, 2016 GS I.T.A. NOS. 4747 & 4746/D/2012 ASSESSMENT YEARS 2008-09, 09-10 26 COPY FORWARDED TO: - 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 4. DR, ITAT BY ORDER ASSTT. REGISTRAR