SHRI AKASH GUPTA, JAIPUR V. INCOME TAX OFFICER, WARD-4-2, JAIPUR

ITA 693/JPR/2018

• Counselvise Citation: [2018] 119 COUNSELVISE.COM (IT) 1629 (ITAT-JAIPUR)
• Duration Of Justice: 5 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-11-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2014-2015
• Appeal Filed On: 21-05-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Rejection of books of accounts; Sale consideration of property below Jantri Value; Capital asset; Transfer pricing; International transaction; Fair market value; Valuation report
• Section: 50C; 145; 56; 144

Judgement Text

VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHE S, JAIPUR JH FOT; IKY JKO] U;KF;D LNL; ,OA JH FOE FLAG ;KNO] YS[KK LNL; DS LE{K BEFORE: SHRI VIJAY PAL RAO, JM & SHRI VIKRA M SINGH YADAV, AM VK;DJ VIHY LA- @ ITA NO. 693/JP/2018 FU/KZKJ.K O'K Z @ ASSESSMENT YEAR :2014-15 SH. AKASH GUPTA F-394C, ROAD NO. 9F2, VKI AREA, JAIPUR CUKE VS. ITO, WARD-4(2), JAIPUR LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN/GIR NO.: ABXPG5267H VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT FU/KZKFJRH DH VKSJ L S@ ASSESSEE BY : SHRI P. C. PARWAL (CA) JKTLO DH VKSJ LS @ REVENUE BY : SHRI ANUP SINGH (JCIT) LQUOKBZ DH RKJH[ K@ DATE OF HEARING : 14/08/2018 MN?KKS'K.KK DH RKJH[ K@ DATE OF PRONOUNCEMENT: 14/11/2018 VKNS'K@ ORDER PER: VIKRAM SINGH YADAV, A.M. THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER OF LD. CIT(A)-2, JAIPUR DATED 14.03.2018 FOR A.Y. 2014-15 WHEREIN TH E ASSESSEE HAS TAKEN THE FOLLOWING GROUNDS OF APPEAL. 1. THE LD. CIT(A) HAS ERRED ON FACTS AND IN LAW IN UPHOLDING THE ACTION OF AO IN REJECTING THE BOOKS OF ACCOUNTS U/S 145(3) OF THE IT ACT, 1961. 1.1 THE LD. CIT(A) HAS ERRED ON FACTS AND IN LAW IN CON FIRMING THE ADDITION OF RS. 53,71,297/- MADE BY THE AO ON ACCOU NT OF LOWER PROFIT ON GOODS SOLD TO BE RELATED PARTIES SPECIFIED U/S 40A( 2)(B) AS COMPARED TO GOODS SOLD TO NON-RELATED PARTIES IGNORING THAT THE RE IS VAST DIFFERENCE IN THE VOLUME OF SALES MADE TO THE RELATED PARTIES AND THAT SECTION 40A(2)(B) IS NOT APPLICABLE ON SALES. ITA NO. 693/JP/2018 SH. AKASH GUPTA, JAIPUR VS. ITO, JAIPUR 2 2. THE LD. CIT(A) HAS ERRED ON FACTS AND IN LAW IN CONFIRMING THE ADDITION OF RS. 10,45,250/- U/S 56(2)(VII) ON ACCOU NT OF STAMP VALUATION DIFFERENCE IN THE PROPERTY PURCHASED BY THE ASSESSE E WITHOUT REFERRING THE MATTER TO DVO. 2. IN RESPECT OF GROUND NO. 1 AND 1.1, BRIEFLY STAT ED, THE FACTS OF THE CASE ARE THAT THE ASSESSEE DERIVES INCOME FROM TRADING O F SILICON STEEL STRIPS AND ELECTRICAL STAMPING IN THE NAME AND STYLE OF M/S SU RYANSH METAL & ALLOYS. MAINLY THE ASSESSEE IMPORTS THE GOODS AND SOLD IT I N INDIA. THE ASSESSEE HAS DECLARED TOTAL TURNOVER OF RS. 21,86,55,682/- AND H AS DECLARED GROSS PROFIT OF RS. 2,23,01,858/- WHICH GIVES A G.P. RATE OF 10.20% . DURING THE COURSE OF EXAMINATION OF BOOKS OF ACCOUNTS AND OTHER DETAILS, IT WAS NOTICED BY THE AO THAT THE ASSESSEE HAS NOT MADE THE SALES TO PERSONS DEFINED U/S 40A(2)(B) AT PREVAILING MARKET RATES AND THE ASSESSEE WAS ASKED TO FURNISH SALES TO DIFFERENT PARTIES ON THE BASIS OF LOT OF PURCHASE. THE DETAIL S FURNISHED BY THE ASSESSEE WAS ANALYSED BY AO AND IT WAS NOTICED THAT THE SALE S MADE TO RELATED PARTIES YIELD A PERCENTAGE OF 12.76% ONLY AND SALES TO THE NON-RELATED PARTIES YIELD A PERCENTAGE OF 16.81%. BASED ON THE SAME, THE AO O BSERVED THAT THE PREVAILING MARKET RATES HAS BEEN REDUCED BY 4.05% W HILE MAKING SALES TO PERSONS DEFINED U/S 40A(2)(B) RESULTING IN REDUCTIO N IN PROFIT OF RS. 53,71,297/- ( 4.05% OF RS. 13,26,24,621). 3. IT WAS FURTHER OBSERVED BY THE AO THAT ON EXAMIN ATION OF THE BOOKS OF ACCOUNTS OF THE ASSESSEE, IT WAS NOTICED T HAT THE VALUATION OF CLOSING STOCK WAS NOT SUBJECT TO VERIFICATION. FURT HER, SAME QUALITY OF GOODS OF SAME LOT AND SAME PURCHASE PRICE ARE SOLD AT DIFFERENT RATES TO RELATED AND NON-RELATED PARTIES. THESE SHORTCOMI NG IN THE BOOKS OF ACCOUNTS WERE COMMUNICATED TO THE A/R OF THE THE AS SESSEE VIDE ORDER SHEET ENTRY DATED 16.12.2016 AND HE WAS ASKED AS TO WHY TRADING ITA NO. 693/JP/2018 SH. AKASH GUPTA, JAIPUR VS. ITO, JAIPUR 3 RESULTS SHOULD NOT BE REJECTED. IN RESPONSE TO THIS , THE A/R OF THE ASSESSEE FILED A WRITTEN REPLY ON 20.12.2016 AND SU BMITTED THAT THE ASSESSEE PURCHASED GOODS IN FORM OF COILS AND LOOSE AND THEREAFTER SORTED THE GOODS ACCORDING TO THICKNESS AND SOLD TH EM. IT IS SUBMITTED THAT THE BETTER QUALITY GOODS WERE SOLD IN OPEN MAR KET AND REMAINING GOODS WERE SOLD TO SISTER CONCERNS AT REASONABLE MA RKET RATE. IT IS ALSO SUBMITTED THAT THE VALUATION OF CLOSING STOCK WAS M ADE BY FIFO METHOD. THE REPLY FILED BY THE ASSESSEE WAS CONSIDE RED BUT FOUND NON TENABLE TO THE AO. AS PER AO, THE ASSESSEE HAS NOT FILED ANY DOCUMENTARY EVIDENCE THAT BETTER QUALITY IMPORTED G OODS WERE SOLD IN OPEN MARKET AND REMAINING GOODS WERE USED BY THE SI STER CONCERN. THE SISTER CONCERN OF THE ASSESSEE VIZ. M/S T.I. INDUST RIES IS MANUFACTURING UNIT AND USED THE GOODS PURCHASED FROM THE ASSESSEE AS RAW MATERIAL. THE SUBMISSION OF THE ASSESSEE WAS ALSO HELD AGAINS T THE ESTABLISHED BUSINESS PRACTICE AND HUMAN TENDENCY WHERE EVERY IN DUSTRY USES BETTER QUALITY RAW MATERIAL FOR BETTER PRODUCTION OF GOODS WHICH COULD FETCH BETTER VALUE AND BETTER PROFIT ON SALES. IT IS CLEAR THAT THE GOODS IMPORTED THROUGH ONE CONTAINER OF SAME QUALITY HAS BEEN SOLD AT LESSER R ATES TO PERSONS DEFINED U/S 40A(2)(B) TO REDUCE THE PROFITS AND TAX LIABILITIES . DURING THE ASSESSMENT PROCEEDINGS, THE ASSESSEE FAILED TO GET VERIFIED HI S TRADING RESULTS AND ALSO FAILED TO VERIFY VALUATION OF CLOSING STOCK. THUS, THE BOOKS OF ACCOUNTS OF THE ASSESSEE WERE REJECTED U/S 145(3) OF THE INCOME-TAX ACT, 1961. REGARDING ESTIMATION OF PROFITS, THE AO STATED THAT THE ASSES SEE HAS SOLD GOODS TO RELATED PERSONS AT LOWER PRICES RESULTING IN EARNING OF LES SER PROFITS BY RS. 53,71,297/- BY THE ASSESSEE AND HENCE, TRADING ADDITION OF RS. 53,71,297/- WAS MADE IN THE HANDS OF THE ASSESSEE. 4. BEING AGGRIEVED, THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE LD CIT(A) AND HIS RELEVANT FINDINGS ARE AS UNDER: ITA NO. 693/JP/2018 SH. AKASH GUPTA, JAIPUR VS. ITO, JAIPUR 4 IT IS SEEN THAT THE MAIN OBJECTION OF THE AO REGAR DING THE DIFFERENCE IN PRICE AT WHICH THE GOODS ARE SOLD TO THE SISTER CON CERNS AND UNRELATED PARTIES COULD NOT BE CONTROVERTED BY THE AR. THE RE MAND REPORT WAS PROVIDED TO THE AR FOR HIS COMMENTS AND THE REJOIND ER FILED HAS BEEN CONSIDERED. IN THE COMPARATIVE CHART PREPARED OF AL L SALES MADE AND CORRESPONDING PURCHASE PRICE CLEARLY BRINGS OUT DIF FERENCE IN PRICES AT WHICH THE GOODS IMPORTED UNDER THE SAME LOT ARE SOL D TO THE SISTER CONCERNS AND TO UNRELATED PARTIES. THE CONTENTION O F THE AR THAT THE GOODS OF A LOT AFTER IMPORTING, ARE SORTED OUT AND GOOD QUALITY STOCK IS SOLD TO UNRELATED PARTIES WHILE LESSER QUALITY STOC K IS SOLD TO THE SISTER CONCERNS AT REASONABLE PRICES, IS BOTH NOT LOGICAL AS WELL AS NOT SUPPORTED BY ANY DOCUMENTARY EVIDENCE WHATSOEVER. SINCE THE R ELATED CONCERN OF THE APPELLANT, THAT IS M/S TI INDUSTRIES IS INTO MA NUFACTURING, IT WOULD BE EXPECTED THAT BETTER QUALITY STOCK IS USED FOR A SI STER CONCERN THAN SOLD IN THE OPEN MARKET, FURTHER AS ALREADY DISCUSSED ABOVE NO EVIDENCES HAVE BEEN PRODUCED IN SUPPORT OF THIS CLAIM MADE BY THE AR. AS REGARDS THE RELIANCE OF THE AR ON THE PAST HISTORY OF THE CASE, IT IS SEEN THAT IN THE IMMEDIATELY PRECEDING YEAR ON SLIGHTLY MORE TURNOVE R THE GP RATE IS ONLY 0.49% WHILE IN THE PRESENT YEAR IT IS 10% WHICH CAN NOT HAPPEN DUE TO NORMAL BUSINESS PRACTICE BUT INDICATES MAJOR CHANGE S IN THE BUSINESS AND IS NOT COMPARABLE. THE AR STATED THAT THE BUSINESS REMAINED THE SAME AND THE DIFFERENCE WAS DUE TO THE FACT THAT THE PRO FIT RATE EARNED WAS DEPENDING UPON THE COMPOSITION OF GOODS IN LOT AND IF BETTER QUALITY OF GOODS IN LOT IS HIGHER, THEN PROFIT INCREASES AS TH E PURCHASES ARE MADE AT AVERAGE PRICE. IF THIS CONTENTION IS ACCEPTED AND T HE PRICE VARIES BETWEEN 0.49% TO 10% ON SIMILAR TURNOVER, THEN THE CRITERIA OF PAST PROFITS CANNOT BE USED TO DETERMINE AVERAGE RATE OF PROFIT. FURTHE R, THE AR COULD NOT PROVE THE CRITERIA BEING USED FOR VALUATION OF THE CLOSIN G STOCK AND THE BASIS FOR ITA NO. 693/JP/2018 SH. AKASH GUPTA, JAIPUR VS. ITO, JAIPUR 5 SORTING OUT THE STOCK INTO DIFFERENT CATEGORIES AND ITS DIFFERENTIAL PRICING. AS REGARDS THE CLAIM THAT IN THE TRANSFER PRICING STUD Y IN THE CASE OF M/S TI INDUSTRIES, WHICH IS A SISTER CONCERN, NO ADVERSE I NFERENCE HAS BEEN DRAWN REGARDING THE ARM'S-LENGTH PRICE IT IS IMPORTANT TO NOTE THAT THE TRANSFER PRICING STUDY IS TO EVALUATE AND MAKE ADJUSTMENTS T O THE ARMS LENGTH PRICE, WHERE THE PURCHASES ARE MADE AT A HIGHER PRICE TO R EDUCE TAX LIABILITY AND WOULD NOT APPLY TO THE CASE IN HAND. IN VIEW OF THE DISCUSSION AS ABOVE, THE REJECTION OF BOOKS OF ACCOUNTS BY THE AO IS UPHELD AND THE ADDITION MADE ON THE BASIS OF DETAILS, AT RS. 53,71,297/- IS CONF IRMED. THE GROUND OF APPEAL IS DISMISSED. 4. DURING THE COURSE OF HEARING, THE LD. AR SUBMITT ED THAT THE ASSESSEE IS MAINTAINING DAY TO DAY BOOKS OF ACCOUNTS WHICH ARE DULY AUDITED. DURING THE ASSESSMENT PROCEEDINGS, NO DEFECT WAS FOUND IN THE ENTRIES MADE IN THE BOOKS OF ACCOUNTS MAINTAINED BY THE ASSESSEE. ALL T HE ENTRIES IN THE TRADING ACCOUNT I.E., OPENING STOCK, PURCHASES, SALES AND C LOSING STOCK IS FULLY SUPPORTED BY THE PURCHASE AND SALES INVOICE. NO DEF ECT IS FOUND IN THESE ENTRIES. THE ASSESSEE IS MAINTAINING PROPER STOCK R EGISTER AND ITEM WISE DETAILS OF STOCK IN THE STOCK REGISTER. HENCE REJEC TION OF BOOKS OF ACCOUNTS IS UNCALLED FOR. FOR THIS RELIANCE IS PLACED ON FOLLOW ING CASE LAWS: CIT V. GOTAN LIME KHANIZ UDYOG 256 ITR 243 (RAJ.) MALANI RAMJIVAN JAGANNATH VS. ACIT 207 CTR 19 (RAJ) ASHOKE REFRACTORIES P. LIMITED V. CIT 279 ITR 457 ( CAL.) CIT V. OM OVERSEAS 315 ITR 185 (PUNJ & HAR) 5. THE LD AR FURTHER REFERRED TO THE G.P. RATE FOR CURRENT YEAR AND LAST TWO YEARS WHICH IS TABULATED AS UNDER AND SUBMITTED THA T THE G.P RATE FOR THE YEAR IS BETTER AS COMPARED TO EARLIER YEARS: ITA NO. 693/JP/2018 SH. AKASH GUPTA, JAIPUR VS. ITO, JAIPUR 6 ASSESSMENT YEAR SALES G.P. G.P. RAT E 2014 - 15 21,86,55,682/ - 2,23,01,858/ - 10.20% 2013 - 14 33,48,13,469/ - 16,44,228/ - 0.49% 2012 - 13 28,10,56,519/ - 94,92,096/ - 3.38% 6. IN RESPECT OF OBSERVATION REGARDING THE VALUATI ON OF THE CLOSING STOCK, THE LD AR SUBMITTED THAT THE ASSESSEE IS MAINTAINING DA Y TO DAY STOCK REGISTER AND THE CLOSING STOCK IS VALUED BY APPLYING FIFO METHOD. TH E DETAILS OF CLOSING STOCK ALONGWITH VALUATION WERE FILED DURING THE ASSESSMEN T PROCEEDINGS WHEREIN NO DEFECT HAS BEEN POINTED OUT BY THE AO. HENCE THE OB SERVATION OF THE AO WITHOUT POINTING ANY SPECIFIC DEFEAT IN VALUATION IS INCORR ECT. 7. IN RESPECT OF OBSERVATION REGARDING SALE OF THE GOODS TO SISTER CONCERN AT LOWER PRICE IS CONCERNED, IT WAS SUBMITTED AS UNDER :- (I) THE ASSESSEE IMPORTS THE CRGO ELECTRICAL STEEL STRIPS/ SHEETS. THESE IMPORTS ARE MADE IN THE FORM OF COIL AND LOOSE IN LOT SIZES WHICH IS OF DIFFERENT- DIFFERENT QUALITY AND LOSSES. IN SUPPORT OF THE SAME, PACKING LIST OF IMPORT OF MATERIAL IS FILED BEFORE THE AO. THE ASSESSEE AFTER SEGREGATING THE SAME TO DIFFERENT-DIFFERENT QUALITY SOLD THE SAME TO DIFFERENT CONCERN AS PER M ARKET PRICE. THUS THE OBSERVATION OF THE AO THAT ONE LOT PURCHASED CONTAI NS ONLY ONE QUALITY OF GOODS IS ONLY ON ASSUMPTION AND PRESUMPTION. (II) THE AO MADE COMPARISON OF AVERAGE PRICE OF GOO DS SOLD TO UNRELATED PARTY WITH THE AVERAGE PRICE OF GOODS SOLD TO RELAT ED PARTIES. FROM THE AVERAGE PRICE CHART GIVEN IN THE ASSESSMENT ORDER ITSELF, I T CAN BE NOTED THAT MARGIN IN CASE OF SALE TO UNRELATED CONCERN RANGES FROM -33.2 4% TO 38.12%. SIMILARLY MARGIN IN CASE OF RELATED CONCERNS RANGES FROM 3.35 % TO 27.58%. THUS THE NATURE OF ITEM SOLD ARE SUCH THAT MARGIN IN EACH SA LE RANGES ACCORDING TO THE QUALITY. HENCE THE OBSERVATION OF THE AO THAT ASSES SEE HAS SOLD THE GOODS TO SISTER CONCERN AT LOWER RATES IS INCORRECT. ITA NO. 693/JP/2018 SH. AKASH GUPTA, JAIPUR VS. ITO, JAIPUR 7 (III) THE TOTAL SALE REFERRED BY THE AO TO POWER CO MPONENT CORPORATION IS RS. 2.45 CRORES WHEREAS THE SALES TO SISTER CONCERN IS OF RS. 13.29 CRORES AND THEREFORE THE PRICE TO BE CHARGED FROM SISTER CONCE RN CAN'T BE AT THE SAME LEVEL AS IT IS NOT COMPARABLE. (IV) THE SISTER CONCERN AFTER PURCHASING THE SAME USED IT IN MANUFACTURING. THE GROSS PROFIT DECLARED BY THESE SISTER CONCERNS ARE LOWER AS COMPARED TO ASSESSEE AS EVIDENT FROM THE FOLLOWING TABLE:- PARTICULARS SALES G.P. G.P. RATE T. I. INDUSTRIES 41,28,04,845/ - 3,33,80,735/ - 8.09% SURYANSH ELECTRICAL INDUSTRIES 7,50,14,132/ - 56,03,910/ - 7.47% SURYANSH METAL & ALLOYS (I.E. THE ASSESSEE) 21,86,55,682/ - 2,23,01,858/ - 10.20% FROM THE ABOVE TABLE IT CAN BE NOTED THAT G.P. RATE OF SISTER CONCERNS ARE NOT SO HIGH WHICH ESTABLISHES THAT PROFIT HAVE NOT BEEN DI VERTED BY SELLING THE GOODS AT LOWER PRICE. 8. IT WAS FURTHER SUBMITTED THAT THE TRANSACTION W ITH THE SISTER WAS ALSO EXAMINED BY TRANSFER PRICING OFFICER IN CASE OF M/S TOPLINE LIMITATION PRIVATE LIMITED AND NO ADVERSE INFERENCE WAS MADE IN RESPECT OF SPECIFIED DOMESTIC TRANSACTION. IN VIEW OF THE ABOVE, THE ADDITION OF RS. 53,71,297/- MADE BY THE AO IS UNCALLED FOR AND BE DELETED. 9. THE LD DR HAS VEHEMENTLY ARGUED THE MATTER AND TAKEN US THROUGH THE FINDINGS OF THE AO AND THE LD CIT(A) WHICH WE HAVE NOTED ABOVE. 10. WE HAVE HEARD THE RIVAL CONTENTIONS AND PURSUE D THE MATERIAL AVAILABLE ON RECORD. IN THE PRESENT CASE, WE FIND THAT THE B OOKS OF ACCOUNTS HAVE BEEN REJECTED UNDER SECTION 145(3) ON THE PREMISE THAT T HE SALES HAVE BEEN MADE TO ITA NO. 693/JP/2018 SH. AKASH GUPTA, JAIPUR VS. ITO, JAIPUR 8 SISTER CONCERNS AT A PRICE LOWER THAN WHAT HAS BEEN SOLD IN THE OPEN MARKET. THERE IS SOME REFERENCE TO VALUATION OF CLOSING STO CK NOT SUBJECT TO VERIFICATION TO WHICH THE ASSESSEE HAS RESPONDED BY STATING THAT CO MPLETE DETAILS OF CLOSING STOCK IS MAINTAINED AND THE ASSESSEE IS FOLLOWING F IFO METHOD OF VALUATION, HOWEVER, THE SUM AND SUBSTANCE OF THE CASE OF THE R EVENUE IS THAT THE PRICES CHARGED TO SISTER CONCERN ARE LOWER THAN THAT IN TH E OPEN MARKET AND THE TRADING RESULTS ARE NOT RELIABLE AND HENCE, BOOKS OF ACCOUN TS WERE REJECTED. WE HAVE RECENTLY DEALT WITH A SIMILAR ISSUE IN CASE OF M/S KOTHARI JEWELS PRIVATE LTD. VS ACIT (ITA NO. 455/JP/15) WHEREIN WE HAVE HELD AS UNDER: 11. NOW, COMING TO THE SECOND ISSUE, WHERE FOR SAK E OF ARGUMENTS, IT IS ACCEPTED THAT THE TRANSACTION OF SALE TO A SISTER C ONCERN IS NOT AT ARMS LENGTH, ARE THERE ANY PROVISIONS IN THE INCOME TAX ACT WHER E THE ASSESSING OFFICER IS EMPOWERED BY THE STATUE TO SUBSTITUTE AND REPLACE T HE ACTUAL SALE CONSIDERATION WITH THE ARMS LENGTH SALE CONSIDERAT ION SO DETERMINED. IN THIS REGARD, THE LD AR HAS DRAWN OUR REFERENCE TO THE DE CISION OF THE HONBLE SUPREME COURT IN THE CASE OF GLAXOSMITHKLINE ASIA ( P) LTD. (SUPRA) AND SUBMITTED THAT IN THAT DECISION, THE HONBLE SUPREM E COURT HAS OBSERVED THAT WITHOUT DOMESTIC TRANSFER PRICING LAW FINDING PLACE IN THE STATUTE BOOK, THE TAX AUTHORITIES HAVE NO RIGHT TO MAKE ADJUSTMENTS REGAR DING DOMESTIC SALES MADE TO SISTER CONCERNS ON THE LINE OF TRANSFER PRICING LAW FOR INTERNATIONAL TRANSACTIONS. IT WAS FURTHER SUBMITTED THAT IN CON SONANCE WITH THE SAID DECISION, DOMESTIC TRANSFER PRICING PROVISIONS WERE BROUGHT ON THE STATUE BOOKS BY THE FINANCE ACT, 2012 W.E.F. 01.04.2013 AND EVEN UNDER THESE PROVISIONS, THE SALES TO THE ASSOCIATED ENTERPRISE IN THE PRESE NT CASE IS NOT COVERED. FURTHER, DRAWING SUPPORT FROM THE DECISION OF THE H ONBLE SUPREME COURT IN THE CASE OF CIT V. GLAXOSMITHKLINE ASIA (P) LTD (SUPRA) , THE LD AR HAS CONTENDED THAT THE HONBLE SUPREME COURT HAS ALSO UPHELD THE PROPOSITION OF TAX NEUTRALITY AND IN THE INSTANT CASE, THE TRANSACTION S BETWEEN ASSESSEE COMPANY AND ITS SISTER CONCERN IS TAX NEUTRAL AS BOTH THE ENTITIES ARE TAXABLE AT THE ITA NO. 693/JP/2018 SH. AKASH GUPTA, JAIPUR VS. ITO, JAIPUR 9 SAME RATE OF 30.9% AND THERE IS NO CARRY FORWARD LO SS IN ANY OF THE CONCERNS, NOR THERE IS ANY ISSUE OF SURCHARGE INVOLVED IN ANY OF THE TWO COMPANIES. IT WAS FURTHER SUBMITTED THAT THE SAID TRANSACTION HAS BEEN ACCEPTED IN THE HANDS OF THE SISTER CONCERN BY THE SAME ASSESSING OFFICER WHO EXERCISES JURISDICTION OVER THE ASSESSEE COMPANY. FURTHER, DRAWING SUPPOR T FROM THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF S.A. BUILDERS LTD. (SUPRA), THE LD AR HAS CONTENDED THAT THE ASSESSEE COMPANY HAS ALL THE RIG HT TO SELL ITS GOODS AT A PRICE, MUTUALLY NEGOTIATED, FOUND PRUDENT AS A BUSI NESSMAN AND SUBMITTED THAT IN THE INSTANT CASE, WHERE THERE IS NO ALLEGATION O F ANY RECEIPT OVER AND ABOVE THE DECLARED CONSIDERATION, THERE IS NO BASIS WITH THE ASSESSING OFFICER TO SUBSTITUTE AND REPLACE THE ACTUAL SALE CONSIDERATIO N WITH THE ARMS LENGTH SALE CONSIDERATION SO DETERMINED. WE FIND FORCE IN AFOR ESAID CONTENTIONS SO RAISED BY THE LD AR. THE TRANSACTION IS A TAX NEUTRAL TRA NSACTION AS BOTH THE ENTITIES ARE PROFIT MAKING AND CHARGEABLE AT MAXIMUM MARGINA L RATE OF 30.9%. IN THE INSTANT CASE, EVEN THOUGH THE AO HAS COMPUTED A NOT IONAL LOSS OF RS 43,99,029, NO ADJUSTMENT HAS BEEN MADE TO THE SALE CONSIDERATION IN THE HANDS OF THE ASSESSEE COMPANY. SIMILARLY, THE PURC HASE CONSIDERATION ARISING OUT OF THE SAME TRANSACTION HAS BEEN ACCEPTED BY TH E ASSESSING OFFICER WHO HAPPENS TO EXERCISE JURISDICTION OVER BOTH THE ENTI TIES. FURTHER, WE FIND THAT THERE IS NO SPECIFIC PROVISION WHICH EMPOWERS THE A SSESSING OFFICER TO MAKE SUCH AN ADJUSTMENT TOWARDS THE SALE CONSIDERATION A S HELD BY THE HONBLE SUPREME COURT IN CASE OF CIT VS GLAXO SMITHLINE (SU PRA) WHICH HAS SUBSEQUENTLY BEEN FOLLOWED BY THE HONBLE PUNJAB AN D HARYANA HIGH COURT IN CASE OF SAIMBHI CYCLES & AUTO INDUSTRIES (SUPRA). PRECISELY FOR THE SAID REASONS, KNOWING VERY WELL THAT THERE ARE NO SPECIF IC PROVISIONS WHICH EMPOWERS HIM TO MAKE THE ADJUSTMENT EVEN THOUGH HE HAS DETERMINED A NOTIONAL LOSS OF RS 43,99,029, THE ASSESSING OFFICE R DID NOT MAKE ANY ADJUSTMENT TOWARDS SUCH NOTIONAL LOSS AND WENT AHEA D AND REJECTED THE WHOLE OF THE BOOKS OF ACCOUNTS INVOKING PROVISIONS OF SEC TION 145(3) OF THE ACT. ITA NO. 693/JP/2018 SH. AKASH GUPTA, JAIPUR VS. ITO, JAIPUR 10 12. NOW, COMING TO THE THIRD ISSUE, GIVEN THAT THER E ARE NO SPECIFIC PROVISIONS WHERE THE ASSESSING OFFICER IS EMPOWERED BY THE STATUE TO SUBSTITUTE AND REPLACE THE ACTUAL SALE CONSIDERATIO N WITH THE ARMS LENGTH SALE CONSIDERATION SO DETERMINED, WHETHER THE ASSESSING OFFICER CAN INVOKE THE PROVISIONS OF SECTION 145(3) TO REJECT THE WHOLE OF THE BOOKS OF ACCOUNTS OF THE ASSESSEE COMPANY AND THEREAFTER, MAKE AN ASSESSMENT IN THE MANNER PROVIDED IN SECTION 144 OF THE ACT. THE LD CIT(A) HAS STATED THAT AS ONE MAIN ITEM OF THE TRADING ACCOUNT I.E. SALES WERE FOUND TO BE MADE NO T ON THE NORMAL PREVAILING RATE THAT TOO TO A SISTER CONCERN, THEN THE AO WAS JUSTIFIED TO INVOKE PROVISION OF SECTION 145(3) OF IT ACT. 13. IN THIS REGARD, WE REFER TO THE PROVISIONS OF S ECTION 145(3) WHICH PROVIDES THAT WHERE THE ASSESSING OFFICER IS NOT SA TISFIED ABOUT THE CORRECTNESS OR COMPLETENESS OF THE ACCOUNTS OF THE ASSESSEE, OR WHERE THE METHOD OF ACCOUNTING PROVIDED IN SUB-SECTION (1) HAS NOT BEEN REGULARLY FOLLOWED BY THE ASSESSEE, OR INCOME HAS NOT BEEN COMPUTED IN ACCORD ANCE WITH THE STANDARDS NOTIFIED UNDER SUB-SECTION (2), THE ASSESSING OFFIC ER MAY MAKE AN ASSESSMENT IN THE MANNER PROVIDED IN SECTION 144. IN THE INSTA NT CASE, THE SALE TRANSACTION HAS BEEN DULY RECORDED IN THE BOOKS OF ACCOUNTS, TH EREFORE, IT IS NOT A CASE OF INCOMPLETE BOOKS OF ACCOUNTS OF THE ASSESSEE. IT I S ALSO NOT A CASE OF THE REVENUE THAT THERE HAS BEEN A CHANGE IN METHOD OF A CCOUNTING REGULARLY FOLLOWED OR INCOME HAS NOT BEEN COMPUTED IN ACCORDA NCE WITH THE NOTIFIED STANDARDS. THE QUESTION IS WHERE THE ASSESSING OFF ICER HAS DETERMINED SALE OF 18CT GOLD AT LOWER THAN THE NORMAL PREVAILING MARKE T RATE, CAN IT BE SAID THAT THE BOOKS OF ACCOUNTS DOESNT REPRESENT CORRECT STA TE OF AFFAIRS AND HENCE, THE SAME CAN BE REJECTED. IN THE INSTANT CASE, WE FIND THAT THE ASSESSEE COMPANY HAS REPORTED A TOTAL TURNOVER OF RS 11,05,27,652 AN D OUT OF THAT, SALE CONSIDERATION IN RESPECT OF GOLD WHICH HAS BEEN QUE STIONED BY THE ASSESSING OFFICER COMES TO RS 1,94,54,089 WHICH CONSTITUTE 17 .60% OF TOTAL TURNOVER. IN OTHER WORDS, SALE TRANSACTIONS REPRESENTING 82.4% O F THE TURNOVER HAS BEEN ITA NO. 693/JP/2018 SH. AKASH GUPTA, JAIPUR VS. ITO, JAIPUR 11 ACCEPTED BY THE ASSESSING OFFICER AND STILL, THE BO OKS OF ACCOUNTS HAVE BEEN REJECTED. FURTHER, IF WE LOOK AT THE AGREEMENT VAL UE OF RS 6,64,62,716 UNDER WHICH SUCH SALE TRANSACTION HAS HAPPENED, IT CONSTI TUTE 29.27% OF TOTAL TRANSACTION VALUE WHICH MEANS THAT THE REMAINING TR ANSACTION VALUE WHICH CONSTITUTE 70.73% HAS AGAIN BEEN ACCEPTED BY THE AS SESSING OFFICER. FURTHER, ON PERUSAL OF LEDGER ACCOUNT OF SISTER CONCERN IN T HE BOOKS OF THE ASSESSE COMPANY AVAILABLE IN APB PAGES 23-28, IT IS NOTED T HAT DURING THE YEAR, BESIDES THE SUBJECT TRANSACTION, THERE ARE OTHER REGULAR SA LES AND PURCHASE TRANSACTION RUNNING INTO CRORES OF RUPEES WHICH HAS BEEN ACCEPT ED BY THE ASSESSING OFFICER. FURTHER, THE ASSESSING OFFICER HAS NOT DI SPUTED THE OPENING STOCK, PURCHASES, SALES AND CLOSING STOCK AS REPORTED BY T HE ASSESSEE COMPANY. THERE IS NO EVIDENCE ON RECORD THAT THE ASSESSEE CO MPANY HAS RECEIVED ANY SALES CONSIDERATION OVER AND ABOVE WHAT HAS BEEN ST ATED IN THE AGREEMENT AND REPORTED IN THE BOOKS OF ACCOUNTS. ASSUMING IT WAS A CASE OF CLOSING STOCK AND THE ASSESSEE COMPANY HAS FAILED TO VALUE THE STOCK TAKING INTO CONSIDERATION THE MARKET VALUE OR COST PRICE, WHICHEVER IS LESS, WE COULD HAVE STILL APPRECIATED THE CONCERN OF THE ASSESSING OFFICER, H OWEVER IN THE INSTANT CASE, IT IS A CASE OF ACTUAL SALE AND WHEN THE SALE TRANSACT ION HAS NOT BEEN DISPUTED AND THERE IS NO MATERIAL TO PROVE THAT THE ASSESSEE HAS RECEIVED ANY CONSIDERATION OVER AND ABOVE THE AGREED CONSIDERATI ON AS REPORTED IN THE FINANCIAL STATEMENTS, THE ACTUAL SALE CONSIDERATION HAS TO BE ACCEPTED. IN THE ABOVE FACTUAL MATRIX, WE FIND THAT THE ASSESSING OF FICER HAS MERELY PROCEEDED ON A PREMISE THAT THE SALE OF GOLD IS AT A VALUE LO WER THAN WHAT IS PREVAILING IN THE MARKET. AS WE HAVE STATED ABOVE, THE TRANSACTI ON UNDER CONSIDERATION IS NOT SALE OF 18CT GOLD SIMPLICITIER BUT 18 CT GOLD J EWELLERY STUDDED WITH DIAMONDS & COLOUR STONES. IN ORDER TO DETERMINE WH ETHER THE SAID TRANSACTION OF SALE OF GOLD JEWELLERY IS AT ARMS LENGTH OR NOT , THE COMPARISON SHOULD BE SALE OF GOLD JEWELLERY STUDDED WITH DIAMONDS AND CO LOUR STONES TO AN UNRELATED THIRD PARTY. THERE IS NOTHING ON RECORD TO SUGGEST ANY SUCH COMPARATIVE ITA NO. 693/JP/2018 SH. AKASH GUPTA, JAIPUR VS. ITO, JAIPUR 12 ANALYSIS AND DETERMINATION UNDERTAKEN BY THE ASSESS ING OFFICER. FURTHER, IT AFFIRMS OUR VIEWS, AS WE HAVE STATED ABOVE, THAT IN ABSENCE OF ANY SPECIFIC PROVISIONS WHICH EMPOWERS HIM TO MAKE THE ADJUSTMEN T TOWARDS THE NOTIONAL LOSS OF RS 43,99,029, THE ASSESSING OFFICER WENT AH EAD AND REJECTED THE BOOKS OF ACCOUNTS INVOKING PROVISIONS OF SECTION 145(3) O F THE ACT. IN OUR VIEW, SUCH AN APPROACH OF THE ASSESSING OFFICER WHICH HAS BEEN CONFIRMED BY THE LD CIT(A) CANNOT BE ACCEPTED. IN LIGHT OF THE SAME, I T CANNOT BE SAID THAT THE BOOKS OF ACCOUNTS DOESNT REPRESENT CORRECT STATE O F AFFAIRS AND HENCE, THE SAME CAN BE REJECTED INVOKING PROVISIONS OF SECTION 145(3) OF THE ACT. OUR DECISION IS FORTIFIED BY THE DECISION OF THE HONBL E RAJASTHAN HIGH COURT IN CASE OF MALANI RAMJEEVAN JAGGANATH VS. ACIT (SUPRA). FUR THER, A SIMILAR VIEW HAS BEEN TAKEN BY THE COORDINATE BENCH IN CASE OF DCIT VS SPHOORTI MACHINE TOOLS (SUPRA) WHEREIN IT WAS HELD THAT THE FACT THAT THE ASSESSEE HAS SOLD ITS PRODUCTS TO ITS SISTER-CONCERNS AT A PRICE LESSER T HAN THE PRICE AT WHICH THE SAME PRODUCT IS SOLD TO THE THIRD PARTIES CANNOT BE A GROUND FOR REJECTION OF BOOKS OF ACCOUNTS. THE FACTS IN THE INSTANT CASE A RE ON A STRONGER FOOTING AS THERE IS NO INSTANCE OF SALE TO A THIRD PARTY AT A HIGHER PRICE. THE RELEVANT FINDINGS OF THE COORDINATE BENCH ARE AS UNDER: 11. WE HAVE GIVEN A CAREFUL CONSIDERATION TO THE R IVAL SUBMISSIONS. THE PRIMARY CONDITION FOR REJECTING THE BOOK RESULTS AS LAID DOWN UNDER SECTION 145 OF THE INCOME-TAX ACT, 1961 (THE ACT) IS THAT THE A SSESSING OFFICER SHOULD BE SATISFIED THAT THE BOOKS OF ACCOUNT MAINTAINED BY T HE ASSESSEE ARE NOT COMPLETE AND CORRECT. AS CAN BE SEEN FROM THE FINDI NGS GIVEN BY THE ASSESSING OFFICER IN THE ORDER OF ASSESSMENT, THE ASSESSING O FFICER HAS MERELY PROCEEDED ON A SURMISE THAT THE PROFITS OF THE ASSESSEE ARE S OUGHT TO BE REDUCED BY SELLING ITS PRODUCTS TO M/S. PRAGATHI AUTOMATION P. LTD., THE ASSESSEE'S SISTER- CONCERN AT A LESSER PRICE. THERE IS NO INSTANCE OF FALSITY OR INCOMPLETENESS OF THE BOOKS OF ACCOUNT POINTED OUT BY THE ASSESSING O FFICER IN THE ORDER OF ASSESSMENT. THE BOOKS OF ACCOUNT REFLECT THE TRUE S TATE OF AFFAIRS OF THE ITA NO. 693/JP/2018 SH. AKASH GUPTA, JAIPUR VS. ITO, JAIPUR 13 ASSESSEE. THE FACT THAT THE ASSESSEE HAS SOLD ITS P RODUCTS TO ITS SISTER-CONCERNS AT A PRICE LESSER THAN THE PRICE AT WHICH THE SAME PRODUCT IS SOLD TO THE THIRD PARTIES, IN OUR OPINION, WOULD NOT BE A SUFFICIENT GROUND TO COME TO A CONCLUSION THAT THE BOOKS OF ACCOUNT OF THE ASSESSE E ARE NOT COMPLETE AND CORRECT. THERE IS NO EVIDENCE BROUGHT ON RECORD THA T OVER AND ABOVE THE PRICE SHOWN IN THE BOOKS OF ACCOUNT, THE ASSESSEE RECEIVE D SOMETHING MORE FROM M/S. PRAGATHI AUTOMATION P. LTD. AS RIGHTLY CONTEND ED ON BEHALF OF THE ASSESSEE IT IS FOR THE BUSINESSMAN TO DECIDE THE PR ICE AT WHICH HE HAS TO SELL ITS PRODUCTS TO ITS CUSTOMERS. THE LAW IS WELL-SETTLED THAT THE REVENUE CANNOT INSIST ON THE WAY IN WHICH BUSINESSMEN SHOULD CONDU CT HIS BUSINESS. THE REVENUE CANNOT COMPEL A BUSINESSMAN TO SELL ITS PRO DUCTS AT A PARTICULAR PRICE, SO THAT THE ASSESSEE DERIVES MAXIMUM PROFIT. THE CO ST CALCULATION, ON WHICH THE ASSESSING OFFICER HAS PLACED RELIANCE, HAS NOTH ING TO DO WITH THE COMPLETENESS AND CORRECTNESS OF THE BOOKS OF ACCOUN T OF THE ASSESSEE. THERE IS ONE ALLEGATION BY THE ASSESSING OFFICER IN THE O RDER OF ASSESSMENT (POINT J) THAT THE SALE OF RAW MATERIALS, BLACKENING SALES AN D LABOUR CHARGES SALES NOT TALLYING WITH THE BOOKS AND DETAILS FURNISHED BY TH E ASSESSEE BEFORE THE ASSESSING OFFICER IN THE COURSE OF ASSESSMENT PROCE EDINGS. THIS IS A VERY VAGUE ALLEGATION. THE ASSESSING OFFICER HAS ULTIMATELY CO NCLUDED THAT THERE IS NO CLARITY IN FIGURES SUBMITTED BY THE ASSESSEE AND TH E BOOKS OF ACCOUNT. THIS ALLEGATION ON WHICH THE LEARNED DEPARTMENTAL REPRES ENTATIVE PLACED RELIANCE, IN OUR VIEW, COULD NOT BE SUFFICIENT TO REJECT THE BOO K RESULTS. WE AGREE WITH THE CONCLUSION OF THE COMMISSIONER OF INCOME-TAX (APPEA LS) THAT THE ASSESSING OFFICER HAS PROCEEDED ON THE ASSUMPTION THAT SOMETH ING IS AMISS, ONLY BECAUSE THE ASSESSEE HAD OFFERED ITS PRODUCTS TO IT S DIFFERENT CUSTOMERS AT DIFFERENT RATES. THE COMMISSIONER OF INCOME-TAX (AP PEALS) FOUND THAT M/S. PRAGATHI AUTOMATION P. LTD. WAS NOT CLAIMING ANY TA X EXEMPTION WHICH NECESSITATES THE ASSESSEE SHIFTING PROFITS TO M/S. PRAGATHI AUTOMATION P. LTD. IN THE CIRCUMSTANCES, WHEN THERE IS NO EVIDENCE REGARD ING INCOMPLETENESS AND ITA NO. 693/JP/2018 SH. AKASH GUPTA, JAIPUR VS. ITO, JAIPUR 14 INCORRECTNESS OF BOOKS OF ACCOUNT OR FACTS SUFFICIE NT TO COME TO A CONCLUSION THAT THE ASSESSEE HAS ATTEMPTED TO DEFRAUD THE REVE NUE, WE ARE OF THE VIEW THAT THE CONCLUSION DRAWN BY THE COMMISSIONER OF IN COME-TAX (APPEALS) ARE CORRECT AND DO NOT CALL FOR ANY INTERFERENCE. CONSE QUENTLY, THE APPEAL FILED BY THE REVENUE IS DISMISSED. 14. IN LIGHT OF ABOVE DISCUSSIONS AND IN THE ENTIRE TY OF FACTS AND CIRCUMSTANCES OF THE CASE AND RESPECTFULLY FOLLOWING THE LEGAL AU THORITIES NOTED ABOVE, THE ACTION OF THE ASSESSING OFFICER IN REJECTING THE BO OKS OF ACCOUNTS UNDER SECTION 145(3) IS SET ASIDE AND THE CONSEQUENT ACTION BY WA Y OF ADDITIONS SO MADE BY ESTIMATING GP RATE THAN DECLARED BY THE ASSESSING C OMPANY ARE HEREBY DIRECTED TO BE DELETED. 11. IN THE INSTANT CASE, IT IS NOTED THAT MARGIN IN CASE OF SALES TO UNRELATED CONCERN RANGES FROM -33.24% TO 38.12%. SIMILARLY, M ARGIN IN CASE OF RELATED CONCERNS RANGES FROM 3.35% TO 27.58%. THUS, WE AGRE E WITH THE CONTENTION OF THE LD AR THAT THE NATURE OF ITEM SOLD ARE SUCH THA T MARGIN IN EACH SALE RANGES ACCORDING TO THE QUALITY AND IT WOULDNT BE CORRECT TO COMPARE MERELY ON BASIS OF AVERAGE REALISATION. THE PURCHASES AND SUBSEQUENT S ALES TO SISTER CONCERNS HAVE NOT BEEN DISPUTED AND THERE IS NO EVIDENCE BROUGHT ON RECORD THAT THE ASSESSEE RECEIVED SOMETHING MORE FROM HIS SISTER CONCERNS OV ER AND ABOVE THE PRICE SHOWN IN THE BOOKS OF ACCOUNTS. THE MERE FACT THAT THE ASSESSEE HAS SOLD ITS PRODUCTS TO ITS SISTER-CONCERNS AT A PRICE LESSER T HAN THE PRICE AT WHICH THE SAME PRODUCT IS SOLD TO THE THIRD PARTIES, IN OUR OPINIO N, WOULD NOT BE A SUFFICIENT GROUND TO COME TO A CONCLUSION THAT THE BOOKS OF AC COUNT OF THE ASSESSEE ARE NOT RELIABLE. IN LIGHT OF ABOVE DISCUSSIONS AND IN THE ENTIRETY OF FACTS AND CIRCUMSTANCES OF THE CASE AND RESPECTFULLY FOLLOWIN G THE LEGAL AUTHORITIES NOTED ABOVE, THE ACTION OF THE ASSESSING OFFICER IN REJEC TING THE BOOKS OF ACCOUNTS UNDER SECTION 145(3) IS SET ASIDE AND THE CONSEQUEN T ACTION BY WAY OF ADDITIONS ITA NO. 693/JP/2018 SH. AKASH GUPTA, JAIPUR VS. ITO, JAIPUR 15 OF RS 53,71,297 IS HEREBY DIRECTED TO BE DELETED. I N THE RESULT, THE GROUND OF APPEAL IS ALLOWED. 12. IN RESPECT OF GROUND NO. 2, THE BRIEFLY STATED, THE FACTS OF THE CASE ARE THAT DURING THE COURSE OF ASSESSMENT PROCEEDINGS, I T WAS NOTICED BY THE AO THAT THE ASSESSEE HAS PURCHASED A FLAT NO. B-603 IN RESI DENTIAL TOWER IRIS-I IN MAHIMA HERITAGE ON 04/12/2013. AS PER COPY OF REGIS TERED SALE DEED SUBMITTED DURING THE COURSE OF ASSESSMENT PROCEEDINGS, IT WAS NOTICED BY THE AO THAT THE FLAT WAS PURCHASED FOR A VALUE OF RS. 27,00,000/-. HOWEVER, IT WAS NOTICED THAT THE SUB REGISTRAR II, JAIPUR HAS VALUED THE PROPER TY AT RS. 37,45,250/- AND ACCORDINGLY CHARGED STAMP DUTY FROM THE ASSESSEE. T HE ASSESSEE HAS PAID THE STAMP DUTY AND AS PER RECORDS, NO OBJECTION HAS BEE N FILED BY THE ASSESSEE IN RESPECT OF THIS STAMP DUTY CHARGED BY SUB REGISTRAR FROM HIM. REFERRING TO PROVISIONS OF SECTION 56(2)(VII) OF THE ACT WHICH P ROVIDES THAT IF IMMOVABLE PROPERTY IS TRANSFERRED FOR A CONSIDERATION WHICH I S LESS THAN THE STAMP DUTY VALUE, THE DIFFERENCE IS TO BE ASSESSED AT INCOME I N THE TRANSFEREE'S HANDS UNDER THE HEAD INCOME FROM OTHER SOURCES, THE AO ISSUED A SHOW CAUSE TO THE ASSESSEE AS TO WHY THE DIFFERENCE OF RS. 10,45,250/- (37,45, 250 27,00,000) SHOULD NOT BE ADDED TO THE TOTAL INCOME UNDER THE HEAD 'INCOME FROM OTHER SOURCES'. IN RESPONSE, THE ASSESSEE SUBMITTED THAT HE HAS PURCHA SED A FLAT NO, B-603 AT SIXTH FLOOR AT MAHITYTA'S IRIS-I FOR AN AMOUNT OF RS. 27. 00 LAKH ONLY. TOTAL PAYMENT HAS BEEN MADE BY CHEQUE ONLY. FIRST CHEQUE OF RS. 20.00 LAKH HAS BEEN GIVEN ON 30.11.2012 AND BALANCE PAYMENT CHEQUE OF RS. 7.00 L AKH ON 24.07.2013. NO OTHER PAYMENT AGAINST THIS FLAT HAS BEEN GIVEN, HOW EVER SUB-REGISTRAR HAS BEEN TAKEN THE VALUE OF THE PROPERTY FOR STAMP DUTY CALC ULATION AT RS. 3745250/- WHICH IS NOT ACTUAL AND MUCH MORE THAN THE ACTUAL VALUE P REVAILING IN THE AREA IN WHICH THE FLAT WAS PURCHASED. IT WAS ACCORDINGLY SUBMITTE D BY THE ASSESSEE TO CONSIDER THE ACTUAL MARKET PRICE OF THE FLAT WHICH HAS BEEN PAID BY THE ASSESSEE AND NOT TO THE DEEMED VALUE TAKEN BY THE SUB-REGISTRAR FOR STA MP DUTY CALCULATION. THE REPLY ITA NO. 693/JP/2018 SH. AKASH GUPTA, JAIPUR VS. ITO, JAIPUR 16 FILED BY THE ASSESSEE WAS CONSIDERED BUT NOT FOUND ACCEPTABLE TO THE AO AS NO EXPLANATION WITH REGARD TO PROVISIONS OF SECTION 56 (2)(VII) HAVE BEEN FILED. IT WAS HELD THAT THE PROVISIONS OF SECTION 56(2)(VII) ARE CLEARLY APPLICABLE IN THIS CASE THUS, RELYING UPON THE PROVISIONS OF THIS SECTION, THE INCOME FROM OTHER SOURCES OF THE ASSESSEE WAS ASSESSED AT RS. 10,45,250/-. 13. BEING AGGRIEVED, THE ASSESSEE CARRIED THE MATTE R IN APPEAL BEFORE THE LD CIT(A) WHO HAS CONFIRMED THE SAID ADDITION AND HIS FINDINGS ARE AS UNDER: 3.3 WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSE D THE MATERIAL AVAILABLE ON RECORD. I HAVE PERUSED THE FACTS OF THE CASE, TH E ASSESSMENT ORDER AND THE SUBMISSIONS OF THE APPELLANT. THE AO NOTED THAT THE APPELLANT HAD PURCHASED A FLAT NO. B-603 IN RESIDENTIAL TOWER IRIS-I IN MAHIM A HERITAGE ON 04/12/2013 AND AS PER COPY OF REGISTERED SALE DEED THE FLAT WAS PU RCHASED FOR A VALUE OF RS. 27,00,000/-WHILE THE SUB REGISTRAR -II, JAIPUR HAS VALUED THE PROPERTY AT RS. 37,45,250/- AND ACCORDINGLY CHARGED STAMP DUTY FROM THE APPELLANT. THE AO FURTHER NOTED THAT THE APPELLANT HAS PAID THE STAMP DUTY AND AS PER RECORDS, NO OBJECTION HAD BEEN FILED BY THE APPELLANT IN RESPEC T OF THIS STAMP DUTY CHARGED BY SUB REGISTRAR FROM HIM. RELYING ON THE PROVISIONS O F SECTION 56(2)(VII) SUBSTITUTED BY THE FINANCE ACT, 2013, WHICH PROVIDES THAT IF IM MOVABLE PROPERTY IS TRANSFERRED FOR A CONSIDERATION WHICH IS LESS THAN THE STAMP DUTY VALUE, THE DIFFERENCE IS TO BE ASSESSED AT INCOME IN THE TRANS FEREE'S HANDS UNDER THE HEAD INCOME FROM OTHER SOURCES, THE AO ADDED THE DIFFERE NCE OF RS. 10,45,250/- (3745250 - 2700000) TO THE TOTAL INCOME UNDER THE H EAD OF 'INCOME FROM OTHER SOURCES'. IN THE ASSESSMENT PROCEEDINGS AS WELL AS THE PRESENT PROCEEDINGS IT WAS SIMPLY REITERATED THAT SINCE THE AMOUNT PAID IS ONL Y RS. 27 LAKHS THROUGH BANKING CHANNELS AND THE AO IS NOT BROUGHT OUT ANY EVIDENCE TO PROVE THAT APPELLANT HAS MADE PAYMENT OVER AND ABOVE THAT MENTIONED IN THE S ALE DEED THE VALUE AS SHOWN SHOULD BE ACCEPTED AND ALSO IF THE AO HAD ANY DOUBT, HE SHOULD HAVE REFERRED THE MATTER TO THE DVO. SINCE THERE WAS A D IFFERENCE IN THE VALUE AS PER ITA NO. 693/JP/2018 SH. AKASH GUPTA, JAIPUR VS. ITO, JAIPUR 17 THE SUB REGISTRAR AND THE CONSIDERATION SHOWN BY TH E APPELLANT, THE PROVISIONS OF SECTION SECTION 56(2)(VII) SUBSTITUTED BY THE FINAN CE ACT, 2013, HAVE BEEN RIGHTLY APPLIED BY THE AO AND THE ADDITION UNDER THIS HEAD IS UPHELD. GROUND OF APPEAL IS DISMISSED. 14. DURING THE COURSE OF HEARING, THE LD. AR SUBMI TTED THAT DURING THE YEAR ASSESSEE GOT REGISTRY OF FLAT NO. B-603 PURCHASED I N RESIDENTIAL TOWER IRIS-1 IN MAHIMA HERITAGE. THIS FLAT WAS BOOKED IN NOVEMBER 2 012 AND PAYMENT OF RS. 20 LACS BY CHEQUE WAS MADE. THEREAFTER BALANCE PAYMENT OF RS. 7,00,000/- WAS MADE BY CHEQUE ON 24.07.2013. THE AO OBSERVED THAT THE STAMP AUTHORITIES HAVE DETERMINED THE PRICE OF THIS FLAT AT RS. 37,45 ,250/- FOR THE PURPOSE OF THE STAMP DUTY. ACCORDINGLY, BY APPLYING THE PROVISIONS OF SECTION 56(2)(VII), HE MADE THE ADDITION OF RS. 10,45,250/-. IT WAS SUBMITTED T HAT THE ASSESSEE HAS MADE ENTIRE PAYMENT OF CHEQUE. THE AO HAS NOT BROUGHT AN Y EVIDENCE TO PROVE THAT ASSESSEE HAS MADE PAYMENT OVER AND ABOVE THAT MENTI ONED IN THE SALE DEED. IN FACT THE DLC RATE IN THIS AREA IS MUCH MORE THAN AC TUAL RATE. IF THE AO WAS HAVING ANY DOUBT HE SHOULD HAVE REFERRED THE MATTER TO THE DVO. IN VIEW OF THE ABOVE FACTS, THE ADDITION MADE BY THE AO IS UNCALLED FOR AND BE DELETED. 15. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. THE LIMITED ISSUE UNDER CONSIDERATION RELAT ES TO INVOCATION OF PROVISIONS OF SECTION 56(2)(VII)(B) WHICH READS AS UNDER: 55A [( VII ) WHERE AN INDIVIDUAL OR A HINDU UNDIVIDED FAMILY REC EIVES, IN ANY PREVIOUS YEAR, FROM ANY PERSON OR PERSONS ON OR AFTER THE 1ST DAY OF OCTOBE R, 2009 56 [BUT BEFORE TH E 1ST DAY OF APRIL, 2017], ( A ) ANY SUM OF MONEY, WITHOUT CONSIDERATION, THE AGGREG ATE VALUE OF WHICH EXCEEDS FIFTY THOUSAND RUPEES, THE WHOLE OF THE AGGREGATE VALUE O F SUCH SUM; 57 [( B ) ANY IMMOVABLE PROPERTY, ( I ) WITHOUT CONSIDERATION, THE STAMP DUTY VALUE OF WHIC H EXCEEDS FIFTY THOUSAND ITA NO. 693/JP/2018 SH. AKASH GUPTA, JAIPUR VS. ITO, JAIPUR 18 RUPEES, THE STAMP DUTY VALUE OF SUCH PROPERTY; ( II ) FOR A CONSIDERATION WHICH IS LESS THAN THE STAMP DU TY VALUE OF THE PROPERTY BY AN AMOUNT EXCEEDING FIFTY THOUSAND R UPEES, THE STAMP DUTY VALUE OF SUCH PROPERTY AS EXCEEDS SUCH CONSIDERATION: PROVIDED THAT WHERE THE DATE OF THE AGREEMENT FIXING THE AMO UNT OF CONSIDERATION FOR THE TRANSFER OF IMMOVABLE PROPERTY AND THE DATE OF REGISTRATION ARE NOT THE SAME, THE STAM P DUTY VALUE ON THE DATE OF THE AGREEMENT MAY BE TA KEN FOR THE PURPOSES OF THIS SUB-CLAUSE: PROVIDED FURTHER THAT THE SAID PROVISO SHALL APPLY ONLY IN A CASE WH ERE THE AMOUNT OF CONSIDERATION REFERRED TO THEREIN, OR A PART THEREO F, HAS BEEN PAID BY ANY MODE OTHER THAN CASH ON OR BEFORE THE DATE OF THE AGREEMENT FO R THE TRANSFER OF SUCH IMMOVABLE PROPERTY;] ( C ) ANY PROPERTY, OTHER THAN IMMOVABLE PROPERTY, ( I ) WITHOUT CONSIDERATION, THE AGGREGATE FAIR MARKET VA LUE OF WHICH EXCEEDS FIFTY THOUSAND RUPEES, THE WHOLE OF THE AGGREGATE FAIR MARKET VALU E OF SUCH PROPERTY; ( II ) FOR A CONSIDERATION WHICH IS LESS THAN THE AGGREGAT E FAIR MARKET VALUE OF THE PROPERTY BY AN AMOUNT EXCEEDING FIFTY THOUSAND RUPE ES, THE AGGREGATE FAIR MARKET VALUE OF SUCH PROPERTY AS EXCEEDS SUCH CONSI DERATION : PROVIDED THAT WHERE THE STAMP DUTY VALUE OF IMMOVABLE PROPER TY AS REFERRED TO IN SUB - CLAUSE (B) IS DISPUTED BY THE ASSESSEE ON GROUNDS MENTIONE D IN SUB-SECTION (2) OF SECTION 50C , THE ASSESSING OFFICER MAY REFER THE VALUATION OF SUCH P ROPERTY TO A VALUATION OFFICER, AND THE PROVISIONS OF SECTION 50C AND SUB-SECTION (15) OF SECTION 155 SHALL, AS FAR AS MAY BE, APPLY IN RELATION TO THE STAMP DUTY VALUE OF SUCH PROPERTY F OR THE PURPOSE OF SUB-CLAUSE (B ) AS THEY APPLY FOR VALUATION OF CAPITAL ASSET UNDER THOSE SECTIONS : 16. THE ABOVE PROVISIONS THUS PROVIDES THAT WHERE A N INDIVIDUAL RECEIVES ANY IMMOVABLE PROPERTY FOR A CONSIDERATION WHICH IS LES S THAN THE STAMP DUTY VALUE OF THE PROPERTY BY AN AMOUNT EXCEEDING FIFTY THOUSAND RUPEES, THE STAMP DUTY VALUE OF SUCH PROPERTY AS EXCEEDS SUCH CONSIDERATION SHAL L BE DEEMED TO BE INCOME IN THE HANDS OF THE INDIVIDUAL ASSESSEE. AT THE SAME TIME, IT PROVIDES THAT WHERE THE STAMP DUTY VALUE OF IMMOVABLE PROPERTY IS DISPU TED BY THE ASSESSEE ON GROUNDS MENTIONED IN SUB-SECTION (2) OF SECTION 50C , THE ASSESSING OFFICER MAY ITA NO. 693/JP/2018 SH. AKASH GUPTA, JAIPUR VS. ITO, JAIPUR 19 REFER THE VALUATION OF SUCH PROPERTY TO A VALUATION OFFICER, AND THE PROVISIONS OF SECTION 50C AND SUB-SECTION (15) OF SECTION 155 SHA LL, AS FAR AS MAY BE, APPLY IN RELATION TO THE STAMP DUTY VALUE OF SUCH PROPERTY F OR THE PURPOSE OF SUB-CLAUSE (B) AS THEY APPLY FOR VALUATION OF CAPITAL ASSET UN DER THOSE SECTIONS. 17. IN THE INSTANT CASE, THE ASSESSEE HAD PURCHASED A FLAT NO. B-603 IN RESIDENTIAL TOWER IRIS-I IN MAHIMA HERITAGE ON 04/1 2/2013 AND AS PER COPY OF REGISTERED SALE DEED, THE FLAT WAS PURCHASED FOR A VALUE OF RS. 27,00,000/-WHILE THE SUB REGISTRAR -II, JAIPUR HAS VALUED THE PROPER TY AT RS. 37,45,250/-. THE AO NOTED THAT THE ASSESSEE HAS PAID THE STAMP DUTY ON THE VALUE SO DETERMINED BY THE SUB-REGISTRAR AND NO OBJECTION HAD BEEN FILED B Y THE ASSESSEE IN RESPECT OF STAMP DUTY CHARGED BY SUB REGISTRAR AND BROUGHT THE DIFFERENTIAL AMOUNT TO TAX. HOWEVER, THE AO LOST SIGHT OF THE PROVISIONS OF SEC TION 50C(2) WHICH EQUALLY APPLIES IN THE CONTEXT OF SECTION 56(2)(VIII)(B) WH ICH READS AS UNDER: (2) WITHOUT PREJUDICE TO THE PROVISIONS OF SUB-SECT ION (1), WHERE ( A ) THE ASSESSEE CLAIMS BEFORE ANY ASSES SING OFFICER THAT THE VALUE ADOPTED OR ASSESSED 37 [OR ASSESSABLE] BY THE STAMP VALUATION AUTHORITY UNDER SUB- SECTION (1) EXCEEDS THE FAIR MARKET VALUE OF THE PROPERTY AS ON THE DATE OF TRANSFER; ( B ) THE VALUE SO ADOPT ED OR ASSESSED 37 [OR ASSESSABLE] BY THE STAMP VALUATION AUTHORITY UN DER SUB - SECTION (1) HAS NOT BEEN DISPUTED IN ANY APPEAL OR REVISION OR NO REFERENCE HAS BEEN MADE BEFORE ANY OTHER AUTHORITY, COURT OR THE HIGH COURT , T HE ASSESSING OFFICER MAY REFER THE VALUATION OF THE CAPITAL ASSET TO A VALUATION OFFICER AND WHERE ANY SUCH REFERENCE IS MADE, THE PROVISIONS OF SUB- SECTIONS (2), (3), (4), (5) AND (6) OF SECTION 16A, CLAUSE (I) OF SUB-SECTION (1) AND SUB- SECTIONS (6) AND (7) OF SECTION 23A, SUB- SECTION (5) OF SECTION 24, SECTION 34AA, SECTION 35 AND SEC TION 37 OF THE WEALTH- TAX ACT, 1957 (27 OF 1957), SHALL, WITH NECESSARY MODIFICATIONS, APPLY I N RELATION TO SUCH REFERENCE AS THEY APPLY IN RELATION TO A REFERENCE MADE BY THE ASSESSING OFFIC ER UNDER SUB- SECTION (1) OF SECTION 16A OF THAT ACT. 18. IN THE INSTANT CASE, AS WE HAVE NOTED ABOVE, TH E ASSESSEE DURING THE COURSE OF ASSESSMENT PROCEEDINGS VIDE ITS LETTER DA TED 19.12.2016 HAS STATED THAT THE VALUE SO ADOPTED BY THE SUB-REGISTRAR IS NOT AC TUAL AND IS MUCH MORE THAN THE ITA NO. 693/JP/2018 SH. AKASH GUPTA, JAIPUR VS. ITO, JAIPUR 20 ACTUAL VALUE PREVAILING IN THE AREA IN WHICH THE FL AT WAS PURCHASED AND HAS THUS OBJECTED TO TAKING SUCH VALUE SO DETERMINED BY THE SUB-REGISTRAR. IN SUCH A SITUATION, THE MATTER IS REQUIRED TO BE REFERRED TO THE VALUATION OFFICER AND UNLESS SUCH REFERENCE IS MADE AND THE VALUATION REPORT IS TAKEN INTO CONSIDERATION, THE ASSESSEE CANNOT BE FASTENED WITH THE LIABILITY UNDE R THE PROVISIONS OF SECTION 56(2)(VII)(B) OF THE ACT. WE ACCORDINGLY SET-ASIDE THE MATTER TO THE FILE OF THE AO TO EXAMINE THE MATTER AFRESH AFTER TAKING INTO CONS IDERATION THE REPORT OF THE VALUATION OFFICER AND DECIDE AS PER LAW. IN THE RE SULT, THE GROUND OF APPEAL IS ALLOWED FOR STATISTICAL PURPOSES. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS DISPOS ED OFF WITH ABOVE DIRECTIONS. PRONOUNCED IN THE OPEN COURT ON 14/11/2018. SD/- SD/- FOT; IKY JKO FOE FLAG ;KNO (VIJAY PAL RAO) (VIKRAM SINGH YADAV) U;KF;D LNL;@ JUDICIAL MEMBER YS[KK LNL;@ ACCOUNTANT MEMBER TK;IQJ@ JAIPUR FNUKAD@ DATED:- 14/11/2018 * GANESH. VKNS'K DH IZFRFYFI VXZSFKR@ COPY OF THE ORDER FORWARDED TO: 1. VIHYKFKHZ@ THE APPELLANT- SH. AKASH GUPTA, JAIPUR 2. IZR;FKHZ@ THE RESPONDENT- ITO, WARD-4(2), JAIPUR 3. VK;DJ VK;QDR@ CIT 4. VK;DJ VK;QDR@ CIT(A) 5. FOHKKXH; IZFRFUF/K] VK;DJ VIHYH; VF/KDJ.K] T;IQJ@ DR, ITAT, JAIPUR. 6. XKMZ QKBZY@ GUARD FILE {ITA NO. 693/JP/2018} VKNS'KKUQLKJ@ BY ORDER, LGK;D IATHDKJ@ ASST. REGISTRAR