G.V.David Rajan, CHENNAI V. ITO, CHENNAI

ITA 991/CHNY/2015

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 4638 (ITAT-CHENNAI)
• Duration Of Justice: 2 year(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-05-2017
• Appeal Filed By: Assessee
• Bench Allotted: C
• Next Hearing Date: 29-03-2017
• Assessment Year: 2010-2011
• Appeal Filed On: 30-04-2015
• Court: TRIBUNAL
• Department Lawyers: A V SREEKANTH
• Assessee Lawyers: T BANUSEKAR
• Keywords: Capital asset converted into stock in trade; Capital asset; Business income; Principle of natural justice; Date of conversion; Fair market value
• Section: 45(2); 234B

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, CHENNAI , . ! ' , # '$ BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SHRI G. PAVAN KUMAR, JUDICIAL MEMBER . /ITA NO. 991/MDS/2015 / ASSESSMENT YEAR : 2010-11 MR. G.V. DAVID RAJAN, NO.21/179, SATHYAMURTHY BLOCK, V.M.BALAKRISHNAN STREET, JAFFERKHANPET, CHENNAI 600 083. PAN AKHPD4371L ( /APPELLANT) V. THE INCOME-TAX OFFICER, BUSINESS WARD-III(3), CHENNAI. RESPONDENT) / APPELLANT BY : SHRI T. BANUSEKAR, FCA / RESPONDENT BY : SHRI A.V.SREEKANTH, JCIT ! / DATE OF HEARING : 29.03.2017 '# ! / DATE OF PRONOUNCEMENT : 11.05.2017 % / O R D E R PER CHANDRA POOJARI, ACCOUNTANT MEMBER - - ITA 991/15 2 THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME-TAX(APPEALS)-14, CHEN NAI, DATED 18.03.2015. 2. IN THIS APPEAL, THE ASSESSEE HAS RAISED THE FOLL OWING GROUNDS : 1. FOR THAT THE ORDER OF THE COMMISSIONER OF INCOM E TAX (APPEALS) IS CONTRARY TO LAW, FACTS AND CIRCUMSTANCES OF THE CASE TO THE EXTENT PREJUDICIAL TO THE INTEREST OF THE APPELLANT AND AT ANY RATE IS OPPOSE D TO THE PRINCIPLES OF EQUITY, NATURAL JUSTICE AND FAIR PLAY. 2. FOR THAT THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) FAILED TO APPRECIATE THAT THE ORDER OF TH E ASSESSING OFFICER IS WITHOUT JURISDICTION. 3. FOR THAT THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) FAILED TO APPRECIATE THAT THE APPELLANT H AD VALUED STOCK-IN-TRADE AT 125/ PER SQ.FT AFTER CONSIDERING THE PREVAILING MARKET RATE AT THE TIME OF CONVERSIO N. 4. FOR THAT THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN UPHOLDING THAT THE IMPUGNED LAND WAS NOT AN AGRICULTURAL LAND. 5. FOR THAT THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) FAILED TO APPRECIATE THAT CAPITAL GAINS D OES NOT ARISE AS PER SECTION 45(2) ON CONVERSION OF AGRICUL TURAL LAND INTO STOCK-IN-TRADE. 6. FOR THAT THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) FAILED TO APPRECIATE THE EVIDENCES AND DOCUMENTS FURNISHED BY THE APPELLANT. - - ITA 991/15 3 7. FOR THAT THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN UPHOLDING THE DISALLOWANCE OF 10 % OF VARIOUS EXPENDITURE INCURRED BY THE APPELLANT. 8. FOR THAT THE APPELLANT OBJECTS TO THE LEVY OF IN TEREST UNDER SECTIONS 234A, 234B AND 234C OF THE INCOME TA X ACT. 3. THE FACTS OF THE CASE ARE THAT THE ASSESSEE IS A N INDIVIDUAL AND ENGAGED IN REAL ESTATE BUSINESS. TH E ASSESSEE HAD RECEIVED 4.68 ACRES OF LAND THROUGH A POWER OF ATTORNEY ON 21.11.2006 FROM DR. S. KARUPPASAMY AND PAID 14,00,000/- THROUGH UNREGISTERED SALE DEED DATED 7.11.2006. TH E SAID LAND (EXTENT 5.89 ACRES) WAS ORIGINALLY PURCHASED BY DR. KARUPPASAMY FOR A TOTAL CONSIDERATION OF 6,83,000/- PLUS REGISTRATION COST OF 1,70,433/-. THIS LAND WAS CONVERTED AS HOUSING PLOTS IN THE NAME OF SUBHAMATHI NAGAR. O NE PLOT MEASURING 900 SQ.FT. WAS SOLD TO SHRI SURESH FOR A CONSIDERATION OF 18,000/-. SUBSEQUENTLY THIS PLOT WAS PURCHASED BY DR. KARUPPASAMY AT SAME CONSIDERATION ON 12.11.2006. T HE LAND MEASURING 4.68 ACRES OUT OF 5.89 ACRES WAS TRANSFER RED TO THE ASSESSEE. - - ITA 991/15 4 3.1 AS ON 1.1.2007, THE ASSESSEE CLAIMED TO HAVE CO NVERTED THIS ASSET (LAND) INTO BUSINESS ASSET AND VALUED TH E STOCK AT THE RATE OF 125/- PER SQ.FT. ACCORDING TO THE ASSESSEE, THIS IS THE MARKET VALUE OF HOUSING PLOTS AT THE TIME OF CONVER SION. BUT THE ASSESSEE CLAIMED IT TO BE AN AGRICULTURAL LAND AND HENCE DID NOT OFFER CAPITAL GAIN U//S.45(2) OF THE ACT. THE FIRS T TRANSACTION OF PLOTTED LAND I.E. TO SRI L.S.SURESH OCCURRED IN 1.6 .2005. 3.2 THE NO OBJECTION CERTIFICATE (NOC) FROM THE TAH SILDAR FOR DEVELOPMENT OF THE LAND INTO PLOTS WAS OBTAINED ON 18 TH DEC., 2006, SUBSEQUENT TO THE TRANSFER OF LAND TO THE ASS ESSEE. THE PLOT APPROVAL WAS MADE ON 7 TH JAN. 2006. AS PER THE APPROVAL, OUT OF TOTAL LAND OF 4.68 ACRES OR 2,03,861 SQ.FT. LAND TO THE EXTENT OF 71,726 SQ.FT. HAVE TO BE RESERVED FOR ROADS AND PARKS (20592 SQ.FT. FOR PARK 51,134 SQ.FT. FOR ROADS). THUS, TH E TOTAL EXTENT OF LAND WHICH WAS CONVERTED INTO PLOTS IS 126021.5 SQ. FT. OUT OF THIS LAND, PLOTS AGGREGATING AREA OF 51876 SQ.FT. LAND W AS SOLD IN THE FY 2008-09 AT A CONSIDERATION OF 332.40 PER SQ.FT. AND IN THE FINANCIAL YEAR 2009-10, 48949.5 SQ.FT. LAND CONVERT ED INTO PLOTS WERE SOLD AT A CONSIDERATION OF 351.03 PER SQ.FT. - - ITA 991/15 5 3.3 FOR THE AY 2010-11, THE ASSESSEE HAD FILED A RE TURN OF INCOME SHOWING AN INCOME OF 7,63,780/- AS CONSIDERATION RECEIVED, ON ACCOUNT OF TRANSFER OF PLOTS WERE NOT OFFERED FOR TAXATION ON THE REASONING THAT THE LAND IS AN AGRIC ULTURAL LAND, THEREFORE, THE CONVERSION OF STOCK-IN-TRADE DOES NO T ATTRACT CAPITAL GAINS. 3.4 WHILE FINALIZING THE ASSESSMENT, THE AO REVALUE D STOCK- IN-TRADE AS ON 1.1.2007 AT THE PURPORTED FAIR MARKE T VALUE OF 20/- PER SQ.FT. AND MADE AN ADDITION OF 8,48,484/- AS SHORT TERM CAPITAL GAINS ON CONVERSION OF PERSONAL ASSET INTO STOCK-IN- TRADE CORRESPONDING TO THE LAND SOLD IN THE ASST. Y EAR 2010-11 AND RECALCULATED INCOME FROM SALE OF LAND FOR THE A SST. YEAR 2010-11 AS 1,25,00,149/- AFTER ACCOMMODATING THE REVALUED AMOUNT FOR STOCK-IN-HAND AND AFTER ADJUSTING THE BU SINESS INCOME ALREADY DECLARED BY THE ASSESSEE, MADE AN AD DITION OF 1,18,41,369/-. THE AO ALSO DISALLOWED A SUM OF 1,96,953/- BEING 10% OF VARIOUS EXPENDITURES FOR WHICH THE ASS ESSEE COULD NOT PRODUCE BILLS AND VOUCHERS AND ADDED THE SAME T O BUSINESS INCOME OF THE ASSESSEE. ACCORDINGLY, THE AO COMPLE TED THE ASSESSMENT FOR THE AY 2010-11, ASSESSING THE ASSESS EES TOTAL - - ITA 991/15 6 INCOME AT 1,36,50,590/- AND RAISING A DEMAND OF 60,24,575/-. AGGRIEVED, THE ASSESSEE WENT IN APPEAL BEFORE THE CIT(APPEALS). 4. ON APPEAL, THE CIT(APPEALS) OBSERVED THAT THE LA ND IS NOT AN AGRICULTURAL LAND, AS NO AGRICULTURAL ACTIVITY I S CARRIED OUT IN THE SAID LAND AND THE LAND WAS CONVERTED INTO NON-AGRIC ULTURAL USE AND THE LAND WAS DIVIDED INTO PLOTS. IF THE VALUATION OF LAND, ON THE DATE OF CONVERSION IS THAT IT IS TO BE VALUED A T 53 PER SQ.FT. AS THE FAIR MARKET VALUE OF THE PROPERTY AS ON 1.1.2007. ACCORDINGLY, HE DIRECTED THE AO TO COMPUTE THE CAPI TAL GAINS AND THE BUSINESS INCOME. AGAINST THIS, THE ASSESSEE IS IN APPEAL BEFORE US. 5. WE HEARD BOTH SIDES IN DETAIL AND GONE THROUGH T HE ORDERS OF THE LOWER AUTHORITIES, THE ARGUMENTS OF T HE PARTIES AS WELL AS THE VARIOUS DECISIONS RELIED ON BY THEM. 6. THE CRUX OF THE ARGUMENTS ADVANCED BY THE ASSESS EE IN THE PRESENT CASE IS THAT THE LANDS SOLD BY HIM WERE SHOWN AS AGRICULTURAL LAND IN REVENUE RECORDS. THE HONBLE GUJARAT HIGH - - ITA 991/15 7 COURT IN THE CASE OF CIT VS. SARIFABIBI MOHAMED IBR AHIM (136 ITR 621) HAS HELD THAT, THE FACT THAT THE LAND IS E NTERED AS AGRICULTURAL LAND IN REVENUE RECORDS AND IS ASSESSE D AS SUCH UNDER THE LAND REVENUE CODE, WOULD BE A CIRCUMSTANC E IN FAVOUR OF CONCLUSION THAT IT IS A AN AGRICULTURAL L AND. HOWEVER, THIS WOULD RAISE ONLY A PRIMA FACIE PRESUMPTION AND THE SAID PRESUMPTION CAN BE DESTROYED BY OTHER CIRCUMSTANCES POINTING TO THE CONTRARY CONCLUSION. THIS LEGAL PROPOSITION HIGHLIGHTED BY THE HONBLE GUJARAT HIGH COURT HAS BEEN LATER UPHEL D BY THE HONBLE SUPREME COURT IN THE CASE OF SARIFABIBI MOH AMED IBRAHIM VS. CIT (204 ITR 631). IT IS ALSO TO BE SE EN THAT THE QUESTION, WHETHER A PARTICULAR LAND IS AGRICULTURAL OR NOT, IS BASICALLY A QUESTION OF FACT. AS LAID DOWN BY VAR IOUS HIGH COURTS IN DIFFERENT JUDGMENTS, A SERIES OF TESTS AR E APPLIED TO DECIDE, WHETHER A LAND IS AGRICULTURAL OR NOT. IT IS ALSO TO BE UNDERSTOOD THAT ALL THESE TESTS ARE IN THE NATURE O F GUIDELINES AND HAVE TO BE APPLIED, DEPENDING UPON THE FACTS AND CI RCUMSTANCES OF EACH CASE. - - ITA 991/15 8 7. IN THE PRESENT CASE, AS ALREADY STATED, THE CORE OF THE ARGUMENTS OF THE ASSESSEE IS ON THE CLASSIFICATION OF THE LAND IN REVENUE RECORDS. BUT, THAT ALONE DOES NOT CONCLUSI VELY PROVE THE NATURE OF THE LAND SOLD BY THE ASSESSEE, AS OTHER E VIDENCES ARE SHADOWING THE SAID PRESUMPTION PRIMA FACIE CREATED BY THE ENTRY MADE IN THE REVENUE RECORDS. THE PROPERTIES WERE I N FACT, RECEIVED BY THE ASSESSEE THROUGH A POWER OF ATTORNE Y FROM DR. S. KARUPPASAMY BY THE ASSESSEE. AT THE TIME OF PURC HASE OF THESE PARCELS OF LAND, THEY MIGHT HAVE BEEN AGRICUL TURAL LANDS. THAT IS WHY THE LAND PARCELS ARE CLASSIFIED IN THE REVENUE RECORDS AS AGRICULTURAL LANDS. THAT POSITION WAS CONTINUED IN A RELIGIOUS MANNER WITHOUT ANY ANNUAL VERIFICATION OF THE NATUR E OF THE PROPERTY. BUT, THE CHARACTER OF THE LAND SOLD BY T HE ASSESSEE HAS BEEN EXPLAINED BY THE TAHSILDAR IN UNEQUIVOCAL TERMS IN HIS LETTER DATED 11/3/2013 GIVEN UNDER SEC.133(6) OF T HE ACT BEFORE THE ASSESSING AUTHORITY. THE TAHSILDAR HAS STATED THAT FROM 2006 TO 2009, NO AGRICULTURAL ACTIVITIES WERE CARRIED OU T IN THAT AREA. THE ASSESSEE WAS NOT IN FACT CARRYING ON ANY AGRICU LTURAL ACTIVITIES. THE LETTER GIVEN BY THE TAHSILDAR IS V ERY IMPORTANT. HE HAS STATED THE REASONS AS TO WHY THE AGRICULTURA L ACTIVITIES - - ITA 991/15 9 WERE NOT BEING CARRIED OUT ON THOSE PROPERTIES AND LAND WAS NOT SUITABLE FOR CULTIVATION (PUNCTURE). 8. THE LETTER GIVEN BY THE TAHSILDAR HAS CATEGORIC ALLY ESTABLISHED THE FINDING OF THE ASSESSING OFFICER TH AT THE LANDS SOLD BY THE ASSESSEE IN THE PREVIOUS YEAR RELEVANT TO THE ASSESSMENT YEAR UNDER APPEAL WERE NOT AGRICULTURAL LAND. THE PAST HISTORY OF THE LAND ALONE IS NOT THE DECIDING FACTOR. ONCE UPON A TIME THE LAND MIGHT HAVE BEEN USED FOR AGRIC ULTURAL OPERATIONS. IN THAT WAY OF SPEAKING, ALMOST ALL PA RTS OF CHENGALPET REGION MIGHT BE AGRICULTURAL OR MARSHY L AND IN GOOD OLD PAST. THEREFORE, HISTORY IS NOT THE ONLY TEST TO BE APPLIED TO DECIDE THE CHARACTER OF THE LAND AT THE TIME OF SAL E. A TEMPORARY STOPPAGE IN THE AGRICULTURAL ACTIVITIES CARRIED ON BY AN ASSESSEE ALSO SHOULD NOT GO AGAINST AN ASSESSEE. FOR ONE OR OTHER REASON, AN ASSESSEE MAY NOT BE CARRYING ON AGRICULT URAL OPERATIONS FOR ONE OR TWO YEARS, HE MIGHT BE CARRYI NG ON AGRICULTURAL OPERATIONS FOR ALL THE YEARS IN A CONS ISTENT MANNER. IN SUCH CASES, IT IS NOT POSSIBLE TO HOLD THAT NON CARRYING ON AGRICULTURAL OPERATIONS FOR ONE OR TWO YEARS PERMAN ENTLY CHANGES THE CHARACTER OF THE LAND. - - ITA 991/15 10 9. BUT, HERE THE CASE IS STILL DIFFERENT. THE ASSE SSEE HAS NOT BEEN CARRYING ON AGRICULTURAL OPERATIONS FOR SO MAN Y YEARS CONTINUOUSLY AND CONSISTENTLY. IT IS NOT A CASE OF INTERMITTENT STOPPAGE OF AGRICULTURAL OPERATIONS. IT IS A CASE OF PERMANENT STOPPAGE OF AGRICULTURAL OPERATIONS IN THE LIGHT OF REAL ESTATE DEVELOPMENT TAKING PLACE IN THE PARTICULAR AREA. T HEREFORE, BY VIRTUE OF NOT CARRYING ON AGRICULTURAL ACTIVITIES F OR A QUIET LONG TIME IN THE PAST, THE CHARACTER OF THE LAND OCCUPIED BY THE ASSESSEE HAS BEEN NATURALLY CONVERTED INTO A NON-AGRICULTURA L LAND. 10. IN THIS REGARD, WE HAVE TO APPLY OUR MIND TO ON E MORE VITAL QUESTION, WHETHER THE ASSESSEE WAS CARRYING O UT AGRICULTURAL OPERATIONS OR NOT. THE CASE OF THE AS SESSEE IN THE PRESENT CASE IS THAT NOT EVEN AT THE TIME OF SALE O F THESE PARCELS OF LAND, THE ASSESSEE HAD BEEN CARRYING ON AGRICULT URAL OPERATION. THE LAND SOLD BY THE ASSESSEE WAS NOT USEFUL FOR CARRYING ON ANY NORMAL AGRICULTURAL ACTIVITIES. 11. IN THE CONTEXT OF AGRICULTURAL OPERATIONS, IT IS NECESSARY TO SEE THAT THE AGRICULTURAL OPERATIONS CARRIED ON BY THE ASSESSEE MUST BE ACTIVITY OF ECONOMIC GAIN. IT MUST GENERAT E MEANINGFUL - - ITA 991/15 11 INCOME TO THE PERSON WHO IS CARRYING ON AGRICULTURA L ACTIVITIES. IF THE AGRICULTURAL ACTIVITIES CARRIED ON BY THE ASSES SEE AS A HOBBY OR CASUAL OR INCIDENTAL, IT IS VERY DIFFICULT TO HO LD A VIEW THAT THE LAND IS AGRICULTURAL IN NATURE. INDIA IS PRE-DOMIN ANTLY AN AGRICULTURAL ECONOMY WHERE AGRICULTURAL ACTIVITIES ARE MAJOR PART OF ECONOMIC ACTIVITIES OF OUR COUNTRY. THEREFORE, THE ACTIVITIES CARRIED ON BY THE ASSESSEE MUST BE MEANINGFUL AND R ESULT- ORIENTED TOWARDS GENERATING REASONABLE INCOME FROM SUCH OPERATIONS. AS FAR AS THE PRESENT CASE IS CONCERNE D, THERE WAS NO SUCH ECONOMIC UTILIZATION OF THE LAND FOR EARNING INCOME BY CARRYING ON AGRICULTURAL OPERATIONS. 12. IT IS, IN THIS CONTEXT THAT WE HAVE TO REFER TH E ARGUMENTS OF THE ASSESSEE THAT THE ASSESSEE HAD NOT REPORTED ANY AGRICULTURAL INCOME IN HIS RETURNS OF INCOME FOR ASSESSMENT YEAR 2010-11 FROM THE IMPUGNED LAND. THE AGRICULTURAL INCOME OF ` 4,00,000/- DECLARED BY THE ASSESSEE WAS FROM LAND SITUATED AT TUTICORIN. WHEN THIS IS CONSIDERED, IT IS OBVIOUS THAT THERE W AS NO AGRICULTURAL OPERATIONS CARRIED ON BY THE ASSESSEE . THERE WAS NO ECONOMIC UTILIZATION OF LAND FOR THE PURPOSE OF EARNING - - ITA 991/15 12 AGRICULTURAL INCOME. IN THE FACTS AND CIRCUMSTANC ES OF THE CASE, WE FIND THAT THE LAND WAS NOT ACTUALLY OR ORDINARIL Y USED FOR AGRICULTURAL OPERATIONS ON OR AROUND THE RELEVANT T IME OF SALE. IT IS ALSO TO BE SEEN THAT EVEN IN ANY ASSESSMENT YEAR , THE INCOME RETURNED FROM AGRICULTURAL OPERATIONS CARRIED ON IN THE LAND WAS JUST FOR NAMESAKE AND DOES NOT HAVE ANY PROPORTION TO THE EFFORTS USUALLY THAT WOULD HAVE BEEN MADE BY A TRUE AGRICULTURIST. AT THE TIME OF SALE OF LAND ALSO NO AGRICULTURAL AC TIVITIES WERE CARRIED ON BY THE ASSESSEE. 13. IN THESE CIRCUMSTANCES, IT IS OUR CONSIDERED VI EW THAT THE ASSESSING OFFICER HAS CONCLUSIVELY ESTABLISHED THAT THE LANDS SOLD BY THE ASSESSEE IN THE PREVIOUS YEAR RELEVANT TO THE ASSESSMENT YEAR WERE NOT AGRICULTURAL IN NATURE, BU T, ON THE OTHER HAND, THEY ARE NON-AGRICULTURAL LAND. THEREF ORE, IT DEFINITELY COMES UNDER THE CATEGORY OF CAPITAL ASSET. FURTH ER, THE ASSESSEE HAS CONVERTED IT INTO STOCK-IN-TRADE AND A LSO THE ASSESSEE DURING THE FINANCIAL YEAR 2006-07, OBTAINE D NOC FROM TAHSILDAR, SRIPERUMPUDUR ON 18.12.2006 AND APPLIED FOR PLOT APPROVAL FROM CHENGALPET LOCAL AUTHORITIES IN THE M ONTH OF JANUARY,2007. THE ASSESSEE RECEIVED SAID APPROVAL F OR - - ITA 991/15 13 CONVERTING HIS LAND INTO HOUSING PLOTS ON 06.02.200 7 FROM DEPUTY DIRECTOR OF URBAN DEVELOPMENT AND HOUSING PLOT WAS DEVELOPED AND SOLD BY ASSESSEE. 14. WHEN THE BASIC NATURE OF THE LAND ITSELF FOUND TO BE NON- AGRICULTURAL, THE ARGUMENTS REGARDING STATUS OF THE PROPERTY, WHETHER WITHIN METROPOLIS OR OUTSIDE THE LIMIT OF T HE METROPOLIS, IS IRRELEVANT. A NON-AGRICULTURAL PROPERTY, WHETHER INSIDE THE MUNICIPALITY OR OUTSIDE THE MUNICIPALITY OR EVEN IN A REMOTE VILLAGE IS A CAPITAL ASSET OR STOCK-IN-TRADE AND TRANSFER OF THE SAME MAY GENERATE INCOME LIABLE FOR CAPITAL GAINS T AXATION OR BUSINESS INCOME AS THE CASE MAY BE. 15. REGARDING FIXING THE VALUE AS ON 01.01.2007 BY THE CIT(A) AT ` 53/- PER SQ. FT., WHICH IS BASED ON THE SALE INCIDE NCE OF THE PROPERTY SITUATED AT NOVALOOR VILLAGE LOCATE D NEXT TO NATTARASAMPATTU VILLAGE VIDE SALE DEED JUNE, 2007 F OR 23,100/- PER CENT AT ` 53/- SQ. FT. IN OUR OPINION, WHEN THE ASSESSEE SOL D THE PROPERTY IN THE A.Y 2010-11 AT ` 351 SQ. FT., IT CANNOT BE SAID THAT THE VALUE OF THAT PROPERTY AS ON 01.04.2009 BE AT ` 53/- PER SQ. FT.. CONSIDERING THE SALE VALUE AT ` 351 SQ. FT., WE DIRECT THE AO TO WORK OUT THE VALUE OF OPENING STOCK AS ON 01. 04.2009 BY - - ITA 991/15 14 APPLYING THE REVERSE INDEXATION METHOD. ACCORDINGLY , THIS ISSUE IS REMITTED TO THE FILE OF AO FOR HIS FRESH CONSIDE RATION ON THIS DIRECTION ONLY. 16. THE NEXT GROUND IN THIS APPEAL IS WITH REGARD T O UPHOLDING THE DISALLOWANCE OF 10% VALUE EXPENDITURE INCURRED BY THE ASSESSEE. 17. THE FACTS OF THE ISSUE ARE THAT THE AO NOTED TH AT IN SPITE OF SPECIFIC QUERIES, THE BILLS AND VOUCHERS OF VARI OUS EXPENSES WERE NOT PRODUCED. HENCE ON AN ESTIMATE BASIS HE D ISALLOWED 10% OF SUCH EXPENDITURE. BEFORE THE CIT(APPEALS) A LSO, THE ASSESSEE HAS NOT PRODUCED ANY BILLS OR VOUCHERS OR ANY EXPLANATION WAS OFFERED TO PROVE ITS CASE. THEREFO RE, THE DISALLOWANCE MADE BY THE AO IS CONFIRMED BY THE CIT (A). AGAINST THIS, THE ASSESSEE IS IN APPEAL BEFORE US. 18. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL ON RECORD. THE AO DISALLOWED 10% OF ` 19,60,530/- ON THE REASON THAT THE ASSESSEE HAS NOT PRODUCED THE BILLS AND VOUCHERS WORKED OUT ` 1,96,953/-. IN OUR OPINION, WHEN THE ASSESSEE HAS NOT PRODUCED THE BILLS AND VOUCHERS, T HERE IS EVERY - - ITA 991/15 15 CHANCE OF INFLATING THE EXPENDITURE BY THE ASSESSEE . ACCORIDNGLY, WE DIRECT THE AO TO DISALLOW AT 5% INSTEAD OF 10% O F THE TOTAL EXPENDITURE OF ` 19,60,530/-. THIS GROUND IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. 19. IN THE RESULT, THE APPEAL OF ASSESSEE IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED ON 11 TH MAY, 2017 AT CHENNAI. SD/- SD/- ( $% & ) ( ' ( ) $ ) *%+,-,./01,2345,.62,+778,293 : ;< /JUDICIAL MEMBER ! ;<=>>70.?,.?@A1BA2 ': /CHENNAI, C; /DATED, THE 11 TH MAY, 2017. K S SUNDARAM ;D EFGF /COPY TO: 1. /APPELLANT 2. /RESPONDENT 3. H3 /CIT(A) 4. H /CIT 5. FIJ K /DR 6. JLM /GF.