Income Tax Appellate Tribunal - Amritsar
Income-Tax Officer, Jalandhar vs Omsons International,, Jalandhar on 21 February, 2017
IN THE INCOME TAX APPELLATE TRIBUNAL
AMRITSAR BENCH; AMRITSAR
BEFORE SH. A.D.JAIN, JUDICIAL MEMBER AND
SH. T.S. KAPOOR, ACCOUNTANT MEMBER
(CAMP AT JALANDHAR)
I.T.A No.55(Asr)/2015
Assessment Year: 2009-10
M/s Omsons Vs. Income Tax Officer,
International, Ward-1(3), Jalandhar.
Model House Road,
Basti Sheikh,
Jalandhar.
PAN:AAAFO-1348R
(Appellant) (Respondent)
I.T.A No.68(Asr)/2015
Assessment Years: 2010-11
Income Tax Officer, Vs. M/s Omsons International,
Ward-1(3), Jalandhar Model House Road,
Basti Sheikh, Jalandhar.
PAN:AAAFO-1348R
(Appellant) (Respondent)
Appellant by: Sh. M.R.Bhagat
Respondent by: Sh. Bhawani Shankar (DR)
Date of hearing: 19.01.2017
Date of pronouncement: 21.02.2017
ORDER
PER T. S. KAPOOR (AM):
These are cross appeals filed by assessee as well as by Revenue against the order of Ld. CIT(A), Jalandhar, dated 18.11.2014 for Asst. Year: 2010-11.2
ITA Nos.55 & 68 (Asr)/2015 Asst. Year: 2010-11
2. The grounds of appeal taken by assessee as well as by Revenue are reproduced herein below.
The following grounds has been taken by assessee.
".1. The appellate order is illegal, perverse, arbitrary to the extent that part of addition made by the A.O. on account of closing stock was confirmed without appreciating the facts of the case.
2. The Learned CIT(A) erred in valuing the closing stock at 30% of the value made by the firm. The stock was very old and made as per specification of the export orders which were cancelled due to slump in the international market and further the valuation was supported by a certificate of an Engineer. It is prayed that addition of Rs.22,96,999/- confirmed by the appellate authority may be deleted.
3. The learned CIT(A) eared in confirming addition of Rs.1,27,382/- being one sixth of the expenses of vehicles and telephone etc. without taking into consideration the facts of the case or citing any comparable case. It is prayed that the addition may be deleted.
4. The leaned CIT(A) erred in confirming addition of Rs.3,60,000/- without appreciating the fact that the appellant and its partners owned about 100 'KANAL"
of agricultural land at one premises. It is prayed that the addition may be deleted." The following grounds has been taken by Revenue.
"1. That, on the facts and in the circumstances of the case, the Ld. CIT(A) has erred in law in deleting the addition of Rs.25,00,790/- made by the AO on account of under valuation of closing stock.
1(a) That, while deleting the above addition of Rs.25,00,790/- Ld. CIT(A) has ignored the observations of the AO to the effect that the report of the Engineer, on the basis of which Ld. CIT(A)has given relief does not at all help the assessee.
2. That, on the facts and in the circumstances of the case, the Ld. CIT(A) has erred in law in deleting the addition of Rs.1,15,47,607/- made by the AO under the provisions of section 50C of the Income Tax Act.
2(a) While deleting the above addition of Rs.1,15,47,607/-, the Ld. CIT(A) has failed to appreciate the fact that the AO made this addition after duly considering the explanation of the assessee and on assessee's inability to give comprehence details as per para 2(v) of the assessment order.
2. That, on the facts and in the circumstances of the case, the Ld.CIT(A) has erred in law in deleting the addition of Rs.78,21,522/- made by the AO on account of reduction of WDV of the building.
3(a) While deleting the above addition of Rs.78,21,522/-, the Ld.CIT(A) has failed to appreciate the observations of the AO to the effect that transfer of assets from 3 ITA Nos.55 & 68 (Asr)/2015 Asst. Year: 2010-11 one Block to the other is not allowed under the provisions of the Income Tax Act, 1961.
3. That, on the facts and in the circumstances of the case, the Ld. CIT(A) has erred in law in deleting the addition of Rs.33,26,291/- made by the AO on account of cost of construction.
4(a) While deleting the above addition of Rs.33,26,291/-, the Ld. CIT(A) has failed to appreciate the observations of the AO to the effect that the assessee has not been able to substantiate his claim by any documentary evidence.
4. It is prayed that the order of the Ld.CIT(A) be set-aside and that of the Assessing Officer restored.
6. That the appellant request for leave to add or amend or alter the grounds of appeal before the appeal is heard and disposed off."
3. The brief facts of the case as noted in the assessment order are that the assessee is engaged in the business of manufacturing and export of hand tools. During the assessment proceedings, the Assessing Officering observed that the assessee entered into an agreement with one M/s S.A.M, Overseas to sell its immovable property situated at Plot No. A-1, Section 64, Noida for Rs.13,51,00,000/- whereas in the computation of income, it had declared the sale consideration at Rs.11,84,52,393/-, therefore, assessee was show caused to explain the same.
In reply, the assessee submitted that as per clause 2 & 3 of agreement to sell, the assessee was to complete /carry out the unfinished work at the site before 31.01.2010 and as per clause 13 of the agreement in case of breach of any clause by the assessee, the purchaser would have right to get the transfer deed registered through the Court of law. It was submitted that assessee could not get the work done as per that agreement and the transfer deed could not be executed on the date mentioned in the agreement. Therefore, new negotiations 4 ITA Nos.55 & 68 (Asr)/2015 Asst. Year: 2010-11 took place and taking into consideration, the market value of the properties which had fallen another agreement to sale was executed on 09.02.2010 and in that agreement the consideration was fixed at Rs.11.51 corores wherein the purchaser had agreed to carry out the remaining construction/finishing of the unfinished work. In this respect, a copy of the second agreement was also submitted to Assessing Officer. It was further submitted that as per the stamp valuation the sale consideration was calculated at Rs.11.84,52,393/- as per provisions of Sec.50C for calculation of capital gain. It was submitted that as per the provisions of income tax, the value of property as assessed by the stamp valuation authority is to be considered for calculation of capital gain. However, the Assessing Officer was not satisfied with the explanation of assessee due to various reasons recorded by him in the assessment order and therefore, substituted the sale consideration of Rs.13.51 crores with the sale consideration of Rs.11,84,52,393/-.
The Assessing Officer further observed that while calculating the capital gain, the assessee had reduced from sale consideration an amount of Rs.78,21,522/- as WDV of building account. The assessee was therefore, asked to substantiate its claim.
In reply the assessee submitted that the building at Jalandhar Head Office of the value of Rs.78,21,522/- was part of block of assets on which depreciation of 10% was being claimed.
It was submitted that after the sale of building the block of assets of Rs.78,21,522/- was reduced to Nil. The Assessing Officer was not satisfied with 5 ITA Nos.55 & 68 (Asr)/2015 Asst. Year: 2010-11 the reply and therefore, he did not consider the reduction from capital gain the WDV of the building.
The Assessing Officer further observed that under the head building account, the assessee had debited an amount of Rs.35,20,309/- as on 31.03.2010 and which expenses related to the preceding years. The assessee was, therefore, asked to explain the same.
In reply the assessee submitted the copies of certain bills. The Assessing Officer, however, held that debiting the building account at the end of the year cannot be considered as genuine as the assessee had not being able to substantiate its claim by any documentary evidence such as source of investment.
He further observed that some of the bills submitted before him were already entered in the books of accounts of the relevant years and he noted down such bills in his assessment order. He further observed that two entries of Rs.15,00,000/- and 1,50,000/- which were reversed in the relevant assessment year has now been debited to the building account. In view of these facts, the Assessing Officer did not consider the addition of Rs.35,20,309/- under the head building account.
The Assessing Officer further observed that the perusal of the opening stock and closing stock revealed that there was no much difference in the number of items in the opening stock as well as closing stock but the rates of each item adopted as on 31.03.2010 was almost 50% of the cost as adopted on 31.03.2009.
6
ITA Nos.55 & 68 (Asr)/2015 Asst. Year: 2010-11 He further observed that none of the items appeared to have been sold during the year under assessment and therefore, the assessee was show caused to explain the same.
In reply, the assessee submitted that closing stock as on 31.03.2010 had become obsolete, unusable and was worst than scrap.
It was further submitted that the stock could not be sold even in the year ended on 31.03.2011 and 31.03.2012. It was submitted that the stock has been valued on the basis of well established trading practice and there has been no change in method of valuation of closing stock.
It was further pleaded that the valuation of closing stock was made as per the valuation made by Chartered Engineer and the partners of the firm and a certificate to this effect forms part of Auditor's report. A copy of report of Chartered Engineer was also filed with the Assessing Officer, the Assessing Officer held the assessee was trying to lower income from such business in order to adjust the same against the capital gain arising from the sale of Noida property. Therefore, Assessing Officer rejected the certificate from Engineer, however, he reduced the valuation of closing stock based upon the value of opening stock by 20%.
The Assessing Officer further observed that assessee had claimed an amount of Rs.3,60,000/- as agricultural income. The Assessing Officer held that assessee holds only two canals of agricultural land and assessee had been declaring agricultural income to the tune of Rs.40,000/- to 50,000/- in the earlier years, and therefore, he held the income from agriculture income declared by assessee as income from other sources.
7
ITA Nos.55 & 68 (Asr)/2015 Asst. Year: 2010-11 The Assessing Officer further observed that assessee had incurred an expenditure of Rs.7,64,297/- on Car repair, Car insurance deprecation and Telephone expenses and therefore, he disallowed an amount equivalent to 1/5 of the same for personal purposes.
4. Aggrieved with the order, the assessee filed appeal before Ld. CIT(A) and submitted various submissions. The Ld. CIT(A) submitted the submissions before him to Assessing Officer and after considering the remand report which though supported the assessment order allowed partial relief to the assessee by holding as under:
Regarding disallowance out of expenses 7.4.I have carefully considered the observations of the Assessing Officer as made by him in the assessment order as well as in the remand report. I have also considered the written submissions of the assessee filed vide letter dated 26.11.2013 as well as his counter comments on the report of the Assessing Officer.
I have further considered the other material brought on record. On careful consideration of the rival contentions, I am of the opinion that the disallowance made by the Assessing Officer appears to be little bit on the higher side more particularly when the partners of the assessee firm have also vehicles in their individual capacity. In my opinion, it will be fare and reasonable if the disallowance out of vehicle running and maintenance expenses and telephone expense is restricted to l/6th of the total expenses incurred at Rs.7,64,297/-. The disallowance will thus come to Rs.1,27,382/- as against made by the Assessing Officer at Rs. 1,52,859/-.
7.5 In view of the above stated facts and in the circumstances of the case, the addition of Rs.1,52,859/- is reduced to Rs.1,27,382/- . The assessee will thus get a further relief of Rs.25,477/-. In the result, ground No. 3 of appeal taken by the assessee is partly allowed.
Regarding Capital Gain.
8.5 I have carefully considered the observations of the Assessing Officer as made by him in the assessment order as well as in the remand report. I have also considered the written submissions of the assessee filed vide letters dated 26.11.2014 & 14.11.2014 as well as its counter comments on the report of the Assessing Officer. I have further considered the judicial pronouncements relied upon by the assessee as well as other material brought on record. On careful consideration of the rival contentions, I am also of the opinion that the Stamp Valuation Officer has valued the property for the purpose of stamp duty at 8 ITA Nos.55 & 68 (Asr)/2015 Asst. Year: 2010-11 Rs.l1,84,52,393/- which has been considered by the assessee for the purpose of calculating capital gains. The fact that the assessee could not fulfill its commitment as per clauses 2 and 3 of the agreement to sell dated 22.09.2009 has also been admitted by the Assessing Officer as he has himself adopted the sale consideration of the Noida property at Rs.l3,00,00,000/- which is entirely different from the sale price mentioned in agreement to sell dated 22.09.2009. The Assessing Officer has also conducted enquiries by deputing his Inspector from the purchaser of property i.e. M/s SAM Overseas with regard to the obligation of the assessee as per first agreement to sell. The purchaser has disclosed that the assessee has not fulfilled its commitment as per clauses 2 and 3 of the agreement to sell dated 22.09.2009. The Assessing Officer has also collected copy of building account as appearing in the books of account of the purchaser for the F.Ys. 2009-10 and 2010-11 through his Inspector but unfortunately the Assessing Officer has not taken any cogngence of the material himself brought by him on record. The assessment order is also silent about the statements of employees of M/s SAM Overseas got recorded by the Assessing Officer through his Inspector. The assessment order is also silent about the report submitted by the Inspector. The report of Inspector in fact further confirms that the assessee has not done anything between the period of first and second agreement. It is on record that the purchaser after purchasing the Noida property on 25.03.2010 has incurred following expenses on construction of unfinished work.
From 28.03.2009 to 31.03.2010 Rs.6,39,959/- From 01.04.2010 to 31.03.2011 Rs.4,10,99,672/-
This fact itself shows that the assessee was to incur huge expenses on unfinished work of construction. The report of the Inspector further confirms that neither the assessee constructed basement nor done any work on first and second floor as was agreed by the assessee vide first agreement dated 22.09.2009. In these facts and in the circumstance of the case, I am of the opinion that the Assessing Officer has adopted the sale consideration of the property at Rs. 13,00,000/- without any logic and without making necessary enquiries. Moreover, he has totally ignored the results of enquiries conducted by him. No expert opinion has also been taken and sale consideration adopted by him is just an estimate which is not supported by any evidence. Moreover, the purchaser has accounted for only Rs.l 1,51,00,000/- as the purchase cost of the property in its books of account. This fact further proves that the assessee has received only Rs.l 1,51,00,000/- from the purchaser and nothing else. No evidence has been brought on record to suggest that the assessee has received anything over and above Rs.l 1,51,00,000/- from the purchaser. 8.6 In view of the above stated facts and in the circumstances of the case, I am of the opinion that the Assessing Officer is not justified in taking sale consideration of the property at Rs.l3,00,00,000/- and thereafter making an addition of Rs.l, 15,47,607/- being the difference in sale consideration adopted by the Assessing Officer and as declared by the assessee as the same is not supported by any evidence. The addition of Rs.l,15,47,607/- made by the Assessing Officer on account of difference in sale consideration adopted by the Assessing Officer and as declared by the assessee is, therefore, directed to be deleted. In the result, ground No. 4 of appeal taken by the assessee is allowed.
Regarding WDV of the Head Officer Building 9 ITA Nos.55 & 68 (Asr)/2015 Asst. Year: 2010-11 9.4. I have carefully considered the observations of the Assessing Officer as made by him in the assessment order as well as in the remand report. I have also considered the written submissions of the assessee filed vide letter dated 26.11.2013 as well as his counter comments on the report of the Assessing Officer. I have further considered various judicial pronouncements relied upon by the assessee and the other material brought on record. On careful consideration of the rival contentions, I am of the opinion that the building at Noida which was sold by the assessee was ready to use and if the assessee has not disposed off the building it would have certainly claimed depreciation @ 10% on the cost of construction of the building. The fact that the building was ready to use is clear from the fact that the purchaser has claimed depreciation on the same in the A.Y. 2010-11. Moreover, the building at Noida and Head Office building fall under the same block of assets and the assessee has reduced the WDV of Head Office building as per provisions of the Act. An act of the assessee which is legally permissible cannot be said to have been done with any ulterior motive. 9.5 In view of the above stated facts and in the circumstances of the case, I am of the opinion that the Assessing Officer is not justified in increasing the capital gains by an amount of Rs.78,21,522/- as the assessee has reduced the WDV of Head Office Building as per provisions of the Act. The addition of Rs.78,21.522/- made by the Assessing Officer is, therefore, directed to be deleted. In the result, ground No. 5 of appeal taken by the assessee is allowed.
Regarding Additions of Building 10.5 I have carefully considered the observations of the Assessing Officer as made by him in the assessment order as well as in the remand report. I have also considered the various written submissions of the assessee filed vide letter dated 26.11.2013 as well as his counter comments on the report of the Assessing Officer. I have further considered the other material brought on record. On careful consideration of the rival contentions, I am of the opinion that the assessee has kept building account in respect of Noida property both at branch office and head office. As the building was not under use and depreciation on the building was not being claimed, the building account at Head Office and branch office was not consolidated by the assessee. It has been noticed that the Assessing Officer has raised objections with regard to the genuineness of the bills produced before him without making any enquiry. It is also true that the Assessing Officer has correctly pointed out that some of the bills were already entered in the books of account but were again being claimed. However, in my opinion some genuine mistakes done by the assessee while making claim will not prove that all the bills produced during the course of assessment proceedings are not genuine or have been entered earlier. On verification of past records, the Assessing Officer has genuinely pointed out some mistakes in the claim of the assessee which the assessee has fairly conceded. The construction expenses to the extent of Rs. 1,94,018/- were again being claimed and reduced from the sale consideration which is not correct on the part of the assessee. In my opinion, the balance expenses of Rs.33,26,291/- [Rs.35,20,309/- (-) Rs. 1,94,018/-] were correctly reduced from the sale consideration as the same relate to construction of Noida property. Moreover, the Assessing Officer has not brought anything on record to either prove that the expenses to this extent have already been taken into account in earlier years or the 10 ITA Nos.55 & 68 (Asr)/2015 Asst. Year: 2010-11 bills in respect of expenses are not genuine. Commenting on the genuineness of the bills without bringing anything adverse on record is not correct in my opinion. 10.6 In view of the above stated facts and in the circumstances of the case, the addition of Rs.35,20,309/- made by the Assessing Officer on account of building construction expenses incurred in earlier years and entered in the books of account maintained at Head Office is restricted to Rs.1,94,018/- and balance addition of Rs.33,26,291/- is, therefore, direction to be deleted. In the result, ground No.6 of appeal taken by the assessee is partly allowed.
Regarding Agricultural Income 11.5 I have carefully considered the observations of the Assessing Officer as made by him in the assessment order as well as in the remand report. 1 have also considered the written submissions of the assessee filed vide letter dated 26.11.2013 as well as his counter comments on the report of the Assessing Officer. I have further considered the other material brought on record. On careful consideration of the rival contentions, I am also of the considered opinion that by no stretch of imagination it can be believed that the assessee has earned agriculture income of Rs.3,60,000/- from a negligible piece of agriculture land owned by the assessee firm. Even, this income cannot be earned from 3 acres of land if the plea of the assessee firm that the agriculture land was to be transferred to the assessee firm as per family settlement is admitted. Moreover, no documentary evidence has been produced in respect of earning of agriculture income except papers related to ownership of agriculture land. The agriculture income if any earned by the family members of partners or the partners themselves cannot be considered as agriculture income of the assessee firm.
11.6. In view of the above stated facts and in the circumstances of the case, I am of the opinion that the Assessing Officer is fully justified in treating agriculture income shown by the assessee firm as its income from unexplained sources. The addition of Rs.3,60,000/- made by the Assessing Officer is, therefore, upheld. In the result, ground No. 7 of appeal taken by the assessee is dismissed."
5. Aggrieved both the parties are in appeal before us.
6. At the outset, the Ld. DR heavily placed his reliance on the order of Assessing Officer with respect to deletions made by Ld. CIT(A), whereas the Ld. AR heavily placed his reliance on the order of Ld. CIT(A) and also heavily placed his reliance on the written submissions relied upon before CIT(A).
7. The Ld. AR further placed his reliance on the balance sheet placed at (PB-
64) and also on the report of Inspector dated 05.02.2013 placed at (PB-20). The 11 ITA Nos.55 & 68 (Asr)/2015 Asst. Year: 2010-11 ld. AR submitted that the Assessing Officer deputed an Inspector, who had recorded the statements of buyers of the property and wherein the purchaser had admitted to have paid the sale consideration as per the second agreement. The Ld. AR further submitted that buyer had incurred a huge expenditure and which fact has also been considered in the Inspector Report, which the Ld. CIT(A) has also considered.
8. As regards assesse's appeal the Ld. AR submitted that some part of stock had become obsolete and was unstable and had become scrap and therefore, as the valuation of stock method regularly employed by the Assessee had valued the stock at net realizable value on the basis of report of a Chartered Engineer. It was submitted that Assessing Officer had allowed reduction in value to the extent of Rs.20% whereas Ld. CIT(A) had reduced the value to the extent of 30% which itself proves that the value of stock had gone down and therefore, the authorities below should have accepted the valuation done by assessee which was based on the basis of technical person.
It was further submitted that Assessee had sold these items as scrap during the year 2012-13 and in this respect invited our attention to written submissions filed before Ld. CIT(A) in which the detail of such sales along with copies of bills was filed.
The Ld. AR further relied on the following case laws for the proposition that stock has to be valued at cost or market price whichever is lower.
(i) Alfa Laval India Ltd. Vs. DCIT 266 ITR 418 (Bom).
(ii) Suzuki Motorcycle P. Ltd. Vs. CIT (2013) 357 ITR 250 (Del). 12
ITA Nos.55 & 68 (Asr)/2015 Asst. Year: 2010-11
9. The Ld. DR, on the other hand relied on the orders of authorities below.
10. We have heard the rival parties and have gone through the material placed on record. We first take up the appeal filed by Revenue. The first ground taken by Revenue is the part of deletion made by Ld. CIT(A) on account of decrease in valuation of closing stock. In this respect, we find that it is an undisputed fact that quantitative details in respect of opening and closing stock remained the same and the decrease in valuation of stocks occurred as the assessee had valued the closing stock at market price. The assessee had adopted such rates on the basis of report from Chartered Engineer. We further find that assessee could not sell these obsolete stock in the subsequent two years also. We further find stock of tools were having logos, branding of the buyers. The Assessing Officer agreed with the contention of assessee that the valuation had deteriorated and he allowed 20% as reduction in value without any basis. Had the Assessing Officer doubted the valuation of closing stock based on the report of the Engineer, he could have made reference to the valuation officer. The Assessing Officer is not a competent person to reject the valuation of Chartered Engineer who is a technical person. We further find that before Ld. CIT(A), the assessee had submitted that in subsequent years the price realized from the above stock was even lower than valuation as declared during the year under consideration, which the Ld. CIT(A) had duly taken care of while allowing part relief to the assessee. The Ld. CIT(A) had granted relief to the assessee by increasing the reduction in value stock from 20% to 30% which in our opinion is not appropriate as the assessee has been following the method of valuation of 13 ITA Nos.55 & 68 (Asr)/2015 Asst. Year: 2010-11 stock on the basis of cost price or market price, whichever, is lower. The copy of audit report placed at (PB-80) also mentioned the method of valuation of closing stock at cost or market price whichever is less. Therefore, assessee was entitled to take into the account the market price while valuing the closing stock. The Hon'ble Delhi High Court in the case of Suzuki Motorcycle India Pvt. Ltd. Vs. CIT 357 ITR 250 (Del) has held that principle "cost or net realizable value, whichever is lower" is an accepted method of valuation of inventory. The Hon'ble Court further held that Accounting Standard 2 issued by the Institute of Chartered Accountants of India is binding on both the assessee as well as the tax authorities.
We further observe that while in the year under consideration the assessee might have gained by valuing the stock at lower figure but this gain would have been nullified in the succeeding year as it is bound to value these goods at the same value in its opening accounts in the succeeding year as opening stock and any sale of goods in that year would result in the entire sale price being treated as profit liable to tax.
We further find from the submissions made before the Ld. CIT(A) that assessee had sold the defective tools as scrap to M/s Chada Engineering Pvt. Ltd. The copy of submissions made to Ld. CIT(A) vide letter dated 05.06.2014 along with copy of sale bills showing sale of defective tools as scrap are placed in (PB I to 9). In view of the above facts and circumstances, we are of the view that Assessing Officer was not justified in disturbing the valuation of closing stock which assessee had adopted on the basis of market price determined by 14 ITA Nos.55 & 68 (Asr)/2015 Asst. Year: 2010-11 Chartered Engineer. In view of the above, Ground No.1 of appeal of Revenue is dismissed whereas the ground no.1 & 2 of the assessee's appeal are allowed.
11. Now coming to the second ground of Revenue's appeal regarding deletion of addition of Rs.1,15,47,607/-, we find that the assessee had initially entered into an agreement for sale of the property at Rs.13.1 Crores but due to delay in execution of unfinished work as promised to the buyers by Clause-2 & 3 of the agreement a fresh agreement was entered into wherein the sale consideration was settled at Rs.11.51 Crores. Both these agreements were available with the Assessing Officer. The Assessing Officer did not believe on the assessee and in his opinion the value of unfinished work were not to the extent of Rs.2 Crores and therefore, he allowed the relief of Rs.51 lacs for not finishing the unfinished work while adopting Rs.13 Crores as sale consideration instead of Rs.11.51 crores agreed to between the parties. The Assessing Officer ignored even the report of Inspector who had examined the purchaser of the property. The copy of report is placed at (PB-20) onwards. We further find that as per the copy of ledger- Building account placed at (PB-30 t0 31), the purchaser had debited in the account an amount of 11.51 cores as purchase of value of land of building.
We further find that the said purchaser after from 1.4.2010 spent a huge amount exceeding more than Rs.2 Crores as is apparent from copy of factory building account placed at (PB 32 to 62). The Ld. CIT(A) has very categorically recorded his findings regarding incurring of such expenditure.
We further find that there is nothing on record to demonstrate that assessee had received amount exceeding Rs.11.51 Corres. In fact, the assessee had adopted the valuation as per stamp valuation authority as provided u/s 50C 15 ITA Nos.55 & 68 (Asr)/2015 Asst. Year: 2010-11 of the Act., therefore, keeping in view these facts and circumstances, we do not find any infirmity in the order of Ld. CIT(A). In view of the above, Ground No.2 of Revenue appeal is dismissed.
12. Now coming to the deletion of addition of Rs.78,21,522/-, we find that the amount was outstanding as WDV of the building as is apparent from (PB 68) where in schedule of fixed assets forming part of balance sheet of the assessee as on 31.03.2010 is placed. The assessee has made Nil the outstanding WDV to the extent of Rs.78,21,522/- and there is nothing wrong in claiming the value of WDV from the sale consideration. It is an undisputed fact that WDV of building which was sold was outstanding of Rs.78,21,522/- which fact is apparent from the coy of fixed assets placed at (PB -68). We find that Ld. CIT(A) has passed speaking and reasoned order and which is supported by facts and figures and therefore, we do not find any infirmity to the extent. In view of the above, Ground No. 3 is also dismissed.
13. Now coming to Ground No.4, regarding deletion of addition of Rs.33,26,291/-, we find that assessee had incurred an expenditure of Rs.35,20,302/- during earlier years and had debited the same to the building account on 31.3.2010. The Assessing Officer disallowed the same on finding that some of bills were relating to earlier years and for some of the bills the assessee had already taken benefit in the preceding years. We find that it is a fact that some of the bills were found recorded in earlier years and, therefore, Ld. CIT(A) has confirmed a disallowance of Rs.1,94,018/- being value of such bills. 16
ITA Nos.55 & 68 (Asr)/2015 Asst. Year: 2010-11 We further find that before Ld. CIT(A) the assessee had submitted that as the amounts paid on account of building construction was outstanding in the name of persons as advances and therefore, at the end of the year these were transferred to the building account. The submissions of the assessee as recorded by Ld. CIT(A) at page 45 and 46 are relevant in this respect and which for the sake of convenience and completeness are reproduced below.
"Ground No. 6-Addition of Rs.35,20,309/-
The assessee started construction of the building at NOIDA in the year 2004. As no business was being done at NOIDA, therefore, all the construction work was done with the funds available at the head office. The funds were also transferred to the branch office for the purpose of construction of the building. The payments were made from branch office as well as from head office depending upon the availability of funds. The chart made by the Assessing Officer made at pages 12, 13,14,15 and 16 show that the bills related to earlier period starting from 25-04- 2004 onwards. The payments were made even after deducting tax at source wherever required. The addition of Rs.35,20,309/- was made after making reference to a few bills which, according to the Assessing Officer, had not been entered in the normal course of business. Has the Assessing Officer confronted these doubts in his minds to the assessee, those could be explained properly. The addition had been made because according to Assessing Officer it was unthinkable to believe that the expenditure of Rs.35, 20,309 had been not entered in the books of accounts. It would be important to mention here that the representative of the appellant firm attended the assessment proceedings before the Assessing Officer on more than a dozen occasions. The books of accounts were never examined by him. It would be true to mention that the Assessing Officer had not even seen the bundles of books placed outside his chamber on every hearing. This fact was established before the Commissioner of Income Tax, Jalandhar-I, Jalandhar to whom reference for approval of special audit had been made. Based on the submissions of the appellant the proposal for special audit was rejected by the learned Commissioner of Income Tax, Jalandhar-I, Jalandhar. Had the Assessing Officer examined the books of account and bills supporting the construction account, he would not have concluded that it was unthinkable to believe that expenditure of Rs.35, 20,309/- had not been accounted in the books of account. In fact the assessee had set his account right by transferring all the amounts paid on account of construction of building which were supported by bills etc., and the payments made to the parties had been shown in the list of advances. The bills produced before the Assessing Officer showed that the expenses were on account of shuttering of ground floor, steel binding of ground floor, electrical conducting in ceiling of ground floor, RCC ceiling ground floor, similarly there were bills for others floors. The learned Assessing Officer was not correct to hold that such expenses were not on account of construction of building (the building at head office had been constructed many years ago). The order of the Assessing Officer is perverse and prayed to be reversed and addition of Rs.35, 20,309/- may be deleted."17
ITA Nos.55 & 68 (Asr)/2015 Asst. Year: 2010-11 We find that Ld. CIT(A) has passed the order keeping in view the facts and figures and after reducing the amount of Rs.1,94,018/- which the Assessing Officer had held to be entered twice. There is no infirmity in the order of Ld. CIT(A) and in view of the above Ground No. 4 is also dismissed.
14. In nutshell, the appeal filed by the Revenue is dismissed.
15. Now coming to the Appeal filed by assessee, ground no.1 and 2 has already been decided in favour of assessee while disposing of ground No.1 of Revenue's appeal.
16. As regards Ground No.3, regarding confirmation of personal expense out of vehicles and Telephones cannot be ruled out in a business concern. The Ld. CIT(A) has already reduced these figures from 1/5 to 1/6 and therefore, we do not find any infirmity in the order of Ld. CIT(A) and in view of the above ground No.3 is dismissed.
17. As regards the addition on account of denial of agricultural income to the extent of Rs.3,60,000/-, we find that assessee had been declared an agricultural income of Rs.40,000/- to 50,000/- in the earlier years and this amount of agricultural income was being accepted by the Department. This fact is noted by Ld. CIT(A) in para 11.1 of his order, therefore, we hold that whole of Rs.3,60,000/- cannot be considered as income from other sources and therefore, on the basis of past records, we allow Rs.50,000/- to be treated as income from 18 ITA Nos.55 & 68 (Asr)/2015 Asst. Year: 2010-11 agricultural and the rest of the income is to be treated as income from other sources. In view of the above, Ground No.4 is partly allowed.
18. In nutshell, the appeal filed by the assessee is partly allowed and the appeal filed by Revenue is dismissed.
Order pronounced in the open Court on 21.02.2017.
Sd/- Sd/-
(A.D. JAIN) (T. S. KAPOOR)
JUDICIAL MEMBER ACCOUNTANT MEMBER
Dated: 21.02.2017
/PK/Ps.
Copy of the order forwarded to:
(1) The Assessee:
(2) The
(3) The CIT(A),
(4) The CIT,
(5) The SR DR, I.T.A.T.,
True copy
By Order