ACIT, Ernakulam v. M/s Rajeswari Glasswares, Cochin

ITA 869/COCH/2008 | 2003-2004
Pronouncement Date: 29-07-2010

Appeal Details

RSA Number 86921914 RSA 2008
Assessee PAN AABFR3639B
Bench Cochin
Appeal Number ITA 869/COCH/2008
Duration Of Justice 1 year(s) 11 month(s) 15 day(s)
Appellant ACIT, Ernakulam
Respondent M/s Rajeswari Glasswares, Cochin
Appeal Type Income Tax Appeal
Pronouncement Date 29-07-2010
Appeal Filed By Department
Bench Allotted DB
Tribunal Order Date 29-07-2010
Date Of Final Hearing 26-07-2010
Next Hearing Date 26-07-2010
Assessment Year 2003-2004
Appeal Filed On 14-08-2008
Judgment Text
IN THE INCOME TAX APPELLAT E TRIBUNAL COCHIN BEN CH COCHIN BEFORE S/SHRI T.R. SOOD AM AND N.VIJAYAKUMA RAN JM I.T.A. NOS. 867 TO 871/COCH/2008 ASSESSMENT YEARS : 2001-02 TO 2005-06 THE ASSISTANT COMMISSIONER OF INCOME-TAX CENTRAL CIRCLE-2 ERNAKULAM M/S. RAJESWARI GLASSWARES CHALIKKAVATTOM VENNALA P.O. KOCHI. [PAN: AABFR3639B] (REVENUE -APPELLANT) (ASSESSE-R ESPONDENT) REVENUE BY SHRI S.C.SONKAR CIT-DR ASSESSEE BY SHRI MOHANAN KUTTICKAT CA. O R D E R PER BENCH IN ALL THESE APPEALS THE REVENUE HAS RAISED COMMO N ISSUES. THEREFORE THE APPEALS WERE HEARD TOGETHER AND THE SAME ARE BEING DISPOSED OFF BY THIS COMMON CONSOLIDATED ORDER. 2. THE FIRST COMMON ISSUE RAISED BY THE REVENUE IS REGARDING DELETION OF ADDITION MADE ON ACCOUNT OF ASSESSMENT OF GROSS PROFIT. THE BRIEF FACTS OF THE CASE ARE THAT A SEARCH WAS CONDUCTED IN THE PREMISES OF THE ASSESSEE. DUR ING THE SEARCH CERTAIN DOCUMENTS WERE FOUND AND SEIZED. THE AO HAS OBSERVED IN THE ASSES SMENT ORDER THAT NO DESCRIPTION OF ITEMS HAS BEEN GIVEN FOR PURCHASES AND ON ENQUIRY IT WAS CLAIMED THAT THE ASSESSEE WAS NOT MAINTAINING ITEM-WISE ACCOUNTS FOR THE PURCHASE S. THE AO HAS NOTED THAT IT WAS CONTRARY TO THE DOCUMENTS FOUND DURING THE SEARCH. AS PER DOCUMENT KMA I-IX THOUGH THE ASSESSEE HAD A GOOD CONTROLLING SYSTEM OF EACH AND EVERY ITEM OF STOCK DAILY RECORDS WERE BEING MAINTAINED FOR STOCK PURCHASES AND EVEN CASH BALANCES WERE DRAWN. IT IS ALSO MENTIONED IN THE ASSESSMENT ORDER THAT ONLY SUCH ST ATEMENTS WERE FOUND ONLY FOR FEW DAYS IN THE MONTH OF AUGUST 2005. ON ENQUIRY IT WAS EX PLAINED THAT SOME OF THE EMPLOYEES HAD MADE THESE DAILY STATEMENTS AND THEY WERE DESTR OYED AFTER THE PAYMENTS TO THE SUPPLIERS. THE AO FURTHER NOTED THAT THE BOOKS W ERE BEING MAINTAINED ON THE BASIS OF SELF ITA.NO. 867 ETC./COCH./2008 2 PREPARED BOUGHT NOTE. WHEN THE ASSESSEE WAS CONFRO NTED WITH THE SEIZED MATERIAL IT WAS EXPLAINED THAT SOME OF THE CASH WAS LEFT WITH THE S UPERVISORS WHO IN TURN GAVE SOME ADVANCES TO THE SUPPLIERS AND THESE PAYMENTS WERE B EING RECORDED IN THE CASH BOOK WHEN THE SUPERVISORS WERE GIVING ACCOUNTS OF THE AMOUNTS SPENT. IT WAS CLAIMED THAT SUCH SLIPS WERE PREPARED ONLY WHEN THE BOTTLES WERE RECEIVED A T THE SITE. IN MOST CASES PART OF THE BOTTLES RECEIVED COULD BE CRACKED OR DAMAGED AND SU CH BOTTLES WERE BEING REJECTED AND HENCE THE QUANTITY AS PER THE SLIPS ISSUED AND THE FINAL PURCHASE BILLS WOULD BE DIFFERENT. 3. THE AO ALSO NOTED FROM DOCUMENT KMA-V THAT PAYME NTS RECORDED TOWARDS SUPPLIERS WERE DIFFERENT AS SHOWN IN THE SLIPS AND HE HAS FURTHER MENTIONED THAT CERTAIN ADVANCES WERE NOT BEING RECORDED AT ALL. SIMILARLY PURCHASES WERE NOT ACCOUNTED AND CORRESPONDING SALES WERE ALSO NOT RECORDED. HE HAS ALSO MENTIONED ABOUT ONE ENTRY WHICH IS REGARDING WITHDRAWAL OF CASH FROM THE BANK BUT WAS NOT RECORDED IN THE BOOKS OF ACCOUNTS. ON THE BASIS OF THESE DISCREPANCIES THE AO REJECTED THE BOOKS OF ACCOUNTS AND HE HAS DRAWN PROFIT AND LOSS ACCOUNT ON THE BASIS O F THE SEIZED MATERIAL. IN THESE ACCOUNTS THE G.P. WORKED OUT TO 18.69%. THE OTHER DIRECT EX PENSES WERE ESTIMATED AT 4% AND THEREFORE THE NET PROFIT ACCORDING TO THE AO SHO ULD HAVE BEEN 14.69% WHEREAS THE ASSESSEE HAD DECLARED THE NET PROFIT GENERALLY IN THE RANGE OF 12%. ACCORDINGLY THE AO ESTIMATED THE NET PROFIT RATE AT 14% AND MADE ADDIT ION TO THE TRADING ACCOUNT FOR ALL THE YEARS. 4. ON APPEAL BEFORE THE CIT(A) IT WAS MAINLY CONT ENDED THAT AT THE TIME OF SEARCH THE OFFICERS OF THE DEPARTMENT HAD VERIFIED THE PUR CHASES IN ONLY ONE OF THE APPELLANTS LOCATION IN TD ROAD ERNAKULAM WHICH WAS OF PURCHAS ES FORM SMALL SUPPLIERS LIKE RAGPICKERS. THE PURCHASE DETAILS COLLECTED FROM TH ESE LOCATIONS WOULD BE FOR ONLY 1% OF THE TOTAL PURCHASES. IT WAS POINTED THAT IN ALL OT HER CASES BOTTLES ARE SUPPLIED IN SACKS AND THEY ARE SORTED ONLY LATER AND SINCE THE BARGAININ G CAPACITY OF THESE SMALL SUPPLIERS IS NOT VERY HIGH AND THE ASSESSEE CANNOT RECOVER ANY AMO UNT AGAINST THE DAMAGED STOCK AND THE PRICES OFFERED TO THESE SUPPLIERS WOULD BE LESS IN COMPARISON TO THE REGULAR BULK SUPPLIERS. IT WAS SUBMITTED THAT THE AO HAS NOT CONSIDERED THE NATURE OF THE TRADE WHEREIN SUBSTANTIAL AMOUNT HAS TO BE PROVIDED FOR BREAKAGES OCCURRING W HILE CLEANING WASHING SORTING ITA.NO. 867 ETC./COCH./2008 3 LOADING AND TRANSPORTING OF THE BOTTLES. IN RESPEC T OF ITEMWISE DETAILS IT WAS ARGUED THAT IT WAS NOT PRACTICAL TO MAINTAIN SUCH DETAILS. IT WAS SUBMITTED THAT DETAILS FILED BEFORE THE BANK REGARDING STOCK WAS ON AN ESTIMATE BASIS. REL IANCE WAS PLACED ON CERTAIN TRIBUNAL DECISIONS WHERE IN COMPARABLE CASES THE LOWER PROF ITS HAVE BEEN UPHELD. THE CIT(A) AFTER EXAMINING THESE SUBMISSIONS FOUND FORCE IN TH EM AND DELETED THE ADDITION AND DIRECTED THE AO TO ACCEPT THE BOOK RESULTS VIDE PAR A 6 OF HIS ORDER WHICH IS REPRODUCED BELOW:- I HAVE CAREFULLY CONSIDERED THE DETAILED ARGUMENTS OF THE LD. CA FOR THE APPELLANT AND THE MATERIALS FURNISHED BY HIM IN SUPPORT OF T HE ARGUMENTS. APPELLANT ENGAGED IN THE TRADING OF EMPTY OLD BOTTLES ARE MA INTAINING REGULAR BOOKS OF ACCOUNTS. THE APPELLANT FIRM IS REGULARLY ASSESSE D TO INCOME TAX. FOR THIS ASSESSMENT YEAR THEY HAD FILED RETURN OF INCOME U /S. 139(1). NOW THE INCOME FOR THIS ASSESSMENT YEAR IS ONCE AGAIN DETERMINED AS A RESULT OF A SEARCH CONDUCTED U/S. 132 OF THE INCOME TAX ACT 1961 AT THEIR PREM ISED ON 24.8.2000. SO THE ASSESSMENT U/S. 153A NOW COMPLETED SHOULD BE BASED ON THE FINDINGS AS A RESULT OF THE SEARCH. AO HAS DETERMINED THE INCOME FROM BUSI NESS OF THE FIRM ON ESTIMATE BASIS. FOR THIS SHE HAS GIVEN A NUMBER OF REASONS. THE FIRST REASON IS THAT APPELLANT RECORDS THE PURCHASES IN THE REGULAR BOO KS OF ACCOUNTS ON THE BASIS OF OWN BOUGHT NOTES AND THAT IN FACT PURCHASE SLIPS A RE ACTUALLY PREPARED WITH QUANTITY RATES DETAILS ETC. ARE DESTROYED AND THE REFORE THE PURCHASES RECORDED ON THE BASIS OF OWN BOUGHT VOUCHERS ARE NOT RELIABLE. IN THE ISSUE APPELLANTS CONTENTION IS THAT AO IS POINTING THE DEFECT IN RE SPECT OF PURCHASES FROM RAG PICKERS WHICH ACCOUNT ONLY FOR 1% OF THE TOTAL PUR CHASES. THE LD. CA ARGUED THAT THE NATURE OF GOODS DEALT WITH AND THE NATURE OF S UPPLIERS ARE NOT CONSIDERED BY THE AO WHILE POINTING OUT THE DEFECT TO DISCREDIT THE ACCOUNTS. I FIND FORCE IN THE ARGUMENT OF THE APPELLANT. CONSIDERING THE NATURE OF TRADE IT IS IMPRACTICAL TO RECORD THE PURCHASES WITH FULL DETAILS OF THE QUAN TITY AND RATE OF THE BOTTLES PURCHASES. OCCURRENCE OF DAMAGES IS AN ACCEPTED FA CT IN THIS TRADE. THEREFORE THE PREPARATION OF OWN BOUGHT VOUCHERS FOR PURCHAS ES AFTER DETERMINATION OF DAMAGES SOUNDS AN ACCEPTABLE PROCEDURE. MORE OVER AO HAS NOT POINTED OUT ANY ITA.NO. 867 ETC./COCH./2008 4 MATERIALS SEIZED AS A RESULT OF THE SEARCH POINTIN G INFLATED PURCHASES RECORDED IN OWN BOUGHT PURCHASE VOUCHERS. THEREFORE AO IS NO T CORRECT IN HER FINDING IN THIS RESPECT. THE FINDING OF THE AO ABOUT NON ACCOUNTI NG OF PURCHASES ADVANCES PAID TO SUPPLIERS ETC. BASED ON THE SEIZED MATERIAL MAR KED KMA V DATED 18 TH AUGUST 2005 ARE NOT RELEVANT FOR CONSIDERING THE ACCEPTAN CE OF ACCOUNTS FOR THIS YEAR. THIS REASON CANNOT BE HELD AS A VALID ONE. THE FIN DING OF THE AO STATED IN PAGE 3 OF THE ORDER THAT SEIZED PURCHASE SLIPS FOR THE PE RIOD 16 TH TO 23 RD AUGUST 2005 REVEALED UNACCOUNTED PURCHASES ARE ALSO IRRELEVANT FOR THE PURPOSE OF THIS ASSESSMENT YEAR. AO HAS ALSO FAILED IN PROVING THA T THE WITHDRAWALS MADE ON 31.7.2004 AND 2.8.2004 OF RS. 5 00 000/- FROM BANK OF INDIA ERNAKULAM WAS UTILISED FOR PAYING THE CONSIDERATION FOR PURCHASE PROPERTY AS ALLEGED BY HER WHEREAS APPELLANT HAS SUBSTANTIATED THEIR CLAIM BY PROVING THAT THE SALES DEEDS WERE REGISTERED PRIOR TO THE ABOVE WITHDRAWALS. T HE SEARCH ALSO DID NOT REVEAL ANY MATERIALS TO SHOW THAT THE ACTUAL CONSIDERATION FO R THE PROPERTY PURCHASED WAS OVER AND ABOVE THE CONSIDERATION STATED IN THE REGISTER ED SALE DEEDS. THE DECISIONS RELIED BY THE APPELLANT SUPPORTS THE CONTENTION OF THE APPELLANT THAT THE VALUE OF STOCK SUBMITTED TO BANK IN CONNECTION WITH LOAN C ANNOT BE TAKEN INTO ACCOUNT FOR THE PURPOSE OF DETERMINING THE INCOME OF THE ASSES SEE. THUS AO HAS NOT BROUGHT ANY MATERIALS ON RECORD RELATING TO THIS ASSESSME NT YEAR RECEIVED AS A RESULT OF THE SEARCH TO DISCREDIT THE BOOKS OF ACCOUNTS OF THE APPELLANT WHICH WAS MAINTAINED IN THE ORDINARY COURSE OF THE BUSINESS. APPELLAN T HAS SUBSTANTIATED THE LEVEL OF GROSS PROFIT RETURNED BY THEM WITH THE SUPPORT OF COMPARABLE CASES AND DECISIONS OF THE ITAT COCHIN IN THOSE CASES. AO HAS NOT STAT ED ANY REASONS FOR NOT CONSIDERING THE COMPARABLE CASES AND HAS NOT STATE D WHY THE GROSS PROFIT OF THE APPELLANT ASSESSEE SHOULD BE HIGHER AT THE G P RATES FIXED BY HER. THUS THE DETERMINATION OF INCOME FROM BUSINESS BY REJECTING THE BOOK RESULTS OF THE APPELLANT AND RESORTING TO ESTIMATION OF GROSS PROFIT AT 14% IS DONE WITHOUT ANY MATERIALS THAT CAN BE ACCEPTED AS EVIDENCE AND WITHOUT ANY BASIS AND FOR INVALID REASONS AND I THEREFORE DISAPPROVE SUCH DETERMINATION. I THEREF ORE ORDER THAT THE BOOK RESULTS OF THE APPELLANT BE ACCEPTED FOR THE DETERMINATION O F INCOME FROM BUSINESS FOR THIS ASSESSMENT YEAR AND INCOME RETURNED BE ACCEPTED. ITA.NO. 867 ETC./COCH./2008 5 5. BEFORE US THE LD. DR CARRIED US THROUGH THE ASS ESSMENT ORDER AND HIGHLIGHTED VARIOUS DISCREPANCIES FOUND BY THE AO IN THE BOOKS OF ACCOUNTS. HE ARGUED THAT THE AO WAS MORE THAN JUSTIFIED TO REJECT THE BOOKS OF ACCO UNTS BECAUSE OF SO MANY DISCREPANCIES. HE FURTHER SUBMITTED THAT PROFITS HAVE BEEN ESTIM ATED ON THE BASIS OF SEIZED RECORDS ONLY. 6. ON THE OTHER HAND THE LD. COUNSEL FOR THE ASSES SEE REITERATED THE SUBMISSIONS MADE BEFORE THE CIT(A). HE ALSO SUBMITTED THAT THE AO HA S NOT PROPERLY ESTIMATED THE DIRECT EXPENSES WHICH ARE MUCH MORE HIGHER. HE ARGUED THA T CONSIDERING THE NATURE OF THE TRADE OF THE ASSESSEE THE AO HAS NOT CONSIDERED THE WAST AGES OCCURRING BECAUSE OF BREAKAGES DURING THE PROCESS OF CLEANING WASHING SORTING L OADING TRANSPORTING AND ON TRANSPORTING AND UNLOADING OF THE BOTTLES. WHILE CONCLUDING HE STRONGLY SUPPORTED THE FIRST APPELLATE AUTHORITY ORDER. 7. WE HAVE HEARD THE RIVAL SUBMISSIONS AND FIND THA T THE AO HAS CORRECTLY REJECTED THE BOOKS OF ACCOUNTS BECAUSE SOME OF THE ENTRIES WHICH WERE RECORDED IN THE SEIZED MATERIAL WERE NOT FOUND IN THE BOOKS OF ACCOUNTS REGULARLY M AINTAINED BY THE ASSESSEE. THERE FORE WE UPHOLD THE REJECTION OF THE BOOKS. HOWEVER AS FAR AS ESTIMATION OF NET PROFIT IS CONCERNED WE AGREE WITH THE CONTENTION OF THE LD. COUNSEL FOR THE ASSESSEE THAT AO HAS NOT TAKEN INTO CONSIDERATION THE NATURE OF THE TRA DE OF THE ASSESSEE WHICH IS DEALING IN EMPTY BOTTLES AND THERE WOULD DEFINITELY BE SOME BR EAKAGES DURING VARIOUS PROCESSES LIKE CLEANING WASHING SORTING LOADING TRANSPORTING E TC. MOREOVER THE AO HAS ESTIMATED THE DIRECT EXPENSES ON THE LOWER SIDE. CONSIDERING THE OVERALL FACTS AND CIRCUMSTANCES OF THE CASE WE ARE OF THE VIEW THAT ENDS OF JUSTICE WOULD BE MET IF THE NET PROFIT IS ESTIMATED AT 13%. THIS PROPOSAL WAS CONCEDED BY THE LD. COUNSEL FOR THE ASSESSEE. THEREFORE WE SET ASIDE THE ORDER OF THE CIT(A) AND REMIT THIS BACK T O THE FILE OF THE AO WITH A DIRECTION TO ESTIMATE THE NET PROFIT AT THE RATE OF 13%. 8. THE SECOND COMMON ISSUE RAISED BY THE REVENUE IS REGARDING DELETION OF ADDITION ON ACCOUNT OF TREATING OF AGRICULTURAL INCOME AS IN COME FROM OTHER SOURCES. ITA.NO. 867 ETC./COCH./2008 6 9. AFTER HEARING BOTH THE PARTIES WE FIND THAT D URING THE ASSESSMENT PROCEEDINGS THE AO NOTICED THAT THE ASSESSEE WAS OWNER OF SOME AGR ICULTURAL LAND FROM WHICH SOME AGRICULTURAL INCOME WAS CLAIMED. THE AO NOTED THAT NO SUCH AGRICULTURAL INCOME WAS SHOWN BY THE ASSESSEE IN THE EARLIER YEARS. ON EN QUIRY IT WAS CLAIMED THAT SUCH INCOME WAS NOT DISCLOSED BECAUSE OF THE IGNORANCE OF THE ASSESSEE. THE AO FURTHER NOTICED THAT NO EVIDENCE REGARDING AGRICULTURAL INCOME DURING TH E YEAR WAS FURNISHED THEREFORE THE AGRICULTURAL INCOME DECLARED BY THE ASSESSEE WAS T REATED AS INCOME FROM OTHER SOURCES AND ADDITION RANGING FROM RS. 40 000/- TO 60 000/- WAS MADE IN VARIOUS YEARS. 10. BEFORE THE LD. CIT(A) IT WAS SUBMITTED THAT AGRICULTURAL INCOME WAS NOT DISCLOSED EARLIER BECAUSE OF IGNORANCE OF THE ASSESSEE AND I T WAS STATED THAT THE DETAILS OF THE VARIOUS PRODUCE WERE NOT FILED BEFORE THE ASSESSING OFFICER THE LD. CIT(A) AGREED WITH THE SUBMISSIONS AND DELETED THE ADDITION VIDE HIS ORDER :- I HAVE CONSIDERED THE CONTENTIONS OF THE APPELLAN T. IT IS A FACT THAT APPELLANT OWNS 2/7 TH SHARE IN 360.57 CENTS OF LAND IN ELOOR. EVEN THOUG H APPELLANT COULD NOT FURNISH EVIDENCES FOR THE AGRICULTURAL ACTIVITIES CONDUCTED IN THE PREVIOUS YEAR RELATING TO THIS ASSESSMENT YEAR THE PRESENCE OF COCONUT TREES IN THAT PREVIOUS YEAR COULD HAVE BEEN BE ARRIVED AT BY A PERSONAL I NSPECTION BY THE AO OF THE PROPERTY AND DETERMINING THE AGE OF THE TREES AND THE QUANTUM OF AGRICULTURAL INCOME THAT WOULD HAVE BEEN EARNED. SUCH A REQUES T IS SEEN MADE BY THE APPELLANT IN THE ASSESSMENT STAGE WHICH WAS NOT AC TED UPON BY THE ASSESSING OFFICER. CONSIDERING THE EXTENT OF LAND AND THE P OSSIBILITY OF THE TYPE OF CULTIVATION CLAIMED I ACCEPT THE CONTENTION OF TH E APPELLANT. THE QUANTUM OF AGRICULTURE INCOME DECLARED BY THE APPELLANT ALSO SEEMS REASONABLE. AO IS THEREFORE DIRECTED TO ACCEPT THE CLAIM OF THE APPE LLANT REGARDING THE AGRICULTURAL INCOME 11. BEFORE US THE LD. DR SUBMITTED THAT FIRST OF A LL THE ASSESSEE HAS NEVER DECLARED THE AGRICULTURAL INCOME IN THE REGULAR RETURNS EARLIER AND THEREFORE IT SHOULD NOT HAVE SHOWN ITA.NO. 867 ETC./COCH./2008 7 AGRICULTURAL INCOME NOW. IN ANY CASE NO EVIDENCE H AS BEEN FILED FOR EARNING THIS AGRICULTURAL INCOME. 12. ON THE OTHER HAND THE LD. AR POINTED OUT THAT THIS SO CALLED LAND WAS SITUATED NEAR COIMBATORE AND THEREFORE THE SAME WAS NOT COVERED UNDER TAMIL NADU AGRICULTURAL INCOME TAX ACT. HE FURTHER SUBMITTED THAT WHEN T HE SEARCH TOOK PLACE U/S. 153A THEN WHATEVER INCOME HAS NOT BEEN DECLARED BY THE ASSESS EE CAN BE DECLARED BY FILING FRESH RETURNS IN PURSUANCE OF SUCH SEARCH. AS FAR AS THE EVIDENCE REGARDING AGRICULTURAL INCOME IS CONCERNED IT WAS SUBMITTED THAT NO SUCH DETAILS WERE EVER ASKED BY THE AO AND THE ASSESSEE COULD HAVE EASILY PRODUCED THE SAME IF DE MANDED. HE SUBMITTED THAT ASSESSEE CAN PRODUCE THE SAME NOW. 13. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS CAREFU LLY AND FIND THAT THE LD. CIT(A) HAS ACCEPTED THE AGRICULTURAL INCOME WITHOUT MENTIONING ANYTHING ABOUT THE PROOF REGARDING AGRICULTURAL INCOME. IT IS SETTLED LAW THAT A PERSO N WHO CLAIMS HIS INCOME TO BE EXEMPT HAS TO PROVE THE SAME. BEFORE US NO EVIDENCE HAS BEEN FILED TO SHOW THAT THE SOME AGRICULTURAL INCOME HAS BEEN REALLY EARNED. THEREF ORE WE SET ASIDE THE ORDER OF THE CIT(A) AND REMIT THIS ISSUE BACK TO THE FILE OF THE AO WITH A DIRECTION TO GIVE FRESH OPPORTUNITY TO THE ASSESSEE TO FILE THE EVIDENCE R EGARDING THE AGRICULTURAL INCOME AND THEN DECIDE THE ISSUE IN ACCORDANCE WITH LAW. 14. ONE MORE ISSUE HAS BEEN RAISED BY THE REVENUE F OR THE ASSESSMENT YEAR 2003-04 IN I.T.A. NO. 869/COCH/08 WHICH READS AS UNDER:- 3. THE CIT(A) HAS ERRED IN DELETING THE ADDITION O F RS. 13 42 742/- REPRESENTING LONG TERM CAPITAL GAINS ON THE SALE OF 140 CENTS O F LAND AT ELOOR HOLDING THAT ELOOR PANCHAYATH IS OUTSIDE THE NOTIFIED AREA FOR THE PURPOSE OF CAPITAL GAINS AND WILL NOT COME UNDER THE DEFINITION OF ASSET AS DEF INED U/S. 2(14). THE CIT(A) FAILED TO APPRECIATE THE FACT THAT AS PER NOTIFICATION NO . 9447 (F.NO. 164/3/87/I.T.A.-1 DATED 6.6.1994 ISSUED BY THE CENTRAL GOVT. AREAS FORMING PART OF ELOOR PANCHAYATH UP TO A DISTANCE OF 8 KMS. FROM THE MUN ICIPAL LIMITS OF KOCHI WILL ITA.NO. 867 ETC./COCH./2008 8 COME UNDER THE DEFINITION OF URBAN AREA AND A TRAN SFER IN THIS AREA IS EXIGIBLE TO CAPITAL GAIN TAX. 15. DURING THE ASSESSMENT PROCEEDINGS AO NOTICED T HAT DURING THE COURSE OF SEARCH AN AGREEMENT FOR THE SALE OF PROPERTY IN ELOOR WAS FOU ND AND THE TOTAL AREA SOLD WAS 140 CENTS IN WHICH THE ASSESSEE HAD 2/7 TH SHARE. THE CONSIDERATION FOR THE PROPERTY OF 140 CENTS IN THE AGREEMENT AMOUNTED TO RS. 65 LAKHS WHEREAS TH E SALE CONSIDERATION SHOWN IN THE REGISTERED DOCUMENT WAS ONLY RS. 39 90 000/-. THE REFORE THERE WAS EXTRA SHARE OF CONSIDERATION OF THE ASSESSEE I.E. RS. 7 17 142/- . IT WAS NOTED THAT ORIGINALLY THE ASSESSEE HAD DECLARED LONG TERM CAPITAL GAIN OF RS. 6 25 000 /- WHEREAS IN THE RETURN FILED U/S. 153C IT WAS CLAIMED THAT THE SALE CONSIDERATION WAS NOT TAXABLE AND THAT THE SAME WAS NOT AGRICULTURAL IN NATURE. ACCORDINGLY THE AO MADE A DDITION OF RS. 13 42 742/-. 16. BEFORE THE CIT(A) IT WAS SUBMITTED THAT SINCE THE LAND IS AGRICULTURAL LAND THEREFORE SALE OF THE SAME WAS EXEMPT. IT WAS ALS O ARGUED THAT THE ONLY CONSIDERATION WHICH IS REFLECTED IN THE SALE DEED WOULD HAVE BEEN CONSIDERED IN THE ABSENCE OF ANY OTHER EVIDENCE SINCE THE AO HAS NOT CONDUCTED ANY FURTHER ENQUIRY WITH THE PURCHASER. THEREFORE THE EXTRA CONSIDERATION COULD NOT HAVE B EEN ASSUMED. THE LD. CIT(A) AFTER CONSIDERING THE SUBMISSIONS DELETED THIS ADDITION VIDE HIS ORDER WHICH IS REPRODUCED BELOW:-. I HAVE CONSIDERED THE CONTENTIONS OF THE APPELLAN T. APPELLANT WAS THE OWNER OF 2/7 TH UNDIVIDED SHARE IN 360.57 CENTS OF LAND AT ELOOR P ANCHAYATH WHICH IS OUTSIDE THE NOTIFIED AREA FOR THE PURPOSE OF CAPITAL GAINS . THEREFORE THE LAND WHICH IS SOLD WILL NOT COME UNDER THE DEFINITION OF ASSET A S DEFINED U/S. 2(14). THEREFORE THE GAIN ARISING OUT OF THE TRANSFER IS NOT EXIGIB LE TO CAPITAL GAINS TAX. AOS CONTENTION THAT APPELLANT HAS EARLIER RETURNED THE CAPITAL GAINS IS NOT RELEVANT FOR THE PURPOSE OF ASSESSMENT U/S. 153A SINCE UPON THE INITIATION OF THE PROCEEDINGS U/S. 153A R.W.S. ALL THE ASSESSMENTS FOR THE PRESC RIBED ASSESSMENT YEARS BECOME NON EXIST AND THE RETURN FILED IN RESPONSE TO NOTI CE U/S. 153A/153C IS FRESH RETURN OF INCOME AND THE ASSESSMENTS IS MADE ONLY ON THE BASIS OF SUCH RETURN AND NOT ON THE BASIS OF THE ORIGINAL RETURN FILED U/S. 139(1) . THERE IS ALSO FORCE IN THE ITA.NO. 867 ETC./COCH./2008 9 ARGUMENT THAT THE CONSIDERATION AS PER THE REGISTE RED SALE DEEDS CAN ONLY BE CONSIDERED IN THE ABSENCE OF CONCRETE EVIDENCE THA T CONSIDERATION OVER AND ABOVE THE AMOUNT MENTIONED IN THE REGISTERED SALE DEED H AS PASSED HAND FROM THE VENDOR TO THE PURCHASER. THE IDENTITY OF THE PURCHASER IS KNOWN TO THE ASSESSING OFFICER. SHE HAS NOT CONDUCTED ANY ENQUIRY WITH THE PURCHAS ER AND ESTABLISHED THAT ACTUAL CONSIDERATION RECEIVED IS THE AMOUNT MENTIONED IN THE AGREEMENT FOR SALE DURING THE COURSE OF SEARCH OPERATION. THE HONBLE KERAL A HIGH COURT WHICH IS THE JURISDICTIONAL COURT IN THIS CASE HAS HELD IN CIT VS. SMT. K.C.AGNES & ORS. (262 ITR 354) SUPPORTS APPELLANTS CONTENTION IN THIS R EGARD. THEREFORE I ACCEPT THE CONTENTIONS OF THE APPELLANT AGAINST THE ADDITION OF RS. 13 42 742/- MADE BY THE AO AS LONG TERM CAPITAL GAIN. ADDITION OF RS. 13 42 742/- IS THEREFORE DELETED. . 17. BEFORE US THE LD. DR STRONGLY SUPPORTED THE OR DER BY THE AO AS WELL AS THE GROUNDS OF APPEAL. ON THE OTHER HAND THE LD. COUNSEL FOR THE ASSESSEE STRONGLY SUPPORTED THE APPELLATE ORDER. 18. AFTER CONSIDERING THE RIVAL SUBMISSIONS WE FIN D THAT IT IS NOT CLEAR WHETHER THE LAND IS REALLY AGRICULTURAL LAND OR NOT. THE DEPARTMENT HAS MENTIONED OF GOVERNMENT NOTIFICATION NO. 9447 (F.NO. 164/3/87/I.T.A.-1 DATED 6.6.1994) ISSUED BY THE CENTRAL GOVT. IN THE GROUNDS OF APPEAL BUT NO SUCH GOVERNM ENT NOTIFICATION WAS PRODUCED BEFORE US AND THE SAME IS EVEN NOT MENTIONED IN THE ASSESS MENT ORDER. THEREFORE IN THE INTEREST OF JUSTICE WE SET ASIDE THE ORDER OF THE CIT(A) AN D REMIT THIS ISSUE BACK TO THE FILE OF THE AO WITH A DIRECTION TO RE-EXAMINE THE SAME IN THE L IGHT OF THE GOVERNMENT NOTIFICATION. NEEDLESS TO SAY THE ASSESSEE SHOULD BE GIVEN PROP ER OPPORTUNITY OF BEING HEARD. 19. IN THE RESULT THE REVENUE APPEALS ARE PARTLY A LLOWED FOR STATISTICAL PURPOSES. SD/- SD/- (N.VIJAYAKUMARAN) (T.R.SOOD) JUDICIAL MEMBER ACCOU NTANT MEMBER PLACE: ERNAKULAM DATED : 29TH JULY 2010 ITA.NO. 867 ETC./COCH./2008 10 GJ COPY TO: 1. M/S. RAJESWARI GLASSWARES CHALIKKAVATTOM VENNA LA P.O. KOCHI. 2. THE ASSISTANT COMMISSIOENR OF INCOME-TAX CENTRA L CIRCLE-2 ERNAKULAM. 3. THE COMMISSIONER OF INCOME-TAX(A)-I KOCHI. 4. THE COMMISSIONER OF INCOME-TAX CENTRAL KOCHI. 5. D.R./I.T.A.T. COCHIN BENCH COCHIN. 6. GUARD FILE. BY ORDER (ASSISTA NT REGISTRAR)