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JCIT (OSD), Circle 26(1), New Delhi. Vs Shri Suresh Kumar Kukreja, L-19, Rajouri Garden, New Delhi.
November, 05th 2015
                 IN THE INCOME TAX APPELLATE TRIBUNAL
                     DELHI BENCH `G' NEW DELHI

     BEFORE SHRI CHANDRA MOHAN GARG, JUDICIAL MEMBER
                             AND
         SHRI L.P. SAHU, ACCOUNTANT MEMBER

                           I.T.A.No.2322/Del/2011
                          Assessment Year : 2007-08


JCIT (OSD),              vs   Shri Suresh Kumar Kukreja,
Circle 26(1),                 L-19, Rajouri Garden, New Delhi.
New Delhi.                    (PAN: AAKPK0073B)
 (Appellant)                        (Respondent)
                       Appellant by: Shri Sujit Kumar, Sr. DR
                      Respondent by : Shri Gautam Jain, Advocate
                               Date of Hearing: 21.10.2015
                       Date of pronouncement:

                                ORDER

PER CHANDRAMOHAN GARG, J.M.

      This appeal by the revenue has been directed against the order of the

CIT(A)-XXIV, New Delhi dated 27.2.2011 in assessee's Appeal No.298/2010-

11 for AY 2007-08.


2.    The main grounds raised by the revenue read as follows:-


            "Restricting the addition to business profits at Rs.
         10,00,000/- as against of Rs. 41,90,024/- made by the AO,
         without giving any justification for the same despite
         holding that the AO was justified in invoking the provision
         of section 145(3) of the I.T. Act in; rejecting the trading
         results of the assessee and that the assessee failed to justify
ITA No.3310/Del/12
AY: 2009-10

          the steep rise in various expenses and assessee's failure to
          produce any documentary evidence or proof of expenses to
          substantiate his claim that there was otherwise loss
          suffered.

            2. Directing the AO to measure the shortest possible
           aerial distance of the land and in case it is in the area upto
           a distance of 2 Kms from the Gunnor Municipal Limits
           while upholding the AO's findings but ignoring the fact
           that in the AO's remand report it was clarified that the
           land area of 5 acre 6 kanal & 4 acre 1 kanal 15 maria falls
           within 2 Kms from the end of the municipal limits."



Ground No.1

3.     Apropos ground no.1, we have heard arguments of both the sides and

carefully perused the material placed on record before us.                  Learned

Departmental Representative submitted that the Assessing Officer noticed that

the land falls within the category of capital assets as defined in section

2(14)(iii)(b) of the Income Tax Act, 1961 (for short the Act), therefore, the sale

of agricultural land is considered for capital gain tax purpose and he rightly

worked out long term capital gain and the same was correctly added to the

income of the assessee.       Learned Departmental Representative vehemently

contended that the CIT(A) granted relief to the assessee without any solid

reasoning or basis, thus the same may be set aside by restoring that of the

Assessing Officer.


                                         2
ITA No.3310/Del/12
AY: 2009-10

4.         Replying to the above, learned counsel of the assessee pointed out that the

Assessing Officer made addition on wrong appreciation of facts and incorrect

application of law which was corrected by the CIT(A) on cogent and justified

reasoning and hence, the impugned order may be upheld on this issue. He has

also drawn our attention towards CBDT Circular No. 17/2015 dated 6.10.2015

the amended prescribed distance to be measured ­ aerially, applied

prospectively in relation to assessment year 2014-15 and onwards. For the

period prior to assessment year 2014-15, it was held that the distance between

municipal limit and agriculture land is to be measured having regard to shortest

road distance. Accepting the decision of Hon'ble Bombay High Court (Nagpur

Bench) in I.T.A. No. 151/2013 in the case of Smt. Maltibai R. Kadu CBDT has

issued said Circular on 6.10.2015 on this issue of distance measurement.





5.         On careful consideration of above, we note that the CIT(A) granted relief

to the assessee by observing as follows:-


             " 4.I have carefully considered the facts of the case,
          remand report of the AO, submission f rejoinder of the
          appellant and perused the record. It is evident from the
          remand report including the Tehsildar's report that the
          Khewat No. 1002/987, Khata No. 1229 and Khewat No.
          898, Khata No. 1154, 1156, 1158 are not agricultural
          lands at all. The facts mentioned in the AO's remand report
          in respect of these two khewats as extracted under were not
          controverted with any documentary evidences by the
          appellant:
     i)   Khewat No. 1002/987, Khata No. 1229 is having the area
          of 3 Kanal & 4 Marla is vacant land in which the stones
          were lying to construct the road, is covered with Boundary
                                            3
ITA No.3310/Del/12
AY: 2009-10

     Wall from which it is noticed that the road is being
     developed for plotting development in the land. Further,
     submitted no Agricultural activities are being carried out
     therein. The status as on the report is same since last year.
     However, in the revenue record, the kind of land is noted
     as per choice (Chaahi Darj Hai).

         ii) Khewat No. 898, Khata No. 1154, 1156, 1158
     having area 9 Kanal, the land, prior to 2006 was used to
     keep animals for Milk Purpose. At present, the land is
     covered with Boundary Wall and is having pieces of bricks
     and no crop is grown in the said land while in the record,
     the kind of land recorded is as (Kism Chaahi Bhoomi
     Darj Ha The land has not been in any use since 2006.

           Thus, it is held that the capital gains worked out on
     transfer of these lands (Khewat No. 1002/987, Khata No.
     1229 and Khewat No. 898,Khata No. 1154, 1156, 1158)
     are held justified as these lands, being non-agricultural
     lands, are capital assets in accordance with the section
     2(14) of the Act and thus the AO's findings in this regard
     are thus upheld.


     4.1 The notification no. 9447 dated 06.01.1994 specifies
     the area upto a distance of 2.00 Kilometers (Kms) from the
     Gunnor Municipal Limits in all direction. It means that the
     distance has to be measured from the boundary of the
     municipal limit. In principle, I do agree with the view of
     the view_of the AO, stated in the remand report, that
     Gunnor Town and Village Panchi Gujran have common
     boundary and Inspectors of Income Tax and the revenue
     authorities of Gunnor measured the distance of lands
     other than lands mentioned in para 4 above ( lands other
     than Khewat Nck 1002/987, Khata No. 1229 and Khewat
     No. 898, Khata No^ll54, 1156, 11581. from the office of
     the Tehsildar by vehicle, which may be more than 6 Kms.
     Therefore, the shortest possible aerial distance of lands
     other than lands mentioned in para 4 above, for the
     purpose of capital gains, has to be taken from the
     boundary of Municipal Limit of Gunnor. The AO is
     therefore, directed to measure the shortest possible aerial
     distance of lands other than lands mentioned in para 4
                                        4
ITA No.3310/Del/12
AY: 2009-10

     above along with the appellant and in case it is in the area
     upto a distance of 2.00 Kilometers (Kms) from the Gunnor
     Municipal Limits, the AO's findings in this regard remain
     upheld other wise not. In these circumstances, this issue is
     set aside for limited purpose for verification by the AO to
     consider the issue in line with the above directions.
     5. The next issue is in respect of working of business
     income. Before going into the merits of the additions made
     by the AO in this case, it would be worthwhile to examine
     the veracity of action of the AO to invoke section 145(3) of
     the Act. The decision of the AO to invoke section 145(3) of
     the Act is based on his observations that the appellant has
     suppressed his gross profit (GP) to avoid the tax incidence
     on surrendered income during the survey operations, as
     normally; there is no loss in the export business. The AO
     further observed that the appellant has failed to produce
     export orders compelling him to sell goods at pre-
     negotiated price. However, the AO has rejected books of
     accounts even when the same was not produced before him
     during the scrutiny proceedings."
6. In view of above conclusion of the CIT(A), at the outset, we note that the

CIT(A) has upheld findings of the Assessing Officer on two counts viz., first,

the capital gains worked out on transfer of lands was held justified as these

lands, being non-agricultural lands, are capital assets in accordance with section

2(14) of the Act and second, that the Assessing Officer, in his remand report,

rightly stated that Gunnor Town and Village Panchi Gujran have common

boundary and distance measured for other lands (other than lands in question)

from the office of the Tehsildar by vehicle was more than 6 kms. With these

observations, the CIT(A) directed the Assessing Officer to measure the shortest

possible distance of lands, other than mentioned in para 4 of the CIT(A) order,

the CIT(A) in principle decided that the order of the Assessing Officer will

                                        5
ITA No.3310/Del/12
AY: 2009-10

remain upheld if the distance from municipal limit to lands is upto 2.00 kms,

otherwise the same would not hold the field. The CIT(A) after laying dicta in

principle, restored the issue to the file of the Assessing Officer for limited

purposes of factual verification and we are unable to see any perversity or any

other valid reason to interfere with the same.         Before we part with the

discussion on this issue, it is relevant to mention that the Assessing Officer will

also take into consideration the binding Circular no. 17/2015 dated 6.10.2015 of

the CBDT (supra) while verifying the facts and while applying the law in

pursuance to the order of the first appellate authority. Accordingly, we uphold

the conclusion of the CIT(A) with the direction to the Assessing Officer, as set

out above. Therefore, ground no. 1 of the Revenue being devoid of merits is

dismissed.

Ground No.2

7.     Apropos ground no. 2 of the revenue, we have heard the rival

submissions and carefully perused the relevant material placed on record, inter

alia, assessment order, impugned order of CIT(A) and other records. Ld. Ld.

DR pointed out that the Assessing Officer in first para at page 4 has rejected the

books of accounts of the assessee u/s 145(3) of the Act and this action of the

Assessing Officer has been upheld by the CIT(A) in last operative para of the

impugned order wherein it is held that the Assessing Officer was justified in

invoking the provisions of section 145(3) of the Act in rejecting book results of


                                        6
ITA No.3310/Del/12
AY: 2009-10

the assessee and the assessee has accepted this conclusion of first appellate

authority as he has not filed any cross appeal or cross objection against these

observations and conclusion of the authorities below.


8.     Learned Departmental Representative further pointed out that the

Assessing Officer was correct in making calculation of profit from business

wherein the Assessing Officer has taken GP rate of 2.90% of the turnover on the

basis of earlier year G.P. rate at Rs.7,70,486 being 2.90% of the turnover of

Rs.2,65,68,488 relevant to financial period 2006-07 relevant to assessment year

2007-08. Learned Departmental Representative has further drawn our attention

to page 4 of the assessment order and submitted that the Assessing Officer

further proceeded to make logical and correct calculation of profits from

business when after calculating gross profit on the basis of earlier year results,

he added the surrendered amount of 85,10,000 pertaining to cash in hand and

excess stock and allowed deduction of depreciation and interest amount Rs.

6,73,538 and Rs.6,24,638 and finally calculated the net business income at

Rs.79,82,620 and also gave reconciliation and adjustment of the amount of

Rs.37,92,596 as declared by the assessee as profit and gains from business.

Learned Departmental Representative vehemently pointed out that the CIT(A)

reduced the addition to Rs.10,00,000 without any reasoning and hence the

impugned order may be set aside by restoring that of the Assessing Officer.




                                        7
ITA No.3310/Del/12
AY: 2009-10

9.     Learned counsel of the assessee submitted that as per dicta laid down by

Hon'ble High Court of Delhi in the case of CIT vs Surendra Buildtech Pvt.

Ltd. in I.T.A. No. 141/2012 order dated 17.5.2012 and submitted that if the

CIT(A) records a factually incorrect finding, then the revenue/assessee , when

they prefer an appeal before the ITAT, must place necessary documents/papers

on record to show and establish that factual findings were incorrectly recorded

by the first appellate authority. Learned counsel of the assessee supported the

action of the CIT(A).


10.    On careful consideration of above, at the outset, we observe that the

assessee accepted the conclusion of the CIT(A) in regard to rejection of book

results u/s 145(3) of the Act as admittedly there is no cross appeal by the

assessee against said findings of the authorities below. Further, the assessee, in

his ground no. 5 before the CIT(A), has agitated the issue of addition of Rs.

41,90,024 by simply alleging that the said addition is not warranted by the case

and the addition so made needs to be deleted. From the facts emerged from the

assessment order as noted by the Assessing Officer, it is apparent that the

assessee, during the survey, surrendered an amount of Rs.85,10,310 during

survey u/s 133A of the Act conducted at the business premises of the assessee

which include difference in stock of Rs. 83,00,310 and excess cash of

Rs.2,10,000. The assessee replying to the question no. 17 in his statement

recorded during survey voluntarily surrendered said amount of Rs.85,10,310 for





                                        8
ITA No.3310/Del/12
AY: 2009-10

taxation over and above normal profit for the financial year and on this basis

and after rejecting the book results, the Assessing Officer proceeded to estimate

the normal profit from business by adopting GP rate of 2.90% of total turnover

amounting to Rs.7,70,486 (being 2.90% of turnover of Rs.2,65,68,488) and he

added surrendered amount of Rs.85,10,310 to this estimated profit and also

allowed deduction of Rs.6,73,538 on account of interest claimed and

Rs.6,24,638 on account of depreciation and calculated the net business profit at

Rs.79,82,630. Furthermore, the Assessing Officer also adjusted the amount of

profit and gains from business as declared by the assessee in his return and

arrived at the figure of Rs.41,90,024 which was added to the returned income of

the assessee.


11.    During first appellate proceedings, the assessee submitted written

submissions, which have been reproduced by the CIT(A) in para 3 of the

impugned order. On careful perusal of the same, we clearly observe that the

assessee has mainly challenged the conclusion of the Assessing Officer wherein

he rejected books of accounts of the assessee u/s 145(3) of the Act. At the cost

of repetition, we may again point out that the CIT(A) has upheld rejection of

books of accounts and since the assessee has not challenged this issue by way of

either cross appeal or objection, then this issue attains finality. In the written

submissions, the assessee has not pointed out any mistake in calculation of the

business profit made by the Assessing Officer.


                                        9
ITA No.3310/Del/12
AY: 2009-10

12.    Now, we proceed to analyse the order of the CIT(A) wherein he restricted

the addition to Rs.10,00,000 instead of Rs.41,90,024. For the sake of clarity in

our findings, the relevant operative part of the impugned order on this is being

reproduced below which reads as under:-


      "5.2 I have carefully considered the facts of the case, remand
      report of the Assessing Officer, submission & rejoinder of the
      appellant and perused the record. It is held that the Assessing
      Officer's observations as mentioned in the impugned order
      coupled with findings of survey were of consequence to
      jeopardize the correctness of the books of accounts, if maintained
      by the appellant though the same was neither produced before
      the AO or me. Books of accounts are thus held non-reliable,
      which is also buttressed by the fact that the excess stock in trade
      and surplus cash were found during survey resulting disclosure
      of income of Rs. 85.10 lakhs for relevant year. Thus it is held that
      the AO was justified in invoking the provisions of section 145(3)
      of the Act in rejecting the trading results of the appellant.
      Further, it is noticed that the gross profit of the appellant, as
      evident from the chart of 7 years which is annexed here with,
      varies from year to year. The reasons for the same are different
      year to year. The GP rate has gone up to 30.48% in the relevant
      year only on account of disclosure of income of Rs. 85.10 lakhs
      during survey, otherwise it is in loss. It is noticed that this is not
      the first year in which the input cost has gone up substantially
      higher in last 7 years. However, the appellant demonstrated that
      goods exported in financial year (FY) 2008-09 was at lesser rate
      than the cost of purchases, which resulted loss of Rs. 69.53 lakhs.
      The appellant argued that the recurring loss forced him to give
      up this export business from 04.09.2009. Further, the appellant
      failed to justify the steep rise in various expenses as pointed out
      by the AO in 3rd para of page 4 of the impugned order. No
      documentary proof of expenses to substantiate the claim was
      produced before me to controvert the findings of the AO.
      Therefore, keeping in view the facts and circumstances in
      totality, I hereby uphold the addition of Rs. 10.00 lakhs out of Rs.
      41,90,024/- done by the AO under the head business income.
      Thus, the addition of Rs. 31,90,024/-/under the head business
      income is hereby deleted. Accordingly, the appellant gets relief."
                                          10
ITA No.3310/Del/12
AY: 2009-10

13.    From the above, it is apparent that the CIT(A) upheld the conclusion of

the Assessing Officer in the adjudication part wherein he concluded that "no

documentary proof of expenses to substantiate the claim was produced before

me to controvert findings of the Assessing Officer." We further observe that in

the last two sentences, the CIT(A) reduced the addition to Rs. 10 lakh and

granted relief of Rs.31,90,024 to the assessee without pointing out any

calculation mistake or any other allegation against the action of the Assessing

Officer. Hence, we are inclined to hold that the CIT(A) granted relief to the

assessee without recording any factual findings and thus we are unable to draw

any conclusion about the correctness of impugned order. In this situation, we

cannot expect the appellant/revenue to show and establish that the factual

findings were incorrectly recorded by the first appellate authority. Hence, in our

humble understanding, the benefit of ratio of the order of Hon'ble High Court of

Delhi in the case of CIT vs Surendra Buildtech Pvt. Ltd. (supra) is not available

for the assessee respondent.


14.    On the basis of foregoing discussion, we are of the considered view that

the CIT(A) reduced the addition without pointing out any mistake in the

calculation of the Assessing Officer and without recording any findings

regarding conclusion of the Assessing Officer which is an incorrect approach

for a first appellate authority. We, therefore, are of the opinion that this issue

requires afresh adjudication at the end of the CIT(A) and hence, we restore this


                                       11
ITA No.3310/Del/12
AY: 2009-10

ground to the file of the CIT(A) for readjudication on this sole issue. Needless

to say that the CIT(A) shall provide due opportunity of hearing to the assessee

and shall decide the issue without being prejudiced from his earlier order and

our observations in this order. Accordingly, ground no. 2 of the revenue is

deemed to be allowed for statistical purposes.


15.    In the result, the appeal of the revenue is partly dismissed on ground no.

1 and partly deemed to be allowed on ground no. 2.


       Order pronounced in the open court on 4.11.15.

         Sd/-                                                   Sd/-

   (L.P. SAHU)                                           (C.M. GARG)
ACCOUNTANT MEMBER                                  JUDICIAL MEMBER

Dated: 04th November, 2015
`GS'


Copy forwarded to:

1.     Appellant
2.     Respondent
3.     CIT 4.CIT(A)
5.     DR

                                                                 Asstt. Registrar




                                       12

 
 
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