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TMI Blog2016 (6) TMI 173X X X X Extracts X X X X X X X X Extracts X X X X ..... of one year before or three years after the transfer of capital asset. Both these are exclusive. Assessee can invest part of the amount within a period of one year before sale of original assets and the balance part may be invested within a period of 3 years after the sale/transfer of asset. Accordingly, we direct the AO to give benefit of Section 54G by verifying the investment so made by the assessee within a period of one year prior to sale of asset and also investment made within a period of 3 years after the sale of asset. With regard to adjustment made by the AO being profit on sale of land and building in Urban area which was directly credited by the assessee to the capital reserves in its books of account, we direct the AO to first calculate the exemption u/s.54G in terms of our above direction and for deciding this issue of book profit accordingly. - ITA No. 4323&4324/Mum/2013, ITA No. 4711/Mum/2013 - - - Dated:- 27-5-2016 - Shri R. C. Sharma, AM And Shri Sandeep Gosain, JM For the Revenue : Manjunatha Swamy For the Assessee : Shri Vijay Mehta ORDER Per R. C. Sharma ( A. M ) These are the cross appeals filed by the revenue and assessee against t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n to the bank and as recorded in the books, the AO also held that there is suppression of stock. While estimating GP as mentioned above, the AO stated that no separate addition for suppression in stock not shown in books of account has been made as the above extra profit addition will take care of suppressed stock also. The AO also stated that as discussed in the assessment order there is unaccounted purchases / or suppressed stock of previous years which has been used by the assessee towards manufacturing account and in manufacturing account, G.P. of 60% has been applied and in this way, applying the same G.P. towards sales shown at ₹ 39,49,83,367/ -, the G.P. comes to ₹ 23,69,90,020/- as against ₹ 37,35,26,651/worked out and in this way, there will be an addition of ₹ 13,65,36,631/ - (37,35,26,651 - 23,69,90,020) u/s. 69 which will be added to the total income of the assessee. 3. By the impugned order the CIT(A) deleted the addition on account of GP rate after observing as under :- Coming to the merits of the addition to the GP, for the reasons mentioned in detail after examining the appellant's books of account, details obtained from the bank i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s also not found fault with the sales turnover, nor stated that the accounts of the appellant are incomplete. The AO has also not pointed out any discrepancy in the purchases made or the opening and closing stock either. There was an audit by the Excise Department and neither the Excise Department nor the Sales Tax/V AT has found the accounts of the appellant faulty. The sample size/ sample item taken by the AO for arriving at a general GP rate for all items, as pointed out by the appellant is not representative of the whole. As also mentioned by the AO in remand report for AY 2008-09, the GP margin on item to item basis cannot be compared on uniform basis and is impracticable. The AO has assessed the GP rate at 26% on the basis that GP rate of 31 % on one item (on the basis of details called for/furnished by the appellant) viz., of hydraulic press (one of the major items manufactured), and basing her estimate on the average GP rate of earlier years at around 24% in effect holding that GP rate should be somewhere between 31% and 24% and thus arrived at a figure of 26%. However this figure is arrived at notwithstanding the lacunae pointed out in the beginning part of this paragraph, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ppellant's claim, the addition on this count of unaccounted purchases/ suppressed stock is not maintainable. Addition made on mere conjectures and surmises is not justified. The addition u/s 69 of the Act is accordingly deleted. 5. Against the above order of CIT(A), revenue is in further appeal before us. 6. We have considered rival contentions and carefully gone through the orders of authorities below and found from the record that the AO has rejected books of account by invoking provisions of Section 145(3) on the plea that stock statement filed with the bank was different from the stock reflected in the books of account and that assessee company has not maintained day-to-day consumption records. The CIT(A) called for a remand report wherein after considering the facts and circumstances the AO has suggested gross profit rate of 26%. From the record we found that gross profit shown by the assessee during the year under consideration was highest as compared to the gross profit rate shown in earlier and subsequent year. The highest gross profit rate shown in the assessment year 2008-09 works out to be 24.31%, accordingly the CIT(A) after giving detailed finding at page ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sion that time period of one year before or three years after the transfer of undertaking should be considered under the alternate and not cumulative. The AO noted that the assessee can claim benefit u/s. 54G in purchase of New Machinery, plant, land and building and other expenses incurred over it within a period of one year before or three years after the date of which transfer took place or in other words, both the claims / i.e. one year before or 3 years after) is not available to the assessee. Only one claim is available to the assessee i.e. assessee either can claim investment for the period from 25/09/2006 to 24/09/2007 or from 25/09/2007 to 24/09/2010 and not both. The second condition is that the assessee should deposit the balance amount in capital gain account before furnishing return of income u/s. 139(1) of the Act. As per the details furnished by the assessee, there is a deposit of ₹ 9.00 crores under the capital gain scheme on 29/09/2008, i.e. before the filling of return of income u / s. 139(1) as per copy of bank pass book furnished. 11. From the record we found that during the financial year ended 31 March 2008, the assessee shifted its factory from MI ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 13. As per our considered view for claiming exemption u/s.54F, the assessee is entitled to make investment within a period of one year before or three years after the transfer of capital asset. Both these are exclusive. Assessee can invest part of the amount within a period of one year before sale of original assets and the balance part may be invested within a period of 3 years after the sale/transfer of asset. Accordingly, we direct the AO to give benefit of Section 54G by verifying the investment so made by the assessee within a period of one year prior to sale of asset and also investment made within a period of 3 years after the sale of asset. We direct accordingly. 14. With regard to adjustment made by the AO being profit on sale of land and building in Urban area which was directly credited by the assessee to the capital reserves in its books of account, we direct the AO to first calculate the exemption u/s.54G in terms of our above direction and for deciding this issue of book profit accordingly. 15. In the result, appeals of revenue are dismissed, whereas appeal of assessee (i.e. ITA No.4711/Mum/2013) is allowed in part, in terms indicated hereinabove. Order p ..... X X X X Extracts X X X X X X X X Extracts X X X X
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