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TMI Blog2016 (8) TMI 1166X X X X Extracts X X X X X X X X Extracts X X X X ..... cussion, we are of the view that the definition of the capital assets for exclusion does not include the assets, ‘machinery’. Hence, the definition cannot be expanded beyond what is not intended to include. Accordingly, the addition made by the AO in this regard is sustained. Addition on account of inflated sales - Held that:- We observe from the submissions and records produced before us that there is sales taken place at the commencement of the business which is fact. For sales to complete there has to be stock for such purpose. In the given case, assessee had made sales in the commencement of the year. There has to be some expenditure without which the stock would not have appeared for making sales. Moreover, the assessee had made sales to its own sister concerns. There has to be stock to make sales. In our considered view, no businessman will make bogus sales in the commencement of the venture. It is wrong to treat such sales as unexplained or inflated sales. The assessee has made sales with stock but failed to explain the source of such arrangement. This is also fact that the sister concerns of the assessee are also in the same line of business. It may be internal arrangeme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ,961/- to tax u/s 56(2)(vii) as the HUF paid inadequate consideration. 4. Aggrieved, the assessee preferred an appeal before the CIT(A). 5. The CIT(A) referring to the provisions of section 56(2)(vii), observed that as per clause (e) of section 56(2)(vii) relative in case of HUF is any member of the family. Therefore, the CIT(A) held that since the assessee HUF received immovable property from a relative (individual) the provisions of section 56 are not applicable. Hence, he deleted the amount of ₹ 22,13,152/- being the inadequate consideration paid by HUF on transfer of building. 5.1 However, he observed that such exemption cannot be given to transfer of machinery from individual to HUF as machinery is not included in the definition of property under clause (d) of section 56(2)(vii). He, therefore, confirmed the addition of ₹ 15,79,809/- being the inadequate consideration paid for receiving machinery. 6. The AO made another addition of ₹ 6,41,625/- towards inflated sales for the following reasons: (a) The assessee started his business on 01.04.2010. On the very first day he started his purchases and sales. (b) In this line of business, weavin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rder of the CIT(A) the assessee is in appeal before us. 9. Ground Nos. 1 to 4 are pertaining to addition of ₹ 15,79,809/- made u/s 56(2)(vii) of the Act. Ground Nos. 5 to 12 are pertaining to the addition of ₹ 6,41,625/-. Ground No. 13 is pertaining to levy of interest u/s 234C of the Act. Ground Nos. 14 to 16 are general in nature. 10. As regards the addition of ₹ 15,79,809/-, the ld AR submitted that the first appellate authority has misunderstood the purport of section 56 (2) (vii) which seeks to tax assets, hitherto treated as exempt capital assets within the meaning of section 2 (14) of the Act. Section 2 (14) of the Act, inter-alia, includes property of any kind, held by an assessee unconnected with his business but excluded personal effects for the purpose of imposing capital gains tax. . Thus, immovable properties, being capital assets, were subjected to capital gains tax; certain transfers of immovable properties such as gifts and settlements were not treated as liable for capital gains taxation and hence the loophole was being misused by gifting or settling immovable properties between non relatives instead of outright sale to avoid payment of taxe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... thousand rupees, the whole of the aggregate value of such sum; (b) any immovable property,- (i) without consideration, the stamp duty value of which exceeds fifty thousand rupees, the stamp duty value of such property; (ii) for a consideration which is less than the stamp duty value of the property by an amount exceeding fifty thousand rupees, the stamp duty value of such property as exceeds such consideration; Provided that where the date of the agreement fixing the amount of consideration for the transfer of immovable property and the date of registration are not the same, the stamp duty value on the date of agreement may be taken for the purposes of this subclause. Provided further that the said proviso shall apply only in a case where the amount of consideration referred to therein, or a part thereof, has been paid by any mode other than cash on or before the date of the agreement for the transfer of such immovable property. (c) any property, other than immovable property,- (i) without consideration, the aggregate fair market value of which exceeds fifty thousand rupees, the whole of the aggregate fair market value of such property; (ii) for a consideration ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... business assets like stock-in-trade, machinery etc. On safe and infallible principle is to read the words through and see if the rule is clearly stated. If the language employed gives the rule in words of sufficient clarity and precision, nothing more requires to be done, in such a case, the task of interpretation can hardly be said to arise. Absoluta sententia expositore non indiget. The language used by the legislature best declares its intention and must be accepted as decisive of it. Hence, it is clear that the intention of the legislature not to include business assets in the exclusion list, it has to be accepted as such. Considering the above discussion, we are of the view that the definition of the capital assets for exclusion does not include the assets, machinery . Hence, the definition cannot be expanded beyond what is not intended to include. Accordingly, the addition made by the AO in this regard is sustained. 13. As regards the addition of 6,41,625/- on account of inflated sales, the ld. AR submitted that the CIT (A) has taken a jaundiced view of the explanations made to countenance the fundamental flaw in the additions made on a subject matter which forms part of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... isbelieves the opening day sales which is duly accounted while accepting the pro tanto purchases therefor. Hence there is no ground for adding a sum of ₹ 6,41,625/-as alleged inflation in sales, when the said sales are already part of the recorded transactions and the Assessing Officer has accepted the pro tanto purchases and manufacturing operations as correct. 13.2. Ld. AR submitted that it is also pertinent to note that the Assessing Officer having accepted the purchases are available, vide his observation in para 3, page 5 of the assessment order, there is no case for suspecting that the sales are bogus. However, in view of the inherent inconsistencies in the accounts rendered per-se, the additions that, can be contemplated on this alleged bogus sale is only a sum of ₹ 37,000/- on basis of decided case laws aforesaid. 14. Ld. DR on the other hand relied on the orders of revenue authorities. 15. Considered the submissions of both the parties and perused the material facts on record. We observe from the submissions and records produced before us that there is sales taken place at the commencement of the business which is fact. For sales to complete there has ..... X X X X Extracts X X X X X X X X Extracts X X X X
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