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2016 (8) TMI 1166 - ITAT HYDERABADAddition made u/s 56(2)(vii)- transaction of machinery purchased by the HUF from the individual - assets given as gift between the relatives - Held that:- On careful reading of the section 56(2)(vii) t is clear that the legislature intended to exclude the properties which are personal belongings like land and buildings, shares, securities and personal effects. It was never intended to exclude the 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. 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 arrangement to make sure to have initial sales on the first day of commencement of the business. In our considered view, the AO must have brought the element of profit to tax instead of whole value of sales. We direct the AO to tax only the profit. We remit the matter back to the file of the AO to determine the profit considering the industry and calculation offered by the assessee. Interest u/s 234C shall be revised on the basis of liability computed as per this order.
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