ACIT-2(2)(1), MMUMBAI vs. M/S. JICS LOGISTIC LIMITED , MUMBAI

PER OM PRAKASH KANT, AM PER OM PRAKASH KANT, AM

These appeals by the These appeals by the Revenue are directed against separate are directed against separate orders passed by the learned commissioner of I by the learned commissioner of Income ncome-tax(Appeals)- National Faceless Appeal Centre, Delhi [ in short the ld ‘CIT(A)’] for National Faceless Appeal Centre, Delhi [ in short the ld National Faceless Appeal Centre, Delhi [ in short the ld assessment years 2011 assessment years 2011-12 to 2018-19. In assessment year 2015 19. In assessment year 2015- 16, the assessee has preferred cross objection against the order of the assessee has preferred cross objection against the order of the assessee has preferred cross objection against the order of the Ld. CIT(A). The issue in dispute involved i the Ld. CIT(A). The issue in dispute involved in these appeals and n these appeals and cross objection being similar, same have been heard together and cross objection being similar, same have been heard together and cross objection being similar, same have been heard together and disposed off by way of this consolidated orde disposed off by way of this consolidated order for convenience and r for convenience and avoid repetition of facts. of facts.

M/s Jics Logistics Ltd. 3 ITA Nos. 1760, 1779, 1761 to 1763, 1780 & 1781, ITA Nos. 1760, 1779, 1761 to 1763, 1780 & 1781, 1764/Mum/2023 and CO No. 105/Mum/2023 1764/Mum/2023 and CO No. 105/Mum/2023

According to the learned DR, the d According to the learned DR, the delay was not intentional and was not intentional and was due to bonafide reasons, and therefore say might be condoned. The reasons, and therefore say might be condoned. The reasons, and therefore say might be condoned. The learned counsel for the assessee also did not seriously object for did not seriously object for admission of the appeal admission of the appeals. After considering submission of the . After considering submission of the parties, we are of the opini parties, we are of the opinion that there exists a sufficient cause for on that there exists a sufficient cause for not complying the limitation period for filing the appeals by the not complying the limitation period for filing the appeal not complying the limitation period for filing the appeal Assessing officer, and therefore , and therefore, in the interest of substantial , in the interest of substantial justice, we admit the appeal we admit the appeals for adjudication.

M/s Jics Logistics Ltd. 4 ITA Nos. 1760, 1779, 1761 to 1763, 1780 & 1781, ITA Nos. 1760, 1779, 1761 to 1763, 1780 & 1781, 1764/Mum/2023 and CO No. 105/Mum/2023 1764/Mum/2023 and CO No. 105/Mum/2023

‘Jhawar’ Ice and Cold Storage Ice and Cold Storage. The assessee company also . The assessee company also firm namely M/s ‘JICS acquired business of a acquired business of a partnership firm namely M/s logistics’, , , Mumbai Mumbai Mumbai on on on 01/11/2010 01/11/2010 01/11/2010 and and and acquired acquired acquired another another another ship concern namely M/s JICS laborato JICS laboratories, having proprietorship concern namely M/s prop. Mr Pranav Jhawar ( prop. Mr Pranav Jhawar (who is also director of the assessee director of the assessee company) on 31/03/2011. 31/03/2011.

4.1 The assessee filed The assessee filed its return of income for the year under for the year under consideration electronically on 29/09/2011 declaring total income electronically on 29/09/2011 declaring total income electronically on 29/09/2011 declaring total income at ₹8,41,44,630/-. During the year under consideration, the . During the year under consideration, the . During the year under consideration, the assessee was engaged in the business of providing warehousing and assessee was engaged in the business of providing warehousing and assessee was engaged in the business of providing warehousing and allied services including financing/refinancing allied services including financing/refinancing against warehoused against warehoused goods to trading members of National commodity and derivative ading members of National commodity and derivative ading members of National commodity and derivative exchange Ltd (NCDEX), farmers et cetera. exchange Ltd (NCDEX), farmers et cetera.

4.2 The return of income filed by the assessee was selecte The return of income filed by the assessee was selecte The return of income filed by the assessee was selected for scrutiny assessment and scrutiny assessment and statutory notices under the Income nder the Income-tax Act, 1961 (in short ‘the Act the Act’), were issued and complied with. In the issued and complied with. In the assessment completed under section 143(3) of the Act on assessment completed under section 143(3) of the assessment completed under section 143(3) of the 10/03/2014, the Assessing Officer made t 10/03/2014, the Assessing Officer made two additions. o additions. Firstly, addition was made made made disallowing disallowing disallowing depreciation depreciation depreciation amounting amounting amounting to to to ₹3,38,42,112/- claimed on intangible assets claimed on intangible assets in the form of form of ‘business right’ and ‘goodwill’ ’ generated due to acquisition of propriety generated due to acquisition of propriety concern namely M/s JICS Laboratories concern namely M/s JICS Laboratories. Second addition has been addition has been made disallowing depreciation amounting to allowing depreciation amounting to ₹79,36, 79,36,017/-, which

M/s Jics Logistics Ltd. 5 ITA Nos. 1760, 1779, 1761 to 1763, 1780 & 1781, ITA Nos. 1760, 1779, 1761 to 1763, 1780 & 1781, 1764/Mum/2023 and CO No. 105/Mum/2023 1764/Mum/2023 and CO No. 105/Mum/2023

was claimed by assessee was claimed by assessee due to enhancement of cost of a enhancement of cost of asset after revaluation of assets of M/s revaluation of assets of M/s Jhawar Ice and Cold Storage/ Jhawar Ice and Cold Storage/-. On further appeal, the Ld. CIT(A) has deleted both , the Ld. CIT(A) has deleted both the additions. Aggrieved, the Revenue is i Aggrieved, the Revenue is in appeal before the Income Income-tax Appellate Tribunal (in short the ‘Tri in short the ‘Tribunal’), raising grounds as reproduced raising grounds as reproduced above.

5.1 The brief facts qua the issue in dispute are that during the The brief facts qua the issue in dispute are that during the The brief facts qua the issue in dispute are that during the year under consideration onsideration, the assessee acquired ongoing business the assessee acquired ongoing business of M/s JICS laboratories, a proprietary concern, which was of M/s JICS laboratories, a proprietary concern of M/s JICS laboratories, a proprietary concern established in 2007 established in 2007. M/s JICS laboratories was an approved was an approved laboratory of NCDEX and laboratory of NCDEX and ‘ACE’ derivatives and commodity derivatives and commodity exchange Ltd and was engaged in the exchange Ltd and was engaged in the ‘commodity testing commodity testing’ business of agro-based and non based and non-agro-based products. As per the balance based products. As per the balance sheet dated 31/03/2011, the book value of t 31/03/2011, the book value of the assets of M/s JICS he assets of M/s JICS laboratories was of ₹43,44, 43,44,359/-. The assessee obtained a assessee obtained a valuation report of the assets of M/s JICS laboratories he assets of M/s JICS laboratories from from a chartered engineer M/s Anmol Se engineer M/s Anmol Sekri Consultants P Ltd. (in short kri Consultants P Ltd. (in short M/s Anmol consultant), who was approved by Government. On the basis of the , who was approved by Government. On the basis of the , who was approved by Government. On the basis of the valuation report of the valuer, t valuation report of the valuer, the assessee took over the business he assessee took over the business alonwith all the assets and li all the assets and liabilities of M/s JICS laboratories abilities of M/s JICS laboratories for a total consideration of total consideration of ₹39,77,99,955/-. After adjusting the book . After adjusting the book

M/s Jics Logistics Ltd. 6 ITA Nos. 1760, 1779, 1761 to 1763, 1780 & 1781, ITA Nos. 1760, 1779, 1761 to 1763, 1780 & 1781, 1764/Mum/2023 and CO No. 105/Mum/2023 1764/Mum/2023 and CO No. 105/Mum/2023

value of the assets of value of the assets of ₹34,55,641/-, intangible assets in the form of , intangible assets in the form of business rights and goodwill of business rights and goodwill of ₹39,34,55,641/-was determined in was determined in the books of account of assessee for books of account of assessee for business of the business of the M/s JICS laboratories, and corresponding amount of and corresponding amount of equity shares equity shares of assessee company were issued assessee company were issued to proprietor of JICS of JICS Laboratories, who happened to be director of the assessee company i.e. related who happened to be director of the assessee company i.e. related who happened to be director of the assessee company i.e. related party. The assessee accordingly recognised business right The assessee accordingly recognised business rights and The assessee accordingly recognised business right goodwill amounting to Rs. goodwill amounting to Rs.39,34,55,641/- as intangible asset as intangible asset in its books of account and claimed and claimed depreciation u/s 32 of the Act depreciation u/s 32 of the Act amounting to Rs. 4,91,81,955/ amounting to Rs. 4,91,81,955/-.

5.1.1 The The The Government Government Government approved approved approved valuer valuer valuer M/s M/s M/s Anmol Anmol Anmol Consultants worked out valuation of business Consultants worked out valuation of business of JICS Laboratories of JICS Laboratories two methods, firstly, by way of Discounted by way of two methods Discounted Cash Flow( DCF) method at Rs. 4287.30 lakhs and secondly, by way of Private DCF) method at Rs. 4287.30 lakhs and secondly, by way of DCF) method at Rs. 4287.30 lakhs and secondly, by way of Equity (PE) method at Rs. 3669.25 lakhs and then method at Rs. 3669.25 lakhs and then method at Rs. 3669.25 lakhs and then average of valuation of both method was worked out to Rs. 3978.28 lakhs. The valuation of both method was worked out to Rs. 3978.28 lakhs. The valuation of both method was worked out to Rs. 3978.28 lakhs. The AO and CIT(A) has reproduced the detailed working of valuation of AO and CIT(A) has reproduced the detailed working of valuation o AO and CIT(A) has reproduced the detailed working of valuation o DCF and PE method DCF and PE method provided on behalf of the assessee provided on behalf of the assessee in the impugned orders.

5.1.2 For ‘DCF’ method method, the Valuer has projected the cash flow , the Valuer has projected the cash flow for next four years and then after applying discounting factor at for next four years and then after applying discounting factor at for next four years and then after applying discounting factor at 10.72% computed discounted cash flow at Rs. 13 10.72% computed discounted cash flow at Rs. 1310 lakhs and after 10 lakhs and after adding the terminal value of Rs. 2977 terminal value of Rs. 2977 lakhs, estimated the bu , estimated the business

M/s Jics Logistics Ltd. 7 ITA Nos. 1760, 1779, 1761 to 1763, 1780 & 1781, ITA Nos. 1760, 1779, 1761 to 1763, 1780 & 1781, 1764/Mum/2023 and CO No. 105/Mum/2023 1764/Mum/2023 and CO No. 105/Mum/2023

value at Rs. 4287 lakhs. value at Rs. 4287 lakhs. The Assessing Officer rejected the The Assessing Officer rejected the reasons, that firstly, no basis for either cash flow valuation for the reasons, , no basis for either cash flow for future years or terminal va for future years or terminal value was disclosed by the valuer, lue was disclosed by the valuer, secondly, no deduction on account of investment in capital , no deduction on account of investment in capital , no deduction on account of investment in capital expenditure in future cash flow has been given, thirdly thirdly, discount expenditure in future cash flow has been given, factor of 10.72% was not explained. For PE valuation method, the factor of 10.72% was not explained. For PE valuation method factor of 10.72% was not explained. For PE valuation method valuer has taken PE ratio of valuer has taken PE ratio of M/s JICS Laboratories at 14 on the JICS Laboratories at 14 on the ground that average PE ratio of listed quality testing laboratories ground that average PE ratio of listed quality testing ground that average PE ratio of listed quality testing was around 32.13 and JICS Laboratories being unlisted small size around 32.13 and JICS Laboratories being unlisted small size around 32.13 and JICS Laboratories being unlisted small size company, the PE ratio of 14 was appropriate. company, the PE ratio of 14 was appropriate. The AO rejected the The AO rejected the PE valuation for the reason that firstly, the PE valuation has been PE valuation for the reaso , the PE valuation has been done on 31/3/2011 where as PE ratio as on 5/03/2011 had been done on 31/3/2011 where as PE ratio as on 5/03/2011 had been done on 31/3/2011 where as PE ratio as on 5/03/2011 had been considered by the valuer, secondly, another company namely M/s considered by the valuer, , another company namely M/s Chokasi Laboratories, engaged in identical quality testing services Chokasi Laboratories, engaged in identical quality testing services Chokasi Laboratories, engaged in identical quality testing services and listed and large c and listed and large company as compared to JICs Laboratories, ompany as compared to JICs Laboratories, but PE ratio of said company was only 2.4. but PE ratio of said company was only 2.4. Those Those discrepancies were confronted to the assessee but were confronted to the assessee but assessee sought more time for assessee sought more time for getting comments from the valuer, however, the limitation of getting comments from the valuer, however, the limitation of getting comments from the valuer, however, the limitation of assessment proceedings wa assessment proceedings was approaching near, the AO adjusted the s approaching near, the AO adjusted the valuation of the approved valuer and determined the potential the approved valuer and determined the potential the approved valuer and determined the potential market value of the business carried on by JICS laboratories at Rs. market value of the business carried on by JICS laboratories at Rs. market value of the business carried on by JICS laboratories at Rs. 12,70,63,110/- as on the date of merger i.e. 31/03/2011. as on the date of merger i.e. 31/03/2011. The as on the date of merger i.e. 31/03/2011. adjustment made to DCF me adjustment made to DCF method and PE method and consequent thod and PE method and consequent addition made is reproduced as under for ready reference: addition made is reproduced as under for ready reference: addition made is reproduced as under for ready reference:

M/s Jics Logistics Ltd. 8 ITA Nos. 1760, 1779, 1761 to 1763, 1780 & 1781, ITA Nos. 1760, 1779, 1761 to 1763, 1780 & 1781, 1764/Mum/2023 and CO No. 105/Mum/2023 1764/Mum/2023 and CO No. 105/Mum/2023

“5.7 Valuation as per DCF method: 5.7 Valuation as per DCF method:- From the income tax returns of From the income tax returns of M/s. JICS Laboratories, for A.Y. 2010 M/s. JICS Laboratories, for A.Y. 2010-11 and 2011-12 it was found 12 it was found that the net profit of the business of M/s. JICS Laboratories has that the net profit of the business of M/s. JICS Laboratories has that the net profit of the business of M/s. JICS Laboratories has increased from Rs. 86,44,370/ increased from Rs. 86,44,370/- in A.Y. 2010-11 to Rs. 1,51, 11 to Rs. 1,51,49,463/- in A.Y. 2011-12. Thus the compounded average growth rate (CAGR) is 12. Thus the compounded average growth rate (CAGR) is 12. Thus the compounded average growth rate (CAGR) is 75%. Considering that its income should grow at a constant growth 75%. Considering that its income should grow at a constant growth 75%. Considering that its income should grow at a constant growth rate of at least at one half of the speed of calculated CAGR of 75%, rate of at least at one half of the speed of calculated CAGR of 75%, rate of at least at one half of the speed of calculated CAGR of 75%, cash flow for next five ycars is calculated i cash flow for next five ycars is calculated in the following table: n the following table:-

A.Y. 2011-12 2012-13 2013-14 2014-15 2015-16 2015 2016-17 JICS Lab.Income 15,149,463 20,830,512 28,641,953 39,382,686 541,51,193/ 541,51,193/ 7,44,57,891/- CAGR @ 37.50% 56,81,049 78,11,442 10,740,733 14,768,507 20,306,697- 20,306,697 2,79,21,709/- Cash Flow 20,830,512 28,641,953 39,382,686 54,151,193 74,457,891/ 74,457,891/ 10,23,79,600/

5.8 While estimating the above cash flow it is presumed that the 5.8 While estimating the above cash flow it is presumed that the 5.8 While estimating the above cash flow it is presumed that the business will require capital expenditure that is equal to depreciation business will require capital expenditure that is equal to depreciation business will require capital expenditure that is equal to depreciation rates. Therefore, neither depreciation has rates. Therefore, neither depreciation has been added back nor capital been added back nor capital expenditure has been deducted while estimating the cash low. The expenditure has been deducted while estimating the cash low. The expenditure has been deducted while estimating the cash low. The above calculated cash flow should be discounted by as acceptable above calculated cash flow should be discounted by as acceptable above calculated cash flow should be discounted by as acceptable interest rate which is estimated at 13.25% considering 8.25% per interest rate which is estimated at 13.25% considering 8.25% per interest rate which is estimated at 13.25% considering 8.25% per annum risk free interest rate plu annum risk free interest rate plus 5% risk premium. Therefore, present s 5% risk premium. Therefore, present value of for future cash flows is being calculated as under: value of for future cash flows is being calculated as under:-

A.Y. 2011-12 2012-13 2013-14 2014-15 2015-16 2015 2016-17 JICS Lab.Income 1,51,49,463 49,463 2,08,30,512 2,86,41,953 3,93,82,686 5,41,51,193/ 41,51,193/ 7,44,57,891/- CAGR @ 37.50% 56,81,049 78,11,442 1,07,40,733 1,47,68,507 2,03 3,06,697- 2,79,21,709/- Cash Flow 20,830,512 28,641,953 39,382,686 54,151,193 74,457,891/ 74,457,891/ 10,23,79,600/- Discounted rate @ 13.25% 0.8675 0.7526 0.6529 0.5664 0.5664 0.4914 Present Value 2,84,46,894 2,96,39,409 3,53,55,314 4,21,72,949 4,21,72,949 5,03,09,335

5.9 Market value of business in terms of future cash flows is being 5.9 Market value of business in terms of future cash flows is being 5.9 Market value of business in terms of future cash flows is being calculated as per formula given here below: calculated as per formula given here below:- (Business income for 2011 (Business income for 2011-12/Capitalization rate) + (Future cash flow 12/Capitalization rate) + (Future cash flow of next five years) of next five years) = (1,51,49,463/3.25) (1,51,49,463/3.25) (1,51,49,463/3.25) + + + (18,23,23,903) (18,23,23,903) (18,23,23,903) = = = (46,61,373/-) (46,61,373/ (46,61,373/ + (18,23,23,903/ (18,23,23,903/-) = 18,69,85,276/- {Where capitalization rate = Risk free rate (8.25%) {Where capitalization rate = Risk free rate (8.25%) - Risk Premium (5%) Risk Premium (5%) = 3.25%}. Thus present value of business of M/s. JICS Laboratories as 3.25%}. Thus present value of business of M/s. JICS Laboratories as 3.25%}. Thus present value of business of M/s. JICS Laboratories as on 31/03/2011 comes to Rs. 18.70 Crore in place of 42.87 Crore as 31/03/2011 comes to Rs. 18.70 Crore in place of 42.87 Crore as 31/03/2011 comes to Rs. 18.70 Crore in place of 42.87 Crore as estimated by the Valu estimated by the Valuer according to the DCF method.

M/s Jics Logistics Ltd. 9 ITA Nos. 1760, 1779, 1761 to 1763, 1780 & 1781, ITA Nos. 1760, 1779, 1761 to 1763, 1780 & 1781, 1764/Mum/2023 and CO No. 105/Mum/2023 1764/Mum/2023 and CO No. 105/Mum/2023

5.10 Valuation as per PE method: 5.10 Valuation as per PE method:- Choksi Laboratories Ltd., Indore is Choksi Laboratories Ltd., Indore is working in similar line of business, which is a listed company, which working in similar line of business, which is a listed company, which working in similar line of business, which is a listed company, which has more experience, larger set up and infrastructure as well as man has more experience, larger set up and infrastructure as well as man has more experience, larger set up and infrastructure as well as man power strength in comparison to M/s. JICS Laboratories and which power strength in comparison to M/s. JICS Laboratories and which power strength in comparison to M/s. JICS Laboratories and which has PE ratio of 2.04 only as on 31/03/2011 which is evident from its has PE ratio of 2.04 only as on 31/03/2011 which is evident from its has PE ratio of 2.04 only as on 31/03/2011 which is evident from its audited annual accounts for the year ended on 31/03/2 audited annual accounts for the year ended on 31/03/2 audited annual accounts for the year ended on 31/03/2011. As Choksi Laboratories Ltd. CL.I is a listed company and founded Choksi Laboratories Ltd. CL.I is a listed company and founded Choksi Laboratories Ltd. CL.I is a listed company and founded 1982 with 26 locations means wide experienced whereas M/s JICS with 26 locations means wide experienced whereas M/s JICS with 26 locations means wide experienced whereas M/s JICS Laboratories was founded in 2007 (25 Yrs. After CLL.) is not a listed Laboratories was founded in 2007 (25 Yrs. After CLL.) is not a listed Laboratories was founded in 2007 (25 Yrs. After CLL.) is not a listed company and it is a very small size compared to the s company and it is a very small size compared to the size and volumes ize and volumes of the listed companies, PE ratio of M/s JICS Laboratories cannot be of the listed companies, PE ratio of M/s JICS Laboratories cannot be of the listed companies, PE ratio of M/s JICS Laboratories cannot be greater than PE ratio of Choksi Laboratories Ltd. greater than PE ratio of Choksi Laboratories Ltd. Therefore, business Therefore, business value of M/s JICS Laboratories is being worked out as per PE value of M/s JICS Laboratories is being worked out as per PE value of M/s JICS Laboratories is being worked out as per PE Method after taking PE ratio of 2.04 as after taking PE ratio of 2.04 as under:

Total discounted cash flow Total discounted cash flow 197473366/- Average discounted cash flows Average discounted cash flows 32912227/- PE Multiple 2.04 Business value Business value 67140943/- 5.11 In view of recaleulated value of business as per DCF & 5.11 In view of recaleulated value of business as per DCF & 5.11 In view of recaleulated value of business as per DCF & PE Method average value of the business is being worked out as under: Method average value of the business is being worked out as under: Method average value of the business is being worked out as under:-

Method Value DCF Method DCF Method 18,69,85,276/- PE Method 67140943/- Average 127063110/- 5.12 Goodwill Calculation: In view of recalculated value of business, 5.12 Goodwill Calculation: In view of recalculated value of business, 5.12 Goodwill Calculation: In view of recalculated value of business, value attributable to goodwill value attributable to goodwill is being worked out as under:

Particular Amount Business Value (as calculated above) Business Value (as calculated above) 127063110 127063110 Goodwill Contribution to the business value (%) Goodwill Contribution to the business value (%) 0.05 Value attributable to goodwill Value attributable to goodwill 53,53,156 53,53,156 5.13 In view of discussion made in para In view of discussion made in para 5.1 to 5.12, it is inferred that 5.1 to 5.12, it is inferred that the potential market value of the business carried on by M/s JICS the potential market value of the business carried on by M/s JICS the potential market value of the business carried on by M/s JICS Laboratories was Rs. 12,70,63,110/ Laboratories was Rs. 12,70,63,110/- as on the date of its merger i.e. as on the date of its merger i.e. 31.03.2011 with M/s JICS Logistics Ltd. Therefore, in the books of 31.03.2011 with M/s JICS Logistics Ltd. Therefore, in the books of 31.03.2011 with M/s JICS Logistics Ltd. Therefore, in the books of M/s JICS Logistics M/s JICS Logistics Ltd. (apart from assets, cransferred at book value Ltd. (apart from assets, cransferred at book value of Rs. 43,44,359/ of Rs. 43,44,359/-) intangible assets in the form of business right and ) intangible assets in the form of business right and goodwill should have been recognized at Rs. 12,27,18,751/ goodwill should have been recognized at Rs. 12,27,18,751/ goodwill should have been recognized at Rs. 12,27,18,751/-(business right of Rs. 11,63,65,595/ right of Rs. 11,63,65,595/- and goodwill of Rs. 63,53,156/ and goodwill of Rs. 63,53,156/-) instead of Rs. 39,34,55,641/ of Rs. 39,34,55,641/- (business right of Rs. 37,34,55,641/ (business right of Rs. 37,34,55,641/- and goodwill of Rs. 2,00.00,000/ goodwill of Rs. 2,00.00,000/-). Due to excess recognition of value of ). Due to excess recognition of value of intangible assets in the form intangible assets in the form of business right and goodwill of Rs. of business right and goodwill of Rs. 27,07,36,890/- - (difference of 393455641-122718751) in books of M/s in books of M/s

M/s Jics Logistics Ltd. 10 ITA Nos. 1760, 1779, 1761 to 1763, 1780 & 1781, ITA Nos. 1760, 1779, 1761 to 1763, 1780 & 1781, 1764/Mum/2023 and CO No. 105/Mum/2023 1764/Mum/2023 and CO No. 105/Mum/2023

JICS Logistics Ltd. excess depreciation of Rs. 3,38,42,112/ JICS Logistics Ltd. excess depreciation of Rs. 3,38,42,112/- (difference of 49181955-15339843 calculated @12.5%) was claimed which was 15339843 calculated @12.5%) was claimed which was 15339843 calculated @12.5%) was claimed which was not allowable. Accordingly claim of depreciation of Rs. 3,38,42, 112/ not allowable. Accordingly claim of depreciation of Rs. 3,38,42, 112/ not allowable. Accordingly claim of depreciation of Rs. 3,38,42, 112/- hereby disallowed and added back t hereby disallowed and added back to the total income of assessee. o the total income of assessee. Penairy proceedings u/s 271(1)(c) initiated separately for furnishing Penairy proceedings u/s 271(1)(c) initiated separately for furnishing Penairy proceedings u/s 271(1)(c) initiated separately for furnishing inaccurate particulars of income and concealment thereon. inaccurate particulars of income and concealment thereon.” 5.1.3 Thus, for ‘DCF DCF’ method calculation, the AO the AO observed that the net profit of the business the net profit of the business of JICS Laboratories has increased of JICS Laboratories has increased from Rs. 86,44,370/- - in 210-11 to Rs.1,51,49,463/- - in AY 2011-12, thus the compounded average rate of growth (CAGR) was 75% and thus the compounded average rate of growth (CAGR) thus the compounded average rate of growth (CAGR) if the income of JICS if the income of JICS Laboratories would have increased at a would have increased at a constant growth rate of at rate of at least one half of the speed of calculated speed of calculated CAGR of 75%, cash flow of next five years would be less , cash flow of next five years would be less , cash flow of next five years would be less than what valuer had determined. The AO was of the view that business would determined. The AO was of the view that business would determined. The AO was of the view that business would require capital expenditure which will be equal to depreciation require capital expenditure which will be equal to depreciation require capital expenditure which will be equal to depreciation rates, therefore, neit rates, therefore, neither depreciation has been added back nor her depreciation has been added back nor capital expenditure has been deducted while capital expenditure has been deducted while estimating the cash estimating the cash flow. The AO further discounted the cash flow calculated by an AO further discounted the cash flow calculated by an AO further discounted the cash flow calculated by an estimated rate of 13.25% considering 8.25% per annum risk free estimated rate of 13.25% considering 8.25% per annum risk free estimated rate of 13.25% considering 8.25% per annum risk free interest plus 5% risk pre interest plus 5% risk premium.

5.1.4 Under ‘PE PE’ method valuation, he took PE ratio of 2.04 method valuation, he took PE ratio of 2.04 and arrived at valuation of business at Rs. 6,71,40,943/-. After and arrived at valuation of business at Rs. 6,71,40,943/ and arrived at valuation of business at Rs. 6,71,40,943/ taking average of both method of valuation, he worked out average taking average of both method of valuation, he worked out average taking average of both method of valuation, he worked out average valuation of business at Rs. 12,70,63,110/ valuation of business at Rs. 12,70,63,110/-.

5.1.5 The Ld AO accordingly held that in the books of account d AO accordingly held that in the books of account d AO accordingly held that in the books of account of JICS Laboratories ( apart from assets transferred at book value of of JICS Laboratories ( apart from assets transferred a of JICS Laboratories ( apart from assets transferred a

M/s Jics Logistics Ltd. 11 ITA Nos. 1760, 1779, 1761 to 1763, 1780 & 1781, ITA Nos. 1760, 1779, 1761 to 1763, 1780 & 1781, 1764/Mum/2023 and CO No. 105/Mum/2023 1764/Mum/2023 and CO No. 105/Mum/2023

Rs. 43,44,359/-) intangible assets in the form of business rights ) intangible assets in the form of business rights ) intangible assets in the form of business rights and goodwill should have been recogniz odwill should have been recognized at Rs. 12,27,18,751 ed at Rs. 12,27,18,751/- instead of Rs.39,34,55, 55,641/- (business rights of Rs. 37,34,55,641/ business rights of Rs. 37,34,55,641/- and goodwill of Rs. 2,00,00,000/ and goodwill of Rs. 2,00,00,000/-) in the books of JICS laboratories. ) in the books of JICS laboratories.

5.2 Before the Ld. CIT(A) the assessee filed comments of the Before the Ld. CIT(A) the assessee filed comments of the Before the Ld. CIT(A) the assessee filed comments of the approved valuer on the defects which were approved valuer on the defects which were pointed out pointed out by the Assessing Officer in the valuation report. The approved valuer Assessing Officer in the valuation report. The approved value Assessing Officer in the valuation report. The approved value justified his valuation report. The Ld. CIT(A) admitted the comments justified his valuation report. The Ld. CIT(A) admitted the comments justified his valuation report. The Ld. CIT(A) admitted the comments of the approved valuer and sent the same to the Assessing Officer of the approved valuer and sent the same to the Assessing Officer of the approved valuer and sent the same to the Assessing Officer calling for a remand repor calling for a remand report. The Assessing Officer in his . The Assessing Officer in his remand report adhered to his earlier viewpoint. report adhered to his earlier viewpoint. In the remand report the In the remand report the Assessing Officer rejected the contention of the assessee with Assessing Officer rejected the contention of the assessee with Assessing Officer rejected the contention of the assessee with respect to the investment agreement entered into a Mauritius respect to the investment agreement entered into a Mauritius respect to the investment agreement entered into a Mauritius company, Tara Holdings which was claimed to company, Tara Holdings which was claimed to be duly approve be duly approved by the Reserve Bank of India (RBI), for the reason that genuineness eserve Bank of India (RBI), for the reason that genuineness eserve Bank of India (RBI), for the reason that genuineness and creditworthiness of the investor was doubtful because same and creditworthiness of the investor was doubtful because same and creditworthiness of the investor was doubtful because same was not verified through the was not verified through the Foreign Tax and Tax Research ( Foreign Tax and Tax Research (FT & TR) division (i.e. a division specified for verifying infor a division specified for verifying infor a division specified for verifying information in relation to foreign investment relation to foreign investment) of Central Board of Direct T of Central Board of Direct Taxes. After considering the remand report and rejoinder of the assessee, After considering the remand report and rejoinder of the assessee, After considering the remand report and rejoinder of the assessee, the Ld. CIT(A) deleted the depreciation in view of following the Ld. CIT(A) deleted the depreciation in view of following the Ld. CIT(A) deleted the depreciation in view of following reasonings:

What remains for adjudication is the am What remains for adjudication is the amount of depreciation that is to ount of depreciation that is to be allowed. Whether it should be based on the amount of value of be allowed. Whether it should be based on the amount of value of be allowed. Whether it should be based on the amount of value of assets calculated by the appellant or by the AO? assets calculated by the appellant or by the AO?

M/s Jics Logistics Ltd. 12 ITA Nos. 1760, 1779, 1761 to 1763, 1780 & 1781, ITA Nos. 1760, 1779, 1761 to 1763, 1780 & 1781, 1764/Mum/2023 and CO No. 105/Mum/2023 1764/Mum/2023 and CO No. 105/Mum/2023

In this respect, the following are seen: In this respect, the following are seen: a. The valuation of assets is done by an independent registered value a. The valuation of assets is done by an independent registered value a. The valuation of assets is done by an independent registered valuer. b. It is a fact that consideration of Rs.39.78 crores has been paid to the b. It is a fact that consideration of Rs.39.78 crores has been paid to the b. It is a fact that consideration of Rs.39.78 crores has been paid to the seller in the form of equity shares (plus small unsecured loan), which seller in the form of equity shares (plus small unsecured loan), which seller in the form of equity shares (plus small unsecured loan), which again is on the basis of another valuation report. again is on the basis of another valuation report. c. As regards the finding of the AO regarding the projec c. As regards the finding of the AO regarding the projected cash flows, ted cash flows, the valuer has stated that the same is based on the information and the valuer has stated that the same is based on the information and the valuer has stated that the same is based on the information and data made available by the management. Besides, various other data made available by the management. Besides, various other data made available by the management. Besides, various other specific factors including (i small scale but high margins (ii) high growth specific factors including (i small scale but high margins (ii) high growth specific factors including (i small scale but high margins (ii) high growth potential (iii) booming commodity potential (iii) booming commodity markets (iv) entry barriers etc have markets (iv) entry barriers etc have been cited. The AO has reiterated in the remand report that the been cited. The AO has reiterated in the remand report that the been cited. The AO has reiterated in the remand report that the estimation is based on inflated projections and no supporting evidence estimation is based on inflated projections and no supporting evidence estimation is based on inflated projections and no supporting evidence has been given. However, it is seen that the AO has not given the basis has been given. However, it is seen that the AO has not given the basis has been given. However, it is seen that the AO has not given the basis for arriving at his decision of estimating the cash flows at half of the at his decision of estimating the cash flows at half of the at his decision of estimating the cash flows at half of the speed of calculated CAGR of 75%. speed of calculated CAGR of 75%. d. As regards the discount rate of 10.72%, the valuer has given a d. As regards the discount rate of 10.72%, the valuer has given a d. As regards the discount rate of 10.72%, the valuer has given a detailed justification in terms of Weighted Average Cost of Capital detailed justification in terms of Weighted Average Cost of Capital detailed justification in terms of Weighted Average Cost of Capital (WACC) in both the original (WACC) in both the original valuation report and clarifications issued by valuation report and clarifications issued by it. It appears that the AO has accepted this rate in the remand report. In it. It appears that the AO has accepted this rate in the remand report. In it. It appears that the AO has accepted this rate in the remand report. In any case, the rate cannot be questioned by the AO by considering risk any case, the rate cannot be questioned by the AO by considering risk any case, the rate cannot be questioned by the AO by considering risk premium of 5% without providing any factual basis for arriving at premium of 5% without providing any factual basis for arriving at premium of 5% without providing any factual basis for arriving at such a conclusion. Wherever the specific computation made by the registered a conclusion. Wherever the specific computation made by the registered a conclusion. Wherever the specific computation made by the registered valuer is to be substituted, it is imperative that it has a factual valuer is to be substituted, it is imperative that it has a factual valuer is to be substituted, it is imperative that it has a factual foundation. In the absence of such an exercise by the AO, in my humble foundation. In the absence of such an exercise by the AO, in my humble foundation. In the absence of such an exercise by the AO, in my humble view, the report of the valuer would gai view, the report of the valuer would gain precedence, particularly since n precedence, particularly since the valuation report has the basis for arriving at WACC. the valuation report has the basis for arriving at WACC. e. As regards the PE adopted, the appellant has pointed out that Vimta e. As regards the PE adopted, the appellant has pointed out that Vimta e. As regards the PE adopted, the appellant has pointed out that Vimta Laboratories which had a market capitalization of Rs.37 crores had a Laboratories which had a market capitalization of Rs.37 crores had a Laboratories which had a market capitalization of Rs.37 crores had a PE of 45.3. While the AO h PE of 45.3. While the AO has opted to compare with a single entity, the as opted to compare with a single entity, the valuer has adopted the average industry PE based on 2 companies and valuer has adopted the average industry PE based on 2 companies and valuer has adopted the average industry PE based on 2 companies and arrived at average of 32.13 of companies in same line of business of arrived at average of 32.13 of companies in same line of business of arrived at average of 32.13 of companies in same line of business of testing laboratories (page 67,73 of valuation report). The valuer has testing laboratories (page 67,73 of valuation report). The valuer has testing laboratories (page 67,73 of valuation report). The valuer has eventually adopted a PE of 14 based on the industry PE of companies in ntually adopted a PE of 14 based on the industry PE of companies in ntually adopted a PE of 14 based on the industry PE of companies in infrastructure field. A PE of 2 indicates a very short payback period of infrastructure field. A PE of 2 indicates a very short payback period of infrastructure field. A PE of 2 indicates a very short payback period of just 2 years. In the listed market space, several companies command just 2 years. In the listed market space, several companies command just 2 years. In the listed market space, several companies command huge valuation (particularly start huge valuation (particularly start-ups) even though they suffer from ough they suffer from huge losses on account of future growth potential. Thus, valuation on a huge losses on account of future growth potential. Thus, valuation on a huge losses on account of future growth potential. Thus, valuation on a PE basis is more of an art and less of a science. One cannot fault the PE basis is more of an art and less of a science. One cannot fault the PE basis is more of an art and less of a science. One cannot fault the valuer for eventually adopting a nominal PE of 14, which is much higher valuer for eventually adopting a nominal PE of 14, which is much higher valuer for eventually adopting a nominal PE of 14, which is much higher than the average PE than the average PE of the indices of the listed entities in the stock of the indices of the listed entities in the stock exchanges. Comparing the PE with a group of entities or the market as exchanges. Comparing the PE with a group of entities or the market as exchanges. Comparing the PE with a group of entities or the market as adopted by the Registered Valuer, as against benchmarking the PE adopted by the Registered Valuer, as against benchmarking the PE adopted by the Registered Valuer, as against benchmarking the PE against a single entity as made by the AO, is in my view, a better against a single entity as made by the AO, is in my view, a better against a single entity as made by the AO, is in my view, a better proposition.

M/s Jics Logistics Ltd. 13 ITA Nos. 1760, 1779, 1761 to 1763, 1780 & 1781, ITA Nos. 1760, 1779, 1761 to 1763, 1780 & 1781, 1764/Mum/2023 and CO No. 105/Mum/2023 1764/Mum/2023 and CO No. 105/Mum/2023

f. As regards the AO's questioning of the inclusion of Vimta Laboratories f. As regards the AO's questioning of the inclusion of Vimta Laboratories f. As regards the AO's questioning of the inclusion of Vimta Laboratories on the ground that it is a much larger entity, it supports the case of the on the ground that it is a much larger entity, it supports the case of the on the ground that it is a much larger entity, it supports the case of the appellant that this is a high growth high potential segment. appellant that this is a high growth high potential segment. In view of the detailed discussion In view of the detailed discussion as above, in my considered view, the as above, in my considered view, the valuation report in this case has adequate factual basis. The Valuation valuation report in this case has adequate factual basis. The Valuation valuation report in this case has adequate factual basis. The Valuation Report has not been assailed by way of compelling contrary evidences Report has not been assailed by way of compelling contrary evidences Report has not been assailed by way of compelling contrary evidences or by demonstrating that any of the assumptions made by the or by demonstrating that any of the assumptions made by the or by demonstrating that any of the assumptions made by the Registered Valuer Registered Valuer / Appellant are divested of reality. In the case of Ashwin Vanaspati Industries vs CIT, 255 ITR 26 (Guj HC), In the case of Ashwin Vanaspati Industries vs CIT, 255 ITR 26 (Guj HC), In the case of Ashwin Vanaspati Industries vs CIT, 255 ITR 26 (Guj HC), the Hon'ble Gujarat HC has held as follows: "The valuation report is by the Hon'ble Gujarat HC has held as follows: "The valuation report is by the Hon'ble Gujarat HC has held as follows: "The valuation report is by a registered" valuer. Neither in the assessment order nor in the a registered" valuer. Neither in the assessment order nor in the a registered" valuer. Neither in the assessment order nor in the Tribunal's order is there any whisper that the valuation report by the order is there any whisper that the valuation report by the order is there any whisper that the valuation report by the registered valuer is incorrect in any manner whatsoever. registered valuer is incorrect in any manner whatsoever. Once there is Once there is a report by the registered valuer, it is incumbent upon an a report by the registered valuer, it is incumbent upon an a report by the registered valuer, it is incumbent upon an authority to dislodge the same by bringing adequate material on authority to dislodge the same by bringing adequate material on authority to dislodge the same by bringing adequate material on record in the form of departmental valuation report, because in ecord in the form of departmental valuation report, because in ecord in the form of departmental valuation report, because in absence of the same, a technical expert's opinion (Registered absence of the same, a technical expert's opinion (Registered absence of the same, a technical expert's opinion (Registered Valuer's report) cannot be dislodged by any authority by merely Valuer's report) cannot be dislodged by any authority by merely Valuer's report) cannot be dislodged by any authority by merely ignoring the same. ignoring the same. In the present case, that is what has happened. In the present case, that is what has happened. Neither the Assessing Officer nor the Tribunal have even attempted to Neither the Assessing Officer nor the Tribunal have even attempted to Neither the Assessing Officer nor the Tribunal have even attempted to state that the valuation report and the values put on the assets are state that the valuation report and the values put on the assets are state that the valuation report and the values put on the assets are incorrect in any manner whatsoever. incorrect in any manner whatsoever. They have simply ignored the val They have simply ignored the valuation report". Although the valuation uation report". Although the valuation report could be questioned by the AO if any of the specific defects had report could be questioned by the AO if any of the specific defects had report could be questioned by the AO if any of the specific defects had been pointed out, the same is not the case here. been pointed out, the same is not the case here. In view of the above facts and position of law, the appellant is entitled In view of the above facts and position of law, the appellant is entitled In view of the above facts and position of law, the appellant is entitled to recognition of valu to recognition of value of intangible assets in the form of business rights e of intangible assets in the form of business rights and goodwill of Rs.27,07,36,890/ and goodwill of Rs.27,07,36,890/- which has been disallowed by the which has been disallowed by the AO. The consequential depreciation of Rs.3,38,42,112/ AO. The consequential depreciation of Rs.3,38,42,112/- is allowable to is allowable to the appellant. This ground stands allowed. the appellant. This ground stands allowed.” 6. Before us, the Ld Before us, the Ld. Departmental Representative (DR) . Departmental Representative (DR) referred to the finding of ld CIT(A), wherein he following the decision of following the decision of Hon’ble Gujarat High Court in the case of Hon’ble Gujarat High Court in the case of Ashwin Vanaspati Ashwin Vanaspati Industries (supra) held that held that in absence of any valuation report from in absence of any valuation report from the Departmental V the Departmental Valuation Officer, the Assessing Officer can’t sing Officer can’t discard the valuation of M/s Jics Laboratories carried out by the the valuation of M/s Jics Laboratories carried out by the the valuation of M/s Jics Laboratories carried out by the registered valuer. The Ld. DR submitted that when the Ld. CIT(A) The Ld. DR submitted that when the Ld. CIT(A) The Ld. DR submitted that when the Ld. CIT(A) noted that there was no report noted that there was no report from the Departmental Valuer from the Departmental Valuer ,he

M/s Jics Logistics Ltd. 14 ITA Nos. 1760, 1779, 1761 to 1763, 1780 & 1781, ITA Nos. 1760, 1779, 1761 to 1763, 1780 & 1781, 1764/Mum/2023 and CO No. 105/Mum/2023 1764/Mum/2023 and CO No. 105/Mum/2023

within his co-terminus power erminus power of Assessing Officer, of Assessing Officer, he could have called for the valuation called for the valuation report from the Departmental Valuer report from the Departmental Valuer for valuation of JICS Laboratories. The Ld. DR referred to the decision Laboratories. The Ld. DR referred to the decision Laboratories. The Ld. DR referred to the decision dated 11/03/2015 of the Hon’ble Delhi High Court in the case of of the Hon’ble Delhi High Court in the case of of the Hon’ble Delhi High Court in the case of Jansampark Advertising and Marketing P ltd (ITA 525/2014) Advertising and Marketing P ltd (ITA 525/2014) Advertising and Marketing P ltd (ITA 525/2014) wherein it is held that if the Assessing Officer fails in carrying out wherein it is held that if the Assessing Officer fails in carrying out wherein it is held that if the Assessing Officer fails in carrying out any inquiry then it is incumbent upon the appellate authorities to any inquiry then it is incumbent upon the appellate authorities to any inquiry then it is incumbent upon the appellate authorities to carry out such inquiry for discovery of the true facts of the case. h inquiry for discovery of the true facts of the case. h inquiry for discovery of the true facts of the case. The Ld. DR further submitted that in the case The Ld. DR further submitted that in the case , the assessee has the assessee has merely acquired proprietary business merely acquired proprietary business of director having book value having book value of Rs.43,44,359/-. The Ld. DR further submitted that the proprietor . The Ld. DR further submitted that the proprietor . The Ld. DR further submitted that the proprietor has not reported valuation of the asse d valuation of the assets of his proprietary concern ts of his proprietary concern as valued by the approved valuer as valued by the approved valuer and consequent capital gain on and consequent capital gain on sale of the intangible assets containing business rights and goodwill sale of the intangible assets containing business rights and goodwill sale of the intangible assets containing business rights and goodwill in his return of income. H in his return of income. He submitted that no additiona e submitted that no additional business or commercial rights arose or develop or commercial rights arose or developed in the proprietary concern in the proprietary concern of the Director merely for the reason that it was transferred to a of the Director merely for the reason that it was transferred to a of the Director merely for the reason that it was transferred to a company in which the proprietor himself is d company in which the proprietor himself is director. The Ld. DR irector. The Ld. DR submitted that valuation by the valuer has been submitted that valuation by the valuer has been made on the basis made on the basis of the unrealistic projections by management and just for the of the unrealistic projections by management and just for the of the unrealistic projections by management and just for the purpose of reducing tax liability in the hand of the company by way purpose of reducing tax liability in the hand of the company by way purpose of reducing tax liability in the hand of the company by way of claiming excess depreciation and no of claiming excess depreciation and no additional additional asset actually came into existence in the hands of the co ce in the hands of the company by way of mpany by way of acquiring proprietary concern of director of the company. The Ld. acquiring proprietary concern of director of the company. acquiring proprietary concern of director of the company.

M/s Jics Logistics Ltd. 15 ITA Nos. 1760, 1779, 1761 to 1763, 1780 & 1781, ITA Nos. 1760, 1779, 1761 to 1763, 1780 & 1781, 1764/Mum/2023 and CO No. 105/Mum/2023 1764/Mum/2023 and CO No. 105/Mum/2023

DR in support of his claim relied on the decision of the Tribunal in DR in support of his claim relied on the decision of the Tribunal in DR in support of his claim relied on the decision of the Tribunal in the case of M/s Dosti Realty Ltd. in ITA No. 2043/Mum/2022 M/s Dosti Realty Ltd. in ITA No. 2043/Mum/2022 M/s Dosti Realty Ltd. in ITA No. 2043/Mum/2022 for assessment year 2016 for assessment year 2016-17 wherein the Tribunal held as under: nal held as under:

“6. As observed by us that scheme of amalgamation not fully observed 6. As observed by us that scheme of amalgamation not fully observed 6. As observed by us that scheme of amalgamation not fully observed by assessee by considering reserve and surplus for the purposes of by assessee by considering reserve and surplus for the purposes of by assessee by considering reserve and surplus for the purposes of calculation calculation calculation of of of goodwill. goodwill. goodwill. As As As far far far as as as allowability allowability allowability of of of depreciation/amortization is concerned we have gon depreciation/amortization is concerned we have gone through the order e through the order of AO, Ld. CIT (A) and assessee’s submissions thereon. In our of AO, Ld. CIT (A) and assessee’s submissions thereon. In our of AO, Ld. CIT (A) and assessee’s submissions thereon. In our observation claim of the assessee is not tenable for the following observation claim of the assessee is not tenable for the following observation claim of the assessee is not tenable for the following reasons notwithstanding the reduction in amount of goodwill by virtue reasons notwithstanding the reduction in amount of goodwill by virtue reasons notwithstanding the reduction in amount of goodwill by virtue of our finding (supra) as under: of our finding (supra) as under: A) In case of amalgamation amongst the closely held companies, In case of amalgamation amongst the closely held companies, In case of amalgamation amongst the closely held companies, where the owner/promoters and directors are same how the where the owner/promoters and directors are same how the where the owner/promoters and directors are same how the goodwill can emerge by virtue of amalgamation, as no new goodwill can emerge by virtue of amalgamation, as no new goodwill can emerge by virtue of amalgamation, as no new people/organization came into picture and whatever reflecting in people/organization came into picture and whatever reflecting in people/organization came into picture and whatever reflecting in Balance Balance-Sheet is merely a balancing figure to match the Balance merely a balancing figure to match the Balance Sheet. B) Assessee is a holding company where all the main owners B) Assessee is a holding company where all the main owners B) Assessee is a holding company where all the main owners and directors are promoters and on the board of the company, in and directors are promoters and on the board of the company, in and directors are promoters and on the board of the company, in that case how is it possible that a smaller entity that is too a that case how is it possible that a smaller entity that is too a that case how is it possible that a smaller entity that is too a subsidiary have more market value/brand value, which can subsidiary have more market value/brand value, which can subsidiary have more market value/brand value, which can create good create goodwill in favour of parent entity which is the main will in favour of parent entity which is the main power house in terms of finance, decision making and personal power house in terms of finance, decision making and personal power house in terms of finance, decision making and personal reputation in the industry. reputation in the industry. C) The assessee had tried to make out a case that the C) The assessee had tried to make out a case that the C) The assessee had tried to make out a case that the amalgamation of two companies with the transferor company amalgamation of two companies with the transferor company amalgamation of two companies with the transferor company was by a method of merger by a method of merger called 'purchase method' by which it called 'purchase method' by which it was not necessary that all the shareholders of the erstwhile was not necessary that all the shareholders of the erstwhile was not necessary that all the shareholders of the erstwhile transferor companies would become shareholders in the same transferor companies would become shareholders in the same transferor companies would become shareholders in the same ratio in the transferee company. On the other hand, in the ratio in the transferee company. On the other hand, in the ratio in the transferee company. On the other hand, in the 'pooling of inter 'pooling of interest' method of amalgamation the transferor's est' method of amalgamation the transferor's assets, liabilities and reserves are recorded by the transferee at assets, liabilities and reserves are recorded by the transferee at assets, liabilities and reserves are recorded by the transferee at the relevant 'carrying amounts', i.e. points. The criteria the relevant 'carrying amounts', i.e. points. The criteria the relevant 'carrying amounts', i.e. points. The criteria applicable was 'pooling of interests method' in para 3(e) of AS applicable was 'pooling of interests method' in para 3(e) of AS applicable was 'pooling of interests method' in para 3(e) of AS- 14.All assets and lia 14.All assets and liabilities of the transferor companies had bilities of the transferor companies had passed on, in totality, to the transferee company, thus, passed on, in totality, to the transferee company, thus, passed on, in totality, to the transferee company, thus, indicating that it was a 'pooling of interest' method of indicating that it was a 'pooling of interest' method of indicating that it was a 'pooling of interest' method of amalgamation and there could not have been accounting for amalgamation and there could not have been accounting for amalgamation and there could not have been accounting for goodwill. goodwill. D) No credible evidence or mater D) No credible evidence or material had been laid on record to ial had been laid on record to show that the assessee incurred any cost for acquiring goodwill show that the assessee incurred any cost for acquiring goodwill show that the assessee incurred any cost for acquiring goodwill in the scheme of amalgamation. The record revealed that the in the scheme of amalgamation. The record revealed that the in the scheme of amalgamation. The record revealed that the assessee himself in the first instance written off the entire assessee himself in the first instance written off the entire assessee himself in the first instance written off the entire

M/s Jics Logistics Ltd. 16 ITA Nos. 1760, 1779, 1761 to 1763, 1780 & 1781, ITA Nos. 1760, 1779, 1761 to 1763, 1780 & 1781, 1764/Mum/2023 and CO No. 105/Mum/2023 1764/Mum/2023 and CO No. 105/Mum/2023

amount of Rs. 46.05 Crores accounted fo amount of Rs. 46.05 Crores accounted for as its goodwill in its r as its goodwill in its accounts. That decision taken by the assessee was consistent to accounts. That decision taken by the assessee was consistent to accounts. That decision taken by the assessee was consistent to the Standard Accounting Practices followed in respect of the Standard Accounting Practices followed in respect of the Standard Accounting Practices followed in respect of fictitious assets. From the accounting treatment, it was clear fictitious assets. From the accounting treatment, it was clear fictitious assets. From the accounting treatment, it was clear that the assessee made accounting entries to th that the assessee made accounting entries to th that the assessee made accounting entries to the goodwill account after the scheme of amalgamation became effective and account after the scheme of amalgamation became effective and account after the scheme of amalgamation became effective and not on account of the order of the High Court to make any not on account of the order of the High Court to make any not on account of the order of the High Court to make any payment for goodwill (intangible assets) specifically. As per payment for goodwill (intangible assets) specifically. As per payment for goodwill (intangible assets) specifically. As per standard accounting practices, in the cases of amalgamations, i standard accounting practices, in the cases of amalgamations, i standard accounting practices, in the cases of amalgamations, if the assets side is greater than the liability side then the the assets side is greater than the liability side then the the assets side is greater than the liability side then the difference is credited to the capital reserve account and in a difference is credited to the capital reserve account and in a difference is credited to the capital reserve account and in a case where the liability side is greater than the asset side then case where the liability side is greater than the asset side then case where the liability side is greater than the asset side then the difference is accounted as 'Goodwill' account in the hands of the difference is accounted as 'Goodwill' account in the hands of the difference is accounted as 'Goodwill' account in the hands of the amalgamated company. This practice is followed to balance the amalgamated company. This practice is followed to balance the amalgamated company. This practice is followed to balance the asset and liability sides by making accounting entries and the asset and liability sides by making accounting entries and the asset and liability sides by making accounting entries and by making such book entries, no real asset as goodwill in fact by making such book entries, no real asset as goodwill in fact by making such book entries, no real asset as goodwill in fact comes into existence. That was how the accounting treatment to comes into existence. That was how the accounting treatment to comes into existence. That was how the accounting treatment to be given was clearly stated in the scheme and no payment on iven was clearly stated in the scheme and no payment on iven was clearly stated in the scheme and no payment on account of any such asset was made by the assessee in that account of any such asset was made by the assessee in that account of any such asset was made by the assessee in that scheme which stood approved by the order of the High Court. scheme which stood approved by the order of the High Court. scheme which stood approved by the order of the High Court. The said order thus, clearly stated that the assets of the The said order thus, clearly stated that the assets of the The said order thus, clearly stated that the assets of the transferor company com transferor company comprised in the undertaking stood prised in the undertaking stood transferred and vested in the transferee company as a going transferred and vested in the transferee company as a going transferred and vested in the transferee company as a going concern. concern. 7. In the case of Smifs Securities Ltd., the Supreme Court has held that 7. In the case of Smifs Securities Ltd., the Supreme Court has held that 7. In the case of Smifs Securities Ltd., the Supreme Court has held that 'goodwill' is an intangible asset eligible for depreciation under the 'goodwill' is an intangible asset eligible for depreciation under the 'goodwill' is an intangible asset eligible for depreciation under the provisions of section 32 of the IT Act. A decision is only an authority for f section 32 of the IT Act. A decision is only an authority for f section 32 of the IT Act. A decision is only an authority for what it actually decides. Hence, the said case can be said to be an what it actually decides. Hence, the said case can be said to be an what it actually decides. Hence, the said case can be said to be an authority only to the extent that goodwill is a depreciable asset. In the authority only to the extent that goodwill is a depreciable asset. In the authority only to the extent that goodwill is a depreciable asset. In the case of U.P. State Industrial Development Corpn. [ case of U.P. State Industrial Development Corpn. [CIT v. U.P. State CIT v. U.P. State Industrial Development Corpn. [1997] 225 ITR 703], the Hon’ble Industrial Development Corpn. [1997] 225 ITR 703], the Hon’ble Industrial Development Corpn. [1997] 225 ITR 703], the Hon’ble Supreme Court held that it is a well Supreme Court held that it is a well-accepted proposition that for the accepted proposition that for the purposes of ascertaining profits and gains the ordinary principles of purposes of ascertaining profits and gains the ordinary principles of purposes of ascertaining profits and gains the ordinary principles of commercial accounting should be ap commercial accounting should be applied, so long as they do not conflict plied, so long as they do not conflict with any express provision of the relevant statute. The said principle with any express provision of the relevant statute. The said principle with any express provision of the relevant statute. The said principle was again retreated by the Supreme Court in the case of Woodward was again retreated by the Supreme Court in the case of Woodward was again retreated by the Supreme Court in the case of Woodward Governor [CIT v. Woodward Governor India (P.) Ltd.[2009] 312 ITR 254] Governor [CIT v. Woodward Governor India (P.) Ltd.[2009] 312 ITR 254] Governor [CIT v. Woodward Governor India (P.) Ltd.[2009] 312 ITR 254] wherein it held that profits for income held that profits for income-tax purpose are to be computed in tax purpose are to be computed in accordance with ordinary principles of commercial accounting, unless accordance with ordinary principles of commercial accounting, unless accordance with ordinary principles of commercial accounting, unless such principles stand superseded or modified by legislative enactments. such principles stand superseded or modified by legislative enactments. such principles stand superseded or modified by legislative enactments. In other words, it can be said that accounting treat In other words, it can be said that accounting treatment of any ment of any transaction is relevant only to the extent they are not in conflict with the transaction is relevant only to the extent they are not in conflict with the transaction is relevant only to the extent they are not in conflict with the express provisions of the IT Act. In case of merger and acquisition, the express provisions of the IT Act. In case of merger and acquisition, the express provisions of the IT Act. In case of merger and acquisition, the IT Act expressly requires recording of capital assets at the price IT Act expressly requires recording of capital assets at the price IT Act expressly requires recording of capital assets at the price appearing in the books of T appearing in the books of Target Company. Accordingly, the recognition arget Company. Accordingly, the recognition of of of goodwill goodwill goodwill in in in accordance accordance accordance with with with Accounting Accounting Accounting Standard Standard-14 Standard and amortisation of the same in accordance with Accounting Standard amortisation of the same in accordance with Accounting Standard amortisation of the same in accordance with Accounting Standard-26 may not be of any help in claiming depreciation under the IT Act in view may not be of any help in claiming depreciation under the IT Act in view may not be of any help in claiming depreciation under the IT Act in view of the express of the express provisions mentioned therein. Thus, the cost of provisions mentioned therein. Thus, the cost of acquisition of existing goodwill in the hands of the acquirer will be the acquisition of existing goodwill in the hands of the acquirer will be the acquisition of existing goodwill in the hands of the acquirer will be the

M/s Jics Logistics Ltd. 17 ITA Nos. 1760, 1779, 1761 to 1763, 1780 & 1781, ITA Nos. 1760, 1779, 1761 to 1763, 1780 & 1781, 1764/Mum/2023 and CO No. 105/Mum/2023 1764/Mum/2023 and CO No. 105/Mum/2023

cost/written down value in the hands of Target Company. Further, in cost/written down value in the hands of Target Company. Further, in cost/written down value in the hands of Target Company. Further, in case of goodwill arising out of amalgamation, the cost in the han case of goodwill arising out of amalgamation, the cost in the han case of goodwill arising out of amalgamation, the cost in the hands of target company would be NIL by virtue of section 55(2) (a) (ii) and, target company would be NIL by virtue of section 55(2) (a) (ii) and, target company would be NIL by virtue of section 55(2) (a) (ii) and, accordingly, the cost would be NIL in the hands of acquirer accordingly, the cost would be NIL in the hands of acquirer accordingly, the cost would be NIL in the hands of acquirer-company. It is pertinent to note that decisions favouring the proposition [CIT v. Smifs is pertinent to note that decisions favouring the proposition [CIT v. Smifs is pertinent to note that decisions favouring the proposition [CIT v. Smifs Securities Ltd.[2012] 348 ITR 302 Securities Ltd.[2012] 348 ITR 302(SC)]that depreciation is available on (SC)]that depreciation is available on goodwill arising out of amalgamation, section, viz., 5th proviso to goodwill arising out of amalgamation, section, viz., 5th proviso to goodwill arising out of amalgamation, section, viz., 5th proviso to section 32 (1), section 49(1)(iii)(e), Explanation 7 to section 43(1) section 32 (1), section 49(1)(iii)(e), Explanation 7 to section 43(1) section 32 (1), section 49(1)(iii)(e), Explanation 7 to section 43(1) and/or Explanation 2(b) to section 43(6)(c) and section 55(2)(a)(ii) were not Explanation 2(b) to section 43(6)(c) and section 55(2)(a)(ii) were not Explanation 2(b) to section 43(6)(c) and section 55(2)(a)(ii) were not referred. 8. Generally, when someone acquires a business and purchase 8. Generally, when someone acquires a business and purchase 8. Generally, when someone acquires a business and purchase consideration paid for the business is more than the net assets consideration paid for the business is more than the net assets consideration paid for the business is more than the net assets acquired, the difference is recognized as goodwill in accounting. Here in acquired, the difference is recognized as goodwill in accounting. Here in acquired, the difference is recognized as goodwill in accounting. Here in this case as amalgamation process has been carri this case as amalgamation process has been carried out as per the ed out as per the direction of Hon’ble Bombay High Court and assessee clearly followed direction of Hon’ble Bombay High Court and assessee clearly followed direction of Hon’ble Bombay High Court and assessee clearly followed “pooling of interest” method, there can’t be any separate purchase “pooling of interest” method, there can’t be any separate purchase “pooling of interest” method, there can’t be any separate purchase consideration, which assessee is supposed to pay. In the whole consideration, which assessee is supposed to pay. In the whole consideration, which assessee is supposed to pay. In the whole scenario the principle of “substance ov scenario the principle of “substance over form” has to be considered. In er form” has to be considered. In substance there is no goodwill involved at all and it is simply an substance there is no goodwill involved at all and it is simply an substance there is no goodwill involved at all and it is simply an accounting entry to balance the accounts of the transferee company by accounting entry to balance the accounts of the transferee company by accounting entry to balance the accounts of the transferee company by virtue of scheme implementation as per the directions of Hon’ble High virtue of scheme implementation as per the directions of Hon’ble High virtue of scheme implementation as per the directions of Hon’ble High Court. 9. Goodwill falls in the category of “Intangible Assets”, but its will falls in the category of “Intangible Assets”, but its will falls in the category of “Intangible Assets”, but its advantages must be tangible and assessee has to establish on record advantages must be tangible and assessee has to establish on record advantages must be tangible and assessee has to establish on record that by virtue of “Goodwill” what are the financial and non that by virtue of “Goodwill” what are the financial and non that by virtue of “Goodwill” what are the financial and non-financial gains are accruing to him. In this case what we observed, p gains are accruing to him. In this case what we observed, p gains are accruing to him. In this case what we observed, pre-merger and post-merger is simply a consolidation of figures of entities involved merger is simply a consolidation of figures of entities involved merger is simply a consolidation of figures of entities involved and not a percentage growth in terms of sales, profitability, net worth and not a percentage growth in terms of sales, profitability, net worth and not a percentage growth in terms of sales, profitability, net worth and customer base etc. post and customer base etc. post-merger. In view of the above discussion merger. In view of the above discussion and legal history analysed, we a and legal history analysed, we are of the considered view that order of re of the considered view that order of Ld. CIT (A) is not sustainable in law and order of AO is restored as Ld. CIT (A) is not sustainable in law and order of AO is restored as Ld. CIT (A) is not sustainable in law and order of AO is restored as found to be based on sound legal logics. In the result Ground Nos. 1&2 found to be based on sound legal logics. In the result Ground Nos. 1&2 found to be based on sound legal logics. In the result Ground Nos. 1&2 of the Revenue is allowed. of the Revenue is allowed.” 7. On the contrary, the Ld. Counsel for the asse On the contrary, the Ld. Counsel for the asse On the contrary, the Ld. Counsel for the assessee submitted that the Assessing Officer has rejected the valuation report of the that the Assessing Officer has rejected the valuation report of the that the Assessing Officer has rejected the valuation report of the Government approved valuer Government approved valuer based on his own presumptions and based on his own presumptions and assumptions. The Ld. Counsel submitted that report of registered The Ld. Counsel submitted that report of registered The Ld. Counsel submitted that report of registered valuer being a technical person cannot be substituted without valuer being a technical person cannot be subst valuer being a technical person cannot be subst obtaining report from obtaining report from a technical person. The Ld. Counsel technical person. The Ld. Counsel submitted that as far as projections in the DC as far as projections in the DC as far as projections in the DCF method are

M/s Jics Logistics Ltd. 18 ITA Nos. 1760, 1779, 1761 to 1763, 1780 & 1781, ITA Nos. 1760, 1779, 1761 to 1763, 1780 & 1781, 1764/Mum/2023 and CO No. 105/Mum/2023 1764/Mum/2023 and CO No. 105/Mum/2023

concerned, same were were based on various factors and projections based on various factors and projections made by the management and following made by the management and following like growth of like growth of company, economic/market /market /market conditions, conditions, conditions, business business business conditions, conditions conditions expected demand and supply, cost of capital and ho d supply, cost of capital and host of other factors. These st of other factors. These factors are considered are based on factors are considered are based on some reasonable approach reasonable approach and they cannot be evaluated purely based on arithmetical evaluated purely based on arithmetical evaluated purely based on arithmetical precision as value is always worked out based on value is always worked out based on approximation and catena of approximation and catena of underline facts and assumptions. At the time of valuation the underline facts and assumptions. At the time of valuation the underline facts and assumptions. At the time of valuation the potential value of business business at that particular time and also keeping particular time and also keeping in mind underline factors that in mind underline factors that may change over the over the period of time and thus the value, which is relevant one might not be relevant might not be relevant after certain period of time. after certain period of time.

M/s Jics Logistics Ltd. 19 ITA Nos. 1760, 1779, 1761 to 1763, 1780 & 1781, ITA Nos. 1760, 1779, 1761 to 1763, 1780 & 1781, 1764/Mum/2023 and CO No. 105/Mum/2023 1764/Mum/2023 and CO No. 105/Mum/2023

does not end merely by does not end merely by saying that the Assessing Officer should that the Assessing Officer should have carried out said exercise of referring the valuation to the have carried out said exercise of referring the valuation to the have carried out said exercise of referring the valuation to the Departmental Valuation Departmental Valuation Officer whereas, he himself should have he himself should have referred the matter to the to the Department valuation officer as held by valuation officer as held by the Hon’ble High Court in the case of Jansampark advertising and Jansampark advertising and the Hon’ble High Court in the case of Marketing p Ltd Pvt. Ltd. Marketing p Ltd Pvt. Ltd. (supra). The relevant para . The relevant para of decision is reproduced as under: der:

“ 42. The AO here may have failed to discharge his obligation to conduct a 42. The AO here may have failed to discharge his obligation to conduct a 42. The AO here may have failed to discharge his obligation to conduct a proper inquiry to take the matter to logical conclusion. But CIT (Appeals), proper inquiry to take the matter to logical conclusion. But CIT (Appeals), proper inquiry to take the matter to logical conclusion. But CIT (Appeals), having noticed want of proper inquiry, could not have closed the chapter having noticed want of proper inquiry, could not have closed the chapter having noticed want of proper inquiry, could not have closed the chapter simply by allowing the simply by allowing the appeal and deleting the additions made. It was also appeal and deleting the additions made. It was also the obligation of the first appellate authority, as indeed of ITAT, to have the obligation of the first appellate authority, as indeed of ITAT, to have the obligation of the first appellate authority, as indeed of ITAT, to have ensured that effective inquiry was carried out, particularly in the face of the ensured that effective inquiry was carried out, particularly in the face of the ensured that effective inquiry was carried out, particularly in the face of the allegations of the Revenue that the account stat allegations of the Revenue that the account statements reveal a uniform ements reveal a uniform pattern of cash deposits of equal amounts in the respective accounts pattern of cash deposits of equal amounts in the respective accounts pattern of cash deposits of equal amounts in the respective accounts preceding the transactions in question. This necessitated a detailed scrutiny preceding the transactions in question. This necessitated a detailed scrutiny preceding the transactions in question. This necessitated a detailed scrutiny of the material submitted by the assessee in response to the notice of the material submitted by the assessee in response to the notice of the material submitted by the assessee in response to the notice under Section 148 Section 148 issued by the AO, as also the material submitted at the issued by the AO, as also the material submitted at the stage of appeals, if deemed proper by way of making or causing to be made stage of appeals, if deemed proper by way of making or causing to be made stage of appeals, if deemed proper by way of making or causing to be made a "further inquiry" in exercise of the power under a "further inquiry" in exercise of the power under Section 250(4) Section 250(4). This approach not having been adopted, the impugned order of ITAT, and approach not having been adopted, the impugned order of ITAT, and approach not having been adopted, the impugned order of ITAT, and consequently that of CIT (Appeals), cannot be approved or upheld. consequently that of CIT (Appeals), cannot be approved or upheld. consequently that of CIT (Appeals), cannot be approved or upheld.” 8.1 Before us, it has also not been explained that how much Before us, it has also not been explained that how much Before us, it has also not been explained that how much amount has been shown by the proprietor in return of income for een shown by the proprietor in return of income for een shown by the proprietor in return of income for the purpose of the computation of the capital gain on sale of his the purpose of the computation of the capital gain on s the purpose of the computation of the capital gain on s proprietary concern and thus it is not clear how the proprietor of proprietary concern and thus it is not clear how the proprietor of proprietary concern and thus it is not clear how the proprietor of JICS Laboratories has reported market value of his business. In the JICS Laboratories has reported market value of his business. JICS Laboratories has reported market value of his business. facts and circumstances of the case, we feel it appropriate to restore ts and circumstances of the case, we feel it appropriate to restore ts and circumstances of the case, we feel it appropriate to restore the matter back to the file of the Assessing Officer for carrying out the matter back to the file of the Assessing Officer for carrying out the matter back to the file of the Assessing Officer for carrying out valuation from an expert valuation from an expert department valuer in the field of in the field of financial valuation of companies and thereafter decide the issue in valuation of companies and thereafter decide the valuation of companies and thereafter decide the

M/s Jics Logistics Ltd. 20 ITA Nos. 1760, 1779, 1761 to 1763, 1780 & 1781, ITA Nos. 1760, 1779, 1761 to 1763, 1780 & 1781, 1764/Mum/2023 and CO No. 105/Mum/2023 1764/Mum/2023 and CO No. 105/Mum/2023

accordance with law. The ground No. 1 of the appeal of the Revenue accordance with law. The ground No. 1 of the appeal of the Revenue accordance with law. The ground No. 1 of the appeal of the Revenue is accordingly allowed for statistical purposes. is accordingly allowed for statistical purposes.

9.1 The brief facts qua the issue in dispute are that the The brief facts qua the issue in dispute are that the The brief facts qua the issue in dispute are that the partnership firm M/s Jhawar Ice and Cold Storage comprising of partnership firm M/s Jhawar Ice and Cold Storage comprising of partnership firm M/s Jhawar Ice and Cold Storage comprising of seven partners was converted into the assessee company with effect en partners was converted into the assessee company with effect en partners was converted into the assessee company with effect from 01/09/2009 and assets/liabilities of the firm were taken over and assets/liabilities of the firm were taken over and assets/liabilities of the firm were taken over at book value in the books of the assessee company, which at book value in the books of the assessee company, which at book value in the books of the assessee company, which remained till 31/3/2010. Subsequently, the assessee company remained till 31/3/2010. Subsequently, the assessee company remained till 31/3/2010. Subsequently, the assessee company w.e.f. from revalued old assets of firm and from revalued old assets of firm and value of the business of value of the business of M/s Jhawar Ice and Cold Storage was estimated to ₹ 15 crores and M/s Jhawar Ice and Cold Storage was estimated to M/s Jhawar Ice and Cold Storage was estimated to accordingly equity shares of accordingly equity shares of ₹ 10 each amounting to 10 each amounting to Rs.1,50,00,000 were allotted to those seven partners, who became directors of the were allotted to those seven partners, who became directors of the were allotted to those seven partners, who became directors of the assessee company. Name of the partners and shares allotted to assessee company. Name of the partners and shares allotted to assessee company. Name of the partners and shares allotted to them, is reproduced by the Assessing Officer are extracted as them, is reproduced by the Assessing Officer are extracted as them, is reproduced by the Assessing Officer are extracted as under:

Sr. No. Name Amount Amount No. of Shares 1. Shri Jai Narayan Jhavar S/o Shri Murli Dhar Jhavar Jhavar S/o Shri Murli Dhar Jhavar 51000000 51000000 5100000 2. Shri Anil Kumar Jhavar S/o Shri Jai Narayan Jhavar Shri Anil Kumar Jhavar S/o Shri Jai Narayan Jhavar 4,95,00,000 4,95,00,000 4950000 3. Shri Pranav Jhavar S/o Shri Anil Kumar Jhavar Shri Pranav Jhavar S/o Shri Anil Kumar Jhavar 49440000 4944000 4. Shri Govind Saboo S/o Shri Gopal Narayan Saboo Shri Govind Saboo S/o Shri Gopal Narayan Saboo 15000 1500 Shri Ajay Lakhotiya S/o Shri P.K. Lakhotiya Ajay Lakhotiya S/o Shri P.K. Lakhotiya 5. 15000 1500

M/s Jics Logistics Ltd. 21 ITA Nos. 1760, 1779, 1761 to 1763, 1780 & 1781, ITA Nos. 1760, 1779, 1761 to 1763, 1780 & 1781, 1764/Mum/2023 and CO No. 105/Mum/2023 1764/Mum/2023 and CO No. 105/Mum/2023

9.2.1 However during assessment year 2011 However during assessment year 2011-12 the assessee 12 the assessee company engaged an approved valuer and engaged an approved valuer and revalued the assets revalued the assets which were acquired on conversion of the partnership firm at which were acquired on conversion of the partnership firm at which were acquired on conversion of the partnership firm at ₹13,76,71,772/- and and according according claimed claimed inflated/higher depreciation, which amounted depreciation, which amounted to ₹79,36,017/-. In the tax audit . In the tax audit report for the year under consideration, the auditor in the notes to report for the year under consideration, the auditor in the notes to report for the year under consideration, the auditor in the notes to account mentioned that two statement of depreciation vide account mentioned that two statement of depreciation account mentioned that two statement of depreciation Annexure A-1 and Annexure 1 and Annexure-A2, were annexed to the audit report. to the audit report. The Annexure:A-1 represented 1 represented working of depreciation as per Act working of depreciation as per Act on the WDV of M/c Jhawar Ice and Cold Storage prior to conversion Jhawar Ice and Cold Storage prior to conversion Jhawar Ice and Cold Storage prior to conversion into assessee company. The into assessee company. The Annexure: A-2 represented working of 2 represented working of depreciation at the rate prescribed under the depreciation at the rate prescribed under the Act on revalued cost of on revalued cost of e decision of Chitra Publicity Company P Ltd Chitra Publicity Company P Ltd assets, in view of the decision of

M/s Jics Logistics Ltd. 22 ITA Nos. 1760, 1779, 1761 to 1763, 1780 & 1781, ITA Nos. 1760, 1779, 1761 to 1763, 1780 & 1781, 1764/Mum/2023 and CO No. 105/Mum/2023 1764/Mum/2023 and CO No. 105/Mum/2023

vs ACIT(2010) 127 TTJ (Ahd)(TM) vs ACIT(2010) 127 TTJ (Ahd)(TM) and opinion obtained from tax and opinion obtained from tax expert. On being asked to justify by the Assessing Officer, the On being asked to justify by the Assessing Officer, the On being asked to justify by the Assessing Officer, the assessee explained that independent approved valuer being expert assessee explained that independent approved valuer being expert assessee explained that independent approved valuer being expert of this line, was competent to determine the market value of the old mpetent to determine the market value of the old mpetent to determine the market value of the old assets and it was claimed on the actual value of the assets for assets and it was claimed on the actual value of the assets for assets and it was claimed on the actual value of the assets for which conversion cost was paid. It was submitted that provisions which conversion cost was paid. It was submitted that provisions which conversion cost was paid. It was submitted that provisions under the Act do not prohibit for claim of depreciation on revalued ct do not prohibit for claim of depreciation on revalued ct do not prohibit for claim of depreciation on revalued assets, because the assessee company is a different entity from the cause the assessee company is a different entity from the cause the assessee company is a different entity from the partnership firm which has been acquired on payment of the cost partnership firm which has been acquired on payment of the cost partnership firm which has been acquired on payment of the cost against conversion by way of allotment of shares. The assessee against conversion by way of allotment of shares. The assessee against conversion by way of allotment of shares. The assessee relied on various decisions cited. Acc relied on various decisions cited. According to the Assessing Officer ording to the Assessing Officer, facts of the cases cited by the assessee are at variance, whereas facts of the cases cited by the assessee are at variance, whereas facts of the cases cited by the assessee are at variance, whereas decision of Hon’ble Kerala High Court in the case of CIT vs Hon’ble Kerala High Court in the case of CIT vs Hon’ble Kerala High Court in the case of CIT vs Poulose and Mathera (P) Lts 236 ITR 416 Poulose and Mathera (P) Lts 236 ITR 416 squarely applicable in squarely applicable in the case of the assessee. The Assessing Officer was of the view that the case of the assessee. The Assessing Officer was of the view tha the case of the assessee. The Assessing Officer was of the view tha revaluation of the assets revaluation of the assets by the assessee was found not motivated was found not motivated with any genuine business need but for y genuine business need but for claiming inflated claiming inflated depreciation in view of increasing income post conversion of firm depreciation in view of increasing income post conversion of firm depreciation in view of increasing income post conversion of firm into assessee Company ssessee Company and resulting increased tax liability. and resulting increased tax liability. For ready reference, the relevant finding of the Assessing Officer is the relevant finding of the Assessing Officer is the relevant finding of the Assessing Officer is reproduced as under: reproduced as under:

“6.7 From the depreciation chart annexed with the Tax Audit Report of 6.7 From the depreciation chart annexed with the Tax Audit Report of 6.7 From the depreciation chart annexed with the Tax Audit Report of M/s. havar Ice & M/s. havar Ice & Cold Storage for A.Y. 2010-11, it is noticed that the 11, it is noticed that the said firm claimed depreciation of only Rs. 2,23,296/ said firm claimed depreciation of only Rs. 2,23,296/- on their assets for on their assets for the part period of 01/04/2009 to 31/08/2009. On same assets after the part period of 01/04/2009 to 31/08/2009. On same assets after the part period of 01/04/2009 to 31/08/2009. On same assets after acquisition the assessee company also claimed depreciation of acquisition the assessee company also claimed depreciation of acquisition the assessee company also claimed depreciation of Rs.

M/s Jics Logistics Ltd. 23 ITA Nos. 1760, 1779, 1761 to 1763, 1780 & 1781, ITA Nos. 1760, 1779, 1761 to 1763, 1780 & 1781, 1764/Mum/2023 and CO No. 105/Mum/2023 1764/Mum/2023 and CO No. 105/Mum/2023

4,46,359/- for the part period of 01/09/2009 to 31/03/2010 relevant for the part period of 01/09/2009 to 31/03/2010 relevant for the part period of 01/09/2009 to 31/03/2010 relevant to A.Y. 2010-11. 11. 6.8 Before conversion of the partnership firm into Assessee Company, Before conversion of the partnership firm into Assessee Company, Before conversion of the partnership firm into Assessee Company, the fixed assets of the partnership firm were revalued as on 31.03.2008 the fixed assets of the partnership firm were revalued as on 31.03.2008 the fixed assets of the partnership firm were revalued as on 31.03.2008 on the basis of valuation on the basis of valuation report dated 17.03.2008 obtained from V.K. report dated 17.03.2008 obtained from V.K. Jain & Co. Assessors Valuers Pvt. Ltd. In the report purpose of Jain & Co. Assessors Valuers Pvt. Ltd. In the report purpose of Jain & Co. Assessors Valuers Pvt. Ltd. In the report purpose of valuation has been mentioned as assessment of here open market valuation has been mentioned as assessment of here open market valuation has been mentioned as assessment of here open market value of developed land, Building blocks & mercury plant etc. pertaining value of developed land, Building blocks & mercury plant etc. pertaining value of developed land, Building blocks & mercury plant etc. pertaining to running cold storage and Ware house belonging to M/s Jhawar Ice & old storage and Ware house belonging to M/s Jhawar Ice & old storage and Ware house belonging to M/s Jhawar Ice & Cold Storage. Fair open market value was assessed at Rs. Cold Storage. Fair open market value was assessed at Rs. Cold Storage. Fair open market value was assessed at Rs. 14,29,00,000/- - as on March 2008 details of which are as under: as on March 2008 details of which are as under:- Particulars Particulars Fair open market value Developed Land Developed Land Rs. 6,62,00,000/- Building/Civil Structures Building/Civil Structures Rs. 4,67,00,000/- Machinery Plant & Machinery Plant & Equipment Equipment Rs. 3,00,00,000/- Total Rs. 14,29,00,000/- 6.9 The Valuer has discussed about the approach to value assessment 6.9 The Valuer has discussed about the approach to value assessment 6.9 The Valuer has discussed about the approach to value assessment for building/civil structure and machinery plant & for building/civil structure and machinery plant & Equipment in his Equipment in his report that (0) As on date fair value of the buildings/ civil structures report that (0) As on date fair value of the buildings/ civil structures report that (0) As on date fair value of the buildings/ civil structures evaluated adopting built evaluated adopting built-up area method and considering class/ type of up area method and considering class/ type of construction, size/built up area and due cognizance of current cost of construction, size/built up area and due cognizance of current cost of construction, size/built up area and due cognizance of current cost of construction, deducting construction, deducting due depreciation there from towards condition/ due depreciation there from towards condition/ maintenance & age etc. (ii) Vaiue assessment of machinery/equipments maintenance & age etc. (ii) Vaiue assessment of machinery/equipments maintenance & age etc. (ii) Vaiue assessment of machinery/equipments accordingly arrived on the basis of physical inspection, make accordingly arrived on the basis of physical inspection, make accordingly arrived on the basis of physical inspection, make size/specification, maintenance/condition and taking into consideration size/specification, maintenance/condition and taking into consideration size/specification, maintenance/condition and taking into consideration new replacement cost, technological obsolescence, residual economical eplacement cost, technological obsolescence, residual economical eplacement cost, technological obsolescence, residual economical life together with due deduction for depreciation etc. However it is life together with due deduction for depreciation etc. However it is life together with due deduction for depreciation etc. However it is observed that the valuation has not been done according to the observed that the valuation has not been done according to the observed that the valuation has not been done according to the approach in fair manner but was done to showe enhanced valu approach in fair manner but was done to showe enhanced valu approach in fair manner but was done to showe enhanced value of the assets in arbitrary manner which is evident from the fact that the cost assets in arbitrary manner which is evident from the fact that the cost assets in arbitrary manner which is evident from the fact that the cost of building, machinery plants and equipments was estimated of building, machinery plants and equipments was estimated of building, machinery plants and equipments was estimated presuming them new and deduction on account of depreciation was presuming them new and deduction on account of depreciation was presuming them new and deduction on account of depreciation was allowed only @ of 20% & 25% respectively that too wi allowed only @ of 20% & 25% respectively that too without mentioning thout mentioning that for how many years the above said depreciation has been charged that for how many years the above said depreciation has been charged that for how many years the above said depreciation has been charged though the firm was in business for a considerable numbers of years as though the firm was in business for a considerable numbers of years as though the firm was in business for a considerable numbers of years as it was incorporated long back on 1" February it was incorporated long back on 1" February 1997. It was also 1997. It was also presumed that all the building block presumed that all the building blocks and machinery equipment are s and machinery equipment are well maintained and have residual life of about 40 years and 25 years well maintained and have residual life of about 40 years and 25 years well maintained and have residual life of about 40 years and 25 years respectively without any basis and in complete ignorance of the fact respectively without any basis and in complete ignorance of the fact respectively without any basis and in complete ignorance of the fact that when the building was constructed and machinery equipments that when the building was constructed and machinery equipments that when the building was constructed and machinery equipments were installed. It is a were installed. It is aiso pertinent to mention that in the books of M/s. iso pertinent to mention that in the books of M/s. Jhavar Ice & Cold Storage, an addition of Rs. 5,17,733/ Jhavar Ice & Cold Storage, an addition of Rs. 5,17,733/- was made in was made in the block of building on 31/03/2009 and after claiming depreciation on the block of building on 31/03/2009 and after claiming depreciation on the block of building on 31/03/2009 and after claiming depreciation on it W.D.V. as on 31/03/2009 was worked out it W.D.V. as on 31/03/2009 was worked out 1906 420/ 1906 420/- but ofter revaluation the value of such block of building was enhanced valuation the value of such block of building was enhanced valuation the value of such block of building was enhanced to Rs. 1.61,73.411/- as on 31/03/2008. as on 31/03/2008.

M/s Jics Logistics Ltd. 24 ITA Nos. 1760, 1779, 1761 to 1763, 1780 & 1781, ITA Nos. 1760, 1779, 1761 to 1763, 1780 & 1781, 1764/Mum/2023 and CO No. 105/Mum/2023 1764/Mum/2023 and CO No. 105/Mum/2023

6.10 The assessee company acquired the business of M/s. Jhavar Ice & 6.10 The assessee company acquired the business of M/s. Jhavar Ice & 6.10 The assessee company acquired the business of M/s. Jhavar Ice & Cold Storage with effect from 01/09/2009 relevant to A.Y. 2010 Storage with effect from 01/09/2009 relevant to A.Y. 2010-11 and Storage with effect from 01/09/2009 relevant to A.Y. 2010 the revaluation of the revaluation of the assets of the firm was done as on 31/03/2008 the assets of the firm was done as on 31/03/2008 but in A. Y. 2010 but in A. Y. 2010-11 neither in 11a beoks cs the nesessee company ner 11a beoks cs the nesessee company ner in the books of M's in the books of M's. Jhavar Ice & Cold Storage, depreciation was Storage, depreciation was claimed on enhanced cost of the assets after revaluation. claimed on enhanced cost of the assets after revaluation. The assessee The assessee company only in A.Y. 2011 company only in A.Y. 2011-12 onwards started to claim the 12 onwards started to claim the depreciation on enhanced cost of the assets after revaluation. depreciation on enhanced cost of the assets after revaluation. depreciation on enhanced cost of the assets after revaluation. 6.11 Thus, the main purpose of the adoption of enhanced value after Thus, the main purpose of the adoption of enhanced value after Thus, the main purpose of the adoption of enhanced value after revaluation of assets in the hands of the assessee company in A.Y. revaluation of assets in the hands of the assessee company in A.Y. revaluation of assets in the hands of the assessee company in A.Y. 2011-12 was claiming of depreciation at enhanced value to reduce the 12 was claiming of depreciation at enhanced value to reduce the 12 was claiming of depreciation at enhanced value to reduce the liability of income tax. The assessee has adopted a colorable device to liability of income tax. The assessee has adopted a colorable device to liability of income tax. The assessee has adopted a colorable device to reduce its income tax liability by claiming higher depreciation with reduce its income tax liability by claiming higher depreciation with reduce its income tax liability by claiming higher depreciation with reference to enhanced cost of assets. Reliance reference to enhanced cost of assets. Reliance is placed on in this is placed on in this regard upon the decision in the case of Mcdowell & Co. Ltd. vs. CTO regard upon the decision in the case of Mcdowell & Co. Ltd. vs. CTO regard upon the decision in the case of Mcdowell & Co. Ltd. vs. CTO (1985) 47 CTR(SC) 126 : (1985) 154 ITR 148 (SC). CTR(SC) 126 : (1985) 154 ITR 148 (SC). 6.12 The contention of the assessee that in the hands of the company 6.12 The contention of the assessee that in the hands of the company 6.12 The contention of the assessee that in the hands of the company cost of assets is re cost of assets is re-valued value of the assets as the company on as the company on conversion allotted the conversion allotted the fully paid equity shares to the partners on the re fully paid equity shares to the partners on the re- valued value, thus the cost of assets in the hands of company is re valued value, thus the cost of assets in the hands of company is re valued value, thus the cost of assets in the hands of company is re- valued price; is not acceptable. There is reasonable belief that the main valued price; is not acceptable. There is reasonable belief that the main valued price; is not acceptable. There is reasonable belief that the main purpose of the revalu purpose of the revaluation of such assets was to reduce the income tax ation of such assets was to reduce the income tax liability by claiming very high amount of depreciation on the enhanced liability by claiming very high amount of depreciation on the enhanced liability by claiming very high amount of depreciation on the enhanced cost of assets adopted by the assessee company. In this regard it is cost of assets adopted by the assessee company. In this regard it is cost of assets adopted by the assessee company. In this regard it is further observed that the actual cost of any particular assets to further observed that the actual cost of any particular assets to further observed that the actual cost of any particular assets to the assessee is entirely a question of fact to be determined with reference to assessee is entirely a question of fact to be determined with reference to assessee is entirely a question of fact to be determined with reference to the attended material. the attended material. In this behalf, the Madras High Court has In this behalf, the Madras High Court has observed in the case of CIT vs. Harvevs Ltd. (1940) 88 ITR 307 (Mad) observed in the case of CIT vs. Harvevs Ltd. (1940) 88 ITR 307 (Mad) observed in the case of CIT vs. Harvevs Ltd. (1940) 88 ITR 307 (Mad) that the mere production of documentary evi that the mere production of documentary evidence showing that a dence showing that a contract was made for purchase of assets at a certain price does net contract was made for purchase of assets at a certain price does net contract was made for purchase of assets at a certain price does net conclusively establish the correctness of claim made by the assessee conclusively establish the correctness of claim made by the assessee conclusively establish the correctness of claim made by the assessee particularly where the AO is of the opinion that the deal was a colorable particularly where the AO is of the opinion that the deal was a colorable particularly where the AO is of the opinion that the deal was a colorable device to avoid tax. device to avoid tax. Under such circumstances the Andhra Pradesh der such circumstances the Andhra Pradesh High Court in the case of Kungundi Industrial Works (P) Ltd. v. CIT High Court in the case of Kungundi Industrial Works (P) Ltd. v. CIT High Court in the case of Kungundi Industrial Works (P) Ltd. v. CIT [1965] 57 ITR 540 (AP) and the Calcutta High Court in the case of CIT v. [1965] 57 ITR 540 (AP) and the Calcutta High Court in the case of CIT v. [1965] 57 ITR 540 (AP) and the Calcutta High Court in the case of CIT v. Jogta Coal Co. Ltd. [1965! 25 ITR 89 (Cal, and the Supreme Court in the Jogta Coal Co. Ltd. [1965! 25 ITR 89 (Cal, and the Supreme Court in the Jogta Coal Co. Ltd. [1965! 25 ITR 89 (Cal, and the Supreme Court in the case of Guzdar Kajora Coai Mines Lid. v. CIT [1972] 85 IR 599 (SC) ase of Guzdar Kajora Coai Mines Lid. v. CIT [1972] 85 IR 599 (SC) ase of Guzdar Kajora Coai Mines Lid. v. CIT [1972] 85 IR 599 (SC) have upheld the action of the AO in going behind the contract and have upheld the action of the AO in going behind the contract and have upheld the action of the AO in going behind the contract and ascertain the actual cost for the purposes of correct ascertainment of ascertain the actual cost for the purposes of correct ascertainment of ascertain the actual cost for the purposes of correct ascertainment of income-iax liability. It is pertinent to mention here iax liability. It is pertinent to mention here that the exercise of that the exercise of revaluation was dose according to the sweet wish of the assessee and revaluation was dose according to the sweet wish of the assessee and revaluation was dose according to the sweet wish of the assessee and not on account of any legitimate business need. Had there been any not on account of any legitimate business need. Had there been any not on account of any legitimate business need. Had there been any legitimate business need of revaluation the same exercise would have legitimate business need of revaluation the same exercise would have legitimate business need of revaluation the same exercise would have been done in the case of M/s JICS Logistics Mumbai also.” been done in the case of M/s 9.2.2 The Assessing Officer invoked Explanation-3 to section The Assessing Officer invoked Explanation The Assessing Officer invoked Explanation 43(1) which authorise the Assessing Officer to determine actual cost 43(1) which authorise the Assessing Officer to determine actual cost 43(1) which authorise the Assessing Officer to determine actual cost

M/s Jics Logistics Ltd. 25 ITA Nos. 1760, 1779, 1761 to 1763, 1780 & 1781, ITA Nos. 1760, 1779, 1761 to 1763, 1780 & 1781, 1764/Mum/2023 and CO No. 105/Mum/2023 1764/Mum/2023 and CO No. 105/Mum/2023

of asset in situation of transfer of asset fo of asset in situation of transfer of asset for the purpose of reduction r the purpose of reduction of liability and after r liability and after relying on the decision of the Hon’ble Supreme elying on the decision of the Hon’ble Supreme Court in the case of Sunil Siddhartbhai Vs CIT (1985) 156 ITR Sunil Siddhartbhai Vs CIT (1985) 156 ITR Court in the case of 509(SC) and Kungundi Industrial Works (P) L 509(SC) and Kungundi Industrial Works (P) Ltd Vs CIT (1965) 57 td Vs CIT (1965) 57 ITR 540(AP), rejected the content rejected the contention of the assessee. The learned ion of the assessee. The learned Assessing Officer distinguished the decisions relied upon by the Assessing Officer distinguished the decisions relied upon by the Assessing Officer distinguished the decisions relied upon by the assessee and relying on the decision of the Hon’ble Kerala High Hon’ble Kerala High assessee and relying on the decision of the Court in the case of CIT Vs Poulsoe and Mthera P Ltd (supra) Court in the case of CIT Vs Poulsoe and Mthera P Ltd (supra) Court in the case of CIT Vs Poulsoe and Mthera P Ltd (supra) disallowed the claim of inflated depreciation of ₹79,36,017/- disallowed the claim of inflated depreciation of disallowed the claim of inflated depreciation of concluding as under: luding as under:

“6.24 Under the above said circumstances and discussion made, it can 6.24 Under the above said circumstances and discussion made, it can 6.24 Under the above said circumstances and discussion made, it can be held that the assessee has adopted enhanced cost and has claimed be held that the assessee has adopted enhanced cost and has claimed be held that the assessee has adopted enhanced cost and has claimed depreciation with reference to such enhanced cost. It is undeniable that depreciation with reference to such enhanced cost. It is undeniable that depreciation with reference to such enhanced cost. It is undeniable that it has resulted in reduction it has resulted in reduction of liability to pay income tax. Thus, all the of liability to pay income tax. Thus, all the requisite conditions of explanation 3 stands fulfilled. After considering requisite conditions of explanation 3 stands fulfilled. After considering requisite conditions of explanation 3 stands fulfilled. After considering the facts and circumstances of the case and provisions of the law, I am the facts and circumstances of the case and provisions of the law, I am the facts and circumstances of the case and provisions of the law, I am of the opinion that the closing W.D.V. of the assets acquired fr of the opinion that the closing W.D.V. of the assets acquired fr of the opinion that the closing W.D.V. of the assets acquired from the firm as per the provisions of the I.T. Act for A.Y. 2010 firm as per the provisions of the I.T. Act for A.Y. 2010-11 should have 11 should have been taken as the opening .D.V. in the hands of the assessee company been taken as the opening .D.V. in the hands of the assessee company been taken as the opening .D.V. in the hands of the assessee company for the purpose of computation of depreciation of A.Y. 2011 for the purpose of computation of depreciation of A.Y. 2011 for the purpose of computation of depreciation of A.Y. 2011-12 which represents the actual cost of the asset represents the actual cost of the assets in the hands of the assessee. s in the hands of the assessee. Accordingly, the claim of inflated depreciation of Rs. 79,36,017/ Accordingly, the claim of inflated depreciation of Rs. 79,36,017/ Accordingly, the claim of inflated depreciation of Rs. 79,36,017/- due to enhancement of the cost of assets after revaluation is hereby enhancement of the cost of assets after revaluation is hereby enhancement of the cost of assets after revaluation is hereby disallowed and added back to the total income of assessee. Penalty disallowed and added back to the total income of assessee. Penalty disallowed and added back to the total income of assessee. Penalty proceedings u/s 271(1 proceedings u/s 271(1)(c) initiated separately.” 9.3 On further appeal the Ld. CIT(A) deleted the disallowance of On further appeal the Ld. CIT(A) deleted the disallowance of On further appeal the Ld. CIT(A) deleted the disallowance of depreciation of observing as under: depreciation of observing as under:

“In this respect, the following are seen: In this respect, the following are seen: a. The valuation of assets is done by an independent registered valuer. a. The valuation of assets is done by an independent registered valuer. a. The valuation of assets is done by an independent registered valuer. b. It is a fact that consideration of Rs. 15 crores has been paid to the fact that consideration of Rs. 15 crores has been paid to the fact that consideration of Rs. 15 crores has been paid to the erstwhile partners in the form of equity shares. erstwhile partners in the form of equity shares.

M/s Jics Logistics Ltd. 26 ITA Nos. 1760, 1779, 1761 to 1763, 1780 & 1781, ITA Nos. 1760, 1779, 1761 to 1763, 1780 & 1781, 1764/Mum/2023 and CO No. 105/Mum/2023 1764/Mum/2023 and CO No. 105/Mum/2023

c. As regards the valuation, although the AO has raised objections in c. As regards the valuation, although the AO has raised objections in c. As regards the valuation, although the AO has raised objections in para 6.9 of the assessment order, they are generic in nature. As para 6.9 of the assessment order, they are generic in nature. As para 6.9 of the assessment order, they are generic in nature. As regards the assumption of residual life of 40 years and 25 years for e assumption of residual life of 40 years and 25 years for e assumption of residual life of 40 years and 25 years for building blocks and machinery equipment respectively adopted by the building blocks and machinery equipment respectively adopted by the building blocks and machinery equipment respectively adopted by the valuer, the unreasonableness of such assumption has not been brought valuer, the unreasonableness of such assumption has not been brought valuer, the unreasonableness of such assumption has not been brought out with any specific fact. out with any specific fact. In the case of Ashwin Vanaspati In the case of Ashwin Vanaspati Industries vs CIT, 255 ITR 26 (Guj HC), Industries vs CIT, 255 ITR 26 (Guj HC), the Hon'ble Gujarat HC has held as follows: "Once there is a report by the Hon'ble Gujarat HC has held as follows: "Once there is a report by the Hon'ble Gujarat HC has held as follows: "Once there is a report by the registered valuer, it is incumbent upon an authority to dislodge the the registered valuer, it is incumbent upon an authority to dislodge the the registered valuer, it is incumbent upon an authority to dislodge the same by bringing adequate material on record in the form of same by bringing adequate material on record in the form of same by bringing adequate material on record in the form of departmental valuation report, because in absence of the same, a valuation report, because in absence of the same, a valuation report, because in absence of the same, a technical expert's opinion (Registered Valuer's report) cannot be technical expert's opinion (Registered Valuer's report) cannot be technical expert's opinion (Registered Valuer's report) cannot be dislodged by any authority by merely ignoring the same." Thus, the dislodged by any authority by merely ignoring the same." Thus, the dislodged by any authority by merely ignoring the same." Thus, the valuation report cannot be discarded by generic discussion and without valuation report cannot be discarded by generic discussion and without valuation report cannot be discarded by generic discussion and without pointing specific defects. pointing specific defects. The AO has relied on the decision of CIT vs Poulose and Mathern P Ltd, The AO has relied on the decision of CIT vs Poulose and Mathern P Ltd, The AO has relied on the decision of CIT vs Poulose and Mathern P Ltd, 236 ITR 416 (Ker HC). In this regard, I find that the case of the ITR 416 (Ker HC). In this regard, I find that the case of the ITR 416 (Ker HC). In this regard, I find that the case of the appellant is more close to that of the recent decision of Padmini appellant is more close to that of the recent decision of Padmini appellant is more close to that of the recent decision of Padmini Products P Ltd vs DCIT, 2 Products P Ltd vs DCIT, 277 Taxman 22 (Karnataka) [2020] wherein the 77 Taxman 22 (Karnataka) [2020] wherein the Hon'ble HC held that the provisions which restrict aggregate Hon'ble HC held that the provisions which restrict aggregate Hon'ble HC held that the provisions which restrict aggregate depreciation claim both by the predecessor and the successor, will depreciation claim both by the predecessor and the successor, will depreciation claim both by the predecessor and the successor, will apply only in the year of succession and if in a particular year there is apply only in the year of succession and if in a particular year there is apply only in the year of succession and if in a particular year there is no aggregate deduction then such restrictions will not apply. The te deduction then such restrictions will not apply. The te deduction then such restrictions will not apply. The appellant has also pointed out how the taxable income of the appellant appellant has also pointed out how the taxable income of the appellant appellant has also pointed out how the taxable income of the appellant rose to Rs.8.41 crores during the year under reference. rose to Rs.8.41 crores during the year under reference. I also find that a similar issue arose in the case of DCIT vs Suyash I also find that a similar issue arose in the case of DCIT vs Suyash I also find that a similar issue arose in the case of DCIT vs Suyash Laboratories, [2016] 65 taxmann.com 217 (Mumbai ratories, [2016] 65 taxmann.com 217 (Mumbai - Trib.), wherein the Trib.), wherein the Hon'ble Jurisdictional Tribunal held that where under an arrangement Hon'ble Jurisdictional Tribunal held that where under an arrangement Hon'ble Jurisdictional Tribunal held that where under an arrangement entire assets and liabilities of a firm had been assigned to a company in entire assets and liabilities of a firm had been assigned to a company in entire assets and liabilities of a firm had been assigned to a company in lieu of shares issued to partners of erstwhile lieu of shares issued to partners of erstwhile firm, successor company firm, successor company was entitled to depreciation based on cost incurred by company. was entitled to depreciation based on cost incurred by company. was entitled to depreciation based on cost incurred by company. In view of the above facts and position of law, in my humble view, the In view of the above facts and position of law, in my humble view, the In view of the above facts and position of law, in my humble view, the depreciation claim of Rs.79,36,017/ depreciation claim of Rs.79,36,017/- is allowable to the appellant. This is allowable to the appellant. This ground stands allowed. ground stands allowed.” 9.4 Before us, the Ld. DR submitted that at the time of the Before us, the Ld. DR submitted that at the time of the Before us, the Ld. DR submitted that at the time of the conversion of the partnership firm, the assessee has entered the conversion of the partnership firm, the assessee has entered the conversion of the partnership firm, the assessee has entered the book value of the assets in its books of accounts and the assets of book value of the assets in its books of accounts and the assets of book value of the assets in its books of accounts and the assets of the partnership firms were not revalued. Therefore, the decision the partnership firms were not revalued. Therefore, the decisio the partnership firms were not revalued. Therefore, the decisio relied upon by the CIT(A) by the CIT(A) of the Karnataka High Court in the case of of the Karnataka High Court in the case of Padmini Products Pvt. Ltd. v. DCIT (supra) cannot be applied over Padmini Products Pvt. Ltd. v. DCIT (supra) cannot be applied over Padmini Products Pvt. Ltd. v. DCIT (supra) cannot be applied over

M/s Jics Logistics Ltd. 27 ITA Nos. 1760, 1779, 1761 to 1763, 1780 & 1781, ITA Nos. 1760, 1779, 1761 to 1763, 1780 & 1781, 1764/Mum/2023 and CO No. 105/Mum/2023 1764/Mum/2023 and CO No. 105/Mum/2023

the case of the assessee. Further, the Ld. DR submitted that the case of the assessee. Further, the Ld. DR submitted that the case of the assessee. Further, the Ld. DR submitted that assessee has revalued its asset in the subsequent year of assessee has revalued its asset in the subsequent year of assessee has revalued its asset in the subsequent year of conversion mainly for the purpose of reducing its tax liability and conversion mainly for the purpose of reducing its tax liability and conversion mainly for the purpose of reducing its tax liability and therefore, the Assessing Officer is justified in determining the actual therefore, the Assessing Officer is justified in determining the actual therefore, the Assessing Officer is justified in determining the actual cost of asset invoking Explanation cost of asset invoking Explanation-3 to section 43(1) of the Act. The to section 43(1) of the Act. The Ld. DR also referred to the decision of the Ho Ld. DR also referred to the decision of the Hon’ble Supreme Court n’ble Supreme Court in the case of CIT v. M/s. Mansukh Dyeing and Printing Mills in v. M/s. Mansukh Dyeing and Printing Mills in v. M/s. Mansukh Dyeing and Printing Mills in Civil Appeal No. 8258 of 2022 Civil Appeal No. 8258 of 2022 and submitted that erstwhile and submitted that erstwhile partnership firm/partners /partners would have been responsible for paying would have been responsible for paying tax for the increase in the increase in their capital account on capital account on account of revaluation of the assets however, the assessee has conveniently revaluation of the assets however, the assessee has conveniently revaluation of the assets however, the assessee has conveniently twisted the facts and only made the revaluation in the year twisted the facts and only made the revaluation in the year twisted the facts and only made the revaluation in the year subsequent to conversion in the firm conversion in the firm into the assessee company. to the assessee company.

9.5 On contrary, the Ld. Counsel On contrary, the Ld. Counsel for the assessee reli the assessee relied on the finding of the Ld. CIT(A) and submitted that in view of the decision finding of the Ld. CIT(A) and submitted that in view of the decision finding of the Ld. CIT(A) and submitted that in view of the decision relied upon by the Ld. CIT(A), n relied upon by the Ld. CIT(A), no disallowance of the depreciation is o disallowance of the depreciation is warranted in the case of the assessee on the revaluation of the warranted in the case of the assessee on the revaluation of the warranted in the case of the assessee on the revaluation of the asset.

9.6 We have heard rival submission We have heard rival submission of the parties on the issue in of the parties on the issue in dispute and perused the relevant material on record. On perusal of dispute and perused the relevant material on record. On perusal of dispute and perused the relevant material on record. On perusal of the facts it is evident that assessee has received the assets and the facts it is evident that assessee has received the assets and the facts it is evident that assessee has received the assets and liability in its books of accounts on the value which was recorded in liability in its books of accounts on the value which was recorded in liability in its books of accounts on the value which was recorded in the books of accounts the books of accounts of the erstwhile partnership firm which has of the erstwhile partnership firm which has

M/s Jics Logistics Ltd. 28 ITA Nos. 1760, 1779, 1761 to 1763, 1780 & 1781, ITA Nos. 1760, 1779, 1761 to 1763, 1780 & 1781, 1764/Mum/2023 and CO No. 105/Mum/2023 1764/Mum/2023 and CO No. 105/Mum/2023

got converted into the assessee company. This con got converted into the assessee company. This conversion happened version happened on 01.09.2010, whereas, the assessee has revalued the assets of hereas, the assessee has revalued the assets of hereas, the assessee has revalued the assets of the erstwhile partnership firm received only on the first day of the the erstwhile partnership firm received only on the first day of the the erstwhile partnership firm received only on the first day of the next assessment year i.e. 01.04.2011. Thus assessment year i.e. 01.04.2011. Thus, it is evident the it is evident the erstwhile partners have been compensated only at the book value of erstwhile partners have been compensated only at the book value of erstwhile partners have been compensated only at the book value of the assets and liability. In such circumstances, we do not find any the assets and liability. In such circumstances, we do not find any the assets and liability. In such circumstances, we do not find any justifiable reasons for revaluing the assets of the erstwhile justifiable reasons for revaluing the assets of the erstwhile justifiable reasons for revaluing the assets of the erstwhile partnership firm that to rtnership firm that too in the subsequent assessment years o he subsequent assessment years on the basis of a valuation the basis of a valuation report from a registered valuer. W registered valuer. We find in the Ground No. 1 we have held that the Ld. CIT(A) was supposed to the Ground No. 1 we have held that the Ld. CIT(A) was suppose the Ground No. 1 we have held that the Ld. CIT(A) was suppose refer to the matter to the Departmental Valuation Officer for refer to the matter to the Departmental Valuation Officer f refer to the matter to the Departmental Valuation Officer f valuation of the assets valuation of the assets. Since the revaluation of the assets of the ince the revaluation of the assets of the erstwhile partnership firm has also not been determined by erstwhile partnership firm has also not been determined by erstwhile partnership firm has also not been determined by Departmental valuation officer and therefore, following our finding Departmental valuation officer and therefore, followi Departmental valuation officer and therefore, followi in ground No. 1, we feel it appropriate to restore this is e feel it appropriate to restore this issue back to e feel it appropriate to restore this is the file of the Ld. Assessing Officer for taking appropriate action for the file of the Ld. Assessing Officer for taking appropriate action for the file of the Ld. Assessing Officer for taking appropriate action for referring the matter to the Departmental Valuation Officer and referring the matter to the Departmental Valuation Officer and referring the matter to the Departmental Valuation Officer and decide the issue in dispute in accordance with law. The ground No. decide the issue in dispute in accordance with law. The ground No. decide the issue in dispute in accordance with law. The ground No. 2 of the appeal of the Revenue is accordin 2 of the appeal of the Revenue is accordingly allowed for statistical gly allowed for statistical purposes.

AY 2012-13

M/s Jics Logistics Ltd. 29 ITA Nos. 1760, 1779, 1761 to 1763, 1780 & 1781, ITA Nos. 1760, 1779, 1761 to 1763, 1780 & 1781, 1764/Mum/2023 and CO No. 105/Mum/2023 1764/Mum/2023 and CO No. 105/Mum/2023

M/s Jics Logistics Ltd. 30 ITA Nos. 1760, 1779, 1761 to 1763, 1780 & 1781, ITA Nos. 1760, 1779, 1761 to 1763, 1780 & 1781, 1764/Mum/2023 and CO No. 105/Mum/2023 1764/Mum/2023 and CO No. 105/Mum/2023

not earned any exempt income during the year under consideration. any exempt income during the year under consideration. any exempt income during the year under consideration. The relevant finding of the Ld. CIT(A) is reproduced as under: The relevant finding of the Ld. CIT(A) is reproduced as under: The relevant finding of the Ld. CIT(A) is reproduced as under:

“ I have considered the submissions and contentions of the appellant. have considered the submissions and contentions of the appellant. have considered the submissions and contentions of the appellant. The Hon'ble Bombay High Court in the case of PCIT Vs. The Hon'ble Bombay High Court in the case of PCIT Vs. The Hon'ble Bombay High Court in the case of PCIT Vs. Ballarpur Industries Ltd. (ITA no.51 of Industries Ltd. (ITA no.51 of 2016) held that in the absence of any 2016) held that in the absence of any exempt income, disallowance u/s 14A of the Act could not be made. exempt income, disallowance u/s 14A of the Act could not be made. exempt income, disallowance u/s 14A of the Act could not be made. Although the explanation of sec. 14A inserted by the Finance Act, Although the explanation of sec. 14A inserted by the Finance Act, Although the explanation of sec. 14A inserted by the Finance Act, 2022 can be treated to be clarificatory in nat 2022 can be treated to be clarificatory in nature, the Hon'ble Delhi ure, the Hon'ble Delhi High Court in the case of M/s. High Court in the case of M/s. Era Infrastructure (India) Ltd. In ITA Era Infrastructure (India) Ltd. In ITA No.204/2022 & CM APPL.31445/2022 dated 20.07.2022 has held No.204/2022 & CM APPL.31445/2022 dated 20.07.2022 has held No.204/2022 & CM APPL.31445/2022 dated 20.07.2022 has held that the provisions cannot be treated to be retrospective. that the provisions cannot be treated to be retrospective. Hence, the claim of the appellant that disall claim of the appellant that disallowance u/s 14A cannot exceed the owance u/s 14A cannot exceed the exempt income is backed by judicial precedence and binding in exempt income is backed by judicial precedence and binding in exempt income is backed by judicial precedence and binding in nature. Therefore, respectfully following the decisions of the Hon'ble High Therefore, respectfully following the decisions of the Hon'ble High Therefore, respectfully following the decisions of the Hon'ble High Courts referred above, the disallowance stands deleted and the Courts referred above, the disallowance stands deleted and the Courts referred above, the disallowance stands deleted and the Ground is allowed. Ground is allowed.” 12.1 We find that Ld. CIT(A) has followed decision of the Hon’ble We find that Ld. CIT(A) has followed decision of the Hon’ble We find that Ld. CIT(A) has followed decision of the Hon’ble Delhi High Court in the case of Delhi High Court in the case of Era Infrastructure (India) Ltd Era Infrastructure (India) Ltd (supra) wherein the amendm wherein the amendment to section 14A of the A ent to section 14A of the Act by way of Finance Act, 2022 has been held to be prospective. As the Ld. ct, 2022 has been held to be prospective. As the Ld. ct, 2022 has been held to be prospective. As the Ld. CIT(A) has followed a precedent on the issue in dispute, we do not CIT(A) has followed a precedent on the issue in dispute, we do not CIT(A) has followed a precedent on the issue in dispute, we do not find any infirmity in the order of the Ld. CIT(A) and accordingly in the order of the Ld. CIT(A) and accordingly in the order of the Ld. CIT(A) and accordingly ,we uphold the same. The ground the same. The ground No.3 of the appeal of the R No.3 of the appeal of the Revenue accordingly dismissed. accordingly dismissed.

AY 2013-14 & 2014- -15

Grounds for assessment year 2013 for assessment year 2013-14

M/s Jics Logistics Ltd. 31 ITA Nos. 1760, 1779, 1761 to 1763, 1780 & 1781, ITA Nos. 1760, 1779, 1761 to 1763, 1780 & 1781, 1764/Mum/2023 and CO No. 105/Mum/2023 1764/Mum/2023 and CO No. 105/Mum/2023

M/s Jics Logistics Ltd. 32 ITA Nos. 1760, 1779, 1761 to 1763, 1780 & 1781, ITA Nos. 1760, 1779, 1761 to 1763, 1780 & 1781, 1764/Mum/2023 and CO No. 105/Mum/2023 1764/Mum/2023 and CO No. 105/Mum/2023

the amendment made by Finance Act 2022 inserting Explanation the amendment made by Finance Act 2022 inserting Explanation the amendment made by Finance Act 2022 inserting Explanation was only clarificatory and hence retrospectives in effect? ly clarificatory and hence retrospectives in effect? ly clarificatory and hence retrospectives in effect? 14. As the grounds raised in the present appeals for assessment As the grounds raised in the present appeals for assessment As the grounds raised in the present appeals for assessment years 2013-14 and 2014 14 and 2014-15 are identical to appeal for assessment 15 are identical to appeal for assessment year 2012-13, and therefore following the same, the grounds for 13, and therefore following the same, the grounds for 13, and therefore following the same, the grounds for assessment years 2013 2013-14 and 2014-15 are decided mutasis 15 are decided mutasis mutandis.

AY 2015-16

Grounds raised by the Revenue : Grounds raised by the Revenue :

Whether on the facts and in the circumstances of the case and in Whether on the facts and in the circumstances of the case and in Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in reducing the addition to 10% on the basis law, the Ld. CIT(A) erred in reducing the addition to 10% on the basis law, the Ld. CIT(A) erred in reducing the addition to 10% on the basis of presumptions bereft of any factual base? of presumptions bereft of any factual base? Whether on the facts and in the circumstances of the case and in Whether on the facts and in the circumstances of the case and in Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in reducing the addition to 10% of the total . CIT(A) erred in reducing the addition to 10% of the total . CIT(A) erred in reducing the addition to 10% of the total addition ignoring that the assessee made contradicting statements addition ignoring that the assessee made contradicting statements addition ignoring that the assessee made contradicting statements about its transaction which has not at all supported by any cogent about its transaction which has not at all supported by any cogent about its transaction which has not at all supported by any cogent documentary evidences? documentary evidences? Whether on the facts and in the circumst Whether on the facts and in the circumstances of the case and in ances of the case and in law, the La. CIT(A) erred in allowing substantial relief to the law, the La. CIT(A) erred in allowing substantial relief to the law, the La. CIT(A) erred in allowing substantial relief to the assessee while at the same. time agreeing with the findings of the assessee while at the same. time agreeing with the findings of the assessee while at the same. time agreeing with the findings of the AO recorded in the assessment order, thus, taking a contradictory AO recorded in the assessment order, thus, taking a contradictory AO recorded in the assessment order, thus, taking a contradictory stand? Cross-objections raised by objections raised by the assessee:

M/s Jics Logistics Ltd. 33 ITA Nos. 1760, 1779, 1761 to 1763, 1780 & 1781, ITA Nos. 1760, 1779, 1761 to 1763, 1780 & 1781, 1764/Mum/2023 and CO No. 105/Mum/2023 1764/Mum/2023 and CO No. 105/Mum/2023

The Learned AO erred in making addition u/s 68 of alleged bogus The Learned AO erred in making addition u/s 68 of alleged bogus The Learned AO erred in making addition u/s 68 of alleged bogus purchases without considering that the provisions of Section 68 purchases without considering that the provisions of Section 68 purchases without considering that the provisions of Section 68 deals with Cash credits found in the books of accounts of deals with Cash credits found in the books of accounts of deals with Cash credits found in the books of accounts of Assessee whereas the additi Assessee whereas the additions are on account of payment for ons are on account of payment for purchases which has been alleged to be bogus by the Learned purchases which has been alleged to be bogus by the Learned purchases which has been alleged to be bogus by the Learned A.O. and hence the addition is illegal, invalid, bad in law and A.O. and hence the addition is illegal, invalid, bad in law and A.O. and hence the addition is illegal, invalid, bad in law and therefore the Appellant Company prays that the said addition therefore the Appellant Company prays that the said addition therefore the Appellant Company prays that the said addition u/s.68 may please be deleted. u/s.68 may please be deleted. 16. We have heard rival submission of the parties on the issue in have heard rival submission of the parties on the issue in have heard rival submission of the parties on the issue in dispute and perused the relevant material on record. The issue in dispute and perused the relevant material on record. The issue in dispute and perused the relevant material on record. The issue in dispute is in respect of addition of dispute is in respect of addition of ₹6,07,44,602/ 602/- made by the Assessing Officer under section 68 of the A fficer under section 68 of the Act. The Assessing ct. The Assessing Officer received information from another officer of the I on from another officer of the Income-tax on from another officer of the I department that assessee received accommodation entries from Sh department that assessee received accommodation entries from Sh department that assessee received accommodation entries from Sh Ashok Kumar Gupta Ashok Kumar Gupta in form of sales to M/s Path International , form of sales to M/s Path International , which was a proprietary concern of sh Anuj Kumar Gupta s/o Sh which was a proprietary concern of sh Anuj Kumar Gupta s/o Sh which was a proprietary concern of sh Anuj Kumar Gupta s/o Sh Ashik Kumar Gupta. During the course of the survey action on Shri Ashik Kumar Gupta. During the course of the survey action on Shri Ashik Kumar Gupta. During the course of the survey action on Shri Ashik Kumar Gupta, he admitted of having engaged in providing Ashik Kumar Gupta, he admitted of having engaged in providing Ashik Kumar Gupta, he admitted of having engaged in providing accommodation entries accommodation entries of purchase and sales to various parties. of purchase and sales to various parties. During the course of the assessment proceeding During the course of the assessment proceedings s, the Assessing Officer called for relevant sale bill. Th relevant sale bill. The assessee had provided copies e assessee had provided copies of bills to prove the sales of bills to prove the sales were carried on by it. The Assessing carried on by it. The Assessing Officer observed that the bills were incomplete with no description Officer observed that the bills were incomplete with no description Officer observed that the bills were incomplete with no description

M/s Jics Logistics Ltd. 34 ITA Nos. 1760, 1779, 1761 to 1763, 1780 & 1781, ITA Nos. 1760, 1779, 1761 to 1763, 1780 & 1781, 1764/Mum/2023 and CO No. 105/Mum/2023 1764/Mum/2023 and CO No. 105/Mum/2023

of grade of goods, per unit rate, quantity supplied, registration of grade of goods, per unit rate, quantity supplied of grade of goods, per unit rate, quantity supplied details of transport vehicle used, no details details of transport vehicle used, no details of VAT paid / payable of VAT paid / payable etc. Accordingly the Assess . Accordingly the Assessing Officer asked the assessee a ing Officer asked the assessee as why the sales credited of the sales credited of ₹6,07,44,602/- against M/s Path International s Path International might not be treated as unexplained cash might not be treated as unexplained cash credit under section 68 of credit under section 68 of the Act. The assessee filed a long list of case laws relied upon by . The assessee filed a long list of case laws relied upon by . The assessee filed a long list of case laws relied upon by him but the Assessing Officer rejected the same as distinguishable him but the Assessing Officer rejected the same as distinguishable him but the Assessing Officer rejected the same as distinguishable and not having any direct relevance to the facts of the case in hand. and not having any direct relevance to the facts of the case in hand. and not having any direct relevance to the facts of the case in hand. The Assessing Officer f The Assessing Officer further observed that the assessee failed to urther observed that the assessee failed to provide details called for and not able to explain his activity by provide details called for and not able to explain his activity by provide details called for and not able to explain his activity by linking his sales with the purchases. The Assessing Officer noted linking his sales with the purchases. The Assessing Officer noted linking his sales with the purchases. The Assessing Officer noted that the assessee failed to furnish evidence in support of import of that the assessee failed to furnish evidence in support of import of that the assessee failed to furnish evidence in support of import of the goods viz custom house receipt, clearing receipt, transport bill viz custom house receipt, clearing receipt, transport bill viz custom house receipt, clearing receipt, transport bill and even failed to furnish purchase/import bills and even failed to furnish purchase/import bills coreponding to sale coreponding to sale of goods. In view of the observation, the learned of the observation, the learned Assessing Officer Assessing Officer rejected the contention of the assessee and held the sales credited rejected the contention of the assessee and held the sales c rejected the contention of the assessee and held the sales c as unexplained cash credit as unexplained cash credit in terms of section 68 of the A in terms of section 68 of the Act. On further appeal, the Ld. CIT(A) rejected the contention of the further appeal, the Ld. CIT(A) rejected the contention of the further appeal, the Ld. CIT(A) rejected the contention of the assessee. Firstly, the assessee contended that statement recorded , the assessee contended that statement recorded , the assessee contended that statement recorded under survey of sh Ashok under survey of sh Ashok Kumar Gupta, had no evidentiary , had no evidentiary value in view of the decision of the Hon’ble Supreme Court in the case of in view of the decision of the Hon’ble Supreme Court in t in view of the decision of the Hon’ble Supreme Court in t Cit Vs S Khader Khan Cit Vs S Khader Khan, 352 ITR 480. But the Ld. CIT(A) held that , 352 ITR 480. But the Ld. CIT(A) held that statement was not the sole or primary basis for addition and it was statement was not the sole or primary basis for addition and it was statement was not the sole or primary basis for addition and it was merely a starting point for making addition. Secondly Secondly, the assessee merely a starting point for

M/s Jics Logistics Ltd. 35 ITA Nos. 1760, 1779, 1761 to 1763, 1780 & 1781, ITA Nos. 1760, 1779, 1761 to 1763, 1780 & 1781, 1764/Mum/2023 and CO No. 105/Mum/2023 1764/Mum/2023 and CO No. 105/Mum/2023

contended that transaction had taken place through bank account contended that transaction had taken place through bank account contended that transaction had taken place through bank account so it should be allowed. The Ld. CIT(A) however held that merely should be allowed. The Ld. CIT(A) however held that merely should be allowed. The Ld. CIT(A) however held that merely because the payment was made by cheque, it could not be held as a because the payment was made by cheque, it could not be held as a because the payment was made by cheque, it could not be held as a genuine transaction i genuine transaction in view of the decision in the case of (i) CIT Vs n view of the decision in the case of (i) CIT Vs Sarvana construction p Ltd 208 Taxman 188( Mag) (ii) CIT Vs Sarvana construction p Ltd 208 Taxman 188( Mag) (ii) CIT Vs Sarvana construction p Ltd 208 Taxman 188( Mag) (ii) CIT Vs Mohankala 161 Taxman 169 ( 291 ITR 278) and (iii) CIT vs 161 Taxman 169 ( 291 ITR 278) and (iii) CIT vs 161 Taxman 169 ( 291 ITR 278) and (iii) CIT vs Precisions Finance p Ltd 208 ITR 465. Thirdly, the Ld. CIT(A) also Precisions Finance p Ltd 208 ITR 465. the Ld. CIT(A) also distinguished the reli distinguished the reliance placed by the assessee on the decision of ance placed by the assessee on the decision of the Hon’ble Bombay High Court in the case of CIT vs Nikunj Eximp the Hon’ble Bombay High Court in the case of CIT vs Nikunj Eximp the Hon’ble Bombay High Court in the case of CIT vs Nikunj Eximp Enterprises Enterprises Enterprises Private Private Private Limited Limited Limited 35 35 35 taxmann.com taxmann.com taxmann.com 384(Bombay). 384(Bombay) 384(Bombay) Fourthly, the ld CIT(A) also rejected the contention of the assessee , the ld CIT(A) also rejected the contention of the assessee , the ld CIT(A) also rejected the contention of the assessee for not giving opportunity to cross examine sh Ashok Kumar Gupta. rtunity to cross examine sh Ashok Kumar Gupta. rtunity to cross examine sh Ashok Kumar Gupta. However in his final finding his final finding, the Ld. CIT(A) held that procedures the Ld. CIT(A) held that procedures were not genuine and therefore he sustained addition to the extent were not genuine and therefore he sustained addition to the extent were not genuine and therefore he sustained addition to the extent of 10% of the bogus purchases amounting to of 10% of the bogus purchases amounting to ₹60,74, 60,74,460/- only. The relevant finding of the Ld. CIT(A) is reproduced as under: inding of the Ld. CIT(A) is reproduced as under: inding of the Ld. CIT(A) is reproduced as under:

“16. In view of the detailed discussion above and considering that 16. In view of the detailed discussion above and considering that 16. In view of the detailed discussion above and considering that the evidences of actual delivery of goods has not been the evidences of actual delivery of goods has not been the evidences of actual delivery of goods has not been demonstrated either before the AO or before the undersigned, and I demonstrated either before the AO or before the undersigned, and I demonstrated either before the AO or before the undersigned, and I have no hesitation have no hesitation holding that the purchases are not genuine. This holding that the purchases are not genuine. This part of the appellant's contentions are rejected. part of the appellant's contentions are rejected. 17. At the same time, it is seen that the appellant has claimed that 17. At the same time, it is seen that the appellant has claimed that 17. At the same time, it is seen that the appellant has claimed that the material purchased has been consumed. Thus the reasonable the material purchased has been consumed. Thus the reasonable the material purchased has been consumed. Thus the reasonable conclusion can be drawn that purchases have been made from conclusion can be drawn that purchases have been made from conclusion can be drawn that purchases have been made from market in cash at the lower prices and used in its business. The market in cash at the lower prices and used in its business. The market in cash at the lower prices and used in its business. The question arises as to what can be the reasonable basis for uestion arises as to what can be the reasonable basis for uestion arises as to what can be the reasonable basis for computing such disallowance. In this respect, I find significant computing such disallowance. In this respect, I find significant computing such disallowance. In this respect, I find significant support from the decision of Hon'ble HIGH COURT OF BOMBAY in support from the decision of Hon'ble HIGH COURT OF BOMBAY in support from the decision of Hon'ble HIGH COURT OF BOMBAY in the case of Principal Commissioner of Income the case of Principal Commissioner of Income-tax v. Jagdish tax v. Jagdish Thakkar [2022] 145 taxmann.com 414 (Bombay) wherein it was 2] 145 taxmann.com 414 (Bombay) wherein it was 2] 145 taxmann.com 414 (Bombay) wherein it was held as under; "In the case at hand, the Assessee statedly had held as under; "In the case at hand, the Assessee statedly had held as under; "In the case at hand, the Assessee statedly had made purchases from the three parties totalling to amount of Rs. 3, made purchases from the three parties totalling to amount of Rs. 3, made purchases from the three parties totalling to amount of Rs. 3,

M/s Jics Logistics Ltd. 36 ITA Nos. 1760, 1779, 1761 to 1763, 1780 & 1781, ITA Nos. 1760, 1779, 1761 to 1763, 1780 & 1781, 1764/Mum/2023 and CO No. 105/Mum/2023 1764/Mum/2023 and CO No. 105/Mum/2023

15,72,840/- in respect of which it has been found by both the in respect of which it has been found by both the in respect of which it has been found by both the CIT(A) as well a CIT(A) as well as the Tribunal that the sales in question have not s the Tribunal that the sales in question have not been doubted, that the payments have been made by the Assessee been doubted, that the payments have been made by the Assessee been doubted, that the payments have been made by the Assessee through banking channels and that the Assessing Officer has also through banking channels and that the Assessing Officer has also through banking channels and that the Assessing Officer has also accepted the book results shown by the Assessee. It is also finding accepted the book results shown by the Assessee. It is also finding accepted the book results shown by the Assessee. It is also finding of fact that the Assessee has produced before the Assessing Officer hat the Assessee has produced before the Assessing Officer hat the Assessee has produced before the Assessing Officer delivery challans, purchase bills as well as evidence of payments delivery challans, purchase bills as well as evidence of payments delivery challans, purchase bills as well as evidence of payments through banking channels. As such, the Assessee has discharged through banking channels. As such, the Assessee has discharged through banking channels. As such, the Assessee has discharged the initial burden or onus of providing the details of the parties; the initial burden or onus of providing the details of the parties; the initial burden or onus of providing the details of the parties; and it was incumbent on the Assessing Officer to rebut the evidence it was incumbent on the Assessing Officer to rebut the evidence it was incumbent on the Assessing Officer to rebut the evidence produced by the Assessee. We do not find anything on record produced by the Assessee. We do not find anything on record produced by the Assessee. We do not find anything on record controverting the findings of fact of the CIT(A) as well as the controverting the findings of fact of the CIT(A) as well as the controverting the findings of fact of the CIT(A) as well as the Tribunal. Despite uncontroverted findings of fact and keeping in Tribunal. Despite uncontroverted findings of fact and keeping in Tribunal. Despite uncontroverted findings of fact and keeping in mind that the Assessing Officer had issued 133(6) notices to the mind that the Assessing Officer had issued 133(6) notices to the mind that the Assessing Officer had issued 133(6) notices to the three suppliers of goods and the parties had not attended and even three suppliers of goods and the parties had not attended and even three suppliers of goods and the parties had not attended and even though the Assessing Officer did not take any further steps for though the Assessing Officer did not take any further steps for though the Assessing Officer did not take any further steps for investigation, in all fairness, the CIT(A) as well as the T investigation, in all fairness, the CIT(A) as well as the Tribunal had ribunal had upheld the dis upheld the dis-allowance in respect of the purchases for the year allowance in respect of the purchases for the year under consideration to the extent of 10% of such purchases against under consideration to the extent of 10% of such purchases against under consideration to the extent of 10% of such purchases against which admittedly no appeal has been filed by the Assessee." which admittedly no appeal has been filed by the Assessee." which admittedly no appeal has been filed by the Assessee." 18. In the case of PCIT vs Pinaki D Panani, ITA no. In the case of PCIT vs Pinaki D Panani, ITA no.1543 of 2017 1543 of 2017 dated 08.01.2020, the Hon'ble Bombay HC held as follows: 08.01.2020, the Hon'ble Bombay HC held as follows: "Assuming that the Respondent "Assuming that the Respondent-Assessee the purchasers Assessee the purchasers from whom the purchases were made were bogus, in view from whom the purchases were made were bogus, in view from whom the purchases were made were bogus, in view of the finding of fact that the material was consumed, the of the finding of fact that the material was consumed, the of the finding of fact that the material was consumed, the question would be o question would be of extending the percentage of net profit f extending the percentage of net profit on total turnover. This would be a matter of calculations by on total turnover. This would be a matter of calculations by on total turnover. This would be a matter of calculations by the concerned authority. In this context, if the Commissioner the concerned authority. In this context, if the Commissioner the concerned authority. In this context, if the Commissioner of Income Tax (Appeals) and the Tribunal chose to follow the of Income Tax (Appeals) and the Tribunal chose to follow the of Income Tax (Appeals) and the Tribunal chose to follow the percentage arrived by the Settl percentage arrived by the Settlement Commission in the ement Commission in the Respondent Respondent-Assessee's own case for the other years, this Assessee's own case for the other years, this exercise cannot be considered as irregular or illegal." exercise cannot be considered as irregular or illegal." exercise cannot be considered as irregular or illegal." 19. In view of the above judicial precedents, factual aspects of the In view of the above judicial precedents, factual aspects of the In view of the above judicial precedents, factual aspects of the case, I hold that the addition of 10% of the bogus case, I hold that the addition of 10% of the bogus purchases of purchases of Rs.6,07,44,602/ Rs.6,07,44,602/- would suffice as against the entire disallowance would suffice as against the entire disallowance of Rs.6,07,44,602/ of Rs.6,07,44,602/- made by the AO. Thus the net addition made by the AO. Thus the net addition sustained in this case on this ground is 10% of Rs.6,07,44,602/ sustained in this case on this ground is 10% of Rs.6,07,44,602/ sustained in this case on this ground is 10% of Rs.6,07,44,602/- i.e. Rs.60,74,460/ Rs.60,74,460/-. Therefore, this ground stands partly allowed. rtly allowed.” 17. Before us the learned counsel us the learned counsel for the assessee submitted that the assessee submitted that no addition could have been made for bogus purchases under no addition could have been made for bogus pur no addition could have been made for bogus pur section 68 of the Act, whereas the learned departmental section 68 of the Act, whereas the learned section 68 of the Act, whereas the learned representative contested that Assessing Officer has made addition representative contested that Assessing Officer has made add representative contested that Assessing Officer has made add

M/s Jics Logistics Ltd. 37 ITA Nos. 1760, 1779, 1761 to 1763, 1780 & 1781, ITA Nos. 1760, 1779, 1761 to 1763, 1780 & 1781, 1764/Mum/2023 and CO No. 105/Mum/2023 1764/Mum/2023 and CO No. 105/Mum/2023

for the sales credit under section 68 of the A credit under section 68 of the Act and and it is the Ld. CIT(A) who has restricted the addition to the 10% of the sales CIT(A) who has restricted the addition to the 10% of the CIT(A) who has restricted the addition to the 10% of the amount holding the same as the bogus pu amount holding the same as the bogus purchases. He submitted rchases. He submitted that the Revenue is in appeal against the finding of the Ld evenue is in appeal against the finding of the Ld evenue is in appeal against the finding of the Ld. CIT(A).

17.1 In back ground of the above facts and circumstances, we are In back ground of the above facts and circumstances, we are In back ground of the above facts and circumstances, we are of the opinion that Assessing Officer of the opinion that Assessing Officer has correctly made the correctly made the addition under section 68 of the A dition under section 68 of the Act for entry of the sales credit in ct for entry of the sales credit in the books of accounts of the assessee the books of accounts of the assessee due bogus sales made ales made by the assessee to M/s Parth International to M/s Parth International. In order to justify non . In order to justify non- genuineness of the sales, the Assessing Officer genuineness of the sales, the Assessing Officer asked the assessee asked the assessee to substantiate the corresponding purchases but the assessee but the assessee failed. The The Ld. Ld. CIT(A) CIT(A) has as the the accepted accepted that that purchases purch corresponding to the sales are not substantiated by the assessee, corresponding to the sales are not substantiated by the assessee, corresponding to the sales are not substantiated by the assessee, however he restricted the addition to the extent of the 10% of the however he restricted the addition to the extent of the 10% of the however he restricted the addition to the extent of the 10% of the sales credited. In our opinion finding of the Ld. CIT(A) on the issue sales credited. In our opinion finding of the Ld. CIT(A) on the issue sales credited. In our opinion finding of the Ld. CIT(A) on the issue in dispute is without appreciation of the facts in dispute is without appreciation of the facts properly properly. Accordingly, we set aside the same. As the assessee has failed to demonstrate we set aside the same. As the assessee has failed to demonstrate we set aside the same. As the assessee has failed to demonstrate purchase corresponding to the sales credited in its books of purchase corresponding to the sales credited in its books of purchase corresponding to the sales credited in its books of accounts, the Assessing Officer is justified in making the addition accounts, the Assessing Officer is justified in making the ad accounts, the Assessing Officer is justified in making the ad under section 68 of the A under section 68 of the Act. The grounds of the R s of the Revenue are accordingly allowed whereas cross objection of the assessee is allowed whereas cross objection of the assessee is allowed whereas cross objection of the assessee is dismissed.

M/s Jics Logistics Ltd. 38 ITA Nos. 1760, 1779, 1761 to 1763, 1780 & 1781, ITA Nos. 1760, 1779, 1761 to 1763, 1780 & 1781, 1764/Mum/2023 and CO No. 105/Mum/2023 1764/Mum/2023 and CO No. 105/Mum/2023

AY 2016-17, 2017-18 and 2018 18 and 2018-19

Grounds for assessment of 2016 for assessment of 2016-17:

M/s Jics Logistics Ltd. 39 ITA Nos. 1760, 1779, 1761 to 1763, 1780 & 1781, ITA Nos. 1760, 1779, 1761 to 1763, 1780 & 1781, 1764/Mum/2023 and CO No. 105/Mum/2023 1764/Mum/2023 and CO No. 105/Mum/2023

Court without appreciating that he AO had adequately refuted the Court without appreciating that he AO had adequately refuted the Court without appreciating that he AO had adequately refuted the working of the value of the business rights and goodwill by the working of the value of the business rights and goodwill by the working of the value of the business rights and goodwill by the registered valuer and the relied upon case in therefore distinguishable? egistered valuer and the relied upon case in therefore distinguishable? egistered valuer and the relied upon case in therefore distinguishable? 2. Whether on the facts and in the circumstances of the case and in 2. Whether on the facts and in the circumstances of the case and in 2. Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in deleting the disallowance of the depreciation law, the Ld. CIT(A) erred in deleting the disallowance of the depreciation law, the Ld. CIT(A) erred in deleting the disallowance of the depreciation of Rs. 36, 14,139/ of Rs. 36, 14,139/-made relying on the decision of the Hon'ble Kerala cision of the Hon'ble Kerala High Court in the case of CIT us. Poulose and Mathern (Put.) Ltd. High Court in the case of CIT us. Poulose and Mathern (Put.) Ltd. High Court in the case of CIT us. Poulose and Mathern (Put.) Ltd. without appreciating the facts in the said case is squarely applicable to without appreciating the facts in the said case is squarely applicable to without appreciating the facts in the said case is squarely applicable to the assessee's case without explicitly pointing out how the decision of the assessee's case without explicitly pointing out how the decision of the assessee's case without explicitly pointing out how the decision of Padmini Product Padmini Products Put Ltd v/s DCIT 277 taxmen 22 Karnataka 2020 is s Put Ltd v/s DCIT 277 taxmen 22 Karnataka 2020 is more close to the facts of the case, when the facts of application of more close to the facts of the case, when the facts of application of more close to the facts of the case, when the facts of application of Explanation 3 to s.43(1) was decided on different ground of non Explanation 3 to s.43(1) was decided on different ground of non Explanation 3 to s.43(1) was decided on different ground of non- approval by the Joint CIT when the impugned assessment order was approval by the Joint CIT when the impugned assessment order was approval by the Joint CIT when the impugned assessment order was passed by the JCIT itself? by the JCIT itself? Grounds for assessment of 2018 for assessment of 2018-19:

M/s Jics Logistics Ltd. 40 ITA Nos. 1760, 1779, 1761 to 1763, 1780 & 1781, ITA Nos. 1760, 1779, 1761 to 1763, 1780 & 1781, 1764/Mum/2023 and CO No. 105/Mum/2023 1764/Mum/2023 and CO No. 105/Mum/2023

Order pronounced in the open Court on nounced in the open Court on 29/11/2023. /11/2023. Sd/ Sd/- Sd/- Sd/ (KAVITHA RAJAGOPAL KAVITHA RAJAGOPAL) (OM PRAKASH KANT OM PRAKASH KANT) JUDICIAL MEMBER JUDICIAL MEMBER ACCOUNTANT MEMBER ACCOUNTANT MEMBER Mumbai; Dated: 29/11/2023 Dragon Legal/Rahul Sharma, Sr. P.S. Dragon Legal/Rahul Sharma, Sr. P.S. Copy of the Order forwarded to Copy of the Order forwarded to : 1. The Appellant 2. The Respondent. 3. CIT 4. DR, ITAT, Mumbai 5. Guard file. BY ORDER, BY ORDER, //True Copy// (Assistant Registrar) (Assistant Registrar) ITAT, Mumbai ITAT, Mumbai