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Income Tax Appellate Tribunal, “DB” BENCH, JABALPUR
PER M. BALAGANESH, A. M.: 1. The appeal in AY 2009-10, arises out of the order of the Commissioner of Income Tax (Appeals) 1, Jabalpur, (hereinafter referred to as 'Id. CIT(A)', in short] in Appeal No.J/CIT[A]-I/JBP/ACIT/Cir/Sagar/Campat JBP/729/11-12dated 23.08.2013 against the order of assessment passed u/s 143(3) of the Income-tax Act, 1961 (hereinafter referred to as 'the Act') dated 30.12.2011 by the Assessing Officer, ACIT, Circle-Sagar (hereinafter referred to as 'Id. AO').
This appeal was originally disposed of by this Tribunal in 07.09.2020. Later a Miscellaneous Application (MA) was preferred by the revenue before this Tribunal. The MA was disposed of by this Tribunal in MA No. 1/JAB/2021 dated 06.04.2022, wherein, the ground Nos. 1(ii) and 3 regarding the addition made on account of valuation of closing stock of Work in Progress (WIP) alone was recalled by this Tribunal. For the sake of convenience, the ground Nos. 1(ii) and 3 are reproduced herein below:-
Shri Sudhir Chandra Datt - 2 - “1(ii) Because the learned Commissioner of Income Tax (Appeal) erred in law as well as in facts while confirming the following deduction:
Business Total Business Expenditure disallowed by Assessing Expenditure Expenditure/ Officer and confirmed by CIT (Appeal) Expenditure Incurred / Estimated by A.O Extent Amount (ii) Valuation of 27,40,000 100% 27,40,000 Closing Stock & WIP 3. Because the AO has erred in calculating the closing stock/ WIP of Datt Township @Rs. 700/- per sq. ft. whereas as per valuation of assessee it was at Rs. 300/- per sq. ft. and the project was sanctioned by the government authorities on 02.10.2008 ie. during the financial year under consideration and it was beginning of the project also the project site is located at village tilheri on national highway away from the city limits.”
We have heard the rival submissions and perused the material available on record. The assessee is a builder of real estate. The return of income for AY 2009- 10 was electronically filed by the assessee on 30.09.2009 declaring taxable income of Rs. 19,90,060/-. The assessee is a builder doing business in the name of Datt Associates. During the year under consideration, the assessee was having 3 sites i.e. Datt Township of Mandla Road, Village Tilheri; Datt Tower at Shastri Bridge and Datt Residency, YMCA (Napier Town). Datt Township was 7 kms away from the other two projects i.e. Datt Tower and Datt Residency. Both the projects i.e. Datt Tower and Datt Residency are located at Napier Town. The assessee submitted that all these sites were located at different places and completion of work were at different stages. The map of Datt Residency (YMCA) was sanctioned on 10.06.2005 for 7 floors, map of Datt Tower was sanctioned on 06.07.2006 for 8 floors and map of Datt Township project was sanctioned on 02.10.2008 and the work was started during the year under consideration and the same was valued at Rs. 300/ sq ft. The total value of closing stock of WIP for Datt Township project was adopted at the end of the year by the assessee at Rs. 300/ sqft valued at Rs. 20,55,000/- (6850 sq.ft @ Rs 300/ sq ft). The other two projects i.e. Datt Tower and Datt Residency were valued at Rs. 700/ sq.ft at the end of the year as they were located at Napier Town.
Shri Sudhir Chandra Datt - 3 - All these details were duly submitted by the assessee before the Id AO during the course of assessment proceedings project-wise together with the basis thereon for valuation of closing stock of WIP. The Id AO mixed up all the projects and concluded the closing stock of WIP at YMCA project is to be taken at Rs. 700/ sq.ft and accordingly revalued the closing stock. According to the Id AO, YMCA project (Datt Township) was to be valued at Rs. 700/sq.ft as against Rs 300/ sq.ft adopted by the assessee. Accordingly, the Id AO made an addition of Rs. 27,40,000/- (6850 sq.ft X Rs 400/sq.ft). This action of the Id AO was upheld by the Id. CIT(A).
At the outset, we are of the considered view that the lower authorities had completely misunderstood the entire facts. It is pertinent to note that there were 3 projects operated by the assessee out of which, map of 2 projects i.e. Datt Tower and Datt Residency were sanctioned on 06.07.2006 and 10.06.2005 respectively. Only Datt Township project's map was sanctioned on 02.10.2008 ie. the year under consideration. Moreover, the YMCA project has been misunderstood by the Id AO to be pertaining to Datt Township project, whereas, YMCA pertains to Datt Residency project. Since, the Datt Township project was sanctioned during the year under consideration, the valuation of closing stock of WIP had to be done based on the percentage of work completed as on 31.03.2009. The other 2 projects had started way back in 2005, 2006 and hence, the percentage of completion of work in those projects would obviously be more and consequentially the closing stock valuation of WIP would also be more. This basic fact has been missed by both the lower authorities. Hence, we have no hesitation to hold that the addition has been made based on wrong appreciation of facts. Accordingly, the addition made by the Id AO does not deserve to survive. Hence, the addition made in sum of Rs. 27,40,000/- is hereby directed to be deleted. Accordingly, ground Nos. 1(ii) and 3 raised by the assessee are hereby allowed.
This order is to be read together with the earlier Tribunal order dated 07.09.2020 and MA order dated 06.04.2022.
Shri Sudhir Chandra Datt - 4 - 6. In the result, the appeal of the assessee is allowed.
Order pronounced in the open court on 28.06.2024