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Income Tax Appellate Tribunal, “C” BENCH : BANGALORE
Before: SHRI CHANDRA POOJARI & SMT. BEENA PILLAI
Per Chandra Poojari, Accountant Member
This appeal by the assessee is directed against the order dated 31.7.2019 of the CIT(Appeals)-12, Bengaluru for the assessment year 2007-08 on the following grounds:-
“1. On the facts and in the circumstances of the case, the learned CIT Appeals erred in upholding the order passed by AO. 2. On the facts and in the circumstances of the case, the learned CIT Appeals erred in upholding that the opening stock of following year need not be the same as the closing stock of earlier year.
3. On the facts and in the circumstances of the case, the learned CIT Appeals failed to Appreciate the fact that there was no provision under the Act to tax the same income twice and therefore the double addition I so made ought to have been deleted.
4. On the facts and in the circumstances of the case, the learned CIT(A) ought to have appreciated that Rs.63,76,323/- had already been brought to tax for the A.Y: 2006-07 and therefore, he ought to have directed the AO to consider the revised return filed for the current year and delete the addition so made. 5. On the facts and in the circumstances of the case, the learned CIT Appeals erred in charging intertest under section 234 B & C of the Act. 6. For the these and such other grounds that may be urged at the time of hearing of the Appeal the Appellant prays that the appeal may be allowed.” 2. The assessee company is in the business of construction activity. A survey under Section 133A of the Act was conducted in its premises on 21.02.2007. For the year under consideration, the assessee filed its return of Income 29.10.2007 declaring a taxable income of Rs. 1,86,83,770. A Revised return of Income was also filed admitting an income of Rs. 1,23,07,440 on 02.06.2009. The AO issued notices under S.143(2) and S.142(1) of the Act on 10.09.2008 after selecting the case for scrutiny.
For the AY 2006-07, the assessee had filed its revised return by withdrawing claim for deduction under S. 80IB of the Act thereby offering the same for taxation and thus it had also to revise its income for the current year since the offer made in revised return for the AY 2006-07 to the extent of Rs. 63,76,323 had already been considered in the computation of income for the AY 2007-08. Thus the said amount of Rs. 63,76,323 being taxed twice for both the years, by the revised return for the year under reference, the same was sought to be withdrawn by the assessee.
The ld. AR submitted that the AO vide assessment order dated 18.12.2009 under S. 143(3) has rejected the revised return filed by the AO and concluded the assessment by assessing the said Rs. 63,76,323 again for the current year also. He not only failed to assess proper Income but also exploited/took advantage of hapless position and innocence of the assessee thereby taxing the same amount twice. He further submitted that the AO took undue advantage of assessee’s position and did not discharge the statutory obligation cast upon him of assessing only the proper income. He also charged interest under s. 234 B & C of the Act.
The CIT(Appeals) confirmed the order of the AO against which the assessee is in appeal before us.
The contention of the ld. AR is that the AO made addition of Rs.63,76,330 to the income of the assessee on the reason that assessee has under-stated the income in the revised return as Rs.2,64,21,800 as against income declared in the original return at Rs.3,27,50,216. According to the assessee, the said difference is on account of stock valued in excess in the last year which was reduced from the opening stock in the assessment year under consideration since it had been offered in the previous year relevant to AY 2006-07. He relied on the judgment of Supreme Court n the case of V.K.J. Builders and Contractors Pvt. Ltd. v. CIT, 318 ITR 204 (SC) wherein it was held that closing stock of earlier year has to be treated as opening stock of subsequent year, therefore opening stock of current year shows a lower value than the value of closing stock of earlier year as finally determined by the AO.
He has also relied on the judgment of Karnataka High Court in the case of CIT v. Motor Industries Co. Ltd. (Bosch Ltd.) in of 2008 dated 31.10.2014 wherein it was held that opening stock of following year need not be the same as closing stock of earlier year.
On the other hand, the ld. DR submitted that the addition made by the AO in AY 2006-07 nowhere related the valuation of closing stock and is only related to the difference with regard to the original return and revised income which is as follows:-
“ In contrast to the above, it is evident on record that the sale proceeds/sale receipts being invariable and the cost incurred on the project being the same. How can there be a reduction in profit of the assessee. Going by the accounts maintained by the assessee it is a established and undisputed fact that the amount received by the assessee on account of sales remain at Rs.7,25,41,262/- and the Profit and Loss Account expenses debited remain the same at Rs. 3,97,89,610, resulting in a profit of Rs. 3,27,99,556/- The assessee has failed to submit or produce any convincing explanation to the above, it's only argument is that on account of the more area being sold at a particular cost, its cost per sq. ft. has gone up and as he has received less value per Sq. Pt. hence the profitability has gone down. This contention of the assessee is not acceptable. I do not see any reduction of actual profit as such. It is a mere notional contention the assessee has adopted, which can at the best be adopted for projected profitability for submission of estimates and not when actual transaction has already taken place, recorded in the books of account, sales have been affected, amounts have been received and accounts have been audited and finalized. In view of the above the assessee's contention and claims put forth in relation to the revised return of income is rejected hereby and I assess the income of the assessee at Rs. 3,27,50,216 as reflected in the original return.
Thus the assessment is concluded by making an addition of Rs. 63,76,330/- to the revised return based on the actual accounts maintained and produced as under. Total sales Rs. 7,52.41,262 Less Expenses as per Profit and Loss Account Rs.3,97,89,610 NET PROFIT Rs.3,27,99,556 Less: income as per revised return of income Rs.2,64,21,800 Difference added to the income Rs. 63,76330 ” as per the revised return
Thus, according to her, the argument of the ld. AR is totally misconceived and is not borne out of record.
We have heard both the parties and perused the material on record. In AY 2006-07 addition was made not on account of valuation of closing stock. It was on account of under-statement of difference between the income offered in the original return and revised return which is evident from the facts of the case as enumerated by the ld. DR in her argument.
Now the contention of the ld. AR is that the assessee reduced excess stock offered in the previous year at Rs.63,76,323 from the opening stock of current year which is total misconception of the assessee which is not based on any legal principles. Admittedly, the addition made by the AO in earlier year is on account of difference between the income offered by the assessee and original return and the revised return of Rs.63,76,330 and not related to balance in closing stock. Being so, the assessee is precluded from adjusting this figure by reducing the same from the income of current assessment year. Hence, we do not find any infirmity in the order of the CIT(Appeals) and the same is confirmed.
In the result, the assessee’s appeal is dismissed.
Pronounced in the open court on this 27th day of December, 2021.