SEBCO PROPERTY PRIVATE LIMITED,TRICHY vs. THE PRINCIPAL COMMISSIONER OF INCOME TAX, CENTRAL - 2, CHENNAI, CHENNAI

The Ld. AR advanced arguments and referred to the order of Tribunal for subsequent years on the impugned issue. The Ld. CIT- DR also advanced arguments and submitted that Ld. AO failed to make requisite enquiries. Having heard rival submissions and upon perusal of case records, our adjudication would be as under. The assessee being resident corporate assessee is stated to be engaged in real estate business. Revisionary Proceedings before lower authorities 3.1 From the facts, it emerges that the assessee’s return of income was subjected to proceedings u/s 153A pursuant to search action on assessee on 22-03-2021. The Ld. AO accepted the returned income vide order dated 31-03-2022. The assessment was framed on best judgment basis as is evident from corrigendum issued by Ld. AO on 24-05-2022. Subsequently, upon perusal of case records, Ld. Pr. CIT noted that the assessee admitted closing stock of Rs.25.46 Crores in its return of income. However, in AY 2017-18, Ld. AO adopted opening stock of Rs.36.42 Crores instead of Rs.25.46 Crores as admitted by the assessee in the return of income. Having adopted value of Rs.36.42 Crores for AY 2017-18, Ld. AO should have adopted same value in AY 2016-17. In such a situation the assessment so framed would be prejudicial to the interest of the revenue. Therefore, the assessment was proposed to be revised and the assessee was show-caused. 3.2 The assessee stated that proposal to revise the order based on completion of assessment for subsequent AY 2017-18 could not be cured by revisionary order for AY 2016-17. It was further stated that the adoption of opening stock for Rs.36.42 Crores was already addressed in appeal proceedings for AY 2017-18. 3.3 However, Ld. Pr. CIT held that pendency of appeal for subsequent years could not prevent revision of order for this year. The assessee, in response to notice u/s 142(1) during the course of assessment proceedings, explained that the entire land of Morais City was not owned by the assessee company and as such other land owners were there. The sheet containing stock value was prepared projecting the probable area of plot / land available with the approximate value to solicit customers to invest in land or purchased the land from assessee-company. The Ld. Pr. CIT observed that the assessee did not corroborate the said statement with necessary evidences. The Ld. AO accepted the returned income without causing necessary enquiries on prima facie undervaluation of stock to the extent of Rs.10.95 Crores while framing the assessment. Moreover, the claim of the assessee deviating from the value of closing stock unearthed during the course of search proceedings in the return of income as the correct one is not maintainable. The return for this year was invalid and the same was not e-verified. Accordingly, the assessment order was held to be erroneous and prejudicial to the interest of the revenue and Ld. AO was directed to modify the same by examining the issue of undervaluation of stock. Aggrieved, the assessee is in further appeal before us. Our findings and Adjudication 4. From the facts, it emerges that the assessee’s return of income for this year was scrutinized u/s 143(3) r.w.s. 153A on 31-03-2022 pursuant to search action on the assessee on 22-03-2021. The regular return of income was already filed by the assessee on 11-03- 2017 which was processed u/s 143(1). In response to notice u/s 153A, the assessee e-filed return of income on 27-11-2021 admitting same income of Rs.132.08 Lacs. During the course of assessment proceedings, notices u/s 142(1) with detailed questionnaire was issued to the assessee on 09-02-2022 directing him to address various issues arising out of search proceedings. The assessee filed the requisite details vide its reply dated 04-03-2022. After due consideration of the same, Ld. AO chose to accept the returned income of the assessee. In notice u/s 142(1) (as placed on Page Nos.9 to 12 of the paper book), the assessee was inter-alia, required to file the financial statements and address various issues arising from search proceedings. By query no. (viii), the assessee was confronted with the fact that it had shown stock as on 31-03-2016 for Rs.25.46 Crores in the return of income. The assessee was directed to furnish the complete break-up thereof in terms of survey numbers and extent of lands as per closing stock mentioned in the return of income filed in response to notice u/s 153A. The Ld. AO also referred to seized material “STOCK 15-16.xlsx” containing details of development cost incurred during FY 2015-16, sales made in that year and closing stock as on 31-03-2016. The scanned image of this sheet was also confronted to the assessee. A specific observation was made that the closing stock arrived on the basis of above seized material was Rs.36.42 Crores whereas the assessee admitted stock of Rs.25.46 Crores in return of income filed u/s 153A. There was huge difference of Rs.10.95 Crores in closing stock and accordingly, the assessee was required to explain the difference with suitable / necessary evidences.

The seized sheet was prepared by taking into account such other landowners’ land / plot. The closing value was arrived at approximate market value or selling value. The sheet was prepared projecting the probable area of land / plot available with the approximate value to solicit the customers to invest in land or purchase the plots from the assessee company. It was stated that the closing stock arrived as per loose sheet could not be considered as the closing stock of the assessee company as on 31-03-2016. No reliance could be placed on estimated closing stock value. The assessee valued the stock by taking into account the actual land owned by the assessee company and at cost price as applicable.