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The Report states that the relevant approvals and permits, etc., from the concerned authorities, in respect of the projects under consideration, which are relevant approvals and permits, etc., and which were being enclosed with the Remand Report, for the perusal of the ld. CIT(A), had also been furnished by the assessee. The Report states that in the same reply, the assessee had informed that the transfer of WIP by SICCL to the assessee firm during Financial Year 2010 – 11 had been accepted during scrutiny assessment proceedings by SICCL’s AO, viz., the DCIT, Circle 1, New Delhi, and that he had added notional profit on the said transfer, vide his order dated 20.11.14, passed under sections 143(3)/142(2A) of the Act, subsequent to special audit of the accounts of SICCL, under section 142(2A) of the Act. The Report states that likewise, as per the same Reply, the assessee had informed that no adverse finding, as regards the WIP transferred by SPCL to the assessee firm, had been given in its assessment order dated 27.3.14, for Assessment Year 2011 –12, passed by the DCIT, Central Circle – 6, New Delhi. The Report states that copies of the said assessment order had been enclosed by the assessee with its Reply dated 24.4.17.
Thus, the Remand Report dated 08.05.2017 has certainly and evidently not been prepared merely on the basis of the audited Balance Sheet and the Profit and Loss Account. Conversely, it has been prepared after taking into consideration, the following documentary evidences, as furnished by the assessee, some (as indicated) on the asking of the AO himself: (a) The Audited Financial Statements of SICCL, for assessment year 2011-12. (b) The Audited Financial Statements of SICCL, for assessment year 2012-13. (c) The Audited Financial Statements of SPCL, for assessment year 2011-12.
Account as closing stock, since the assessee firm had remained in operation for only three days during the Financial Year 2010- 11, pursuant to execution of the partnership deed on 28.3.11. The WIP of Rs.50,91,92,350/- was found to subsequently appear in the Profit and Loss Account for the year ending 31.3.2012, as part of the opening inventories totalling Rs.62,23,15,822/-. No fault was found therein, and it cannot be gainsaid that rightly so, in the presence of all the aforesaid voluminous documents of clinching unshaken evidentiary value. Therefore, in the absence of anything opposed to this evidence coupled with the undisputed fact that the assessee had not added anything further to the works-in-progress acquired by it, in its short existence of just three days during the relevant year, and despite the fact that in the next year also, the assessee had carried out only activities of site cleaning, levelling, landfilling, removal of boulders, excavation and watering, etc., so as to consolidate the land holdings contributed by its transferors, which also remained unchallenged in view of the evidences produced in the shape of the relevant approvals and permits, etc., no physical examination of the work done was called for. Rather, it would have been an exercise in futility. Only the expenditures incurred had been, the project being in its initial stage, and so, no addition having made to the physical assets, debited to the WIP Account. When the WIP thus, in fact, comprises only of expenditure like that incurred on levelling of the land, survey, fees of the municipality, salary of the staff and security charges, etc., indubitably, getting the valuation of such WIP from the DVO is infeasible. It is well settled that nomenclature is not decisive of nature. Just because expenditure was debited to the WIP Account, it could not have been concluded that the WIP Account pertained to buildings under construction, or any other asset. It is not the Revenue’s case that such debiting of expenditure to the WIP Account is not permissible. Moreover, the transfers of the works-in-progress stand accepted in the respective assessments framed in the cases of SICCL and SPCL, which fact, again, stands proved on record and remains unquestioned. As such, neither would physical examination of the work done help in adjudicating the issues, nor could the DVO carry out the valuation of the expenditure incurred on WIP. This also supports our rejection of the Department’s request to remand the issue to the file of the Assessing Officer for valuation at the hands of the DVO.
Then, otherwise also, the requirements for making additions under sections 69C and 68 of the Act are specific and entirely peculiar thereto. They have no interplay with valuation of the works-in-progress. They operate separately in their respective distinct areas. That being so, valuation of the works-in-progress could not have any bearing whatsoever, on the additions made.
Therefore, even this observation of the ld. CIT(A) cannot be sustained.
The ld. CIT(A) further observed that when the Assessing Officer required the assessee to submit the valuation report and/or to assist the DVO in getting the valuation of the property done to ascertain the exact WIP, the assessee, for reasons best known to it, did not give any detail/assistance to the DVO, and the valuation could not be done, and that it is thus clear that the rationale of the value of the WIP has not been substantiated by the assessee.
It is seen, as above, that in the remand proceedings, the assessee provided full cooperation to the Assessing Officer. This fact stands acknowledged by the Assessing Officer in his Remand Report dated 08.05.2017. The assessee placed before the Assessing Officer, all material facts and details along with the relevant documentary evidences, which were duly examined by the Assessing Officer. All these voluminous documentary evidences were also filed before the ld. CIT(A).
To elaborate, as stated above, the assessee had filed before the Assessing Officer as well as the ld. CIT(A), its Balance Sheet (APB:46) for the year ended 31.3.2011, Ledger Account (APB:43) of WIP as on 31.3.2011, the details of the WIP along with the evidences supporting the same (APB:178-256), etc. The Assessing Officer, in the first remand proceedings, examined the audited financial statements of SICCL, SPCL and the assessee, for Assessment Years 2011-12 and 2012-13, the related Ledger Accounts in the books of all these three parties, the respective confirmatory statements of these parties, and the audited statements and Ledger Accounts of these parties, the audited statements and Ledger Accounts of SICCL and SPCL, for Assessment Year 2010-11. The Assessing Officer found the WIPs to have been duly accounted for in the aforesaid voluminous documentary evidences, preceding the transfer of these WIPs to the assessee. The ld. CIT(A) has not made any adverse remark with regard to the said evidences.
The Assessing Officer also examined, and did not find any discrepancy, in the relevant approvals and permits, etc., from the concerned authorities, regarding the assessee’s activities relating to site clearing, levelling, land filling, removal of boulders, excavation, etc. These evidences were also furnished before the ld. CIT(A), who too did not find any fault therein.
The assessee also furnished before the authorities below, assessment orders in the cases of SPCL and SICCL, for