THE ITO, WARD-4(2), AHMEDABAD vs. JAI MAHAKALI INFRASTRUCTURE PVT. LTD., AHMEDABAD

The revenue has raised following grounds of appeal:- “1. The Ld. CIT(A) has erred in law and on facts in deleting the addition of Rs. 36,07,210/- made on account of under valuation of closing stock. However, the assessing officer restricted the disallowance to Rs.83,75,488/- subject to the available income. 2. On the facts and in the circumstances of the case, the Ld. CIT(A) ought to have upheld the order of the assessing officer. 3. It is, therefore, prayed that the order of the Ld. CIT(A) may be set aside and that of the Assessing Officer may be restored to the above extent.”

In this case, assessee has filed return of income declaring loss of Rs. 9,16,608/- on 15th Feb, 2013. The same was accepted during 12th assessment u/s. 143(3) made on November, 2009. Subsequently, the case was reopened u/s. 147 of the act by issuing of notice u/s. 148 on 26th March, 2012 stating that there was difference in closing stock of Rs. 36,07,210/-. The assessee has submitted that there was no under-statement of closing stock and the reason of loss for the was on account of sale of land made during the year under consideration. The assessing officer has not accepted the explanation of the assessee and observed that the assessee had closing stock of land in the previous year relevant to the assessment year 2006-07 of Rs. 2,95,40,877/- and after sale of plot in the assessment year 2007-08 of Rs. 17,61,444/- the net stock of land was reflected as Rs. 2,41,72,223/- as against aggregate closing stock of Rs. 2,77,79,433/-.0/-. Therefore, the assessing officer added Rs. 36,07,210/- to the total income of the assessee.

Aggrieved assessee filed appeal before the ld. CIT(A). The ld. CIT(A) has allowed the appeal of the assessee by observing as under:- “5.3 Decision:- I have carefully considered the Assessment Order and submission filed by Appellant. The Assessing Officer has observed that Appellant has shown opening stock at Rs. 2,95,40,8/7/- whereas sale of plot in A.Y. 2007-08 was Rs. 17,61,444/- and after reducing sale value of plot sold during the year from opening stock of land, closing stock is worked out at Rs. 2,77,79,433 (2954877 - 1761444). As Appellant had shown closing stock of land, at Rs.2,41,72,223, addition of Rs. 36,70,210 was made. On the other hand, Appellant has argued that land, on which plotting activity was carried out was purchased in A.Y. 2005-06 at cost of Rs. 2,74,75,165/- and after considering other ancillary cost of Rs. 28,29,600 incurred in A.Y. 2006-07, total cost of land was worked out at Rs. 3,03,04,765 and as area of land was 20260.36 sq.mt., average cost of land worked out at Rs. 1495.761 per sq. mt. Thus, this average cost of land per square meter was considered for valuing closing stock of land on year to year basis from A.Y. 2006-07, 2007-08 and onwards. As Appellant has valued closing stock at cost value, addition made by Assessing Officer should be deleted. It is noted that appellant has valued the closing stock of land-at Rs.-1495.761 per square meter considering cost of land along with other charges and total area of land. The working of per square meter cost of land computed by Appellant as submitted before Assessing Officer is tabularised herein below: - Particulars Area of Rate per Amount (Rs.) Remarks Land(Sq. Sq. Mtrs. Mfrs.) (Rs.) Land 20,260.36 1,356.10 2,74,75,165 Acquired on 22.06.2004 Cost 1 39.66 28,29,600 incurred during F.Y. 2005-06

During the course of appellate proceedings before us, ld. departmental representative has supported the order of the assessing officer. After hearing ld. departmental representative and perusal of material on record, we observed that assessee has valued opening stock of land at Rs.2,95,40,877/- after considering rate per square meter of - Rs. 1,495.761 and same rate has been considered while computing closing stock of land. On the other hand while valuing closing stock of land in A.Y. 2007-08 the Assessing Officer has computed closing stock by reducing sale value from opening stock of land which was valued at cost .We observed that assessing officer

In the result, the appeal of the revenue is dismissed.