M/s. Schemak Developers Pvt. Ltd., Navi Mumbai V. Income-tax Officer,

ITA 138/PUN/2014

• Counselvise Citation: [2015] 134 COUNSELVISE.COM (IT) 1043 (ITAT-PUNE)
• Duration Of Justice: 1 year(s) 8 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-09-2015
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 21-09-2015
• Assessment Year: 2008-2009
• Appeal Filed On: 21-01-2014
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: HARSHAVARDHINI BUTY
• Section: 63

Judgement Text

] IQ.KS ] IQ.KS ] IQ.KS ] IQ.KS IQ.KS IQ.KSIQ.KS IQ.KS IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH B, PUNE . . , , ' # BEFORE SHRI R.K. PANDA, AM AND SHRI VIKAS AWASTHY, JM . / ITA NO.138/PN/2014 '% % / ASSESSMENT YEAR : 2008-09 M/S. SCHEMAK DEVELOPERS PVT. LTD., C-205 & 207, 2 ND FLOOR, ITC PARK, SPECIAL COMPLEX, CBD BELAPUR, NEW MUMBAI 400 614 PAN NO.AAGCS3056D . / APPELLANT V/S ITO, WARD-1(1), AURANGABAD . / RESPONDENT / ASSESSEE BY : SMT. DEEPA KHARE / DEPARTMENT BY : SMT. HARSHAVARDHINI BUTY / ORDER PER R.K. PANDA, AM : THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAINST THE O RDER DATED 15-03-2013 OF CIT, AURANGABAD PASSED U/S.263 OF T HE I.T. ACT FOR THE ASSESSMENT YEAR 2008-09. 2. THERE IS A DELAY OF 247 DAYS IN FILING OF THIS APPEAL BY TH E ASSESSEE. THE ASSESSEE HAS FILED A CONDONATION PETITION A LONGWITH AN AFFIDAVIT EXPLAINING THE REASONS FOR DELAY IN FILING OF THE AFFIDAV IT. IT / DATE OF HEARING :21.09.2015 / DATE OF PRONOUNCEMENT:23.09.2015 2 ITA NO.138/PN/2014 HAS BEEN EXPLAINED IN THE SAID AFFIDAVIT THAT THE ASSESSEE SUFFERED FROM HEART ATTACK ON 30-05-2012 AND HAD UNDERGONE OP EN HEART SURGERY ON 04-06-2012. THEREAFTER, HE WAS ADVISED COM PLETE BED REST. SINCE HE WAS UNABLE TO WORK FOR 1 YEARS AND WA S UNDER BED REST FOR THE ABOVE MEDICAL REASONS THERE WAS DELAY IN FILIN G OF THE APPEAL FILED BY THE ASSESSEE. THE LD. COUNSEL FOR THE ASS ESSEE REFERRING TO THE ABOVE REASONS SUBMITTED THAT A LENIENT VIEW MAY BE TAKEN AND DELAY IN FILING OF THE APPEAL BE CONDONED. 3. THE LD. DEPARTMENTAL REPRESENTATIVE ON THE OTHER HA ND OBJECTED TO THE DELAY IN FILING OF THE APPEAL BY THE ASSESS EE. SHE SUBMITTED THAT THE OPERATION WAS DONE IN JUNE 2012 WHER EAS THE APPEAL WAS SUPPOSED TO BE FILED IN MAY 2013. THEREFORE, TH ERE IS NO VALID REASON FOR NON-FILING OF THE APPEAL IN TIME. SHE ACCORDIN GLY SUBMITTED THAT THE DELAY SHOULD NOT BE CONDONED. 4. AFTER HEARING BOTH THE SIDES AND CONSIDERING THE CONT ENTS OF THE AFFIDAVIT AS WELL AS THE CONDONATION PETITION AND THE MEDICAL REPORTS FILED, WE ARE OF THE CONSIDERED OPINION THAT THERE WAS A R EASONABLE CAUSE ON THE PART OF THE ASSESSEE FOR NON-FILING OF THE A PPEAL IN TIME. CONSIDERING THE TOTALITY OF THE FACTS OF THE CASE AND IN TH E INTEREST OF JUSTICE, WE CONDONE THE DELAY AND ADMIT THE APPEAL FOR ADJUDICATION. 5. FACTS OF THE CASE, IN BRIEF, ARE THAT THE ASSESSEE IS A COMPANY ENGAGED IN THE BUSINESS OF CONSTRUCTION OF RESIDENTIAL APAR TMENTS UNDER THE NAME AND STYLE OF M/S. SCHEMAK DEVELOPERS PV T. LTD. AT AURANGABAD. THE ASSESSEE FILED ITS RETURN OF INCOME ON 30 -09-2008 DECLARING LOSS OF RS.89,06,985/-. THE AO COMPLETED THE ASS ESSMENT U/S.143(3) ON 31-12-2010 DETERMINING THE TOTAL INCOME AT RS.95,09,334/-. WHILE DOING SO, THE AO MADE ADDITION OF 3 ITA NO.138/PN/2014 RS.1,64,94,443/- U/S.41(1) BEING WAIVER OF LOAN UNDER ONE TIME SETTLEMENT SCHEME BY DEOGIRI NAGARI COOP. BANK LTD. AND A N AMOUNT OF RS.19,21,876/- ON ACCOUNT OF BAD DEBT CLAIMED BY THE ASSESSEE. 6. SUBSEQUENTLY THE LD.CIT CALLED FOR THE RECORDS AND NO TED THAT THE ASSESSEE HAS SHOWN OPENING STOCK OF 76 FINISHED FLATS HAVING BUILT UP AREA OF 49,710 SQ.FT. VALUED AT RS.751/- PER SQ.FT. AT RS.3,73,45,250/-. THE ASSESSEE HAS NOT MADE ANY NEW CONSTRUCTION/ADDITION TO THE SAID FINISHED STOCK AND HAS S OLD 31 FLATS HAVING AGGREGATE BUILT UP AREA OF 17,825 SQ.FT. FOR A CONSID ERATION OF RS.1,28,70,000/-. THE BALANCE 45 FLATS HAVING BUILT UP AREA OF 31,825 SQ.FT. HAVE BEEN SHOWN AS CLOSING STOCK VALUED AT RS.2,15,22,375/- AT RS.675/- PER SQ.FT. THUS, THERE IS UNDER VALUATION OF CLOSING STOCK BY RS.76/- PER SQ.FT. SINCE THE A O HAD NOT LOOKED INTO THIS ASPECT, THE LD.CIT WAS OF THE OPINION THA T THE ORDER OF THE AO IS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE. IN VIEW OF THE ABOVE, HE ISSUED A NOTICE U/S.263 TO THE ASSESSEE. 7. ALTHOUGH OPPORTUNITIES WERE GIVEN TO THE ASSESSEE, TH E ASSESSEE DID NOT AVAIL OF THE OPPORTUNITY AND WAS SEEKING ADJOURNM ENTS FROM TIME TO TIME. FINALLY, THE LD.CIT GAVE A FINAL OPPORTUNITY TO THE ASSESSEE FIXING THE DATE OF HEARING ON 08-03-2013. SINC E NONE APPEARED ON BEHALF OF THE ASSESSEE ON THAT DATE OR BE FORE THE DATE OF FINALIZATION OF THE ORDER, THE LD.CIT PASSED THE ORDER U/S.2 63 HOLDING THAT PRIMA-FACIE IT APPEARS THAT THERE IS VARIATION IN VALU ATION OF CLOSING STOCK VALUED BY THE ASSESSEE FOR THE PREVIOUS YE AR AND THE CURRENT YEAR. THE AO DURING THE COURSE OF ASSESSMENT PROCEEDINGS HAS NOT EXAMINED THE ISSUE OF CLOSING STOCK VALUATION AS W ELL AS VARIATION IN AREA. THEREFORE, THE METHOD OF ACCOUNTING CON SISTENTLY 4 ITA NO.138/PN/2014 ADOPTED BY THE ASSESSEE FOR VALUATION OF CLOSING STOCK N EEDS VERIFICATION. SINCE DURING THE 263 PROCEEDINGS BEFORE HIM TH E ASSESSEE DID NOT EXPLAIN THE GENUINENESS OF THE ABOVE VA RIATION, THE LD.CIT DIRECTED THE AO TO EXAMINE THE METHOD OF ACCOUNT ING ADOPTED BY THE ASSESSEE FOR VALUATION OF CLOSING STOCK, FLATS SOLD DU RING THE YEAR UNDER CONSIDERATION BY EXAMINING THE BOOKS OF ACCO UNT AS WELL AS SALE DEED ETC. 8. AGGRIEVED WITH SUCH ORDER OF THE CIT THE ASSESSEE IS IN APPEAL BEFORE US WITH THE FOLLOWING GROUNDS : 1. THE LD.CIT ERRED IN LAW AND ON FACTS IN INVOKING THE PROVISIONS OF SECTION 263 IN RESPECT OF VALUATION OF CLOSING STOCK AT THE END OF THE YEAR WHICH WAS FULLY EXAMINED BY THE LEARNED AO IN THE ASSE SSMENT PROCEEDINGS. 2. THE LD.CIT ERRED IN LAW AND ON FACTS IN HOLDING T HE ORDER OF THE LEARNED AO AS ERRONEOUS AND PREJUDICIAL TO THE INTERE ST OF THE REVENUE IN RESPECT OF VALUATION OF CLOSING STOCK. 3. THE APPELLANT CRAVES TO ADD, ALTER, MODIFY OR SUBST ITUTE ANY GROUND OF APPEAL AT THE TIME OF HEARING. 9. THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE A SSESSEE IS ENTITLED TO CLAIM DEDUCTION U/S.80IB(10). THEREFORE, EVEN IF ADJUSTMENT IS MADE TO THE TOTAL INCOME OF THE ASSESSEE BY CONSIDERING HIGHER CLOSING STOCK VALUE, THEN ALSO, THE ENTIRE PROFIT IS E NTITLED TO DEDUCTION U/S.80IB(10). THERE IS NO PREJUDICE TO THE INTE REST OF THE REVENUE. ACCORDING TO THE LD. COUNSEL FOR THE ASSESSEE , FOR INVOKING THE PROVISIONS OF SECTION 263, THE TWIN CONDITIONS NAMELY (1 ) THE ORDER IS ERRONEOUS AND (B) THE ORDER IS PREJUDICIAL TO THE INTERE ST OF THE REVENUE MUST BE SATISFIED. IN THE INSTANT CASE, THE ORDE R MAY BE ERRONEOUS, HOWEVER, THE SAME CANNOT BE TERMED AS PREJ UDICIAL TO THE INTEREST OF THE REVENUE SINCE THE PROFIT FROM THE HOUSING PROJECT WILL BE ENTITLED TO DEDUCTION U/S.80IB(10). SHE FURTHER SUBMITTE D THAT THE 5 ITA NO.138/PN/2014 TRIBUNAL IN ASSESSEES OWN CASE FOR THE IMPUGNED ASSESSM ENT YEAR HAS RESTORED THE MATTER TO THE FILE OF THE AO TO EXAM INE THE ALLOWABILITY OF CLAIM OF DEDUCTION U/S.80IB(10). FURTHER, DURING A .Y. 2003-04, THE PROCEEDINGS INITIATED U/S.263 HAS ALSO BEEN D ROPPED WHERE ONE OF THE ISSUE WAS DEDUCTION U/S.80IB(10) ON ACCO UNT OF VALUATION OF CLOSING STOCK. SHE ACCORDINGLY SUBMITTED THAT THE ORDER PASSED U/S.263 BY THE CIT BE SET ASIDE AND THE GROUND S RAISED BY THE ASSESSEE BE ALLOWED. 10. THE LD. DEPARTMENTAL REPRESENTATIVE ON THE OTHER HA ND STRONGLY SUPPORTED THE ORDER OF THE CIT. REFERRING TO THE COPY OF THE ASSESSMENT ORDER THE LD. DEPARTMENTAL REPRESENTATIVE S UBMITTED THAT ALTHOUGH THE ASSESSEE HAS SHOWN THE VALUATION OF C LOSING STOCK OF THE FLATS AT A PRICE LESS THAN THE PRICE AT WHICH THE O PENING STOCK WAS SHOWN, THE AO HAS NOT RAISED ANY QUERY DURING THE ASSESSMENT PROCEEDINGS NOR THE ASSESSEE HAS JUSTIFIED THE REASONS FOR SUCH UNDER VALUATION. THEREFORE, THE ORDER PASSED BY THE AO IS ERRO NEOUS AS WELL AS PREJUDICIAL TO THE INTEREST OF THE REVENUE. SHE ACCOR DINGLY SUBMITTED THAT THE ORDER PASSED BY THE CIT BE UPHELD AND THE GROUNDS RAISED BY THE ASSESSEE BE DISMISSED. 11. WE HAVE CONSIDERED THE RIVAL ARGUMENTS MADE BY BOTH THE SIDES, PERUSED THE ORDERS OF THE AO AND LD.CIT AND THE PAPER BOOK FILED ON BEHALF OF THE ASSESSEE. FROM THE REASONS GIVEN BY THE LD.CIT FOR INVOKING THE JURISDICTION U/S.263, WE FIND THE ASSESSEE H AD SHOWN OPENING STOCK OF 76 FINISHED FLATS HAVING BUILT UP AREA OF 49, 710 SQ.FT. VALUED AT RS.751/- PER SQ.FT. AT RS.3,73,45,250/-. AFTER SELLING 31 FLATS DURING THE YEAR WHERE THE AGGREGATE BUILT UP AREA WAS 17,825 SQ.FT. FOR A CONSIDERATION OF RS.1,28,70,000/- THERE WERE 45 FLATS LEFT 6 ITA NO.138/PN/2014 HAVING BUILT UP AREA OF 31,825 SQ.FT. THE ASSESSEE HAS VA LUED SUCH CLOSING STOCK OF 45 FLATS AT RS.675/- PER SQ.FT. AT RS.2,15,22 ,375/-. IF WE CONSIDER THE SELLING PRICE OF 31 FLATS AT RS.1,28,70,000/-, THE RATE PER SQ.FT. COMES TO RS.722/- FOR 17,825 SQ.FT. HOWEVER, WE FIND THE ASSESSEE HAS VALUED THE CLOSING STOCK AT RS.675/- PER S Q.FT. AT RS.2,13,22,375/- WHICH IS LESS THAN THE OPENING RATE AS WELL AS THE AVERAGE RATE AT WHICH THE FLATS HAVE BEEN SOLD DURING TH E YEAR. FROM THE COPY OF THE ASSESSMENT ORDER, WE FIND THE AO HAS NO T CONSIDERED SUCH UNDER VALUATION OF CLOSING STOCK BY THE ASSESSEE. N O QUERY HAS BEEN RAISED ON THIS ISSUE WHICH IS VERY MUCH MATERIAL. THE ASSESSEE HAS ALSO NOT GIVEN ANY REASON DURING THE COURSE OF ASSE SSMENT PROCEEDINGS JUSTIFYING SUCH UNDER VALUATION. THE SUBMISSIO N OF THE LD. COUNSEL FOR THE ASSESSEE THAT THERE WAS FALL IN THE RE AL ESTATE MARKET AND THERE WAS DISTRESS SALE ON THE PART OF THE ASSESSEE IS ALSO NOT BORNE OUT FROM THE RECORDS. SO FAR AS THE CONTENT ION OF THE LD. COUNSEL FOR THE ASSESSEE THAT EVEN IF SUCH VALUATION IS INC REASED THE PROFIT WILL BE ENTITLED TO DEDUCTION U/S.80IB(10) AND THEREFOR E THERE IS NO PREJUDICE TO THE REVENUE CANNOT BE ACCEPTED AT TH IS JUNCTURE SINCE THE ASSESSEE HAS FILED A RETURN DECLARING LOSS WHICH HAS G ONE UP DUE TO SUCH UNDER VALUATION. 12. IN THE INSTANT CASE WE ARE SUPPOSED TO DECIDE AS TO WHETHER THE ORDER PASSED BY THE AO IS ERRONEOUS AS WELL AS PRE JUDICIAL TO THE INTEREST OF THE REVENUE. IN THE INSTANT CASE, THERE IS C OMPLETE NON- APPLICATION OF MIND BY THE AO SO FAR AS THE VALUATION OF TH E CLOSING STOCK OF 45 FLATS WITH BUILT UP AREA OF 31,825 SQ.FT. IS CONCE RNED IT IS THE SETTLED PROPOSITION OF LAW THAT FOR INVOKING JURISDICTIO N U/S.263 THE TWIN CONDITIONS THAT (A) THE ORDER IS ERRONEOUS AND (B ) THE ORDER IS PREJUDICIAL TO THE INTEREST OF THE REVENUE MUST BE SATISFIE D. IN THE 7 ITA NO.138/PN/2014 INSTANT CASE, THE ASSESSEE HAS UNDERVALUED THE CLOSING STOCK OF 45 FLATS WITH BUILT UP AREA OF 31,825 SQ.FT WHEREIN IT HAS ADOPTE D THE RATE OF RS.675/- PER SQ.FT. AS AGAINST THE OPENING VALUE OF RS.75 2/- PER SQ.FT. THE ASSESSEE DURING THE YEAR HAS SOLD THE FLATS AT A RATE OF RS.722/- PER SQ.FT. NO JUSTIFIABLE REASON HAS BEEN GIVEN BY THE ASSESSEE EITHER BEFORE THE AO OR DURING THE PROCEEDINGS U/S.263 TO SUBSTANTIATE THAT THERE IS JUSTIFIABLE REASON FOR SUCH UN DER VALUATION. THE AO HAS NOT RAISED ANY QUERY REGARDING THIS VITAL AS PECT. THEREFORE, THE ORDER OF THE AO IS ERRONEOUS AS WELL AS PR EJUDICIAL TO THE INTEREST OF THE REVENUE. UNDER THESE CIRCUMSTANCES , THE LD.CIT, IN OUR OPINION, WAS JUSTIFIED IN INVOKING THE JURISDICTION U/S.26 3 OF THE I.T. ACT. WE ACCORDINGLY UPHOLD THE ORDER OF THE CI T ON THIS ISSUE AND THE GROUNDS RAISED BY THE ASSESSEE ARE DISMISSED. 13. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 23-09-2015. SD/- SD/- ( VIKAS AWASTHY ) ( R.K. PANDA ) ' / JUDICIAL MEMBER / ACCOUNTANT MEMBER IQ.KS PUNE ; # DATED : 23 TH SEPTEMBER, 2015. LRH'K ( )'+ , / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3. ( S / THE CIT, AURANGABAD 4. 5. ) ,, ,, IQ.KS / DR, ITAT, B PUNE; / GUARD FILE. / BY ORDER , ) ) //TRUE COPY// { //TRUE COPY// 0 , / SR. PRIVATE SECRETARY ,, IQ.KS / ITAT, PUNE