ACIT, Circle-1, Nellore V. M/s. Sri Sai Builders, Nellore

ITA 1757/HYD/2011

• Counselvise Citation: 175722514 RSA 2011
• Duration Of Justice: 2 year(s) 8 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-06-2014
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2006-2007
• Appeal Filed On: 11-10-2011
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Assessee Lawyers: K UMA
• Keywords: Reopening of assessment; Opportunity of being heard; Tangible material; Difference of opinion; Change of opinion
• Section: 12A; 147; 69; 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH B, HYDERABAD BEFORE SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER AND SHRI SAKTIJIT DEY, JUDICIAL MEMBER ITA NO. 1757/HYD/2011 ASSESSMENT YEAR : 2006-07 ASST. COMMISSIONER OF INCOME- TAX, CIRCLE 1, NELLORE. M/S SRI SAI BUILDERS, NELLORE. PAN ABCFS3107F (APPELLANT) (RESPONDENT) C.O. NO. 10/HYD/2012 (IN ITA NO. 1757/HYD/2011 ASSESSMENT YEAR: 2006-07) M/S SRI SAI BUILDERS, NELLORE. PAN ABCFS3107F. ASST. COMMISSIONER OF INCOME- TAX, CIRCLE 1, NELLORE. (CROSS OBJECTOR) (RESPONDENT) REVENUE BY SHRI SOLGY JOSE T. KOTTARAM ASSESSEE BY SMT. K. UMA DATE OF HEARING 09-06-2014 DATE OF PRONOUNCEMENT 18-06-2014 O R D E R PER SAKTIJIT DEY, A.M.: THIS APPEAL OF THE DEPARTMENT IS DIRECTED AGAINST THE ORDER DATED 14/07/2011 PASSED BY THE CIT(A), GUNTUR FOR T HE ASSESSMENT YEAR 2006-07. THE ASSESSEE HAS ALSO FILED C.O. AGAI NST THE VERY SAME ORDER OF THE CIT(A). 2. AS CAN BE SEEN FROM THE GROUNDS RAISED BOTH THE DEPARTMENT AS WELL AS THE ASSESSEE ARE AGGRIEVED WITH THE ADDITIO N SUSTAINED BY THE LEARNED CIT(A), THOUGH FOR TOTALLY DIFFERENT REASON S, ON ACCOUNT OF 2 ITA NO. 1757/H/2011 & CO NO. 10/H/12 SRI SAI BUILDERS, NELLORE VALUATION OF CLOSING STOCK. IN ADDITION, THE ASSESS EE HAS RAISED A GROUND CHALLENGING THE JURISDICTION OF THE AO IN IN ITIATING PROCEEDING U/S 147 OF THE ACT. 3. BRIEFLY STATED, ASSESSEE A PARTNERSHIP FIRM IS E NGAGED IN THE BUSINESS OF REAL ESTATE AND LAND DEVELOPMENT. FOR T HE IMPUGNED ASSESSMENT YEAR ASSESSEE FILED ITS RETURN OF INCOME ON 31/10/2006 DECLARING TOTAL INCOME OF RS. 11,52,530/-. THE RETU RN OF INCOME INITIALLY WAS PROCESSED U/S 143(1). SUBSEQUENTLY, A S MENTIONED BY THE AO IN ASSESSMENT ORDER, ON PERUSAL OF THE P&L A/C., IT WAS NOTICED THAT ASSESSEE HAS INCURRED EXPENDITURE OF RS. 2,48, 44,380/-. FURTHER, ON EXAMINING THE 3CD REPORT, AO NOTICED THAT OUT OF TOTAL LAND DEVELOPED OF 1,81,256.60 SQ.FT., ASSESSEE DURING TH E YEAR HAS SOLD 53221.70 SFT. HAVING CLOSING STOCK OF UNSOLD PLOTS OF 1,28,034.02 SFT., WHICH HAS BEEN VALUED AT COST AMOUNTING TO RS. 1,20 ,73,178.02. ON THE BASIS OF THE AFORESAID INFORMATION THE AO WORKE D OUT THE UNIT COST OF LAND AT RS. 137/- PER SFT. (RS. 2,48,44,380/1,81 ,256.5 SFT.). BY APPLYING THE RATE OF RS. 137/- PER SFT., THE AO WOR KED OUT THE VALUE OF CLOSING STOCK AT RS. 1,75,40,767/-, WHICH ACCORDING TO THE AO SHOULD HAVE BEEN ADOPTED BY THE ASSESSEE IN STEAD OF RS. 1 ,20,73,178/-. THIS RESULTED IN UNDER VALUATION OF CLOSING STOCK T O THE TUNE OF RS. 54,67,589/- NECESSITATING INITIATION OF ACTION U/S 147 OF THE ACT. 4. DURING THE ASSESSMENT PROCEEDING WHEN THE AO PRO POSED TO ADD RS. 54,67,589/- TOWARDS UNDERVALUATION OF CLOSI NG STOCK, THE ASSESSEE REPLIED THAT BANGALORE METROPOLITAN REGION DEVELOPMENT AUTHORITY (BMRDA) WHILE GRANTING APPROVAL IMPOSED A CONDITION THAT THE LAYOUT SHOULD BE SOLD IN TWO PHASES I.E., INITI ALLY ONLY 60% OF THE LAND CAN BE SOLD AND ONLY AFTER VERIFYING THAT LAY OUT HAS BEEN DEVELOPED AND NECESSARY FACILITIES HAVE BEEN CREATE D BALANCE 40% LAND WILL BE PERMITTED TO SOLD. IT WAS SUBMITTED TH AT WHILE GRANTING PERMISSION FOR SALE OF INITIAL 60% OF LAND, BMRDA A LSO ALLOTTED PLOT NUMBERS. THEREFORE, BEING A PRUDENT BUSINESSMAN, AS SESSEE THOUGHT 3 ITA NO. 1757/H/2011 & CO NO. 10/H/12 SRI SAI BUILDERS, NELLORE IT PROPER TO DEVELOP 60% OF THE LAND PERMITTED TO B E SOLD BY BMRDA AND BALANCE 40% LAND, WHICH CONSTITUTES THE CLOSING STOCK, WAS NOT DEVELOPED. THE BALANCE PLOTS WERE DEVELOPED AND SOL D IN SUBSEQUENT YEARS. THEREFORE, IT WAS SUBMITTED THAT IT WILL BE INCORRECT TO ASSUME THAT COST OF DEVELOPMENT IS EVENLY SPREAD OVER ALL PLOTS. IT WAS SUBMITTED, FOR THESE REASONS ASSESSEE HAS ONLY TAKE N THE ACTUAL COST OF LAND IN RESPECT OF THE BALANCE PLOTS. 5. THOUGH THE AO DID NOT DISPUTE ASSESSEES CONTENT ION WITH REGARD TO THE CONDITION IMPOSED BY BMRDA BUT HE NEV ERTHELESS OBSERVED THAT AS PER THE COLUMN 12A OF THE FORM NO. 3CD, THE ASSESSEE ITSELF HAS ADMITTED THAT THE METHOD OF VAL UATION OF CLOSING STOCK EMPLOYED BY IT IN THE PREVIOUS YEAR IS AT COS T. THEREFORE, THE ASSESSEE ITSELF ARRIVED AT THE VALUE OF CLOSING STO CK OF UNSOLD UNITS AT COST AFTER CONSIDERING THE NATURE OF THE UNSOLD UNI TS. ASSESSEES CONTENTION THAT THE VALUE OF CLOSING STOCK ADOPTED BY HIM ON UNSOLD PLOTS WAS ONLY COST OF THE LAND AND NOT TAKING INT O CONSIDERATION THE EXPENDITURE INCURRED FOR DEVELOPMENT CANNOT BE ACCE PTED. THE AO, THEREFORE, APPLYING THE UNIT COST OF LAND PER SFT. AS WORKED OUT BY HIM AT RS. 137 PER SFT., WORKED OUT THE VALUATION OF CL OSING STOCK AT RS. 1,75,40,767/-. THE ASSESSEE HAVING SHOWN THE VALUE OF CLOSING STOCK AT RS. 1,27,73,178/-, DIFFERENTIAL AMOUNT WAS TREAT ED AS UNDER VALUATION OF CLOSING STOCK AND ADDED TO THE INCOME OF THE ASSESSEE U/S 69 OF THE ACT. BEING AGGRIEVED OF SUCH ADDITION , THE ASSESSEE PREFERRED APPEAL BEFORE THE CIT(A). 6. BEFORE THE CIT(A), THE ASSESSEE REITERATED THE S AME CONTENTIONS, WHICH WERE ADVANCED BEFORE THE AO. THE CIT(A) AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE THOUGH UPHELD FINDING OF THE AO WITH REGARD TO UNDER VALUATION OF THE CLOSIN G STOCK BUT HE DID NOT AGREE TO THE QUANTUM OF UNDER VALUATION WORKED OUT BY THE AO. CIT(A) WAS OF THE VIEW THAT IT WILL BE REASONABLE T O RETAIN 1% OF THE CLOSING STOCK AS DETERMINED BY THE AO TOWARDS UNDER VALUATION OF 4 ITA NO. 1757/H/2011 & CO NO. 10/H/12 SRI SAI BUILDERS, NELLORE CLOSING STOCK. ACCORDINGLY, OUT OF THE TOTAL ADDITI ON OF RS. 54,67,589/- MADE BY THE AO, THE CIT(A) SUSTAINED THE ADDITION O F RS. 54,680/-. THE RELEVANT FINDINGS OF THE CIT(A) IN DELETING THE BALANCE ADDITION ARE AS UNDER: 4.2.1 I HAVE CONSIDERED THE SUBMISSIONS MADE BY T HE APPELLANT, GONE THROUGH THE ORDER OF THE ASSESSING OFFICER. IT IS SEEN FROM THE RECORDS THAT THE IMPUGNED PROJECT HAS BEEN UNDERTAKEN BY THE APPELLANT DURING THE YEAR UNDER C ONSIDERATION AND LASTED FOR 3 MORE YEARS; THUS THIS VENTURE TOOK 4 YEARS FOR ITS DEVELOPMENT AND SALE OF THE ENTIRE PLOTS AS CON CEIVED. IT IS TRUE THAT THE APPELLANT FIRM HAS TO CONDUCT ITSELF AS PER THE TERMS AND CONDITIONS AS LAID DOWN BY THE BANGALORE METROPOLITAN REGION DEVELOPMENT AUTHORITY (BMRDA, F OR SHORT), WHICH IN THIS CASE HAS APPROVED FOR SALE OF PLOTS I N 2 PHASES. IN THE INITIAL PHASE ONLY 60% OF THE PLOTS AS APPROVED AND LISTED IN THEIR APPROVAL LETTER ARE TO BE SOLD AND AFTER CONS IDERING THE DEVELOPMENT AS APPROVED THE SALE OF BALANCE 40% OF THE PLOTS IS ALLOWED BY THE BMRDA. IN THE CIRCUMSTANCES, ANY PRUDENT BUSINESSMAN IS INCLINED TO DEVELOP THE 60% OF PLOTS EARMARKED, WHICH HAVE BEEN PERMITTED TO BE SOLD IN THE FIRST P HASE, INSTEAD OF DEVELOPING THE ENTIRE PROJECT IN A UNIFORM MANNE R. IN FACT, WHAT THE APPELLANT DID IN THE FIRST YEAR OF THE PRO JECT WAS THE SAME, I.E., DEVELOPING THE 60% OF THE EARMARKED PLOTS, INSTEAD OF DEVELOPING THE ENTIRE PROJECT AT A STRETCH. WHIL E THIS IS THE FACT OF THE CASE DURING THE FIRST YEAR OF THE PROJE CT AND ACCORDINGLY THE CLOSING STOCK WAS VALUED ON THE BAS IS OF ACTUAL EXPENDITURE INVOLVED BY THE APPELLANT, THE AO IN CO URSE OF THE ASSESSMENT PROCEEDINGS HAS WORKED OUT THE CLOSING STOCK BASED ON UNIFORM DEVELOPMENT, I.E., WHETHER IT WAS 60% IN FIRST PHASE OR 40% IN SECOND PHASE, THE ENTIRE DEVELOPMENT EXPENDITURE WAS UNIFORMLY SPREAD ON ENTIRE PROJECT, WHICH IS NOT SCIENTIFIC OR REALISTIC. IN SO DOING, THE AO AS PER THE WORKING SPELT OUT BY HIM IN THE BODY OF THE ASSESSMENT ORDE R HAS ARRIVED AT UNDER STATEMENT OF CLOSING STOCK OF RS. 54,67,589/-, WHICH WAS ADDED TO THE RETURNED INCOME WHILE FINALI SING THE ASSESSMENT PROCEEDINGS, WHICH IS NOT CORRECT AND PR OPER. ESSENTIALLY, THIS IS THE ONE WHICH IS UNDER CHALLEN GE. 4.2.2 IN FACT, THOUGH THEORETICALLY, THE SUBMISSION S OF THE AR HAS A MERIT, THE CONTENTION THAT THE AO WAS IN ERRO R COMPLETELY IS NOT ACCEPTABLE, AS SOME OF THE EXPENSES INCURRED BY THE APPELLANT HAVE A BEARING FOR THE ENTIRE PERIOD OF T HE PROJECT. FOR INSTANCE, COMMON WORKS LIKE LAYING ROADS, SEWERAGE PIPELINES, EXPENSES INCURRED FOR CITE OFFICE, QUARTERS FOR WAT CHMAN WATCH AND WARD STAFF SALARIES AND ADVERTISEMENT EXPENSES OF T HE PROJECT IN PRINT, AIR, TV, CABLE NETWORK ETC AND ETC., WHICH 5 ITA NO. 1757/H/2011 & CO NO. 10/H/12 SRI SAI BUILDERS, NELLORE HAVE A BEARING NOT ONLY FOR THE YEAR UNDER CONSIDER ATION, BUT ALSO OTHER YEARS. EVEN THOUGH THE AR WAS IN AGREEME NT WITH THE PROPOSITION THAT SOME OF THE ITEMS OF EXPENDITU RE HAVE A BEARING IN THE SUBSEQUENT YEARS, AS TO WHAT EXTENT IT WILL HAVE A BEARING IS NOT ASCERTAINABLE. HENCE A REASONABLE ES TIMATE HAS TO BE RESORTED TO, TO FIND OUT THE UNREASONABLE AMO UNT INVOLVED, IN THE VALUATION OF THE CLOSING STOCK. 4.2.3.LT MAY HOWEVER BE NOTED HERE THAT THERE IS NO DISPUTE IN AS MUCH AS THE QUANTUM OF EXPENDITURE IS INVOLVED, BUT PERCEPTIONS CHANGED WHILE WORKING OUT THE VALUE OF CLOSING STOCK. THERE IS ANOTHER POINT TO BE NOTED HERE THAT ONE YEAR'S CLOSING STOCK IS NEXT YEAR'S OPENING STOCK. BUT, NO NETHELESS, THE FINDING OF THE AO THAT THE VALUE OF CLOSING STOCK D ETERMINED BY THE APPELLANT IS NOT HUNDRED PERCENT CORRECT, IS BO RNE OUT OF RECORDS. FOR THAT, THE AO WAS ALSO NOT CORRECT IN F INDING THE DEFICIENCY IN WORKING OUT OF CLOSING STOCK BY THE A PPELLANT, AS THE AO HAS SPREAD THE EXPENDITURE EQUALLY, WHERE AS THE FACTS REVEAL THAT MAJOR PORTION OF EXPENDITURE WAS REQUIR ED TO BE SPENT ON 60% OF THE PLOTS THAT WERE APPROVED FOR SA LE IN THE FIRST PHASE BY THE BANGALORE METROPOLITAN REGION DE VELOPMENT AUTHORITY. THUS, THE AO'S FINDING THAT THE CLOSING STOCK FOR THE YEAR ENDING 31-03-2006 IS UNDER STATED IS UPHELD, T HE QUANTUM AS WORKED OUT BY THE AO COULD NOT BE UPHELD AS THE WORKING ADOPTED BY THE AO WAS NOT FOOL PROOF. AS TO WHAT IS THE AMOUNT OF ADDITION THAT HAS TO BE HELD TO BE REASONABLE IS SPELT OUT IN THE FOLLOWING PARA. 4.2.4.LT IS IMPORTANT TO NOTE HERE THAT THOUGH BOTH THE APPELLANT AND THE AO WERE CORRECT IN WORKING OUT THE VALUE OF THE CLOSING STOCK FOR THE YEAR ENDING 31-03-2006, AS TO HOW BOT H OF THEM WERE WRONG IN QUANTIFYING THE CLOSING STOCK AMOUNT WAS SPELT OUT IN THE PRECEDING PARAGRAPHS. SINCE, IT HAS TO B E RESOLVED AMICABLY, IN MY CONSIDERED OPINION, THE ENDS OF JUS TICE ARE MET IF ONE PERCENT OF CLOSING STOCK AS DETERMINED BY THE AO IS RETAINED AND THE AO IS DIRECTED ACCORDINGLY. THAT I S, AN AMOUNT OF RS. 54,680/- IS RETAINED AS ADDITION TO THE CLOS ING STOCK FOR THIS YEAR, IN PLACE OF RS. 54,67,589/-, IMPLYING TH EREBY THAT THE APPELLANT'S OPENING STOCK FOR THE NEXT ASSESSMENT Y EAR HAS TO BE ENHANCED BY THE SAME AMOUNT. 7. SO FAR AS THE GROUND RAISED BY THE ASSESSEE WITH REGARD TO LEGALITY OF PROCEEDING INITIATED U/S 148 IS CONCERN ED, THE CIT(A) DISMISSED THE SAME BY HOLDING AS UNDER: 5. IN AS MUCH AS THE CHALLENGE TO THE REOPENING OF THE ASSESSMENT BY ISSUE OF A NOTICE UNDER SECTION 148, EVEN THOUGH IT IS ONE OF THE GROUNDS PREFERRED BY THE APPELLANT , NEITHER IT 6 ITA NO. 1757/H/2011 & CO NO. 10/H/12 SRI SAI BUILDERS, NELLORE WAS WITHDRAWN NOR ANY DEFENCE WAS PUT FORTH BY THE APPELLANT REVEALS THAT IT IS NOT SERIOUS IN PERUSING THIS GRO UND OF APPEAL. HENCE, THE SAME IS TREATED AS DISMISSED. 8. THE LEARNED DR SUBMITTED BEFORE US THAT CONCLUSI ON DRAWN BY CIT(A) IS NOT PROPER. THE LEARNED DR SUBMITTED THAT THE FACT THAT THE ASSESSEE HAS VALUED THE CLOSING STOCK AT COST IS VE RY MUCH EVIDENT FROM FORM NO. 3CD. THEREFORE, ON THE BASIS OF TOTAL EXPENDITURE DEBITED TO THE P&L A/C BEING RS. 2,48,44,380/-, TH E ASSESSING OFFICER HAS WORKED OUT THE UNIT COST FOR SFT. FOR VALUATION OF CLOSING STOCK. THOUGH IT IS THE CLAIM OF THE ASSESSEE THAT THE UNS OLD LAND WAS NOT DEVELOPED, HENCE, THE COST OF LAND CAN ONLY BE TAKE N AT THE TIME OF VALUATION OF CLOSING STOCK BUT THE ASSESSEE HAS TO PROVE THE SAME. IT WAS SUBMITTED THAT THE CIT(A) WITHOUT CONSIDERING T HE FACTS IN PROPER PERSPECTIVE HAS DIRECTED THE ASSESSING OFFICER TO A DD 1% OF THE CLOSING STOCK DETERMINED TOWARDS UNDER VALUATION OF CLOSING STOCK. THE LEARNED DR SUBMITTED THAT THE CIT(A) WAS NOT CO RRECT IN DELETING THE MAJOR PART OF THE ADDITION MADE WHEN HE ACCEPTS IN PRINCIPLE THAT THE FINDING OF THE ASSESSING OFFICER THAT ASSESSEE HAS UNDERVALUED THE CLOSING STOCK AND HAS ALSO ACCEPTED THE PROCEDU RE ADOPTED BY THE ASSESSING OFFICER IN VALUATION OF THE CLOSING STOCK . 9. THE LEARNED AR, ON THE OTHER HAND, STRONGLY CONT ESTING THE ARGUMENTS PUT FORWARD BY THE DEPARTMENT SUBMITTED T HAT THE ASSESSING OFFICER AS WELL AS THE CIT(A) HAVING ACCE PTED THE FACT THAT CLOSING STOCK COMPRISES OF ONLY 40% OF THE UNDEVELO PED LAND, THE EXPENDITURE DEBITED TO THE P&L A/C CANNOT BE APPORT IONED TOWARDS COST OF THE UNDEVELOPED LAND REMAINING AS CLOSING S TOCK. THE LEARNED AR SUBMITTED THAT WHEN THERE IS NO DISPUTE TO THE F ACT THAT 40% OF LAND WHICH REMAINS AS CLOSING STOCK IS UNDEVELOPED, THE VALUATION ADOPTED BY THE ASSESSEE OF THE CLOSING STOCK CANNOT BE DISTURBED. FURTHER, THE LEARNED AR SUBMITTED THAT THOUGH THE A SSESSEE HAS SPECIFICALLY RAISED A GROUND BEFORE THE CIT(A) WITH REGARD TO THE VALIDITY OF THE PROCEEDING INITIATED U/.S 147 OF TH E ACT., THE CIT(A) WAS NOT JUSTIFIED IN NOT DECIDING THE ISSUE RAISED ACCO RDING TO ITS OWN 7 ITA NO. 1757/H/2011 & CO NO. 10/H/12 SRI SAI BUILDERS, NELLORE MERIT. FURTHER ELABORATING, THE LEARNED AR SUBMITTE D THAT THERE BEING NO FRESH OR TANGIBLE MATERIAL/INFORMATION IN THE PO SSESSION OF THE ASSESSING OFFICER, THE ASSESSING OFFICER COULD NOT HAVE INVOKED JURISDICTION U/S 147 OF THE ACT BY RELYING UPON THE VERY SAME MATERIAL/INFORMATION WHICH WAS AVAILABLE BEFORE THE ASSESSING OFFICER AT THE TIME OF COMPLETION OF ORIGINAL ASSESSMENT. IT WAS SUBMITTED THAT THE SATISFACTION HAVING BEEN REACHED BY THE AS SESSING OFFICER ON THE BASIS OF THE SELF-SAME MATERIAL, REOPENING OF T HE ASSESSMENT IS ONLY ON A MERE CHANGE OF OPINION, WHICH IS NOT PERM ISSIBLE IN LAW. IN SUPPORT OF SUCH CONTENTION, THE LEARNED AR RELIED U PON A DECISION OF HONBLE SUPREME COURT IN CASE OF KELVINATOR OF INDI A LTD., 320 ITR 561. 10. WE HAVE CONSIDERED THE SUBMISSIONS OF THE PARTI ES AND PERUSED THE MATERIALS ON RECORD AS WELL AS THE ORDERS OF TH E REVENUE AUTHORITIES ON THIS ISSUE. AS CAN BE SEEN, THE ASSE SSING OFFICER HAS WORKED OUT THE UNDERVALUATION IN CLOSING STOCK BY M AINLY RELYING UPON THE NOTE IN THE 3CD REPORT WHERE IT IS STATED THAT CLOSING STOCK HAS BEEN VALUED AT COST. ON THAT BASIS, THE ASSESSING O FFICER TREATED THE ENTIRE EXPENDITURE OF RS. 2,48,44,380/- AS COST OF THE TOTAL EXTENT OF LAND OF 1,81,256.50 SFT., TO WORK OUT THE UNIT COST PER SFT. TO RS. 137/-. BY APPLYING THE AFORESAID UNIT COST OF RS. 137/- TO THE UNSOLD LAND OF 1,28,304.30 SFT., THE ASSESSING OFFICER HAS WORKED OUT THE VALUE OF CLOSING STOCK AT RS. 1,75,40,767/-. HOWEVER, FROM T HE DISCUSSION MADE IN THE ASSESSMENT ORDER, IT APPEARS, IT IS THE SPECIFIC CONTENTION OF THE ASSESSEE THAT IT HAS DEVELOPED ONLY 60% OF T HE LAND AS PER THE LAY OUT APPROVED BY BMRDA AND BALANCE 40% WAS NOT A T ALL DEVELOPED. THEREFORE, FOR VALUATION OF BALANCE 40%, THE ASSESSEE HAS ONLY TAKEN THE COST OF LAND. IT IS ALSO THE SPECIFI C PLEA OF THE ASSESSEE BEFORE THE DEPARTMENTAL AUTHORITIES AS WELL AS BEFO RE US THAT THE COST OF DEVELOPMENT, WHICH WAS INCURRED FOR 60% OF THE D EVELOPED LAND, WHICH HAS BEEN SOLD CANNOT BE APPORTIONED TOWARDS C OST OF THE 40% UNDEVELOPED LAND REMAINING AS CLOSING STOCK. THIS F ACT, IN OUR VIEW, 8 ITA NO. 1757/H/2011 & CO NO. 10/H/12 SRI SAI BUILDERS, NELLORE HAS NOT BEEN PROPERLY CONSIDERED BY THE ASSESSING O FFICER. IT IS CLEAR FROM THE ASSESSMENT ORDER THAT ASSESSING OFFICER HA S WORKED OUT UNDER VALUATION BY SIMPLY RELYING UPON THE FACT TH AT AS PER THE FORM NO. 3CD, THE ASSESSEE HAS ADMITTED THAT THE VALUATI ON OF CLOSING STOCK IS AT COST. SIMILARLY, THE CIT(A)S ORDER IS NOT ONLY CONFUSING BUT AT THE SAME TIME APPEARS TO BE CONTRADICTORY. THOUG H ON ONE HAND THE CIT(A) HAS UPHELD ASSESSING OFFICERS FINDING T HAT CLOSING STOCK FOR THE YEAR ENDING WAS UNDERSTATED BUT AT THE SAME TIME, HE HAS NOT AGREED WITH THE QUANTUM WORKED OUT BY THE ASSESSING OFFICER. IT IS ALSO PERTINENT TO MENTION HERE THAT IN PARA 4.2.4, THE CIT(A) WHILE OBSERVING THAT BOTH THE ASSESSEE AS WELL AS THE ASS ESSING OFFICER WERE CORRECT IN WORKING OUT THE VALUE OF THE CLOSIN G STOCK FOR THE YEAR ENDING 31/03/2006, IN THE SAME BREATH HAS OBSERVED THAT BOTH OF THEM WERE WRONG IN QUANTIFYING CLOSING STOCK. THIS VIEW OF THE CIT(A), ACCORDING TO US, IS TOTALLY CONTRADICTORY. IT IS AL SO NOT UNDERSTOOD ON WHAT BASIS THE CIT(A) HAS CONCLUDED THAT 1% OF CLOS ING STOCK DETERMINED BY THE ASSESSING OFFICER IS TO BE TREATE D AS UNDER VALUATION MADE BY THE ASSESSEE. IN FACT, THE CIT(A) HAS COMMITTED FURTHER ERROR WHILE RETAINING ADDITION OF RS. 54,68 0/- SINCE HE HAS DIRECTED THE ASSESSING OFFICER TO TREAT 1% OF CLOSI NG STOCK AS DETERMINED BY HIM. AS CAN BE SEEN FROM THE ASSESSME NT ORDER, THE CLOSING STOCK DETERMINED BY THE ASSESSING OFFICER I S RS. 1,75,40,767/-, 1% OF WHICH COMES TO RS. 1,75,407/-. 11. SO FAR AS THE ISSUE OF REOPENING OF ASSESSMENT U/S 147 IS CONCERNED, ON PERUSAL OF THE ORDER OF CIT(A) ITSELF IT BECOMES CLEAR THAT THE ASSESSEE HAS RAISED A SPECIFIC GROUND WITH REGARD TO VALIDITY OF PROCEEDING U/S 148 OF THE ACT. HOWEVER, AS IT AP PEARS FROM FINDING OF THE CIT(A) IN PARA 5 OF HIS ORDER, HE HAS NOT DE CIDED THE ISSUE ON MERIT. IT IS THE SPECIFIC CONTENTION OF THE LEARNED AR BEFORE US THAT REOPENING OF ASSESSMENT IS INVALID IN LAW AS IT HAS BEEN MADE ON A MERE CHANGE OF OPINION. IT WAS CONTENDED THAT SINCE THE ASSESSING OFFICER HAS REOPENED THE ASSESSMENT BY RELYING UPON THE SAME 9 ITA NO. 1757/H/2011 & CO NO. 10/H/12 SRI SAI BUILDERS, NELLORE MATERIAL, WHICH WAS CONSIDERED AT THE TIME OF ORIGI NAL ASSESSMENT REOPENING OF ASSESSMENT IS BAD IN LAW. THIS ASPECT, IN OUR VIEW HAS NOT BEEN CONSIDERED PROPERLY BY LEARNED CIT(A). 12. HAVING CONSIDERED THE SUBMISSIONS OF THE PARTIE S IN THE LIGHT OF THE MATERIALS ON RECORD, WE ARE OF THE VIEW THAT TH E ALL THE ISSUES RAISED BY THE DEPARTMENT AS WELL AS ASSESSEE NEEDS TO BE DECIDED AFRESH BY THE CIT(A) AS WE ARE UNABLE TO RECORD A C LEAR FINDING OF FACT ON THE ISSUES RAISED IN ABSENCE OF RELEVANT MATERIA L LIKE PERMISSION OF BMRDA AND DETAILS OF EXPENDITURE INCURRED BY THE A SSESSEE FOR DEVELOPMENT, LAY OUT PLAN ETC. THEREFORE, CONSIDERI NG THE FACT THAT THE CIT(A) HAS NOT APPRECIATED THE FACTS PROPERLY WITH REGARD TO VALUATION OF CLOSING STOCK AS WELL AS HE HAS NOT DECIDED THE ISSUE OF VALIDITY OF INITIATION OF PROCEEDING U/S 148 OF THE ACT, ON MER IT, WE ARE INCLINED TO REMIT THE MATTER BACK TO THE FILE OF THE CIT(A) FOR DECIDING BOTH THE ISSUES, VIZ., VALIDITY OF PROCEEDING INITIATED U/S 148 OF THE ACT AS WELL AS THE ISSUE OF VALUATION OF CLOSING STOCK. THE CIT (A) MUST AFFORD A REASONABLE OPPORTUNITY OF BEING HEARD IN THE MATTER TO THE ASSESSEE AND DECIDE THE ISSUE AFRESH AFTER CONSIDERING ALL T HE MATERIALS ON RECORD. 13. IN THE RESULT, APPEAL OF THE DEPARTMENT AS WELL AS THE C.O OF THE ASSESSEE ARE CONSIDERED TO BE ALLOWED FOR STATISTIC AL PURPOSES. PRONOUNCED IN THE OPEN COURT ON 18/06/2014. SD/- SD/- (B. RAMAKOTAIAH) (SAKTIJIT DE Y) ACCOUNTANT MEMBER JU DICIAL MEMBER HYDERABAD, DATED: 18 TH JUNE, 2014 KV 10 ITA NO. 1757/H/2011 & CO NO. 10/H/12 SRI SAI BUILDERS, NELLORE COPY TO:- 1) ACIT, CIRCLE 1, 24-2-438, GNT ROAD, DARGAMITTA , NELLORE. 2) M/S SRI SAI BUILDERS, 15-110-1, BRINDAVANAM, NEL LORE 3)CIT(A), GUNTUR 4) CIT, GUNTUR. 5)THE DEPARTMENTAL REPRESENTATIVE, I.T.A.T., HYDER ABAD.