ACIT, Jabalpur V. Sudhir Chandra Datt, Jabalpur

MA 1/JAB/2021

• Counselvise Citation: [2022] 104 COUNSELVISE.COM (IT) 4849 (ITAT-JABALPUR)
• Duration Of Justice: 1 year(s) 1 month(s) 13 day(s)
• Appeal Type: Miscellaneous Application
• Pronouncement Date: 05-04-2022
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2009-2010
• Appeal Filed On: 22-02-2021
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Assessee Lawyers: SANJAY SETH

Judgement Text

1 | P a g e IN THE INCOME TAX APPELLATE TRIBUNAL JABALPUR BENCH, JABALPUR (through web-based video conferencing platform) BEFORE SHRI SANJAY ARORA, HON’BLE ACCOUNTANT MEMBER & SHRI MANOMOHAN DAS, HON'BLE JUDICIAL MEMBER M.A. No. 01/JAB/2021 (arising out of ITA No. 244/JAB/2013) (Asst. Year : 2009-10) Applicant by : Shri S.K. Halder, Sr. DR Respondent by : Shri Sanjay Seth, FCA Date of hearing : 30/03/2022 Date of pronouncement : 06/04/2022 O R D E R Per Sanjay Arora, AM This is a Miscellaneous Application (MA) by the Revenue directed against the Order u/s. 254(1) of the Income Tax Act, 1961 (‘the Act’, hereinafter), dated 07/09/2020, by the Tribunal in the captioned appeal by the assessee-respondent for Assessment Year (AY) 2009-10. 2. The appeal raised three Grounds. The instant MA concerns the assessee’s Ground 3 (and Gd. 1 in part) before the Tribunal, contesting the addition for Rs. 27.40 lacs toward under-valuation of closing inventory insofar as it relates to one of three construction projects in progress as at the year-end, i.e., Datt Township Project, raising the following grounds: Asst. CIT, Circle-1(1), Jabalpur. vs. Sudhir Chandra Datt, 1148-A,Napier Town, Jabalpur. [PAN : ACSPD 5225 E] (Applicant) (Respondent) MA No. 01/JAB/2021 (AY: 2009-10) Asst. CIT vs. Sudhir Chandra Datt 2 “1. Whether on the facts and in the circumstances of the case, the Hon'ble ITAT erred in deleting the addition on account of difference in valuation of closing stock and WIP without appreciating the findings of the AO that assessee has shown much higher value per sq.ft. in the township of Datt Tower & Datt Residency i.e. Rs. 700 per sq.ft. as compared to YMCA (Datt Township) for Rs. 300/- per sq.ft., whereas both the parties were situated in same locality. 2. Whether on the facts and in the circumstances of the case, the Hon'ble ITAT erred in dismissing the appeal filed by the Department without appreciating the fact that assessee was given proper opportunity to submit his explanation regarding basis of valuation of closing stock/WIP vide order sheet dtd. 20/12/2011 and 29/12/2011 and same was noted and signed by authorised representative. 3. On the facts and in the circumstances of the case, the Revenue's Appeal No. 244/JAB/2013 instituted deserves to be restored for fresh adjudication.” The adjudication by the Tribunal is at para 5 of its’ impugned order which, read out during hearing, is reproduced here-in-below for ready reference: ‘5. We have heard the parties, and perused the material on record. We find little merit in the case of the Revenue. It is an admitted fact that the Township project, work-in-progress (WIP) of which it claims as undervalued, is on the outskirts of Jabalpur, as opposed to the other two, located in the midst of the city. Land cost is a substantial part of a real estate project cost. Land prices may vary considerably even within the city, while the Township project is outside of the city limits whereat, on account of under-development of the area and the distance involved (from the main city), the land prices are much lower. It is in fact for this economic reason that the people are tempted or forced to shift to the outer areas of a city, the limits of which, i.e., any developing city, thus, keep getting regularly extended, a common phenomenon of urban India. It is, therefore, wholly presumptuous to say that the said project also costed as much as the other two projects, inferring under-valuation on that basis. That apart, this project was sanctioned on 10.4.2008, while the other two projects were sanctioned much earlier, i.e., on 10.6.2005 (Residency) and 6.7.2006 (Towers), reference to which is found in the assessee’s grounds of appeal (Gd. 6) before the ld. CIT(A) as well as the assessee’s submissions thereto, reproduced at pg. 10 of the impugned order. The same, therefore, cannot be considered as complete to the same extent, i.e., would be at different MA No. 01/JAB/2021 (AY: 2009-10) Asst. CIT vs. Sudhir Chandra Datt 3 stages of completion. The comparison fails on this ground as well. No doubt, the date (02.10.2008), as stated in the ‘Grounds of Appeal’ as the date of sanction of the map of the Township project, being a public holiday, is clearly incorrect. It may perhaps be the date of commencement of construction, wrongly mentioned. The question, however, is if there is a valid basis for comparison, and which we find as not. The ld. CIT(A) has, again, misdirected himself, reproducing several case law deliberating section 145A. The said section provides for inclusion of tax, duty, or any other levy on the goods bought and sold, in the valuation of purchases, sales, and inventory thereof. How, we wonder, is the same relevant? Again, sure, the assessee has not clarified the matter properly. The Revenue having raised the issue of valuation of one of his ongoing projects, the assessee ought to have provided the relevant details, i.e., the breakup of cost, justifying the same with reference to his accounts; the cost being purportedly reflected therein. Why, there is even no mention of the difference in the land price between its projects on account of locational difference, which forms the nucleus of the assessee’s case as pleaded before us, (and with, we must admit, merit), in the assessee’s submissions before the ld. CIT(A). In fact, it is not even clear if the assessee is maintaining his books on project-wise basis, in which case all he was required to do to substantiate his case was to advert thereto. It does not, for that reason, seem so, and which would have scotched any query by the Revenue in this regard. In its absence, the question as to the basis for the adoption of the valuation rate/s, which appear to be estimates, arises. So however, we do not consider it proper to, for that reason, remit the matter back. There is, to begin with, no raising of the issue by the AO, for the assessee to have responded thereto. As Shri Seth would clarify during hearing, no question in this regard was put by the AO, and it was only on the receipt of the assessment order that the assessee came to know of an addition on account of purported under-valuation of stock- in-trade. Such a manner for effecting an addition cannot be countenanced. The assessee’s accounts are audited; the audit report expressly states the basis of valuation i.e., cost or market price, whichever is less. Cost is a matter of fact, and ought to have been required to be justified and, in any case, matched with that reflected in the books of account, and which has not been. That is, at no stage has the assessee been called upon to prove his case. There was thus no occasion for it to furnish the cost details, which rather ought to MA No. 01/JAB/2021 (AY: 2009-10) Asst. CIT vs. Sudhir Chandra Datt 4 have been asked by the AO. The deficiency is not made good at the first appellate level as well, whereat the ld. CIT(A) fails to appreciate the issue, purely factual in nature. Even though not specifically mentioned, land cost, without doubt, forms an integral part of a real estate project cost. His conclusion, i.e., on under-valuation, is sans any factual finding, or even reference to the assessee’s accounts and, in fact, completely out of sync with the bulk of his order on this issue, i.e., section 145A, which we have stated as not applicable and to be completely besides the point. Further, there has been no examination of the facts. What, then, is the basis for the Revenue to contend that the assessee had incurred a cost higher than Rs.300/- per sq. ft. for the Township project? We could understand where the Revenue had based its charge of under-valuation w.r.t. the assessee’s accounts, or found them unreliable, which is not so. The stated basis, as afore- noted, is wholly presumptuous. Thus, notwithstanding the fact that the assessee has not furnished the cost details, as it ought to have, we find no reason for remission. We have already observed that at no stage was the assessee called upon to prove his case. The onus to establish escapement of income is on the Revenue, which it has completely failed to, with there being no charge of the assessee being not cooperative, or having not, on asking, furnished the relevant details. It is a clear case of non-application of mind by the Revenue. It would therefore be unfair to call upon the assessee to, after lapse of a number of years, justify its case. The addition is without any basis, much less valid, as well as sans any factual finding, and deserves to be deleted. We direct so. Needless to add, the opening stock (for the following year) shall be the closing stock as reflected in the assessee’s final accounts for the current year, i.e., as on 31/3/2009.’ (emphasis, by underling, ours) 3. Before us, while Shri Halder, the ld. Sr. DR, would reiterate the issues raised by the Revenue per its’ Grounds afore-noted, Shri Seth, the ld. counsel for the assessee, would submit that Gd. 1 (of the MA) is completely misplaced as it is wholly incorrect to say that the Township project, located on the National Highway, is in the same locality as the other two projects, which are in the heart of the city. This fact is in fact irrelevant, as the cost, for under-reporting of which the impugned addition has been made, is the cost of construction, which does not include the cost of land. The lower land cost of the Township project thus does not MA No. 01/JAB/2021 (AY: 2009-10) Asst. CIT vs. Sudhir Chandra Datt 5 impact the impugned addition. As regards Gd. 2, he would counter by stating that the assessee had duly responded vide reply dated 29/12/2011 (not on record), so that it is incorrect on the part of the Revenue to state vide said Gd. that the assessee did not respond to the opportunities allowed thereto vide order-sheet entries dated 20/12/2011 and 29/12/2011, duly signed by the authorised representative. 4. We have heard the parties, and perused the material on record. In our considered view, the impugned order needs to be recalled for adjudication afresh on the assessee’s Ground 3 before the Tribunal, reading as under, and the corresponding part of its’ Ground 1, which though is cast in general terms: ‘3. Because the AO has erred in calculating the closing stock/WIP of Datt Township @ Rs. 700/- per sq.ft. whereas as per valuation of assessee it was at Rs.300/- per sq.ft. and the project was sanctioned by the government authorities on 02/10/2008, i.e., during the financial year under consideration, and it was beginning of the project also the project site is located at village Tilheri on national highway away from the city limits.’ (emphasis, ours) The reason is simple. The Tribunal’s decision, reproduced hereinabove, is based on its’ following findings/observations: (a) land cost of the Datt Township project, even though not specified, being located on the Highway, would be lower by far than the other two in-city projects; (b) the said project stands sanctioned in April, 2008, as against in 2005 & 2006 for the other two projects (for the unexplained difference between the cost of which the addition stands made) and, therefore, commenced much later, justifying a lower cost; and (c) the Revenue had not questioned the assessee in the matter, for it to have proved or established his case. As apparent from the foregoing, Grounds (a) & (c) hereinabove are clearly and admittedly incorrect, removing, to that extent, the basis of the deletion of the impugned addition by the Tribunal. Why, Shri Seth’s pleadings, explaining the irrelevance of the land cost, itself contradicts the assessee’s Ground 3, i.e., in part; rather, prove it to be, to that extent, misleading. Further, his explaining to have responded by furnishing a reply to the AO in the matter during assessment MA No. 01/JAB/2021 (AY: 2009-10) Asst. CIT vs. Sudhir Chandra Datt 6 proceedings, again contradicts his submission as to denial of opportunity by the AO during hearing, assumed correct by the Tribunal in the absence of any contrary material on record, and without allowing the Revenue opportunity to rebut the same. The finding, which prejudices the Revenue, thus becomes presumptuous. In Honda Siel Power Products Ltd. v. CIT [2007] 295 ITR 466 (SC) the Apex Court clarified that where prejudice has resulted to a party which is attributable to a mistake, error or omission by the Tribunal, it is duty bound to set right the same. 5. Even as indicated at the close of the hearing itself, the impugned order is accordingly recalled for adjudication afresh on the assessee’s Gd. 3 (and the relevant part of its’ Gd. 1) before the Tribunal. As the matter is already long delayed, the Registry is directed to post this case for hearing on April 27, 2022 before the Division Bench. No separate notices of hearing shall be accordingly sent to the parties, and this order would itself serve to communicate the date of hearing to the parties. We decide accordingly. 6. In the result, the Revenue’s MA is allowed on the aforesaid terms. Order pronounced in open Court on April 06, 2022 Sd/- S d/- (Manomohan Das) (Sanjay Arora) Judicial Member Accountant Member Date: 06/04/2022 vr/- Copy to: 1. The Applicant: Asst. CIT, Circle-1(1), Jabalpur. 2. The Respondent: Sh. Sudhir Chandra Datt, 1148-A, Napier Town, Jabalpur 3. The Principal CI T-1, Jabalpur 4. The CI T( Appeals)-1, Jabalpur 5. The Sr . DR , I TAT, Jablapur 6. Guard File