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2019 (2) TMI 168 - AT - Income TaxTreatment of undisclosed investment on purchase of property - as per assessee transactions are business transactions and the loss sustained by the assessee should be allowed - loss sustained should also be allowed to be carried forward u/s 71 - Held that:- We notice that the assessee had declared and accepted that the value of the property purchased by him from Mr. Jaipal Reddy was at ₹ 42.84 lakhs. At the same time, he claims that the above funds were arranged from the customers as advances. Since, assessee has not brought any cogent material in support of the above claim, we are inclined to determine the purchase cost of the property at ₹ 42.84 lakhs. Accordingly, ground No. 2 is rejected. Loss sustained should also be allowed to be carried forward u/s 71 - as considered the profit & loss statement drawn by the assessee. The assessee records the purchase cost as per the actual cost agreed with Mr. Jaipal Reddy but declared sales value as per the registered sale deed, thereby, declaring huge loss. We are also not in a position to accept since the purchase cost is declared on actual agreed price but the sales values are declared as per registered sale deed, which is not the actual sale price. Since, in this AY, AO has only made addition u/s 69, we can only adjudicate on this aspect. Since the assessee has accepted the purchase price and AO has made the addition u/s 69, we direct the AO to allow the assessee to declare the value of closing stock based on the purchase price. Since the cost of purchase is treated as investment in land, the assessee is allowed to carry forward the unsold value of land as closing stock as determined above. The assessee cannot treat the difference between purchase price and sales price as loss and is also not eligible to carry forward as business loss u/s 71. Accordingly, the grounds raised by the assessee on this issue are partly allowed.
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