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TMI Blog2014 (7) TMI 300X X X X Extracts X X X X X X X X Extracts X X X X ..... e of Rs. 11,52,530/-. The return of income initially was processed u/s 143(1). Subsequently, as 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 the 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 worked 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 worked 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 to 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 proposed to add Rs. 54,67,589/- towards undervaluation of closing stock, the assessee replied that Bangalore Metropolitan Region Development Authority ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... % of the closing stock as determined by the AO towards undervaluation of closing stock. Accordingly, out of the total addition of Rs. 54,67,589/- made by the AO, the CIT(A) sustained the addition of 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 the 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 consideration and lasted for 3 more years; thus this venture took 4 years for its development and sale of the entire plots as conceived. 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, for short), which in this case has approved for sale of plots in 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 considering 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% o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rmined by the appellant is not hundred percent correct, is borne out of records. For that, the AO was also not correct in finding the deficiency in working out of closing stock by the appellant, as the AO has spread the expenditure equally, where as the facts reveal that major portion of expenditure was required to be spent on 60% of the plots that were approved for sale in the first phase by the Bangalore Metropolitan Region Development Authority. Thus, the AO's finding that the closing stock for the year ending 31-03-2006 is under stated is upheld, the 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 both of them were wrong in quantifying the closing stock amount was spelt out in the preceding paragraphs. Since, it has to be resolved amicably, in my considered opinion, the ends of justice are met if one percent of closing stock as determ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dispute to the fact 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 assessee has specifically raised a ground before the CIT(A) with regard to the validity of the proceeding initiated u/.s 147 of the Act., the CIT(A) was not justified in not deciding the issue raised according to its own merit. Further elaborating, the learned AR submitted that there being no fresh or tangible material/information in the possession 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 Assessing Officer on the basis of the self-same material, reopening of the assessment is only on a mere change of opinion, which is not permissible in law. In support of such contention, the learned AR relied upon a decision of Hon'ble Supreme Court in case of Kelvinator of India Ltd., 320 ITR 561. 10. We have con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) has concluded that 1% of closing stock determined by the Assessing Officer is to be treated as under valuation made by the assessee. In fact, the CIT(A) has committed further error while retaining addition of Rs. 54,680/- since he has directed the Assessing Officer to treat 1% of closing stock as determined by him. As can be seen from the assessment order, the closing stock determined by the Assessing Officer is 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 appears from finding of the CIT(A) in para 5 of his order, he has not decided 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 material, which was considered at the time of original assessment reopening of assessment is bad in law. This aspect, i ..... X X X X Extracts X X X X X X X X Extracts X X X X
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