TMI Blog2021 (5) TMI 237X X X X Extracts X X X X X X X X Extracts X X X X ..... ee furnished the details of claim of deduction under section 80IB(10) in earlier years - AR submitted that the disallowance on account of reduction in value of closing stock of work in progress in the Assessment Year under consideration due to change of applicability of accounting standing from AS 7 to AS 9 to be restricted to only to the extent of ₹ 27,80,57,341/- on which the assessee has claimed deduction under section 80IB(10) of the Act in earlier years and the balance of ₹ 1,18,83,207/- on which the assessee has not claimed deduction under section 80IB(10) in earlier years. Hence, the disallowance in this Assessment Year shall be restricted to ₹ 27,80,57,341/- only account of change in following of accounting standard from AS 7 to AS 9. Otherwise, it will not reflect the true and correct state of affairs of the company and cost of work in progress is to be valued at cost or market price whichever is lower. Unexplained reduction in closing work in progress - HELD THAT:- As there was a difference on account of change in following of accounting standard from AS 7 to AS 9 in the valuation of closing work in progress and that was already disallowed by AO in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... In any case the disallowance as made/confirmed is excessive. 5. The learned Assessing Officer had erred in adding a sum of ₹ 13,90,45,559/- under the caption unexplained reduction in closing work in progress and the learned Commissioner of Income tax (Appeals) has erred in confirming the same. On proper appreciation of facts, the addition as made/confirmed being erroneous and liable to be deleted. 6. The appellant denies liability to pay the Interest. The Interest having been levied erroneously is to be deleted. 3. The first ground is with regard passing of the order under section 144 of the Income Tax Act, 1961 (hereafter called the Act ), without participation of the assessee before the AO. At the time of hearing, no argument has been put by the AR of the assessee on this issue. Being so, this ground is dismissed as not pressed. 4. The next ground is with regard to disallowance under section 14A r.w.r. 8D(2)(ii). The facts of the issue are that during the Assessment Year under consideration, assessee received dividend of ₹ 4,180/- which was claimed as exempted income under section 10(38) of the Act. The assessee is said to be incurred no expenditure ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al Teck Park Pvt. Ltd. Being so, taking a consistent view, we are inclined to hold that disallowance in the case of assessee cannot exceed the exempted income to the tune of ₹ 4,180/- only. Thus, ground Nos.2 and 3 of appeal of the assessee are partly allowed. 7. Ground No.4.1 is with regard to disallowance of claim of assessee on account of reduction of closing stock of work in progress at ₹ 28,99,40,548/-. The assessee, since its inception had been maintaining books of accounts under percentage completion method as recognized by AS 7 till the Assessment Year 2007-08. Search action was taken in the premises of the assessee on 28.02.2008. Subsequently, in response to notice under section 153A of the Act, the assessee had filed return of income from Assessment Year 2002-03 to 2007-08 by recognizing revenue as per AS 7. However, Audited statements were not changed. For Assessment Year 2008-09 and 2009-10, the assessee changed the method of recognizing the revenue from AS 7 to AS 9 and accordingly the financial statements were drawn. During proceedings under section 153A of the Act, the AO had completely ignored the return filed under section 153A of the Act based on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ar shall be restricted to ₹ 27,80,57,341/- only account of change in following of accounting standard from AS 7 to AS 9. Otherwise, it will not reflect the true and correct state of affairs of the company and cost of work in progress is to be valued at cost or market price whichever is lower. Accordingly, this ground of appeal is partly allowed. 10. The next ground in this appeal is with regard to addition of ₹ 13,90,45,559/- under the caption unexplained reduction in closing work in progress. The facts of this issue are that the AO disallowed a sum of ₹ 13,90,45,559/- on account of unexplained deduction in closing work in progress. The AO worked out reconciliation of opening and closing inventory and made following working: As per para 17 of the Assessment order Remarks of the appellant Particulars Amounts (Rs.) Closing stock of WIP 105,88,55,614 Add: Project Expenses of Project Mahaveer 23,41,57,587 The net result of Mahaveer project i.e. loss of &# ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (8,20,29,838) Already disallowed under para 16 of the Asst. Order Unexplained reconciliation Nil 12. Thus, he submitted that there was a difference of ₹ 8,20,29,838/- on account of change in following of accounting standard from AS 7 to AS 9 in the valuation of closing work in progress and that was already disallowed by AO in his order in para 16 by observing as follows and once again disallowing this difference of ₹ 8,20,29,838/- amounting to double disallowance, which should be disallowed: 15. As above, it is seen that the total revenue is taken at ₹ 168.78 crores and the cost is taken at ₹ 117.07 crores. The profit arrived at thereon at ₹ 51,70,81,586/- has already been claimed as deduction u/s. 801B(10) in earlier years from Asst. year 06-07 to Asst. Year : 09-10. Nonetheless, the assessee company has now claimed the same receipt and expenses as below u/s. AS-9. Receipt/ expenses in Asst. Year : Cost 23,41,57,594 , Revenue 15,21,27,756 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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