Case Law Details
Sudhir Chandra Datt Vs ACIT (ITAT Jabalpur)
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 underdevelopment 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 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 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.
FULL TEXT OF THE ITAT JUDGEMENT
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