Siddhivinayak Buildcon Vs ACIT (Gujarat High Court)
Summary: The Gujarat High Court considered a petition challenging a notice issued under Section 148 of the Income Tax Act, 1961 dated 13.03.2019 for A.Y. 2015-16 and the order dated 27.09.2019 rejecting the petitioner’s objections. The petitioner, a partnership firm engaged in real estate development and sales, had filed its return declaring total income of Rs.64,01,500/-. The return was processed under Section 143(1), and the petitioner subsequently revised its return declaring the same income.
The reopening was based on the Assessing Officer’s recorded reason that the petitioner had calculated closing Work In Progress (WIP) at Rs.13,71,58,102/- instead of Rs.13,07,69,637/-, thereby allegedly inflating WIP by Rs.63,88,466/- and causing income to that extent to escape assessment. The petitioner contended that reduction in closing WIP would reduce, rather than increase, taxable income and therefore could not result in escapement of income. It also submitted that the Assessing Officer had subsequently shifted the basis by stating, while disposing of the objections, that inflation of closing stock had resulted in suppression of sales or other income by Rs.63,88,466/-.
The petitioner further contended that the invocation of Clause (b) of Explanation 2 to Section 147 was misplaced, that the reopening amounted to a change of opinion, and that the method of valuing closing WIP had consistently been followed since A.Y. 2013-14. It was also submitted that the valuation had not been challenged in A.Ys. 2013-14 and 2014-15 and that the issue had subsequently been considered by the CIT (Appeals).
