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2019 (4) TMI 1656 - AT - Income TaxValuation of closing stock of unsold flats - Taxable income of the assessee by arbitrarily increasing the valuations of closing stocks of the unsold flats of the two Buildings - renovation expenses not included at the time of determining the values of the unsold portions of the said two buildings i.e. at the time of arriving at the values of Closing Stock of the said two buildings - HELD THAT - We note that the renovation expenses in respect of property at 157, Rabindra Sarani and 159, Rabindra Sarani were borne exclusively in respect of the areas sold. The assessing officer has failed to bring any cogent evidence on record to show that these expenses were not borne exclusively in respect of the areas sold. Hence, the assessee, OPFPL has applied renovation expenses incurred of ₹ 37,29,731/- and ₹ 23,52,484/- for the sold flats of the two buildings to determine surpluses from the sale of flats of the said two buildings. Based on this factual position we allow the ground No.1 raised by the assessee. TDS u/s 194C - Addition u/s 40(a)(ia) - purchases and purchase of gift items - assessee has fairly agreed that assessee has not submitted purchase bills and other required documents to prove the bona file of purchases - HELD THAT - As based on the submissions made by the ld. Counsel and ld DR for the Revenue that the deduction of TDS u/s 40a(ia) of the Act and purchases made by the assessee needs to be examined by the Assessing Officer, therefore we are of the view that purchases from M/s Tirupati Mercantile Trading Co. Ltd and purchases of gift items from M/s G.B. Promoters should be remitted back to the file of the Assessing Officer for his necessary verification. Therefore, we allow this grounds of appeal raised by the assessee for statistical purposes.
Issues Involved:
1. Valuation of closing stock of unsold flats. 2. Disallowance and addition under section 40(a)(ia) of the Income Tax Act, 1961. Issue-wise Detailed Analysis: 1. Valuation of Closing Stock of Unsold Flats: The primary issue pertains to the valuation of the closing stock of unsold flats in two buildings located at 157 and 159 Rabindra Sarani, Kolkata. The Assessing Officer (AO) increased the valuation of the closing stock by ?55,67,210, which was confirmed by the Commissioner of Income Tax (Appeals) [CIT(A)]. During the assessment proceedings, the AO examined the books of accounts and found discrepancies in the valuation of the properties. The AO calculated the per square foot value of the properties, including the cost of improvement, and determined the closing stock value for the properties at ?2,47,33,180. However, the assessee disclosed a lower valuation of ?1,91,65,970. The assessee argued that the renovation expenses were incurred only for the flats sold to existing tenants and should not be included in the valuation of the unsold flats. The AO rejected this contention, stating that the renovation expenses should be considered for the entire building. Upon appeal, the Tribunal noted that the renovation expenses were indeed borne exclusively for the areas sold, and the AO failed to provide any evidence to the contrary. Consequently, the Tribunal allowed the assessee's ground, concluding that the renovation expenses should not affect the valuation of the unsold portions of the buildings. The Tribunal accepted the assessee's valuation of ?1,91,65,970 for the closing stock of the unsold flats. 2. Disallowance and Addition under Section 40(a)(ia): The second issue involves the disallowance and addition made by the AO under section 40(a)(ia) of the Income Tax Act, 1961, concerning payments made to M/s Tirupati Mercantile & Trading Co. Ltd. and M/s G.B. Promoters. The AO observed that the assessee made payments of ?1,89,96,589 to M/s Tirupati Mercantile & Trading Co. Ltd. for printing charges without deducting tax at source (TDS) as required under section 194C. The AO also noted discrepancies in the purchase details and disallowed the amount under section 40(a)(ia). Additionally, the AO disallowed ?5,95,598 paid to M/s G.B. Promoters for business promotion expenses, citing the assessee's failure to deduct TDS and produce supporting bills. The assessee contended that the payments to M/s Tirupati Mercantile & Trading Co. Ltd. were for purchases, not printing charges, and thus not subject to TDS under section 194C. The assessee also argued that the payment to M/s G.B. Promoters was for gift items, which were later written off as bad debts, and not subject to TDS. The Tribunal noted that the assessee failed to provide necessary documents and purchase bills to substantiate its claims. Both the assessee and the Departmental Representative (DR) agreed that the matter should be remitted back to the AO for verification. Consequently, the Tribunal remitted the issue back to the AO for verification of the purchases and the applicability of TDS under section 40(a)(ia). This ground of appeal was allowed for statistical purposes. Conclusion: The appeal filed by the assessee was partly allowed. The Tribunal accepted the assessee's valuation of the closing stock of unsold flats and remitted the issue of disallowance under section 40(a)(ia) back to the AO for further verification. Order Pronounced: The order was pronounced in the Court on 24.04.2019.
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