2013 (6) TMI 404 - AT - Income Tax

Jurisdiction power u/s 263 by CIT(A) - sale consideration in respect of land both at Gurramguda and Badangipet should be taken at Rs.250/- per sq. yard and the difference should have been added which was not done by the AO - Held that - Considering plea of the assessee that in a confused state of mind, he had accepted the sale of plot at Gurramguda at Rs.250/- per sq. feet and the sale of plot at Badangapet would not be at such higher rate as that of Gurramguda has to be considered. Further, AO shall enquire with the purchasers of the plots and has to determine the correct value after ascertaining the rate which is prevalent in that area at that period of time. Hence remit the issue to the file of AO to re-work the sale consideration of the plots and thereafter, decide the issue in accordance with law. Under-valuation of closing stock - Held that - Merit in the argument of the assessee that the entire cost of development is not to be taken into consideration but the land development costs as on 31.3.2003 has to be taken and therefore, the amount of Rs.13,18,478/- arrived by CIT is the difference in closing stock, has to be deleted. Inclusion of amount received as advance found in the balance sheet to income of the assessee - Held that - As during the A.Y. 2004-2005, the assessee sold parts of land at Rs.17,85,600/- and income of Rs.4,01,760/- was offered. The assessee has admitted the advances received during the year at Rs.7,59,943/- has revenue receipts for the immediately succeeding year. Therefore, AO and CIT were not justified in treating the amount of Rs.7,59,943/- as the income of the assessee.

Summary

Issues:
1. Delay in filing the appeal.
2. Assessment of income from real estate for A.Y. 2003-2004.
3. Order passed under section 263 of the Income Tax Act, 1961.
4. Valuation of land at Gurramguda and Badangipet.
5. Treatment of advances received.
6. Valuation of closing stock.

Issue 1: Delay in filing the appeal:
The appeal filed by the assessee was found to be time-barred by 286 days. The delay was attributed to inadvertence, and the learned D.R. objected to the reasons provided for condonation of delay. However, considering that the Order under section 263 of the Income Tax Act directed the Assessing Officer to re-do the assessment, the delay was condoned.

Issue 2: Assessment of income from real estate for A.Y. 2003-2004:
The assessee, an individual deriving income from real estate, filed returns admitting varying incomes. The Assessing Officer conducted a survey and issued notices, eventually determining the total income. Subsequently, the Commissioner of Income Tax set aside the assessment under section 263, directing a re-assessment.

Issue 3: Order passed under section 263 of the Income Tax Act, 1961:
The Commissioner of Income Tax, Hyderabad, set aside the assessment directing a re-assessment due to perceived discrepancies. The Commissioner highlighted issues related to the sale consideration of land, understated closing stock, and unexamined liabilities like net advances and unsecured loans.

Issue 4: Valuation of land at Gurramguda and Badangipet:
The appeal challenged the valuation of land at Gurramguda and Badangipet, disputing the assumed sale price of Rs.250 per sq. yard. The absence of documentary evidence supporting the valuation and failure to examine purchasers were key contentions, leading to a remittal for re-evaluation by the Assessing Officer.

Issue 5: Treatment of advances received:
Regarding advances received, the assessee argued that the amounts were accounted for in subsequent years upon land sales, thus contesting their immediate inclusion as income. The Assessing Officer's treatment was deemed unjustified.

Issue 6: Valuation of closing stock:
The dispute over the valuation of closing stock centered on the timing of development costs and the consideration of expenses up to a specific date. The contention was that only costs incurred up to 31.3.2003 should be included, leading to a disagreement with the Commissioner's valuation, resulting in a deletion of the assessed difference.

In conclusion, the Tribunal partly allowed the appeal concerning the valuation of land and closing stock, remitting certain issues for re-evaluation by the Assessing Officer. The appeal against the Order giving effect to the Commissioner's decision was dismissed as infructuous.