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2019 (2) TMI 1391 - HC - Income TaxValuation of land under litigation/encroachment - status of the land for the purpose of determination of value - CIT(A) concurred with the view of the Assessing Officer and has held that the value of land cannot be taken at NIL and has further upheld that the assessee appellant has changed its method of valuation during the year under consideration - assessee has argued that the learned ITAT failed to appreciate that valuing the closing stock of encroached/litigated land at actual direct development expenditure upto assessment year 2005-2006 is against the principle of prudence - HELD THAT - The Tribunal considering the decisions of Coordinate benches of the Tribunal itself in assessee's own case, set aside the issue to the record of the Assessing officer for fresh adjudication after conducting a proper verification and enquiry. The assessee was also directed to produce all the relevant facts in respect of each and every piece of land under litigation and encroachment so as to reveal the actual status of the land for the purpose of determination of value. Moreover, in the subsequent assessment year viz assessment year 2007-08 in the case of assessee, the Tribunal 2011 (6) TMI 954 - ITAT JAIPUR , restored back the matter to the Assessing Officer for deciding the issue and even in subsequent years i.e. 2009-10, 2010-11, 2011-12, 2012-13, vide order dated 23.02.2018, the Tribunal set aside this issue to the record of the Assessing Officer for deciding the same afresh in terms of the directions as given by the Tribunal in the assessment year 2007- 2008 and no appeal has been filed against the aforesaid orders by the assessee before this Court or before the Supreme Court.
Issues Involved:
1. Valuation of encroached/litigated land in closing stock. 2. Method of valuation change by the assessee. 3. Compliance with Accounting Standards and principles of prudence. 4. Consistency with previous Tribunal decisions. Detailed Analysis: 1. Valuation of Encroached/Litigated Land in Closing Stock: The primary issue revolves around the valuation of land under litigation or encroachment. The assessee, M/s. Rajasthan State Industrial Development & Investment Corporation Limited (RIICO), valued such land at NIL, citing that it was not saleable or available for industrial development. The Assessing Officer (AO) disagreed, asserting that the value cannot be taken at NIL and added ?10,42,85,000 to the income. The CIT(A) upheld this view, and the ITAT remitted the matter back to the AO for further verification and adjudication, emphasizing that the land cannot be valued at NIL but should reflect its diminished value due to defects and deficiencies. 2. Method of Valuation Change by the Assessee: The assessee initially valued the closing stock of land at actual direct development expenditure. However, for the assessment year 2006-2007, the method was changed to value encroached/litigated land at NIL. The AO and CIT(A) held that this change in valuation method was not justified. The ITAT noted that any change in valuation method should be based on specific facts and circumstances of each case, not a blanket approach. 3. Compliance with Accounting Standards and Principles of Prudence: The assessee argued that the valuation at NIL was in line with Accounting Standard 2, which mandates valuing closing stock at cost or market value, whichever is lower. They contended that since the land was under encroachment/litigation and not saleable, its market value was NIL. The ITAT, however, stressed that the valuation should consider the actual status of the land and cannot uniformly apply NIL value without detailed verification. 4. Consistency with Previous Tribunal Decisions: The ITAT referred to its earlier decisions in the assessee's own case for assessment years 2007-08 and 2009-10 to 2012-13, where similar issues were remitted back to the AO for detailed verification. The Tribunal emphasized the need for consistency and directed the AO to follow the same approach, requiring the assessee to provide detailed information on each piece of land under litigation and encroachment. Conclusion: The High Court dismissed the appeal, upholding the ITAT's decision to remit the matter back to the AO for fresh adjudication. The Court found no substantial question of law arising from the appeal, affirming the need for detailed verification and consistency with previous Tribunal decisions. The valuation of encroached/litigated land must reflect its actual status and cannot be uniformly set at NIL without proper examination.
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