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TMI Blog2011 (9) TMI 256X X X X Extracts X X X X X X X X Extracts X X X X ..... sing Officer. At the same time, it is noted that this issue is not looked into and considered even by the AO in its proper perspective. - Remanded back to the AO with direction to arrive at the value of 'closing work in progress'. - ITA 1884 OF 2010 - - - Dated:- 9-9-2011 - MR. JUSTICE A.K. SIKRI, MS. JUSTICE INDERMEET KAUR, JJ. For APPELLANT Through :Mr. N.P. Sahni, Sr. Standing Counsel. For RESPONDENT Through: Mr. Vikram Kapoor, Advocate with Mr. Dilip Kapoor, Advocate. A.K. SIKRI, J. 1. The respondent/assessee (hereinafter referred to as the assessee) had filed the return for the assessment year 2005-06 at an income of Rs.7,08,334/-. It is in the business of building construction i.e. buying plots, constructing flat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y the assessee at Rs. 50,62,500/-. The assessee had made the valuation of basement and third floor on weighted average method for ground floor, basement and third floor in the ratio of 4:1.25:1. Since ground floor was sold at Rs. 90 lacs, on that basis, value of the basement was worked out at Rs.90,000,00/- x 1.25/4 =Rs.28,12,500/-. Applying the same formula, the value of the third floor was worked out at Rs. 90,000,00/- x = Rs. 22,50,000/-. 3. It was on this basis that value of basement and third floor as closing work in progress was shown at Rs.50,62,500/- [28.12:22.50 lacs]. The assessee gave its justification for adopting weighted average method to the ground floor, basement and third floors in the ratio of 4:1.25:1 respectively ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 90 lacs. He valued the basement and third floor as Rs. 36 lacs and 45 lacs respectively. 4. In appeal, the CIT (A) reversed the aforesaid order of the Assessing Officer. Before the CIT (A), the argument of the assessee was that the work in progress shown by the assessee was nothing but the closing stock only as the assessee had not added anything further in the said floors. Valuation was done on the basis of cost or market price whichever is less and it was not proper on the part of the Assessing Officer to adopt the value of the closing stock as cost only. It was also argued that the first floor and second floor of the same very building were sold in April, 2005 and September, 2005 for a consideration of Rs.48 lacs and Rs.36 lacs respe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... loors were constructed. However, two floors were handed over to the original owners. Insofar as the assessee is concerned, it acquired three floors namely basement, ground and third floor and as is the business proposition for these three floors, it incurred the entire cost. Therefore, insofar as the assessee is concerned, cost which was borne by the assessee for these three floors had to be taken into consideration and not five floors. 6. Coming to the issue of apportionment of the cost, we find that neither the Assessing Officer not the CIT(A)/ITAT have arrived at the valuation of basement and third floor by adopting the valid method. The Assessing Officer simply took the sale price of ground floor and applied the ratio of 2.5:1:1.25. H ..... X X X X Extracts X X X X X X X X Extracts X X X X
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