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TMI Blog2012 (11) TMI 666X X X X Extracts X X X X X X X X Extracts X X X X ..... nishing inaccurate particulars of income by the assessee. 3. Briefly the facts are, the assessee is engaged in the business of real estates. The assessee purchases land and after developing and plotting the same, sells to the customers. For the assessment year under dispute, the assessee filed its return of income on 1-12-2003 declaring income at Nil after set off of carried forward loss of Rs.2,07,081/-. The AO completed the assessment u/s 143(3) of the Act by making addition under following heads:- Valuation of closing stock Rs.83,91,026/- Disallowance u/s 40A(3) Rs.12,69,393 Unexplained expenditure u/s 69 Rs.1,82,806 As a result of additions made, the AO initiated proceedings for imposition of penalty u/s 271(1)(c) by issuing a noti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the penalty imposed u/s 271(1)(c) filed an appeal before the CIT (A). In course of hearing before CIT (A) the assessee submitted that the AO had worked out the closing stock for the year under consideration after taking into account the cost of land and development expenditure right from the assessment year 1997-98 to 2003-04. The AO had himself observed that the development expenses will be incurred over a reasonably long and uncertain period of time and as there was no time schedule, the assessee would carry on development activity at its convenience. The assessee contended that the AO further found that even in respect of the venture where sales have been completed and sales amount has been credit to the Profit & Loss A/c, the developmen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing stock by considering the details of expenditure from the inception of the project and has disturbed only the closing stock of the year under consideration without making similar adjustments in the opening stock of the relevant assessment year and closing stock of earlier year. The CIT (A) observed that since the closing stock of earlier year becomes opening stock of subsequent accounting year, the difference in closing stock worked by the AO for the year under consideration would be because of the fact that the closing and opening stock of earlier years have not been disturbed or properly substituted in the earlier accounting year. According to the CIT (A), working out closing stock only for the assessment year under consideration based ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ier years. 6. With regard to the disallowance made u/s 40A (3), the CIT (A) held that it is a routine disallowance for the violation of a particular provision of the Act which will not tantamount to the assessee furnishing inaccurate particulars of income when the AO does not dispute the payment made by the assessee to be genuine. The CIT (A) relying upon a judgment of Karnataka High Court in the case of Balaji Vegetable Products Pvt. Ltd. Vs. CIT (290 ITR 172) held that the addition made in the assessment by itself does not justify penalty because a bonafide claim for deduction was found to be inadmissible. So far as expenditure claimed on stamp duty is concerned, the CIT (A) found that the assessee instead of adding the expenditure towar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e discussion made by the CIT (A), it is quite clear that the AO has valued the closing stock for the assessment year under dispute by adopting a method of estimation by taking into consideration the land development expenditure right from the assessment year 1997-98 to 2003-04. It is fact found on record that the AO even though he has valued the closing stock for the assessment year under dispute, similar valuation of opening stock or closing stock for the earlier assessment year was not made by him. It is certainly not a correct method and does not reflect the correct amount of profit or loss for the relevant assessment year. It is also a fact that the assessee is following the same method of valuation of closing stock consistently from it ..... X X X X Extracts X X X X X X X X Extracts X X X X
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