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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 ..... of valuation of closing stock consistently from its very inception and the department has never raised any objection with regard to the method of valuation of closing stock adopted by the assessee. In the aforesaid background, it cannot be said that the assessee has furnished inaccurate particulars of its income. Similarly, with regard to the addition made on account of cash payments above Rs.20,000/- which was disallowed u/s 40A(3) and also the claim of expenditure in the Profit & Loss A/c towards stamp duty the finding of the CIT (A) that such additions cannot lead to the conclusion that the assessee has furnished inaccurate particulars of income is quite acceptable - appeal of revenue is dismissed - in favour of assessee. Decision of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 271(1)(c) by issuing a notice u/s 274 to the assessee. The assessee in response to the notice, submitted its explanation before the AO by contending that the assessee sells developed plotted land on instalment basis and the registration is done after receiving full payment from the customers. Therefore, sales are credited to Profit Loss A/c only on registration. It was contended by the assessee that due to long gestation period in development which is very slow in the initial years bifurcation of expenditure venture wise is a difficult task and accordingly valuation of stock is taken on estimate basis. It was contended by the assessee that with an intention to co-operate with the department the assessee had agreed for revaluation of clos ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it Loss A/c, the development activity was still going on. The AO however, for the first time, during the relevant assessment year estimated the expenditure and added development expenditure at Rs.15.41 per sq. Ft. And Rs.71.52 per sft., to the closing stock of its different ventures and arrived at the closing stock value at Rs.1,80,76,666/- by adding average cost as per his own formula. The assessee submitted that the addition on account of closing stock had been made on estimate basis by the AO. So far as addition/s 40A (3) is concerned, the assessee contended that for business exigency cash payment was made to the land owners who were mostly agriculturists staying in villages. Similarly, the expenditure towards stamp duty was debited to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... year under consideration based on quantum of land and cost of development expenditure from the assessment years 1997-98 to 2003-04 without making similar adjustment to the opening and closing stocks of the earlier assessment years will give a distorted picture of the profit/loss of the year under consideration. The CIT (A) came to hold that notwithstanding the fact that the assessee has not challenged the addition made by the AO but it nevertheless cannot be said that the profit worked out by the AO in the assessment order by adopting peculiar method of valuation of closing stock can be said to reflect the correct total income of the assessee for the year under consideration. It was further found by the CIT (A) that the assessee had been co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of adding the expenditure towards stamp duty to the land purchase account has debited it to Profit Loss A/c. The CIT (A) found it to be only technical fault without making any difference to the determination of total income computed by the assessee since it is added to the land purchase account instead of debiting to P L A/c in either case, it will be an expenditure which will go to reduce the income. On the basis of the aforesaid finding, the CIT (A) came to a conclusion that penalty u/s 271(1)(c) cannot be imposed on the assessee for furnishing inaccurate particulars of income. The CIT (A) found the explanation furnished by the assessee to be bonafide and acceptable and deleted the penalty imposed u/s 271(1)(c) of the Act. 7. The le ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... closing stock consistently from its very inception and the department has never raised any objection with regard to the method of valuation of closing stock adopted by the assessee. In the aforesaid background, it cannot be said that the assessee has furnished inaccurate particulars of its income. Similarly, with regard to the addition made on account of cash payment s above Rs.20,000/- which was disallowed u/s 40A(3) and also the claim of expenditure in the Profit Loss A/c towards stamp duty the finding of the CIT (A) that such additions cannot lead to the conclusion that the assessee has furnished inaccurate particulars of income is quite acceptable. Imposition of penalty u/s 271(1)(c) is not automatic and consequential upon the additio ..... X X X X Extracts X X X X X X X X Extracts X X X X
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