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TMI Blog2022 (7) TMI 437X X X X Extracts X X X X X X X X Extracts X X X X ..... many fixations, assessee did not attend and even the notices were served by the assessee. Except on few occasions one Mr. G.P. Mehta, CA appeared and he also asked for adjournment only on one pretext or the other. Hence, we have proceeded to hear these appeals exparte quo assessee and will decide on merits. 3. The first issue in this appeal of Revenue is as regards to the order of the CIT(A) deleting the additions made by AO by adding the recasted value of closing stock. For this Revenue has raised following ground no. 2.1 to 2.3 which is reproduced as under: "2.1. The learned CIT(A) erred in allowing the claim of the assessee that it had correctly valued the closing stock. 2.2. The learned CIT(A) failed to appreciate that value determined by the AO in respect of value of closing stock was based on facts and as per accounting principles. 2.3. The learned CIT(A) also failed to distinguish the facts of the case in the case of M/s Apollo Tyres, reported in 255 1TR 273(SC) and the assessee's case. In the former's case, only limited adjustments can be made while determining the book profit u/s 115J of the I.T. Act but in the assessee's case, the AO has correctly deter ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... same area taking at closing stock and relevant findings of CIT(A) is reproduced as under: "Para 6,29:- "In view of the above discussion, the AO's action in ignoring entire cost of construction as discussed above and calculation of the closing stock by taking the entire super built up area of the property of 1,28,373 sq.ft. and consequent determination of closing stock based on the same in the recasted profit and loss account for the period 01.04.2010 to 3 1.03.201 1 does not appear to be logically tenable or correct even from the accounting point of view as the whale cost of development incurred for the project was attributable to the area belonging to the assessee company alone in as much as, but far the construction and completion of the whole building the assessee company could not have bettered its rights, title and interest In the property and recover the cost incurred on acquisition from M/s. RBF Nidhi Ltd. and other allottees, as correctly contended by the AR. Para 6.30:- The AO has all along not been able to appreciate the basic fact as pointed out earlier that area entitlement of allottees in the constructed building KGN Towers' had already been determined as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3,736/- is directed to be deleted and. the AO is directed to retain the profit and loss account as determined by the assessee instead of the recasted figures adopted by him resulting in inflated gross profit of Rs.6,14,13,736/- as against loss of Rs.5,76,90,707/- returned by the assessee, This ground is therefore allowed." Aggrieved, now Revenue is in appeal before us. 6. We have heard Ld. Sr. DR and gone through the facts and circumstances of the case. Before us, Ld. Sr. DR only made submission that he is not aware of the fate of the CIT(A) order for AY 2011-12 in ITA No. 1706/13-14 order dated 23.03.2015 and in case the addition there is sustained and has no objection in deleting the addition but if the recasted closing stock in that year is deleted this addition has same way to be treated. We also noted that the CIT(A) has deleted the addition on the basis that the same was considered in the re-casted profit and loss account of earlier assessment year i.e., AY 2011-12 and hence he deleted the addition. We find no infirmity in the order of CIT(A) but in case the addition is deleted in AY 2011-12 and that re-casted profit and loss on account of valuation of closing stock is made ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Rs. 5,77,36,926/- to KDH Investment Pvt. Ltd excluding the opening balance and Rs. 6,81,44,748/- to common directors. The assessee before CIT(A) denied the other related parties findings of Rs. 6,44,88,309/- and he produced the complete accounts before the CIT(A). Thereby, the total advances interest free remains is Rs. 11,58,81,774/-, this includes the opening balance also. The CIT(A) going through these facts noted in para 9.5 to 9.8 read as under: "9.5 The AO appears to have proceeded on the misplaced premise and assumption that the assessee after obtaining both short term / long term borrowings during the year on 24% flat interest utilised them for advances to. various related parties as defined In Section 40(A)2B, interest free, for non business purposes and therefore has consequently disallowed and added back to the total income the notional interest 'receivable' on such advances aggregating to Rs.3.38 crores calculated at the flat rate of 24% per annum and that too, irrespective, of the dates of advancing of the amounts, without making any case, let alone a convincing case that it indeed was the case. 9.6 Further and more importantly the AO has nowhere establi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... MIL for extending financial assistance and the said KMIL agreed to grant loan to the appellant and consequently took over the entire liability of the appellant with Cosmos Bank on 31.03.2011 without actual physical disbursement of the loan amount to the assessee and therefore the loan granted by KMIL was never available to the appellant company for any other purpose including the alleged diversion of the same interest free to related parties which fact has neither been questioned or controverted by the AO. 9.8 The above taking over of the loan liability owed to Cosmos Bank by KN duly evidenced by an agreement between the two parties and the subsequent payment of interest of Rs.6.3 crores thereof, as also part of the principal amount of Rs.12.92 crores totalling in all to Rs.19.4 crores appears to have not even been considered by the AO while disallowing the interest at a flat rate of 24% on the alleged interest free advances, mostly to related parties as he put it, as there is precious little discussion on the matter in the assessment order." And deleted the addition by observing para 9.16 as under: "9.16 To sum up, the AO in the context and factual matrix of the instant case ..... X X X X Extracts X X X X X X X X Extracts X X X X
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