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Asstt. Commissioner of Income Tax 15(2), Matru Mandir, Room No.113, Grant Road (W) Mumbai 400 007 Vs. M/s. Aditya Enterprises, B-1/306, Laram Centre, M.A. Road, Andheri (W), Mumbai 400 058
September, 18th 2015
                        MUMBAI BENCH "A", MUMBAI


                                 ITA No.2749/M/2013
                               Assessment Year: 2007-08

          Asstt. Commissioner of Income     M/s. Aditya Enterprises,
          Tax ­ 15(2),                      B-1/306, Laram Centre,
          Matru Mandir,                 Vs. M.A. Road,
          Room No.113,                      Andheri (W),
          Grant Road (W)                    Mumbai ­ 400 058
          Mumbai ­ 400 007                  PAN: AAJFA 5021C
                (Appellant)                   (Respondent)

      Present for:
      Assessee by                   : Shri Rajesh Kothari, A.R.
      Revenue by                    : Shri Rajneesh K. Arvind, Sr. D.R.

      Date of Hearing               : 04.08.2015
      Date of Pronouncement         : 16.09.2015


Per Sanjay Garg, Judicial Member:

      The present appeal has been preferred by the Revenue against the order
of the Commissioner of income Tax (Appeals) dated 02.01.2013. The registry
has noted that the appeal is time barred by 36 days. However the Ld. DR has
pointed that the appeal has been filed within the period of limitation. The date
of communication of order appealed against was mistakenly written as
2.1.2013 whereas the correct date was 08.2.3013. He has submitted that the
defect has been rectified. The Ld. AR has not put any objection to the above
submissions. The appeal is therefore treated as filed within the limitation
2.    The Revenue has taken the following grounds of appeal.
      "1.     On the facts and in the circumstances of the case, the Ld. CIT(A) erred in
              holding that the re-opening of assessment in this case was not justified since
                                           2                                ITA No.2749/M/2013
                                                                           M/s. Aditya Enterprises

             there was a change of opinion and not appreciating the fact that the case
             was re-opened within 4 years from the end of the relevant A.Y.

      2.     On the facts and in the circumstances of the case, the Ld. CIT(A) has erred in
             deleting the addition of Rs.87,48,301/- made by the assessing officer on
             account of application of stamp valuation rate of Rs.4554 per sq. ft. for
             arriving at the sale value of the total salable area to calculate the
             presumptive sale value of the project."

3.    The Revenue through Ground No.1 has contested the action of the Ld.
CIT(A) in setting aside the reassessment done u/s 147 of the Act while holding
the same as bad in law. The brief facts of the case are that the assessee is
engaged in the business of builders & developer and started construction of
commercial premises during the relevant assessment year. The assessee has
been following percentage completion method and accordingly income was
offered to tax based on the project completed during the year and on the
estimated value of sales of the project. The assessment was completed under
section 143(3) of the Income Tax Act, 1961 on 27.11.09 assessing the income
at Rs.11,60,272/-. Thereafter, the case was reopened by issuing notice under
section 148 of the Income Tax Act, 1961 dated 09.08.10. The Assessing
Officer (hereinafter referred to as the AO) in the reopened assessment
proceedings made an addition of Rs.87,48,301/- by way of applying stamp
valuation rate for arriving at the sale value of the project.
In appeal, the Ld. CIT(A) set-aside the reopening of the assessment holding
the same as bad in law. Being aggrieved, the Revenue has come in appeal
before us.

4.    We have heard the rival contentions of the Ld. Representatives of the
parties. We find from the impugned order that before the Ld. CIT(A) it was
submitted by the assessee that the AO had duly verified the relevant facts and
details including the books of account during the assessment proceedings. The
assessee had fully cooperated with the AO in providing and submitting all
                                            3                               ITA No.2749/M/2013
                                                                           M/s. Aditya Enterprises

information relating to the mode of estimating sale value of the project for
arriving at profit based on completion of project. No new fact or material had
come to the notice of the AO, indicating any escapement of income. The
assessee had further stated that the conclusion drawn by the AO was erroneous
for the reason that he considered the rate of stamp duty valuation of shops at
Rs.4,554/- per sq. meter as applicable for the valuation of the office area.
Therefore, reopening the assessment for applying rate of stamp duty valuation
of Rs.4,554/- applicable to shops in respect of the office area itself was
incorrect.   It was also the case of the assessee that the reopening of the
assessment was done by the AO on the basis of the audit objections in a
mechanical manner.

5.    After considering the submissions of the assessee and relevant facts on
record, the Ld. CIT(A) observed that the reopening of the assessment by the
AO in this case could not be held to be justified. The relevant part of the
observations of the CIT(A) is reproduced as under:

      "4. I have carefully considered the findings of the A.O in the assessment order as
      well as the submissions of the appellant. After considering the rival submissions, it
      is noted that the issue of valuation of closing stock/presumptive sale was inquired
      into by the A.O at the time of scrutiny assessment and from the
      clarification/explanation of the assessee at the time of original assessment, the A.O
      was satisfied on this aspect. It is further noted that reopening has been done on the
      basis of audit objections. However, it is further noted that the A.O in the first
      instance did not agree with the observations of the audit team that the assessee
      has disclosed lesser value of the unsold flats/shops. On the other hand, the A.O has
      objected to the observations of the audit party. Under these circumstances, it
      appears that the A.O was prima facie satisfied that income assessed at the time of
      original assessment is correct, however, in view of the audit objections, he has
      mechanically re-opened the assessment. Therefore, it is seen that in this case
      neither the A.O got any specific information nor the assessee gave any incorrect
      information, under these circumstances, when in scrutiny assessment u/s. 143(3)
      earlier A.O has duly accepted the valuation of the assessee as correct, then taking a
      different stand in the re-assessment proceedings on the same facts clearly
      tantamount to change of opinion. It is a well settled principle of law that under
      these circumstances, proceedings u/s. 148 cannot be justified."
                                       4                           ITA No.2749/M/2013
                                                                  M/s. Aditya Enterprises

6.    Before us, the Ld. DR could not bring any convincing argument which
may justify our interference in the above reproduced well-reasoned order of the
CIT(A). The Assesse had provided all the details and particulars before the
assessing officer.   The assessing officer himself was not convinced with the
working of the value of the project done by the audit party and had objected to
the same. However latter on he reopened the assessment in a mechanical
manner without application of mind. It has been held time and again by
various courts of the country that the reopening merely on the basis of audit
objections was not sustainable in the eyes of law. The view taken by the AO
after appreciation of the material on record during the original assessment
proceedings was one of the possible views and in his opinion the same was the
correct view even after the objections of the audit party. Even as observed by
the CIT(A), the stamp duty value of the shops could have not been applied to
the office area. Even section 50C provides for substituting the rate adopted for
stamp duty value, if the agreement rate is lower than the rate adopted for the
stamp duty. This is applicable only to transfer of capital asset. Since shops
and office have been the business asset of the assessee, section 50C providing
for adopting stamp duty value does not arise. This view has been confirmed by
the Hon'ble Allahabad High Court in the case of CIT vs. Kan Construction and
Colonizers (P) Ltd. (2012) 70 DTR (All.) 169 wherein it is held that section
50C does not apply to the contents held as stock in trade.         Hence even
otherwise, the reason for reopening was not a valid reason. The Hon'ble
Supreme Court in the case of "CIT vs. M/s. Kelvinator India Ltd." reported as
(2010) 320 ITR 561 (SC) has held that the AO has no power to review, he has
power to reassess but reassessment has to be based on fulfillment of certain
pre-condition and if the concept of `Change of opinion' is removed then in the
garb of reopening of the assessment, review would take place. The AO has
power to reopen provided there is tangible material to come to the conclusion
                                              5                        ITA No.2749/M/2013
                                                                      M/s. Aditya Enterprises

that there is escapement of income from assessment and reasons must have a
link with the formation of the belief. In this case the AO had no valid reason to
believe that the income of the assessee had escape assessment . We therefore
do not find any infirmity in the order of the CIT(A) in seting aside the
reopening of the assessment.

7.       Even on merits the addition made by the AO are not sustainable in law
as discussed above. Neither the action of the AO in applying the stamp value
rate of shops to the office area was correct nor he was entitled to do so in
respect of stock in trade as discussed above. Even the AO had not rejected the
books of accounts of the assessee. Hence, there is no infirmity in the order of
the CIT(A) on factual merits also. The order of the CIT(A) is therefore upheld.

8.       In the result the appeal of the Department is hereby dismissed.

                  Order pronounced in the open court on 16.09.2015.

          Sd/-                                                   Sd/-
    (G.S. Pannu)                                            (Sanjay Garg)
ACCOUNTANT MEMBER                                       JUDICIAL MEMBER

Mumbai, Dated: 16.09.2015.
* Kishore, Sr. P.S.

Copy to: The Appellant
        The Respondent
        The CIT, Concerned, Mumbai
        The CIT (A) Concerned, Mumbai
        The DR Concerned Bench
//True Copy//                             [

                                                  By Order

                                 Dy/Asstt. Registrar, ITAT, Mumbai.
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