Revenue's Appeal Partly Allowed for Statistical Purposes. Grounds 1 & 2 Remitted, Ground 3 Dismissed. Decision: 28th June 2013.

The court partly allowed the revenue's appeal for statistical purposes. Grounds 1 and 2 regarding additions on sale consideration of properties and inventory differences were remitted back to the Assessing Officer for fresh examination. However, Ground 3 concerning the disallowance of interest expenses was dismissed. The decision was pronounced on 28th June 2013.

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Issues Involved:
1. Addition of Rs. 1,08,79,000/- on account of sale consideration of properties.
2. Addition of Rs. 52,54,314/- on account of unaccounted/differences in inventory.
3. Disallowance of Rs. 15,84,783/- on account of interest expenses.

Summary:

Issue 1: Addition of Rs. 1,08,79,000/- on account of sale consideration of properties
The Assessing Officer (AO) observed that the sale consideration declared by the assessee was lower than the value adopted for stamp duty purposes. The AO added Rs. 1,08,79,000/- to the income of the assessee, considering the circle rate as a reliable yardstick for determining the fair market value. The CIT(A) deleted the addition, holding that section 50C applies only to capital assets and not to properties held as stock-in-trade. The Tribunal noted that while section 50C is not applicable to stock-in-trade, the AO should have examined why the sales were shown at a lower price. The issue was remitted back to the AO for fresh examination and re-adjudication.

Issue 2: Addition of Rs. 52,54,314/- on account of unaccounted/differences in inventory
The AO observed differences between the areas of properties sold as per sale deeds and as per opening and closing stock, leading to an addition of Rs. 52,54,314/-. The CIT(A) deleted the addition, accepting the assessee's reconciliation statement and method of valuation, which had been consistently followed and accepted in earlier years. The Tribunal remitted the issue back to the AO for re-adjudication, directing the AO to verify whether the areas mentioned in earlier years were actually declared in the P&L account of those years.

Issue 3: Disallowance of Rs. 15,84,783/- on account of interest expenses
The AO disallowed the interest expenses, arguing that the interest should have been capitalized as the assessee had not carried out any construction activity during the year. The CIT(A) deleted the addition, noting that the interest was incurred for running the business and the assessee had already capitalized a significant portion of the interest. The Tribunal upheld the CIT(A)'s decision, finding no infirmity in the order and confirming that the interest was paid for business purposes.

Conclusion:
The appeal filed by the revenue is partly allowed for statistical purposes. Ground No.1 & 2 are remitted back to the AO for fresh examination, while Ground No.3 is dismissed. The order was pronounced in the open court on 28th June, 2013.

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