2019 (3) TMI 465 - AT - Income Tax

Tribunal grants relief, remands capital gains issue for fresh review, assessee gets three chances. Decision on 28/02/2019.

The tribunal partly allowed the appeal by reversing the addition of unexplained sundry credits but directed a 12.5% disallowance. The issue of short term ... Addition u/s 68 - Unexplained credit-sundry creditor - proof of bogus corresponding sales - HELD THAT:- There is hardly any dispute that this assessee is a wholesale dealer / trader in various electrical items and appliances such as water pumps, fans, coolers, gesysers, home appliances etc.,. It transpires during the course of hearing that neither of the lower authorities has rejected assessee’s corresponding sales nor have they treated assessee’s purchases to be bogus. They simply hold the corresponding parties as bogus sundry creditors. DR fails to dispute that if the corresponding sales and purchases are treated as genuine, the very course of action has to be followed regarding creditors parties in issue in order to avoid inconsistency.We therefore reverse the impugned addition in principle on this count alone. Assessee failure to prove its relevant parties to be genuine - as contended lower authorities have accepted sales of the corresponding items and all this sufficiently proves assessee’s purchases to be genuine - HELD THAT:- We find no substance in assessee’s instant argument as it is assessee’s bounden duty to prove of the purchases in issue by way of leading cogent evidences. The fact also remains whole of the assessee’s purchases cannot be treated as bogus since corresponding sales have already been accepted. We hold in these peculiar facts and circumstances that the impugned purchases deserve to be disallowed @ 12.5% only. We therefore direct the Assessing Officer to restrict the impugned disallowance of ₹1,10,17,324/- to the extent 12.5% thereof only in consequential computation. This former substantive ground is partly accepted in above terms. Capital gains addition - treating assessee’s agricultural land sold to be a capital asset - AO completed his best judgment assessment u/s. 144 - HELD THAT:- The assessee could not produce all the relevant details in the lower appellate proceedings as well. We reiterate that we have already restored the former issue back to the Assessing Officer with specific directions. We therefore deem it appropriate that larger interest would be met in case the Assessing Officer adjudicate the instant issue afresh as per law after affording three effective opportunities to the assessee. This latter substantive ground is accepted for statistical purposes. Issues Involved:1. Addition of unexplained sundry credits amounting to Rs. 1,10,17,324/-2. Short term capital gains addition of Rs. 10.57 lac treating agricultural land sold as a capital asset.Issue 1: Addition of Unexplained Sundry CreditsThe primary issue in this case pertains to the addition of Rs. 1,10,17,324/- as unexplained sundry credits in the assessee's accounts for the assessment year 2012-13. The Assessing Officer (AO) noted that the assessee had claimed sundry creditors and expenses payable in the balance sheet but failed to provide supporting documents, such as account confirmations and vouchers. Consequently, the AO treated these credits as unexplained and added them to the total income, initiating penalty proceedings under section 271(1)(c) of the Income Tax Act, 1961 for concealment of income.During the appeal, the assessee argued that all relevant documents, including the audited balance sheet, profit and loss account, tax audit report, bank statements, and some creditor confirmations, were submitted. The assessee contended that the AO should have considered all these materials, especially since the income tax return was filed electronically with all relevant figures. The assessee also highlighted that the AO did not compare the profit rates with other similar businesses and erroneously added the sundry creditors and advances received from debtors as unexplained credits.The appellate authority, however, upheld the AO's decision, noting that the assessee failed to provide necessary evidence, such as account confirmations and details of creditors, even during the appeal stage. The authority emphasized that the onus is on the assessee to explain the credits in the books of accounts, which was not discharged. The reference was made to judicial precedents where courts have held that failure to substantiate claims with evidence leads to additions being upheld.Upon further appeal, the tribunal observed that the assessee is a wholesale dealer in electrical items and that neither the sales nor purchases were rejected by the lower authorities. The tribunal found inconsistency in treating the creditors as bogus while accepting the sales and purchases as genuine. Consequently, the tribunal reversed the addition of Rs. 1,10,17,324/- in principle but noted the assessee's failure to prove the genuineness of the parties. Hence, it directed the AO to restrict the disallowance to 12.5% of the impugned amount, i.e., Rs. 1,10,17,324/-.Issue 2: Short Term Capital Gains AdditionThe second issue involves the addition of Rs. 10.57 lac as short term capital gains, treating the sale of agricultural land as a capital asset. The AO completed the assessment under section 144 of the Act, noting the non-cooperation of the assessee in producing relevant details. The assessee also failed to provide these details during the appellate proceedings.Given that the first issue was restored to the AO for fresh adjudication, the tribunal deemed it appropriate to remand this issue as well. The tribunal directed the AO to adjudicate the matter afresh, allowing three effective opportunities to the assessee to present the necessary evidence.ConclusionThe appeal was partly allowed. The tribunal reversed the addition of unexplained sundry credits in principle but restricted the disallowance to 12.5% of Rs. 1,10,17,324/-. The issue of short term capital gains was remanded to the AO for fresh adjudication. The order was pronounced in the open court on 28/02/2019.