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 capital gains was remanded to the AO for fresh adjudication, providing the assessee with three opportunities to present evidence. The decision was pronounced on 28/02/2019.

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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 Credits
The 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 Addition
The 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.

Conclusion
The 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.

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