2011 (7) TMI 1194 - AT - Income Tax

Summary

Issues involved:
1. Addition u/s 50C of the Income Tax Act
2. Addition on account of low GP
3. Addition of LIC loan interest treated as non-business purpose

Issue 1: Addition u/s 50C of the Income Tax Act

The appeal pertains to the addition of Rs. 53,70,000 by applying provisions of section 50C of the IT Act. The Assessing Officer (AO) determined the total consideration for a land and building sale at Rs. 88,70,000 based on stamp duty information, while the assessee declared Rs. 35 lacs. The CIT(A) affirmed the AO's action under section 50C, leading to a confirmed addition of Rs. 69,53,542 as long-term capital gain (LTCG). The appellant argued that the AO should have awaited the DVO's report before finalizing the assessment and should have considered the valuation reports submitted. The Tribunal held that the AO should have waited for the DVO's report as per section 50C(2) and restored the issue back to the AO for proper valuation. The Tribunal also allowed the appellant to challenge the computation of LTCG before the AO.

Issue 2: Addition on account of low GP

The AO made an addition of Rs. 54,563 due to the lower Gross Profit (GP) declared by the assessee in the textile retail business. The CIT(A) affirmed the AO's action without considering the provisions of section 44AF supporting the declared profit. The Tribunal opined that if the AO is unsatisfied with the declared profit, guidance from section 44AF should have been sought. As the turnover did not exceed the limit, the issue was restored to the AO for reconsideration in light of section 44AF.

Issue 3: Addition of LIC loan interest treated as non-business purpose

The AO disallowed Rs. 7,148 claimed as LIC loan interest, treating it as utilized for non-business purposes. The CIT(A) confirmed the disallowance as the loan was not shown to be wholly and exclusively for business purposes. The Tribunal found no error in the CIT(A)'s decision, and since the addition was minor and not contested seriously, the ground was dismissed.

The Tribunal partially allowed the assessee's appeal, primarily on the first two issues, directing a reconsideration by the AO. The order was signed, dated, and pronounced on 29th July 2011.