2013 (7) TMI 845 - AT - Income Tax

Addition on account of capital gain - AO has made the addition by invoking the provision of section 50C - Held that - As assessee has submitted that AO should have referred the matter to the DVO in terms of section 50C(2) as the assessee has objected to the valuation by the stamp valuation authority & provision of section 50C are not applicable to the lease hold property. This ground was not raised before the authorities below, thus matter is remitted to the file of AO to consider the issue afresh. Addition on account of low GP - Held that - As there is a fall in the GP rate in the current year, but, it is not a very significant one. Assessee has given explanation for the reasons of the fall in GP, but the authorities below have summarily rejected it without putting any cogent basis for rejecting the submissions of the assessee. Further, as regards the purchase from the sister concern is concerned, if AO was not satisfied with the rate of purchase, he should have brought on record appropriate materials for proposition that the said purchases which were at higher rates. However AO has not been able to bring on record any such data. Furthermore, assessee has submitted that the assessee has given all the details which as per AO not submitted some of the details - matter remitted to the file of AO to consider the issue afresh. Appeal filed by the Assessee stands allowed for statistical purposes.

Summary

Issues:
1. Addition on account of capital gain
2. Addition on account of low GP

Analysis:
1. Addition on account of capital gain:
The appellant challenged the addition made under section 50C for short valuation of property. The appellant contended that the Assessing Officer should have referred the matter to the DVO as per section 50C(2) since the valuation was objected to. Additionally, the appellant argued that section 50C does not apply to leasehold property. The Tribunal remitted the issue back to the Assessing Officer for fresh consideration, emphasizing the need to address all grounds raised by the appellant, including the applicability of section 50C to leasehold property.

2. Addition on account of low GP:
Regarding the fall in GP rate, the Assessing Officer noted a decrease and made an addition based on his estimation. The appellant provided detailed reasons for the fall in GP, including increased costs and competitive pricing pressures. The Assessing Officer also questioned purchases from a sister concern. The Tribunal observed that the authorities summarily rejected the appellant's explanations without sufficient basis. It directed the matter to be reconsidered by the Assessing Officer, highlighting the lack of concrete evidence to support the higher rates of purchases from the sister concern. The Tribunal stressed the importance of providing the appellant with a fair opportunity to present their case.

In conclusion, the Tribunal allowed the appeal for statistical purposes, indicating a favorable outcome for the Assessee.