2018 (1) TMI 1560 - AT - Income Tax

Capital gain computation - Value of sale consideration by the value adopted by Stamp Valuation Authority - entitlement for indexation cost - HELD THAT - The assessee was asked to produce the sale-deed for land shown in fixed asset for the purpose of computing capital gain. The assessee not provided copy of sale-deed for sale of land and factory building at Taloja or any other evidence, the AO made the addition of ₹ 5 Crore in the income of assessee on estimate basis. CIT(A) after considering the contention of assessee observed that the profit of sale of land shall be taken as LTCG and the assessee shall be entitled for indexation cost and directed the AO to adopt the value adopted by Stamp Valuation Authority and verified the fact regarding the period of lease. Before us, the assessee has neither filed any documentary evidence nor explained the fact. Thus, we do not find any illegality or infirmity in the order passed by ld. CIT(A). Hence, ground no.1 of the appeal is dismissed. Disallowance of bad-debt - HELD THAT - No details of debts were provided by the assessee, thus claimed was disallowed. The ld. CIT(A) also observed while confirming the action of the AO, that no details of bad-debt was made available nor any prima facie justification was given. Even before us, the assessee has neither given any explanation nor filed any detailed about the bad-debts. None come forward on behalf of assessee to explain the fact about the bad-debt and the treatment given in the books of account. Thus, we do not find any illegality or infirmity in the order passed by ld. CIT(A). Thus, ground no.2 of the appeal is also dismissed.

Summary

Issues:
1. Applicability of Section 50C to transfer of leasehold land and ownership determination.
2. Disallowance of bad debts under section 36(1)(vii).

Analysis:

Issue 1: Applicability of Section 50C and Ownership Determination
The appeal was against the order of the CIT(A) for Assessment Year 2006-07 concerning the applicability of Section 50C to the transfer of leasehold land and ownership determination. The AO disallowed a bad debt and made an addition on account of the enhancement in the sale value of land and factory building. The CIT(A) directed the AO to adopt the value of sale consideration as per the Stamp Valuation Authority and verify the lease period of the land. The appellant contended that Section 50C should not apply to leasehold land and challenged the ownership determination based on the lease period. However, the appellant failed to provide any documentary evidence or explanation before the authorities. The ITAT upheld the CIT(A)'s order, dismissing the appeal on both grounds.

Issue 2: Disallowance of Bad Debts under Section 36(1)(vii)
Regarding the disallowance of bad debts under section 36(1)(vii), the AO disallowed a bad debt claimed by the assessee from M/s Ruchi Pvt. Ltd. The CIT(A) upheld this disallowance due to the lack of details or justification provided by the assessee regarding the bad debt. The ITAT noted that even during the appeal hearing, the assessee failed to provide any explanation or details about the bad debts. As a result, the ITAT found no illegality in the CIT(A)'s order and dismissed the appeal on this ground as well.

In conclusion, the ITAT upheld the orders of the lower authorities, dismissing the appeal of the assessee concerning the applicability of Section 50C to leasehold land, ownership determination, and the disallowance of bad debts under section 36(1)(vii). The decision was based on the lack of evidence and explanations provided by the assessee throughout the proceedings.