2018 (6) TMI 287 - AT - Income Tax

Additions for capital gains on sale of land u/s 50C - reference to DVO - Held that - In view of the judgement in case of SUNIL KUMAR AGARWAL VERSUS COMMISSIONER OF INCOME TAX, SILIGURI 2014 (6) TMI 13 - CALCUTTA HIGH COURT we set aside the order of learned CIT(A) and restore the matter back to the file of the AO for fresh adjudication of the entire issue on merits after referring the matter to DVO for valuation - AO/DVO shall admit all necessary evidence submitted by the assessee and adequate opportunity of being heard in accordance of principles of natural justice shall also be given to the assessee. Additions made for bogus purchase - Held that - Unusually long credits were given by these parties and payments vis-a-vis purchases do not reveal normal purchase transactions happening in normal course of business . The onus was on the assessee to have proved genuineness of purchases and consumption/utilisation of material for business purposes. The assessee could not discharge primary burden and the amount was also surrendered during assessment proceedings. Under these circumstances and keeping in view factual matrix of the case we are not inclined to interfere with the order of learned CIT(A) which we confirm. The assessee fails on this ground.

Summary

Issues Involved:
1. Addition under Section 50C of the Income-tax Act, 1961.
2. Addition of alleged bogus purchases.

Issue-wise Detailed Analysis:

1. Addition under Section 50C:
The assessee sold a plot of land for ?4,00,000, while the stamp duty valuation was ?9,03,000. The AO adopted the higher value for computing long-term capital gains under Section 48, resulting in an addition of ?5,03,000. The CIT(A) confirmed this addition, stating that no purpose would be served by referring the matter to the Departmental Valuation Officer (DVO) at the appellate stage as the assessee did not request this during the assessment proceedings.

The tribunal observed that the CIT(A)'s powers are co-terminus with those of the AO and, in the interest of natural justice, should have referred the matter to the DVO. The tribunal cited the Hon’ble Calcutta High Court's decision in Sunil Kumar Agarwal v. CIT, which mandates that the AO should give the assessee an option to have the valuation made by the DVO. The tribunal set aside the CIT(A)'s order and restored the matter to the AO for fresh adjudication after referring the valuation to the DVO, ensuring proper opportunity for the assessee to present evidence.

2. Addition of Alleged Bogus Purchases:
The AO made an addition of ?19,92,426, treating purchases from five parties as bogus based on information from Maharashtra VAT authorities indicating these parties were hawala dealers issuing bogus bills without supplying material. The assessee provided purchase bills and ledger accounts but failed to produce stock registers, transport receipts, or evidence of material movement and consumption.

The CIT(A) confirmed the addition, noting that the assessee surrendered the amount and failed to substantiate the purchases with adequate evidence. The tribunal upheld the CIT(A)'s decision, emphasizing the assessee's inability to prove the genuineness of the purchases and the material's utilization for business purposes. The tribunal noted that the assessee's records showed unusually long credit periods and irregular payment patterns, which did not align with normal business transactions.

Conclusion:
The tribunal partly allowed the appeal for statistical purposes, directing a fresh adjudication on the Section 50C addition after DVO valuation and upholding the addition for bogus purchases due to lack of evidence supporting the assessee's claims. The order was pronounced in the open court on 01.06.2018.