No Capital Gain without incurring cost

Where Whole amount of sale consideration was taxed by the Assessing Officer as capital gains without giving assessee any benefit with regard to cost of acquisition or cost of construction because the assesse could not prove the expenditure.

Held by ITAT that  It can be nobody’s case that the assessee had acquired the property without paying any cost. Some value for cost of acquisition has to be given to the assessee. Even in cases of properties acquired through gifts, etc. the cost of acquisition as incurred by the previous owner is given to the assessee.

Nand lal Popli [2016] 71 taxmann.com 246 (Chandigarh – Trib.)]

While making estimated addition AO can not make a pure guess Dhakeswari Cotton Mills Ltd [1954] 26 ITR 775 (SC

 As regards the second contention, although ITO is not fettered by technical rules of evidence and pleadings, and that he is entitled to act on material which may not be accepted as evidence in a court of law, but there the agreement ends; because it is equally clear that in making the assessment under section 23(3) he is not entitled to make a pure guess and make an assessment without reference to any evidence or any material at all and there must be something more than bare suspicion to support the assessment under section 23(3). The rule of law on this subject has been fairly and rightly stated by the Lahore High Court in the case of Seth Gurmukh Singh v. CIT [1944] 12 393. In the instant case, the Tribunal violated certain fundamental rules of justice in reaching its conclusions. Firstly, it did not disclose to the assessee what information had been supplied to it by the departmental representative. Next, it did not give any opportunity to the assessee to rebut the material furnished to it by him, and lastly, it declined to take all the material that the assessee wanted to produce in support of its case. The result was that the assessee had not had a fair hearing. The estimate of the gross rate of profit on sales, both by the ITO and the Tribunal, was based on surmises, suspicions and conjectures. The Tribunal took from the representative of the department a statement of gross profit rates of other cotton mills but did not show that statement to the assessee did not give him a opportunity to show that statement had no relevancy whatsoever to the case of the mill in question. It was not known whether the mills which had disclosed these rates were similarly situated and circumstanced. Not only did the Tribunal not show the information given by the representative of the department to the assessee, but it refused even to look at books and papers which assessee’s representative produced before the Accountant Member in his chamber. The assessment in this case and in the connected appeal, was above the figure of Rs. 55 lakhs and it was just and proper when dealing with a matter of this magnitude not to employ unnecessary haste and show impatience, particularly when it was known to the department that the books of the assessee were in the custody of the Sub-Divisional Officer. Thus both the ITO and the Tribunal in estimating the gross profit rate on sales did not act on any material but acted on pure guess and suspicion. It was thus a fit case for the exercise of power under Article 136.

Gross profit rate couldn’t be computed with reference to returns of subsequent years : J&K High Court

Nek Ram Sharma & Co. [2017] 85 taxmann.com 176 (Jammu & Kashmir) 19-08-2017

The appellant firm is a partnership firm which was constituted for the purpose of execution of purchase contract of bulk timber worth over Rs. Three crores from Jammu and Kashmir State Forest Corporation .The appellant had made the sales below the cost price to unidentifiable parties.

CIT A adopted the GP ratio of subsequent years to make the addition in second innings of the proceedings, because record of earlier years was not available.

Write back of provision for which expense has not been claimed can not result into addition u/s 41:Gujrat High Court

 

Gujarat State Co-OP Bank Ltd. [2017] 85 taxmann.com 259 (Gujarat) 22-08-2017

 

Para 10 “…………..When provision was never claimed as deduction, there cannot be any occasion to bring to tax reversal of such a provision. The entire exercise of creating this provision, and reversing the same – partly or fully, is completely tax neutral. The fact that income was eligible for deduction under section 80P, even if that be so, is wholly irrelevant in this context…………”