2009 (8) TMI 1181 - AT - Income Tax

Summary

Issues Involved:
1. Addition of Rs. 11,71,340/- on account of unexplained investment in flat u/s 69 of the IT Act.
2. Charging of interest u/s 234B of the IT Act.
3. Deletion of addition of Rs. 19,20,000/- on account of unexplained credits shown under long-term capital gain u/s 68 of the IT Act.

Summary:

Issue 1: Addition of Rs. 11,71,340/- on account of unexplained investment in flat u/s 69 of the IT Act

The assessee purchased a flat in Mumbai for Rs. 30,62,500, but the Stamp Valuation Authority (SVA) valued it at Rs. 42,33,840, leading to a demand for additional stamp duty. The Assessing Officer (AO) treated the difference of Rs. 11,71,340 as unexplained investment u/s 69. The assessee argued that the flat was bought at a lower price due to distress sale and paid additional stamp duty for peace of mind. The AO rejected this explanation, noting the acceptance of the SVA valuation by the assessee. The Commissioner of Income Tax (Appeals) upheld the AO's decision, emphasizing the principle behind section 50C, which suggests that the sale consideration should match the jantri price. However, the ITAT found that section 50C applies only to sellers for capital gains purposes and not to buyers. The ITAT concluded that there was no evidence that the assessee paid more than Rs. 30,62,500 and deleted the addition of Rs. 11,71,340.

Issue 2: Charging of interest u/s 234B of the IT Act

The assessee did not make any submission on this ground. The ITAT held that charging of interest is consequential and disposed of this ground accordingly.

Issue 3: Deletion of addition of Rs. 19,20,000/- on account of unexplained credits shown under long-term capital gain u/s 68 of the IT Act

The assessee claimed long-term capital gain of Rs. 19,20,000 from the sale of shares of 'Offshore Investment Ltd.' The AO found discrepancies in the transaction, including cash purchase, lack of demat account, and non-compliance with SEBI guidelines, and treated the gain as unexplained cash credit u/s 68. The Commissioner of Income Tax (Appeals) deleted the addition, noting that the broker's note provided sufficient details and the transactions were genuine. However, the ITAT observed that the contract note did not mention the distinctive number of shares or Securities Transaction Tax (STT). The ITAT set aside the issue for re-adjudication, directing the AO to verify the transfer of shares, the genuineness of the transactions, and the market price of the shares on the purchase and sale dates.

Conclusion:

The appeal in ITA No. 3997/Ahd/08 is partly allowed, and the appeal in ITA No. 93/Ahd/09 is allowed for statistical purposes.