2016 (8) TMI 1174 - AT - Income Tax

Addition on undisclosed short term capital gain - CIT-A deleted addition - Held that - CIT (A) has verified the fact that the capital asset remained in the books of account of the firm. It is also a fact that the capital asset was introduced into the firm by the partners. The ld. CIT (A) has relied upon the judgment of the Hon ble Supreme Court rendered in the case of Sunil Siddharthbhai vs. CIT, (1985 (9) TMI 7 - SUPREME Court). The revenue has not submitted any contrary binding precedent. Therefore, we do not find any infirmity in the order of ld. CIT (A), which is hereby affirmed. The ground raised by the revenue is rejected. Addition on undisclosed investment in purchase of immovable property - Held that - The assessee was having sufficient balance in the bank account and there was an withdrawal of amount of ₹ 71.50 lacs on 6th July, 2008. The ld. CIT (A) has given finding of fact that there was sufficient cash balance in the account of the assessee to meet the expenses incurred on registration. In view of the above finding of fact, which is not controverted by the revenue by bringing any contrary material on record, we do not see any reason to interfere in the order of ld. CIT (A). The same is hereby upheld. This ground of the revenue s appeal is rejected. Addition on account of agriculture income - Held that - In respect of proving the earning of agricultural income, ld. Counsel for the assessee stated that the assessee had duly filed evidence of ownership of the land but he expressed his inability to furnish the evidence with regard to earning of agricultural income. In our considered view, the assessee made the claim of agricultural income but burden of proving the same is on the assessee. The assessee could not discharge the burden of proving by placing any supporting evidences. In the absence of supporting the evidences before the authorities below and also before this Tribunal, we are unable to accept the contention of the ld. Counsel for the assessee. Hence we reject this ground of the assessee. The appeal of the assessee is dismissed.

Summary

Issues Involved:
1. Deletion of addition of ?29,21,631/- made by the AO on account of undisclosed short-term capital gain.
2. Deletion of addition of ?19,91,110/- made by the AO on account of undisclosed investment in the purchase of immovable property.
3. Confirmation of addition of ?2,10,400/- made on account of unexplained agricultural income.

Detailed Analysis:

Issue 1: Deletion of addition of ?29,21,631/- made by the AO on account of undisclosed short-term capital gain

The revenue contended that the Commissioner of Income-tax (Appeals), Alwar (CIT (A)) erred in deleting the addition of ?29,21,631/- made by the Assessing Officer (AO) on account of undisclosed short-term capital gain. The AO had based the addition on the sale of a piece of land, which was converted for industrial use and sold in parts, considering the stamp valuation. However, the CIT (A) deleted the addition, reasoning that no actual transfer took place as the property remained in the firm's books, and the seller and buyer were partners in the firm. The CIT (A) referred to the provisions of the Indian Partnership Act, 1932, and relevant Supreme Court judgments, which established that the property of the firm includes all property brought into the firm by partners and that a firm is not a distinct legal entity apart from its partners. The CIT (A) concluded that the capital asset remained in the firm's books, and there was no dissolution or distribution of capital assets, thus no capital gains tax liability arose in the hands of the appellant. The Tribunal upheld the CIT (A)'s decision, noting that the revenue did not provide any contrary binding precedent.

Issue 2: Deletion of addition of ?19,91,110/- made by the AO on account of undisclosed investment in the purchase of immovable property

The revenue argued that the CIT (A) erred in deleting the addition of ?19,91,110/- made by the AO for undisclosed investment in the purchase of immovable property. The AO had observed that the assessee purchased land and incurred registration expenses without explaining the source of such investment. The assessee contended that no consideration was paid for the purchase as the property was transferred by the appellant himself as a General Power of Attorney (GPA) holder, and the registration expenses were met from cash withdrawals from the bank. The CIT (A) accepted this explanation, noting that the property was transferred to secure legal rights and that there was sufficient cash balance in the appellant's bank account to cover the registration expenses. The Tribunal upheld the CIT (A)'s decision, as the revenue did not provide any contrary evidence.

Issue 3: Confirmation of addition of ?2,10,400/- made on account of unexplained agricultural income

The assessee challenged the addition of ?2,10,400/- made by the AO on account of unexplained agricultural income. The assessee claimed ownership of agricultural land and provided a copy of Jamabandi (land record) but failed to produce evidence of earning agricultural income. Both the AO and CIT (A) found that the assessee did not provide sufficient evidence to support the claim of agricultural income. The Tribunal agreed with the authorities below, stating that the burden of proving agricultural income lies with the assessee, who failed to discharge this burden. Consequently, the Tribunal dismissed the assessee's appeal.

Conclusion:

Both the revenue's and the assessee's appeals were dismissed. The Tribunal upheld the CIT (A)'s decisions on deleting the additions for undisclosed short-term capital gain and undisclosed investment in the purchase of immovable property, while confirming the addition for unexplained agricultural income. The order was pronounced in the open court on 11/08/2016.