2013 (5) TMI 946 - AT - Income Tax

Summary

Issues Involved:
1. Assessment of Short Term Capital Gain of Rs. 42 lacs.
2. Disallowance of expenses of Rs. 74,923/- against business income.

Issue 1: Assessment of Short Term Capital Gain of Rs. 42 lacs
The assessee contested the order of the Ld. CIT(A)-1, Jaipur, which confirmed the action of the assessing officer in assessing Short Term Capital Gain of Rs. 42 lacs. The grounds included:
- The assessee was held as the owner of the land sold to his wife, Radha Devi Khatoria, despite the land being sold by Shri Bharat Singh and Shri Vijay Pal Singh via a power of attorney dated 15/11/2006.
- The agreement dated 17/11/2006 through which Radha Devi Khatoria acquired rights from Smt. Manju Yadav was deemed invalid as it was not registered.
- Reliance on the replies given by Shri Bharat Singh and Smt. Manju Yadav in response to notices u/s 131 & 133(6) respectively, without allowing cross-examination.
- Incorrect interpretation of documents and incorrect application of sec. 50C, ignoring that the assessee did not sell any land to his wife.

The assessing officer concluded that the assessee executed a sale deed for land measuring 0.30 hectares, originally owned by Shri Bharat Singh, for Rs. 42 lacs. The Ld. CIT(A) upheld that only 0.15 hectares were transferred to Miss. Manju Yadav, and the remaining 0.30 hectares were sold by the assessee without valid ownership, thus invoking sec. 50C for capital gains computation.

Issue 2: Disallowance of expenses of Rs. 74,923/- against business income
The Ld. CIT(A) confirmed the disallowance of expenses claimed by the assessee, stating that no evidence was provided to show that such expenses were incurred wholly and exclusively for business purposes.

Judgment:
1. Assessment of Short Term Capital Gain:
- The ITAT found that the assessee executed the sale deed as a power of attorney holder, not as the owner of the land. The sale consideration of Rs. 42 lacs was adopted by the stamp valuation authority, but the assessee had no independent right in the land.
- The ITAT concluded that the assessee was neither the owner nor the deemed owner of the land, and thus, the capital asset could not be considered his property. Therefore, the application of sec. 50C was unjustified.
- The addition of Rs. 42 lacs as capital gains was directed to be deleted.

2. Disallowance of Expenses:
- The ITAT upheld the Ld. CIT(A)'s decision, as the assessee failed to provide evidence that the expenses were incurred for business purposes.
- The disallowance of Rs. 74,923/- was sustained.

Conclusion:
The appeal by the assessee was partly allowed, with the deletion of the addition of Rs. 42 lacs as capital gains and the sustenance of the disallowance of Rs. 74,923/- in business expenses. The order was pronounced in the open court on 27.05.2013.