2016 (11) TMI 1454 - AT - Income Tax

Sale of residential premises - LTCG OR STCG - nature of gain - A.O. has considered the date of agreement to sell which is 30th December, 2003 as the date of acquisition of the flat - assessee along with his wife had purchased the flat by jointly raising bank loan - Held that - As observed that the CBDT Circular No. 471 dated 15th October, 1986 relating to allotment of flat under self financing scheme of Delhi Development Authority shall be applicable as we do not see any reason why the said circular shall not be applicable to a private builder, and date of letter of allotment i.e. 27- 01-2003 shall be deemed to be date of acquisition of flat and hence since the flat was sold on 24-11-2006, the gains accrued to the assessee are long term capital gains as the asset is held for a period of more than thirty six months. Assessee will be entitled for cost inflation index(CII) based on the actual payments made and date of payment, accordingly CII will be worked out with reference to amount of payment and date of payment, on progressive payments. Further it is observed that the assessee has raised additional grounds before the learned CIT(A) which were not admitted by the ld. CIT(A) and rejected at the threshold and hence consequently not adjudicated while framing appellate order dated 23.05.2014. In our considered view and in the interest of justice , these additional grounds raised by the assessee before the learned CIT(A) need to be admitted as they rise from the order of the AO and the matter is to be set aside and restored to the file of the learned CIT(A) for adjudication of these issue s raised in these additional grounds on merit , after considering the evidences/explanations filed by the assessee .

Summary

Issues:
1. Determination of long-term capital gains as short-term capital gains.
2. Rejection of additional grounds of appeal by the CIT(A).

Issue 1: Determination of Capital Gains:
The appeal concerned the assessment year 2007-08, where the assessee contested the characterization of long-term capital gains on the sale of residential premises as short-term capital gains by the CIT(A). The AO observed discrepancies in the ownership declaration between the assessee and his wife, leading to a notice under section 142(1) of the Income-tax Act, 1961. The AO calculated the capital gain based on the agreement date instead of the letter of allotment date, resulting in the determination of short-term capital gains. The CIT(A) upheld the AO's decision, emphasizing the lack of substantial investment and domain over the property from the date of allotment. However, the Tribunal disagreed, citing a CBDT circular applicable to private builders, deeming the date of allotment as the acquisition date. This decision aligned the holding period to over thirty-six months, qualifying the gains as long-term capital gains.

Issue 2: Rejection of Additional Grounds by CIT(A):
The assessee raised additional grounds before the CIT(A) regarding the assessment of short-term capital gains and the cost of improvement. However, the CIT(A) rejected these grounds as not purely legal and not arising from the original appeal. The Tribunal, after considering the CBDT circular and the assessee's arguments, found merit in the additional grounds. They directed the CIT(A) to admit and adjudicate on these issues, emphasizing the need for proper consideration of evidence and explanations provided by the assessee. The Tribunal granted the assessee an opportunity to present their case fully before the CIT(A for a fair assessment.

In conclusion, the Tribunal allowed the appeal for the assessment year 2007-08, setting aside the CIT(A)'s decision on the characterization of capital gains and directing a reevaluation of the additional grounds raised by the assessee. The detailed analysis of the issues highlighted the importance of correct date determination for capital gains and the necessity for thorough consideration of all grounds raised during the appeal process.