2009 (6) TMI 626 - AT - Income Tax

Condonation Of Delay - Search and seizure - Disallowance - Undisclosed income - Deduction u/s 54F - Demand - Assessee being a retired person and not conversant with the intricacies of the law therefore did not file an appeal initially on the advise of previous chartered accountant - Notwithstanding the issue regarding validity of assessment by invoking s. 153C of the Act is a legal issue and therefore the assessee is entitled to raise it as additional ground otherwise also in. the cross-objections - The main thrust of the reasons for not filing the appeal in time was that the assessee had filed cross-objections in time in response to appeal filed by the Revenue but fearing that Revenue might withdraw the appeal and therefore the cross-objections so filed would come in jeopardy it has filed an appeal independently Regarding capital gain - there is no evidence on record that books of account and documents belonging to the assessee and found during the course of search in the case of Shri Subodhbhai M. Sanghvi were handed over to the AO of the present assessee - The main thrust of s. 153C of the Act is to empower the AO of the person searched to handover the money gold jewellery or other relevant articles/things or books of account or documents belonging to the other person to the AO of that other person and the AO of that other person is empowered to proceed against such other person to assess undisclosed income resulting from such money bullion jewellery and valuable articles or things books of account or other documents - Appeal is allowed by way of remand

Summary

Issues Involved:
1. Deduction for cost of acquisition of land.
2. Classification of income as undisclosed income versus long-term capital gain.
3. Determination of the sale value of the land.
4. Disallowance of deduction under section 54F.
5. Disallowance of improvement cost of land.
6. Addition on account of household expenses.
7. Validity of assessment under section 153C.
8. Condonation of delay in filing the appeal.

Issue-Wise Detailed Analysis:

1. Deduction for Cost of Acquisition of Land:
The Revenue contended that the CIT(A) erred in directing the AO to allow the cost of acquisition of land worth Rs. 17 lacs to the assessee, arguing that it was not recorded in the assessee's books. The Revenue cited the Gujarat High Court decision in Fakir Mohmed Haji Hasan vs. CIT, which states that no deduction is allowable for unexplained and unrecorded expenditure for asset acquisition. The Tribunal upheld the CIT(A)'s decision to allow the deduction, noting that the cost of acquisition was substantiated by the assessee.

2. Classification of Income as Undisclosed Income vs. Long-Term Capital Gain:
The assessee argued that the income should be treated as long-term capital gain rather than undisclosed income. The CIT(A) treated the entire sum of Rs. 1,34,00,000 as sale consideration but did not allow the claim under section 54F. The Tribunal noted that the CIT(A) allowed the deduction for the cost of acquisition but treated the sale value as Rs. 1.34 crore.

3. Determination of the Sale Value of the Land:
The assessee contested the CIT(A)'s confirmation of the sale value at Rs. 1.34 crore instead of Rs. 93,72,555. The AO based the assessment on documents found during a search, which indicated a higher sale consideration. The Tribunal found that the AO's determination was based on seized documents, and the CIT(A) upheld this assessment.

4. Disallowance of Deduction under Section 54F:
The assessee's claim for deduction under section 54F was disallowed by the CIT(A). The Tribunal noted that the CIT(A) did not allow this deduction, and the assessee's appeal on this ground was part of the issues to be reconsidered.

5. Disallowance of Improvement Cost of Land:
The CIT(A) confirmed the disallowance of the improvement cost of Rs. 5,95,250 claimed by the assessee. The Tribunal included this issue in the matters to be reviewed upon remand to the CIT(A).

6. Addition on Account of Household Expenses:
The CIT(A) confirmed an addition of Rs. 60,000 on account of household expenses. The Tribunal did not specifically address this issue in detail but included it in the remand for further consideration.

7. Validity of Assessment under Section 153C:
The assessee challenged the validity of the assessment under section 153C, arguing that no satisfaction was recorded by the AO of the person searched. The Tribunal highlighted that the AO of the searched person must hand over documents to the AO of the other person (the assessee) and that the date of handing over is crucial for determining the assessment period. The Tribunal noted that the documents were handed over on 3rd Nov., 2006, making the assessment for the year 1999-2000 barred by limitation. This issue was remanded to the CIT(A) for further examination.

8. Condonation of Delay in Filing the Appeal:
The assessee filed an appeal late by 235 days, explaining that the delay was due to the advice of their chartered accountant and subsequent realization of the need to file an independent appeal. The Tribunal condoned the delay in the interest of substantial justice, allowing the appeal to proceed.

Conclusion:
The Tribunal remanded the case to the CIT(A) to reconsider the validity of the assessment under section 153C, the date of handing over documents, and the satisfaction recorded by the AO of the searched person. The appeals and cross-objections were allowed for statistical purposes, with instructions for the CIT(A) to address the legal issues first and then the merits of the case.