2011 (4) TMI 459 - AT - Income Tax

Addition - Capital gain - Valuation report - assessee has shown long-term capital loss of Rs. 2,30,000 by taking the fair market value of the property as on 1-4-1981 to be the cost of acquisition for the purpose of computation of capital gains - There is no dispute that the impugned property which was sold by the assessee became the asset of the assessee prior to 1-4-1981 and the assessee has opted fair market value as on 1-4-1981 for the purpose of computation of capital gain - The assessee has relied on the valuation report which he obtained from the registered valuer who is technical person and duly approved by the department - Held that once the assessee has submitted the necessary evidence by way of valuation report made by the registered valuer, the onus gets shifted on the Assessing Officer to contradict the report of the registered valuer - Held that the opinion that the revenue has not discharged the onus but merely rejected the fair market value as has been taken by the assessee - Appeals are allowed Regarding addition u/s 68 - The department has failed to bring any evidence on record to belie the cash transactions shown in the cash flow statement submitted by the assessee nor is there any such objection that such cash transactions entered by the assessee are not verifiable from the bank account - Appeal is allowed

Summary

Issues Involved:
1. Sustenance of the addition of Rs. 16,02,400 under the head long-term capital gain.
2. Sustenance of the addition of Rs. 2,17,000 under section 68 of the Income-tax Act on account of unexplained deposits in the bank account.

Issue-wise Detailed Analysis:

1. Sustenance of the Addition of Rs. 16,02,400 Under the Head Long-Term Capital Gain:

The first issue concerns the addition of Rs. 16,02,400 under long-term capital gain. The assessee reported a long-term capital loss of Rs. 2,30,000, using the fair market value of the property as of 1-4-1981, based on a registered valuer's report. The Assessing Officer (AO) rejected this valuation, instead using the circle rate list dated 8-6-1981 for agricultural land in Koil Tehsil, valuing the land at Rs. 12,300 per bigha as of 1-4-1981. This led to a recomputation of the long-term capital gain at Rs. 16,02,400.

The assessee appealed to the CIT(A), arguing that the AO did not justify rejecting the registered valuer's report and relied on the non-technical Income-tax Inspector's report. The assessee also highlighted that there is a difference between fair market value and circle rate, and the AO should have referred the matter to the Departmental Valuation Officer if he doubted the valuation report. The CIT(A) upheld the AO's decision.

The assessee reiterated these points before the Tribunal, emphasizing that fair market value, as defined under section 2(22B), does not equate to the circle rate used for stamp duty purposes. The Tribunal noted that section 55(2)(b)(i) allows the assessee to use the fair market value as of 1-4-1981 for capital gain computation, and the AO should have referred to the Valuation Officer under section 55A if he doubted the registered valuer's report. The Tribunal concluded that the AO failed to provide contrary evidence and should have accepted the registered valuer's estimate. Consequently, the Tribunal set aside the CIT(A)'s order and directed the AO to re-compute the capital gain using the fair market value claimed by the assessee.

2. Sustenance of the Addition of Rs. 2,17,000 Under Section 68 of the Income-tax Act:

The second issue involves the addition of Rs. 2,17,000 under section 68 due to unexplained bank deposits. The AO observed deposits of Rs. 67,000, Rs. 50,000, and Rs. 1,00,000 in the assessee's bank account, which appeared disproportionate to the reported income. Despite the assessee providing a fund flow statement, the AO doubted its credibility due to a lack of supporting evidence and the absence of personal statements of affairs or maintained books of account. Consequently, the AO added Rs. 2,17,000 as unexplained cash credits, a decision upheld by the CIT(A).

The Tribunal reviewed the submissions and found that the addition under section 68 was unsustainable. The assessee's fund flow statement for the relevant assessment years detailed all cash transactions, verifiable from the bank account. The department failed to provide evidence contradicting the cash transactions or showing they were unverifiable. Thus, the Tribunal found no basis to sustain the addition and set aside the CIT(A)'s order, allowing the assessee's appeal.

Conclusion:

In conclusion, the Tribunal allowed the assessee's appeal on both issues. It directed the AO to re-compute the capital gain using the fair market value as of 1-4-1981, as claimed by the assessee, and found no justification for the addition of Rs. 2,17,000 under section 68, setting aside the CIT(A)'s order on both counts.