2011 (2) TMI 513 - HC - Income Tax

Addition on account of purchase and sale of shares - Exemption u/s 54F - Allegation of receiving cash payment in lieu of cheques issued - Reference u/s 131(1) - Capital gain - CIT(A) and ITAT deleted teh addition - Exemption u/s 54F - Held that - Since it is not clear whether evidence has been earlier furnished by the assessee there being no finding with reference to such evidence the view taken by the CIT(A) as upheld by the Tribunal has to be held to be vitiated As regards additions on account of unexplained construction of new house based on valuation as per report of the DVO there has been an amendment by way of insertion of Section 142A vide Finance Act 2004 with effect from 15.11.1972 - Decided against the assessee by way of remand

Summary

Issues:
1. Appeal under Section 260A of the Income Tax Act, 1961 regarding deletion of additions on account of purchase and sale of shares.
2. Appeal under Section 260A of the Income Tax Act, 1961 regarding deletion of additions for unexplained construction of a new house based on valuation.

Analysis:
1. The first issue pertains to the appeal filed by the revenue under Section 260A of the Income Tax Act, 1961 against the order passed by the Income Tax Appellate Tribunal, Delhi Bench 'G', Delhi. The dispute revolved around the deletion of additions amounting to Rs. 14,72,964/- made by the Assessing Officer on account of purchase and sale of shares shown by the assessee. The assessing officer contended that the transaction was manipulated, and the cheque received for the sale proceeds was in exchange for cash paid to brokers. The CIT(A) deleted the additions based on the documents provided by the assessee, including share certificates, contract notes, and bank statements. The Tribunal upheld the CIT(A)'s decision, citing a Supreme Court judgment and stating that the assessing officer could not obtain a report from the Departmental Valuation Officer without a statutory provision allowing it. However, the High Court found the CIT(A)'s decision lacking in examining the genuineness of the share certificates and contract notes. Consequently, the High Court set aside the impugned orders and remanded the matter to the CIT(A) for a fresh decision.

2. The second issue in the appeal under Section 260A of the Income Tax Act, 1961 concerned the deletion of additions for unexplained construction of a new house based on valuation. The assessing officer disputed the quantum of investment in the construction of the house, relying on the report of the Departmental Valuation Officer (DVO). The CIT(A) overturned these additions, stating that the assessing officer failed to consider self-supervision costs. The Tribunal upheld the CIT(A)'s decision without delving into the merits of the case, following a previous judgment. The High Court noted an amendment to the Act and emphasized the need for a reconsideration of the issue. As the Tribunal did not assess the merits, the High Court set aside the Tribunal's decision, directing a fresh decision by the CIT(A) in accordance with the law.

In conclusion, the High Court addressed the issues raised in the appeal, highlighting deficiencies in the lower authorities' decisions and emphasizing the importance of a thorough examination of evidence and legal provisions in tax matters.