2014 (1) TMI 1583 - AT - Income Tax

Whether the shares transferred were long term capital asset or not - Held that - The assessee has filed share transfer form and share certificate to proof that the shares were purchased on 25.10.2005 - If the Assessing Officer had any doubts on these documents, he could have carried out further investigation and gathered evidence to disprove the claim of the assessee - He instead accepted the assessee s claim - The bank entries for receipt of consideration shows that the AO was wrong in doubting the transaction - The Assessing Officer could have summoned the purchasers or taken confirmations from them, in case he disbelieved the transfers - The order of CIT(A) upheld. Whether the assessee was owner of a residential house at Gadaipur - Held that - The property was purchased by the appellant in financial year 1995-96 for Rs.60,000/- and the same was shown as agricultural land in the balance sheet as on 31.3.96 - There is no improvement on this property since it is being shown at the same value till financial year ending on 31.3.2007 - The sale deed shows that the property was a piece of agricultural land - The AO didnot considered the facts correctly - The assessee is not a fractional owner of the property at Gadaipur, and hence eligible for deduction u/s 54 of the Act - Decided against Revenue.

Summary

Issues Involved:
1. Whether the capital gain on the sale of 5000 unquoted equity shares is long-term or short-term.
2. Whether the assessee was the owner of another residential house at Village Gadaipur, Delhi.
3. Whether the assessee is entitled to exemption under Section 54 of the Income Tax Act.
4. Whether the First Appellate Authority erred in admitting additional evidence.

Detailed Analysis:

Issue 1: Long-Term vs. Short-Term Capital Gain
The assessee purchased 5000 equity shares of M/s Valley View Probuild Pvt. Ltd. on 25th October 2005 and sold them on 8th November 2006. The Assessing Officer (AO) doubted the genuineness of the transaction and considered the gains as short-term capital gains. However, the First Appellate Authority, after examining contemporaneous documents such as share transfer forms, share certificates, and annual returns filed with the Registrar of Companies (ROC), concluded that the shares were indeed held for more than 12 months, making the capital gains long-term. The Tribunal upheld this finding, stating that the AO did not provide sufficient evidence to disprove the assessee's claims and that the transaction was genuine.

Issue 2: Ownership of Residential House at Village Gadaipur
The AO contended that the assessee owned more than one residential house, disqualifying him from claiming exemption under Section 54F. The First Appellate Authority found that the house in question was located on land owned by the assessee's father (Khasra No. 76) and not on the land owned by the assessee (Khasra Nos. 75 and 90). Additional evidence, including sale deeds, balance sheets, and Khasra Gidwari, supported this conclusion. The Tribunal upheld this finding, noting that the AO failed to provide contrary evidence and that the assessee only owned agricultural land without any residential structure.

Issue 3: Entitlement to Exemption under Section 54F
Given the findings on the ownership issue, the Tribunal upheld the First Appellate Authority's decision that the assessee was entitled to exemption under Section 54F. The Tribunal dismissed the AO's arguments based on conjectures and surmises, affirming that the assessee was not the owner of another residential house at Village Gadaipur.

Issue 4: Admission of Additional Evidence
The AO did not raise specific grounds of appeal against the admission of additional evidence by the First Appellate Authority. The Tribunal declined to adjudicate on this issue, noting that the AO did not dispute the decision to admit additional evidence in the grounds of appeal.

Conclusion:
The Tribunal dismissed the Revenue's appeal, upholding the First Appellate Authority's findings that the capital gains were long-term, the assessee did not own another residential house at Village Gadaipur, and the assessee was entitled to exemption under Section 54F. The Tribunal also declined to address the issue of additional evidence, as it was not specifically contested by the AO.