2014 (3) TMI 263 - AT - Income Tax

Determination of fair market value of the property for the purpose of computation of capital gains Held that - The assessee has not been able to submit any evidence or any material to show that the FMV adopted by him, is the actual market value of the land as on 1.4.1981 - The assessee has not brought on record any comparable instances of sale of property in that locality, to show that the FMV adopted by him was the actual market value - In the absence of any material to substantiate its claim, the FMV cannot be accepted - When there is no material available on record, which could clearly establish the FMV of the land, in that locality, one has to go by a reasonable estimate thus, the FMV adopted by the CIT(A) is fair and reasonable and needs no interference Decided against Assessee. Source of funds - Availability of funds not accepted by the CIT(A) Addition restricted to 50% - Held that - Assessee claimed that the investment was made by him out of the sale proceeds from sale of gold jewellery, as well as salary income - It is quite evident from the order of the CIT(A) that he does not dispute the fact that the assessee s explanation with regard to availability of fund from sale of gold jewellery cannot be rejected outright - CIT(A) has come to a conclusion that the savings from salary income itself would be sufficient to invest in the property at Noida, there is no reason why she should have disallowed 50% of the amount of investment claimed thus, the disallowance made by the CIT(A) cannot be sustained, when she is satisfied that there was availability of fund with the assessee to make investment the entire addition made by the Assessing Officer is set aside Decided in favour of Assessee. Estimation of agricultural income Held that - CIT(A) held that the assessee himself has categorically stated that the agricultural income per year would be around Rs.3,000 per acre, and for five acres it would be Rs.15,000 - Considering this and the agricultural income disclosed for earlier and subsequent years, the same for the assessment year has been estimated at Rs.20,000 - In the absence of any material to the contrary brought on record by the assessee there is no infirmity in the orders of the Revenue authorities on the issue Decided against Assessee. Restriction of the addition to 50% - Unexplained investment in property Held that - CIT(A) restricted the disallowance to 50% of the investment claimed, by merely observing that the Assessing Officer has mentioned about discrepancies in the statement made by the assessee during the assessment proceedings - The CIT(A) having accepted the fact the assessee s wife has received 150 tolas of gold jewellery, there is no reason why she should not have accepted the claim of the assessee in relation to the entire investment instead of restricting it to 50% - having accepted the source of funds, viz. sale of 150 tolas of gold, the entire investment should be treated as having been explained thus, the order of the CIT(A) modified Decided in favour of Assessee.

Summary

Issues Involved:
1. Determination of fair market value (FMV) of property for capital gains.
2. Acceptance of sources for investment in property.
3. Estimation of agricultural income.
4. Unexplained investment in property.

Detailed Analysis:

1. Determination of Fair Market Value (FMV) of Property for Capital Gains:
The first issue pertains to the determination of the FMV of the property at Garividi for the purpose of calculating capital gains for the assessment year 1995-96. The Assessing Officer (AO) had estimated the FMV as on 1.4.1981 at Rs.1,50,000, which was contested by the assessee, who proposed Rs.3,75,000 based on the development in the area. The Commissioner of Income-tax (Appeals) [CIT(A)] partially agreed with the assessee and revised the FMV to Rs.2,50,000. The Tribunal upheld the CIT(A)'s decision, stating that without concrete evidence or comparable sales to support the assessee's claim, the FMV of Rs.2,50,000 was fair and reasonable.

2. Acceptance of Sources for Investment in Property:
The second issue involves the investment of Rs.5,25,000 in a property at Noida in the name of the assessee's wife. The AO treated this amount as unexplained under Section 69 of the Income Tax Act, rejecting the claim that it was sourced from the sale of gold jewelry purchased from agricultural income. The CIT(A) found some merit in the assessee's explanation and directed the AO to restrict the addition to 50% of the claimed amount, i.e., Rs.2,62,500. The Tribunal, however, found that the CIT(A) had already acknowledged the availability of funds from the assessee's salary savings and agricultural income, and thus, there was no justification for disallowing 50% of the investment. Consequently, the Tribunal deleted the entire addition, accepting the assessee's claim.

3. Estimation of Agricultural Income:
The third issue concerns the estimation of agricultural income for both assessment years 1995-96 and 1996-97. The AO had estimated the agricultural income at Rs.20,000, which the assessee contested, claiming it should be Rs.50,000. The CIT(A) upheld the AO's estimation, noting that the assessee himself had admitted to an annual agricultural income of Rs.15,000 for five acres. The Tribunal found no infirmity in the CIT(A)'s decision, given the lack of contrary evidence from the assessee, and thus upheld the estimation of Rs.20,000.

4. Unexplained Investment in Property:
For the assessment year 1996-97, the AO added Rs.7,56,000 under Section 69, which was claimed to be sourced from the sale of 150 tolas of gold gifted to the assessee's wife. The CIT(A) accepted the claim partially, restricting the addition to 50%, i.e., Rs.3,78,000, due to discrepancies in the assessee's statements. The Tribunal, however, noted that the CIT(A) had accepted the fact of the gift and the sale of gold, and thus, there was no reason to restrict the addition to 50%. The Tribunal deleted the entire addition, accepting the assessee's explanation in full.

Conclusion:
The Tribunal's judgment provided partial relief to the assessee by upholding the CIT(A)'s determination of the FMV of the property, deleting the entire addition for the unexplained investment in the Noida property, and maintaining the AO's estimation of agricultural income. The appeals were partly allowed, reflecting a balanced approach in evaluating the evidence and explanations provided by the assessee.