2015 (6) TMI 456 - AT - Income Tax

Capital gain computation - valuation of property refer to the DVO - assessment as provided under section 50C(2) and 50C(3)- AO computed the capital gains after taking the circle rate/stamp duty valuation - Held that - Assessee had filed objections against adoption of the circle rate/stamp duty valuation before the Assessing Officer. When assessee has filed objections before the Assessing Officer that circle rates are above the fair market value, the Assessing Officer was duty bound to refer the impugned property for valuation to the DVO before proceeding to make an assessment of long term capital gains. The CIT (A) has only directed the Assessing Officer to refer the matter for valuation to the DVO and thereafter conclude the assessment. The directions of the CIT (A) has legal sanctity by various judicial pronouncements, including the judgment of N Meenakshi vs. ACIT 2009 (9) TMI 59 - MADRAS HIGH COURT . Therefore, we see no reason to interfere with the order of CIT (A) - Decided against revenue. Unexplained cash credits u/s 68 - CIT(A) deleted the addition - Held that - The cash deposited of ₹ 14,00,000/- in assessee s accounts were duly and fully explained in the cash flow statement with supporting evidence consisting of assessee s bank statements and the sale deed executed by the assessee as General Power of Attorney for his wife, Anjana Gupta. The copies of the cash flow statement, bank statement and various sale deeds are placed on record. The receipt of sale consideration in cash is duly supported by the sale deeds. Therefore, the addition of ₹ 14,00,000/- as unexplained cash credit u/s 68 of the Act is unwarranted and CIT (A) was justified in deleting the same - Decided against revenue. Disallow the claim cost of improvement - CIT(A) deleted the addition - Held that - The confirmation of expenses on improvement of property before its sale has been placed on record and statement of Shri Daulat Ram Saini was recorded on oath. Confirmation and statement has been rejected by the Assessing Officer on the ground not satisfactory, insufficient and not reliable which are vague and based on surmises and conjectures. Therefore, the CIT (A) is justified in deleting the same - Decided against revenue.

Summary

Issues:
1. Valuation of property for capital gains computation under sections 50C(2) and 50C(3) of the Income-tax Act, 1961.
2. Addition of unexplained cash credits.
3. Disallowance of cost of improvement on properties sold.

Issue 1 - Valuation of Property for Capital Gains:
The appeal revolved around whether the CIT (A) was justified in directing the Assessing Officer to refer the property for valuation to the DVO under sections 50C(2) and 50C(3) of the Income-tax Act, 1961. The Assessing Officer had added an amount to the capital gains based on circle rate valuation, which was contested by the assessee. The CIT (A) found that the AO had not followed the complete provisions of section 50C(2) and directed the valuation to the DVO. The ITAT upheld the CIT (A)'s decision, citing legal precedents and the assessee's objections to the circle rate valuation, leading to the rejection of grounds no.1 & 2.

Issue 2 - Addition of Unexplained Cash Credits:
The Assessing Officer added a sum as unexplained cash credits under section 68 of the Income Tax Act, based on cash deposits in the assessee's bank account. However, the CIT (A) deleted this addition, noting that the cash deposits were explained in the cash flow statement supported by bank statements and sale deeds. The ITAT concurred with the CIT (A)'s decision, emphasizing the proper justification for the deletion of the addition, resulting in the rejection of grounds no. 3, 4 & 5.

Issue 3 - Disallowance of Cost of Improvement:
Regarding the disallowance of 50% of the claimed cost of improvement on properties sold, the Assessing Officer disallowed the amount due to insufficient evidence provided by the assessee. However, the CIT (A) overturned this decision, stating that the disallowance was unjustified without valid reasons. The ITAT supported the CIT (A)'s decision, highlighting the confirmation of expenses and the recorded statement of the concerned individual, leading to the rejection of ground no. 6.

In conclusion, the ITAT dismissed the revenue's appeal on all grounds, upholding the CIT (A)'s decisions on the valuation of property for capital gains, addition of unexplained cash credits, and disallowance of the cost of improvement. The judgment provided detailed analysis and legal reasoning for each issue, resulting in the rejection of the revenue's appeal.