2017 (11) TMI 316 - AT - Income Tax

Sale of plot of land - Short term capital gain OR short term capital loss - Held that - AO though issued notice u/s 133(6) and received the reply from these persons however, all other connected and relevant facts and aspects of the matter like whether these six persons were in possession of the property in question and when the property was got vacated. All these facts can be verified only in the enquiry conducted through examination of these six persons by recording their statements and giving opportunity to the assessee for cross examination. Since the AO has not conducted the requisite enquiry to reach conclusive finding of fact. We are of the considered view that these matters require a proper verification and enquiry of the relevant facts. Accordingly, we set aside this issue to the record of the Assessing Officer for conduct of proper enquiry by examination of these six persons and also giving an opportunity to the assessee to cross examine and then decide the issue as per outcome of the such fact finding enquiry. As regards the source of the money claimed for compensation the assessee has contended that the barrowed funds was used and repaid through banking channel subsequently. However, except the details of the borrowed funds the assessee has not produced any other material or documentary evidence to show the transaction of borrowed funds. Accordingly, the assessee is required to produce the documentary evidence as well as the creditors for examination by the AO. Assessee s appeal is allowed for statistical purposes.

Summary

Issues:
1. Computation of short term capital gain on the sale of land.
2. Rejection of claim for payment made to vacate the property.
3. Source of funds for compensation paid to individuals.

Issue 1: Computation of short term capital gain on the sale of land:
The Assessing Officer (AO) computed short term capital gain on the sale of a property based on the value adopted by the Stamp Valuation Authority. The appellant contended that additional payments made for vacating the property should be considered to determine the actual cost. The AO issued a notice proposing short term capital gain tax due to the undeclared capital gain. The appellant's explanation of additional payments was not accepted by the AO, leading to the assessment of short term capital gain. The Commissioner of Income Tax (Appeals) upheld the AO's decision, emphasizing the lack of evidence supporting the appellant's claim. The appellant failed to provide confirmation from individuals who received the payments, leading to the denial of the claim.

Issue 2: Rejection of claim for payment made to vacate the property:
The appellant argued that payments were made to vacate the property, supported by agreements and acknowledgments from the recipients. However, the AO and CIT(A) doubted the authenticity of the claim, citing denials from the individuals who allegedly received the compensation. The appellant's assertion that the property was occupied by the recipients and the subsequent payments were made in cash were challenged by the authorities. The lack of thorough investigation and cross-examination of the individuals led to the rejection of the claim. The Tribunal emphasized the need for proper verification and enquiry into the matter, directing the AO to conduct a detailed examination of the individuals involved and assess the claim based on factual findings.

Issue 3: Source of funds for compensation paid to individuals:
The appellant claimed that borrowed funds were used to make the compensation payments, supported by repayment details through banking transactions. However, the authorities questioned the lack of comprehensive evidence regarding the borrowed funds and the repayment process. The Tribunal highlighted the necessity for the appellant to provide additional documentary evidence and present the creditors for examination by the AO to substantiate the claim adequately.

In conclusion, the Tribunal allowed the appeal for statistical purposes, emphasizing the importance of conducting a thorough investigation and providing concrete evidence to support claims related to property transactions and compensation payments.