2018 (1) TMI 1288 - AT - Income Tax

Sale of immovable property as Short Term Capital Gain (STCG) instead of Long Term Capital Gain (LTCG) - period of holding - Held that - CIT(A) was right in disregarding the effect of such discredited possession letter. Thus the period of holding in our view cannot be reckoned either from the date of allotment letter or the date of purported possession as claimed In the similar vain we do not find any merit in the plea of the assessee for affirmation of possession having regard to rental income shown to be generated on such property. The property was under construction and thus not habitable. Rent was claimed to be received in cash from an unidentifiable user. The entire action of the assessee defies legitimacy of any sort and is clearly devoid of any strength whatsoever. Thus the period of holding of the asset/property cannot be reckoned from the date of allotment letter or possession letter as claimed. In this view of the matter we decline to interfere with the conclusion of the CIT(A) that the asset under sale was short term capital asset and consequently profit is liable to be taxed as Short Term Capital Gains only. Unexplained cash credit - Held that - The whole narrative of receipt of disproportionate cash of such large amount out of the estate of late brother is highly improbable and a sad spectacle of a make believe story devoid of any credence. The cross-examination of legal heirs or otherwise is inconsequential for understanding the legal effect of a void in the absence of WILL or other tangible document. Incidentally it is also not known as to when the socalled cash was given to the assessee and by whom and before its transfer it was lying in whose custody. The facts towards credits are not clear at all. Circumstances do not stand to reasons and indicates otherwise to take the transaction out of ambit of section 68. The hawkish narrative given by the assessee was rightly denounced by the revenue authorities. In the absence of any documentary evidences and in view of totally improbable and unsubstantiated circumstances we are unable to affirmatively appreciate the stand of the assessee on this score. Therefore we decline to interfere with the orders of the authorities below

Summary

Issues Involved:
1. Computation of profit on the sale of immovable property as Short Term Capital Gain (STCG) versus Long Term Capital Gain (LTCG).
2. Addition of unexplained cash credit under Section 68 of the Income Tax Act, 1961.

Issue-wise Detailed Analysis:

1. Computation of Profit on Sale of Immovable Property:
- Background: The assessee declared a profit of ?21,76,721/- as Long Term Capital Gain (LTCG) on the sale of an immovable property. The Assessing Officer (AO) computed it as Short Term Capital Gain (STCG) amounting to ?67,00,000/-, asserting the property was held for less than three years.
- Assessee's Argument: The assessee claimed possession of the property from 29/03/2007, supported by an allotment letter and a possession letter, arguing the holding period exceeded 36 months, thus qualifying for LTCG.
- AO's Findings: The AO noted the purchase deed was registered on 15/07/2008 and the sale occurred on 01/04/2010, implying a holding period of less than 36 months. The AO also highlighted the lack of credible evidence for possession before the registration date.
- CIT(A)'s Decision: The CIT(A) dismissed the possession letter as it was undated and not produced during the assessment stage. The CIT(A) also found discrepancies in the possession dates and noted the lack of supporting evidence for rental income claimed by the assessee.
- Tribunal's Analysis: The Tribunal examined the allotment letter and possession letter, concluding that the allotment letter did not create any enforceable rights in favor of the assessee. The possession letter was deemed unreliable due to its undated nature and lack of original presentation. The Tribunal emphasized that substantial payment and formal agreements were missing at the time of claimed possession. The property was under construction, and the Building Use permission was granted much later, making the possession claim implausible.
- Conclusion: The Tribunal upheld the CIT(A)'s decision, affirming the AO's computation of the gain as STCG.

2. Addition of Unexplained Cash Credit:
- Background: The AO added ?19,05,489/- as unexplained cash credit under Section 68, which the assessee claimed to have received from the estate of his deceased brother.
- Assessee's Argument: The assessee presented affidavits from the legal heirs of the deceased brother, asserting the amount was given as per the deceased's oral wishes.
- AO's Findings: The AO found the explanation unconvincing, noting the deceased's limited cash resources and the absence of a formal WILL. The AO questioned the plausibility of such a large cash transfer.
- CIT(A)'s Decision: The CIT(A) upheld the AO's addition, citing the lack of credible evidence and the improbability of the claimed cash transfer.
- Tribunal's Analysis: The Tribunal found the assessee's claim perplexing and unsupported by documentary evidence. The capital account of the deceased showed limited resources, and the purported cash transfer was deemed improbable. The Tribunal emphasized the necessity of a formal WILL to substantiate such claims and found the affidavits insufficient.
- Conclusion: The Tribunal upheld the CIT(A)'s decision, affirming the addition of ?19,05,489/- as unexplained cash credit.

Final Judgment:
The Tribunal dismissed the assessee's appeal on both issues, confirming the AO's treatment of the sale profit as STCG and the addition of unexplained cash credit under Section 68. The judgment was pronounced in open court on 01/12/2017.