2018 (2) TMI 729 - AT - Income Tax

Taxability of the profit claimed to be earned by the assessee on sale of agricultural land - nature of land sold - Held that - Although the assessee has once again relied on the documentary evidence filed by the assessee to show that the land in question sold by the assessee was an agricultural land as per the relevant land record, he has failed to adduce any evidence to show that the said land was actually utilised by the assessee for carrying out any agricultural activity during the period of two years immediately preceding the date of transfer. He has also not been able to produce any evidence to rebut or controvert the findings recorded by the Ld. CIT(A) in his impugned order that the land sold by the assessee was not fit to use for agricultural purpose. It is thus clear that the user condition to establish that the land sold by the assessee was an agricultural land is not satisfied in the present case - addition made by the A.O. on account of long term capital gain arising to the assessee from the sale of the said land confirmed - Decided against assessee Addition of car expenses claimed by the assessee for the involvement of personal element - Held that - Since the personal use of the said vehicles by the assessee could not be ruled out, some disallowance for such personal use, in my opinion, was very much called for and since such disallowance made by the A.O. to the extent of about 25% for such personal use is fair and reasonable, I do not find any justifiable reason to interfere with the impugned order of the Ld. CIT(A) confirming the same Disallowance of maintenance cost of office equipment - Held that - Admittedly there was a failure of the assessee to produce the supporting bills and vouchers for verification of the A.O. Keeping in view all it would be fair and reasonable to restrict the disallowance made by the A.O. out of maintenance cost of office equipment to ₹ 25,000/-. Addition on account of expenses on staff training which was done on the basis that the total expenditure incurred by the assessee on salary was only ₹ 2,08,142/- - Held that - Keeping in view the nature of the assessee s business, the entire disallowance made by the A.O. on account of staff training expenses is not justified and it would be fair and reasonable to restrict the same to 50%. Disallowance on account of loss claimed by the assessee on sale of assets - Held that - As find that the said loss cannot be claimed by the assessee in case of depreciable asset after the introduction of the concept of block of asset . Even the assessee has not been able to bring on record anything to show that the relevant block of asset had got exhausted during the year under consideration so as to justify the claim of the assessee for loss on sale of assets. Therefore, find no infirmity in the impugned order of the Ld. CIT(A) upholding the action of the A.O. in disallowing the claim of the assessee for loss on sale of assets.- Decided against assessee Addition on fresh capital introduction - guinity of gift received and capacity of gift donor - Held that - CIT(A) confirmed the said addition made by the A.O. after having found that the source of capital introduction explained by the assessee as gift from Shri Ashim Kumar Bandhopadhyay was not supported by any evidence and there was a failure on the part of the assessee to establish the capacity of Shri Ashim Kumar Bandhopadhyay to give such gift. Even at the time of hearing before the Tribunal, the learned counsel for the assessee has not produced any evidence to establish the capacity of Shri Ashim Kumar Bandhopadhyay to give the amount in question as gift to the assessee. Therefore, find no justifiable reason to interfere with the impugned order of the Ld. CIT(A) confirming the addition made by the A.O. - Decided against assessee.

Issues:
1. Validity of notice u/s 148 and profit on sale of agricultural land
2. Disallowances made by Assessing Officer
3. Addition of fresh capital introduction

Issue 1: Validity of notice u/s 148 and profit on sale of agricultural land
The appeal challenged the order of Ld. CIT (Appeals) regarding the notice u/s 148 and the taxability of profit on the sale of agricultural land. The assessee claimed exemption under section 54 of the Income Tax Act, 1961 for the long term capital gain from the sale of land. However, the Assessing Officer disallowed the claim as the land did not have residential facilities or evidence of agricultural use. The Ld. CIT (Appeals) upheld the decision, stating that the land was not fit for agricultural purposes. The Tribunal found no evidence of agricultural activity on the land, upholding the addition of long term capital gain.

Issue 2: Disallowances made by Assessing Officer
The disallowances included expenses on car, maintenance of office equipment, staff training, and loss on sale of assets. The Tribunal upheld the disallowance of car expenses due to personal use, reducing maintenance cost disallowance to ?25,000, and staff training expenses disallowance to 50%. The claim for loss on sale of assets was disallowed as the relevant "block of asset" had not been exhausted.

Issue 3: Addition of fresh capital introduction
The additional ground raised by the assessee regarding the addition of fresh capital introduction was admitted by the Tribunal. The A.O. added the unexplained cash credit under section 68 as the source of capital introduction was not explained. The Ld. CIT (Appeals) confirmed the addition due to lack of evidence supporting the source of the capital. The Tribunal upheld the addition, dismissing the additional ground raised by the assessee.

In conclusion, the appeal was partly allowed, with the Tribunal upholding the decisions on the issues of the notice u/s 148, profit on sale of agricultural land, disallowances made by the Assessing Officer, and addition of fresh capital introduction.

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