2018 (5) TMI 1544 - AT - Income Tax

Whether the capital gain account of sale of agriculture land is taxable in the hands of the assessee - Held that - the amount of capital gain income has been duly reflected in his return of income - also assessee has invested his sale proceeds in another agriculture land and the deduction u/s 54B of the Act was also claimed - thus AO is directed to delete the addition made by him - decided in favor of assessee.

Summary

Issues Involved:
1. Confirmation of addition of ?56,65,900/- as short term capital gain.

Issue-wise Detailed Analysis:

1. Confirmation of Addition of ?56,65,900/- as Short Term Capital Gain:

Background:
The appeal was filed by the assessee, an HUF engaged in manufacturing containers, against the order of the Commissioner of Income Tax (Appeals) [CIT(A)], which upheld the addition of ?56,65,900/- made by the Assessing Officer (AO) as short term capital gain. The AO observed that the assessee sold agricultural land for ?1,31,31,800/- along with his brother, with the assessee's share being ?56,65,900/-. The land was purchased for ?18,00,000/- with the assessee paying ?9,00,000/- for his share. The AO noted that the assessee did not disclose any capital gain income in the tax return and added the amount as short term capital gain.

Assessee’s Argument:
The assessee contended that the transaction was recorded in the individual account of Shri Rajesh P. Shah, the Karta of the HUF, and the PAN of the HUF was wrongly mentioned in the sale deed. The payment for the purchase was made from Rajesh P. Shah’s individual account, and the sale proceeds were also deposited in his individual account.

Assessing Officer’s Findings:
The AO disregarded the assessee's contention, stating:
- The PAN of HUF was correctly mentioned in both purchase and sale deeds.
- Payments for the purchase were made from the HUF account, not from Rajesh P. Shah’s individual account.
- Rajesh P. Shah did not offer any capital gain in his income tax return.
- The amount received by Rajesh P. Shah was shown as an unsecured loan from another individual.

CIT(A)’s Findings:
The CIT(A) upheld the AO’s decision, noting:
- Neither Rajesh P. Shah nor his brother disclosed any capital gain income in their individual returns.
- Payments for the purchase were made from the HUF account.
- The PAN of the HUF was correctly mentioned, and the transactions were not reflected in the individual returns of Rajesh P. Shah.

Tribunal’s Analysis:
The Tribunal examined the facts and submissions, noting:
- The capital gain was duly reflected in the individual account of Rajesh P. Shah, as evidenced by the statement of income.
- Rajesh P. Shah showed a loan of ?9,00,000/- in his books for the amount invested by the HUF.
- The sale proceeds were invested in another agricultural land, and a deduction under Section 54B of the Income Tax Act was claimed.

Conclusion:
The Tribunal concluded that the lower authorities' findings were based on incorrect assumptions. The short term capital gain was disclosed by Rajesh P. Shah in his individual capacity, and there was no loss to the Revenue. The Tribunal reversed the lower authorities' orders and directed the AO to delete the addition of ?56,65,900/-.

Judgment:
The appeal filed by the assessee was allowed, and the addition made by the AO was directed to be deleted. The judgment was pronounced in open court on 24/05/2018.