2018 (12) TMI 918 - AT - Income Tax

Addition under the head capital gain - whether the assessee has incurred the cost of improvement as discussed above on the building partly owned by him? - initial onus to substantiate claim - Held that - Claim of the assessee was not substantiated before the authorities below by supporting evidence. Moreover, one of the party namely Dilip K. Mistry did not appear in response to the notice issued under section 131 of the Act. Similarly, the other party namely Gautam P. Suthar Prop of Riddi Siddi Furniture conceded that he had provided the bills to the assessee on request owing a very old association with the assessee. From the above, it is clear that the assessee failed to discharge his onus by documentary evidence in support of his claim. The map filed by the assessee showing the construction of 2 rooms on the 1st floor on the building was the proposed layout. The proposed layout does not prove that the assessee has constructed two rooms on the 1st floor of the building. There was no other document filed by the assessee evidencing that the assessee has constructed two rooms on the 1st floor of the building. There is no mentioned in the valuation report of the registered valuer about the two rooms on the 1st floor of the building viz a viz wall fencing. The registered valuer has valued the property taking the entire land and the building constructed thereon for the entire built-up area of the building as on 1st April 1981. As such the valuer has not reduced the built up area in respect to the impugned two rooms to determine actual built up area of the property as on 1-4-1981. Accordingly, no separate deduction on account of the cost of improvement for constructing two rooms and wall fencing can be given to the assessee in the given facts and circumstances. - decided against assessee. Addition of unexplained cash credit u/s 68 - Held that - The assessee in the present case has just explained the source of the cash deposited in the bank but failed to substantiate the same by documentary evidence. The onus lies on the assessee to explain the source of the cash deposited in the bank from documentary evidence which assessee failed. There was no dispute regarding the sale consideration of the immovable property. The assessee has also not challenged the sale consideration of the property either before the AO or the learned CIT (A). The assessee 1st time before us has taken a plea that the cash deposited represents the part of the sale proceeds of the immovable property. There is a contradictory statement of the assessee before the authorities below and before us. Therefore, we conclude that there is no merit in the argument raised by the learned counsel for the assessee. - Decided against assessee.

Summary

Issues Involved:
1. Addition of ?8,48,600/- towards capital gains.
2. Addition of ?4,40,000/- as unexplained cash deposits.

Issue-wise Detailed Analysis:

1. Addition of ?8,48,600/- towards capital gains:

The assessee, an individual with income primarily from salary, owned a 6.67% share in an immovable property acquired through inheritance in 2009. This property was sold on 10th April 2010 for ?2,14,60,000/-. The assessee claimed no capital gain on this sale, calculating the capital gain as nil after considering indexed costs of acquisition and improvement. The costs claimed for improvement included ?15,12,000/- for constructing two rooms and ?9,95,800/- for wall fencing and renovation. However, the Assessing Officer (AO) rejected these claims due to lack of original bills, income tax returns, and bank passbooks from the contractors. Additionally, one contractor admitted issuing a bill upon request without actual work. The AO, therefore, added ?8,48,600/- as long-term capital gain.

The CIT(A) upheld the AO's decision, and upon appeal, the Tribunal noted the following:
- The initial onus to substantiate claims with documentary evidence lies with the assessee.
- The assessee failed to provide original bills or credible evidence of the claimed improvements.
- The valuation report did not mention the construction of additional rooms or wall fencing.
- The map provided was a proposed layout, not evidence of actual construction.

The Tribunal concluded that the assessee did not meet the burden of proof and dismissed the appeal regarding the capital gains addition.

2. Addition of ?4,40,000/- as unexplained cash deposits:

The assessee deposited ?4,40,000/- in cash into his savings account, claiming it was from past savings and his wife's income. The AO found inconsistencies:
- No evidence of the wife’s commercial activities.
- The joint bank account negated the need for large cash holdings.
- The deposits were made shortly after the property sale, suggesting a link.

The AO treated the cash deposits as unexplained under section 68 of the Income Tax Act, and the CIT(A) confirmed this view. On appeal, the assessee argued that the deposits were part of the property sale proceeds, but provided no documentary evidence. The Tribunal noted the following:
- The assessee failed to substantiate the source of cash deposits.
- Contradictory statements were made by the assessee before different authorities.
- The Tribunal cited the Calcutta High Court’s judgment, emphasizing the unreliability of a witness with inconsistent statements.

The Tribunal found no merit in the assessee’s arguments and upheld the addition of ?4,40,000/- as unexplained cash deposits.

Conclusion:
The Tribunal dismissed the appeal, affirming the additions of ?8,48,600/- towards capital gains and ?4,40,000/- as unexplained cash deposits. The judgment emphasized the necessity for the assessee to provide credible and consistent documentary evidence to support claims.