2019 (11) TMI 356 - AT - Income Tax

Revision u/s 263 - Capital gain on sale of land - jurisdiction with the AO to make an inquiry on the issue of assessability of capital gain on sale of agriculture land - HELD THAT - We have gone through the record carefully. Jurisdiction in the AO for passing the impugned order on the present issue was being infused by the order of the ld.Commissioner passed under section 263. Once that order was set side, then there is no issue remained to be inquired at the end of the AO. Power to pass fresh assessment order under section 143(3) r.w.s. 263 with the AO on this issue has been extinguished. Therefore, we do not find any merit in ground no.1 to 8 of the Revenue; they are rejected. Difference in job work income shown in the profit loss account and income as per form no.26AS - HELD THAT - No justification to interfere in the order of the ld.CIT(A) on this issue, because, for the differential amount shown in the ITS statement and the profit and loss account, the assessee has furnished all details before the AO, viz. copy of sales and purchase accounts, ledger account of all three parties, copy of job work. AO simply ignored all these details, and without issuing show cause notice on this issue, or even without making any inquiries with the vendors, made the impugned addition. From the impugned order, it emerges out that the assessee has explained with supporting evidences the reason for difference in two statements as netting of income from the job work; and that the entire job work income shown in ITS was reflected in the books of accounts. There is nothing before the AO to make the addition and he simply proceeded on the premise that the assessee failed to provide complete details relating to purchases. It is settled position of the law that no addition can be made on the basis of receipts shown in the ITS alone, unless the AO is able to show with evidence that such income forms part of the income of the assessee. The assessee cannot be expected to prove negative, rather, it is for the Revenue to prove that the assessee has understated its income, and for that matter, received undisclosed income. CIT(A) has considered the issue in right perspective, and rightly deleted the impugned addition. We uphold his order on this issue, and reject this ground of appeal. Deleting the addition u/s 50C by CIT-A - no merit in this ground. Accordingly, this ground stands rejected.

Summary

Issues Involved:
1. Assessability of capital gain on sale of land in the Asstt.Year 2011-12.
2. Deletion of addition on account of difference in job work income.
3. Deletion of addition under section 50C of the Income Tax Act.

Detailed Analysis:

1. Assessability of Capital Gain on Sale of Land in the Asstt.Year 2011-12:

The primary issue in grounds no.1 to 8 is whether the capital gain on the sale of land should be assessed in the Asstt.Year 2011-12. The assessee entered into an agreement for the sale of non-agricultural land on 15.5.2006. Initially, the AO accepted the transfer of agricultural land in the Asstt.Year 2006-07 and did not tax the capital gain in the current assessment year. However, the Commissioner set aside this assessment order under section 263, leading to a reassessment under section 143(3) r.w.s. 263, which included the capital gain in the Asstt.Year 2011-12.

The assessee appealed against this order, and the ITAT vacated the CIT's order under section 263, stating that the capital gain should be assessed in the Asstt.Year 2007-08. The ITAT's decision was based on the fact that the land was transferred in the Asstt.Year 2007-08 as per Section 53A of the Transfer of Property Act r.w.s. 2(47)(v) of the Income Tax Act. The ITAT further noted that the statutory bar in Gujarat prevented the registration of agricultural land transfers to non-agriculturists, validating the unregistered agreements.

The Tribunal concluded that the assessee had transferred the land in the Asstt.Year 2007-08, and thus, the capital gain should not be assessed in the Asstt.Year 2011-12. Consequently, the grounds of appeal by the Revenue were rejected.

2. Deletion of Addition on Account of Difference in Job Work Income:

In ground no.9, the Revenue contested the deletion of an addition of ?27,43,663/- due to a discrepancy between job work income shown in the profit & loss account and Form No.26AS. The assessee explained that the amount reflected in the profit & loss statement was net of purchases, which were also recorded in the books of accounts.

The AO did not accept this explanation and made an addition. However, the CIT(A) allowed the assessee's claim, noting that the assessee provided all necessary details, including sales and purchase accounts and ledger accounts of relevant parties. The AO ignored these details and made the addition without proper inquiry.

The Tribunal upheld the CIT(A)'s decision, emphasizing that no addition could be made solely based on ITS receipts unless the AO provided evidence of understated income. The Tribunal found that the AO failed to prove that the assessee received undisclosed income, and thus, the deletion of the addition was justified.

3. Deletion of Addition under Section 50C of the Income Tax Act:

The last issue in ground no.10 involved the deletion of an addition of ?1,89,250/- under section 50C. Given the Tribunal's findings on the primary issue of the capital gain's assessability, it found no merit in this ground. The Tribunal upheld the CIT(A)'s decision to delete the addition under section 50C, as the capital gain was not assessable in the Asstt.Year 2011-12.

Conclusion:

The Tribunal dismissed the Revenue's appeal, affirming the CIT(A)'s decisions on all contested grounds. The capital gain on the sale of land was correctly assessed in the Asstt.Year 2007-08, the addition for job work income discrepancy was rightly deleted, and the addition under section 50C was also appropriately removed. The order was pronounced in the Court on 15th October 2019 at Ahmedabad.