2020 (1) TMI 353 - AT - Income Tax

Assessment u/s 153C - Addition of brokerage commission - addition made by the AO on the basis of information received during the course of assessment proceedings - HELD THAT - The assessee has explained that this commission was reflected in the books of accounts and included in the commission receipt by the assessee and offered to tax. This aspect has been considered by the ld.CIT(A) on the basis of explanation and bank statements furnished during the course of assessment proceedings and found that the addition was being made without any evidence, and therefore, unjustified. Before us also, there is no material to justify action of the AO for making the impugned addition. In a proceeding under section 153C, no addition can be made in the absence of any incriminating material. Undisputedly, there is no material evidence with the AO to make the impugned addition. Capital gain computation - nature of land sold - agricultural land of capital asset - Addition with aid of section 50C - CIT- A deleted the addition admitting additional evidence - HELD THAT - If an agriculture land is situated beyond 8 kms. from the local limit of any municipal or cantonment area, whose population is more than ₹ 10 lakhs, then that would not fall within the ambit of definition capital assets. This demarcation of the geographical situation of the land is to be seen from the boundary notified by the CBDT in its gazette notification. It was brought to the notice of the ld.CIT(A) that the CBDT has notified boundary from where it is to be measured vide notification no.9447 dated 6.1.1994. Thereafter, it has not been revised, and from that boundary limit, geographical situation of the mainland was beyond 8 kms. Hence, it was not a capital asset. As far as admission of additional evidence is concerned, if the ld.CIT(A) has entertained the notification no.9447 for determining the geographical situation of the land of the assessee, then to our mind, this type of material can be considered by the ld.CIT(A) under Rule sub-rule (4) of Rule 46A, and there cannot be any violation at the end of the ld.CIT(A). Considering all these aspects, we are of the view that the ld.CIT(A) has considered the issue analytically and recorded a categorical finding that the land in dispute was situated beyond 8 kms. and it was not a capital asset on whose transfer capital gain can be assessed in the hands of the assessee. - Decided against revenue

Summary

Issues Involved:
1. Maintainability of the appeals based on tax effect.
2. Deletion of addition on account of unexplained investment.
3. Deletion of addition on account of alleged brokerage income.
4. Deletion of addition made under section 50C of the Income Tax Act.

Issue-wise Detailed Analysis:

1. Maintainability of the Appeals Based on Tax Effect:
The Tribunal initially dismissed the appeal of Shri Ravjibhai Manilal Patel (IT(SS)A.No.132/Ahd/2018) due to an apparent typographical error, treating it as if the tax effect was less than ?50 lakhs. However, the tax effect was more than ?50 lakhs, making the appeal maintainable. The Tribunal acknowledged the error and decided to recall the order and restore the appeal and cross-objection (CO) to their original numbers for fresh adjudication.

For Shri Tushar Ravjibhai Patel (IT(SS)A.No.133/Ahd/2018), the tax effect was indeed less than ?50 lakhs. The Tribunal dismissed the appeal and CO based on CBDT Circular No.17 of 2019, which directs that appeals should not be filed before the Tribunal if the tax effect is below ?50 lakhs. The Tribunal also noted that the Department could approach for recall if it is later demonstrated that the tax effect is more, or if the case falls within exceptions provided in the Circular.

2. Deletion of Addition on Account of Unexplained Investment:
The Revenue challenged the deletion of ?55.00 lakhs made on account of unexplained investment in the case of Shri Tushar Ravjibhai Patel. The Tribunal, considering the CBDT Circular, dismissed the appeal due to the low tax effect involved, which was less than ?50 lakhs.

3. Deletion of Addition on Account of Alleged Brokerage Income:
In the case of Shri Ravjibhai Manilal Patel, the Revenue challenged the deletion of ?10.00 lakhs made by the AO on account of alleged brokerage income. The AO based the addition on information received during assessment proceedings, which was not supported by any evidence. The assessee explained that the commission was reflected in the books of accounts and offered for taxation. The CIT(A) deleted the addition, noting that the explanation was verifiable and supported by bank statements. The Tribunal upheld the CIT(A)'s decision, finding no material evidence to justify the AO's action and confirming that no addition can be made in a proceeding under section 153C in the absence of incriminating material.

4. Deletion of Addition Made Under Section 50C of the Income Tax Act:
The Revenue also challenged the deletion of ?2,54,59,000/- added by the AO under section 50C. The AO made the addition based on the difference between the sale value of land and the value as per stamp duty. The assessee contended that the land was agricultural and situated beyond 8 kms from municipal limits, thus not a capital asset subject to capital gains tax. The CIT(A) accepted this contention, noting that the land did not fall within the definition of capital assets as per section 2(14)(iii) and the CBDT Notification No. 9447 dated 06.01.1994. The Tribunal upheld the CIT(A)'s decision, confirming that the land was not a capital asset and the addition under section 50C was not tenable.

Conclusion:
The Tribunal dismissed both appeals of the Revenue and the COs of the assessee, confirming the CIT(A)'s decisions on all issues. The judgment highlights the importance of accurate tax effect calculations and adherence to CBDT instructions, as well as the necessity of supporting evidence for additions made during assessment proceedings.