2020 (4) TMI 709 - AT - Income Tax

Reopening of assessment u/s 147 - AO issued notice U/s 148 on account of escapement of income on the basis of AIR information - escapement of income is capital gains arising on the sale transaction of the property - not allowing the benefit of cost of improvement and brokerage paid while calculating the short term capital gain - HELD THAT - Where the AO is in possession of information that the assessee has sold a property during the year under consideration and the same has not been reported in the return of income, it is clearly a case of escapement of income in terms of capital gains which will arise on sale of such property. Basis such tangible piece of information even where received through AIR, where the AO forms a prima facie opinion that the income has escaped assessment and has recorded the reasons and sought the permission from the higher authorities before issue of notice u/s 147 we donot see any infirmity in the action of the AO in acquiring jurisdiction under section 147 - reasons for escapement of income is capital gains arising on the sale transaction of the property and not that sale consideration is less than the value adopted for stamp duty purposes, therefore, mere inter- change of sale consideration and value adopted for the purposes of stamp duty in the reasons so recorded cannot be treated as fatal which can deny the acquisition of jurisdiction by the AO. Further, basis this tangible piece of information in possession of the AO which shows that capital gains has escaped assessment, where the approval has been accorded by the higher authorities, we donot see any infirmity therein. Not allowing the deduction of expense incurred by the assessee on account of cost of improvement of the house property and the transfer expenses - Where certain expenditure has been incurred before selling the property, the assessee can claim the same provided he is able to substantiate the same through any verifiable evidence. In the instant case, there is nothing on record which remotely support the contention so advanced by the assessee either in terms of any physical attributes of the property at the time of purchase and at the time of sale of the said property or any third party evidence which corroborates the act of incurrence of such expenditure as so claimed by the assessee - for claiming brokerage expenses, the assessee has to submit some evidence in terms of the person to whom the brokerage has been paid and his involvement in the sale transaction, however, there is nothing on record in this regard and therefore, we donot see any infirmity in the order of the CIT(A) in sustaining the disallowance of cost of improvement and brokerage expenses. In the result, the ground of appeal is dismissed. Addition u/s 68 - Assessee has submitted necessary affidavits in support of gift of money received from his family members and close relatives. The affidavits contain the necessary particulars about the donor, their address, PAN and Aadhaar number as well as their current occupation and source of money so gifted to the assessee. In absence of any material on record disputing the contents of the affidavits so filed by the assessee, the initial onus cast on the assessee has been satisfied and the addition so sustained by the ld CIT(A) is hereby deleted. In the result, the ground of appeal is allowed.

Summary

Issues:
1. Challenge to initiation of proceedings under section 147/148 of the Income Tax Act.
2. Disallowance of cost of improvement and brokerage expenses while calculating short term capital gain.
3. Sustenance of addition under section 68 of the Act.

Issue 1: Challenge to Initiation of Proceedings under Section 147/148:
The appeal contested the initiation of proceedings under section 147/148 of the Income Tax Act, arguing that the Assessing Officer (AO) lacked proper satisfaction and relied solely on AIR information. The appellant contended that the AO misrepresented facts and obtained approval mechanically. The appellant cited legal precedents to support their claim. The Tribunal held that the AO had sufficient grounds to initiate proceedings based on tangible information regarding the sale of property not disclosed in the return of income. The Tribunal dismissed the appeal, stating that the reasons for escapement of income were valid, and the approval from higher authorities was appropriate.

Issue 2: Disallowance of Cost of Improvement and Brokerage Expenses:
The appellant challenged the disallowance of expenses incurred for property improvement and brokerage while calculating capital gains. The appellant argued that the improvement costs were essential and the brokerage was a standard market practice. The Tribunal noted the lack of evidence supporting these claims. It emphasized the need for verifiable evidence to substantiate such expenses. As the appellant failed to provide adequate proof, the Tribunal upheld the disallowance of both cost of improvement and brokerage expenses.

Issue 3: Sustenance of Addition under Section 68:
The appellant contested the addition under section 68 of the Act, claiming that as no regular books of accounts were maintained, the provision did not apply. The appellant submitted affidavits from individuals confirming the amounts received, arguing that these constituted self-speaking evidence. The Tribunal acknowledged the affidavits as sufficient proof, noting the absence of contradictory evidence. Consequently, the Tribunal deleted the addition sustained by the CIT(A) under section 68. The Tribunal partially allowed the appeal, overturning the addition based on the affidavits.

This detailed analysis of the judgment provides insights into the legal reasoning and outcomes related to each issue raised in the appeal before the Appellate Tribunal ITAT Jaipur.