2022 (6) TMI 1158 - AT - Income Tax

Addition of Short term capital gain - AO has made addition of revaluation of the land in the books of the assessee treating the same as short term capital gain - transfer of asset by the partnership firm to partners - Case reopened u/s 147 on the ground that the assessee was one of the beneficiaries of Client Code Modification ( CCM ) and during the financial year 2008-09 profit shifted and loss shifted resulting into net reduction in income due to CCM - CIT(A)held that revalued amount of capital asset which was transferred to capital account of the partners in their respective shares of profit, was not liable to capital gain tax in view of section 45(4) - HELD THAT - DR could not produce before us any judgments in favour of the Revenue, as against the addition made on account of revaluation of the land in the partnership firm. Similarly, the ld.DR could not place before us any contradictory finding as relied by the ld.CIT(A). In the absence of any further materials or judgments, we do not find it necessity to interfere with the order passed by the ld.CIT(A). Further, the fact in the case of Om Namah Shivay Builders Developers 2010 (11) TMI 137 - ITAT, MUMBAI relied upon by the ld.DR is that one of the partners died and his legal heirs continued in the firm and then retired from the said firm, and this fact is not applicable to the facts of the present case. Thus, the order passed by the ld.CIT(A) does not require any interference on the facts brought out therein are not disputed by the Revenue, therefore, the same is liable to be upheld. - Decided against revenue.

Summary

Issues:
1. Addition of short term capital gain
2. Addition on account of share transaction by resorting Clint Code Modification

Issue 1: Addition of Short Term Capital Gain

The appeal was filed by the Revenue against the order passed by the Commissioner of Income-tax (Appeals)-6, Ahmedabad for the Assessment Year 2009-10. The assessee, a Hindu Undivided Family (HUF), engaged in trading in investment, finance, and securities, filed a return declaring NIL income which was later reopened under section 147 of the Income Tax Act, 1961. The Assessing Officer (AO) made an addition of short term capital gain of Rs.5,98,73,450/- relating to the revaluation of land in the books of the assessee. The assessee contended that there was no transfer of asset from the partnership firm to the partners, and hence, no capital gain should be applicable. The Commissioner of Income-tax (Appeals) relied on judicial precedents and held that the revalued amount of the capital asset transferred to the partners' capital account was not liable to capital gain tax under section 45(4) of the Act. The addition made by the AO was subsequently deleted based on this reasoning.

Issue 2: Addition on Account of Share Transaction by Resorting Clint Code Modification

Regarding the addition made on account of a share transaction due to Clint Code Modification (CCM), the assessee argued that they were not a beneficiary of CCM and any modifications were not made with malicious intent. The AO, however, made an addition as capital gain on the revaluation of land and also added an amount on account of share transaction due to CCM. The Commissioner of Income-tax (Appeals) noted that the entire addition was based on information received by the AO for alleged CCM, without concrete evidence of malpractice. Relying on various decisions, the Commissioner deleted the addition made by the AO on account of CCM.

In conclusion, the Revenue's appeal was dismissed, and the order passed by the Commissioner of Income-tax (Appeals) was upheld. The Tribunal found no necessity to interfere with the decision as the facts presented did not warrant any changes. The judgment highlighted the importance of concrete evidence and legal precedents in determining the tax implications of transactions, especially in cases involving revaluation of assets and share transactions.