2022 (11) TMI 616 - AT - Income Tax

Short term capital gain - AO has considered registered document between the parties and computed short term capital gains by taking into account deemed consideration as per provisions of section 50C - HELD THAT - AO has rightly computed short term capital gains on the basis of registered document and ignored unregistered MoU between the parties, because the assessee could not substantiate transactions with necessary evidences. Hence, we are of the considered view that there is no error in the reasons given by the ld. CIT(A) to sustain additions made by the AO towards computation of short term capital gains and thus, we are inclined to upheld the findings of the CIT(A) and reject the ground taken by the assessee. Disallowance of other expenses made - AO has disallowed a sum of other expenses on the ground that the assessee had incurred all the expenses in cash and could not file necessary evidences - HELD THAT - Fact remains unchanged that the assessee could not controvert the findings of the facts recorded by the Ld. CIT(A) with evidence except stating that books of accounts of the assessee were audited and the assessee has explained the expenses with documentary evidence. But, fact remains that no evidence has been filed to justify expenditure incurred in cash and also payments in cash in excess of prescribed limit as provided u/s. 40A(3) - Therefore, we are of the considered view that there is no error in the reasons given by the Ld. CIT(A) to sustain disallowance of expenses and thus, we are inclined to upheld the findings of the CIT(A) and reject the ground taken by the assessee. Appeal filed by the assessee is dismissed.

Summary

Issues:
1. Computation of short term capital gains based on unregistered MoU and sale deed.
2. Disallowance of other expenses incurred in cash.

Issue 1: Computation of Short Term Capital Gains:
The appellant contested the addition of Rs. 53,12,025 made by the AO as short term capital gain, arguing that the CIT(A) did not consider all submissions. The case involved the transfer of property and the computation of capital gains. The AO rejected the MoU submitted by the assessee and considered the sale deed, fixing the sale consideration at Rs. 73,81,185. The CIT(A) upheld the AO's decision, stating that the MoU was unregistered and involved related parties. The tribunal agreed, emphasizing that the registered sale deed showed the property was purchased for Rs. 16,75,000 and transferred for Rs. 20,69,160. The AO's computation based on the sale deed and section 50C provisions was deemed correct. Consequently, the tribunal upheld the CIT(A)'s decision, dismissing the appellant's appeal.

Issue 2: Disallowance of Other Expenses:
Regarding the disallowance of other expenses of Rs. 17,721, the AO had disallowed a portion of total expenses incurred in cash due to lack of evidence. The CIT(A) upheld the disallowance for expenses incurred in cash, citing violation of section 40A(3) of the Act. The tribunal noted that the appellant failed to provide sufficient evidence to justify cash expenditures exceeding the prescribed limit. Therefore, the tribunal agreed with the CIT(A)'s decision to sustain the disallowance of Rs. 17,721. The appeal on this issue was rejected, affirming the CIT(A)'s findings.

In conclusion, the tribunal upheld the AO's computation of short term capital gains based on the registered sale deed and rejected the appellant's arguments regarding the unregistered MoU. Additionally, the tribunal supported the CIT(A)'s decision to disallow a portion of other expenses incurred in cash due to non-compliance with section 40A(3) of the Act. Consequently, the appeal filed by the assessee was dismissed by the tribunal on 14th October 2022 in Chennai.