2023 (1) TMI 1009 - AT - Income Tax

Capital gain computation - assessee is seeking reduction of sale consideration by amount paid to Rajesh K Mehta as occupying the said land and to remove the encumbrances three acres of land was given to him to remove all his encumbrances - HELD THAT - On careful perusal of bank statement of Rajesh K Mehta, find cheque drawn on Dena Bank was never encashed or realised either from bank account of Rajesh K Mehta or in the account of assessee. Thus, consideration shown in the sale deed was never passed/received by assessee. Shri Rajesh K Mehta has confirmed his fact in his affidavit. Thus, the said amount was not received by the assessee. It is settled position under law that income which has earned or accrued can only be taxed. In my considered view, once it is shown and proved on record that Rs. 9.00 lacs is not received by the assessee, so such income cannot be considered for taxation in the hands of assessee. So the assessee get relief to that extent. Amount as allegedly incurred by assessee for purchasing of land in the name of Nani Navla Patel as per the direction of Collector, Dadra Nagar Haveli, we are fully convinced with the order of ld. CIT(A) that there is no condition precedent in the sale deed dated 12/08/2011. Moreover, such condition was on the seller of land to maintain minimum standard of area of land to safeguard their interest. Therefore, no justification for allowing such expenses while calculation capital gain. Accordingly, we uphold the order of ld. CIT(A) qua this issue. In the result, grounds of appeal raised by assessee is partly allowed.

Summary

Issues Involved:
1. Calculation of Short Term Capital Gain (STCG)
2. Allowability of Transfer Expenses and Improvement Costs
3. Consideration of Sale Proceeds not Realized

Issue-wise Detailed Analysis:

1. Calculation of Short Term Capital Gain (STCG):
The primary issue was the calculation of STCG for the Assessment Year (AY) 2012-13. The Assessing Officer (AO) noted discrepancies in the sale and purchase of immovable properties by the assessee and computed a higher STCG than declared by the assessee. The AO's computation included sales of non-agricultural land in Silvassa, which were not offered for taxation by the assessee. The AO computed the STCG as Rs. 27,28,584/- against the assessee's computation of Rs. 6,32,057/-. The AO allowed certain expenses but disallowed others, leading to the enhanced STCG.

2. Allowability of Transfer Expenses and Improvement Costs:
The assessee claimed significant expenses on account of transfer expenses and improvement costs, which were partly disallowed by the AO. The AO allowed Rs. 4,45,800/- out of the claimed Rs. 6,76,125/-, rejecting a bill of Rs. 2.00 lacs as it was merely a quotation. The assessee contested this, providing detailed submissions and evidence of incurred expenses, including payments to Nani Navla Patel and others, and expenses for land levelling and soil filling. The CIT(A) upheld the AO's decision, noting that the assessee failed to provide adequate justification for the claimed expenses beyond those allowed by the AO.

3. Consideration of Sale Proceeds not Realized:
The assessee contended that a sale consideration of Rs. 9.00 lacs for three acres of land sold to Rajesh K Mehta was never realized, as the cheques mentioned in the sale deed were not encashed. The assessee provided bank statements and an affidavit from the purchaser to support this claim. The CIT(A) did not accept this contention, emphasizing that the sale deed clearly mentioned the consideration. However, the Tribunal found merit in the assessee's argument, noting that the cheques were not realized and thus the income could not be taxed on a hypothetical basis.

Judgment Summary:
The Tribunal partly allowed the appeals, providing relief to the assessee by excluding the unrealized sale consideration of Rs. 9.00 lacs from the STCG computation. The Tribunal upheld the CIT(A)'s decision regarding the disallowance of certain transfer expenses and improvement costs, agreeing that the assessee failed to provide sufficient evidence to justify these expenses. Consequently, the appeals were partly allowed, reflecting a balance between the assessee's claims and the AO's findings. The judgment emphasized the principle that only income actually earned or accrued should be taxed, and unsubstantiated expenses cannot be allowed.