2009 (9) TMI 78 - AT - Income Tax

Issues Involved:
1. Validity of capital gains tax on the sale of a fuel station.
2. Determination of cost of acquisition for capital gains computation.
3. Applicability of Supreme Court judgment in CIT v. B.C. Srinivasa Setty.
4. Computation of capital gains on sale of land.
5. Admissibility of statements recorded under section 132(4).
6. Rejection of assessee's claim regarding Central Board of Direct Taxes instructions.
7. Consideration of estimated additions in block assessments.

Issue-wise Detailed Analysis:

1. Validity of Capital Gains Tax on the Sale of a Fuel Station:
The Assessing Officer (AO) determined that the sale of the fuel station, including the land, was a transfer as defined under section 2(47) of the Income-tax Act, 1961, and liable for capital gains tax. The AO calculated the capital gains at Rs. 55,57,238. The Commissioner of Income-tax (Appeals) (CIT(A)) upheld the AO's finding that the sale was a concluded transaction but accepted the assessee's alternate contention that the transaction was not liable for capital gains tax due to the inability to determine the cost of acquisition as per the Supreme Court's decision in CIT v. B.C. Srinivasa Setty.

2. Determination of Cost of Acquisition for Capital Gains Computation:
The CIT(A) observed that the cost of acquisition of the asset sold by the assessee could not be determined, referencing the Supreme Court's judgment in CIT v. B.C. Srinivasa Setty. The CIT(A) noted that the expression "right to carry on any business" was inserted in the definition of "cost of acquisition" under section 55(2) with effect from April 1, 2003, applicable from the assessment year 2003-04. Thus, for the assessment year 1999-2000, the cost could not be ascertained, and the transaction could not be subjected to capital gains tax.

3. Applicability of Supreme Court Judgment in CIT v. B.C. Srinivasa Setty:
The CIT(A) relied on the Supreme Court's judgment in CIT v. B.C. Srinivasa Setty, which held that if the cost of acquisition is not computable, the transaction cannot be subjected to capital gains tax. The Tribunal agreed with this interpretation, noting that the amendments to section 55(2) were effective only from the assessment year 2003-04, and thus, the transaction in question for the assessment year 1999-2000 could not be taxed under capital gains.

4. Computation of Capital Gains on Sale of Land:
The CIT(A) deleted the capital gains of Rs. 16,89,601 and Rs. 3,52,973 for the assessment years 1998-99 and 1999-2000, respectively, on the basis that the AO did not provide any material evidence from the search indicating receipt of a higher amount of consideration than what was disclosed in the registered sale deeds. The Tribunal upheld this finding, emphasizing the lack of clinching evidence for higher consideration.

5. Admissibility of Statements Recorded Under Section 132(4):
The Revenue argued that the capital gains were computed based on statements recorded under section 132(4) from the assessee during the search. The Tribunal noted that such statements must be supported by material evidence, which was lacking in this case, and thus, the CIT(A)'s deletion of the additions was justified.

6. Rejection of Assessee's Claim Regarding Central Board of Direct Taxes Instructions:
The assessee's cross-objection claimed that the addition towards the transfer of the petrol pump violated instructions issued by the Central Board of Direct Taxes. The Tribunal found that this ground did not survive since the Revenue's appeal was dismissed.

7. Consideration of Estimated Additions in Block Assessments:
The assessee contended that estimated additions could not be made in block assessments. The Tribunal dismissed this ground, noting that the addition regarding kerosene was based on materials collected during the search.

Conclusion:
The Tribunal dismissed both the Revenue's appeal and the assessee's cross-objection, upholding the CIT(A)'s decision that the transaction for the assessment year 1999-2000 could not be subjected to capital gains tax due to the inability to determine the cost of acquisition and the nature of the asset as per the Supreme Court's judgment in CIT v. B.C. Srinivasa Setty.

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