2008 (12) TMI 255 - AT - Income Tax

Summary

Issues involved:
1. Deletion of addition under the head "Capital gain" on sale of plot by adopting index cost of purchase.
2. Determination of the date of purchase of the plot and calculation of indexed cost of acquisition.

Detailed Analysis:
Issue 1: The Department contested the deletion of an addition of Rs. 2,62,263 made by the Assessing Officer (AO) under the head "Capital gain" on the sale of a plot. The sole issue raised was whether the Commissioner of Income Tax (Appeals) erred in deleting the said addition. The Department argued that the title of the plot was issued by the society on 27th June, 1990, and thus, the cost of acquisition should be calculated based on this date. The AO maintained that the plot was purchased by the assessee only on 27th June, 1990, and not in 1971 as claimed by the assessee. The Department sought to set aside the CIT(A)'s order and restore the AO's decision.

Issue 2: The assessee contended that the plot was purchased in 1971, supported by evidence such as cash book entries and society records. The possession of the plot was given in 1971, and the society issued the Patta in 1990 due to legal issues. The assessee argued that the cost of acquisition should be calculated based on the purchase date in 1971. The CIT(A) upheld the assessee's claim, considering the evidence provided and the legal aspects. The Tribunal analyzed the material and concluded that the plot was indeed purchased in 1971, and the fair market value as of 1st April, 1981, should be considered for calculating capital gains. The AO's decision to base the fair market value on the Patta date in 1990 was deemed erroneous. The Tribunal found the CIT(A)'s order appropriate, as it correctly interpreted the evidence presented by the assessee.

In conclusion, the Tribunal dismissed the Department's appeal, upholding the CIT(A)'s decision regarding the calculation of capital gains based on the purchase date in 1971 and the fair market value as of 1st April, 1981. The Tribunal found the Department's arguments lacking merit and supported the assessee's position with the available evidence.