1980 (3) TMI 162 - AT - Income Tax

Issues Involved:
1. Jurisdiction of reassessment under Section 147(a) of the IT Act, 1961.
2. Inclusion of the entire amount of Rs. 17,14,621 as taxable income.
3. Disallowance of Rs. 2,25,000 paid to Shri Mallick.
4. Market value of the property as on 1st Jan., 1954.
5. Disallowance of Rs. 41,500 out of legal expenses.
6. Claim of solatium of Rs. 2,18,507.
7. Allowance of Rs. 90,000 as cost of improvement.

Detailed Analysis:

1. Jurisdiction of Reassessment under Section 147(a) of the IT Act, 1961:

The assessee objected to the reassessment on the grounds of jurisdiction, claiming that all relevant information was provided during the original assessment and that Section 147(a) could not be applied. The Department opposed the admission of this additional ground. However, the Tribunal admitted the ground, stating that the question relates to jurisdiction based on existing records. The Tribunal found that the omission to disclose the return of deposit of Rs. 30,000 as part of the compensation to Shri Mallick constituted a non-disclosure of a primary fact material for the assessment, justifying the application of Section 147(a). The reassessment was deemed justified on this ground.

2. Inclusion of the Entire Amount of Rs. 17,14,621 as Taxable Income:

The Department appealed for the entire amount of Rs. 17,14,621 to be taxed. The property was agreed to be sold for Rs. 10 lakhs, but was acquired by the government for Rs. 17,17,293. The ITO included additional amounts received as compensation. The AAC concluded that the sale price should be Rs. 14,65,227, considering Rs. 10 lakhs from the Collector, Rs. 4 lakhs from John Thomas, and Rs. 65,227 from additional compensation. The Tribunal upheld the AAC's decision, stating that the amounts received by John Thomas were his share due to the agreement of sale, and the assessee was entitled only to the amounts she received.

3. Disallowance of Rs. 2,25,000 Paid to Shri Mallick:

The assessee objected to the disallowance of Rs. 2,25,000 paid to Shri Mallick as compensation for breach of contract. The AAC and the Tribunal found that this payment was not for the perfection of title but was a personal liability arising from the breach of contract. The payment was not considered as part of the cost of acquisition or improvement, and the disallowance was confirmed.

4. Market Value of the Property as on 1st Jan., 1954:

The assessee claimed the market value of the property as on 1st Jan., 1954, to be Rs. 3,35,000, while the ITO had adopted Rs. 2,28,000. The Tribunal found no material to support the assessee's claim and upheld the original valuation. The assessee's appeal on this point failed.

5. Disallowance of Rs. 41,500 out of Legal Expenses:

The assessee claimed legal expenses of Rs. 72,817, but the AAC allowed only Rs. 31,317. The Tribunal confirmed the disallowance of Rs. 21,500 related to Mallick's case but allowed Rs. 20,000 paid to John Thomas for representing the assessee in acquisition proceedings. The Department's appeal against the allowance of Rs. 31,317 failed, while the assessee's appeal succeeded to the extent of Rs. 20,000.

6. Claim of Solatium of Rs. 2,18,507:

The claim for solatium of Rs. 2,18,507 was disallowed by the ITO and confirmed by the AAC as it was not pressed before him. The Tribunal also noted that the claim was not pressed before them and thus, it was negatived.

7. Allowance of Rs. 90,000 as Cost of Improvement:

The AAC allowed Rs. 90,000 as the cost of improvement, which was contested by the Department. The Tribunal found that the assessee had incurred expenses for maintenance and improvement of the property, which were not rebutted by the Department. The allowance was confirmed.

Conclusion:
The departmental appeal was dismissed, and the assessee's appeal was partly allowed with a relief of Rs. 20,000.

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