2013 (6) TMI 126 - HC - Income Tax

Disallowance of deduction on account of fair market value from the business income of the assessee - Held that - The assessees & his wife may have occupied equal status initially, but the unequality arose from the fact that in the case of her assessment, AO did not realize the infirmity in her computation which was realized by the AO in the case of the assessee and therefore they became unequals. The infirmity pointed out by the AO was not refuted by the assessee by any cogent evidence. Therefore, the assessee cannot claim equal treatment. The fact that the assessee did not take steps to establish by producing or having the books of accounts of the joint venture produced to show that the sum was received without deducting market value of the land leads to the only inference under section 114(g) of the Evidence Act that the account books were not produced in spite of repeated opportunities because, if produced, they would not have supported the contention of the assessee that the sum of Rs.21,98,141/- was received without debiting the market value of the land. Thus it is to be opined that the CIT (Appeal) had no evidence before him to hold that the sum of Rs.21,98,141/- was received by the assessee from the joint venture without deducting the cost of the land, and therefore, the CIT (Appeal) had no jurisdiction to set aside the order of the Assessing Officer. The Tribunal without going into the matter dismissed the appeal relying on the judgment of Kaumudini Narayan Dalal (2000 (12) TMI 101 - SUPREME Court) which had no manner of application to the facts and circumstances of the case. In favour of revenue.

Summary

Issues:
- Whether the order upholding deletion of addition made by the Assessing Officer is perverse?

Analysis:
The case involved a dispute regarding the deletion of an addition of Rs.21,98,141/- made by the Assessing Officer in the assessment of the assessee. The assessee, a joint owner of a property, had entered into a joint venture agreement for construction. The Assessing Officer disallowed the deduction of Rs.43,11,000/- on account of fair market value, resulting in the addition of Rs.21,98,141/-. The appellate authority allowed the appeal based on a previous judgment involving the assessee's wife. The Revenue appealed to the Tribunal, which dismissed the appeal citing non-filing of an appeal against the wife's case. The Tribunal's decision was challenged, arguing that the factual matrix differed from the wife's case, and the Assessing Officer had valid reasons for disallowing the deduction.

The respondent contended that the Assessing Officer should have allowed the deduction as an expenditure under section 45(2) of the Income Tax Act once the capital gain was accepted for taxation. However, the Court rejected this argument, stating that the fair market value was deemed to have been received as a result of the transfer and should have been realized from the joint venture. The respondent also claimed inability to produce joint venture account books, but the Court found this argument lacking merit, as the Assessing Officer had the power to compel production of evidence.

The Court held that the CIT (Appeal) had no evidence to support the deletion of the addition, and the Tribunal's reliance on a judgment unrelated to the case was misplaced. The Court concluded that the assessee failed to establish that the sum of Rs.21,98,141/- was received without deducting the cost of the land, leading to the allowance of the appeal.

In summary, the Court found that the Assessing Officer's decision to disallow the deduction was justified, and the CIT (Appeal) lacked evidence to support the deletion of the addition. The Tribunal's dismissal of the appeal based on an unrelated judgment was deemed incorrect, leading to the allowance of the appeal in favor of the appellant.