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2014 (11) TMI 4 - AT - Income TaxBenefit of indexation not given Computation of capital gain for sale of two plots No evidence for ascertainment of date - Held that - As decided in ARUN SHUNGLOO TRUST Versus CIT 2012 (2) TMI 259 - DELHI HIGH COURT - the cost of acquisition as envisaged in Explanation III to S.48 would be the same which was in the hands of the previous owner. The next question which posed before us is when the mother of the assessee Smt. Sita Devi had acquired these plots, if she had acquired prior to 1.4.1981 then indexation benefit as on 1.4.1981 would be admissible for the assessee, otherwise from the date on which she had acquired the flats - On the record there was no evidence for ascertaining this date - Some rough reference is available in the will - assessee is directed to produce some document indicating the cost of acquisition in the hands of his mother thus, the matter is required to be remitted back to the AO with the direction that the AO shall determine the date on which assessee s mother had acquired these plots and thereafter give the benefit of indexation accordingly - If she acquired the plots in question before 1.4.1981 then benefit of indexation would be from 1.4.1981 otherwise from the date on which she acquired the plots - AO is directed to recomputed capital gain on sale of two plots, after determining the date of acquisition in the hands of previous owner i.e. Smt. Sita Devi. Expenses on consultancy services disallowed - Held that - During the course of assessment proceedings, the assessee had filed confirmation from the recipients - He has submitted the schedule of payment - According to the assessee payments on each day were not exceeding ₹ 20,000/- prescribed u/s 40A(3) - There is no course to verify the claim except cross examining the recipients - AO did not carry out that exercise thus, the matter is also required to be remitted back to the AO for re-examination of issue Decided in favour of assessee. LTCG deleted Held that - S.45 of the I.T.Act contemplates that any profits or gains arising from the transfer of a capital asset effected in the P.Y. shall save as otherwise provided in S.54, 54B, 83C be chargeable to income tax under the head capital gains and shall be deemed to be the income of the P.Y. in which the transfer took place - the transfer had never taken place - It was a fraudulent attempt at the end of the vendee - The assessee had never received sale consideration - He has never given possession to the vendee - The moment he came to know about the alleged sale deed, he challenged it in the Civil Court and ultimately the sale deed was declared as null and void - where is the right to receive sale consideration, which can authorise the AO to say that capital gain had arisen to the assessee CIT(A) rightly deleted the addition Decided against revenue. Unexplained investment u/s 69 Held that - AO has overlapped the facts CIT(A) has observed that the Revenue is concerned with the source of deposit and not with regard to difference in the denomination of notes - AO has an expectation that same notes ought to be possessed by any individual which were withdrawn from the bank for redeposit - the amount withdrawn should not be used for any other purpose and the same notes should be redeposited - such an expectation in the ordinary course of life is little improbable CIT(A) was rightly of the view that the assessee has explained the facts and source and therefore no addition should be made Decided against revenue.
Issues Involved:
1. Benefit of indexation for computing capital gain on sale of plots. 2. Disallowance of expenses of Rs. 3,37,000. 3. Deletion of addition of long-term capital gain of Rs. 82 lakhs. 4. Deletion of addition of Rs. 25 lakhs under Section 69 of the Income Tax Act. Detailed Analysis: 1. Benefit of Indexation for Computing Capital Gain on Sale of Plots: The assessee contested the computation of capital gains on the sale of two plots, arguing that the cost of acquisition should be indexed from 1.4.1981, as the plots were inherited from his mother. The Assessing Officer (AO) disagreed, stating the plots were inherited in 1995, and thus, indexation should start from that year. The CIT(A) sided with the assessee, referencing the Special Bench decision in DCIT vs. Manjula J. Shah and the Delhi High Court's ruling in Arun Kumar Shungloo Trust, which support using the previous owner's acquisition cost for indexation. The Tribunal directed the AO to determine the exact acquisition date of the plots by the assessee's mother to apply the correct indexation. 2. Disallowance of Expenses of Rs. 3,37,000: The AO disallowed the expenses on consultancy services due to non-deduction of TDS and cash payments exceeding Rs. 20,000. The CIT(A) noted that TDS provisions were not applicable as the assessee was not subject to tax audit. For the cash payments, the CIT(A) found that payments were spread over multiple days. The Tribunal directed the AO to re-examine the issue, as the assessee had provided confirmations and payment schedules, which the AO did not cross-verify. 3. Deletion of Addition of Long-Term Capital Gain of Rs. 82 Lakhs: The AO added Rs. 82 lakhs as capital gains from a land sale, based on a sale deed showing a consideration of Rs. 87 lakhs, which the assessee claimed was fraudulent. The assessee had filed a civil suit, and the court declared the sale deed null and void. The Tribunal upheld the CIT(A)'s decision to delete the addition, stating that no transfer took place, and thus, no capital gain arose. 4. Deletion of Addition of Rs. 25 Lakhs Under Section 69: The AO added Rs. 25 lakhs as unexplained cash deposits in the assessee's HDFC bank account. The assessee explained that the deposits were from prior cash withdrawals and land sale proceeds. The CIT(A) accepted this explanation, noting the withdrawals matched the deposits. The Tribunal agreed with the CIT(A), emphasizing that the AO's focus on note denominations was irrelevant, and the source of deposits was sufficiently explained. Conclusion: The Tribunal dismissed the Revenue's appeal and partly allowed the assessee's Cross Objection for statistical purposes, directing further examination on specific issues. The Tribunal emphasized the need for accurate determination of acquisition dates for indexation and proper verification of cash payments and deposits.
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