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2014 (12) TMI 67 - AT - Income TaxEstimation of profits @ 10% of GP Held that - When the assessee has not produced its books of accounts or bills and vouchers in support of claim of expenditure, the AO could not have pointed out any defect or discrepancy in the books of accounts or inadmissibility of any particular expenditure in the absence of books of accounts, bills, vouchers or even break-up of the expenditure the contention of the assessee cannot be accepted that it has produced all the relevant material before the AO - regular assessment in case of the assessee has not been made prior to the search the AO retains the original jurisdiction as well as jurisdiction conferred on him u/s 153A for assessing the income - unless the assessee produces its books of accounts and other evidences in support of the claim made in the return of income, the AO would be handicapped in computing the income, hence would be forced to estimate the profit - This fact has not been properly appreciated by the first appellate authority - thus, the matter is to be remitted back to the AO for fresh consideration Decided in favour of assessee. Addition of rental income and interest income as income from other sources Held that - When the assessee itself is treating the lease rental income and interest income as income from other sources in the subsequent AY i.e., AY 2009-10, then it becomes very much clear that it is not temporary exploitation of business asset - Rather it demonstrates that the assessee himself no longer treats the asset leased out as business asset but in the nature of exploitation of property by an owner the contention of the revenue is accepted that the amount being lease rental and interest have to be treated as income from other sources the order of the CIT(A) is set aside and the matter is remitted back to the AO Decided in favour of revenue. Allowability of exemption u/s 54F Held that - In case of capital gains arising from transfer of any long term capital asset not being a residential house, if the assessee, within the period of one year before or two years after the date on which the transfer took place had purchased a residential house or within the period of three years, has constructed a residential house, then there will be exemption of capital gains - the assessee will not be entitled to avail exemption u/s 54F(1) if he owns more than one residential house other than the new asset on the date of transfer of original asset or purchases any other residential house other than the new asset within period of one year after the date of the transfer of original asset or constructs any residential house other than the new asset within the period of three years after the date of transfer of the original asset - the assessee has invested the capital gains in construction of an additional floor as claimed by the assessee over an already existing house property. Whether the additional floor stated to have been constructed can be considered to be a distinct and separate house independent of existing house property Held that - More than one flat purchased by an assessee on the same building on the same floor or different floor have to be considered as one unit - it cannot be treated as a new asset as per the provisions of section 54F of the Act thus, the order of the CIT(A) is set aside Decided in favour of revenue. Addition made by CIT(A) deleted Whether there is an excess of jewellery to the extent of ₹ 1,27,60,063/- as determined by the Assessing Officer - Held that - So far as value of jewellery stated to have been declared in the wealth-tax return of Sri Krishna Kumar HUF amounting to ₹ 60,36,175/- does not appear in the assessment order wherein the AO has considered the jewellery declared in the case of the assessee and other family members - the CIT(A) before accepting the contention of the assessee should have given an opportunity to the AO to put forth his opinion on the issue thus, the matter is remitted back to the AO for verification. Examination of fresh information under Rule 46A Held that - The AO has clearly mentioned that in absence of the details regarding disbursement of loan as well as sanction letter from HDFC or any statement from the bank to substantiate the disbursement of the loan he did not accept the claim of ₹ 24 lakh - Nothing has been produced before us to show that the details of disbursement of loan from HDFC were submitted before the AO to substantiate its claim of availing loan for construction of the property - the CIT (A) also has not allowed the AO to have his view on the evidences/information submitted by the assessee during appellate proceedings - thus, the matter is remitted back to the AO for fresh consideration Decided in favour of revenue.
Issues Involved:
1. Estimation of profit by the Assessing Officer. 2. Classification of rental income and interest income. 3. Allowability of exemption under Section 54F of the Income Tax Act. 4. Valuation of gold jewelry and unexplained investment. 5. Cost of acquisition and capital gains computation. 6. Procedural fairness and consideration of new evidence by the CIT (A). Detailed Analysis: 1. Estimation of Profit by the Assessing Officer: The department raised concerns about the Assessing Officer estimating the profit at 10% of the gross receipts due to the assessee's failure to produce books of accounts or supporting documents. The CIT (A) deleted this addition, citing a lack of adverse information or specific disallowance of expenditure. However, the tribunal found that the absence of books of accounts justified the Assessing Officer's estimation. The matter was remitted back to the Assessing Officer for fresh consideration after verifying the books of accounts. 2. Classification of Rental Income and Interest Income: The Assessing Officer classified rental income and interest income as "income from other sources," contrary to the assessee's claim of business income. The CIT (A) treated the rental income as business income, citing commercial exploitation of the asset. However, the tribunal noted that the assessee had classified similar income as "income from other sources" in subsequent years, indicating it was not temporary exploitation. Thus, the tribunal restored the Assessing Officer's classification. 3. Allowability of Exemption under Section 54F: The Assessing Officer denied exemption under Section 54F, arguing that the assessee invested in improving an existing asset rather than acquiring a new one. The CIT (A) allowed the exemption, interpreting the construction of an additional floor as creating a new asset. The tribunal disagreed, stating that the additional floor should be treated as part of the existing house and not a new asset. Consequently, the tribunal upheld the Assessing Officer's decision to deny the exemption. 4. Valuation of Gold Jewelry and Unexplained Investment: The Assessing Officer added the difference between the declared value of gold jewelry and the value determined by the registered valuer as unaccounted investment. The CIT (A) partially accepted the assessee's reconciliation, reducing the addition. The tribunal found that the CIT (A) considered new evidence without giving the Assessing Officer an opportunity to verify it. The matter was remitted back to the Assessing Officer for verification and fresh decision. 5. Cost of Acquisition and Capital Gains Computation: The Assessing Officer disputed the assessee's claimed cost of acquisition for a sold plot, leading to an addition as short-term capital gains. The CIT (A) deleted the addition based on new evidence, including a development agreement and loan details. The tribunal noted that the Assessing Officer had not been given an opportunity to examine this new evidence. The issue was remitted back to the Assessing Officer for verification and fresh decision. 6. Procedural Fairness and Consideration of New Evidence by the CIT (A): In multiple instances, the CIT (A) considered new evidence submitted by the assessee without allowing the Assessing Officer to examine it. The tribunal emphasized the need for procedural fairness, remitting several issues back to the Assessing Officer for verification of new evidence and fresh adjudication. Conclusion: The tribunal's decision emphasized the importance of procedural fairness and the need for the Assessing Officer to verify new evidence before making a final determination. Several issues were remitted back for fresh consideration, ensuring that the Assessing Officer had the opportunity to examine all relevant materials and evidence. The tribunal upheld the Assessing Officer's classification of rental and interest income and denied the exemption under Section 54F, reinforcing the principle that improvements to existing assets do not qualify as new assets for tax exemption purposes.
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