2016 (3) TMI 675 - AT - Income Tax

Income from other source v/s long term capital loss - transfer of land - Held that - From the grounds of appeal raised by the revenue it is clear that the revenue has not dispute any of the findings of the CIT(A) except harping on the point that the purchaser of the property did not confirm the details of the transactions as given by the Assessee. The sale deed of the property dated 14.06.2005 is a registered documents. The authenticity of the same cannot be doubted. The fact that the purchase of the property did not respond to the notices issued by the AO cannot be the basis to treat the gain in question as income from other sources. The AO has not brought any material on record about the value of the property as adopted for the purpose of registration of documents by the Registrar of Assurances. In the given facts and circumstances we are of the view that conclusions drawn by the CIT(A) do not call for any interference . Accordingly order of CIT(A) is confirmed and this appeal by the revenue is dismissed. - Decided in favour of assessee

Summary

Issues:
1. Treatment of profit on sale of land by the AO as Income from Other Sources.
2. Dispute over chargeability under a particular head - Income from Other Sources or Capital Gains.
3. Failure of the purchaser to confirm transaction details.
4. Assessment of long term capital loss on sale of land.

Analysis:
1. The appeal pertains to the treatment of profit on the sale of land by the Assessing Officer (AO) as Income from Other Sources instead of Capital Gains. The Assessee contended that the property sold was a capital asset, not depreciable, or part of stock-in-trade. The AO's order under section 143(3) of the Income Tax Act, 1961 categorized the profit as Income from Other Sources.

2. The Central Board of Direct Taxes (CBDT) rules state that any gain from the transfer of a capital asset should be assessed under the head "Capital Gain" as per section 45 of the Act. The Assessee argued for the treatment of the profit as Long Term Capital Loss under Capital Gains, providing a detailed calculation to support their claim.

3. The CIT(A) considered the evidence, including the transaction transparency, registration of documents, and valuation report by a registered valuer. The CIT(A) found no reason to doubt the genuineness of the transaction, affirming that the property was a capital asset under section 2(14) of the Income Tax Act. The CIT(A) directed the AO to delete the addition under Income from Other Sources and recognize the Long Term Capital Loss.

4. The revenue appealed to the Tribunal, emphasizing the lack of confirmation from the purchaser regarding transaction details. However, the Tribunal found the revenue's stance unsustainable, noting the registered sale deed's authenticity and lack of material from the AO regarding property valuation. The Tribunal upheld the CIT(A)'s decision, dismissing the revenue's appeal and confirming the order in favor of the Assessee.

In conclusion, the Tribunal upheld the CIT(A)'s decision, emphasizing the genuine nature of the transaction, the property's classification as a capital asset, and the proper treatment of the profit as Long Term Capital Loss under Capital Gains.