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2016 (4) TMI 355 - AT - Income TaxRectification of mistake - offering for tax the capital gain on sale of land in the current year which related the subsequent year i.e AY 2009-10 - Held that - The income offered by the assessee in the current year i.e AY 2008-09 under the head capital gain be rectified as the said income accrued and was assessed in the AY 2009-10. The both the authorities below had failed to appreciate that if the same income was assessed to tax in two assessment years it would be bad in law and also would be a mistake apparent liable for rectification u/s 154 of the Act regardless of the fact that it might had happened be due to assessee s mistake. Accordingly we delete LTCG of ₹ 3,02,93,202/- from the current year ₹ 3,02,93,202/- as apparent mistake from records and direct the AO accordingly. Addition under the head income from other sources - Held that - We find that the assessee during the course of assessment proceedings could not file the sale deed in respect of plot at survey no.132 on Mumbai-Pune Highway which was duly shown by assessee in the revised return of income filed u/s 139(5) of the Act. The details of sale considerations from both the plots at survey no.68 and 132 were shown while calculating the capital loss in the revised return of income. The ld. CIT(A) allowed the appeal of the assessee subject to quantification by holding that the same would be considered under the head capital gains and accordingly deleted the addition of ₹ 1,20,00,000/-. However, we find merit in the ground as raised by the revenue to set aside the proceedings to the file of the AO in view of the violation of Rule 46A of the Rules. In our view, the ld.CIT(A) has rightly deleted the addition under the head income from others sources and therefore the order of ld. CIT(A) does not require any interference at our end. However, in order to meet principle of natural justice we are of the opinion that the matter be restored to the file of the AO for a limited purpose of examining the sale deed and delete the addition accordingly. Addition under the head income from house property by estimating the rent of property - Held that;- We find that the rent from the rental properties located in Khar area have been shown at ₹ 15,808/- and water charges ₹ 4,94,282/- and property tax ₹ 54,532/- were claimed in respect of the said property. The AO further observed that the five flats were occupied by the partner and their family members. The AO estimated the rent in respect of rented property at ₹ 30 to 50 sq. ft. and thus arrived at notional income of ₹ 28,23,840/- which was increased by water charges of ₹ 4,94,982/- and from the total rental charges allowed standard deduction of 30% u/s 24 of the Act and worked out the total income from house property at ₹ 23.,21,775/- which was confirmed by the ld.CIT(A) on the ground that low rent was charged by the assessee from the partners and his family members. As it is clear from the above the AO has failed to prove/bring on record by any cogent evidence that the rent of comparable properties in the vicinity where the assessee s property was located and we find that the estimation of rent by AO is a purely guess work and based on estimation, conjecture and surmises, which in our opinion, cannot be sustained. We, therefore, delete the addition Estimation of LTCG - Held that - AO and CIT(A) had taken different method of valuation to in order to ascertain the FMV on 1.4.1981. It was also pointed out that there was a building in the plots sold. Under the present circumstances and facts, we are of the view that the ends of justice would be met if the assessee is supplied the copy of final valuation report by the valuation officer and after allowing the opportunity to the assessee the matter is decided afresh and de nova as per law. We therefore set aside the matter to the file of AO with the direction to supply a copy of the valuation report to the assessee and after allowing reasonable opportunity decide the matter afresh as per law.
Issues Involved:
1. Rejection of rectification application under Section 154 of the Income Tax Act, 1961. 2. Deletion of addition under "income from other sources". 3. Addition under "income from house property". 4. Enhancement of assessment by taking long-term capital gains. Issue-wise Detailed Analysis: 1. Rejection of Rectification Application under Section 154 of the Income Tax Act, 1961: The assessee filed an appeal against the rejection of a rectification application under Section 154, which aimed to correct a mistake of offering capital gain for tax in AY 2008-09 instead of AY 2009-10. The assessee had declared a capital gain of Rs. 3,02,93,202/- in the return for AY 2008-09, which was processed under Section 143(1) with a demand of Rs. 87,65,930/-. The AO rejected the rectification application, stating that the mistake was not apparent from the record and required debate. The CIT(A) upheld the AO's decision, emphasizing that the issue was debatable and not a clear mistake. However, the Tribunal found that the capital gain arose in AY 2009-10 due to the execution of sale deeds in April 2008, and it should not be taxed twice. The Tribunal directed the AO to rectify the mistake and delete the LTCG of Rs. 3,02,93,202/- from AY 2008-09. 2. Deletion of Addition under "Income from Other Sources": The revenue appealed against the deletion of an addition of Rs. 1,20,00,000/- under "income from other sources". The AO added this amount, considering it as unexplained income since the sale deed for plot no. 132 was not produced. The CIT(A) deleted this addition, treating it under "capital gains" instead. The Tribunal upheld the CIT(A)'s decision but remanded the case to the AO to examine the sale deed and ensure compliance with Rule 46A of the Income Tax Rules, 1962. 3. Addition under "Income from House Property": The AO estimated the rental income of the assessee's property at Rs. 28,23,840/- based on market inquiries, significantly higher than the declared rent of Rs. 15,808/-. The CIT(A) upheld this estimation, noting that the properties were let out to related parties at nominal rent. The Tribunal, however, found that the AO's estimation was based on guesswork without concrete evidence of comparable properties' rent. The Tribunal deleted the addition and directed the AO to assess the property income as in earlier years. 4. Enhancement of Assessment by Taking Long-Term Capital Gains: The CIT(A) enhanced the assessment by taking the long-term capital gains at Rs. 3,00,35,936/-, calculating the FMV as on 1.4.1981 at Rs. 79,736/- using a progressive valuation method. The assessee argued that the FMV should be calculated using the reverse valuation method, which was also the basis for the AO's initial calculation. The Tribunal found merit in the assessee's argument and noted that the CIT(A) did not consider the final valuation report from the valuation officer. The Tribunal remanded the matter to the AO, directing to supply the valuation report to the assessee and decide the matter afresh after allowing reasonable opportunity. Conclusion: The Tribunal allowed the assessee's appeal regarding the rectification application and deletion of addition under "income from house property". The appeal concerning "income from other sources" and enhancement of assessment was allowed for statistical purposes, with directions for a fresh examination by the AO. The Tribunal emphasized the need for proper valuation and avoiding double taxation, ensuring compliance with procedural requirements and principles of natural justice.
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