2018 (1) TMI 1101 - AT - Income Tax

Long term capital gain of the assessee - determination of FMV - property purchased prior to 1981 - Held that - CIT(A) correctly held that he was convinced with the argument of AR of the assessee that the property was purchased prior to 1981, therefore, deduction of fair market value as on 01/04/1981 and benefit of indexation should be allowed. This was not done by the AO in the Assessment Order as the Order was passed ex-parte and the assessee did not supply any information in this regard. The value of the property as on 01/04/1981 is valued by the Chartered Valuer at ₹ 3,79,000/-. The AO has not challenged the valuation in his Remand Report and has submitted to consider the case on merits. Considering the value of the property in 1981 at ₹ 3,79,000/- based on Valuer s Report, the indexed cost comes to ₹ 22,05,780/-. Accordingly he was correct to held that the assessee was entitled for deduction of ₹ 22,05,780/- u/s.48 of the Act and, therefore, reworked the long term capital gain on sale of above property at ₹ 43,67,720/- in place of 65,73,500/- and allowed relief of ₹ 22,05,780/- to the assessee. - Decided against revenue Unexplained cash deposits - Held that - Claim of the appellant that he and his mother were having savings since past years out of known sources cannot be rejected in toto. It is seen that the documentary evidences have been filed showing sale of agricultural land at ₹ 28,57,102/-. The claim of the appellant is that entire deposit of ₹ 47,77,500/- worked-out by the AO is out of past savings, in the absence of any direct evidence filed by the appellant with regard to savings utilized by him for aforesaid deposits into bank, thus have no alternative but to estimate his savings available with him and his mother. Ends of justice would meet if the accumulated savings of the appellant and his mother is taken at ₹ 20,00,000/-which could have been available with them for deposits into the bank. DR though relied on the order of AO but could not point out any specific error in the above quoted order of CIT(A). - Decided against revenue

Summary

Issues:
1. Long Term Capital Gain (LTCG) addition
2. Adoption of property value as on 01.04.1981
3. Unexplained deposit in bank under section 69 of the IT Act, 1961

Long Term Capital Gain (LTCG) Addition:
The appeal filed by the Revenue challenged the order of the CIT(A) regarding the addition of LTCG from ?65,73,500 to ?43,67,720 for the assessment year 2009-2010. The AO treated the entire amount of ?65,73,500 as long term capital gains since the assessee failed to provide explanations. However, the CIT(A) reduced the amount after considering the inheritance of the property by the appellant and the valuation report of a Chartered Valuer. The CIT(A) allowed a deduction of ?22,05,780 based on the property's value as on 01.04.1981, resulting in the revised LTCG of ?43,67,720. The DR argued against the additional evidence filed by the assessee, citing a violation of Rule 46A of I.T. Rules, 1962. The AR contended that the evidence was submitted on demand by the CIT(A), falling outside the purview of Rule 46A.

Adoption of Property Value as on 01.04.1981:
The dispute revolved around the adoption of the property value as on 01.04.1981. The AO added the entire sum of ?65,73,500 as income due to an ex-parte order. The CIT(A) considered the property's purchase before 1981 and allowed the deduction of fair market value as on 01/04/1981, based on the Chartered Valuer's report. The AO did not challenge this valuation in the Remand Report, leading to the deduction of ?22,05,780 under section 48 of the Act. Consequently, the LTCG on the property sale was recalculated to ?43,67,720, providing relief to the assessee.

Unexplained Deposit in Bank under Section 69 of the IT Act, 1961:
Regarding the unexplained deposit in the bank, the AO added ?47,77,500 as undisclosed income under section 69 of the Act due to the lack of explanations from the assessee. On appeal, the CIT(A) restricted the disallowance to ?24,00,000 after considering the peak cash deposit and the appellant's age and income history. The CIT(A) estimated the peak cash deficit and allowed a relief of ?3,77,500, reducing the addition to ?24,00,000. The DR supported the AO's order but failed to identify any specific errors in the CIT(A)'s decision, leading to the dismissal of the Revenue's appeal.

In conclusion, the Appellate Tribunal upheld the CIT(A)'s decision to reduce the LTCG addition and the unexplained deposit in the bank, dismissing the appeals filed by both the Revenue and the cross objection by the assessee. The judgments were pronounced on January 17, 2018, at Raipur.