2020 (9) TMI 921 - AT - Income Tax

Computation of Long Term Capital Gain - Adoption of sale value - difference between the value declared by the assessee and value assessed by the DVO - HELD THAT - CIT(A) has adopted the said value assessed by the DVO and had directed the AO to re-compute the income in his hands. Where the difference between the value declared by the assessee and value assessed by the DVO is 4.74% i.e. marginal difference which is less than 10% of difference between value declared and value estimated. Since it is case of estimation of value by the DVO, the Courts have held that the marginal difference needs to be ignored. We place reliance on the ratio laid down in Honest Group of Hotels vs ACIT 2001 (11) TMI 1016 - HIGH COURT OF JAMMU KASHMIR and Rahul Construction vs DCIT 2012 (1) TMI 229 - ITAT PUNE . Accordingly, we direct the Assessing Officer to adopt the sale value declared by the assessee for computing the Income from Long Term Capital Gains in the hands of the assessee. Extent of ownership of the assessee - assessee claimed that it is an ancestral property which was owned by three co-owners - HELD THAT - Both the sale deed have been executed by two co-owners and the sale consideration has been bifurcated amongst three persons. In these facts and circumstances, we find no merit in the orders of the authorities below and direct the Assessing Officer to adopt 1/3rd net capital gains in the hands of the assessee and balance 1/3rd share in the hands of the Shri Anil Swarup. Cost of improvement claimed 100% - said expenditure was disallowed as no evidence was filed by the assessee - HELD THAT - We are of the view that principle of justice would meet in case ₹ 1,00,000/- each is allowed as cost of improvement. Accordingly, we hold so. Addition made on account of cash deposits in the bank accounts - unexplained deposits in HDFC bank and unexplained deposits in State Bank of India - HELD THAT - Assessee had failed to produce the necessary evidence with regard to the cash deposits and also the source of cash deposits before Assessing Officer. In the interest of justice, we are of the view that the onus is upon the assessee to strictly explain each and every deposits in two bank accounts i.e. HDFC bank and State Bank of India, as both these accounts were not declared in the return of income. Following the principal of natural justice, matter may be set-aside to the file of the Assessing Officer with direction to the assessee to file necessary evidence explaining the source of cash deposits or by cheque in the aforesaid accounts. AO shall allow reasonable opportunity of hearing to the assessee and decide the issue accordingly.

Summary

Issues Involved:
- Computation of Long Term Capital Gain
- Addition made on account of cash deposits in bank accounts

Computation of Long Term Capital Gain:
The appeals were filed against orders of CIT(A) relating to assessment years 2010-11 under the Income-tax Act, 1961. The common issues raised were regarding the computation of Long Term Capital Gain and addition made on account of cash deposits in bank accounts. The assessee had sold an immovable property and declared the sale consideration. The Assessing Officer noted discrepancies in the declared value and circle rate of the property. The CIT(A) directed re-computation based on a Valuation Officer's report. The tribunal directed to adopt the sale value declared by the assessee for computing the Long Term Capital Gains. It was established that the property was jointly owned by three co-owners, and the capital gains were distributed accordingly. The tribunal allowed the appeal on the grounds related to the computation of capital gains.

Addition on Account of Cash Deposits:
The addition was made on unexplained deposits in HDFC Bank and State Bank of India. The assessee failed to provide sufficient evidence for the source of cash deposits. The tribunal noted that the onus was on the assessee to explain each deposit in the bank accounts. It was decided that the matter be sent back to the Assessing Officer for the assessee to provide necessary evidence regarding the source of cash deposits. The tribunal allowed the appeal on the grounds related to the addition of cash deposits in bank accounts.

Conclusion:
Both appeals were allowed, with directions given for the computation of Long Term Capital Gain and the addition made on account of cash deposits in bank accounts. The tribunal provided detailed analysis and reasoning for each issue involved, ensuring a fair and just decision based on the facts presented during the proceedings.