2021 (3) TMI 529 - HC - Income Tax

Additions on account of short term capital gains - slump sale - assessee could not produce any documentary evidence - whether Tribunal was right in holding that the disallowance made on account of short term capital gains charged on account of slump sale are not proper even though the assessee could not produce any documentary evidence? - HELD THAT - Revenue has not specifically doubted the transaction and therefore, the Tribunal has come to the conclusion that the order passed by the Commissioner of Income Tax (Appeals) is proper and that of the Assessing Officer is erroneous. The payments made by Shri Chakkubai and Shri Dhanapal, as part of cost of acquisition, after having found that the entire consideration has been considered in the hands of the assessee company. While passing the assessment order, the Assessing Officer had erroneously left out some of the entires which necessitated the Commissioner of Income Tax (Appeals) to interfere with the assessment order. The order passed by the Cit (Appeals) is just and proper. Considering all these aspects, the Tribunal has rightly confirmed the order passed by the Commissioner of Income Tax (Appeals). Retention money withheld - whether to be allowed even though the liability on account of it had nto crystallized during the present assessment year? - HELD THAT - In view of the Judgment reported 2020 (7) TMI 754 - MADRAS HIGH COURT the 2nd question of law is decided in favour of the assessee and against the Revenue.

Summary

Issues:
1. Disallowance of short term capital gains on slump sale without documentary evidence.
2. Allowance of retention money even though the liability had not crystallized.

Analysis:
1. The appellant, a company engaged in the business of builders and promoters of residential flats, challenged the order passed by the Income Tax Appellate Tribunal regarding the Assessment Year 2007-08. The Assessing Officer determined the total income at a higher level due to additions on short term capital gains. The appellant had purchased land for a residential project and paid amounts over and above the guideline value to landowners. The Assessing Officer disallowed certain amounts while computing short term capital gains, resulting in a higher taxable income. On appeal, the Commissioner of Income Tax (Appeals) allowed the cost factors but disallowed cash payments under section 40A(3) of the Act. The Tribunal confirmed the order of the Commissioner of Income Tax (Appeals), leading to the appellant challenging the decision.

2. The substantial questions of law admitted for the appeal were related to the disallowance of short term capital gains and the allowance of retention money. The appellant contended that the Tribunal was wrong in disallowing the short term capital gains without documentary evidence. However, the Tribunal upheld the Commissioner of Income Tax (Appeals) order, stating that the Assessing Officer had erroneously left out certain entries, justifying the interference by the Commissioner of Income Tax (Appeals). The Tribunal found no grounds to interfere with its decision, especially after referring to a relevant judgment.

3. The second question of law raised in the appeal was found to be covered by a previous judgment of the Hon'ble Division Bench of the court. The court dismissed the appeal based on the precedent where it was held that amounts retained by clients could not be considered as part of income if not received, as per contracts. The court cited the decision of the Supreme Court in a similar matter, indicating that no question of law arose for consideration. Consequently, the court dismissed the appeal, following the previous judgment and ruling in favor of the assessee against the Revenue.

In conclusion, the High Court dismissed the Tax Case Appeal, upholding the decisions of the Tribunal and the Commissioner of Income Tax (Appeals) regarding the disallowance of short term capital gains and the allowance of retention money. The court found no substantial questions of law to interfere with the Tribunal's order and cited relevant judgments to support its decision.