2022 (10) TMI 349 - AT - Income Tax

Capital gains earned on purchase and sale of immoveable property - treating information contained in ITS as related to transaction of sale of immovable property - HELD THAT - We find that the assessee had repeatedly admitted to having entered into in only one transaction of purchase of immoveable property with her share in the same being 20%.The assessee had duly substantiated this investment with necessary documentary evidence by way of furnishing copy of purchase deed of the said property. The assessee s explanation with regard to this investment was examined and duly accepted by the Revenue authorities as the source of investment in the same being explained. With respect to this transaction reported in the ITS of the assessee, the Revenue, we have noted, is satisfied with the assesses explanation of source of investment. With respect to the other transaction reported in the ITS of value which the Ld.CIT(A) has interpreted to relate to sale of the property purchased by the assessee, we find that other than the ITS information the Revenue had no other basis for treating the said information so. Even inquiries conducted by the AO from the sub Registrars office revealed no information relating to this transaction.Assessee on the other hand we find repeatedly asserted that the two transactions reported in the ITS were relating to one and same transaction of purchase of immoveable property - The other transaction being different has all along being denied by the assessee. CIT(A)'s inference that the second transaction related to sale of the immoveable property was also demonstrated by the assessee to be incorrect who had pointed out that the said property had in fact been sold in A.Y 2012-13 and not the impugned year ,and capital gains earned thereon by the assessee returned to tax. The explanation was substantiated with copy of return of income for A.Y 2012-13 reflecting capital gains therein. Assessee had pointed out how the two transactions reflected in the ITS pertained to one transaction of purchase of immoveable property, pointing out the same registration no. mentioned against the two transactions in the ITS and also pointing out that based on the stamp duty paid by the assessee on the property purchased ,the value of the second transaction reflected the stamp duty value of the said transaction and hence the two transactions were nothing but one transaction reflected twice in the ITS. None of the above averments of the assessee have been dealt with by the CIT(A) while holding the second transaction to represent sale of immoveable property purchased by the assessee. The assesses contention duly substantiated that the property was sold in A.Y 2012-13 , has not been controverted by the CIT(A). Nor has the Ld.CIT(A) cared to even apply his mind to the similarities pointed out by the assessee in the two transactions reported in the ITS. The entire exercise of the Ld.CIT(A) in holding the second transaction reported in the ITS to reflecting sale of the property purchased appears to be totally adhoc,without any basis and per his own whims and fancies, in total disregard of the assesses explanation. We therefore agree with the Ld.Counsel for the assessee that there was no reason for treating the second transaction reported in the ITS as being distinct from the first transaction. Addition made to the income of the assessee on account of capital gain earned by the assessee by treating the second transaction reported in the ITS as distinct from the first and being sale of property purchased, is accordingly directed to be deleted. Appeal of the assessee is allowed.

Summary

Issues Involved:
1. Confirmation of addition of Rs.2,43,272/- to the returned income by treating ITS information as related to the transaction of sale of immovable property.
2. Validity of ITS information pertaining to sales transactions without documentary evidence.

Issue-Wise
Detailed Analysis:

1. Confirmation of Addition of Rs.2,43,272/- to the Returned Income:
The assessee contested the addition of Rs.2,43,272/- confirmed by the Commissioner of Income-Tax (Appeals) [CIT(A)] on account of capital gains allegedly earned from the sale of immovable property. The assessee argued that the Individual Transaction Statement (ITS) information, which was the basis for the addition, related to a single transaction repeated twice in the statement. The CIT(A) treated the two transactions reported in the ITS as distinct and pertaining to the purchase and sale of the same property during the impugned year.

The assessee pointed out that as per ITS data, the assessee had purchased two immovable properties during the year for Rs.73,41,358/- (Rs.30,00,000/- + Rs.43,41,358/-). The assessee accepted investing in one property of Rs.30,00,000/-, admitting to a 20% share in it. The Assessing Officer (AO) made an addition of the total investment made in both properties, resulting in a total addition of Rs.49,41,358/-. The CIT(A) applied his logic and held that the second transaction related to the sale of the same plot number, bringing to tax the capital gain allegedly earned by the assessee, computed to be Rs.2,43,272/-.

2. Validity of ITS Information Pertaining to Sales Transactions Without Documentary Evidence:
The assessee reiterated that the ITS statement reflected only one property purchase in which the assessee had a 20% share and denied any other investment during the year. The assessee argued that the Revenue failed to provide any basis for the second transaction reported in the ITS, and even inquiries conducted by the AO with the Sub-Registrar's office elicited no information.

The assessee submitted various documents, including replies filed during the assessment proceedings, an affidavit, a conveyance deed, and a copy of the return of income for A.Y 2012-13, substantiating the sale of the property in A.Y 2012-13 and returning the capital gains earned to tax in that year. The assessee also contended that the second transaction reflected in the ITS at Rs.43,87,755/- related to the same transaction of purchase of immovable property for Rs.30,00,000/-, representing the stamp duty value of the property.

The Tribunal found that the assessee had repeatedly admitted to entering into only one transaction of purchase of immovable property of value Rs.30,00,000/- with a 20% share. The assessee's explanation was examined and accepted by the Revenue authorities. The Tribunal noted that the Revenue had no other basis for treating the second transaction reported in the ITS as relating to the sale of the property. The Tribunal agreed with the assessee that there was no reason for treating the second transaction reported in the ITS as distinct from the first transaction.

Conclusion:
The Tribunal concluded that the addition of Rs.2,43,272/- on account of capital gain earned by treating the second transaction reported in the ITS as distinct from the first and being the sale of the property purchased was without basis. The Tribunal directed the deletion of the addition and allowed all grounds raised by the assessee. The appeal of the assessee was allowed, and the order was pronounced on 7th October 2022 at Ahmedabad.