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TMI Blog2016 (4) TMI 909X X X X Extracts X X X X X X X X Extracts X X X X ..... g the addition of Rs. 3,00,000/-, as made by the ITO by treating the 'biana' received against first sale deal of property, to have been forfeited. 4. That while confirming the above addition of Rs. 3 lacs, the ld. CIT(A) was not justified in disbelieving the 'compromise deal' reached with the first party, as an afterthought. 5. That likewise, the ld. CIT(A) also erred in confirming the denial of exemption under section 54 to the extent of Rs. 11,92,500/- being the cost of plot purchased on a wholly erroneous construction of the provisions of section 54/54F. 6. That most relevant and binding judicial authorities, cited before the ld. CIT could not have been bypassed simply to reject all contentions raised by assessee. 7. That the assessee having been put to undue harassment of the authorities below, by taking arbitrary stands contrary to binding CBDT instructions and also the judicial precedents, she seeks to be allowed appropriate cost in the matter." 2. The facts are that the AO issued a notice (APB-8) dated 21.09.2012 to the assessee, seeking information in connection with the return of income submitted by the assessee on 17.10.2011, for the year under c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s would be limited only to aspects of information received through AIR. 5. In response to the AO's query, (Question no.11 of the Questioner), regarding the source of the alleged cash deposit of Rs. 25 lakhs in the assessee's savings bank account with O.B.C, the assessee stated that she had sold her residential house for Rs. 32.25 lakhs on 15.05.2010 and the proceeds thereof, i.e., Rs. 7 lakhs received by cheque and Rs. 25.25 lakhs by cash were deposited in her savings bank account with O.B.C. In support, she filed a copy of the sale deed (APB 13-14) and a copy of her saving bank account with OBC [APB 17 (back) to 18]. 6. In the assessment order, the AO observed as follows: "3.1 The assessee has declared the capital gain of Rs. 18,30,652/-vhich was claimed exempted u/s 54 of the Income Tax Act, 1961 . The assessee purchased a plot for Rs. 11,92,500/- plus stamp duty of Rs. 83,475/- on 28 07.2009 and also invested Rs. 6.5 Lacs on 29 .07 .2011, in the Capital Gain Scheme with the oriental Bank of Commerce, Jalandhar. During the course of assessment proceedings, the assessee filed another agreement to sell the same property (House No. 13 /2 situated in area o, Green Mode! To ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nce the assessee has failed to clarify this aspect. Thus in the absence of asscssee's compliance to produce the vendees of the agreement, it is presumed that this agreement could not gain finality, because the same property was sold by the assessee to somebody else by way of sale deed dated 07.05.2010.Thus the amount of advance taken by the assessee to the tune of Rs. 3,00,000/- on 15.03.2009, still remain with the assessee which stand forfeited and it forms part of the assessee's total receipt/sale consideration of the property in question as per the provisions of section 51 of the Income Tax Act, 1961." 7. The AO thus computed long term capital gain as follows: Sale consideration as per registered deed dated 07.05.2010. 32,25,000/- Add forfeited Biana as per Agreement dated 15.03.2009. 3,00,000/- Total sale consideration of the property to compute the capital gain. 35,25,000/- Less cost of acquisition of property. 5,24,508/- Less Indexed cost of improvement as 8,69,840/- Total cost of acquisition. 13,94,348/- Balance. 21,30,652/- Less Deposit in the Capital Gain Scheme 6,50,000/- Balance Taxable Capital Gain 14,80,652/- 8. The AO refused to grant bene ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tions taken by the assessee were just to divert the attention of the AO to come to a logical conclusion. 11. The ld. DR, on the other hand, strongly relied on the impugned order. 12. It has been contended that evidently, the AO has not violated the CBDT instructions governing AIR cases, since he has limited his enquiries to the source of cash deposits in the in the bank account of the assessee and it is further a logical conclusion, that as correctly observed by the ld. CIT(A), the AO was duty bound to see as to whether the assessee has correctly declared taxable value of the long term capital gains from the sale of her residential house; that the long term capital gain was correctly computed by the AO in accordance with law; and that the assessee has not been able to successfully dispute the observation of the ld. CIT(A) that the assessee had raised objection just to divert the attention of the AO to arrive at a logical conclusion. 13. The question is whether, firstly, the AO is bound by the CBDT Instruction F.No.225/26/2006-ITA-II(Pt.) dated 08.09.2010 and as to whether in the present case, while computing capital gain and denying benefit of section 54 to the assessee, the AO ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ived through AIR. However, a case may be taken up for wider scrutiny with the approval of the administrative Commissioner, where it is felt that apart from the AIR information there is a potential escapement of income more than Rs. 10 Lacs. 3. It has also been decided that in all the cases which are picked for scrutiny only on the basis of AIR information, the notice u/s 143(2) of Income Tax Act 1961 should clearly be stamped with "AIR Case". This should be immediately brought to the notice of all the officers working in your region. Yours faithfully, (Ajay Goyal) Director (ITA.II)" 19. As per the table at page-1 of the AO, the AIR information was regarding transaction of Rs. 25 lakhs dated 31.3.2011 (Entry No.2 in the table is, as stated, merely a repetition of Entry No.1). According to para-3 of the assessment order, the details of this are deposits of Rs. 9.5 lakhs on 07.05.2010, Rs. 9.5 lakhs on 08.05.2010 and Rs. 6 lakhs in cash by the assessee in her savings bank account with OBC, Jalandhar. 20. Para 2 of the CBDT Instruction states that the scrutiny of cases selected on the basis of information received through AIR returns would be limited only to the aspects of in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e, as above. 27. In fact, what the AO did was to widen the scrutiny. Now, para 2 of CBDT Instruction is specific when it states that where it is felt that apart from the AIR information, there is potential escapement of income more than Rs. 10 lakhs, the case may be taken up for wider scrutiny with the approval of the administrative Commissioner. 28. So, the proper course for the AO before making these additional enquiries would have been to take approval from the administrative Commissioner to widen the scrutiny. This, however, was not done and therefore, the action of the AO is violative of the CBDT Instruction. 29. Apropos the ld. CIT(A)'s order, obviously the ld. CIT(A) has erred in confirming the assessment order. The ld. CIT(A) had erred in view of the above observation of the Bench, in holding that the AO has not violated the CBDT Instruction. The ld. CIT(A) has gone wrong in observing that the AO has limited his enquiries to the source of cash deposits. True, the AO is duty bound to see whether the assessee has correctly declared taxable value of the long term capital gains from the sale of her residential house. However, as noted, in a case like the present one, whe ..... X X X X Extracts X X X X X X X X Extracts X X X X
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