ACIT-4(3)(1), MUMBAI vs. MANISH JASWANT SINGH BHACHOO, MUMBAI

Coming to first issue/addition of Rs.53,44,100/-, it is observed that the Assessee had purchased an immovable property on a consideration amount of Rs.1,36,48,000/- as against the stamp duty valuation of Rs.1,89,92,100/- and therefore, the Assessing Officer (AO) added the differential amount of Rs.53,44,100/- under Section 56(2) (vii)(b) of the Act in the income of the Assessee, but the ld. Commissioner deleted the same.

The Assessee has claimed that the property under consideration was originally booked and substantially paid for, by the Assessee’s wife Smt. Prachi Bachhu along with her brother Shri Punit Nagpal and upon her demise intestate in 2011, the property devolved upon the Assessee as legal heir through inheritance and release deeds executed by Shri Punit Nagpal. The Assessee in support of above contentions also submitted certain documents, such as booking memo, allotment letter, registered agreement, death certificate, affidavit and release letters, which were duly acknowledged by the authorities below.

Admittedly, the provision of Section 56(2) (vii) (b) explicitly exempts transactions arising by way of inheritance and those received from relative and therefore, Assessee’s case squarely falls within the ambit of clause (c) of the second proviso to Section 56(2) (vii) (b) read with clause (e) of the explanation defining “relative” and therefore, the ld. commissioner by considering the aforesaid provisions, as well as the judgment of the Hon’ble Apex Court in the case of CIT Vs Kamlini Khatau (1994) 209 ITR 101 (SC), wherein the Hon’ble Apex Court has held that income received by way of inheritance is not taxable specially under the clubbing and income from other sources under the provision of the Act, has rightly deleted the addition of Rs.53,44,100/- as made by the AO under Section 56(2) of the Act and thus, the decision of the ld. Commissioner in deleting the addition under consideration needs no interference and resultantly decision of the ld. Commissioner on this aspect, is upheld.

Now, coming to the second addition of Rs. 1,90,76,631/- made by the AO, arises from a purported mismatch between the figures, reported in the tax audit report (Form 3CD) and the income tax return in respect of capital gains on house property and shares.

The Assessee before the ld. Commissioner has explained that audit report showed accounting gains while the ITR showed index and exempt LTCG after claiming of deduction under Section 54/54-F and adjustment of losses. The Assessee before the ld. Commissioner also provided reconciliation statements, with detailed workings and documentary evidences.

On analyzing the assessment order and the submission made by the Assessee in the context of the tax audit report and the income tax return, the ld. Commissioner observed that AO has presumed that difference represent unexplained or unrecorded income, without appreciating the income in accounting principles and income tax computation provisions. The Audit Report shows accounting profit, as per accounting standard 13 (on disposal of investments), without indexation for exemption. The ITR computation rightly applies indexation (under Section 48) and claims eligible deduction under Section 54 and reflects carried forward capital losses. The ld. Commissioner therefore, on the aforesaid observations and analyzations came to the conclusion that discrepancy is therefore, only apparent and reconcilable, not indicative of concealment. The Assessee in this respect has submitted a detailed reconciliation showing that the long term capital gain of Rs.1.385 crore on house property was nullified by Section 54 investment in index cost, resulting in ‘NIL’ taxable gain, LTCG of Rs.5.14 Lakh on share was offset by indexation, resulting in a long term capital loss and short term capital gain, difference of Rs. 37713/- was due to separate treatment of speculative intra gains. The ld. Commissioner further observed that these explanations were well supported by computation sheets, supported schedules, ITR acknowledgement and tax audit report, submitted by the Assessee. The ld. Commissioner ultimately held the addition of Rs. 1,90,76,631/- made under Section 45 of the Act as factually and legally untenable.

We have given thought consideration to the decision on this issue and observe that the decision of the ld. Commissioner in deleting the addition under consideration, is not only based on the computation sheet, supporting schedules, ITR acknowledgment, tax audit report and income tax return but also based on detailed reconciliation submitted by the Assessee. The ld. Commissioner not only examined the documents but in fact also verified the mismatch figures independently.

Even otherwise, we could not find any reason and/or material to contradict the finding of the ld. Commissioner in deleting the addition under consideration. Hence, on the aforesaid analyzations the decision of the ld. Commissioner in deleting the addition under consideration, is sustained.

In the result, Revenue’s appeal is dismissed.