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Income Tax Appellate Tribunal, “SMC” BENCH : KOLKATA
Before: Hon’ble Shri J.Sudhakar Reddy, AM]
This appeal by the Assessee directed against the order of the Learned Commissioner of Income Tax (Appeals)-10, Kolkata [ in short the ld CITA] dated 12.10.2017 passed under section 250 of the Income Tax Act, 1961 (in short “the Act”) for the Assessment Year 2011-12.
The assessee is an individual and has income from ‘house property’, business, as well as from other sources. During the year, the assessee declared long term capital gains of Rs. 2,73,905/-. He claimed that he has sold a plot of land for Rs. 7,50,000/-. During the course of scrutiny, the assessee was asked to submit the evidences of the purchase and the sale of the land in question. As the assessee could not produce any document in support of his claim. Hence an addition has been made u/s 68 of the Act of the total credit of Rs. 7,50,000/-. The assessee carried the matter an appeal.
2 ITA No.99/Kol/2018 Ram Swaroop Bajaj A.Yr.2011-12 3. Before the ld. First Appellate Authority the assessee submitted a General Power of Attorney given by the assessee authorizing the sale, mortgage etc. a plot of land, situated at 38, Shivpet, Surajnagar, Civil Land, Jaipur, Rajasthan, which belong to the assessee. The General Power of Attorney was given to one Mr. Ramesh Pradhan on 04.06.2005. This land was ultimately sold to Mrs. Geeta Pradhan on 06.01.2006 by the General Power of Attorney holder Mr. Ramesh Pradhan.
It was claimed by the assessee that due to sickness and lack of information, this transaction in question was not offered to tax during the assessment year 2007-08. It was claimed that the property was purchased by the assessee on 08.08.1994 at the cost of Rs. 1,73,430/- and thereafter sold on 08.10.2006 for the sale prices of Rs. 7,50,000/-. After considering the index cost of the property as Rs. 3,75,530/- long term capital gain of Rs. 4,02,470/- was stated to have been earned. It was further submitted that during the assessment year 2006-07 there is a business loss and above capital gains could be adjusted against that loss. The Ld. CIT(A) called for the remand report. The assessing officer on the ground that the assessee had changed the capital gains for Rs. 2,73,905 to Rs. 4,02,479/- and on the grounds that the assessee has not produced any documentary evidence in support of this claim, drew a conclusion that this is a concocted story made out by the assessee, which should not be accepted. The Ld. CIT(A) confirmed the addition. Aggrieved the assessee is in appeal before us.
The ld. Counsel for the assessee submitted that, the receipt on sale of proceeds was not credited to the books of accounts of the assessee and hence no addition can be made u/s 68 of the Act. He relied on the judgment of Kolkata “ C” Bench of the Tribunal in the case of DCIT vs. Global Merchants pvt. Ltd. [2016] 67 Taxman.com66 (Kol. Trib) for this proposition. He further submitted the paper book containing the copy of the sale deed and submitted that, this amount should have been taxed during the assessment year
3 ITA No.99/Kol/2018 Ram Swaroop Bajaj A.Yr.2011-12 2007-08 not during the impugned assessment year in the words the yearly taxation was disputed by the assessee.
The ld. DR Smt. Ranu Biswas, on the other hand, opposes the contentions of the assessee and submitted that, the assessee had offered long term capital gains of Rs. 2,73,905/- to tax and had admitted that there was a sale of immovable property and an amount of Rs. 7,50,000/- was received by him on such sale. As the assessee could not substantiate with documentary evidence, his claim that had earned long term capital gains, this amount of Rs. 7,50,000/- was added u/s 68 of the Act. On the agreement that there was no entry in the books of accounts of the assessee, she submitted that the assessee is a trader and has been maintaining books of accounts and if this amount is an unaccounted receipt, it can be added as unaccounted income under section 68 of the Act. She submitted that quoting a wrong section is not fatal to the assessment of undisclosed income. On the year of taxability, she submitted that the assessee had offered this amount to tax this year and hence he cannot plead otherwise.
In reply the ld. Counsel for the assessee submitted that the assessee had actually earned capital gains in the earlier assessment year 2007-08 and instead of offering the same to tax in that year, has, honestly declared the long term capital gain in this year and is being penalized for doing the same.
After hearing rival submissions and on a careful consideration of the facts and circumstances of the case, a perusal of papers on record and orders of the lower authorities below, as well as case law cited, I hold as follows.
The assessee claims is that it had sold property during the financial year 2006-07 and that, he failed to disclose the long term capital gains on this property, during that year and that this capital gain was disclosed in the current year. The claim was that the 3
4 ITA No.99/Kol/2018 Ram Swaroop Bajaj A.Yr.2011-12 assessee has given a general power of attorney to one Mr. Ramesh Pradhan on 4.06.2005 with respect to a plots situated at Civil Lines, Jaipur and that this plot of land was ultimately sold to Smt. Geeta Pradhan on 06.10.2006, it was claimed that due to lack of information and non-availability of the sale deed this transaction was not offering to tax during that year 2007-08. It was stated that this plot of land was originally purchased on 18.10.1994 for Rs. 1,73,430/- and thereafter sold on 08.10.2006 for Rs. 7,50,000/-. The long term capital gain was calculated at Rs. 4,02,470/-after indexation. After calling for the remand report the Ld. CIT(A) as at para 13 held as follows: “13. A Remand Report had been called for from the Ld. AO, and the Ld AO had forwarded the Remand Report as under; 1. In the return of income, assessee declared LTCG amounting to Rs.2,73,905/. The capital Gain has been worked out from the sale consideration of Rs.7,50,000/- of the asset reduced by indexed cost of acquisition of such asset for Rs.4,76,095/-. During the assessment proceedings, the assessee was asked to submit documentary evidence of the purchase and sale of the Immovable property, name and address to whom the property had been sold and the address of the Registry Office where the property got registered. . 2. But the assessee failed to submit such documents. As a result the AO had no other alternative but to treat the sale proceeds of Rs.7,50,000/- as unexplained cash credit u/s 68 and add to the total Income of the assessee under the head "Income from other sources". 3. In the letter of the assessee addressed to you, the assessee fabricated a story that the capital gain is Rs.4,02,470/- and not Rs.2,73,905/-, and that it does not relate to the A. Y 2011-12, but it relates to the A. Y 2007-08. During the scrutiny assessment of A. Y 2011-12, the documents as required by the AO were not made available to him. 4. The above story of the assessee is totally baseless. In the Instant case, A. Y 2011-12 is relevant and not A. Y 2007-08. The assessee voluntarily offered sale consideration to the tune of Rs.7,50,000/- in the return. Moreover, statement of LTCG as submitted by the assessee with the submission shows that sale was executed on 04.06.2010 relevant to the assessment year 2011-12. In this situation, It can be said that the assessee Is just trying to mislead Revenue, presenting a tailor-made story. It can be concluded that the assessee has considered the amount of Rs.7,50,000/- under the head LTCG income from income from other sources to avoid tax liability”. 14. Thereafter, the observations of the Ld AO In the Remand Report have been offered to the appellant, and the reply (counter) In the matter is as follows: 4
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Addition of Rs. 7,50,000/- invoking section 68 of the Income Tax Act, 1961. Your Honour, the Ld. A.O. Invoked the provision contained in sect/on 68 of the Income Tax Act, 1961. However, the basic condition for invocation of section 68 is that the sum should be credited in the books of accounts maintained by the appellant during the year. However, in the present case under consideration the sum is not credited In the books of accounts of the appellant during the year. Therefore, the sine qua non condition for the applicability of section 68 is not satisfied and hence, the addition is void and should not be sustained.
Further we would like to submit that the appellant had produced all the evidence supporting the claim of the Long term Capital Gain and also the set off from the loss of the previous year. The Ld. A.O. in his remand report has not found any Infirmity in the documents submitted by the appellant. However, the Ld. A.O. concluded that the appellant has made up story. It shall not be out of place to mention that, the appellant had produced necessary documents to support its contention. Therefore, the finding made by the Ld. A. O. is baseless and without any logical application of mind and thus the addition to the tune of Rs. 7,50,000/- invoking the provision of section 68 of the Income Tax Act, 1961 is incorrect and should be deleted. The appellant should also be allowed to claim the benefit of the carry forward loss from the earlier year.
DECISION:
In this matter, I find that the appellant has submitted certain documents that according to him quantify the amount of capital gains and the year for which It relates. However, there is no clear cut evidence that it can be linked to the year for which the claim is being made.
The appellant has been unable to counter the findings of the Ld AO that he had voluntarily offered sale consideration to the tune of Rs. 7,50,000/- in the return. And that moreover, statement of LTCG as submitted by the assessee with the submission shows that sale was executed on 04.06.20io relevant to the assessment year 2011-12.
I find that there is Incorrectness In some of the claims made by the assessee, and there are Inconsistencies which are coming forth, and therefore the Ld. AO has quite correctly considered the amount as unexplained and added the same u/s 68 of the Income Tax Act, 1961. The action of the Ld AO in the matter Is sustained and the ground taken by the appellant stands dismissed.”
I find no infirmity in this order. The assessee in this case has failed to prove that, the long term capital gain disclosed in the return of income during this year, is nothing but
6 ITA No.99/Kol/2018 Ram Swaroop Bajaj A.Yr.2011-12 the long term capital gain that arose to the assessee on the sale of a plot of land at Jaipur during the financial year 2006-07 relevant to assessment year 2007-08.
Coming to the plea that the addition cannot be made u/s 68 of the Act, as this amount entered into books of accounts, I hold that the receipt in question is taxable as undisclosed income as pleaded by the ld. DR. It is well settled principle of law that mentioning of a wrong provision or non-mentioning of provision does not invalidate the addition. For this proposition, we draw strength from the judgment of Andhra Pradesh High Court in the case of “Action for Welfare and Awakening Rural Environment vs. DCIT [2003]” 130 Taxmann. Com 82 (AP) judgment 20.03.2003. In this case all that the AO did, was to hold that this receipt cannot be taxed under the head “Capital Gains” but was to be taxed under the head other sources as unexplained income.
In the decision cited by the ld. Counsel for the assessee, the Kolkata Bench of the Tribunal in the case of Global Mercantile Pvt. Ltd. [2016] 67 Taxmann.com 166 (Kol), the issue was an addition of share capital. The ITAT held that no addition could be made u/s 68 of the Act in the assessment year under appeal, as no money was received during the year. The facts in the present case are different. The assessee had claimed that it had received an amount of Rs. 7,50,000/- on sale of capital asset and thereafter could not substantiate the same. Hence, I uphold the order of the Ld. CIT(A) and dismiss the appeal.
In the result, the appeal of the assessee is dismissed. Order pronounced in the Court on 27.06.2018
Sd/- [ J.Sudhakar Reddy] Accountant Member Dated : 27.06.2018 SB, Sr. PS 6
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Copy of the order forwarded to: 1. Ram Swaroop Bajaj, C/o, Agarwal Vishwanath & Associates, 133/1/1A. S.N. Banerjee Road,Pushkal Bhawan, 3rd Floor, Kolkata-700013. 2. ITO, Ward-36(1) Kolkata, 110, Shantipally, Kolkata-700107. 3..C.I.T.(A)- , Kolkata 4. C.I.T.- Kolkata. 5. CIT(DR), Kolkata Benches, Kolkata.