2012 (10) TMI 659 - AT - Income Tax

Tribunal decision on capital gain & income addition: ADA land acquisition, compensation, and source income explained.

The Tribunal upheld the CIT(A)'s decision to delete the addition on account of long-term capital gain, ruling that no capital gain arose as the land was ... Addition on account of long term capital gain – compulsory possession - dispute pending before HC - Held that:- the provisions of section 2(47) (iii) and (v) section 45(5) would not apply in the case of the assessee - Merely because full consideration has been received by the assessee on account of agreement to sale by itself is no ground to charge capital gains - Since the conditions of above provisions are not fulfilled in the case of the assessee, therefore, the ld. CIT(A) rightly held that no capital gain is chargeable to tax - assessee made investment in agricultural land and residential house in terms of section 54B and 54F - assessee would be entitled for deduction on account of capital gains - In favor of assessee Addition on account of income from other sources – deposit made in the bank account of the assessee in cash – Held that:- Assessee in the cash flow statement claimed benefit each received by both of his brothers, but admittedly, no evidence was produced before the authorities below to support such contention - no evidence was produced before the authorities below that the brothers of the assessee have given these amounts to the assessee for depositing in the bank account of the assessee - CIT(A) further gave benefit of current income of Rs. 25,500/- in which we do not find any infirmity - assessee would be entitled for reduction of Rs. 25,500/- out of the total addition - appeal of the Revenue is partly allowed Issues Involved:1. Deletion of addition on account of long-term capital gain.2. Deletion of addition on account of income from other sources.3. Confirmation of addition being unexplained deposit.Issue-wise Detailed Analysis:1. Deletion of Addition on Account of Long-term Capital Gain:The Revenue challenged the deletion of Rs. 26,31,467/- made on account of long-term capital gain. The Assessing Officer (AO) added this amount as capital gains, asserting that the land was transferred when the assessee entered into an agreement to sell and received consideration. However, the land was acquired by the Agra Development Authority (ADA) in 2000, and the possession was with ADA. The assessee contested the acquisition and had not received any compensation. The CIT(A) held that no capital gain arises for taxation as the land was already acquired by ADA and no compensation was received. The CIT(A) also noted that the assessee made investments in agricultural land and residential house, qualifying for deductions under sections 54B and 54F. The Tribunal upheld the CIT(A)'s decision, stating that the provisions of section 2(47) and section 45(5) were not applicable as the land was compulsorily acquired, and no compensation was received. The agreement to sell was contingent upon de-notification of the land, which had not occurred, hence no transfer of capital asset took place.2. Deletion of Addition on Account of Income from Other Sources:The AO added Rs. 7,84,000/- as unexplained deposits in the assessee's bank account, treating it as income from other sources. The assessee explained that part of the deposit came from amounts received from his brothers and from the builder. The CIT(A) gave partial relief, considering Rs. 2,50,000/- as explained and confirming the addition of Rs. 5,34,000/-. The Tribunal found that the assessee failed to provide corroborative evidence for the amounts received from his brothers and the opening cash balance. The Tribunal modified the CIT(A)'s order, allowing only Rs. 25,500/- as explained, and maintained the addition of Rs. 7,58,500/-.3. Confirmation of Addition Being Unexplained Deposit:The assessee contested the confirmation of Rs. 5,34,000/- as unexplained deposit. The CIT(A) had considered part of the deposit as explained based on the cash flow statement and other evidence. However, the Tribunal found that the assessee did not provide sufficient evidence to support the claimed amounts from his brothers or the opening cash balance. The Tribunal upheld the CIT(A)'s decision to not give benefit for the amounts claimed to be received from the brothers and reduced the unexplained deposit to Rs. 7,58,500/-.Conclusion:The Tribunal upheld the CIT(A)'s deletion of the addition on account of long-term capital gain, finding no transfer of capital asset occurred as the land was acquired by ADA and no compensation was received. The Tribunal modified the CIT(A)'s decision regarding the unexplained deposits, allowing only Rs. 25,500/- as explained and maintaining the addition of Rs. 7,58,500/-. The appeal of the Revenue was partly allowed, and the cross-objection of the assessee was dismissed.