2014 (4) TMI 441 - AT - Income Tax

Appeal partially allowed on unexplained investment in jewellery & valuation for sale consideration received.

The ITAT partly allowed the appeal, upholding the CIT (A)'s decision on the unexplained investment in jewellery for the assessment year under dispute and ... Unexplained investment in jewellary – Held that:- The amount of Rs.4,94,900 forms part of the amount of Rs.10,51,295/- declared by the assessee towards unexplained investment in jewellery for assessment year 2008-09 - jewellery worth Rs.4,94,900/- was acquired during the financial year 2006-07 relevant to the assessment year - This factual position has not been controverted by the assessee – thus, there is no infirmity in the direction of the CIT (A) in reducing the amount from the income assessed in the assessment year 2008-09 and assess it for the year under dispute – Decided against Assessee. Determination of sale consideration received in kind – Held that:- Neither the AO nor the CIT (A) has brought any material on record to show that the actual market value of the plots in question is either at Rs.1000/- per sq. yard or at Rs.800 per sq. yard - No comparable instances of sale of plots in the same locality or nearby locality has been brought on record - purely on guess work and presumptions, the value of the plots cannot be fixed either at Rs.1000 or Rs.800/- per sq. yard - At least the value adopted by the assessee at Rs.350/- per sq. yard is on the basis of SRO’s rate - the value of Rs.800 per sq. yard adopted by the CIT (A) cannot be accepted – thus, the AO is directed to accept the value disclosed by the assessee of Rs.12,54,050/- at the rate of Rs.350 per sq. yard - the amount of Rs.12,54,050/- should be considered as the cost of acquisition while computing the capital gains when the assessee actually sells the land in future – Decided in favour of Assessee. Issues involved:1. Direction to consider unexplained investment in jewellery for the assessment year under dispute instead of the subsequent assessment year.2. Determination of sale consideration received in kind towards plots exchanged for land development.Analysis:Issue 1: Unexplained investment in jewelleryThe appellant contested the direction of the CIT (A) to consider an amount of Rs.4,94,900 as unexplained investment in jewellery for the assessment year under dispute instead of the subsequent assessment year. The appellant had previously offered Rs.10,51,295 in the assessment year 2008-09, which included the disputed amount. The CIT (A) held that the Rs.4,94,900 should be taxed in the current year to avoid double taxation. The ITAT upheld the CIT (A)'s decision, stating that the jewellery worth Rs.4,94,900 was acquired during the financial year 2006-07, relevant to the assessment year under dispute. The ITAT found no error in the CIT (A)'s direction and dismissed the appellant's appeal.Issue 2: Sale consideration received in kind for plotsThe Assessing Officer proposed to adopt a value of Rs.1000 per sq. yard for 16 plots received by the appellant in exchange for land given for development, as opposed to the appellant's valuation of Rs.346 per sq. yard. The CIT (A) reduced the valuation to Rs.800 per sq. yard. The ITAT noted that no concrete evidence was presented to support the valuation of Rs.1000 or Rs.800 per sq. yard. As the appellant had offered Rs.12,54,050 at Rs.350 per sq. yard, the ITAT directed the Assessing Officer to accept this value. The amount should be considered as the cost of acquisition for future capital gains computation. Consequently, the ITAT allowed the grounds raised by the appellant on this issue.In conclusion, the ITAT partly allowed the appeal filed by the appellant, upholding the CIT (A)'s decision regarding the unexplained investment in jewellery for the assessment year under dispute and directing the Assessing Officer to accept the appellant's valuation for the sale consideration received in kind for plots exchanged for land development.