2015 (3) TMI 606 - AT - Income Tax

Tribunal upholds tax decision applying Section 50C, denies benefits under Sections 69C and Benami Act

Kailash Chand Garg Thru: Legal Heir Smt Manju W/O Deceased Assessee Prop. Garg Sari Centre, Kota Versus Income Tax Officer

The Tribunal upheld the CIT(A)'s decision in a tax case, affirming the application of Section 50C of the Income Tax Act to calculate capital gains based ... Computation of Long term capital gain - dis-allowance of expenditure u/s 48 which was found as unexplained u/s 69C - assessee contends that once section 50C is to be held applicable and the asset and sale thereof is held to be long term capital gains, the provision of section 48 will be automatically applicable - deduction of cost of improvements - Held that:- the assessee is blowing hot and cold, in 1992-93 he has not shown cost of acquisition/purchase value of the alleged property in other years no direct evidence has been given except relying on some mischievous entries sometimes in balance sheet or in capital gain. It is difficult to believe that this clever assessee will dare to show cost of improvement in books qua the property whose cost is not shown in the earlier books. Thus the assessee's contentions lack any type of sincerity or corroboration worth appealing to logic. We do not see any infirmity in the order of the ld. CIT(A) in invoking the overriding proviso to sec. 69C. As per assessee's own acceptance in A.Y. 1992-93, no cost of acquisition was disclosed in his books of accounts, therefore by deeming provisions of sec 69C the same is deemed to be unexplained expenditure of the assessee on which proviso to sec 69C of the Act has overriding effect. Assessee audacious claim may be right that nothing can be brought to tax as assessments for those years are now time barred, but the proviso expressly debars allowance of any benefit in this behalf. Having accepted this proposition, the ld. CIT(A)'s order deserves to be upheld as the benefits of such unrecorded expenditure cannot be claimed by the assessee in any year by this overriding proviso. As already mentioned apropos alternate contention of allowing the amount of ₹ 77,726/- and ₹ 39,400/-, we have already rejected the assessee's claim being without any basis and it digress from the issue. Sec. 4 of THE BENAMI TRANSACTIONS (PROHIBITION) ACT, 1988 was introduced as an overriding law as mentioned in sec. 3 to curb the pernicious practices of Benami Transaction and denying the benefits of enjoyment of Benami property to real owner. Sec. 4(1) clearly forbids any claim or action from real owner in respect of any Benami property. Thus assessee's claim for benefits u/s 48 are also denied by this specific and overriding law which is fully applicable to this case. Consequently the order of Ld. CIT(A) is upheld in toto. - Decided against assessee. Issues Involved:1. Applicability of Section 50C of the Income Tax Act.2. Treatment of cost of acquisition, improvement, and indexation benefits for capital gains calculation.3. Application of Section 69C regarding unexplained expenditure.4. Impact of the Benami Transactions (Prohibition) Act, 1988 on the assessee's claims.Detailed Analysis:1. Applicability of Section 50C of the Income Tax Act:The assessee disclosed a capital gain on the sale of a plot, where the Long Term Capital Gain (LTCG) was calculated after deducting the cost of acquisition, improvement, and indexation benefits. The Assessing Officer (AO) found the stamp value of the property to be Rs. 14,89,520/- and applied Section 50C, which the assessee initially accepted but later contested, arguing that the property was sold at a lower price due to personal reasons. The AO, however, upheld the applicability of Section 50C, deeming the stamp value as the sale consideration for capital gains calculation.2. Treatment of Cost of Acquisition, Improvement, and Indexation Benefits:The AO observed that the investment of Rs. 2,97,311/- was not reflected in the assessee's regular books of accounts. The assessee also incurred additional expenses on boundary wall replacement and lease payments, which were claimed but not substantiated with adequate evidence. The CIT(A) upheld the AO's decision to take the full value of consideration at Rs. 14,89,520/- but denied the expenditure towards cost of acquisition, improvement, and indexation benefits, citing the overriding proviso of Section 69C. The CIT(A) concluded that the unexplained expenditure could not be allowed as a deduction under any head of income.3. Application of Section 69C Regarding Unexplained Expenditure:The CIT(A) applied Section 69C, which states that unexplained expenditure deemed to be the income of the assessee shall not be allowed as a deduction under any head of income. The CIT(A) found that the assessee failed to substantiate the claim that the expenses incurred were from explained sources. Consequently, the expenditure of Rs. 2,19,466/- was deemed unexplained and not allowable as a deduction. The assessee's claim for boundary wall expenses and lease rent payments was also disallowed under Section 69C.4. Impact of the Benami Transactions (Prohibition) Act, 1988:The CIT(A) and the Tribunal emphasized the relevance of the Benami Transactions (Prohibition) Act, 1988, which prohibits any claim or action to enforce rights in respect of benami properties by the real owner. The Tribunal noted that the assessee admitted to purchasing the property benami and not disclosing it in the books of accounts. The Tribunal upheld the CIT(A)'s decision, denying the benefits under Section 48 due to the overriding effect of the Benami Transactions (Prohibition) Act and Section 69C.Conclusion:The Tribunal dismissed the appeal, upholding the CIT(A)'s decision that the full value of consideration at Rs. 14,89,520/- was correct under Section 50C. The cost of acquisition, improvement, and indexation benefits were disallowed due to the unexplained nature of the expenditure under Section 69C and the prohibitions under the Benami Transactions (Prohibition) Act. The Tribunal emphasized that the assessee's claims lacked sincerity and corroboration, and the provisions of Section 69C and the Benami Transactions (Prohibition) Act had an overriding effect, preventing the allowance of any benefits for the unexplained expenditure.