2015 (6) TMI 841 - AT - Income Tax

ITAT Pune Dismisses Revenue's Appeal on Tax Limit; Bombay High Court Confirms Revised Instructions

The ITAT Pune dismissed the Revenue's appeal due to the tax effect being below the prescribed limit set by the CBDT's Instructions. The Bombay High ... Addition u/s 68 - Held that:- The assessee deposited cash totaling ₹ 2,55,000/- in her bank account, which she claims to be out of her savings and also partly out of agricultural produce. Our attention was drawn to the cash flow statement furnished by the assessee in which, even the expenditure relating to agricultural activities was debited. In the totality of the above said facts and circumstances, we delete the addition of ₹ 2,55,000/- being the amount raised by the assessee from her savings and partly out of agricultural proceeds. Accordingly, we direct the Assessing Officer to delete the addition of ₹ 2,55,000/- made under section 68 of the Act. - Decided in favour of assessee. Indexation of the cost of acquisition of the assets sold - Held that:- he contention of the assessee was that it had initially purchased the land along with a small built up area in financial year 1999-2000 and had constructed building in financial year 1995-96. We find that the necessary details in this regard are not available on record and hence, it needs to be verified. Accordingly, we direct the Assessing Officer to carry out the verification exercise and compute the long term capital gain by adopting the cost of acquisition relatable to the acquisition i.e. the cost of land with built up area in financial year 1999-2000 and the additional cost of construction in the financial year 1995-96. - Decided in favour of assessee for statistical purposes. Issues:1. Maintainability of cross-appeals due to tax effect below prescribed limit.2. Applicability of revised Instructions by CBDT to pending appeals.3. Addition under section 68 of the Act for cash deposits.4. Indexation of cost of acquisition for long term capital gains.Issue 1: Maintainability of cross-appeals:The ITAT Pune heard cross-appeals against the CIT(A)-II, Nashik's order for assessment year 2008-09. The tax effect in the Revenue's appeal was below Rs. 4 lakhs, making it non-maintainable according to Instruction No.5 of 2014 by the CBDT. The issue was whether revised Instructions applied to pending appeals. The Bombay High Court's rulings established that such Instructions were applicable to pending cases as well, leading to the dismissal of the Revenue's appeal.Issue 2: Applicability of revised Instructions:The ITAT Pune considered whether Instructions by the CBDT, setting a monetary limit for filing appeals, applied to pending cases. Relying on the Bombay High Court's decisions, it concluded that the revised Instructions were applicable to both new and pending appeals. Therefore, the revised Instruction No.5 of 2014, limiting appeals to tax effects exceeding Rs. 4 lakhs, was applied to dismiss the Revenue's appeal.Issue 3: Addition under section 68 of the Act:Regarding the addition of Rs. 2,55,000 under section 68 of the Act for cash deposits, the ITAT Pune analyzed the source of these funds. While the CIT(A) had accepted Rs. 10 lakhs as sale proceeds, the remaining amount was claimed to be from savings and agricultural proceeds. After considering the evidence and explanations, the ITAT directed the Assessing Officer to delete the addition of Rs. 2,55,000, as it was sourced from savings and agricultural income.Issue 4: Indexation of cost of acquisition:The ITAT Pune addressed the dispute over the indexation of the cost of acquisition for long term capital gains. The assessee argued for bifurcated figures based on land purchase and building construction in different financial years. Due to lack of detailed records, the ITAT directed the Assessing Officer to verify and compute the long term capital gain accordingly, providing a reasonable opportunity for the assessee to be heard.In conclusion, the ITAT Pune allowed the assessee's appeal and dismissed the Revenue's appeal, pronouncing the order on February 13, 2015.