Tribunal partially allows appeal, deletes adhoc addition of Rs. 2,00,000. Ground No. 5 accepted.

The tribunal partly allowed the appeal, accepting Ground No. 5 and directing the deletion of the adhoc addition of Rs. 2,00,000. All other grounds raised by the assessee were dismissed. The order was pronounced on 29.08.2016.

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Issues Involved:
1. Violation of the principle of natural justice.
2. Incorrect assessment year for capital gains under Section 45(4) of the Income Tax Act, 1961.
3. Rejection of the circle rate of land and construction rate.
4. Arbitrary calculation of full value of consideration without referring to the Valuation Officer.
5. Adhoc addition of Rs. 2,00,000 under Section 45(4) for the transfer of a building.

Issue-Wise Detailed Analysis:

Ground No. 1: Violation of the Principle of Natural Justice
The assessee contended that the CIT(A) erred in law by confirming the AO's order without providing a proper opportunity of being heard, thus violating the principle of natural justice. However, the tribunal found that the AO issued a show-cause notice and considered the assessee's reply before passing the assessment order. The CIT(A) also provided the assessee with opportunities to submit rejoinders. Consequently, the tribunal concluded that there was no violation of the principle of natural justice and dismissed Ground No. 1.

Ground Nos. 2 to 5: Incorrect Assessment Year for Capital Gains
The assessee argued that the capital gains arising from the transfer of capital assets on dissolution should be taxed in A.Y 2008-09 and not in A.Y 2009-10. The tribunal examined the dissolution deed, submissions, and relevant legal provisions. The tribunal noted that the dissolution deed, although dated 31.03.2008, was notarized on 02.09.2008, and the transfer of assets was recorded in F.Y 2008-09. The tribunal referred to the provisions of Section 45(4) and Section 2(47) of the Income Tax Act, which state that capital gains arising from the transfer of capital assets on dissolution are chargeable to tax in the previous year in which the transfer takes place. The tribunal concluded that the transfer took place in F.Y 2008-09, making the capital gains taxable in A.Y 2009-10. Thus, Ground Nos. 2 to 5 were dismissed.

Ground No. 4: Arbitrary Calculation of Full Value of Consideration
The assessee contended that the AO arbitrarily calculated the full value of consideration for the land and building transferred on dissolution without referring the matter to the Valuation Officer under Section 55A r.w.s 142A of the Income Tax Act. The tribunal found that the AO issued a show-cause notice and the assessee did not object to the market rates certified by the Collector, Karnal. There was no request from the assessee to refer the matter to the Valuation Officer. Therefore, the tribunal dismissed Ground No. 4, finding no merit in the contention.

Ground No. 5: Adhoc Addition of Rs. 2,00,000
The assessee argued that the CIT(A) erred in confirming the adhoc addition of Rs. 2,00,000 made by the AO under Section 45(4) for the transfer of a building constructed on land belonging to a third party. The tribunal observed that the AO made the addition based on the assessee's failure to furnish complete details of the building's value. However, the tribunal found that this estimated adhoc addition was not justified, as the capital gains on the building had already been assessed. Consequently, Ground No. 5 was allowed, and the addition of Rs. 2,00,000 was directed to be deleted.

Conclusion:
The appeal of the assessee was partly allowed, with Ground No. 5 being accepted and the addition of Rs. 2,00,000 being deleted, while all other grounds were dismissed. The order was pronounced in the open court on 29.08.2016.

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