ITAT remits appeal for source verification & correct capital gains figure. Verify investments for accurate tax.

The ITAT partly allowed the appeal, remitting the matter back to the AO for verification of sources of shares and correct capital gains figure adoption. ITAT stressed the importance of verifying disclosed investments and income for accurate income-tax computation and collection.

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Issues Involved:
1. Treatment of investment in flat as unexplained investment under Section 69.
2. Rejection of excess claim of exemption under Section 10(38).
3. Treatment of shares purchased as unexplained investment.

Issue-wise Detailed Analysis:

1. Treatment of Investment in Flat as Unexplained Investment under Section 69:
The assessee, a salaried employee, made an investment in a new residential flat amounting to Rs. 2,35,28,820/- during the assessment year 2012-13. The Assessing Officer (AO) questioned the sources of this investment. The assessee claimed that the investment was funded by selling shares worth Rs. 2,25,78,513/- and a loan of Rs. 20,00,000/- from Ms. Shahida Kachwalla. The AO accepted the loan but disbelieved the share sale proceeds, treating Rs. 2,15,28,820/- as unexplained investment under Section 69. The learned Commissioner of Income Tax (Appeals) [CIT(A)] provided partial relief by accepting the sale consideration of shares received by way of gift from the father and those declared under the Voluntary Disclosure of Income Scheme (VDIS) by the grandfather. However, CIT(A) did not accept the sources from shares purchased prior to AY 2005-06, shares purchased from AY 2006-07 to AY 2008-09, and shares sold in AY 2011-12. The ITAT remitted the matter back to the AO for verification of the sources of shares acquired from AY 2009-10 onwards, emphasizing that if the shares were acquired from disclosed income and declared bank accounts, the additions should be deleted.

2. Rejection of Excess Claim of Exemption under Section 10(38):
The assessee filed a revised computation of income during the assessment proceedings, correcting the capital gains figure from Rs. 1,14,41,084.24 to Rs. 1,18,56,886.22. The AO did not accept this revised computation as it was not filed through a revised return of income, citing the Supreme Court decision in Goetze (India) Ltd. v. CIT. The ITAT noted that while the AO could not accept the revised computation, the appellate authorities could. The ITAT directed that the correct revised figure of sale of shares and capital gains should be adopted, aligning with the principle of computing and collecting correct income-tax.

3. Treatment of Shares Purchased as Unexplained Investment:
The AO disbelieved the sources of shares acquired by the assessee, categorizing them into four groups: shares received by gift, shares purchased prior to AY 2005-06, shares purchased from AY 2006-07 to AY 2008-09, and shares purchased after AY 2009-10. The CIT(A) accepted the shares received by gift and those declared under VDIS but did not accept the shares purchased before AY 2005-06 and from AY 2006-07 to AY 2008-09. The ITAT agreed in principle with the assessee that if the shares were disclosed to Revenue from year to year and the dividend income was declared in the return of income, no addition was warranted for the impugned assessment year. The matter was remitted back to the AO for verification, emphasizing that if the investments were declared and disclosed, the additions should be deleted.

Conclusion:
The appeal was partly allowed for statistical purposes, with the ITAT remitting the matter back to the AO for verification of the sources of shares and the adoption of the correct revised figure of capital gains. The ITAT emphasized the importance of verifying declared and disclosed investments and income to ensure correct computation and collection of income-tax.

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