Tribunal allows appeal, deletes short term capital gains and unexplained deposits. Inherited property qualifies as gift, leading to long term capital gains.

The Tribunal upheld the reopening of the assessment under section 147 of the Income-tax Act, 1961. However, it directed the deletion of additions made as short term capital gains and unexplained deposits. The Tribunal found that the property in question was inherited, and the relinquishment of shares qualified as a gift, resulting in long term capital gains. The addition of unexplained deposits was also deleted due to supporting affidavits and a family settlement deed. The appeal was allowed, and the order was pronounced on 28/04/2020.

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Issues Involved:
1. Reopening of assessment under section 147 of the Income-tax Act, 1961.
2. Sustenance of addition as short term capital gains from the sale of property.
3. Sustenance of addition as unexplained deposit in the bank account.

Issue-Wise Detailed Analysis:

1. Reopening of Assessment under Section 147:

The assessee challenged the reopening of the assessment under section 147 of the IT Act. The AR argued that the reopening was based on a time deposit of Rs. 10,00,000 and that the reasons recorded were not properly communicated to the assessee, violating the procedure laid down by the Supreme Court in GKN Driveshafts (India) Limited vs. ITO. The AR contended that there must be "reasons to believe" and not "reasons to suspect" that income has escaped assessment, citing CIT vs. Maniben Vilji Shah. The DR countered that the reasons were duly supplied, and the reopening was justified as the assessee had not filed a return of income. The Tribunal found that the reasons were adequately communicated, and the reopening was based on credible information. The ground of appeal was dismissed, upholding the reopening of the assessment.

2. Sustenance of Addition as Short Term Capital Gains:

The assessee objected to the addition of Rs. 3,29,302 as short term capital gains, arguing that the assessment was reopened on the grounds of a time deposit but the addition was made towards capital gains and other sources. The AR cited Ranbaxy Laboratories Limited vs. CIT and other cases to argue that the AO cannot assess other escaped income if the income for which the assessment was reopened was not assessed. On merits, the AR contended that the property was inherited and the relinquishment of shares by family members should be treated as a gift, thus qualifying for long term capital gains with indexed cost of acquisition from the previous owner. The Tribunal agreed with the assessee, stating that the relinquishment amounted to a gift and the indexed cost of acquisition should be computed from the date the previous owner held the asset. The ground of appeal was allowed, treating the gains as long term capital gains.

3. Sustenance of Addition as Unexplained Deposit in Bank Account:

The assessee challenged the addition of Rs. 4,30,000 as unexplained deposits, arguing that the deposits were gifts from family members supported by affidavits and a family settlement deed. The AR claimed that the AO failed to make further inquiries and did not consider the affidavits. The DR argued that the gifts from non-assessees and the low income of the brother raised doubts about their creditworthiness. The Tribunal found that the assessee had substantially discharged the initial onus by providing affidavits and other supporting documents. Given the norm of household savings, the Tribunal accepted the explanation for the deposits and directed the deletion of the addition. The ground of appeal was allowed.

Conclusion:

The appeal filed by the assessee was allowed, with the Tribunal upholding the reopening of the assessment but directing the deletion of the additions made under short term capital gains and unexplained deposits. The order was pronounced on 28/04/2020.

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