2021 (7) TMI 189 - AT - Income Tax

Tribunal rules in favor of Assessee, emphasizing evidence requirement for capital gain assessments

Rajubhai M Patel Versus The Income Tax Officer, Ward-8 (4), Surat.

Rajubhai M Patel Versus The Income Tax Officer, Ward-8 (4), Surat. - TMI Issues Involved:1. Addition of Rs. 21,35,877/- as short-term capital gain.2. Disallowance of Rs. 31,690/- out of various expenses claimed against income from partnership firm.Issue 1: Addition of Rs. 21,35,877/- as Short-Term Capital GainFacts and Arguments:The Assessee contested the addition of Rs. 21,35,877/- as short-term capital gain, arguing that the sale transaction of the property was not completed due to a dispute between the seller and the purchaser. The cheques issued for the sale consideration were dishonored, and the parties were litigating in Civil Court. The Sub-Registrar held the registration of the conveyance deed, and the Assessee continued to occupy the property. The Assessee presented evidence, including a certified copy of the Civil Suit and an affidavit confirming possession of the property.Tribunal's Analysis:The Tribunal noted that the Assessing Officer (AO) made the addition based solely on AIR information without corroborative evidence. The AO failed to prove that the transaction was completed, especially since the Assessee had consistently maintained that the sale consideration was not received and a civil suit was filed for the cancellation of the sale deed. The Tribunal also considered a similar case involving the Assessee's co-owner, where the Commissioner of Income Tax (Appeals) [CIT(A)] deleted the entire addition, emphasizing that AIR information alone could not justify the addition without supporting evidence.Conclusion:The Tribunal concluded that the addition based on AIR information was unsustainable without corroborative evidence. The Tribunal allowed the Assessee's appeal on this ground, emphasizing that the Revenue should treat similarly situated taxpayers equally.Issue 2: Disallowance of Rs. 31,690/- Out of Various Expenses ClaimedFacts and Arguments:The Assessee argued against the disallowance of Rs. 31,690/- out of expenses claimed against income from partnership firms. The AO disallowed the expenses, including depreciation on vehicles, on the grounds that the Assessee did not carry out any business activities. The Assessee contended that the expenses were incurred for business purposes as a partner in three firms, and the remuneration and interest income from these firms were taxable under the head 'Business Income.'Tribunal's Analysis:The Tribunal noted that the CIT(A) had partly upheld the AO's disallowance but allowed 50% of the vehicle expenses and partial depreciation. The Tribunal observed that similar disallowances were fully allowed in the case of other partners of the same firms. The Tribunal emphasized that the Assessee should not be treated differently from other similarly situated partners.Conclusion:The Tribunal allowed the Assessee's appeal on this ground, directing the AO to verify that similar depreciation and expenses were not claimed by the Assessee against the income of the three firms. The Tribunal highlighted the principle of equal treatment for similarly situated taxpayers.Final Judgment:The appeal of the Assessee was allowed, and the Tribunal ordered the deletion of the additions and disallowances made by the AO. The order was announced on 14 June 2021.