2021 (10) TMI 205 - AT - Income Tax

Tribunal Upholds CIT(A)'s Capital Gains Decision, Considers Stamp Price for Property

The Tribunal upheld the CIT(A)'s decision to compute capital gains based on a cash component and the registered value of land, dismissing both the ... Additional income addition - cash component receipts - settlement deed wherein he had agreed to receive cash amount - addition based on a mere statement recorded u/s.131 - HELD THAT:- All the arguments duly stand submitted in the records since the learned lower authorities had duly brought the other co-director Sri Sreenivasulu for their mutual cross-examination. It is evident therefrom that this taxpayers had surrendered cheques in lieu of cash payment. And also that the corresponding cash receipt(s) and the twin settlement acknowledgment(s) dt.14th March and 11th April, 2008 (pages 32 & 33) duly contained his signatures. Coupled with this, the assessee had duly admitted during cross-examination that had had indeed issued the said receipts as well as corresponding acknowledgment; as the case may be. We conclude in these facts and circumstances that the impugned addition of ₹ 75 lakhs made in assessee’s hands is liable to be affirmed. Ordered accordingly. Issues Involved:1. Correctness of the CIT(A)’s action in restricting additional income.2. Transfer of shares by the appellant to M/s. Swadesh Villas Pvt. Ltd.3. Sale consideration for computing capital gains.4. Evidentiary value of statements recorded during the survey.Detailed Analysis:1. Correctness of the CIT(A)’s Action in Restricting Additional Income:The primary grievance of both the Revenue and the assessee revolves around the CIT(A)’s decision to restrict the additional income of Rs. 2,90,00,000/- to a cash component of Rs. 75 lakhs along with the SRO value of the plot and land, totaling Rs. 1,43,75,000/-. The assessee, a director in M/s. Swadesh Villas Pvt. Ltd., admitted an additional income of Rs. 2,90,00,000/- during a survey. However, in his return, he declared NIL income, prompting the Assessing Officer to add the entire Rs. 2.90 crores as additional income. The CIT(A) partially allowed the appeal, considering only the cash component and the registered value of the land for capital gains computation.2. Transfer of Shares by the Appellant to M/s. Swadesh Villas Pvt. Ltd.:The appellant was one of the directors in M/s. Swadesh Villas Pvt. Ltd. and had agreed to transfer his shares in exchange for cash and land. The CIT(A) examined whether there was a transfer of shares and concluded that the appellant was subject to the provisions of section 2(47) of the Income Tax Act, which defines 'transfer' in relation to a capital asset. The appellant received cash and land as consideration for the transfer of shares, which constituted a transfer under the Act.3. Sale Consideration for Computing Capital Gains:The CIT(A) directed the Assessing Officer to adopt the registered value of the plots and land for capital gains computation. The appellant received a cash component of Rs. 75,00,000/- and land valued at Rs. 68,75,000/-. The total consideration for the transfer of shares was Rs. 1,43,75,000/-. Despite the appellant's claim that he had not received the entire cash component, the CIT(A) determined that the entire Rs. 75,00,000/- should be considered for capital gains computation, supported by the appellant’s cross-examination and the impounded documents.4. Evidentiary Value of Statements Recorded During the Survey:The appellant contended that the addition was based on a statement recorded under section 131 of the Act, which lacks evidentiary value without corroborative evidence. The CIT(A) noted that substantial opportunities were given to the appellant to cross-examine the other co-director, Sri R. Sreenivasulu. The cross-examination revealed that the appellant had indeed received cash and issued corresponding acknowledgments. The Tribunal affirmed the CIT(A)’s decision, emphasizing that the impugned addition of Rs. 75 lakhs was substantiated by evidence and the appellant’s own admissions during cross-examination.Final Judgment:The Tribunal dismissed both the Revenue’s and the assessee’s appeals, upholding the CIT(A)’s decision to compute the capital gains based on the cash component and the registered value of the land. The Tribunal found no merit in the arguments presented by either party, concluding that the CIT(A) had correctly directed the Assessing Officer to adopt the stamp price of the immovable properties as the sale consideration for computing capital gains. The Tribunal also noted that the delay in pronouncing the judgment was due to the COVID-19 lockdown, as per the Hon’ble Apex Court’s directions.Order Pronouncement:The judgment was pronounced in the open court on 13th September, 2021, dismissing the cross-appeals filed by both the Revenue and the assessee.