Tribunal overturns capital gain addition, ruling in favor of assessee

The Tribunal concluded that the addition of Rs.2,43,272/- on account of capital gain earned by treating the second transaction reported in the Individual Transaction Statement (ITS) as distinct from the first and being the sale of the property purchased was without basis. The Tribunal directed the deletion of the addition and allowed all grounds raised by the assessee. The appeal of the assessee was allowed, and the order was pronounced on 7th October 2022 at Ahmedabad.

---

---

Issues Involved:
1. Confirmation of addition of Rs.2,43,272/- to the returned income by treating ITS information as related to the transaction of sale of immovable property.
2. Validity of ITS information pertaining to sales transactions without documentary evidence.

Issue-Wise
Detailed Analysis:

1. Confirmation of Addition of Rs.2,43,272/- to the Returned Income:
The assessee contested the addition of Rs.2,43,272/- confirmed by the Commissioner of Income-Tax (Appeals) [CIT(A)] on account of capital gains allegedly earned from the sale of immovable property. The assessee argued that the Individual Transaction Statement (ITS) information, which was the basis for the addition, related to a single transaction repeated twice in the statement. The CIT(A) treated the two transactions reported in the ITS as distinct and pertaining to the purchase and sale of the same property during the impugned year.

The assessee pointed out that as per ITS data, the assessee had purchased two immovable properties during the year for Rs.73,41,358/- (Rs.30,00,000/- + Rs.43,41,358/-). The assessee accepted investing in one property of Rs.30,00,000/-, admitting to a 20% share in it. The Assessing Officer (AO) made an addition of the total investment made in both properties, resulting in a total addition of Rs.49,41,358/-. The CIT(A) applied his logic and held that the second transaction related to the sale of the same plot number, bringing to tax the capital gain allegedly earned by the assessee, computed to be Rs.2,43,272/-.

2. Validity of ITS Information Pertaining to Sales Transactions Without Documentary Evidence:
The assessee reiterated that the ITS statement reflected only one property purchase in which the assessee had a 20% share and denied any other investment during the year. The assessee argued that the Revenue failed to provide any basis for the second transaction reported in the ITS, and even inquiries conducted by the AO with the Sub-Registrar's office elicited no information.

The assessee submitted various documents, including replies filed during the assessment proceedings, an affidavit, a conveyance deed, and a copy of the return of income for A.Y 2012-13, substantiating the sale of the property in A.Y 2012-13 and returning the capital gains earned to tax in that year. The assessee also contended that the second transaction reflected in the ITS at Rs.43,87,755/- related to the same transaction of purchase of immovable property for Rs.30,00,000/-, representing the stamp duty value of the property.

The Tribunal found that the assessee had repeatedly admitted to entering into only one transaction of purchase of immovable property of value Rs.30,00,000/- with a 20% share. The assessee's explanation was examined and accepted by the Revenue authorities. The Tribunal noted that the Revenue had no other basis for treating the second transaction reported in the ITS as relating to the sale of the property. The Tribunal agreed with the assessee that there was no reason for treating the second transaction reported in the ITS as distinct from the first transaction.

Conclusion:
The Tribunal concluded that the addition of Rs.2,43,272/- on account of capital gain earned by treating the second transaction reported in the ITS as distinct from the first and being the sale of the property purchased was without basis. The Tribunal directed the deletion of the addition and allowed all grounds raised by the assessee. The appeal of the assessee was allowed, and the order was pronounced on 7th October 2022 at Ahmedabad.

---