1990 (12) TMI 126 - AT - Income Tax

Tribunal confirms property cost inclusion for capital gains, rejects revenue appeal

The Tribunal upheld the original assessment in a case involving a dispute over the cost of a property for capital gains computation. It rejected the ... Capital Gains, Computation Of Capital, Cost Of Acquisition, Set Off Issues:1. Dispute over the cost of property at Alwaye for capital gains computation.2. Validity of the amount paid to perfect title to the property.3. Disagreement on the character of the property as short-term or long-term asset for capital gains calculation.4. Jurisdictional validity of reassessment under section 147(b) of the IT Act.Analysis:1. The appeal involved a dispute regarding the cost of a property in Alwaye for capital gains computation. The original assessment considered the cost at Rs. 1,50,000, but a notice under section 148 was issued, claiming the actual cost to be Rs. 53,310. The CIT (Appeals) upheld the original assessment, considering the payment of Rs. 1,35,000 to Smt. Kamalamma as the cost of acquisition, which was accepted based on a compromise decree settling the issue. The department objected, arguing that Smt. Kamalamma had no title to the property. However, the Tribunal rejected this objection, citing a Supreme Court decision emphasizing the presumption of wedlock in long-term relationships. The Tribunal upheld the CIT (Appeals) decision, dismissing the revenue's appeal.2. The issue of the amount paid to perfect the title to the property was raised by the department, questioning Smt. Kamalamma's entitlement. The assessee argued that the payment was made to resolve a dispute and perfect the title, constituting a family arrangement to avoid prolonged litigation. The Tribunal rejected the department's contention, emphasizing the settlement through compromise and the long-standing relationship between Smt. Kamalamma and the deceased. The Tribunal upheld the original assessment, considering the payment as a legitimate cost of acquisition.3. The character of the property as a short-term or long-term asset for capital gains calculation was debated. The CIT (Appeals) deemed it a short-term asset due to acquisition within 36 months of sale, a decision the assessee's representative did not oppose. However, in a cross objection, the assessee disputed this treatment, claiming no acquiescence before the CIT (Appeals). The Tribunal held that the CIT (Appeals) could not alter the character of gains based on acquiescence, especially since the reassessment under section 147(b) was deemed invalid. The cross objection was allowed, and the original assessment of long-term capital gains was maintained.4. The jurisdictional validity of reassessment under section 147(b) of the IT Act was challenged by the assessee. The Tribunal found that the reassessment was triggered by a change of opinion on existing facts, which was impermissible. As the ITO was aware of the dispute during the original assessment, the reassessment lacked valid grounds. The Tribunal upheld the objection against reassessment, concluding that the CIT (Appeals) could not alter the capital gains character based on the invalidated reassessment. The cross objection was allowed, and the original assessment stood.