Unexplained Cash Credits Require Entries in Taxpayer Books; Capital Gains Deductions Need Evidence and Verification.
Section 68 applies only to sums credited in books maintained by the taxpayer; a bank passbook or account statement is not such books where no books are kept. Accordingly, the cash-deposit addition was removed. Claims for indexed conversion charges and other improvement costs require verification of evidence, timing, nature and nexus to the transferred land before capital-gains deduction. Claims concerning capital gains on property allegedly owned by a former spouse and foreign rental income must be examined when raised in DRP proceedings, even if absent from draft-order variations. A fresh Section 54F exemption claim lacking verified facts on investment, ownership and statutory conditions cannot be entertained at the Tribunal stage.
Issues: (i) Whether cash deposits could be assessed as unexplained cash credits under Section 68 of the Income-tax Act, 1961 where the assessee maintained no books of account; (ii) Whether the claimed indexed cost of conversion charges and other improvement expenditure required verification for deduction in computing long-term capital gains; (iii) Whether claims seeking exclusion of capital gains on land allegedly owned by the ex-husband and rental income from a foreign property could be refused merely because they were outside the draft-order variations; and (iv) Whether a fresh exemption claim under Section 54F of the Income-tax Act, 1961 could be entertained without a factual foundation in the record.
Issue (i): Whether cash deposits could be assessed as unexplained cash credits under Section 68 of the Income-tax Act, 1961 where the assessee maintained no books of account.
Analysis: Section 68 applies only where a sum is credited in books maintained by the assessee. The assessee was neither carrying on a business or profession nor maintaining books of account, and a bank passbook or account statement is not the assessee's books of account. Further, the final assessment repeated the addition under Section 68 despite the direction under Section 144C to assess the amount under Section 69, although such directions are binding on the Assessing Officer.
Conclusion: The addition of Rs. 55 lakh under Section 68 was deleted in favour of the assessee.
Issue (ii): Whether the claimed indexed cost of conversion charges and other improvement expenditure required verification for deduction in computing long-term capital gains.
Analysis: The Collector's order concerning conversion charges and the common survey-number reference in the purchase deed and conversion proceedings constituted material evidence bearing on the claimed cost of improvement. Section 144C(6) and the Explanation to Section 144C(8) require consideration of evidence and matters arising from the draft assessment proceedings. The factual nexus of the larger land extent with the portion transferred required verification. The claimed expenditure on land levelling, compound wall and allied work also required verification of its nature, period and nexus because original vouchers were unavailable.
Conclusion: In favour of the assessee to the extent that the indexed conversion-charge claim of Rs. 27,14,836 and the indexed other-improvement claim of Rs. 5,03,992 were restored to the Assessing Officer for verification and adjudication in accordance with law.
Issue (iii): Whether claims seeking exclusion of capital gains on land allegedly owned by the ex-husband and rental income from a foreign property could be refused merely because they were outside the draft-order variations.
Analysis: Both claims were raised during the statutory DRP proceedings and directly concerned computation of the correct taxable income. Their absence from the proposed draft-order variations was not, by itself, a valid basis to refuse examination. The capital-gain claim required verification of title documents, sale deeds, power of attorney, divorce records, sale consideration and accounting treatment. The foreign-rental claim required verification of residential status, ownership, source and nature of income, supporting evidence, and the applicable domestic law and tax-treaty provisions.
Conclusion: In favour of the assessee to the extent that both claims were restored to the Assessing Officer for fresh verification and determination of the income chargeable to tax.
Issue (iv): Whether a fresh exemption claim under Section 54F of the Income-tax Act, 1961 could be entertained without a factual foundation in the record.
Analysis: The claim had not been made before, or examined by, either the Assessing Officer or the DRP. Eligibility depended on unverified factual matters, including acquisition or construction dates, actual investment, source and utilisation of funds, ownership, completion, and satisfaction of statutory conditions. It was therefore not a pure question of law arising from facts already on record.
Conclusion: The fresh claim under Section 54F was rejected as not maintainable before the Tribunal, against the assessee.
Final Conclusion: The impermissible cash-credit addition was eliminated, while the claims affecting capital-gain computation and foreign rental income require factual verification by the Assessing Officer; the unsupported fresh exemption claim cannot be pursued at this stage.
Ratio Decidendi: A bank passbook or bank account statement is not books of account of an assessee who maintains no books, and therefore cannot satisfy the foundational requirement for an addition under Section 68 of the Income-tax Act, 1961.