TaxTMI 
TaxTMI 
2026 (8) TMI 1426
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.... quashing the assessment order when the Assessing Officer did not consider the reply dated 20.03.2024 and did not furnish a remand report despite repeated directions of the learned CIT(A). 2. On the facts and in the circumstances of the case and in law, the learned CIT(A) erred in not quashing the assessment order passed without issuing a draft assessment order as mandated under section 144B(1)(xxi) and without entertaining the request for video conferencing under section 144B(6)(viii) of the Act. 3. On the facts and in the circumstances of the case and in law, the learned CIT(A) erred in restoring the addition on account of increase in capital, instead of deleting the addition of Rs. 15,79,17,123 made under section 68 read with section 115BBE of the Act, though the Assessing Officer compared balances of two non-consecutive years and did not identify any unexplained component for the relevant previous year. 4. On the facts and in the circumstances of the case and in law, the learned CIT(A) erred in confirming the addition of Rs. 20,93,000 under section 68 read with section 115BBE without appreciating that the cash deposits were duly recorded in the audite....
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....eted the assessment at Rs. 42,07,62,833 after making additions of Rs. 15,79,17,123 towards alleged unexplained increase in capital Rs. 15,20,64,000 towards an alleged unexplained bank credit Rs. 20,93,000 towards cash deposits Rs. 6,60,01,104 as long-term capital gain on sale of immovable property, and Rs. 1,00,19,696 by denying set-off against capital gain on sale of shares/equity-oriented mutual funds. 5. In appeal, the learned CIT(A) noticed that the Assessing Officer had compared the capital balance as at 31.03.2020 with that as at 31.03.2022. The learned CIT(A) accordingly directed the Assessing Officer to verify only the capital movement relating to financial year 2021-22 and restrict the addition to any unexplained portion found on verification. The addition of Rs. 15,20,64,000 of unexplained bank credit was deleted on the ground that the credit represented the net sale consideration of the same property whose transfer and consideration had been accepted while computing capital gains. However, the learned CIT(A) confirmed the cash-deposit addition and the computation of capital gain by restricting the indexed cost to 50%, and consequently denied the set-off. Both sides ar....
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....missions and carefully considered the assessment order, the impugned appellate order, the written submissions and the paper books. We first take up ground No.3 of the assessee's appeal concerning the capital account. The addition of Rs. 15,79,17,123 has been made on the difference between capital balance of Rs. 19,72,88,298 as at 31.03.2020 and Rs. 35,52,05,421 as at 31.03.2022. Thus, as rightly noticed by the learned CIT(A), balances of two non-consecutive years were compared. This elementary error destroys the very computation on which the addition rests. 10. More importantly, the capital account for the relevant previous year, placed at page 75 of the factual paper book, opens with Rs. 21,00,66,964 and records the following credits: house-property income of Rs. 6,05,161; professional profit of Rs. 2,72,22,591; share of profit from LLP of Rs. 1,68,757; book gain on property of Rs. 4,73,48,915; long-term gain on shares of Rs. 99,02,127; short-term gain on shares of Rs. 37,85,928; income from other sources of Rs. 16,20,779; PPF interest of Rs. 6,08,529; income-tax refund of Rs. 9,30,620; and Rs. 6,73,03,842 on partition of the HUF. After drawings and tax-related debits, the ....
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.... of the share received on partition was nil because it was received without consideration. This conclusion overlooks the express deeming provision in section 49(1)(i). "49. (1) Where the capital asset became the property of the assessee- (i) on any distribution of assets on the total or partial partition of a Hindu undivided family; ... the cost of acquisition of the asset shall be deemed to be the cost for which the previous owner of the property acquired it, as increased by the cost of any improvement of the assets incurred or borne by the previous owner or the assessee, as the case may be." 14. The statutory fiction therefore substitutes the cost to the previous owner for the cost in the hands of the recipient on partition. Explanation 1(i)(b) to section 2(42A) similarly includes the period for which the asset was held by the previous owner. Consequently, the share obtained by the assessee on partition cannot be assigned a nil cost. Since the aggregate historical cost was Rs. 7,12,95,000 and the applicable cost inflation indices are 129 and 317, the indexed cost works out to Rs. 17,51,97,791. Against sale consideration of Rs. 15,36,00,000, the resul....