The Banglore Bench of the Income Tax Appellate Tribunal (ITAT) comprising Judicial Member Beena Pillai and Accountant Member Chandra Poojari has recently held that the consideration received by the assessee on relinquishment of property rights to his father is taxable as Long Term Capital Gain under Section 45 of the Income Tax Act.
As per the information from tax returns, the assessee had deposited a sum of Rs. 54,42,660/- in his bank accounts. In response to the Assessing Officer(AO)’s query regarding the source of the cash deposits, the assessee submitted that the cash deposits, comprised a sum of Rs. 50,12,500/- received from his father out of sale consideration of Rs. 2,40,50,000/- received by the latter from sale of land.
On being asked by the AO why he had not declared the amount of Rs.50,12,500/- in his return, the assessee stated that the land was agricultural land and hence exempt from taxation. The AO observed that neither the assessee nor his father had declared agricultural income for the preceding two years and added the sum of Rs.49,86,132/- to the assessee’s income.
The assessee, aggrieved by the order of the Commissioner of Income Tax (Appeals) [CIT(A)], approached the ITAT and seeked for deletion of the impugned additions. The assessment order is without jurisdiction, wholly inadequate on this count and requires to be quashed, according to the submissions of the counsel for the assessee.
It was observed, “It cannot be said that AO precluded in bringing the said amount into taxation on the simple reason that cash deposit was from the sale of property and assessee received his share on the relinquishment in favour of his father and the same has to be brought into tax” and held that, “that lower authorities is justified in bringing to tax the capital gain in the hands of the assessee”, denying the relief to assessee.
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