Case Law Details
Babusinh P. Thakor Vs ITO (ITAT Ahmedabad)
Income Tax Appellate Tribunal (ITAT) Ahmedabad has recently delivered a verdict in Babusinh P. Thakor Vs ITO, addressing the matter of an unjust addition to the assessed tax liability. In this ruling, the Tribunal has directed the deletion of an addition made by the Assessing Officer (AO) on the grounds of wrongful assessment of the tax liability. This article provides an in-depth analysis of the case and the conclusion drawn by ITAT.
In this case, the appellant (Babusinh P. Thakor) was charged for short-term capital gain tax of Rs. 92,00,000 against the returned capital gain of Rs. 2,28,700. The AO had assessed gross sale consideration at Rs. 1,04,00,000, to which Thakor objected. The argument revolved around whether a payment of Rs. 89,00,000 made by Thakor to Frontline Financial Services Ltd. represented a sham transaction designed to avoid tax liability.
Upon examination of the case, the ITAT noted that the payment made by Thakor to Frontline Financial Services Ltd was conducted through a legitimate banking channel and was accepted by the company. Furthermore, the company had given an undertaking to be responsible for the tax liability on the received payment, which implies that Thakor was not responsible for any tax payments related to this amount.
Despite the peculiarities in the transaction, the Tribunal found that Thakor should not be charged with tax for the capital gain mentioned in the Memorandum of Understanding (MOU). This decision was influenced by a precedent set by a previous case, Sapnaben Dipakbhai Patel v Income Tax Officer.
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