Ritu Chopra Vs ITO (ITAT Chandigarh)
The Income Tax Appellate Tribunal (ITAT), Chandigarh, allowed the assessee’s appeal, holding that the Commissioner of Income Tax (Appeals) [CIT(A)] exceeded the scope of his jurisdiction by enhancing the assessee’s income through taxation of long-term capital gains that were never examined during reassessment proceedings. The Tribunal also held that, on merits, the assessee was entitled to indexed cost of construction and deduction under Sections 54/54F of the Income-tax Act.
The assessee had originally filed a return declaring total income of ₹33.38 lakh. The assessment was reopened under Section 148 after the Assessing Officer (AO) received information that the assessee had purchased an immovable property in Panchkula for ₹79.20 lakh. During reassessment, the AO sought an explanation regarding the source of investment. Finding the explanation unsatisfactory, the AO treated the investment as unexplained under Section 69 and completed the reassessment under Sections 147 and 144 by making an addition of ₹79.20 lakh.
Before the CIT(A), the assessee explained that the Panchkula property had been purchased entirely from the sale proceeds of a property at Manesar sold for ₹1.20 crore. Sale deeds, bank statements and other documents were produced to establish that the sale proceeds were credited into the bank account and utilised for purchasing the Panchkula property. Accepting this explanation, the CIT(A) deleted the addition under Section 69. However, while disposing of the appeal, the CIT(A) noticed that no capital gains had been offered on the sale of the Manesar property. Exercising powers under Section 251, the CIT(A) enhanced the income by computing long-term capital gains of ₹98.94 lakh after denying indexed cost of construction and deduction under Sections 54/54F.
