2009 (11) TMI 415 - HC - Income Tax

Capital Gains- The common question pertains to assessment of short-term capital gains in respect of sale of petrol bunk. Held that- (i) that the finding of the Tribunal was that pursuant to an agreement for sale possession itself was given and the transferee was carrying on business in later year. Thus the assessee not entitled to contend that section 2(47)(v) of the Act was not applicable. (ii) Tribunal found that no books of accounts or documents were produced in support of the business and income the assessee had. Thus the Tribunal rightly disbelieved the source claimed by the assessee.

Summary

Issues:
1. Assessment of short-term capital gains in the case of two assessees related to the sale of a petrol bunk.
2. Addition of Rs. 3,24,165 in one of the cases based on the claimed source of cash balance available in the business transaction.

Issue 1: Assessment of short-term capital gains

The High Court considered the case of two assessees regarding the assessment of short-term capital gains arising from the sale of a petrol bunk. The assessees argued that even though there was an agreement for sale, the actual sale did not occur, and the property was later sold to the brother of the original transferee after canceling the agreement. However, the Tribunal found that possession was given to the transferee following the agreement for sale, and the transferee was conducting business in subsequent years. The Tribunal held that the agreement for sale constituted a transfer under section 2(47)(v) of the Income-tax Act, encompassing transactions under section 53A of the Transfer of Property Act. As possession was transferred to the purchaser, the appellants were not entitled to contest the applicability of section 2(47)(v). Consequently, the appeals challenging this issue were dismissed, affirming the Tribunal's findings.

Issue 2: Addition of Rs. 3,24,165

In one of the cases (I. T. A. No. 145 of 2002), the sole issue revolved around the addition of Rs. 3,24,165. The assessee claimed the amount originated from the cash balance available in the business transaction of Sree Bhagavathy Services. However, the Tribunal noted the absence of supporting books of account or documents for the business and income claimed by the assessee. Additionally, the Tribunal observed that Sree Bhagavathy Services had reported losses in the preceding three years (1993-94 to 1995-96) in their filed returns. Consequently, the Tribunal deemed the source of the claimed amount as unreliable, leading to the dismissal of the appeal contesting this addition.

In conclusion, the High Court dismissed both appeals concerning the assessment of short-term capital gains and the addition of Rs. 3,24,165, upholding the Tribunal's decisions in both instances.