Kishor K. Kasta Vs ITO (ITAT Rajkot)
Indexed Cost of Improvement Must Be Allowed Even for Cash Payments – ITAT Rajkot Reduces Section 50C Addition to ₹3.45 Lakhs
The Rajkot Bench of the ITAT partly allowed the assessee’s appeal for AY 2015-16 and granted relief on computation of capital gains by directing allowance of indexed cost of improvement of ₹5 lakhs, thereby substantially reducing the addition made under the stamp-duty valuation provisions of section 50C.
The assessee had sold an immovable property for ₹9.50 lakhs, whereas the stamp-duty (jantri) value was ₹17.92 lakhs. Since no capital gains were declared, reassessment was initiated and the AO adopted the full stamp value as consideration and made an addition of ₹17.92 lakhs. The CIT(A) partly reduced the addition to ₹8.45 lakhs, but denied further benefit of cost of improvement for want of bank evidence.
Before the Tribunal, the assessee produced bills and ledger accounts evidencing improvement expenditure of ₹5 lakhs, contending that the payments were made in cash and therefore bank corroboration was not possible.
The ITAT held that:
- Cost of improvement supported by genuine bills and documentary evidence cannot be rejected merely because payments were made in cash.
- The authorities below had disallowed the claim without proper verification and on mere surmises.
- Once improvement expenditure is proved, the assessee is legally entitled to indexed deduction under section 48 even in a section 50C computation.
Accordingly, the Tribunal directed the AO to allow indexed cost of improvement of ₹5 lakhs and reduced the sustained addition from ₹8.45 lakhs to ₹3.45 lakhs only, to be taxed at normal rates.
The appeal was thus partly allowed with substantial relief to the assessee
FULL TEXT OF THE ORDER OF ITAT RAJKOT
