Case Law Details
Shekhar Bharti Vs ITO (ITAT Delhi)
Introduction: The case of Shekhar Bharti vs. ITO at ITAT Delhi revolves around the dispute of a salaried employee who claimed an exemption under section 54F of the Income Tax Act, 1961, related to the sale of his residential property. The main point of contention in this case was the valuation report provided by the assessee for the property, and whether it could be discredited without the support of the Departmental Valuation Officer’s (DVO) report.
Background of the Case: The assessee, a salaried employee, had purchased a residential house in the fiscal year 2002-03. He claimed that the house was in a poor condition, so he invested in its repair and renovation, covering a span of several years. The source of this investment included his past savings and retirement benefits, and even a loan from a bank. Eventually, he sold the property during the fiscal year 2011-12.
Exemption Claim and Scrutiny: The assessee declared the sale of the property in his Income Tax Return and claimed an exemption under section 54 of the Income Tax Act, 1961. However, the case was selected for scrutiny by the Income Tax Officer (ITO). The ITO examined the availability of funds for the construction and renovation, disallowed the addition of the construction costs, and further disallowed the investment of the sale proceeds for the purpose of re-computing the disallowance.
Challenges and Findings: The assessee challenged these disallowances before the Ld. CIT(A), specifically with reference to the additions made by the appellant to the property over the years. During the course of remand proceedings, the AO acknowledged the increase in the covered area but requested not to allow the cost of improvement post-purchase. The Ld. CIT(A) noted that the assessee failed to substantiate year-wise costs of construction and concluded that no supporting evidence of year-wise investment had been provided. The valuation reports submitted by the appellant were also disbelieved on the basis of inconsistency.
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