Ashwin Kapur Vs ACIT (ITAT Delhi)
Introduction: The appeal by Ashwin Kapur against the final assessment order dated 19.01.2023 is based on the denial of indexed cost of improvement for the property sold during the assessment year 2020-21. The Assessing Officer (AO) disallowed the renovation expenses claimed by the assessee, leading to a challenge and subsequent proceedings before the Dispute Resolution Panel (DRP).
Detailed Analysis: During the assessment year, the assessee sold a property and claimed a deduction under section 48 of the Income Tax Act. The claimed renovation expenses of Rs.9,50,000/- faced scrutiny as the AO found insufficient documentation. The appellant argued that, being an NRI, payments were made through his mother’s accounts, and the renovation was done by Alok Lal through his firm M/s Fourth Dimension.
The DRP, after a remand report, upheld the AO’s decision, citing lack of evidence establishing the relationship between Fourth Dimension and Alok Lal. The appellant argued that the flat required significant renovation before being inhabitable, justifying the claimed expenses.
Citing a similar case, the appellant highlighted the practical challenges of obtaining evidence for renovations carried out several years ago. The appellant also emphasized the use of cheques for payments and cash withdrawals as evidence of genuine expenses.
Conclusion: The ITAT, after considering the submissions, found merit in the appellant’s arguments. It accepted the explanation of the NRI appellant, directing the AO to allow the indexed cost of improvement and recompute the capital gains. The decision emphasizes the practical challenges faced by NRIs in providing documentation for expenses incurred several years ago.
This detailed analysis provides insights into the Ashwin Kapur vs ACIT case, focusing on the denial of indexed cost of improvement and subsequent directions from the ITAT.
FULL TEXT OF THE ORDER OF ITAT DELHI
This appeal is filed by the assessee against the final assessment order dated 19.01.2023 passed by the Assessing Officer (for short “AO”) u/s 143(3) r.w.s. 144C(13) pursuant to the directions of the DRP dated 09.12.2022 passed u/s 144C(5) of the Act. The assessee in the grounds of appeal challenged the order of the AO/DRP in not allowing indexed cost of improvement to the property while computing the capital gains for the assessment year under consideration i.e. AY 2020-21.
2. Brief facts are that during the assessment year under consideration the assessee has sold property for sale consideration of Rs.4 crores and claimed deduction u/s 48 of the Act at 3,40,43,088/- and declared capital gains of Rs.59,56,912/-. The assessee claimed renovation expenses of Rs.9,50,000/- and upon indexation at Rs.20,04,015/- with respect to the said property. The assessee was required to provide documentary evidences in support of his claim of renovation of cost of Rs.9,50,000/-. The assessee furnished reply which was rejected by the AO on the ground that assessee has failed to provide details of name, address and PAN of party to whom payment was made, did not furnish invoices, bank statements, reflecting the entries for the payment of Rs.9,50,000/-. Accordingly, he proposed an addition of Rs.20,04,015/- being indexed cost of renovation cost for which the assessee filed its objections before DRP.
3. In the course of proceedings before DRP the assessee submitted that all the payments for purchase of flat were made through assessee’s bank account maintained in SBI, New York. It was also contended that more than 14 years lapsed from the time the flat was renovated and assessee being an individual does not maintained any regular books of accounts. The assessee submitted that since more than 13-14 years had lapsed assessee requested for old bank account statements from bank where the payments were made. Assessee submitted that as he was living in USA all costs for renovation were incurred through his mother Smt. Sunita Kapur. It was also contended that the work of renovation was done through Alok Lal through his sole proprietary firm M/s Fourth Dimension 242, Sector-17, Urban Estate, Gurgaon having PAN No.AAXPL6937C that all the payments were made from withdrawals from his bank account the cheques were issued to Alok Lal for withdrawing cash for purchase of material on behalf of the assessee and provided the cheque details.
4. The DRP called for a remand report and the AO observed that as per bill, bank account statement and copy to cheque counter files the assessee had made total payment of Rs.10,96,800/- to Fourth Dimension or Alok Lal without entering any counter agreement for renovation work. The AO observed in the remand report that no additional documentary evidence was furnished establishing the relationship between Fourth Dimension and Alok Lal. In the remand report the AO also observed that no substantial proof was available to show that the cash withdrawal amounts were precisely used for the renovation work. Based on the remand report the DRP held that order passed by the AO does not suffer from any infirmity.
5. The Ld. Counsel for the assessee before us made elaborate submissions as under:
“It was submitted that since the Appellant was living in USA, all costs for renovation were incurred through his mother Smt Sunita Kapur. After obtaining old bank statements etc. locating the old documents it was submitted that the work of renovation was done through, Sh. Alok Lal through his sole propriety firm MIS Fourth Dimension 242, Sector-17, Urban Estate, Gurgaon 122001 having PAN No.AAXPL6937C.
In respect of his services he raised following invoices for his labour charges:-
Bill No 010029 dated 20.5.2010 Rs.59,000I-(copy Enclosed)
Bill No 10.5.2020 dated 10.05.2010 Rs.2,47,8001-(copy Enclosed)
Payment in respect of his bills were made vide 694186 on 2 1.5.2010 for Rs 2,00,000 through ICIC bank Account in favour of Alok Lal and vide 694173 on 08.4.20 10 for Rs 90,000 through ICIC bank Account in favour of Fourth Dimension.
Besides above, cheques for withdrawing cash were issued to Sh. Alok Lal for purchase of material on behalf of the assessee as per details given below:-
Comments are closed.