Meena Gupta Vs ACIT (ITAT Delhi)
Conclusion: Denial of the entire expenditure incurred towards as cost of construction by AO could not be held to be justified even if assessee did not submit satisfactory bills/vouchers in support of her claim towards the cost of construction. An amount of Rs.3,94,860/- for the FY 2009-10 was paid for Stamp Duty, MCD Map fee and MCD Development charges which reinforced the fact that the building that was sold was constructed on which expenses were definitely incurred. Therefore, AO was directed to allow 50% of the indexation claimed i.e. Rs.24,42,262/-.
Held: Assessee-individual had filed her income tax return declaring ₹23,74,730, but her income was assessed at ₹1,45,44,630 under Section 153C read with Section 144. A search targeting the Rama and Param Group uncovered incriminating documents linked to her for the relevant year. Based on these documents, the assessment included key additions such as ₹71,86,571 under Section 69A and ₹48,48,524 for construction/renovation expenses, among others, totaling ₹1,45,44,634. Assessee sold a property in Shahdara, Delhi, for ₹71,50,000 and reported capital gains of ₹20,84,508 after claiming indexation of ₹50,65,492, including ₹31,98,704 for construction expenses. While ₹1,80,968 for land cost was allowed, AO disallowed ₹48,84,524 due to the lack of evidence for the claimed construction expenses, adding it to the income. CIT(A) agreed with the AO that the claimed expenses were frivolous and unverifiable due to bogus bills. Only ₹3,94,860, related to payments to municipal authorities in 2009-10, was allowed. The remaining ₹31,98,704 was disallowed for lack of credible evidence, and AO was instructed to recompute the long-term capital gains. It was held that there was a building, which was sold during the year on which capital gains had been offered by assessee. Therefore, the denial of the entire expenditure incurred towards as cost of construction by AO could not be held to be justified even if the assessee did not submit satisfactory bills/vouchers in support of her claim towards the cost of construction. It was also a fact that the AO in his remand report stated that an amount of Rs.3,94,860/- for the FY 2009-10 was paid for Stamp Duty, MCD Map fee and MCD Development charges and this amount was allowable as these expenditures were paid to the Government department. This further reinforced the fact that the building that was sold was constructed on which expenses were definitely incurred. Therefore, considering the facts in entirety, AO was directed to allow 50% of the indexation claimed i.e. Rs.24,42,262/-. There would be no further allowance of indexation of Rs.3,94,860/- as allowed by CIT(A) as the same in our estimation was also included in the 50% of the indexation amounting to Rs.24,42,262/- allowed by us. The balance disallowance of Rs.24,42,262/- claimed towards indexation by the assessee by the AO was confirmed.
