Case Law Details
Kanhaiya Lal Lalwani Vs ITO (ITAT Jaipur)
ITAT Jaipur held that cost of improvement cannot be rejected on the reason that building plan approval, property tax, etc. not provided as no building approval is required for construction area of 870 Sq. Fts and property tax was not leviable on the residential house property. Cost of improvement allowable as valuation report submitted.
Facts- Assessee contended that CIT(A) has erred in rejecting the claim of the assessee in respect of indexed cost of improvement on Rs.3,41,000/- base don valuation report of the registered valuer being construction made by the assessee through a contractor on the ground floor and at first floor on Plot No. 40A, situated at Krishna Colony, Ramgarh Mode, Jaipur during the financial year 2000-2001, notwithstanding the fact that the valuation report of the said property submitted before the ld. CIT(A) as an evidence and for which the ld.CIT(A) himself observed that ‘’on verification of the documentary evidence and the valuation report, the claim of the assessee is appeared to be reasonable”. In view of these facts, the ld. CIT(A) was not justified in not accepting the claim of the assessee.
Conclusion- It is observed that the assessee had resubmitted the desired documents on three occasions before the ld. CIT(A) on 17-01-2021, 11-03-2022 and lastly on 22-092022 but the ld.CIT(A) had not asked for documents like building plan approval, property tax receipt if any, cost of improvement with sources and bills and vouchers during the period of three years. The Bench has deeply considered the submissions of the ld. AR of the assessee and found that it does not suffer from any infirmity as no building approval is required for construction area of 870 Sq. Fts and property tax was not leviable on the residential house property. The assessee has shown the investment of source like (i) Rs.1,80,000/- (given by the wife of the assessee out of her Istri Dhan (ii) Rs.90,000/- (given bythe father of the assessee in instalments) (iii) Rs.78,000/- (out of the funds available with the assessee) for which the assessee has filed an affidavit. The assesse has also filed an affidavit of Contractor Shri Om Prakash Kumawat.
FULL TEXT OF THE ORDER OF ITAT JAIPUR
This appeal filed by the assessee is directed against order of the ld. CIT(A) dated 23-09-2022, National Faceless Appeal Centre, Delhi [hereinafter referred to as (NFAC)] for the assessment year 2011-12 wherein the assessee has raised the following ground of appeal.
‘’On the facts and in the circumstances of the case, the ld. CIT(A) has erred in rejecting the claim of the assessee in respect of indexed cost of improvement on Rs.3,41,000/- base don valuation report of the registered valuer being construction made by the assessee through a contractor on the ground floor and at first floor on Plot No. 40A, situated at Krishna Colony, Ramgarh Mode, Jaipur during the financial year 2000-2001, notwithstanding the fact that the valuation report of the said property submitted before the ld. CIT(A) as an evidence and for which the ld.CIT(A) himself observed that ‘’on verification of the documentary evidence and the valuation report, the claim of the assessee is appeared to be reasonable. ‘’’’In view of these facts, the ld. CIT(A) was not justified in not accepting the claim of the assessee.”
2.1 Apropos solitary ground of the assessee, the facts as emerges from the order of the ld. CIT(A) is as under:-
‘’4.3 The submission made by the appellant and relevant case laws have been gone through. On verification of the documentary evidences and valuation report, the claim of appellant is appeared to be reasonable. As the supporting evidences could not be made available before the Assessing Officer, the cost of acquisition/ improvement was not given credit while computing LTCG. In view of this, the AO is directed to give credit of cost of acquisition alongwith indedxation, as allowed by the Act after ascertaining the purchase price from the relevant purchase document. With regard to cost of improvement made on the schedule land, the appellant has submitted only valuation report from the approved valuer and not submitted any other documentary evidences like building plan approval, property tax receipt, if any, cost of improvement alongwith its sources and bills and vouchers. In absence of the supporting evidences, the cost of improvement cannot be ascertained and hence the claim of improvement made by the appellant is hereby rejected as the material on record is not sufficient to accord any relief w.r.t. cost of improvement.
4.4 In view of the above facts and circumstances, the AO is directed to give credit of cost of acquisition while arriving taxable long term capital gains arising out of the transaction (as discussed above) after verification of the genuineness of the relevant purchase document and then pass the order partly allowing the appeal. Ground Nos. (1) to (3) are thus partly allowed subject to condition mentioned as above.
5.0 In the result, the appeal of the appellant is hereby partly allowed.”
2.2 During the course of hearing, the ld. AR of the assessee prayed that the ld. CIT(A) was not correct in observing that the assessee had submitted only valuation report from the approved valuer and not submitted any other documentary evidences like building plan approval, property tax receipt, if any, cost of improvement with its sources and bills and vouchers. The ld. AR further submitted that written submission alongwith supporting documentary evidences in support of the claim of the assessee were submitted on 14-08-2019 before the ld.CIT(A), NFAC Delhi and thereafter as required the same were resubmitted before the ld. CIT(A), NFAC, Delh on 17-01-2021, 11-03-2022 and 21-09-2022. He further submitted that despite these facts, no other supporting documentary evidences like building plan approval, property tax, if any, cost of improvement with sources and bills and vouchers were requisitioned by the ld. CIT(A) during these period of three years. He further submitted that no building plan approval was required for construction area of 870 Sq. Fts and no property tax was leviable on the residential house property in question. He further submitted that with regard to cost of improvement with its source of cost of improvement on Rs.3,41,000/-was claimed before the ld.CIT(A) for which the valuation report of the Registered Valuer was filed before the ld CIT(A) but the ld. CIT(A) did not allow the claim of the assessee notwithstanding the fact that ld. CIT(A) himself observed that ‘’on verification of documentary evidences and valuation report, the claim of the appellant is appeared to be reasonable”. The ld. AR of the assessee, as regards non-submissions of bills and vouchers submitted that the assessee got the construction work done through the contractor Shri Om Prakash Kumawat with material during the F.Y. 2000-2001 for which the Contractor given an affidavit on judicial stamp paper and it is in the paper book pages 32-33. He further submitted that when the assessee has made construction work on 870 Sq. Fts. mentioned in the Sale Deed and Map of the property then the assessee is eligible for benefit of indexed cost of improvement while computing the LTCG for which the ld. AR relied on the decision of ITAT Jaipur Bench dated 18-06-2020 in the case of ACIT vs Ijyaraj Singh (ITA No. 152/JP/2019-A.Y. 2013 -14) and Shri Ijyaraj Singh vs ACIT (ITA No. 91/JP/2019-A.Y. 2013-14). He further submitted that when construction work is clearly mentioned in the sale deed and shown in the Map which is part of the sale deed and also supported by the valuation report of the Registered Valuer and the affidavit of the Contractor then the ld. CIT(A) was not justified in rejecting the claim of the assessee as to indexed cost of improvement of Rs.3.41 lacs which should be allowed.
2.3 On the other hand, the ld. DR supported the order of the ld. CIT(A).
2.4 The Bench has heard both the parties and perused the materials available on record. The Bench noted from the order of the ld. CIT(A) wherein he mentioned that ‘’On verification of the documentary evidences and valuation report, the claim of the appellant is appeared to be reasonable” but rejected the claim of the assessee on the ground that the appellant has submitted only valuation report from the approved valuer and not submitted any other documentary evidences like building plan approval, property tax, if any, cost of improvement alongwith its sources and bills and vouchers. From the arguments of the ld. AR of the assessee, it is observed that the assessee had resubmitted the desired documents on three occasions before the ld. CIT(A) on 17-01-2021, 11-03-2022 and lastly on 22-092022 but the ld.CIT(A) had not asked for documents like building plan approval, property tax receipt if any, cost of improvement with sources and bills and vouchers during the period of three years. The Bench has deeply considered the submissions of the ld. AR of the assessee and found that it does not suffer from any infirmity as no building approval is required for construction area of 870 Sq. Fts and property tax was not leviable on the residential house property. The assessee has shown the investment of source like (i) Rs.1,80,000/- (given by the wife of the assessee out of her Istri Dhan (ii) Rs.90,000/- (given bythe father of the assessee in instalments) (iii) Rs.78,000/- (out of the funds available with the assessee) for which the assessee has filed an affidavit (PB 30-31). The assesse has also filed an affidavit of Contractor Shri Om Prakash Kumawat (PB 32-33). The Bench has also given its verdict in assessee’s case in ITA No.95/JP//2022 dated 15-09-2022 for the assessment year 2011-12 on the issue of penalty u/s 271F of the Act, as under:-
‘’3.4 After hearing both the parties, perusing the materials available on record and appreciating the details submitted by the ld. AR of the assessee, it is noted that the cost of acquisition of plot as per the assessee was Rs.555/- purchased on 16-04-1999 and thereafter addition/ improvement of Rs.3,41,000/- was made. In my view, if these benefits were allowed to the assessee then in that eventuality the capital gain arose on the sale of immovable property could have been below taxable limit. It is noteworthy to mention that the provisions of Section 273B of the Income Tax Act, 1961 categorically mentions that penalty u/s 271F is not leviable in case the assesee proves that there was a reasonable cause for not filing the return of income during the year under consideration, as per provisions of Section 139 of the Act. After analyzing the facts of the present case, the Bench finds that AO has passed the assessment order ex-parte taking into consideration the assessee has not advanced any documents pertaining to sale of house in question. It is also noted from the record that the assessee is not having any taxable income and the AO has not given the benefit of indexed cost of acquisition and indexed cost of improvement on the immovable property in question and thus in that eventuality the capital gain arose on the sale of immovable property would have been below taxable limit. This plea of the ld. AR of the assessee in my view tantamounts to reasonable cause as is prescribed u/s 273B of the Act. While giving benefit of the same, the Bench deletes the penalty levied by the AO of Rs.5,000/-u/s 271F of the Act. The Bench orders accordingly. Thus the appeal of the assessee is allowed.”
In view of the above deliberation, the Bench does not concur with the findings of the ld. CIT(A). Hence, the appeal of the assessee is allowed.
3.0 In the result, the appeal of the assessee is allowed
Order pronounced in the open court on 13 /02/2023.
Author Bio
