Avnish Kumar Vs DCIT (ITAT Hyderabad)
Improvement Cost of Rs. 4.05 Crore Accepted: ITAT Confirms Property Was Upgraded Post-Purchase
The assessee purchased a semi-constructed residential building on 28.07.2014 for Rs. 7.90 crore and sold it on 10.08.2017 for Rs. 13.90 crore. He claimed indexed cost of improvement of Rs. 4,05,72,447, supported by bills, vouchers, contractor ledgers, and evidence of extensive completion work undertaken on the semi-finished structure. The AO disallowed the claim, holding that (i) the purchase and sale deeds described the building similarly, and (ii) the expenditure was “not commensurate” with the 8,000 sq.ft. built-up area. The CIT(A) upheld the disallowance.
The ITAT held that both authorities erred in ignoring clear differences between the semi-constructed structure purchased and the fully completed, furnished house sold. The Tribunal noted that the assessee produced specific contractor bills, ledgers, material purchase evidence, and that the AO never disproved any document. The AO’s conclusion—based merely on suspicion about the quantum of expenditure vis-à-vis built-up area—was held to be unsupported by evidence.
On examining the purchase and sale deeds, the Tribunal found material variation in the stage of completion, confirming that substantial improvement was undertaken. Therefore, the ITAT deleted the entire disallowance and allowed the claim of indexed cost of improvement of Rs. 4,05,72,447.
