Case Law Details
Yashpalsingh Surindersingh Matharu Vs ITO (ITAT Pune)
ITAT Pune held that claim of indexed cost of development not acceptable as assessee failed to furnish any evidence towards the same.
Facts- During the course of assessment proceedings, the AO observed that the assessee had computed income under the head `Capital gains’ on transfer of certain property and claimed exemption towards long term capital gain. In such computation of capital gain, the assessee had claimed deduction of indexed cost of improvement at Rs.9,17,560/- towards development work carried out. On being called upon to substantiate and furnish necessary copies of bank account and invoices through which said development work was carried out, the assessee submitted confirmation from Pallod & Associates, the developer, affirming that the development cost of Rs.2,40,000/- and Rs.3,00,000/- was incurred on 22-09-1998. The AO did not grant such deduction in the draft order because of the failure of the assessee to furnish any evidence as required by him. No relief was allowed by the Dispute Resolution Panel. The AO made the addition of Rs.9,17,560/- in the final assessment order. Aggrieved thereby, the assessee has come up in appeal before the Tribunal.
Conclusion- We fail to appreciate as to how the assessee could obtain an estimate of development work to be carried out at the property and such development work also got completed on or before the date of purchase by the assessee. Even if it is presumed that what the assessee is stating is correct, we find from the sale deed dated 22-09-98 that there is no reference to such shed or ornamental entrance door etc. The sale deed refers only to some Kutcha construction, which fact is discernible from page 48 of the paper book, that is a part of the sale deed to this effect. In view of the foregoing reasons, we are satisfied that the AO was justified in not accepting the claim of indexed cost of development by the assessee. This ground is not allowed.
FULL TEXT OF THE ORDER OF ITAT PUNE
This appeal by the assessee is directed against the final assessment order dated 27-04-2022 passed by the Assessing Officer (AO) u/s.143(3) read with section 144C(13) of the Income-tax Act, 1961 (hereinafter also called ‘the Act’) in relation to the assessment year 2019-20.
2. The appeal is time barred by 37 days. The assessee has filed an affidavit explaining the reasons for the delay. We are satisfied with the reasons so stated. The delay is, therefore, condoned and the appeal is admitted for disposal on merits.
3. The assessee is aggrieved by the addition of Rs.9,17,560/- towards indexed cost of improvement. Succinctly, the facts of the case are that, the assessee is a non-resident individual who filed his return declaring total income at Rs.13,49,630/-. During the course of assessment proceedings, the AO observed that the assessee had computed income under the head `Capital gains’ on transfer of certain property and claimed exemption towards long term capital gain. In such computation of capital gain, the assessee had claimed deduction of indexed cost of improvement at Rs.9,17,560/- towards development work carried out. On being called upon to substantiate and furnish necessary copies of bank account and invoices through which said development work was carried out, the assessee submitted confirmation from Pallod & Associates, the developer, affirming that the development cost of Rs.2,40,000/- and Rs.3,00,000/- was incurred on 22-09-1998. The AO did not grant such deduction in the draft order because of the failure of the assessee to furnish any evidence as required by him. No relief was allowed by the Dispute Resolution Panel. The AO made the addition of Rs.9,17,560/- in the final assessment order. Aggrieved thereby, the assessee has come up in appeal before the Tribunal.
4. The first issue raised by the assessee is against non-granting of deduction towards indexed cost of improvement. In this regard, it is observed that the assessee transferred the property in question during the year, which was purchased on 22-09-1998. A copy of the purchase deed has been placed at page 24 of the paper book. The assessee claimed that he incurred development cost on such property, whose indexed value was Rs.9,17,560/-. In support of such claim, the assessee furnished estimate given by the developer, who thereafter raised bills, copies of which have been placed at pages 18 and 19 of the paper book. It can be seen that the estimate given by the developer, namely, Pallod & Associates on 20-07-98 was towards Barbed wire fencing; Ornamental entrance door; Construction of shed; and Water reservoir. Thereafter, there is a so called Bill dated 22-09-98 given by the developer towards the above four things. At this stage, it is relevant to mention that the property in question was purchased by the assessee on 22-09-98 through registered sale deed. In such a scenario, we fail to appreciate as to how the assessee could obtain an estimate of development work to be carried out at the property and such development work also got completed on or before the date of purchase by the assessee. Even if it is presumed that what the assessee is stating is correct, we find from the sale deed dated 22-09-98 that there is no reference to such shed or ornamental entrance door etc. The sale deed refers only to some Kutcha construction, which fact is discernible from page 48 of the paper book, that is a part of the sale deed to this effect. This shows that, firstly, the assessee did not adduce any evidence of having done any development work on the property by furnishing the direct invoices for the development work. Secondly, even if it is presumed that the development work was actually carried out as claimed through the estimate/Bill of the developer, it is hard to accept that the development of the property was got done by the assessee before the date of its purchase itself. Thirdly, even if we go with the hypothesis that the assessee actually got the development work, then such development work should have been reflected in the description of the property in the sale deed, which is absent. In view of the foregoing reasons, we are satisfied that the AO was justified in not accepting the claim of indexed cost of development by the assessee. This ground is not allowed.
5. An alternate ground has been raised for increase in the proportionate deduction u/s.54F because of the resultant increase in the amount of capital gain for the disallowance of the claim for indexed cost of improvement. The AO is directed to verify such claim and allow the same as per law. Needless to say, the assessee will be allowed an opportunity of hearing.
6. In the result, the appeal is partly allowed for statistical purposes.
Order pronounced in the Open Court on 11th April, 2023.
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