LATE SRI ATUL SHANTILAL POORABIA REPRESENTED BY L/R ALPA ATUL POORABIA ,HYDERABAD vs. ITO, WARD-12(3), HYDERABAD

Brief facts of the case are that late Atul Poorabia, filed the return of income on 26/08/2015 and revised the same declaring NIL income for the assessment year 2015-16. On his death, the present assessee is brought on record. During the scrutiny, computation of income was filed showing a loss of Rs. 3,13,892/- as sale of house property. Learned Assessing Officer, however, obtained the copy of sale deed from the SRO and determined the indexed cost of acquisition at Rs. 48,72,954/- and deducting the same from the sale consideration of Rs. 78 lakhs, added the long term capital gains of Rs. 29,27,086/- to the income of the assessee.

Grievance of the assessee was that in that process, the learned Assessing Officer took the cost inflation index at 519 applicable for the financial year 2006-07, whereas according to the assessee, year of acquisition of property was financial year 2003-04, that is when the agreement dated 29/07/2003 was entered into and possession of property was delivered. Further grievance of the assessee was that the learned Assessing Officer failed to consider the expenditure of Rs. 12 lakhs towards the cost of improvement.

Assessee, therefore, filed an appeal before the learned CIT(A) and produced the loan sanction letters from Standard Chartered Bank, sale agreement dated 29/07/2003, Building Completion Certificate dated 22/11/2004 etc. Learned CIT(A) considered all these documents and held that the agreement of sale submitted by the assessee is not a registered sale deed, but only an agreement between the two parties, it reads that only a sum of Rs. 2.5 lakhs were to be paid at the time agreement and rest of the amount has to be paid in installments before taking possession. The agreement itself reads that the possession of flat will be delivered before March, 2004 but there is no document to support that such possession was delivered during the financial year 2003-04, and, therefore, for want of evidence, case of assessee fails.

So also in respect of the cost of improvement, learned CIT(A) held that the relevant bills/vouchers/agreement with contractor or developer for alterations etc., are produced and since there is no document such as bills or agreement etc., such a claim cannot be accepted. Learned CIT(A), therefore, declined to grant relief on either count.

Assessee is, therefore, before us in this appeal, contending that the agreement clearly read that the delivery of possession of property was to be before March, 2004 and since there is nothing contrary, the cost of inflation index has to be taken for the financial year 2003-04. So also learned AR submitted that having regard to the proximity of the dates of sale deed and loan sanction letter, it can safely be inferred that the assessee incurred Rs. 12 lakhs towards cost of improvement.

Per contra, learned DR opposed the contentions of the assessee and submitted that the agreement of sale is an unregistered one and it never passes title to the purchaser unless such a sale transaction is registered. He further submitted that there is no evidence as to either the date of acquisition of the property or to support the cost of improvement. He, therefore, prayed that the appeal is devoid of merits and may be dismissed.

We have gone through the record in the light of the submissions made on either side. On a perusal of the sale agreement dated 29/07/2003, we find that the husband of the assessee paid a sum of Rs. 2.5 lakhs on the date of agreement and the balance sale consideration had to be paid in instalments before taking possession of the same. It further reads that the vendor shall handover the possession of the flat on or before the end of March, 2004. The sale deed dated 08/09/2006 vide clause-2 at page No. 7 of 13 says that the purchaser had already been put in possession of the flat under the sale agreement and such sale deed confirms such a transaction. It is, therefore, apparent from these two documents that the assessee must have entered into possession subsequent to the date of agreement and before the sale deed.

Since the agreement itself says that as on the date of the agreement of sale, the delivery of possession was contemplated to be somewhere before March, 2004. But, the Occupancy Certificate issued by the Bangalore Mahanagar Palika on 22/11/2004 shows that the permission to occupy the flat under consideration was granted only on 22/11/2004. Before grant of this permission to occupy the premises, the husband of assessee could not have occupied the relevant flat. We can, therefore, safely conclude that it is only in the financial year 2004-05 the flat was occupied, and accordingly, the cost inflation index must be relevant to the financial year 2004-05. We, therefore, while taking a pragmatic view, direct the learned Assessing Officer to take the cost inflation index relevant for the financial year 2004-05 and recompute the indexed cost of acquisition.

Coming to the other grievance of the assessee that they incurred cost of improvement to the tune of Rs. 12 lakhs, both the authorities below rejected such a claim stating that there is no evidence in the form of bills/vouchers, loan sanctioned letter or agreement with contractor etc.

Undisputedly, the flat under consideration was acquired for residential purpose. We can take judicial notice of the fact that the flat that would be handed over by the developer mostly requires certain improvements without which, such a flat cannot be utilised meaningfully. At the same time, it occurs to our mind that the common man does not preserve the bills/vouchers etc., incurred for making the flat habitable, so that they can produce such evidence at the time of sale to be produced before the income tax authorities to claim the benefit of indexed cost of improvement. We have to keep in mind that the sale took place on 28/02/2015 i.e., more than a decade after the purchase. Facts have to be apprised having regard to the common course of natural events, human conduct and public and private business, in their relation to the facts of the particular case. In the normal course of life, we cannot expect evidence for every and sundry expenditure. When the expenditure is inevitable, but the quantum is in question, it would be in the interest of justice, not to disallow the entire expenditure, but to disallow a portion of it. With this view, we deem it just and proper to restrict the disallowance to 20% of the improvement cost claimed.

In the result, appeal is allowed in part.