JUGESH SALUJA,PUNE, MAHARASHTRA vs. DY. COMMISSIONER OF INCOME TAX, CIRCLE-4(1), CHANDIGARH

Briefly stated, the facts of the case are that the assessee had sold residential property situated at House No.156, Sector 33-A, Chandigarh during the year under consideration for a sale consideration adopted under section 50C at Rs. 4,39,66,173/-. While computing long term capital gains, the assessee claimed indexed cost of acquisition/improvement amounting to Rs.1,03,41,977/-, deduction under section 54 amounting to Rs.2,12,81,658/- on account of investment in a new residential property at Pune and deduction under section 54EC amounting to Rs.50,00,000/- on account of investment in specified bonds. Consequently, the assessee declared taxable long term capital gain at Rs.73,42,538/-.

During the course of assessment proceedings, the Assessing Officer required the assessee to substantiate the claim of indexed cost of improvement and deduction claimed under section 54. The Assessing Officer observed that the assessee had failed to produce supporting bills, vouchers and documentary evidence in support of the expenditure claimed towards improvement carried out in financial years 1985-86, 1986-87, 1996-97 and 2006-07. The Assessing Officer further observed that the new residential property at Pune had been purchased jointly in the names of the assessee and her husband and accordingly held that deduction under section 54 was allowable only to the extent of 50% share of the assessee in the property. The Assessing Officer also excluded GST, infrastructure charges, utility charges, cluster fund, club charges and other incidental expenses from the eligible cost of acquisition of the new residential property and restricted the deduction under section 54 to Rs.88,66,540/-. Accordingly, additions amounting to Rs.1,03,41,977/- and Rs.1,24,15,208/- were made and assessment was completed at an income of Rs.3,13,09,655/-.

Aggrieved against the assessment order, the assessee carried the matter in appeal before the ld. CIT(A). The ld. CIT(A), after considering the submissions of the assessee and remand report of the Assessing Officer, confirmed the additions made by the Assessing Officer by holding that the assessee had failed to substantiate the cost of improvement with documentary evidences and that deduction under section 54 was rightly

Against the order of the Ld. CIT(A) the assessee preferred an appeal before the Tribunal.

Before us, the ld. Counsel for the assessee submitted that the authorities below have erred in disallowing the indexed cost of improvement merely because old bills and vouchers were not available. It was submitted that the property in question consisted of constructed residential house and the existence of the super structure itself stood accepted by the stamp valuation authority while valuing the property for the purposes of stamp duty. It was further submitted that the assessee had furnished details of construction and improvements carried out over different years and the authorities below could not have rejected the claim outrightly without resorting to valuation mechanism contemplated under section 55A of the Act. The ld. Counsel further submitted that the assessee had invested the entire sale consideration in acquisition of leasehold rights in a residential flat at Pune and the entire consideration had been paid out of the assessee’s own bank account. Merely because the husband of the assessee was included as joint holder, deduction under section 54 could not be restricted. Reliance was placed upon the decisions of Hon’ble Karnataka High Court in the case of CIT vs. Jennifer Bhide, Hon’ble Delhi High Court in the case of CIT vs. Ravinder Kumar Arora and other judicial precedents.

Per contra, the ld. DR strongly relied upon the orders of the lower authorities and submitted that the assessee had failed to produce any supporting evidence in respect of the alleged cost of improvement despite repeated opportunities granted during assessment proceedings. It was further submitted that the new residential property admittedly stood jointly

We have heard the rival submissions and perused the material available on record. So far as the issue relating to indexed cost of improvement is concerned, we find that the assessee had originally acquired residential plot bearing House No.156, Sector 33-A, Chandigarh admeasuring 523.13 square yards vide registered sale deed dated 02.09.1985 for a total consideration of Rs.2,25,000/- besides stamp duty and other incidental expenses, thereby resulting into total acquisition cost of Rs.2,49,000/- claimed by the assessee for the financial year 1985-86. Thereafter, the assessee carried out construction and improvements in the said residential property from time to time. The assessee incurred expenditure of Rs. 6,25,100/- during the financial year 1986-87 towards the construction of the residential superstructure immediately after the acquisition of the plot. Subsequently, further improvement expenditure of Rs. 4,89,000/- was incurred during the financial year 1996-97, and additional renovation/improvement expenditure of Rs. 6,50,000/- was incurred during the financial year 2006-07. On the basis of the aforesaid investments, the assessee claimed indexed cost of acquisition/improvement aggregating to Rs. 1,03,41,977/- while computing long-term capital gains arising from the sale of the property.

The aforesaid residential property was ultimately sold vide registered sale deed dated 14.12.2016 for a consideration adopted under section 50C at Rs.4,39,66,173/-. Significantly, from the recitals contained in the registered sale deed itself, it emerges that the residential house constructed on the said plot had a covered area of 3300 square feet. Further, the stamp valuation authority/Sub-