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Facts
The assessee sold a house property and, in computing capital gains, claimed an indexed cost of improvement of Rs.36,58,422/- and a deduction under Section 54 for a new property purchase. While the Assessing Officer initially disallowed both claims, the CIT(A) allowed the Section 54 deduction but upheld the disallowance of the cost of improvement, citing a lack of supporting evidence for expenditure incurred approximately 30 years prior.
Held
The Tribunal dismissed the assessee's appeal, affirming the disallowance of the indexed cost of improvement. It concluded that the assessee failed to furnish sufficient documentary evidence, such as relevant financial statements from the year of expenditure, despite having ample opportunities before both lower authorities and the Tribunal. Consequently, for want of evidence, the claim for cost of improvement was rejected.
Key Issues
Whether the indexed cost of improvements claimed by the assessee could be allowed without adequate documentary evidence, particularly when the expenditure was incurred 30 years prior to the sale.
Sections Cited
143(2), 54, 139(1), 234B, 234C
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, “B” BENCH : BANGALORE
Before: SHRI LAXMI PRASAD SAHU & SHRI SOUNDARARAJAN K
Per Laxmi Prasad Sahu, Accountant Member :
This is an appeal filed by the assessee against CIT(A)’s Order vide DIN & Order No: ITBA/NFAC/S/250/2024-25/1068311833(1)dated 04.09.2024 on the following grounds :
1. For that the order of the Commissioner of Income Tax (Appeals) is contrary to law, facts and circumstances of the case to the extent prejudicial to the interests of the appellant and is opposed to the principles of equity, natural justice and fair play.
2. For that he Commissioner of Income Tax (Appeals) failed to appreciate that the order of the Assessing Officer is without jurisdiction. 3. For that the Commissioner of Income Tax (Appeals) erred in upholding the disallowance of Rs.36,58,422/- being indexed cost of improvements incurred for the property. 4. For that the Commissioner of Income Tax (Appeals) has failed to appreciate the fact that the building improvements were made 30 years before the impugned year and it is not possible to foresee and retain the evidences for the expenses made. 5. For that the Commissioner of Income Tax (Appeals) erred in not considering the explanations provided by the appellant. 6. For that the Commissioner of Income Tax (Appeals) failed to appreciate the evidences produced for incurring the improvement expenditure. 7. For that the appellant objects to the levy of interest u/s. 234B and 234C.
Briefly stated the facts of the case are that the assessee filed return of income on 07.11.2017 declaring income of Rs.31,74,250/-. The case was selected for scrutiny on the following issues: i. Capital gains / losses on sale of property ii. Investments in immovable property.
Notice under section 143(2) of the Act dated 14.08.2018 was issued and served on the assessee. Subsequently other notices were issued to the assessee. From the documents submitted it was found that the assessee had computed capital gain as under:
Assessee sold house property bearing No.607/10, 4th Cross, Banashankari 4. Stage II Block, Bangalore – 560 070 on 30.06.2016. Assessee’s share in the said property was 75%. From the above computation of capital gain, it was observed that the assessee had claimed cot of improvement but could not furnish the detail of the expenditure incurred by the assessee. Hence, the claim of Rs.36,58,422/- was disallowed. Further it was noted that the assessee has claimed deduction under section 54 of the Act for the purpose of purchase of residential flat towards which payment of Rs.1,36,37,818/- was made by the assessee as per details submitted the claim of the assessee was examined. It was noted that the assessee sold her original asset on 13.06.2016 relevant to the previous year and has made payment for purchase of the new asset. The AO noted that the new asset has not been purchased within the period of 2 years from the date of transfer of the original asset as required under section 54 of the Act and also did not invest in the capital gain account in specified scheme within the due date under section 139(1) of the Act. Therefore, deduction claimed under section 54 of the Act of Rs.1,93,25,351/- was disallowed and assessment was completed.
Aggrieved from the above Order, assessee filed appeal before the CIT(A). The assessee filed detailed written submissions. The learned CIT(A) accepted the claim of deduction under section 54 of the Act but cost of improvement could not be established by the assessee with supporting evidence towards incurring of expenditure and he submitted that the expenditures were incurred 30 years back and it was not possible to maintain the said expenditure details and the assessee submitted that cost of improvement to the tune of Rs.4,87,470/- was incurred 30 years back in 1994-95 for making the new purchase house habitable since the same pertains to the Financial Year 1994-95. It is neither a legal mandate nor practicable to expect submission of bills or receipts for the same. Moreover, the assessee has been declaring the said amount in her Balance Sheet, as cost of acquisition and has been disclosing the same in all the ITRs filed. The assessee’s Balance Sheet has also been audited by a Chartered Accountant and attached the audited balance sheet and the filed ITR for the Financial Year 2015-16 and submitted that the cost of acquisition/improvement is clearly reflecting in the audited financial statement. The carrying cost of the property of the year prior to sale is certified by a Chartered Accountant which is sufficient to prove the cost of improvement incurred in the year 1994-95. The learned CIT(A) noted that in support of expenditure claimed, the assessee failed to establish that the documentary evidence has nexus between the property sold and purchase of new unit and he allowed the deduction claimed u/s 54 of the ACT.
Aggrieved from the above Order, assessee filed appeal before the Tribunal. The learned Counsel reiterated the submissions made before the lower authorities and submitted that audited financial statement is enclosed at Paper Book Page Nos.18-22 and submitted that the cost of improvement incurred is duly reflecting which is sufficient to prove that the expenditures were incurred on the said property to keep as habitable and the financial statements are audited by a CA, requested that the matter may be remitted back to the AO for further verification of the financial statements. The expenditure was incurred 30 years back and the assessee had no relevant expenditure evidences because the figures reflected in the financial statement of the assessee in the year of the expenditure was incurred.
On the other hand, learned DR relied on the Order of the lower authorities and submitted that the assessee is unable to produce the details of the expenditure incurred during the year with documentary evidence. Even she had various opportunity to produce before the lower authorities the financial statements showing the expenditure incurred during the year but he failed to submit the financial statement as well as the documentary evidence for the year of incurring the expenditure. The assessee has produced the financial statement only for the year in which the property was sold which is not sufficient to establish that the assessee has actually incurred the expenditure.
Considering the rival submissions, we noted that here the dispute raised by the assessee is only with regard to cost of improvement which was not allowed by the lower authorities for want of evidence towards expenditure incurred. Before us, the learned Counsel submitted that the audited financial statement is attached from Paper Book Page Nos.18-22 and on going through the same, we noted that it is not the audited financial statement but is a certified copy by the Chartered Accountant with e-stamp only for the Financial Year ending 31.03.2016. We further noted that the assessee’s submissions made before the learned CIT(A) was also without any proof of financial statement from when the expenditure was incurred. The assessee had sufficient time to produce the same before the lower authorities to justify the cost of improvement. As per submission of the ld. AR that the expenditures were incurred 30 years back, in this regard he could have produced at least financial statement supporting the expenditure were incurred and the said financial statements were submitted to the Income Tax Department. He could have produced it before the authorities below even before us he could not furnish the same instead of asking for remand to the AO for verification towards the cost of improvement but assessee could not furnish any evidence as well as financial statements for relevant financial year and any subsequent years except the year of sale of the property. Therefore, we cannot accept the prayer of the assessee. For want of evidence, we are rejecting the claim made by the assessee.
In the result, appeal filed by the assessee is dismissed.