AVNISH KUMAR,HYDERABAD vs. DCIT., CIRCLE-5(1), HYDERABAD

आदेश/ORDER PER MANJUNATHA G, A.M. : This appeal filed by the assessee is directed against the order of the Learned Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi (“Ld. CIT(A)”) dated 21.04.2025 for the Assessment Year 2018-19.

4. Aggrieved with the order of Assessing Officer, the assessee filed appeal before the Ld. CIT(A). The assessee reiterated the submissions made before the Assessing Officer that the Assessing Officer has erred in disallowing the cost of improvement even though the documents furnished by the assessee including purchase deed clearly showed that the assessee purchased semi constructed building and subsequently he made the improvements and therefore incurred expenditure of Rs.3,88,87,592/- for which necessary bills and other evidences were furnished before the Assessing Officer. The Ld. CIT(A) after considering the submissions of the assessee and also taken note of purchase deed and sale deed of the property, opined that there was no improvement to the property as claimed by the assessee to allow the indexed cost of improvement. Further the Ld. CIT(A) observed from the purchase deed and sale deed / documents furnished by the assessee, that it is clear that the impugned property of ground plus two upper floors, there was no improvement in the property at the time of purchase as well as at the time of sale. Therefore he held that the Assessing Officer correctly disallowed the cost of improvement of Rs.4,05,72,447/-.

5. Aggrieved with the order of Ld. CIT(A), the assessee is in appeal before us. The learned counsel of the assessee submitted that the Ld. CIT(A) is erred in upholding the assessment order towards disallowance of cost of improvement with indexation of the amount of Rs.4,05,72,447/- without appreciating the facts, that the assessee has purchased semi constructed building vide purchase deed dated 28.07.2014 and sold the fully furnished house through sale deed dated 10.08.2017 which is evident from the sale deed. The learned counsel for the assessee referred to the schedule of property as per purchase deed and submitted that, the assessee has purchased the house of ground plus two upper floors and the same has been fully furnished by incurring various expenditure by the assessee and all the bills / documents submitted to the Assessing Officer. The assessee has incurred Rs.3,88,87,592/- for further construction and improvement of the house of which he has claimed indexation benefit and claimed deduction of Rs.4,05,72,447/-. The Assessing Officer without appreciating the relevant facts, simply disallowed the claim of the assessee stating that purchased house property and sold house property are one and the same even though the schedule clearly shows the difference in the property purchased by the assessee and sold for the year under consideration. Therefore he submitted that the additions made by the Assessing Officer should be deleted.

6. On the other hand, the learned Department Representative supported the orders of authorities below and submitted that as per the schedule of the property which is reproduced in the assessment order, the assessee has purchased house property consisting of house plus two upper floors with all fittings, electrical fittings, electrical service connections, security deposits with electricity department & GHMC for water and sewerage connections with fixtures and schedule of the property sold on 10.08.2017, also very same house without any additions. Therefore, the arguments of the assessee that he has completed the construction by spending Rs.3,88,87,592/- cannot be accepted going by the total built up area of the house property of 8000 sq. ft. and for the said area it is impossible to spend so much amount of Rs.3,88,87,592/- for improvement. The Assessing Officer has rightly disallowed the cost of improvement with indexation of the impugned property. The Ld. CIT(A) has also rightly sustained the additions made by the Assessing Officer. Therefore, he submitted that the additions should be sustained.

8. We have given our thoughtful consideration to the various arguments of the learned counsel for the assessee along with relevant evidences and the reasons given by the Assessing Officer for not allowing the cost of improvement with indexation, and, we ourselves do not subscribe to the reasons given by the Assessing Officer for the simple reason that, as per purchase deed dated 28.07.2014, the assessee has purchased a house consisting of semi constructed house whereas the assessee sold the property on 10.08.2017 which was fully completed with all doors, windows, fittings, electrical fittings, electrical service connections, security deposits with electricity department & GHMC for water and sewerage connections, etc. The evidences filed by the assessee i.e. purchase deed of the property and sale deed clearly shows distinction between what was purchased by the assessee and what was sold by the assessee. Further, the assessee has also furnished ledger accounts of various contractors along with bills (including bills of VR Associates, Mohammed Abdul Masseh, Abdul Sattar Abdul Gani, Salaries payment, Aparna Enterprises Limited, Mohd. Abdul Habeen, Uday Heights Pvt. Ltd.), for expenditure incurred for Rs.3,88,87,592/- for further construction of house property and improvement to the house property. Since there is a clear evidence for improvement of the house property and also there was difference between what was purchased by the assessee and what was sold by the assessee, in our considered opinion, the reasons given by the Assessing Officer to disallow the cost of improvement with indexation cannot be accepted. Further, the cost incurred by the assessee towards construction of house property cannot be said to be excessive or unreasonable only on the basis of super built up area of 8000 sq.ft and what is required to be seen is the type of house construction by the assessee and quality of the material used. In absence of relevant details, the cost incurred by the assessee of Rs.3,88,87,592/- for construction and improvement of house property with all supporting bills and vouchers cannot be said to be not commensurate with super built up area of 8000 sq. ft. In our considered view, the observation of the Assessing Officer with regard to cost of improvement of Rs.3,88,87,592/- in light of super built up area of 8000 sq. ft is only on the basis of suspicion and surmise and not backed by any evidence. Since there are clear evidences in the form of bills and vouchers for incurring expenditure towards house property and further there is a clear difference between the schedule of property purchased by the assessee and the property sold by the assessee for the year under consideration, in our considered view, the additions made by the Assessing Officer and sustained by the Ld. CIT(A) cannot be upheld. Thus, we set aside the order of Ld. CIT(A) and direct the Assessing Officer to delete the additions made on account of cost of improvement with indexation of Rs.4,05,72,447/-.

Order pronounced in the open Court on 10th Dec., 2025.