SHAILESH NATVARLAL PATEL,AHMEDABAD vs. THE ITO, WARD-4(2)(3), AHMEDABAD

2. The Learned Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi has erred in confirming the addition of Rs.6,96,236/- made by the Assessing Officer for the long term capital gain income by making disallowance of stamp duty expenses of Rs.48,000/-, Other expenses of Rs.1,72,675/- and improvement expenses of Rs.1,00,000/- as claimed by the appellant while computing the income from capital gain in the return of income filed.

3. The appellant craves leave to add, alter, amend or modify any of the grounds of appeal

on or before the date of hearing of appeal.

7. During the course of hearing before us the learned Authorised Representative for the assessee submitted that the addition of Rs.6,96,236/- sustained by the lower authorities as long-term capital 4 gain is wholly unjustified in law and on facts. He pointed out that the disallowances made by the Assessing Officer towards stamp duty of Rs.48,000/-, other incidental expenses of Rs.1,72,675/-, and cost of improvement of Rs.1,00,000/- were not on account of any finding of falsity or contradiction in the assessee’s claims, but merely on the ground that the evidence furnished was not sufficient in the opinion of the Assessing Officer. The AR contended that the same approach was followed by the learned CIT(A) who summarily affirmed the disallowances without independently appreciating the evidentiary value of the material on record.

8. The AR emphasized that the assessee had duly furnished relevant documentary evidence before both the Assessing Officer and the CIT(A), including the sale deed, cost records, and submission confirming the cost of improvement. The explanation regarding stamp duty being the cost of stamp paper used for executing the original purchase deed was also placed before the lower authorities. However, instead of examining the veracity and completeness of the evidence, the authorities chose to disregard it entirely, without pointing out any specific defect or contradiction. The AR submitted that such an approach defeats the basic principles of evidence appreciation under taxation jurisprudence.

9. On being informed by the Bench of a possible inclination to restore the matter back to the file of the Assessing Officer for fresh adjudication, the learned AR objected and contended that since the assessee had already placed all relevant documentary evidence before the lower authorities, it would be unjust to remand the matter to the Assessing Officer. The AR submitted that the assessee is not pressing for remand and in fact requests that the matter be adjudicated on merits based on the material already available on record. In support of his submissions, the AR placed reliance on the judgment of the Hon’ble Gujarat High Court in the case of Rajesh Babubhai Damania v. ITO [(2001) 251 ITR 5 541 (Guj)], wherein it was held that once the assessee has discharged the burden by producing relevant material, the Tribunal cannot remand the matter to the Assessing Officer merely to allow a “fresh inning” when no material has been found to rebut the assessee’s evidence. It was observed therein that appellate proceedings are not meant to grant additional opportunity to the lower authorities in absence of any demonstrable deficiency in the assessee’s explanation. The AR submitted that the ratio of the aforesaid judgment squarely applies to the present case, where the assessee has produced all possible documentation in support of his claim and has cooperated with the assessment and appellate proceedings. Therefore, it was prayed that the matter be decided on merits, in favour of the assessee, in light of the material already on record.

10. At this stage, when the Bench specifically queried the AR as to whether the assessee would be in a position to furnish any further supporting documents to substantiate the payment in respect of vouchers already placed on record at page nos. 56 and 57 of the paper book, the AR candidly submitted that the assessee is unable to produce any additional payment details or supporting records, as the transactions pertain to a very old period, and such details are no longer available with the assessee.

12. All the above claims were disallowed on the ground of lack of adequate documentary evidence. The CIT(A) confirmed the disallowances, without properly appreciating the evidentiary value of the records furnished.

ii. A voucher dated 22.07.2005 showing receipt of Rs.1,04,000/- in cash for civil improvement, reasonably rounded off by the assessee to Rs.1,00,000/-.(paper book page No. 57) 14. These vouchers are specific, dated, and signed acknowledgments of cash payments made by the assessee for works executed in the property. The names of the assessee and property location (Virat Complex, Varanasi) are clearly mentioned. More importantly, the phrase “received in cash” (Nagad) is expressly stated. While these are not formal invoices supported by banking documents, they represent contemporaneous records of genuine capital expenditure, which the assessee has preserved and produced. The Revenue has not disproved their authenticity, nor alleged fabrication. It is also notable that these 7 expenses were incurred several years prior to the sale of the property in 2017, at a time when cash payments to local contractors for interior and improvement works were commonplace. In such context, evidentiary requirements must be interpreted pragmatically, balancing commercial reality with documentary discipline. The modest scale of expenditure, its consistency with the assessee’s financial position, and the absence of any contrary evidence from the Revenue reinforce the bona fide nature of the claims. With regard to the stamp duty of Rs.48,000/-, the same represents the value of the stamp paper used for the original purchase deed of the property. This is a standard and allowable component of the cost of acquisition under section 48 and is clearly evidenced in the purchase deed forming part of the assessment record and paper book. Separately, the assessee has also claimed Rs.88,200/- as stamp duty paid in respect of the new residential property purchased post-sale, forming part of the investment made towards exemption under section 54. The said payment is handwritten on the sale deed itself, which is on record. There is no dispute regarding the identity of the property or the transaction itself. Since the exemption under section 54 is to be allowed on the actual investment made in a residential house, including registration and stamp duty charges, the stamp duty of Rs.88,200/- forms a valid part of such investment and must be included while quantifying the exemption allowable under section 54. We have also considered the reliance placed by the AR on the judgment of the Hon’ble Gujarat High Court in Rajesh Babubhai Damania v. ITO [(2002) 122 Taxman 614 / 251 ITR 541]. While that case involved loan confirmations and production of creditors, the principle that once the assessee discharges the initial burden of proof, the claim should not be rejected merely on suspicion (particularly when not doubted by the lower authorities), holds true in the present case as well.

8 • The cost of acquisition shall include: o Stamp duty of Rs.48,000/-, o Interior work of Rs.1,70,000/-, o Improvement expenditure of Rs.1,00,000/- • The investment eligible for exemption under section 54 shall include: o Stamp duty of Rs.88,200/-, as evidenced in the sale deed of the new property. 16. The Assessing Officer is directed to re-compute the long-term capital gain and eligible exemption under section 54 accordingly. The grounds of appeal are, therefore, allowed.

Order pronounced in the Court on 6th May, 2025 at Ahmedabad.