LALIT PRAKASH,LUCKNOW vs. CIT(A), LUCKNOW
Income Tax Appellate Tribunal, SMC BENCH, LUCKNOW
Before: SHRI. SUDHANSHU SRIVASTAVAAssessment Year: 2020-21
This appeal has been preferred by the Assessee against the order dated 04.06.2024, passed by the ld. Commissioner of Income Tax (Appeal), National Faceless Appeal Centre (NFAC),
Delhi for Assessment Year 2020-21. 2.0
The brief facts of the case are that the assessee filed his return of income for the year under consideration on 11.08.2020, declaring a total income of Rs.7,42,700/-. Subsequently, the assessee filed revised return of income on 30.11.2020, disclosing
Long Term Capital Gain of Rs.2,650/- on the full value consideration of Rs.17,80,000/-. The case of the assessee was selected for scrutiny to verify the claim of cost of improvement of Rs.11,99,350/- in computing the Long Term Capital Gains and ITA No.474/LKW/2024 Page 2 of 6
the source of investment of Rs.5,20,000/- in Sardar Patel
Educational and Social Welfare Trust.
2.1
The assessee had sold an immovable property for a sale consideration of Rs.17,80,000/- and after claiming indexed cost of acquisition of Rs.5,78,000 and indexed cost of improvement of Rs.11,99,350/-, declared a Long Term Capital Gain of Rs.2650/-. During the course of assessment proceedings, the assessee submitted that the indexed cost of improvement represents Rs.4,15,000 invested in the year 1995 and furnished some bills towards purchase of bricks, etc. However, the Assessing Officer (AO) was of the view that the bills were bogus.
The AO, therefore, disallowed the claim of Rs.11,99,350/- being the indexed cost of improvement in computing the Long Term
Capital Gain and re-computed the Long Term Capital Gain at Rs.12,02,000/-.
2.2
Aggrieved, the assessee preferred an appeal before the NFAC, which partly allowed the appeal of the assessee, observing that the assessee may be allowed 50% rebate on the cost of improvement and the AO was directed to re-compute the Long
Term Capital Gain accordingly.
ITA No.474/LKW/2024 Page 3 of 6
3 Now, the assessee has approached this Tribunal challenging the impugned order of the NFAC by raising the following grounds of appeal: 1. The Commissioner of Income-tax (Appeals) has erroneously disallowed 50% of the indexed cost of improvement amounting to Rs.11,99,350 as claimed by the appellant. The appellant had incurred genuine expenses towards the improvement of the property, substantiated by an approved valuation report, and the disallowance is unjustified. 2. The Assessing Officer's (AO) rejection of the improvement cost based on the presence of mobile numbers on the bills was erroneous. The appellant had provided adequate evidence and an explanation regarding the difficulty in maintaining documents over an extended period. The rejection based solely on this ground is arbitrary and not based on substantial evidence. 3. The AO wrongly concluded that the property was purchased in the year 2003-04. The appellant has demonstrated ownership and possession since FY 1992- 93, supported by various documents, including EMI payments and registered deeds. 3.0 The Ld. Authorized Representative for the assessee (Ld. A.R.) submitted that the Ld. First Appellate Authority has erroneously disallowed 50% of the indexed cost of improvement without there being any valid reason for the same. It was submitted that the assessee had incurred genuine expenses
ITA No.474/LKW/2024 Page 4 of 6
towards improvement of the property and the same is also evidenced by the Report from an approved Valuer and has been placed on record. It was submitted that the assessee had provided explanation that since the cost was incurred way back in 1995, it was not possible to have retained the same as evidence and even otherwise, the assessee was not expected to maintain records for a period of more than Ten years as per the provisions of the Income Tax Act. It was submitted that rejection of assessee’s claim for cost of improvement in a summary manner was against the spirit of the law and it was prayed that the appeal of the assessee be allowed.
4.0
Per contra, the Ld. Sr. D.R. placed reliance on the findings of both the lower authorities and submitted that the ld.
CIT(A) had deleted 50% of the addition without there being any documentary evidence and, therefore, the interest of the assessee had duly been safeguarded by the Ld. First Appellate Authority.
It was prayed that the appeal of the assessee be dismissed.
5.0
I have heard the rival submissions and have also perused the material on record. The only issue in dispute before me is rejection of cost of improvement as claimed by the assessee. The assessee had claimed cost of improvement at Rs.4,15,000/- which was disallowed by the AO and the ITA No.474/LKW/2024 Page 5 of 6
disallowance was scaled down to 50% of such claim, i.e.,
Rs.2,07,500/- by the Ld. First Appellate Authority. A perusal of the impugned order shows that it was the assessee’s submission before the Ld. First Appellate Authority that the assessee had got possession of the property way back in 1995 which consisted of a single room and, thereafter, the assessee had spent an amount of Rs.4,15,000/- towards its improvement, whose indexed cost came to Rs.11,99,350/- in the captioned assessment year.
Before the AO as well as before the Ld. First Appellate Authority, the assessee expressed his inability to substantiate such claim of cost of improvement, as substantial time had lapsed. The Ld.
First Appellate Authority accepted the contention of the assessee and observed in page 3 of the impugned order that he found no rationale behind the above disallowance by insisting upon the proof of the expenses claimed and that considering the totality of facts, the complete denial of the claim was not called for and that the assessee may be given allowance of 50% of cost of improvement so claimed. Thus, it is seen that the Ld. First
Appellate Authority has, on one hand, duly accepted and observed that there was no rationale behind disallowance by insisting on the proof of expenditure and, on the other hand, he, on estimate basis, held that 50% of the allowance may be given.
This estimate by the Ld. First Appellate Authority does not have ITA No.474/LKW/2024 Page 6 of 6
any basis and further once the Ld. First Appellate Authority has himself stated that there was no rationale for asking for proof of expenses claimed, the entire disallowance deserved to be deleted.
Therefore, on an overall view of the facts of the case, I am of the considered opinion that the Ld. First Appellate Authority should have deleted the entire disallowance, if he himself has reached a conclusion that there was no rationale behind the AO’s action of requiring the assessee to furnish evidence of expenditure having been incurred. Accordingly, I set aside the order of the Ld. First
Appellate Authority and direct deletion of the entire amount and also direct that the entire cost of improvement as being claimed by the assessee be given to him.
6.0
In the final result, the appeal of the assessee stands allowed.
Order pronounced in the open Court on 04/07/2025. [SUDHANSHU SRIVASTAVA]
JUDICIAL MEMBER
DATED:04/07/2025
JJ: