Loading judgment…
Facts
The assessee, Smt. Kusum Devi, sold an immovable property in A.Y. 2010-11. The assessment was reopened under Section 147, and the Assessing Officer recomputed her income, disallowing a significant part of her claimed cost of improvement for lack of evidence. The CIT(A) partly allowed her appeal, directing the AO to consider a portion of renovation cost and indexation benefit, but rejected further claims regarding improvement costs and the contractor's affidavit.
Held
The Tribunal held that the assessee had sufficiently established her claim for expenditure on renovation and construction. It found that the CIT(A) was not justified in rejecting the contractor's affidavit and the son's declaration, especially when the contractor had appeared before the AO and reiterated his deposition. The Tribunal allowed a further deduction of Rs. 3,68,000/- for the cost of improvement.
Key Issues
Whether the assessee is entitled to a deduction for the full claimed cost of improvement of an immovable property for long-term capital gains computation, particularly when additional evidence like a contractor's affidavit and bank withdrawals were presented.
Sections Cited
147, 143(3), 250, 148, 139, 50C
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, JAIPUR BENCHES,”SMC” JAIPUR
Before: SHRI RATHOD KAMLESH JAYANTBHAI, AM & SHRI NARINDER KUMAR, JM vk;dj vihy la-@ITA No. 1305/JPR/2024
fu/kZkj.k o"kZ@Assessment Year : 2010-11 Smt. Kusum Devi Cuke The ITO, Vs. 2, 517, Kala Kaun H.B. Aravli Ward-2(3), Vihar, Alwar. Alwar. LFkk;hys[kk la-@thvkbZvkj la-@PAN/GIR No.: DWQPD0130K vihykFkhZ@Appellant izR;FkhZ@Respondent fu/kZkfjrh dh vksj ls@Assessee by : Sh. Anoop Bhatia, C.A. jktLo dh vksj ls@Revenue by: Sh. Gautam Singh Choudhary, JCIT lquokbZ dh rkjh[k@Date of Hearing : 07/05/2025 mn?kks"k.kk dh rkjh[k@Date of Pronouncement: 08/05/2025 vkns'k@ORDER PER: Narinder Kumar, Judicial Member Present appeal pertains to the assessment year 2010-11. The assessee, named above, is feeling aggrieved by the order dated 29.08.2024, passed by Learned CIT(A), passed u/s 250 of the Income Tax Act, 1961 (hereinafter referred to as “the Act”).
2. Vide impugned order, Learned CIT(A) has partly allowed the appeal filed by the assessee.
Kusum Devi, Alwar The assessee was before Learned CIT(A), while challenging the assessment order dated 15.11.2017, passed by the Assessing Officer u/s 147 r.w.s. 143(3) of the Act. Admittedly, the Assessing Officer reopened the assessment and after providing opportunity of being heard to the assessee recomputed her total income as under:- “1. Salary income (As shown in the ITR) Rs. 98,505/- 2. Capital gain (short term):- Rs. 6,94,497/- - Sale consideration (u/s 50C) Rs. 15,49,515/- - Deduction (as discussed in para 2 above) Rs. 8,55,018/- 3. Income from other sources: (as declared in ITR) Rs. 307/- Total Rs. 7,93,309/-“
3. While dealing with the appeal of the assessee, Learned CIT(A) felt satisfied that the assessee had established, by way of production of bills, that a sum of Rs. 65,040/- was incurred towards renovation/construction of immovable property i.e. House No. 2/517, SWB, Kala Kuwa Housing Board, Alwar. Accordingly, the Assessing Officer was directed to consider a sum of Rs. 65,040/- as cost of improvement and also to allow the benefit of indexation for the purpose of computation of long term capital gains.
Hence, this appeal by the assessee.
Arguments heard. File perused.
Kusum Devi, Alwar 6. As noticed above, the assessment was reopened u/s 147 of the Act, and notice u/s 148 of the Act was issued to the assessee on 31.03.2017. The assessee furnished return of income declaring income of Rs. 98,810/-, in response to the above said notice.
It is an admitted fact that the assessee sold the above said immovable property i.e. House No. 2, situated at Alwar, vide registered sale deed dated 08.10.2009 and executed sale deed in favour of her daughter in law Smt. Manisha Sharma W/o Shri Simant Chaturvedi; that the Sub- registrar valued the property at Rs. 15,49,515/- as against the value of Rs. 9,00,000/- as mentioned in the registered sale deed; and that the assessee had not filed any return of income u/s 139 of the Act.
From the computation sheet and some documents annexed thereto by the assessee in support of her claim for deductions, claim of the assessee as regards cost of acquisition was accepted only to the extent of Rs. 8,55,018/-, whereas for the remaining amount of Rs. 6,94,497/-, her claim was rejected.
The Assessing Officer was of the view that the assessee did not furnish any evidence in support of her claim for deductions of remaining sum.
Kusum Devi, Alwar Since the Assessing Officer observed that it was a case of escapement of income to the tune of Rs. 6,94,197/-, under the head “capital gains” , the Assessing Officer reopened the assessment.
As per return furnished by the assessee in response to the notice u/s 148 of the Act, the Assessee claimed deduction of Rs. 8,08,942/- towards cost of acquisition after indexation, and Rs. 7,59,686/- towards cost of improvement. Accordingly, the assessee depicted “Nil” income under the head “capital gains”.
Admittedly, immovable property was acquired on 01.12.1995 for a sum of Rs. 1,25,000/- and the assessee sold the same to her daughter in law vide registered sale dated 08.10.2009, depicting for a sale consideration of Rs. 9,00,000/-. It is also not in dispute that the Sub-registrar, before whom the sale deed was got registered, valued the property at Rs. 15,49,515/-, while resorting to the provisions of Section 50C of the Act. It may be mentioned here that while re-computing the income of the assessee, the Assessing Officer had computed capital gains as short term capital gains, but the assessee claimed that it was a case of long term capital gains, the immovable property having been purchased in Kusum Devi, Alwar December, 1995 and ultimately sold on 08.01.2009 by the assessee to her daughter in law. Learned CIT(A), accepted this claim of the assessee and treated the transaction as that of long term capital gains. In this regard, Learned CIT(A) was of the view that Section 50C of the Act is attracted in case of seller, who transfers immovable property at a rate of lesser than the value of the property as determined by the Stamp Valuation Authority, and further that the Assessing Officer had correctly invoked the provisions of Section 50C of the Act and considered the value determined by the Sub-registrar as the sale consideration for computation of capital gains. Learned CIT(A) did not find any merit in the claim of the appellant that the said transaction was exempted from the purview of tax. It may be mentioned here that said finding recorded by by Learned CIT(A) is not under challenge before us. What is under challenge before us is the expenses said to have been incurred for improvement of the said immovable property, but which were disallowed by the Assessing Officer to the extent indicated above.
Kusum Devi, Alwar Cost of Improvement 12. In proof of payment of labour, as regards a grill to Mahesh Iron & Fabrication, Alwar, before the Assessing Officer, the assessee furnished two bills by way of annexures to her reply dated 20.09.2017. The Assessing Officer rejected said two bills from being considered, on the ground that there was no bill number on the bills, and also because these were issued in the name of Simant Chaturvedi son of the assessee. That is how, the Assessing Officer allowed deductions only to the tune of Rs. 8,55,018/-, but disallowed the claim of deduction of Rs. 6,94,497/-, on the ground that there was no supporting documentary evidence.
As noticed above, before the Assessing Officer, the assessee produced only two bills in support of payment of labour as regards grill , but said evidence was rejected for want of bill No. and that the same was not in the name of the assessee, but in the name of her son.
Admittedly, when the assessee was in appeal before Learned CIT(A), she furnished some additional evidence. Learned CIT(A) forwarded the same to the Assessing Officer for his remand report. In the remand report, the Assessing Officer expressed that there was no reasonable cause to suggest as to what prevented the assessee to Kusum Devi, Alwar furnish the additional evidence in the assessment proceedings, and recommended that the additional evidence be not taken into consideration. However, Learned CIT(A) considered the additional evidence and partly allowed the appeal, as noticed above.
At this stage, it is pertinent to refer to the additional evidence which was admitted by the Learned CIT(A). From the impugned order, same can be gathered as under: “1. Affidavit from contractor Shri Lal Chand dated 21.01.2019 regarding construction of House No. 2/517, Kala Kuan, Housing Board, Aravali Vihar, Alwar for construction and renovation work amounting to Rs. 1,20,000/-, 1,78,000/- and 70,000/- for the F.Y. 1995-96,1997-98 and 2001-02 respectively.
Copy of saving bank a/c passbook of Bank of Baroda in the name of assessee Smt. Kusum Devi. As per submission of AR that withdrawals of Rs. 1,78,000/- was used for construction of house property during the F.Y. 1997-98. In the supporting of his facts, the AR has enclosed bills and vouchers of building material in the name assessee's sons of Shri Simant Chaturvedi and Pushkar Chaturvedi.
Declaration of Shri Simant Chaturvedi, son of assessee for expenditure incurred of Rs. 70,000/- on the construction of the house property of his mother during the F.Y. 2001-02. As per declaration, the source of expenditure of above amount was out of his salary income from Railway job.”
In the appeal before Learned CIT(A), the assessee claimed that the assessment order disallowing the cost of improvement was bad in law, especially when she had submitted corroborative evidence before the Assessing Officer in support of her claim regarding improvement.
Kusum Devi, Alwar 17. Admittedly, before Learned CIT(A), the assessee presented affidavit dated 21.01.2019, of Shri Lal Chand, contractor who is stated to have got done /carried out construction work after procuring material for construction of the subject immovable property. Learned CITI(A) rejected from consideration said affidavit of the contract, by observing as under:- “As regards the expenses incurred for improvement, the submission of the affidavit of the contractor and certain bills by the appellant are considered. It is seen from the affidavit dated 21.01.2019 of the contractor that he had admitted to carry out the construction and the renovation work at appellant residence. However, the appellant has not furnished the copy of I return, if any, filed by the said contractor wherein he had offered the corresponding income received from the appellant. The appellant had also admitted that the contractor had not maintained any books of account. It is further seen that the affidavit is furnished by the contractor after nearly 18 to 24 years from the year in which the renovation/construction work was carried out. In his remand report the AO had recorded the statement of contractor. However, the contractor did not submit any document in support of his claim of carrying out the renovation work before the AO. It is against the principal human probability that a person who had neither filed any return nor maintained any books of account will remember the consideration received in various years for carrying out the work at appellant's place after a lapse of around 18 to 24 years. Therefore, the affidavit submitted by the contractor after lapse of nearly 20 years from the year in which the renovation work was carried out has no evidentiary value.
Ld. DR for the department admits that the contractor appeared in the proceedings conducted by the Assessing Officer for the purpose of submission of remand report, as regards the additional evidence, and that the said contractor even made statement before the Assessing Officer.
Kusum Devi, Alwar The contention of Ld. DR is that since the contractor did not submit any document in support of contents of his affidavit, as regards carrying out of renovation work, this piece of additional evidence by way of affidavit of the contractor, submitted after 18 to 24 years, has been rightly rejected.
It is true that the contractor was not maintaining any books of accounts and the matter pertains to the period 1995 - 96, 1997-98 , 2001- 2002. But, simply on this ground, the assessee could not be deprived of benefit available to the assessee under the law We find that Ld. AR for the appellant is right in submitting that even though the contractor did not furnish copy of his return of income for the relevant period i.e. when improvement/ construction was made, and that the contractor had not maintained any books of accounts, but the said evidence by way of affidavit should not have been discarded particularly when the contractor appeared before the Assessing Officer during proceedings conducted by him for submission of remand report about additional evidence. In the given facts and circumstances of the case, in our view Learned CIT(A) should not have rejected the evidence of the contractor by way of his evidence, particularly when the said contractor appeared before the Assessing Officer and on oath reiterated deposition as regards the Kusum Devi, Alwar renovation/construction work carried out by him, in respect of the above said immovable property.
As per affidavit furnished by the contractor, he had carried out construction/renovation work as regards the said immovable property/house to the tune of Rs. 1,20,000/- during the years 1995-96; to the tune of Rs. 1,78,000/- in the years 1997-98; and to the tune of Rs. 70,000/- during the years 2001-02. It may be mentioned here that Learned CIT(A) took into consideration three bills dated 05.11.1995, 10.12.1995, 25.12.1995 for a sum of Rs. 6,470/-, Rs. 21,300/- and Rs. 19,880/- respectively, as regards purchase of material from Shyam Sanitary Wares , and fourth bill dated 20.2.1996 for a sum of Rs. 20,000/- as regards labour expenses paid to Mahesh Iron & Fabricators. As regards the expenses incurred in the years 1997-98, the assessee produced two bills i.e. bill dated 8.8.1997 for Rs. 15,770/- issued by Shyam Sanitary Wares for purchase of material, and bill dated 24.1.1998 for Rs. 20,000/-towards labour expenses. These bills supported the claim of the assessee and also the deposition of the contractor, on affidavit, and by way of his deposition Kusum Devi, Alwar before the Assessing Officer as regards expenses incurred during the period from 1995-96 and 1997-98.
As regards source of payment of the said expenses incurred on improvement, the assessee claimed before Learned CIT(A) that a sum of Rs. 1,78,000/- was withdrawn from her bank account. In this regard, Learned CIT(A), on perusal of the pass book found that as on 21.11.1997 there was total withdrawal of Rs. 1,48,000/- only. Learned CIT(A) did not believe said claim of the assessee on the ground that no entry regarding payment to the contractor was appearing in the bank statement and because there was no nexus of said withdrawal to the expenses incurred.
It is not case of the assessee that the said amount of Rs. 1,78,000/- was paid by her to the contractor through banking channels. Department was not having any material available with it to suggest that in November, 1997 or soon thereafter the assessee incurred expenses some elsewhere. From the material produced by the assessee, after so many years, she probablized her claim regarding payment of Rs. 1,78,000/- to the contractor as regards construction/renovation work carried out in the year 1997-98. Accordingly, said evidence could not be discarded from being accepted.
Kusum Devi, Alwar Once the abovesaid evidence was accepted, relating to period 1997- 98, in absence of any other material from the side of the department, Learned CIT(A) was not justified in rejecting the deposition of the contractor regarding expenditure of Rs. 1,78,000/- during said years, for renovation/construction of the said house.
As regards expenditure of Rs. 70,000/- appearing in the affidavit of the contractor, during period 2001-02, affidavit of the contractor has gone unchallenged. As noticed above, the contractor appeared before the Assessing Officer in the proceedings for the purposes of remand remand as regards additional evidence, and then made statement before the Assessing Officer. Furthermore, before the Learned CIT(A), Simant Chaturvedi son of the assessee produced his own affidavit to the effect that he was employed in Indian Railways since 06.09.2001; and that from his salary he had contributed a sum of Rs. 70,000/- towards construction/renovation of the above said house, which ultimately came to be transferred to the name of his wife Smt. Manisha Sharma, by his mother -the assessee. Said affidavit of the son of the assessee has also gone unchallenged.