What did the Tribunal hold?

The Tribunal found that the AO's inquiry to the contractor was misdirected to a different property. Therefore, the disallowance was not justified, and the matter was restored to the AO for fresh adjudication.

The assessee sold an immovable property (shop) and claimed the cost of improvement incurred in 1990-91. The Assessing Officer (AO) disallowed this claim without proper verification.

What were the issues?

Whether the AO properly verified the claim for improvement cost before disallowing it, and if a misdirected inquiry invalidates the disallowance.

Shri Surji Ramji Gada vs ITO | ITAT Mumbai 2019

Income Tax Appellate Tribunal, “SMC” BENCH, MUMBAI

Before: SHRI R.C. SHARMA

Hearing: 06/11/2019

आदेश / O R D E R PER R.C. SHARMA (AM): This is an appeal by the assessee against order of the CIT(A) for the A.Y 2011-12, in the mater order passed u/s 143(3) of the Act. In this appeal the assessee is aggrieved for not considering the improvement cost incurred by the assessee in respect of shop No.1 on ground floor of building.

. Shri Surji Ramji Gada, Mumbai. - 2 - 2. I have considered the rival contentions and found that during the relevant assessment year assessee Shri Surji Ramji Gad jointly with his two brothers Shri Hansraj Ramji Gad and Shri Hemchand Ramji Gada all three co-owners had sold the immovable property being Shop No.1 on ground floor of building known as chandalok-A situated at 97, Nepeansea Road, Mumbai-400 006 for total consideration of Rs. 69,00,000/-. As per the agreement of sale dated 22.12.2010 each having equal share received Rs. 23,00,000/- as his share in sale transaction of joint ownership property. The shop premises was originally purchased by Shri Ramji Karsan Gada, father of assessee for consideration of Rs. 50,000/- vide agreement of sale dated 27.11.1978. Cost index is effective from the beginning of 1st April 1981. As father of assessee purchased shop during the year 1978 the prevailing market

. Shri Surji Ramji Gada, Mumbai. - 3 - price of 1st April 1981 was taken as base price for computing capital gain.

I also found that during the F.Y 1990-91 strucatual repairing of shop premises, furniture, fixtures and contract was given to M/s. Patel Contractor at agreed cost of Rs. 11,90,000/- towards improvement, renovation of shop.

During the course of assessment proceedings the assessee has submitted detail cost of improvement and bill of person who has carried out said improvement. The A.O did send a letter to said contractor for confirming the job work. But instead of asking detail regarding shop at Chandralok Building at Nepeansea Road the assessing officer inquired him about shop at Malad (W). So the owner of M/s. Patel Contractor did not give reply. The A.O did not accept the assessee’s contentions and accordingly did not give any benefit of the improvement cost so incurred.

. Shri Surji Ramji Gada, Mumbai. - 4 - Before us, the assessee has filed a copy of bill raised by Patel Contractors amounting to Rs. 11,90,000/-. I found that A.O has wrongly sent enquiry letter with respect to the premises at Malwa Beach, Malad (W), Mumbai, which was not the property in the instant case. Accordingly there is no merit for decline of assessee’s claim without making proper enquiry. In all fairness I restore the matter back to the file of the A.O for deciding afresh after giving due opportunity of hearing to the assessee.

In the result the appeal of the assessee is allowed for statistical purposes.

SHRI SURJI RAMJI GADA,MUMBAI vs. INCOME TAX OFFICER WARD-16(2)(4), MUMBAI

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