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Facts
The assessee, an individual, did not file an original return for the assessment year 2018-19. The Assessing Officer (AO) re-opened the case upon learning the assessee sold an immovable property. The assessee disclosed total income and claimed a cost of improvement, but failed to provide sufficient evidence of payments.
Held
The AO allowed only 25% of the claimed cost of improvement due to lack of evidence, disallowing the remaining 75%. The CIT(A) upheld the AO's order. The Tribunal, while acknowledging the lack of proof, granted an additional 25% relief, allowing a total of 50% of the claimed cost of improvement.
Key Issues
Whether the re-assessment proceedings were validly initiated and whether the disallowance of 75% of the cost of improvement was justified.
Sections Cited
147, 148, 151A
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Income Tax Appellate Tribunal, NAGPUR BENCH, NAGPUR
Before: SHRI V. DURGA RAO & SHRI K.M. ROY, ACCOUNTANT, MEMBER
Date of Hearing – 07/01/2025 Date of Order – 27/01/2025
O R D E R PER V. DURGA RAO, J.M.
The aforesaid appeal by the assessee is against the impugned order dated 12/07/2024, passed by the learned Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Delhi, [“learned CIT(A)”], for the assessment year 2018–19.
In its appeal, the assessee has raised following grounds:–
“1. Whether the re assessment proceedings under section 147 of the Act and notice issued under section 148 of the Act have been issued in accordance with law after complying with the provisions of section 151A of the Act read with Notification No 18/2022 dated 29.09.2022? 2. Whether on the facts and circumstances of the case, the learned CIT(A) was justified in affirming the order of the assessing officer by allowing only 25% of cost of improvement claimed and disallowed balance 75%.
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3. Assessee craves leave to add or alter any other ground at the time of hearing.”
In this case, the assessee is an Individual and did not file original return of income for the year under consideration. The Assessing Officer re–opened the case. During the assessment proceedings, the Assessing Officer noticed that the assessee had sold immovable property for a consideration of ` 60 lakh and hence statutory notices were issued and served upon the assessee in response to which the assessee furnished copy of return of income filed on 31/05/2022, disclosing total income of ` 23,40,640 and claimed aggregate deduction of ` 25,11,711, wherein assessee’s share was ` 18,25,020, as cost of improvement incurred due to development activities carried out on the property in question against which a copy of bill was also furnished. The Assessing Officer was of the view that since the assessee did not produce the evidence of the payments made for the cost of improvement and also the bills produced did not match with the expenditure claimed, the Assessing Officer allowed only 25% of the cost of improvement claimed and disallowed balance 75% thereby making an addition of ` 21,84,268 as long term capital gain.
On appeal, the learned CIT(A) upheld the order passed by the Assessing Officer. The observation of the learned CIT(A) are reproduced below:–
“8.1 The appellant claimed that he has incurred total expenses of Rs. 18,25,020/- on land leveling, cutting of trees, earth filling and craving out road, cemented boundary wall and steel gate at entrance. The appellant produced some bills from Nikhil Construction which do not contain any bill nos. The said bills are of FY 2009-10, 2012-13 & 2013-14. The appellant has not been able to prove the payment made to Nikhil Construction. The total payment claimed to have been made by the appellant and his co-owner is Rs.35,12,088/-. From which bank account, this payment has been made has not been explained. As there are no bill nos. on the bills produced from Nikhil Construction, the authenticity of the said bills is questionable. In such case,
3 Himmat Ramjibhai Patel ITA no.479/Nag./2024 the appellant should have produced the bank evidences of having made the payments to Nikhil Construction. The appellant did not produce any such evidences either before the AO or during appellate proceedings. The claim of cost of improvement is substantial, it is not a small amount to say that the payment has been made in cash. Unless this payment is made out of explained sources, the cost of improvement as claimed by the appellant cannot be allowed. The appellant has also not been able to prove with any books of accounts for the relevant period that such expenditure on improvement of the land purchased was incurred and accounted in the relevant FYs. The AO has allowed 25% of such expenditure which in my opinion is quite just and judicious. Therefore, the action of the AO in allowing 25% of cost of improvement claimed is upheld. Accordingly, the addition/disallowance of Rs.21,84,268/- is upheld. Ground No.3 to 7 are dismissed.”
The assessee being aggrieved is in further appeal before the Tribunal.
We have heard the rival arguments, perused the material available on record and gone through the orders of the authorities below. We find that the assessee purchase an immovable property for a consideration of ` 60 lakh (assessee’s share) and claimed commission to broker and cost of improvement aggregating to ` 18,25,020 (assessee’s share). The Assessing Officer granted 25% of the cost of improvement in assessee’s share which was claimed by the assessee. The learned CIT(A) upheld the order of the Assessing Officer. Keeping in view the overall facts and circumstances of the case and the arguments putforth by the parties before us, to meet the ends of justice, we deem it fit and appropriate to grant further 25% of the cost of improvement insofar as assessee’s share is concerned by leaving balance of 50% share of cost. Thus, the assessee gets relief of further 25% of the cost of improvement other than the 25% so granted by the Assessing Officer which was confirmed by the learned CIT(A).
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In the result, appeal filed by the assessee is partly allowed. Order pronounced in the open Court on 27/01/2025