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Before: Shri A. Mohan Alankamony & Shri Duvvuru RL Reddy
O R D E R
PER DUVVURU RL REDDY, JUDICIAL MEMBER:
This appeal filed by the Revenue is directed against the order of the Commissioner of Income Tax (Appeals) 4, Chennai dated 21.09.2016 relevant to the assessment year 2012-13. The Revenue has raised the following grounds: “1. The ld.CIT(A) erred in directing the Assessing Officer to adopt the cost of acquisition at Rs.1,17,000/- as against Rs.75,000/- adopted by the Assessing Officer.
The ld.CIT(A) erred in law and in facts in directing the Assessing Officer to adopt Rs.1,17,000/- as cost of acquisition when the assessee had failed to produce any evidence to substantiate its claim.
3. The ld.CIT(A) erred in law and in facts in directing the Assessing Officer to adopt Rs.48,83,000/- as cost of improvement when the assessee failed to produce any evidence regarding the expenses incurred for renovation of the impugned property. 4. The ld.CIT(A) erred in law and facts in not considering that the onus is on the assessee to prove the claim of expenses made in the Return of Income- tax.” 2. The appeal of the Revenue is found to have been filed late by one day before the Tribunal. By referring to the petition for condonation of delay, the ld. DR has explained that since the concerned Assessing Officer was on leave, the Department was constrained to file the appeal in time. The ld. DR, citing the above reason requested for condoning the short delay and to admit the appeal for hearing. The ld. Counsel for the assessee did not object to the submissions of the ld. DR and therefore, we condone the delay of one day in filing the appeal and admit the appeal for hearing.
Brief facts of the case are that the assessee is an individual and filed her return of income on 31.08.2012 admitting total income of ₹.60,75,920/- consisting salary at ₹.26,61941/-, long term capital gains at ₹.22,13,146/- and income from other sources at ₹.13,35,832/-. After claiming VIA deduction of ₹.1,35,000/-, the total income was arrived at ₹.60,75,920/-. The return filed by the assessee was selected for scrutiny and the assessee filed all details against statutory notices.
3.1 During the course of assessment proceeding, the Assessing Officer noticed that the assessee sold a house property on 24.02.2012 along with other two co-owners for a total consideration of ₹. 13,50,00,000/-. As per the document No. 385/2012 registered with SRO, Adyar, each person was in receipt of ₹.4,50,00,000/-. The assessee has in her return of income admitted ₹.4,50,00,000/- as full value of consideration. The assessee has claimed indexed cost of acquisition at ₹. 47,86,854/-. The assessee has not claimed any indexed cost of improvement and also expenditure on transfer. The balance amount after deduction of indexed cost of acquisition was arrived at ₹.4,02,13,146/-. Against this, the assessee has claimed the exemption under section 54 of the Act to the tune of ₹.3,80,00,000/- and arrived at taxable Long Term Capital Gain of ₹. 22,13,146/-.
3.2 After examining the sale deed No. 235 of 1971 dated 05.02.1971, the Assessing Officer observed that the assessee purchased the said property for a consideration of ₹. 75,000/-. However, the assessee has taken 1981 value of the above property at ₹.1,17,000/- and worked out indexed cost of acquisition. No documentary evidence for ₹. 1,17,000/- was filed by the assessee. Hence, the Assessing Officer has taken the value as on 01.04.1981 at ₹.75,000/- only. Accordingly, the indexed cost of acquisition was worked out at ₹.5,88,750/- (Rs, 75,000 * 785/100).
3.3 The assessee has claimed cost of improvement at ₹.4,40,000/-, ₹.16,00,000/- and ₹.78,00,000/- in the years 1981, 1996 and 2008 respectively. Since the assessee has not furnished any documentary proof for the above said claim, the Assessing Officer rejected the same. Further, in respect of indexed cost of improvement in the year 2008, the A.R. produced some bills before the Assessing Officer, which were in the name of M/s Studio Tara. The AR submitted that the vouchers are in the name of Studio Tara which is a concern owned by Smt. Bharathi Raviprakash, sister of the assessee. The additions were done by her on behalf of all the three persons as she was living there at that time and moreover, only one third of the total cost of additions were claimed, which is reasonable. However, since the assessee could not be able to prove that the above bills were relating to improvements made to the above property and why the bills were in the name of M/s Studio Tara, the Assessing Officer did not accept the above plea of the AR since he has not produced any documentary evidence showcasing that the expenditure incurred were not debited to M/s Studio Tara account and that the expenditures were spent by the owners of the property from their own funds with sufficient documentary evidence.
The assessee carried the matter in appeal before the ld. CIT(A). After considering the submissions of the assessee, the ld. CIT(A) directed the Assessing Officer to adopt the cost of acquisition at ₹.1,17,000/- as against ₹.75,000/- adopted by the Assessing Officer. Further, with regard to the cost of improvement, the ld. CIT(A) directed the Assessing Officer to adopt ₹.48,83,000/- as cost of improvement.
Aggrieved, the Revenue is in appeal before the Tribunal. The ld. DR vehemently argued that since the assessee has failed to produce any evidence to substantiate its claim of cost of acquisition as well as cost of improvement and moreover, the onus is on the assessee to prove the claim in the return of income, the order of the ld. CIT(A) on these issues should be reversed and restored that of the Assessing Officer.
On the other hand, the ld. Counsel for the assessee strongly supported the order passed by the ld. CIT(A).
We have heard both sides, perused the materials available on record and gone through the orders of authorities below. With regard to the indexed cost of acquisition, the assessee has taken the value of the above property as on 01.04.1981 at ₹.1,17,000/-. Since no documentary evidence for adopting fair market value at ₹. 1,17,000/- was filed by the assessee, the Assessing Officer has taken the actual sale consideration as fair market value of the property as on 01.04.1981 at ₹.75,000/- only. On appeal, it was the submission of the assessee that the property was acquired in 1971 for a price of ₹.75,000/- and the fair market value of the property was taken at ₹.1,17,000/-, which is reasonable since for a ten year period, the inflation was assumed to be 56% only. Moreover, it is impractical and not required to maintain proof for a property bought 44 years ago, where, the Act required to maintain the records for a period of six years only except under specific circumstances. It was further submission of the assessee that the property was purchased by the grandparents of the assessee and they all died and therefore, the assessee was unable to furnish any evidence. After considering the above submissions, the ld. CIT(A) has observed that the claim of the assessee is quite reasonable and accordingly, he directed the Assessing Officer to adopt the FMV of the property at ₹.1,17,000/- and recalculate the capital gain. The only contention of the Department is that the assessee could not file any evidence to substantiate her claim. However, the ld. DR fairly conceded that it is neither practical nor required to maintain proof for a property bought nearly 44 years ago and moreover, the Act requires an individual to maintain the records for a period of six years only except under specific circumstances. Under the above facts and circumstances, we find that the ld. CIT(A) has rightly accepted the submissions of the assessee and directed the Assessing Officer to adopt the FMV of the property at ₹.1,17,000/-, which is very reasonable because for a ten year period, the inflation was assumed to be 56% of the actual sale consideration of the property. Thus, the ground raised by the Revenue stands dismissed.
The next ground raised by the Revenue relates to adoption of cost of improvement. With regard to the issue of additions/expansion claimed to have been carried out by the assessee or the previous owners in the year 1981, 1996 and 2008 at ₹4,40,000/-, ₹.16,00,000/- and ₹.78,00,000/- respectively, the assessee does not have any kind of documentary evidence to substantiate the same. Therefore, the Assessing Officer rejected the claim of the assessee.
8.1 On appeal, after considering the submissions of the assessee, the ld. CIT(A) directed the Assessing Officer to work out of the capital gains by taking the figure of ₹.48,83,000/- as cost of renovation/expansion.
8.2 Aggrieved, the Revenue is in appeal before the Tribunal. The ld. DR contended that the assessee has failed to produce any piece of evidence to substantiate the expenses incurred for renovation of the impugned property. On the other hand, by supporting the order passed by the ld. CIT(A), the ld. Counsel for the assessee submitted that based on the value adopted by the Sub-Registrar for the purpose of stamp duty and registration purposes, the ld. CIT(A) determined the cost of expenditure on the expansion/renovation of the impugned property since it was not possible for the assessee to produce any evidence for the event which would have been taken place after 20 or 30 years later.
8.3 We have considered the rival submissions. The assessee claimed cost of improvement relating to the years 1981, 1996 and 2008. Since no documentary evidence was produced, the Assessing Officer rejected the claim of the assessee. Before the ld. CIT(A), the assessee has argued that nobody can apprehend an event which would be taking place after 20 or 30 years later with regard to maintaining the entire records towards cost of improvement made in the property. However, the ld. CIT(A) observed that the fact may be true but it is also not understandable as to how the assessee could figure out the exact amount of expenditure claimed have been incurred towards such renovation or expansion and opined that the genuineness and authenticity of the claim is highly doubtful.
8.4 At the same time, the ld. CIT(A) also observed that it will be highly unjustified to hold that not even single penny was expended on the renovation or expansion of the house during the entire period of 44 years. Therefore, in order to find out as what could be the amount of such expenditure, the ld. CIT(A) made a reference to the Sale Deed of the impugned property executed on 24.02.2012 between the vendors Ms. Bharathi Raviprakash, Ms. Gayathri Ramamurthy (assessee) and Mr. Srinath Ramamurthy with the Purchaser Mr. P. Ravi. On perusal of the registered Sale deed, the same was registered with the office of the Sub Registrar, Adyar, Chennai and the ld. CIT(A) noticed from Annexure 1-A which is a document that tells about the market value of the property transacted, the details of the properties etc. for the purposes of the Stamp Duty and Registration Charges. As per Annexure 1-A, the age of the building was mentioned as 40 years with the 3.85 grounds of land along with super built up area of 6400 square feet (4000 sq. ft. in the ground floor and 2400 sq. ft. in the first floor). The cost of land has been determined at ₹.13,00,00,000/-. The value of the building has been worked out at ₹.50,00,000/- and the total value of the property was calculated at ₹.13,50,00,000/-. From the above details, it is evidently clear that the value of the property on the date of sale on 24.03.2012 was ₹.50,00,000/- which included the cost of renovation/expansion and also the cost of acquisition of ₹.1,17,000/-, as accepted by the assessee. Therefore, the ld. CIT(A) determined the cost of expenditure of expansion/renovation of the impugned property at ₹.48,83,000/- [₹.50,00,000 – ₹.1,17,000] and directed the Assessing Officer to adopt the same as cost of improvement. The argument of the ld. DR that the assessee has not filed any evidence for the claim of expenses is not acceptable, because, it is not possible for the assessee to produce any evidence for the event which would have been taken place after 20 or 30 years later. However, by considering the value adopted by the SRO for stamp duty and Registration, as detailed above, we are of the considered opinion that the ld. CIT(A) has rightly determined the cost of expenditure on expansion/renovation of the impugned property and accordingly, we find no reason to interfere with the order passed on this issue. Thus, the ground raised by the Revenue stands dismissed.
In the result, the appeal filed by the Revenue is dismissed. Order pronounced on the 11th April, 2018 at Chennai.