SUSHILA BHARDWAJ,JAIPUR vs. ITO 1(4), JAIPUR, JAIPUR

per sq. feet considering the fact that in the PY 2015-16 during which the

assessee had sold her residential property per sq, ft. and the rate of

construction cost was around Rs. 1,200/- per sq. feet. Accordingly he

worked out that for construction of 2005 sq. feet of construction the cost of

the assessee in today`s time is Rs. 24,06,000 which has been treated by

12 ITA No. 604/JP/2023 Sushila Bhardwaj vs. ITO him as indexed cost of construction. The ld. AO by applying reverser

indexation process worked out cost of construction during 1982-83 at Rs.

2,42,600 which he opined to be rational based on the said working. The ld.

CIT (A) while dealing with the appeal of the assessee on this ground

sustained the order of the ld. AO (in para 5.1.3 at page 5 of his order) by

holding as under :-

“I have considered the submission of the appellant and the documents filed during the appeal proceedings. The submissions made in appeal were made before the AO also. As discussed in para 2 of the assessment order, the construction of the property was 32 years old. Further, it is an undisputed fact that the property in question was a constructed property, hence cost of improvement needs to be allowed to the assessee. Since the property is very old, the appellant is not expected to have kept the bills/vouchers pertaining to construction of the property. However, the appellant should have made due diligence to calculate the cost of improvement through a registered valuer. The appellant failed to provide any basis for taking the cost of improvement at Rs. 321/- per sq Ft. as in 1982 and 1983. The AO on the other hand has applied reverse indexation method for calculating the cost of improvement which is based on logic. In the absence of actual valuation of cost of improvement, I find the reverse indexation method to be the most practical method for computing the cost of improvement. Accordingly, the disallowance made by the AO of Rs.37,59,795/- is confirmed. The ground of appeal raised is hence dismissed.”

9.1 The action of the ld. AO determining estimated cost of construction at

present and considering the same as indexed cost of construction on

reverse indexation is not in accordance with law when the assessee has

objected and has placed his cost of construction stating that the same is

done in two year whereas the ld. AO has estimated the cost in one year

only and that too on reverse working considering the cost at the time of

13 ITA No. 604/JP/2023 Sushila Bhardwaj vs. ITO sale is not permissible. The bench has also noted that the assessee’ claim

for land was accepted but only the dispute made related to the cost of

construction. Since, it is also not disputed fact that if the matter is

remanded back to estimate the cost of construction the present building is

not there as stated by the ld. AR of the assessee. Thus, to give the justice

and to consider the principles of natural justice we considered the cost of

construction estimated by the approved valuer as guiding factor to render

justice to the assessee. The assessee claimed that construction of the

house had been done during PY 1982-83 and 1983-84 whereas the ld. AO

has nowhere denied this fact but for working out estimated cost during

1982-83 by adopting reverse indexation method he has shown his

satisfaction about the estimated cost as had been incurred during PY

1982-83. He has also stated that the ld. AO could not appreciate that then

constructed house of the assessee was having 2005 Sq. feet RCC

construction and 167.50 Patti Posh construction whereas the ld. AO

worked out estimated cost of construction for 2005 sq. ft RCC construction

only. Since there is no scientifical basis for arriving the cost of construction

by the ld. AO and as he is also not an expert person in the civil

construction field and hence his working is merely a work of his estimation

without any proof not only that the way he has estimated the cost of

14 ITA No. 604/JP/2023 Sushila Bhardwaj vs. ITO construction is also not correct he has first estimated the cost and then

apply the indexation of the subsequent indexation and not the reverse.

Since, the buyer of the property of the assessee had demolished the

residential house of the assessee and the construction is no more in

existence and hence at none of the stages i.e. before AO or CIT (A) she

could substantiate his cost and also not made any request to refer the

matter to Departmental valuation cell. Due to these circumstances the

assessee appointed a registered valuer (approved by CCIT, Jaipur) to

whom she had submitted parameters of the construction and based

thereon the valuer has estimated cost of construction of the house during

the years 1982-83 and 1983-84 by applying local PWD rates as prevailing

during these years. Such report has been submitted by the assessee with a

request for admission of this document as an additional document so as to

seek the justice and to be used as guiding tool the same is used for the first

time before us as a reasonable and scientific way of estimation of cost of

construction. In terms of the sub rule 4 to rule 18 of the ITAT Rules, 1963

we consider this evidence as a guiding support so as to give the justice to

the assessee. As per this valuation report the estimation made by the

registered valuer is Rs. 3.86 Lacs and in the report the valuer stated that in

absence of any requisite details it can safely be presumed that such

15 ITA No. 604/JP/2023 Sushila Bhardwaj vs. ITO estimated cost of construction may be divided equally between two years

viz. FY 1982-83 and 1983-84. The bench noted that the estimation done by

the ld. AO at Rs. 24,06,000 during PY 2015-16 is not in accordance with

the provisions of section 48. As per the provisions of section 48 read with

its explanation estimation of actual cost as had been incurred during the

relevant year has first to be estimated and thereafter only indexation has to

be applied whereas the ld. AO straightway jumped to estimating current

cost of construction and justified the same by reverse indexation is not

correct. The AO is silent on the issue as to why not he disturbed the rate of

land. It is not correct to accept only a part of the matter as correct and not

to accept other part of the matter without any justification. We also note that

the assessee had claimed cost of construction as had been incurred during

two previous years viz. 1982-83 and 1983-84 which fact seems to had

been completely ignored by the ld. AO. At one place in the order he doubts

about the construction period whereas in subsequent para he agrees to the

period 1982-83 by comparing the presently estimated cost by reverse

indexation. We also note that the ld. AO has used his estimations only

about the cost of construction. If he had any doubts he could have referred

the matter to Valuation Cell of the department, which he did not do and

proceeded as per his own estimations. Under these circumstances we

16 ITA No. 604/JP/2023 Sushila Bhardwaj vs. ITO accept the document said valuation in the interest of justice and equity and

direct the ld. AO to consider the cost of construction at Rs. 3,86,000 to be

distributed equally in the year 1982-83 & 1983-84 as against the claim of

the assessee at Rs. 6,44,300/- which will serve end to justice to both the

revenue as well as to the assessee. Based on this observation the appeal

of the assessee is partly allowed.

In the result, the appeal of the assessee is partly allowed.

Order pronounced in the open court on 01/03/2024. Sd/- Sd/- ¼ Mk0 ,l- lhrky{eh ½ ¼ jkBksM deys'k t;UrHkkbZ ½ (Dr. S. Seethalakshmi) (Rathod Kamlesh Jayantbhai) U;kf;d lnL;@Judcial Member ys[kk lnL;@Accountant Member

Tk;iqj@Jaipur fnukad@Dated:- 01/03/2024 *Ganesh Kumar, PS आदेश की प्रतिलिपि अग्रेf’ात@ब्वचल वf जीम वतकमत वितूंतकमक जवरू 1. The Appellant- Sushila Bhardwaj, Jaipur izR;FkhZ@ The Respondent- ITO, Ward-1(4), Jaipur 2. 3. vk;dj vk;qDr@ The ld CIT 4. vk;dj vk;qDr¼vihy½@The ld CIT(A) 5. विभागीय प्रतिनिधि] आयकर अपीलीय अधिकरण] जयपुर@क्त्ए प्ज्Aज्ए Jंपचनत xkMZ QkbZy@ Guard File (ITA No. 604/JP/2023) 6. vkns'kkuqlkj@ By order,

सहायक पंजीकार@Aेेज. त्महपेजतंत