GIRISH KUMAR KESHARI,VARANASI vs. DCIT, CIRCLE - 01, VARANASI

SHRI VIJAY PAL RAO, JUDICIAL MEMBER: This appeal by the assessee is directed against the order dated 22.07.2019 of CIT(A), Varanasi for the assessment year 2013-14. The assessee has raised the grounds which read as under:- “i. Because the learned CIT(A) has erred in law as well as on facts in dismissing the appeal in utter disregard to the factual and legal position of the appeal. ii. Because the learned CIT(A) has simply disbelieved the assessee’s avernments simply on conjectures and surmieses, duly supported by irrefutable evidences. iii. Because the learned CIT(A) has drawn illogical conclusions to the effect that the property purchased for Rs. 6,60,000/- can be sold for Rs. 23,00,000/- can be sold for Rs. 23,00,000/- just after 2.5 months without making any improvements therein. iv. Because the learned CIT(A) as well as the learned Assessing Officer have failed to appreciate that the two conveyance deeds clearly gave description of the properties and the addition made to the property can clearly be seen by comparing the deeds.

ITA No.201/VNS/2019 Sh. Girish Kumar Keshari

v. Because the learned CIT(A) as well as the learned Assessing Officer have erred in simply disregarding the valuation report of a qualified engineer to justify the illegal and unjudicious addition.” 2. The assessee is an individual and filed his return of income on 01.10.2013 declaring total income of Rs. 10,28,170/-. During the scrutiny assessment, the Assessing Officer noted that the assessee has shown short term capital gain of Rs. 4,78,500/- on a sale of property situated at Birdopur, Varanasi bearing House No. B-37/171A. The assessee purchased this property on 09.01.2013 vide registered sale deed and the second floor of the property was sold by the assessee on 23.03.2013 for sale consideration of Rs. 23,00,000/-. After claiming cost of acquisition plus cost of construction total amounting to Rs. 18,21,500/- the assessee has shown short term capital gain of Rs. 4,78,500/- . The Assessing Officer doubted the claim of cost of construction of the second floor of the property in view of the fact that the assessee has sold the property within a period of two and a half months after it was purchased and therefore, how the property was constructed within such a short spam of time. Further, the Assessing Officer disallowed the claim of cost of construction on the ground that the assessee has not produced any documentary evidence like purchase of construction material and other expenses except producing the valuation report which is also not based on any evidence indicating any improvement taken place in the property. The assessee challenged the action of the Assessing Officer before the CIT(A) but could not succeed. 3. Before the Tribunal, the learned AR of the assessee has submitted that the purchase deed dated 09.01.2013 and sale deed dated 20.03.2013 clearly shows the existence of the property at the time of purchase as well as at the time of sale. He has submitted that at the time of purchase only ground floor and small portion at first floor was in existence and the construction upto 2

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second floor was done after purchase of property and before the sale of the second floor. The learned AR has referred to the description of the property in the schedule of property as part of the purchased deed as well as part of the sale deed. He has also referred to the photographs of the property and site plan being the part of the purchase deed and sale deed and submitted that at the time of purchase only ground floor and part of the first floor was constructed and thereafter, the assessee constructed the property upto second floor. The assessee sold the second floor of the property and offered the short term capital gain after reducing cost of acquisition being proportionate cost of the land as well as cost of construction. In support of his claim the assessee filed a valuation report and certificate of the civil engineer. The Assessing Officer has not conducted any enquiry to disprove the claim of the assessee. Thus, the learned AR has submitted that once the assessee has produced the certificate of the civil engineer as well as the valuation report to show the proportionate cost of acquisition of land as well as cost of construction of the second floor then the claim of the assessee cannot be denied in the absence of any contrary fact or material brought on record by the Assessing Officer. The Assessing Officer has not conducted any enquiry or referred the valuation to the DVO. Hence, the addition made by the Assessing Officer and confirmed by the CIT(A) is unjustified and the same may be deleted. 4. On the other hand, the learned DR has submitted that no evidence was produced by the assessee either before the Assessing Officer or before the CIT(A) in support of the cost of construction. The assessee has thus failed to prove that he has incurred the expenditure on further construction of the building of second floor before the sale of property on 23.03.2013. The assessee has purchased the property on 09.01.2013 from his family members and thus the actual state of property and total investment in the property has to be 3

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proved by the assessee which he failed. Nothing has been produced about the purchase of material or approval of the local authority for construction. The valuation report of the property carry no evidentiary value in the absence of any independent evidence. He has relied upon orders of the authorities below. 5. I have considered the rival submissions as well as the relevant material on record. The fact of the purchase of the property by the assessee bearing House No. B-37/171A, vide registered sale deed dated 9.01.2013 having built up portion up to two floors is not in dispute as it reflects from the sale deed as well as the site plan being part of the sale deed whereby the assessee has purchased the property. This fact is also not disputed by the Assessing Officer as well as by the CIT(A) and accepted that at the time of purchase, the constructed portion of the property comprising ground floor and small portion at first floor was in existence. Even there is a specific description about the constructed portion of the property at page nos. 6 and 7 of the purchase deed dated 9.01.2013. Thereafter, the assessee vide sale deed dated 23.03.2013 sold the second floor of the property and offered short term capital gain after claiming the cost of acquisition as well as cost of construction of the second floor. The existence of the second floor is not disputed by the Assessing Officer Even as per the photographs which is attached to the sale deed as well as site plan being part of the sale deed the existence of the second floor being a newly constructed flat cannot be disputed. All these facts are reflected in the sale deed itself which is duly registered with the Sub Registrar. Even the Assessing Officer has not disputed the sale transaction of the second floor therefore, once the second floor has been built up after the purchase of the property then the cost of construction is a pure matter of ascertaining the facts through enquiry to be conducted by the Assessing Officer. The assessee produced the valuation report in support of the cost of construction though no other evidence regarding the 4

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expenditure incurred on purchase of construction material etc., is produced by the assessee. However, the construction cannot be carried out without the cost thereof. Even if the assessee has failed to produce the supporting evidence towards the expenditure incurred on the construction, the same can be estimated by applying the prevailing rate of cost of construction having regard to the quality of the construction. The assessee has produced the estimated cost of construction through the valuation report which was not accepted by the Assessing Officer. However, the Assessing Officer has also not carried out any enquiry to find out the actual cost of construction if the cost of construction as determined by the valuer in the valuation report is not found to be correct. Therefore, having regard to the facts and circumstances of the case, when the second floor of the property in question came into existence after the property was purchased by the assessee then the Assessing Officer was required to get the fair cost of construction through the reference to the Valuation Officer. In the absence of such an exercise on the part of the Assessing Officer, the cost of construction as determined by the registered valuer in the valuation report cannot be rejected. Further the Assessing Officer has also not given its finding about the proportionate cost of acquisition being cost of land attributable to the second floor and simply rejected the claim on the ground that the assessee has failed to support the claim by submitting documentary evidence. The determination of cost of land is not a complicated issue as prevailing rate of land as per the Government circulation or the valuation of the land by the Stamp Duty authority can be taken as cost of the total land on which the second floor is constructed. The Assessing Officer has not even attempted to verify the correctness of the cost of land and construction claimed by the assessee. Hence, in the absence of any proper verification and enquiry by the Assessing Officer, the claim of proportionate cost of acquisition as well as cost of construction 5

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based on the valuation report cannot be denied. Accordingly, the addition made by the Assessing Officer is deleted. 6. In the result, the appeal of the assessee is allowed. Order pronounced as per Rule 34(4) of I.T.A.T. Rules, 1963 on 26.04.2022.

Sd/- [VIJAY PAL RAO] JUDICIAL MEMBER DATED: 26/04/2022 Varanasi/Allahabad Sh Copy forwarded to: 1. Appellant- 2. Respondent- 3. CIT(A) 4. CIT 5. DR

By order Sr. P.S.