2017 (10) TMI 1456 - AT - Income Tax

Capital gain computation - Issue of cost of improvement which was claimed by the assessee while computing long term capital gain, being the cost of improvement incurred by the appellant in the property sold - purchase of house - sum paid on account of renovation of old building - whether payment was made by the assessee-company through payees account cheque and this fact has been duly admitted by Sh. Kewal Krishan Gupta ? - HELD THAT - Assessee has made vague submissions and allegations and in fact primafacie failed to establish its claim by producing any substantive and/or corroborative material as the statement of the assessee creates many doubts about the date of the purchase of the house, actual condition of the house, at that time, and renovation carried out in the house and in all human probabilities it is not acceptable to our conscious mind that while purchasing a house on consideration of ₹ 6,54,000/- why the person will give ₹ 4.95,000/- for renovation to the erstwhile owner. Even otherwise no documentary evidences with regard to the renovation works done previously and later stage of the house was ever filed before the authorities below or before us. On the aforesaid consideration, we do not have any hesitation to hold that that the ld. CIT(A) has rightly decided the issue in hand against assessee Addition on account of repair and renovation of the property - HELD THAT - We have failed to understand as to why the assessee alongwith his mother had shown to be licensee/tenant of his father, once his father purchased the property on 29th April, 1999. From the complaint, it reflects that assessee s father had purchased the hotel on 29.04.1999 and therefore sold the same on 04.04.2005 to Sh. Makhtool Singh and other persons and till date the assessee claimed to be the tenant of the said property. This case pertains to the assessment year 2006-07 which means Financial Year 2005-06 and father of the assessee sold the said property on 04.04.2005, however, it seems that the assessee claiming the expenditure on renovation to be carried out in the F.Y. 2005-06 which at all, does not seems to be true. It is against human probabilities that the quotation dated 26.06.1999 reflects the amount of ₹ 10,31,906/-, however, the renovation alleged to be carried on later on after many years, which have been claimed by the assessee exactly as of quotation amount which creates many doubts for its authenticity. Further, we have to observe that in the Evidence Act, there is a provision to prove the facts by adducing secondary evidence, if primarily is not available as in the instant case, the assessee has based his case upon the theft taken place at the hotel premises, however, we have failed to understand as to what stopped the assessee to brought on record or to call upon the records of raw material supplier, contractor, labours and labour wages expenses if incurred if any. The assessee got various opportunities in the assessment proceedings to substantiate its claim, however, undisputedly failed to establish. Hence, in our considered opinion, the Ld. CIT(A) adjudicated the issues under consideration by logic and well reasoning and therefore, liable to be upheld. Charging interest u/s 234A, 234B and 234C as the charges of interest is statutory in nature and hence, does not required to be interfered with. - Assessee appeal dismissed.

Summary

Issues Involved:

1. Validity of the Assessing Officer's and CIT(A)'s orders.
2. Justification of additions made by CIT(A) regarding renovation expenses.
3. Assessment of the claimed renovation expenses of ?10,31,906.
4. Assessment of the claimed renovation expenses of ?4,95,000.
5. Legitimacy of interest charged under sections 234A, 234B, and 234C.

Detailed Analysis:

1. Validity of the Assessing Officer's and CIT(A)'s Orders:
The appellant argued that both the Assessing Officer (AO) and the Commissioner of Income Tax (Appeals) [CIT(A)] issued orders that were "against the facts of the case and are untenable in law." The appellant claimed that the CIT(A) did not appreciate the facts and merely relied on the AO's order without proper reasoning, making the order "bad in law and liable to be cancelled."

2. Justification of Additions Made by CIT(A) Regarding Renovation Expenses:
The appellant contended that the CIT(A) failed to appreciate that ?4,95,000 was given to Sh. Kewal Krishan Gupta for the renovation of an old building, which Gupta admitted before the AO. The appellant insisted that the payment was made via account payee cheque, and this fact was admitted by Gupta. The CIT(A) confirmed the addition of ?5,00,000, which the appellant argued was unwarranted.

3. Assessment of the Claimed Renovation Expenses of ?10,31,906:
The appellant claimed that ?10,31,906 was spent on the repair and renovation of an old property, supported by a certificate from an architect. The AO rejected this claim, noting that the appellant failed to provide any documentary evidence, such as bills for materials or labor, to substantiate the expenses. The AO found the self-serving quotation insufficient and observed that the estimated expenditure was exactly the same as the claimed amount, raising doubts about its authenticity. The CIT(A) upheld the AO's decision, stating that the quotation was not evidence of actual expenditure and confirming the addition of ?10,31,906.

4. Assessment of the Claimed Renovation Expenses of ?4,95,000:
The appellant claimed that ?4,95,000 was spent on renovation, which Gupta admitted to receiving but stated that only ?90-95 thousand was spent on minor renovations like whitewashing. The AO recorded Gupta's statement under section 131, where he denied any major expenditure beyond ?1,00,000. The CIT(A) partially accepted the claim, allowing ?1,00,000 and confirming the addition of the remaining ?4,00,000. The Tribunal upheld this decision, emphasizing that the appellant failed to provide substantial evidence to support the claimed expenditure.

5. Legitimacy of Interest Charged Under Sections 234A, 234B, and 234C:
The appellant argued that the interest charged under sections 234A, 234B, and 234C was unjustified and excessive. However, the Tribunal noted that the charging of interest is statutory and does not require interference.

Conclusion:
The Tribunal found that the appellant failed to substantiate the claims of renovation expenses with adequate evidence. The statements provided by Gupta and the lack of documentary proof led to the rejection of the claimed amounts. The Tribunal upheld the CIT(A)'s order, finding no perversity, illegality, or impropriety in the decision. Consequently, the appeal filed by the assessee was dismissed. The order was pronounced in the open court on 31.10.2017.