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2023 (1) TMI 971 - AT - Income TaxDenial of natural justice - CIT(Appeals) deciding on fresh evidence without giving opportunity of being heard to the AO - HELD THAT - As perusing the orders of the lower authorities wherein the finding of the Assessing Officer was that assessee was asked to produce documentary evidence with regard to cost of improvement claimed but the assessee failed to give any documentary evidence with regard to the said claim. Therefore, we are of the considered opinion that this matter should go back to the AO for proper verification of the evidence in respect of cost of improvement claimed by the assessee. We restore ground Nos. 1 and 2 of grounds of appeal of the Revenue to the file of the AO with a direction for de novo adjudication of cost of improvement claimed by the assessee. Claim of the assessee of cost of improvement - CIT-A held inherited property cost of acquisition as well as the cost of improvement by the previous owner of a capital asset the indexation shall be allowed during the year of acquisition or improvement by the previous owner or the year of inheritance by the person, who sold the property - HELD THAT - Hon ble Bombay High Court in the case of CIT Vs. Manjula J. Shah 2011 (10) TMI 406 - BOMBAY HIGH COURT affirmed the view of the Tribunal in holding that while computing the capital gains arising on transfer of a capital asset acquired by the assessee under a gift or inheritance the index cost of acquisition has to be computed with reference to the year in which the previous owner first held the asset and not the year in which the assessee became the owner of the asset. Similar view has been taken by Arun Shungloo Trust 2012 (2) TMI 259 - DELHI HIGH COURT - We direct the AO to allow the cost of indexation to the assessee keeping in view the principles laid down by the above judgements. Appeal of the assessee is allowed.
Issues:
1. Additional evidence admitted without opportunity to AO. 2. Allowance of claim of cost of improvement without documentary evidence. 3. Indexation of cost of improvement and acquisition for inherited property. Analysis: Issue 1: Additional evidence admitted without opportunity to AO - The Revenue contended that the Assessee submitted additional evidence before the CIT (Appeals) without giving the Assessing Officer (AO) a chance to review it. - The additional evidence included copies of cost of improvement year-wise, which the Revenue argued should have been reviewed by the AO. - The Assessee's counsel, however, claimed that no additional evidence was directly filed before the CIT (Appeals) and that the matter should be sent back to the AO for verification of the cost of improvement. - The Tribunal found that the AO had asked for documentary evidence regarding the cost of improvement, which the Assessee failed to provide. Consequently, the Tribunal decided to send the matter back to the AO for proper verification. Issue 2: Allowance of claim of cost of improvement without documentary evidence - The Assessee's appeal focused on the indexation of cost of improvement and acquisition for inherited property. - The Assessee argued that the indexed cost of acquisition should be based on the year the previous owner acquired the asset, not the year the Assessee acquired it. - Citing relevant court decisions, the Assessee's counsel supported their argument, emphasizing that indexation should be allowed based on the year of acquisition by the previous owner or the year of inheritance. - The Tribunal, in line with the decisions referenced, directed the AO to allow indexation to the Assessee considering the principles established in those judgments. Conclusion: - The Tribunal allowed the Revenue's appeal for statistical purposes and partially allowed the Assessee's appeal regarding the indexation of cost of improvement and acquisition for inherited property. - The decision highlighted the importance of proper verification of evidence and adherence to legal principles in determining the cost of improvement and acquisition for tax purposes in cases of inherited property.
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