2023 (5) TMI 410 - AT - Income Tax

Capital Gain computation - Addition towards indexed cost of improvement - HELD THAT - The sale deed refers only to some Kutcha construction, that is a part of the sale deed to this effect. This shows that, firstly, the assessee did not adduce any evidence of having done any development work on the property by furnishing the direct invoices for the development work. Secondly, even if it is presumed that the development work was actually carried out as claimed through the estimate/Bill of the developer, it is hard to accept that the development of the property was got done by the assessee before the date of its purchase itself. Thirdly, even if we go with the hypothesis that the assessee actually got the development work, then such development work should have been reflected in the description of the property in the sale deed, which is absent. In view of the foregoing reasons, we are satisfied that the AO was justified in not accepting the claim of indexed cost of development by the assessee. This ground is not allowed. Increase in the proportionate deduction u/s.54F because of the resultant increase in the amount of capital gain for the disallowance of the claim for indexed cost of improvement - AO is directed to verify such claim and allow the same as per law. Needless to say, the assessee will be allowed an opportunity of hearing.

Summary

Issues involved: Appeal against final assessment order, addition of indexed cost of improvement, non-granting of deduction towards indexed cost of improvement, increase in proportionate deduction u/s.54F.

Addition of indexed cost of improvement: The appellant, a non-resident individual, contested the addition of Rs.9,17,560 towards indexed cost of improvement in relation to a property transaction. The appellant claimed deduction for development work carried out on the property, supported by estimates and bills from the developer. However, the Tribunal found discrepancies in the evidence provided by the appellant. The sale deed for the property did not align with the claimed development work, raising doubts about the timing and nature of the improvements. Consequently, the Tribunal upheld the AO's decision to disallow the indexed cost of development claimed by the appellant.

Increase in proportionate deduction u/s.54F: An alternate ground was raised by the appellant for an increase in the proportionate deduction under section 54F due to the disallowance of the indexed cost of improvement. The Tribunal directed the AO to verify this claim and provide the appropriate deduction as per the law, ensuring the appellant is granted a fair opportunity of hearing.

Result: The appeal was partly allowed for statistical purposes, with the Tribunal's order pronounced in the Open Court on 11th April, 2023.