2023 (2) TMI 347 - AT - Income Tax

Computation of LTCG - determine the cost of construction of the villa - reference to DVO - assessee was unable to furnish any documentary evidence in support of her claim that she had incurred an expenditure on cost of construction (indexed to cost of improvement claimed by the assessee) - AO reworked the cost of improvement by adopting prevailing guidance value rate (construction of villa between AY 2009-10 and AY 2012-13) - HELD THAT - AO had adopted the guidance value as cost of construction primarily for the reason that the valuation report submitted by the assessee is not backed by any evidence/proof of expenditure incurred. The assessee, however, submitted that the details called for were duly submitted before the AO and the AO is not justified in stating the assessee has not provided details in support of the cost incurred for construction of the villa. On perusal of the proof submitted as regards to the cost of construction/ improvement of property, we find the assessee has filed before us the statement of cost of construction, certain bills towards expenses/purchases, details of payments made to the builder/contractor, etc. We find confirmation of such payments from builder/contractor and the architect are not on record. The paper book submitted before the Tribunal is not certified that the material produced before the Tribunal has been placed before the AO and the DRP. There is no clarity whether the evidences that are produced before the Tribunal has been on the record before the AO and the DRP. Hence, in the interest of justice and equity we are of the view that the matter needs fresh examination by the AO. Accordingly the issues raised in this appeal are restored to the file of the AO. AO is directed to adopt the actual cost of construction in respect of the villa. The assessee shall provide necessary proof such as confirmation from the builder/architect with regard to the payments received from the assessee, the invoice incurred on cost of construction, etc. In the event the assessee is not able to prove the actual cost of construction AO shall be at liberty to refer the matter to the Valuation Officer to determine the cost of construction of the villa (to rebut the valuation report submitted by the assessee). Appeal filed by the assessee is allowed for statistical purposes.

Summary

Issues:
1. Condonation of delay in filing appeal before the Tribunal.
2. Dispute regarding the cost of construction of a villa for the purpose of calculating capital gains.
3. Adoption of fair market value by the Assessing Officer instead of the actual cost of construction.
4. Lack of cooperation by the assessee in providing necessary documents and details to support the claimed cost of construction.
5. Directions given by the Dispute Resolution Panel (DRP) to adopt fair market value.

Issue 1: Condonation of Delay
The delay of four days in filing the appeal was condoned by the Tribunal after considering the reasons stated in the affidavit, which indicated that the delay was not due to any fault of the assessee.

Issue 2: Dispute over Cost of Construction
The dispute revolved around the cost of construction of a villa sold by the non-resident assessee, with the Assessing Officer questioning the claimed cost and adopting a lower guidance value rate for the construction.

Issue 3: Adoption of Fair Market Value
The Assessing Officer adopted the fair market value instead of the actual cost of construction, leading to a difference in the calculation of long-term capital gains.

Issue 4: Lack of Cooperation by Assessee
The Assessing Officer and the Dispute Resolution Panel noted a lack of cooperation from the assessee in providing sufficient evidence to support the claimed cost of construction, which led to discrepancies in the assessment.

Issue 5: Directions by DRP
The DRP directed the Assessing Officer to consider the fair market value determined by the District Valuation Officer, but due to lack of cooperation from the assessee, the value was not determined, resulting in a decision based on the guidance value.

The non-resident assessee's appeal challenged the assessment order concerning the cost of construction of a villa, leading to discrepancies in the calculation of capital gains. The Assessing Officer adopted the fair market value instead of the actual cost, citing lack of supporting evidence from the assessee. The Tribunal found that while the assessee provided some proof of construction costs, there was a lack of confirmation from the builder/architect. Consequently, the matter was remanded to the Assessing Officer for fresh examination. The AO was directed to consider the actual cost of construction, with the assessee required to provide necessary proof. If unable to prove the claimed cost, the matter could be referred to the Valuation Officer. The Tribunal emphasized the need for cooperation and directed an expeditious disposal of the case, ultimately allowing the appeal for statistical purposes.