2023 (3) TMI 660 - AT - Income Tax

Penalty u/s 271F - rejecting the claim of the assessee in respect of indexed cost of improvement based on valuation report of the registered valuer being construction made by the assessee - HELD THAT - From the arguments of assessee, it is observed that the assessee had resubmitted the desired documents on three occasions before the ld. CIT(A) on 17-01-2021, 11-03-2022 and lastly on 22-09- 2022 but the ld.CIT(A) had not asked for documents like building plan approval, property tax receipt if any, cost of improvement with sources and bills and vouchers during the period of three years. The Bench has deeply considered the submissions of the ld. AR of the assessee and found that it does not suffer from any infirmity as no building approval is required for construction area of 870 Sq. Fts and property tax was not leviable on the residential house property. The assessee has shown the investment of source like (i) Rs.1,80,000/- (given by the wife of the assessee out of her Istri Dhan (ii) Rs.90,000/- (given by the father of the assessee in instalments) (iii) Rs.78,000/- (out of the funds available with the assessee) for which the assessee has filed an affidavit (PB 30-31). The assessee has also filed an affidavit of Contractor Shri Om Prakash Kumawat (PB 32-33). As decided in assessee own case 2022 (9) TMI 875 - ITAT JAIPUR AO has passed the assessment order ex-parte taking into consideration the assessee has not advanced any documents pertaining to sale of house in question. It is also noted from the record that the assessee is not having any taxable income and the AO has not given the benefit of indexed cost of acquisition and indexed cost of improvement on the immovable property in question and thus in that eventuality the capital gain arose on the sale of immovable property would have been below taxable limit. This plea of the ld. AR of the assessee tantamounts to reasonable cause as is prescribed u/s 273B - Appeal of assessee allowed.

Summary

Issues:
Appeal against rejection of claim for indexed cost of improvement on property construction.

Analysis:
The appeal was against the rejection of the claim for indexed cost of improvement on property construction for the assessment year 2011-12. The appellant contended that the ld. CIT(A) erred in not accepting the claim despite the valuation report being submitted. The ld. CIT(A) directed the AO to credit the cost of acquisition along with indexation after verifying the purchase price. However, the claim for cost of improvement was rejected due to lack of supporting documentary evidence. The appellant argued that necessary documents were submitted multiple times, including a valuation report and an affidavit from the contractor. The ld. CIT(A) did not request additional documents like building plan approval or property tax receipts during this period. The appellant highlighted that no building approval was needed for the construction area and property tax was not applicable. The appellant demonstrated the sources of funds for the improvement cost and provided affidavits as evidence. The Bench reviewed the case and found the appellant's submissions valid, especially considering the provisions of Section 273B of the Income Tax Act. The Bench disagreed with the ld. CIT(A) and allowed the appeal, emphasizing the reasonable cause for not filing the return of income and the potential capital gain falling below the taxable limit if the benefits were allowed.

The judgment highlighted that the appellant had diligently submitted the necessary documents to support the claim for indexed cost of improvement. The appellant's arguments regarding the absence of requirements like building plan approval and property tax receipts were deemed valid. The appellant's provision of sources of funds and affidavits from the contractor were considered sufficient evidence. The Bench referenced a previous case to support the appellant's position on penalty under Section 271F of the Act, emphasizing the reasonable cause for not filing the return of income. The judgment concluded by allowing the appeal, indicating a thorough review of the facts and circumstances presented by the appellant.

Therefore, the judgment favored the appellant, allowing the appeal against the rejection of the claim for indexed cost of improvement on property construction. The decision was based on the appellant's submission of relevant documents, the absence of certain requirements like building plan approval and property tax receipts, and the provision of sources of funds and affidavits as evidence. The judgment also highlighted the applicability of Section 273B of the Income Tax Act in supporting the appellant's position on penalty under Section 271F.