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TMI Blog2024 (11) TMI 1091X X X X Extracts X X X X X X X X Extracts X X X X ..... tal in nature as they add permanent value to the property and are incurred to improve the property s condition. Assessee also submitted a valuation report from an independent valuer who personally inspected the property and provided a detailed breakdown of the improvements made. Expenditure was supported by bank statements showing payments made through the banking channel, which the AO examined. As evident from the assessment order that the AO exercised his judicial discretion and adopted a plausible view based on the material on record - AO was satisfied with the evidence submitted and did not find it necessary to call for further documentary proof, such as bills or vouchers, for expenses incurred 14 years ago. CIT, in his order u/s 263 emphasized that the AO should have conducted a more in-depth inquiry into the cost of improvement, especially by asking for bills and invoices. CIT cited Explanation 2 to Section 263 of the Act, which allows revision of an order that is passed without proper inquiry or verification. However, it must be noted that Section 263 cannot be invoked merely because the AO did not carry out the inquiry in the manner the CIT would have preferred. AO had aske ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... returned income without making any adjustments. 2.1. The AO examined the sale of an immovable property located at 16, Nayagaon, Rampur, Jabalpur, which was sold on 11.04.2018 for Rs. 2,51,00,000/-. The assessee claimed a cost of improvement of Rs. 68,90,000/- in the computation of capital gains, including expenses for interior work, kitchen appliances, plywood laminating flooring, and tiles. After indexing the cost, the assessee offered long-term capital gains (LTCG) of Rs. 24,04,665/-. The AO, after obtaining all relevant details like the purchase deed, sale deed, computation of capital gains, bank statement, and valuation report, accepted the cost of improvement and assessed the income as returned. 2.2. Subsequently, the learned CIT, upon perusal of the records, found that the AO had allowed the assessee s claim for the cost of improvement without conducting detailed inquiries or verifying supporting documentary evidence such as bills, vouchers, or confirmation from the contractor. As per the learned CIT, the assessment order was passed without verifying the allowability of the cost of improvement as per Section 55(1)(b)(2) of the Act, and the failure to conduct this inquiry rend ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urred for the property and not movable appliances and details of improvements have been specifically mentioned in the valuation report of the valuer and all the payments were made through the banking channel and merely on the basis that bill and vouchers are not available it cannot be denied as it is not possible to keep bills and voucher for such a long period of 14 years and when appellant has already shifted to abroad. 7. The appellant craves for leave to amend, add to omit any grounds up to the time of hearing of appeal. 4. During the course of hearing before us the Authorised Representative (AR) of the assessee, stated that the AO had made all necessary inquiries regarding the cost of improvement and had applied his mind to the details furnished by the assessee and the revisionary proceedings were initiated merely because the learned CIT held a different view from the AO. The AR further explained the details of cost of improvement as per statement and corresponding entries in bank statements which were already submitted to lower authorities. Reliance was placed on the decision of the Jaipur Bench of the ITAT in case of Sourabh Sharma vs. PCIT (ITA No. 240/JP/2023 ), where it w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... previous owner or the assessee, and (ii) in any other case, means all expenditure of a capital nature incurred in making any additions or alterations to the capital asset by the assessee after it became his property, and, where the capital asset became the property of the assessee by any of the modes specified in subsection (1) of section 49, by the previous owner, but does not include any expenditure which is deductible in computing the income chargeable under the head Interest on securities , Income from house property , Profits and gains of business or profession , or Income from other sources , and the expression improvement shall be construed accordingly. 6.3. It is important to note that capital expenditure under Section 55(1)(2) must be incurred to enhance or improve the value of the property. Such expenditure must be distinguishable from revenue expenditure (e.g., repairs or maintenance), which is generally allowable as a deduction from other heads of income, such as Income from House Property or Business Income. 6.4. The property in question was purchased by the assessee in FY 2002-03 and was sold in FY 2018-19. The assessee claimed a cost of improvement of Rs. 68,90,000/- ..... X X X X Extracts X X X X X X X X Extracts X X X X
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