Madhu Bhaduri Vs ACIT

1. This appeal is filed by the assessee against the order of the National Faceless Appeal Centre [NFAC]/ld. Commissioner of Income Tax (Appeals) [hereinafter referred to CIT (Appeals) dated 15.03.2022 for assessment year 2016-17.

2. The assessee has raised the following substantive grounds of appeal:-

“1. That the order is bad in law and fact of the case.

2. That the Ld. Commissioner of Income Tax (Appeals) has erred in not appreciating the fact that it is not possible to maintain the evidence for Maintenance and Protection of land keeping in view the nature of expenses incurred.

3. That the Ld. Commissioner of Income Tax (Appeals) has erred by affirming the disallowance of the cost of improvement which was incurred for maintaining the land over the period of time.

4. That the Ld. Commissioner of Income Tax (Appeals) failed to consider ITAT judgements in this regard which allows expenditure incurred on improvement of the land long ago even if assessee does not provide any proof to substantiate it being accrural inherited land.

5. That the Ld. Commissioner of Income Tax (Appeals) has erred by not considering the fact that how land can sustain without incurring any cost of improvement.”

3. Brief facts of the case are that, the assessee filed return of income for the Assessment Year 2016-17 declaring income of Rs. 1,86,38,460/ . The Assessee’s case was selected for scrutiny and A.O. completed the assessment u/s 143(3) of the Act determining the income of the assessee at Rs. 2,43,99,593/- by making an addition of Rs. 57,61,133/-on account of increase in capital gain, wherein the Ld. A.O. has disallowed the indexed cost improvement of Rs. 72,46,735/- for want of evidences regarding construction/development claimed to have been done/incurred by the assessee’s late mother. Accordingly, assessment order came to be passed on 22/12/2018.

4. As against the assessment order dated the assessee has preferred the appeal before the CIT(A). The Ld.CIT(A) vide order dated 15/03/2022 dismissed the appeal filed by the assessee.

5. The Ld. Counsel for the assessee submitted that, the Ld.CIT(A) has failed in not appreciating the fact that it is not possible to maintain the evidences for maintaining and protection of land keeping in view in nature of expenses incurred. The Ld. Counsel for the assessee further and submitted that the land improvement cost has been incurred right from 1982 to 2005 which has not been considered by the Ld. A.O.

6. Per contra, the Ld. DR submitted that the indexed cost of improvement to Rs. 72,46,735/- cannot be believed without there being any evidence regarding construction/development claimed to have been incurred by the assessee’s late mother on the inherited property which was sold during the year under consideration.

7. We have heard the parties perused the material available on record and gave our thoughtful consideration. It is the specific case of the assessee is that the improvement cost had been incurred over a period of 25 years since from 1981 for the maintenance and protection of the land by Assessee’s deceased mother and since work was got done from non organized sector/labour, no receipt/bill were obtained. The assessee further claimed that expenditure of Rs. 14,97,549/- on 16 bigha land was incurred over 25 years which comes to 59,900/- per annum which is very small in comparison to the size of the land as the nature of the expenses are towards land improvement and leveling, weeding, boundary wall, care taker expenses and expenses to keep the land safe from encroachment. Accordingly, the assessee has provided indexed cost improvement as under:-

7. It is not in dispute that the assessee has not furnished even a single piece of evidence such as receipt/bills to substantiate the claim of cost of improvement which ultimately resulted in disallowing the indexed cost of improvement claimed by the assessee by the Lower Authorities. Though the onus to establish the genuineness of any expenditure incurred by the assessee lies on himself/herself, which has not been established by the assessee. But the facts remains that there will be incurred certain expenditure to maintain/improve the property and reasonable estimation to be made in the absence of proper bills and vouchers produced by the assessee. We take support of the following precedent to substantial our view.

8. In the case of ITO Vs. Anil Kumar in ITA No. I.T.A. No. 3872 and 3873/Del/2013 and CO No 16 and 17/Del/2014 in I.T.A. No. 3872 and 3873/Del/2013 Assessment year 2009-10 vide order dated 30/01/2015 wherein the Coordinate Bench of the Tribunal held as under:-

“5. We find that in the light of Hon'ble Supreme Court's judgment in the case of Mehraban & Ors, a copy of which was filed before us as well, there is indeed no error in rejecting in valuation @ Rs 70 per square yard adopted by the assessee. However, learned CIT(A) was in error to the extent that solatium is required to be treated as a part of the compensation, for income tax purposes, in the light of Hon'ble Gujarat High Court's judgment in the case of Vadilal Soda Ice Factory Vs CIT [ (1970 80 ITR 711], and, therefore, as against valuation at Rs 85 per square yard, he should have taken the same as at Rs 110 per square yard as claimed by the assessee. As regards the cost of improvement, there is no dispute about the fact of the levelling having been done but the claim is declined only for want of evidences. In the case of expenses of this nature, i .e on levelling etc, it is not always possible to have third party evidences of expenses. The assessee is an individual and not a corporate. Keeping in view all these factors, and smallness of amount, we see no reasons to decline the claim. We uphold the grievance of the assessee on this count as well.”

9. In our opinion the claim made by the assessee towards improvement over 25 years right from 1982 to 2005 amounting to Rs. 72,46,735/- without there being any evidence in support of the same is not only unreasonable but also exorbitant and excessive. However, in the interest of justice, we deem it fit to be estimated the expenditure at Rs.2,000/- per annum in the year 1982 and 10% increase to be made from year to year up to 2005 to meet the ends of justice. Accordingly, we direct the Ld. A.O. to consider the amount of Rs. 2,000/- in the year 1982 and increased the same by the 10% in each year up to 2005 and grant the indexation of cost benefit to compute the cost of accusation in terms of Section 49 of the IT Act. Accordingly, the grounds of appeal are partly allowed.

10. In the result, the grounds of appeal of the assessee is partly allowed.