2020 (9) TMI 229 - AT - Income Tax

Appeal partially allowed: Deductions granted for boundary wall, property purchase, registry expenses.

Shri Umesh Chand Gupta Versus The ITO, Ward-7 (2), Jaipur

Shri Umesh Chand Gupta Versus The ITO, Ward-7 (2), Jaipur - TMI Issues Involved:1. Disallowance of cost of improvement for boundary wall construction.2. Disallowance of deduction under Section 54 for property purchased in the wife's name.3. Disallowance of registry expenses for the new property.4. Disallowance of cost of improvement/renovation of the new property.Issue-wise Detailed Analysis:1. Disallowance of Cost of Improvement for Boundary Wall Construction:The first issue concerns the disallowance of Rs. 1,15,000 claimed by the assessee as the cost of constructing a boundary wall while computing long-term capital gains on the sale of a plot of land. The assessee sold the plot on 05.11.2008 for Rs. 18,50,000 but did not file a return of income under Section 139. Consequently, the AO issued a notice under Section 148, and the assessee claimed the cost of improvement for the boundary wall. The AO disallowed this claim due to a lack of supporting evidence, and the CIT(A) upheld this decision. The Tribunal noted that while the sale deed mentioned a boundary wall of 57 meters, the assessee did not provide evidence of the expenditure or details of the wall's height and thickness. The Tribunal estimated the cost of construction at Rs. 75,000 and directed the AO to allow this amount as the cost of improvement.2. Disallowance of Deduction under Section 54 for Property Purchased in the Wife's Name:The second issue involves the disallowance of deduction under Section 54 because the new property was purchased in the name of the assessee's wife. The AO disallowed the claim on this ground, and the CIT(A) further disallowed it, stating that the property was not a habitable residential house. The Tribunal found that the property, originally allotted by the Rajasthan Housing Board, was a residential house that required renovation to be habitable. The Tribunal ruled that the deduction under Section 54 was not applicable since the assessee sold only a plot of land, but allowed the deduction under Section 54F, as the investment was made from the assessee's bank account. The Tribunal cited a decision by the Rajasthan High Court, which allowed deductions even if the investment was made in the name of the wife, provided the funds were from the assessee.3. Disallowance of Registry Expenses for the New Property:The third issue concerns the disallowance of Rs. 51,900 claimed by the assessee as registry expenses for the new property. The AO did not consider this claim as the deduction under Section 54 was disallowed at the threshold. The CIT(A) also rejected this claim due to a lack of supporting evidence. The Tribunal noted that the stamp duty and registry expenses were evident from the sale deed itself and allowed the claim of Rs. 51,900 as part of the cost of the new property.4. Disallowance of Cost of Improvement/Renovation of the New Property:The fourth issue is related to the disallowance of Rs. 3,34,800 claimed by the assessee for the cost of improvement/renovation of the new property. The Tribunal noted that neither the AO nor the CIT(A) considered the documentary evidence provided by the assessee. The Tribunal set aside this issue and directed the AO to reconsider the claim after reviewing the evidence and providing an appropriate hearing to the assessee.Conclusion:In conclusion, the Tribunal partly allowed the appeal, directing the AO to allow Rs. 75,000 for the boundary wall construction, permit the deduction under Section 54F for the new property purchased in the wife's name, allow Rs. 51,900 for registry expenses, and reconsider the claim for renovation expenses after reviewing the evidence. The order was pronounced on 03/09/2020.