Tribunal dismisses claim for cost of improvement due to lack of proper verification and transparency.

The Tribunal upheld the Principal Commissioner of Income Tax's objections regarding the allowance of the assessee's claim of cost of improvement without proper inquiry and non-insistence on the production of sale deeds for verification of stated sale values. The Tribunal found the Assessing Officer's actions lacking transparency and proper verification, directing the AO to conduct further inquiries and provide the assessee with a fair opportunity to present evidence. The assessee's appeal was dismissed, affirming the need for thorough investigation and substantiation of claims.

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Issues Involved
1. Allowance of the assessee’s claim of cost of improvement without proper inquiry.
2. Non-insistence on the production of sale deeds for verification of the stated sale values.

Issue-wise Detailed Analysis

Allowance of the Assessee’s Claim of Cost of Improvement Without Proper Inquiry
The Principal Commissioner of Income Tax (Pr. CIT) objected to the allowance of the assessee’s claim of Rs. 30 lacs as the cost of improvement under Section 48 of the Income Tax Act, 1961. The Pr. CIT argued that the Assessing Officer (AO) allowed this claim without proper inquiry. The assessee contended that the AO had conducted due inquiry, including physical verification by an Inspector, which confirmed the assessee’s submissions. However, the Tribunal observed a complete lack of transparency regarding the inquiry process. There was no record of any query or material substantiating the claim, and the Inspector’s report was unsigned and vague. The Tribunal noted that the Builder had a different version of the payment, claiming it was compensation for stoppage of work, not for cost of improvement. This conflicting evidence necessitated further inquiry, which the AO failed to conduct.

Non-insistence on the Production of Sale Deeds for Verification of Stated Sale Values
The Pr. CIT’s second objection was that the AO did not insist on the production of sale deeds for the seven flats sold by the assessee during the year. The assessee argued that the sale deeds were submitted and examined during the assessment proceedings. However, the Tribunal found no evidence of their production or examination in the assessment records. The Tribunal upheld the Pr. CIT’s direction for the AO to conduct a proper inquiry and verify the sale deeds.

Conclusion
The Tribunal concluded that the AO acted with haste and without due application of mind in accepting the assessee’s claims without proper substantiation or verification. The Tribunal found no reason to interfere with the Pr. CIT’s order, directing the AO to pass a suitable order after making proper inquiries and allowing the assessee a proper opportunity to present his case. The assessee’s appeal was dismissed.

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