Tribunal directs reassessment of acquisition cost for accurate capital gains calculation

The Tribunal allowed the appeal for statistical purposes, directing the AO to reassess the cost of acquisition with a proper breakup, verify bills and documents related to brokerage, interiors, painting, etc., and consider these amounts for computing capital gains. The judgment ensures that the actual outflow towards the acquisition of the property is considered for computing capital gains, and the assessee is given a fair opportunity to present supporting documents.

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Issues Involved:
1. Cost of acquisition considered by the AO.
2. Maintainability of the draft assessment order for a non-resident.
3. Non-consideration of brokerage/selling expenses in computing capital gains.

Detailed Analysis:

1. Cost of Acquisition Considered by the AO:
The primary issue in this appeal is the cost of acquisition considered by the Assessing Officer (AO) at Rs. 49,08,340 against Rs. 70,00,000 claimed by the assessee while computing capital gains. The assessee, a non-resident individual working in the Netherlands, filed a return of income for AY 2019-20 admitting a total income of Rs. 2,95,600. The AO issued a draft assessment order making an addition of Rs. 52,89,346 towards capital gains, which was later revised to Rs. 64,60,469 in the final assessment order after considering the correct indexation value.

The assessee argued that the cost of acquisition should include Rs. 49,44,000 paid to the assignment holders, Rs. 5,98,160 towards covered car park, corpus deposit, etc., and Rs. 1,54,500 as assignment fee to L&T. The AO, however, did not accept these amounts, citing that the assignment agreement was not registered and the registered value of the property was only Rs. 36,05,000.

The Dispute Resolution Panel (DRP) confirmed the AO's addition, rejecting the assessee's pleas regarding the cost of acquisition and cost inflation index, among others. The Tribunal, however, found merit in the assessee's argument that the actual outflow towards acquisition, including payments made through proper banking channels, should be considered for computing capital gains. The Tribunal remitted the issue back to the AO to arrive at the cost of acquisition with a proper breakup and to verify the bills and documents related to brokerage, interiors, painting, etc.

2. Maintainability of the Draft Assessment Order for a Non-Resident:
The assessee raised an additional ground regarding the maintainability of the draft assessment order for opting the DRP route for a non-resident for the year under consideration. The Tribunal referred to the Explanatory Memorandum to Finance Bill, 2020, which states that the amendment to include non-residents as eligible assessees is applicable from 1.4.2020. Since the AO issued the draft assessment order on 27.9.2021, the amended provisions of section 144C were applicable. Therefore, the Tribunal dismissed this additional ground raised by the assessee.

3. Non-Consideration of Brokerage/Selling Expenses in Computing Capital Gains:
The assessee also raised an additional ground regarding the AO not considering brokerage/selling expenses of Rs. 1,55,000 while computing capital gains. The Tribunal admitted this additional ground, noting that it is a pure legal issue that does not require investigation of new facts. The Tribunal directed the AO to verify the bills and documents related to brokerage and consider these amounts for the purpose of arriving at the capital gains in accordance with the law.

Conclusion:
The Tribunal allowed the appeal for statistical purposes, directing the AO to:
1. Reassess the cost of acquisition with a proper breakup, including amounts paid as per the Assignment Agreement and to L&T.
2. Verify the bills and documents related to brokerage, interiors, painting, etc., and consider these amounts for computing capital gains.
3. Provide the assessee an opportunity of being heard during this reassessment process.

The judgment ensures that the actual outflow towards the acquisition of the property is considered for computing capital gains, and the assessee is given a fair opportunity to present supporting documents.

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