Appellant's Appeal Partially Allowed: Consideration of Estimated Expenditure for Indexation

The Tribunal partly allowed the appellant's appeal, directing the Assessing Officer to consider the estimated expenditure for improvement over the years and granting indexation benefits to compute the cost of acquisition. The decision emphasized the need for reasonable estimation in the absence of evidence and relied on precedents supporting such considerations for property maintenance expenses.

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Issues:
1. Disallowance of indexed cost improvement for lack of evidence
2. Failure to consider ITAT judgments regarding land improvement expenses

Issue 1: Disallowance of indexed cost improvement for lack of evidence

The appellant filed an appeal against the order of the National Faceless Appeal Centre regarding the disallowance of indexed cost improvement for the Assessment Year 2016-17. The Assessing Officer (A.O.) disallowed the indexed cost improvement of Rs. 72,46,735 for lack of evidence regarding construction/development claimed to have been done by the assessee's late mother. The appellant contended that the improvement cost had been incurred over 25 years for maintenance and protection of the land, with expenses towards land improvement, leveling, weeding, boundary wall, caretaker expenses, and protection from encroachment. The appellant failed to provide any receipts or bills to substantiate the claim, leading to the disallowance by the Lower Authorities. The Tribunal noted that while the onus to establish the genuineness of expenses lies on the assessee, certain expenditures for property maintenance can be estimated in the absence of proper documentation. The Tribunal referred to a precedent to support its view, emphasizing the need for reasonable estimation in such cases.

Issue 2: Failure to consider ITAT judgments regarding land improvement expenses

The appellant argued that the Commissioner of Income Tax (Appeals) erred in not considering ITAT judgments allowing expenditure on land improvement even without proof, especially for inherited land. The appellant claimed that the improvement cost had been incurred over several years and should have been considered by the authorities. The Department, on the other hand, contended that the indexed cost of improvement could not be accepted without evidence of construction/development on the inherited property. The Tribunal referred to a previous case where expenses on levelling were accepted even without third-party evidence due to the nature of the expenses and the individual status of the assessee. In the present case, the Tribunal found the claimed amount of Rs. 72,46,735 without evidence to be unreasonable and excessive. However, in the interest of justice, the Tribunal estimated the expenditure at Rs. 2,000 per annum in 1982, with a 10% increase each year up to 2005, and directed the A.O. to consider this estimation for computing the cost of acquisition.

In conclusion, the Tribunal partly allowed the appellant's appeal, directing the A.O. to consider the estimated expenditure for improvement over the years and granting indexation benefits to compute the cost of acquisition. The decision was based on the need for reasonable estimation in the absence of evidence and the precedent supporting such considerations for property maintenance expenses.

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