Assessee's indexed cost of improvement claim remanded for re-examination with proper verification of payment evidence

ITAT Hyderabad remanded the matter back to AO for re-examination of indexed cost of improvement claim in long-term capital gain computation. The assessee claimed construction costs based on work order for completing semi-finished residential flat, but AO rejected it due to lack of bank statements proving payment to vendor. ITAT found AO's rejection of work order as non-genuine was baseless, but assessee also failed to provide sufficient evidence of actual payment. AO directed to verify claim by calling bank records if necessary and allow deduction if payment proven. Appeal allowed for statistical purposes.

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Issues involved: Assessment of long term capital gains, consideration of indexed cost of improvement, verification of necessary evidences.

Assessment of long term capital gains:
The appeal was filed against the assessment order for A.Y. 2014-15, where the Assessing Officer determined the total income towards Long-Term Capital Gain derived from property transfer without allowing deduction towards the cost of acquisition due to lack of necessary details. The draft assessment order was challenged before the DRP-1 Bengaluru, which led to the final assessment order determining the total income at a different amount. The assessee contended that the Assessing Officer erred in not considering the indexed cost of improvement, providing evidence of additional construction work and housing loan availed. The CIT (DR) supported the rejection of the claim due to lack of sufficient evidence. The Tribunal found that the Bank sanctioned a housing loan based on the agreement and work order for construction, indicating the genuineness of the claim. The matter was remanded to the Assessing Officer for further verification, directing to allow deduction towards indexed cost of improvement if payment for further construction is substantiated.

Consideration of indexed cost of improvement:
The assessee claimed indexed cost of improvement based on a work order and agreement with the vendor for additional construction work. The Assessing Officer rejected the claim citing lack of evidence to justify the payment. The Tribunal observed that the Bank sanctioned a housing loan considering the additional amount paid for construction, indicating the genuineness of the claim. However, the assessee failed to provide further evidence to substantiate the payment to the vendor. The Tribunal set aside the Assessing Officer's order, directing reexamination of the claim with necessary verification to allow deduction towards indexed cost of improvement if payment for further construction is proven.

Verification of necessary evidences:
The Assessing Officer rejected the claim of indexed cost of improvement as the assessee could not justify the payment to the vendor with necessary bank statements. The Tribunal noted the housing loan sanction based on the agreement and work order, indicating the genuineness of the claim. However, the lack of additional evidence to prove the payment for further construction led to the remand of the issue for further verification by the Assessing Officer, emphasizing the need for substantiating claims with necessary evidences for consideration in the assessment of Long-Term Capital Gain derived from property transfer.

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