Demand of proof - payment of repairs

[Rajagopal Ramachandran]

Respected Sir! Assessee spent Rs 85,000 for repairs in the year 1984 on a apartment bought in 1975 for Rs 45,000 after 10 years due to poor condition. The apartment was sold for Rs 50 lacs in the year 2005 For computation of capital gain tax the assessee took into consideration the repairs costs when calculating the capital gain. AO is demanding bills and invoices for money spent in the year 1985 - afte 20 years. Assessee is unable to produce such receipts since its more than 20 years. Partial payment is reflected in bank statement for the repair payment without any receipt of payment voucher. My question how can AO demand proof of payment to repairs on the flat after 20 years. Can anyone guess the situation. The assessee is senior citizen 92 years old now. ANy suggestion for the retired government officer who is 92 years now.Thanks

[DEV KUMAR KOTHARI]

AO need satisfation about correctness of claim and that can be establsihed in different manner in a given situation. However,I think taking proper FMV as on 01.04.1981 and indexing it with CII may result in LTC Loss because apparently the deal for purchase was at very good bargain and FMV as on 01.04.1981 must be very high but it has to be established by showing improvement in the area where property is situate. If CII of FMV as on 01.04.1981 is suffeciently high then In such case the cost and relevant documetns will not be required. It may not be necesary to claim even cost of improvement. The assessee can rely on balance sheets of 1975- 76 and 1984-85 , he can also rely on declaration if any filed by him with employer regarding house purchase and improvement. Pictures of house if availabe for 1975, 1984 or picture of today with picture of 1975 can also be gogd evidence of improvement. Picture after improvemetn can establsih that improvement was undertaken, then cost of improvement can be estimated. Any intimation given to municipalty and change in municipal valuation after improvement of property can be prima facie evidence of improvement carried out. Self declaration, declaration of contractor who worked for improvement can be useful. Discuss the matte with assessee and his children and find out ways to establsih nature and extent of improvement, and period of improvement. Once improvement is establhshed, then it will not be difficult to estiamte cost of improvement. Take resort and help from every possible evidence.

[Rama Krishana]

I agree with the suggesions of Mr. Dev Kumar Kothar. But in case nothing is available as per the registered valuer and municipal records to the extent possible.

AI Summary

Proof of repair expenses may be supported by alternative contemporaneous evidence, enabling capital gains cost claims. Demand for proof of repair expenditure concerns the AO's satisfaction about correctness of capital gains claims; when original bills are missing, the assessee may rely on alternative evidence such as bank payment entries, balance sheets, employer declarations, contractor or self declarations, photographs, municipal valuation changes, and registered valuer opinions. Establishing the fair market value as on 01.04.1981 and applying indexation is an alternative that can reduce reliance on original cost and improvement receipts.