TaxTMI 
TaxTMI 
2014 (1) TMI 101
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....ing the survey conducted on 11/03/2010 in the case of Sri Karim Nawaz Alladin and M/s Alladin Investments and Properties, wherein, tt was noticed that the market value of the property sold by the assessee was more than the actual sale consideration recorded in the registered sale deeds. The AO held that the assessee had offered capital gains on the basis of sale consideration as per the registered sale deeds, therefore, there was escapement of income in terms of provisions of section 50C of the Act. Accordingly, the assessment was reopened by issuance of notice u/s 148 of the Act and reassessment order was passed. The AO disallowed the expenditure of Rs. 25 lakhs incurred by the assessee in making payment to M/s Voltas Ltd. for releasing th....
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....adin Investments and Properties. The AO relied on the decision in the case of CIT Vs. Ranga Setty, 159 ITR 797, held that the assessee has not produced bank account statement to prove the fact of payment. Further, he held that the land belonged to the ancestors and encumbrances has been created by them, which means that the encumbrance has been created by the assessee only and in these ircumstances the expenditure on account of payment made to M/s Voltas Ltd. is to be rejected. 3. Aggrieved, the assessee carried the matter in appeal before the CIT(A) and relying on the decision in the case of VSMR Jagadish Chandra Vs. CIT, 227 ITR 240 submitted that where the assessee's ancestors create any lien, mortgage or any actionable claim, and the a....
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....ale consideration received." 5. We have heard the arguments of both the parties and perused the record as well as gone through the orders of the authorities below. We are in agreement with the view taken by the CIT(A) since in order to determine the capital gains arising from the sale of any property received on succession, the cost of acquisition thereof has to be taken as the cost in the hands of the previous owner. Since the assessee has acquired the property on on account of succession, the cost of acquisition would get restricted only to that in the hands of his ancestors, which excludes the cost of any encumbrance created by them. The Hon'ble Bombay High Court in the case of CIT Vs. RM Merchant Hussien and Fancy Corporation Ltd. held....
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....uction in respect of the cost of any improvement, the expenditure should have been incurred in making any additions or alterations to the capital asset that was originally acquired by the previous owner and if the previous owner had mortgaged the property and the assessee and his co-owners cleared off the mortgage so created, it could not be said that they incurred any expenditure by way of effecting any improvement to the capital asset that was originally purchased by the previous owner. This decision has been followed in subsequent decisions of the High Court in Salay Mohamad Ibrahim Sait v. ITO [1994] 210 ITR 700 (Ker) and K.V. Idiculla v. CIT [1995] 214 ITR 386." 6. Therefore, even if the assessee had discharged the liability by making....