INCOME TAX ACT, 1961

Section 45

Capital gains - Cost of improvement - Cost of construction of boundary wall - Assessee did not produce any evidence regarding any expenditure incurred for construction of boundary wall

AO made disallowance of cost of improvement being the cost of construction of boundary wall of Rs. 1,15,000 claimed by assessee while computing long-term capital gain on sale of a plot of land. AO alleged that the assessee did not produce any evidence regarding any expenditure incurred for construction of the boundary wall. Further, the assessee also failed to produce any documents to show as to when the boundary wall was constructed therefore, in absence of any supporting evidence, the claim of the assessee could not be accepted. Assessee referred to the purchase deed through which he purchased the plot of land and submitted that the description of the property revealed that there was no construction on the plot at the time of purchase. He further referred to the sale deed whereby the said plot of land was sold and submitted that, it was stated that there was a boundary wall around the said plot running 57 meters. Thus, the assessee concluded that once there was construction of wall on the plot of land then the claim of cost of improvement ought to have been allowed while computing the capital gain. Held: Except the description of plot of land in question given in the purchase deed as well as sale deed, the assessee did not produce any documentary evidence in support of the claim of expenditure incurred for construction of the alleged boundary wall. It was noted that at the time of purchase the description of the property clearly stated that there was no construction of any kind on the plot whereas at the time of sale, the description of the property included plot of land in question and the boundary wall around the said plot with length of 57 meters. Once the boundary wall was in existence at the time of sale though the correct description of the boundary wall was not available being the height of the boundary wall and thickness of the boundary wall, then, the claim of Rs. 1,15,000 made by the assessee was without any supporting evidence as well as necessary particulars. Accordingly, the cost of construction of the boundary wall was estimated at Rs. 75,000 and the AO was directed to allow such cost of improvement while computing the capital gain.

REFERRED :

FAVOUR : Partly in favour of assessee

A.Y. : 2009-10

INCOME TAX ACT, 1961

Section 54

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