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2022 (1) TMI 630 - AT - Income TaxDisallowance of Cost of Improvement of cost of assets sold - as per AO there was no evidence in respect of improvements carried out and the year of construction of the same - AO has referred the matter to the DVO u/s 55A - HELD THAT:- The Income Tax Authorities has not taken into consideration the DVO’s report, wherein it is clearly mentioned the probable cost of improvement undertaken during the financial year 1998-1999 as per Annexure-II - in the case of CIT v. Dr.Indra Swaroop Bhatnagar[2013 (2) TMI 456 - ALLAHABAD HIGH COURT] had held that DVO’s report is binding on the Income Tax Authorities. In the instant case, the DVO’s report has been received subsequent to the order of the A.O. The A.O. did not have an occasion to consider the same. In the facts and circumstances of the case, it is necessary the same needs to be considered. Therefore, we restore the issue to cost of improvement of assets sold (with reference to cost of improvement made in the financial year 1998-1999) to the files of the A.O. The A.O. shall take into consideration the DVO’s report and accordingly make the computation for long term capital gains. Ground allowed for statistical purposes. Disallowance of Brokerage in respect of transfer of his old asset - HELD THAT:- Admittedly, the brokerage paid for sale of old asset was not claimed by the assessee neither in the original return of income nor in the revised return of income. The payment has been made in cash. The assessee has only produced receipt of Sri.S.T.Yogesh, Neetha Real Estate, Bangalore stating that towards brokerage charges for arranging residential premises. Since the payment has been made in cash and the claim has not been made in the original nor in the revised return, we confirm the orders of the Income Tax Authorities on this issue. Unexplained cash credit u/s 69A - HELD THAT:- As the amount was received through banking channel from the purchaser of the old asset. Therefore, the source of amount was never in dispute. The agreement for sale with regard to amenities and movables dated 16.03.2014 narrate the details of the furniture and fixture that are transferred to the buyer of the old asset. The said sum is nothing but linked with the sale of capital asset. Therefore, the sum received over and above amount mentioned in sale deed needs to be assessed under the head “income from capital gains”. It is ordered accordingly. Alternate plea that the entire amount is exempt from tax since the same represents sale of personal effect, which are outside the definition of capital asset within the meaning of section 2(14) - Since in the foregoing paragraphs we have held that ₹ 15 lakh is linked to the sale of capital asset, is to be brought to tax as income from long term capital gains. Therefore, the ground 5 raised by the assessee is rejected. Cost of improvement of assets purchased - For the new asset purchased, the assessee claims that he had paid an amount to the seller by bank channel for making some renovation at his instance and said amount paid was claimed as part of cost of the new asset for claiming deduction u/s 54 - HELD THAT:- Assessee claims that ₹ 14.50 lakh has been paid to the seller of flat to make certain modifications for making it habitable. The assessee has produced copy of agreement entered by the assessee and the seller, whereby a sum of ₹ 14.50 lakh is paid for making necessary modification to make the flat habitable. The A.O. has also referred the new property for valuation as point 8(d) of the reference u/s 55A of the Act. However, the DVO has not made valuation of the new property. In the interest of justice and equity, we are of the view that this matter requires reexamination by the A.O. and if required the reference may be made to DVO u/s 55A of the Act for valuation of the new asset. It is ordered accordingly. Brokerage on purchase of new asset - HELD THAT:- The assessee has filed copy of the receipt from broker, Sri.Saadiq Ahmed. However, the said receipt does not contain the address of the broker. The amount originally written was ₹ 69,000 and was struck off and ₹ 50,000 is written in hand. Admittedly, there is no cheque payment insofar as ₹ 50,000 to the broker. In such facts and circumstances of the case, we hold that the Income Tax Authorities are justified in disbelieving the payment of ₹ 50,000 to the broker for purchase of the residential flat. Modification made to the new asset - AO disallowed the claim of the assessee for the benefit of deduction u/s 54 - HELD THAT:- The invoices for the cost of improvement of the asset purchased are placed from 43 to 48 of the paper book. The A.O. has also referred the new asset for valuation as per point 8(d) of the reference u/s 55A of the I.T.Act. However, the DVO has not done the same. Therefore, we restore the issue raised in ground 8 to the A.O. The AO is directed to afford a reasonable opportunity of hearing to the assessee and shall take a decision in accordance with law.
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