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TMI Blog2016 (6) TMI 326X X X X Extracts X X X X X X X X Extracts X X X X ..... ncluded income from 'long term capital gain' of Rs. 1,82,803/-. The case was selected for scrutiny under CASS. The AO determined the taxable income at Rs. 39,30,900/- by making disallowance of cost of acquisition of proportionate land area sold during the year and cost of improvement incurred to the proportionate sale of flats. 2.1 During the FY 2004-05, the assessee had entered into Memorandum of Understanding with M/s Sai Vamsi Construction, Hyderabad on 05/02/2005 for the development of properties owned by her i.e. Plot No. 125, H. No. 8-3-167/D/125 admeasuring 338 sq.yds. As per the agreement, both the parties will construct residential flats by contributing equal expenditure/investment. Assessee has got property at Plot No. 124 throug ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... struction, assessee had only vacant land for construction. As per the section 55(2) of the IT Act, assessee must have adopted Fair Market Value (FMV) as on 01/04/1981 in respect of capital asset, which is transferred by her father under will, the said property was acquired before 01/04/1981. As per the provisions of section 49(1), the cost of the previous owner is deemed to be the cost of acquisition to the assessee. Assessee should have adopted SRO value as on 01/04/1981. Since assessee has not adopted this valuation, AO adopted adhoc value of Rs. 50,000/- to the entire cost of land as on 01/04/1981 in the interest of revenue. AO has estimated Rs. 17,751/- as the cost of land which pertains to the two flats. 2.3. The Assessing Officer has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l evidences in support of her claim and filed written submissions, which were extracted by the CIT(A) from pages 3 to 5 of his order. The additional evidences along with the written submissions were sent to the AO by the CIT(A) calling for a report on the same after making necessary enquiries/verification. The AO submitted his remand report, which was extracted by the CIT(A) at pages 5 to 7 of his order. 5. The CIT(A) after considering the additional evidences, written submissions of the assessee and remand report of the AO deleted the additions made by the AO by observing as under: 7.1. The first issue pertains to the cost of acquisition determined for the purposes of computing capital gains on sale of proportionate undivided share of l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e said plot of land has to be demolished anyway for obtaining permissions to construct new flats. In view of the above, the. Assessing Officer is directed to take into account the cost of acquisition arrived by the appellant at Rs. 4,60,197/- for the purposes of computation of capital gains. 7.2. The other issue pertains to the addition made u/s.69 of the Act of Rs. 33,12,500/-. The Assessing Officer observed that the appellant could not explain the sufficient sources and details with supporting evidence for the investment in the, shape of construction of residential flats. The appellant contended that appellant has not constructed all the flats in the year under consideration but only 2 flats were completed and the remaining 3 flats wer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aw. ii. The Ld.CIT(A) erred in allowing the relief without verifying the sources for investment in the construction. iii. The Ld. CIT(A) erred in treating the advance amount received for flats were invested but in the sale deed registered in the F. Y 2006-07 nowhere mentioned as advances given. iv. The Ld.CIT(A) erred in considering the fact that 90% of construction work was completed as on 31.3.2007 as per the Builder statement, and sources for investment were considered as stated by the assessee i.e., advance received from flat purchaser without any basis and proof. v. Any other ground at the time of hearing." 7. Ld. DR submitted that the assessee had completed the construction of the flats in the current AY itself as the AO ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he building was completed in AY 2007-08 itself. Hence, we have no option but to rely on the submissions of the assessee. 10. The next issue is to determine the sources of funds to the above investment in the building for construction of the flats up to the end of the financial year 31/03/2007. 11. After considering the remand report of AO, subsequent submissions of the assessee to remand report and financial report submitted by the assessee, we find that the assessee has made investment in the building to the extent of cost involved. Completed two flats 25,25,000 Completed 50% of the three flats (approx.) (only super structure) 18,94,000 44,19,000 The source for the above investment was: a) Advance received from Vee ..... X X X X Extracts X X X X X X X X Extracts X X X X
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