The Chandigarh Bench of the Income Tax Appellate Tribunal (ITAT) overturned the partial disallowance of property improvement costs claimed by the assessee, directing full allowance based on the architect’s valuation certificate.
Jatinder Kumar Singla, the assessee, filed the appeal against the order dated March 26, 2024, passed by the Additional Commissioner of Income Tax, Coimbatore, for the Assessment Year 2017-18.
The issue related to the disallowance of Rs. 5,92,409 from the cost of improvement claimed by the assessee on the property sold which directly impacted the calculation of Long Term Capital Gains.
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The assessee had provided a valuation certificate from an architect to substantiate the cost of the improvement. The Assessing Officer (AO) acknowledged the certificate as genuine but still disallowed 10% of the claimed amount on an ad hoc basis, without citing any logical reasoning or evidence to support the decision.
During the proceedings, the assessee was not present despite being served notice. The tribunal proceeded to decide the matter based on the records and submissions of the Department Representative.
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A single-member bench comprising Shri Sanjay Garg (Judicial Member) observed that paragraph 10 of the assessment order shows that the Assessing Officer considered the architect’s certificate for valuing the additional construction work and accepted it as genuine.
However, the officer arbitrarily disallowed 10% of the improvement costs without any valid reason so this disallowance lacks justification. The tribunal observed that the disallowance made by the AO was arbitrary and lacked justification, as it contradicted the evidence provided by the assessee.
The tribunal explained that tax assessments should be grounded in reasonable and substantial evidence rather than arbitrary estimations. So, the tribunal ordered the deletion of the disallowed amount and allowed the appeal in full.
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