Sri Mohan Puri , Bangalore V. Income Tax Officer Ward-7(2)(2), Bangalore

ITA 2925/BANG/2018

• Counselvise Citation: [2022] 106 COUNSELVISE.COM (IT) 0665 (ITAT-BANGALORE)
• Duration Of Justice: 3 year(s) 2 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-01-2022
• Appeal Filed By: Assessee
• Order Result: PartlyAllowed
• Bench Allotted: C
• Assessment Year: 2015-2016
• Appeal Filed On: 23-10-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Unexplained cash credit; Capital asset; Valuation report; Benefit of exemption; Revised return; TDS; Capital Gains
• Section: 54; 143(3); 2(14); 69A; 55A; 43; 48

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL BANGALORE BENCHES “C”, BANGALORE Before Shri George George K, JM & Shri B.R.Baskaran, AM ITA No.2925/Bang/2018 : Asst.Year 2015-2016 Late Mohan Puri LR – Sri. Kunal Puri 174/1, 2 nd Floor, K.S.Garden 4 th Cross, Lalbag Road Bangalore – 560 027. PAN : ASLPP1958M. v. The Income Tax Officer Ward 7(2)(2) Bangalore. (Appellant) (Respondent) Appellant by : Sri.R.E.Balasubramaniyan, CA Respondent by : Smt.Priyadarshini Besaganni. JCIT-DR Date of Hearing : 23.12.2021 Date of Pronouncement : 03.01.2022 O R D E R Per George George K, JM This appeal at the instance of the assessee is directed against CIT(A)’s order dated 06.08.2018. The relevant assessment year is 2015-2016. 2. Eight grounds are raised in this appeal. Ground 1 is general in nature and no adjudication is required. Hence, the same is rejected. The surviving grounds, namely, grounds 2 to 8 reads as follows:- “2. The ld.CIT(A) misdirected himself in upholding the order of the ld.AO in respect of improvements carried out and built- up area of the assets sold and in doing so he failed to appreciate that the claims of the appellant have been validated in the report of the DVO and as such does not call for any further substantiation. ITA No.2925/Bang/2018 Late Mohan Puri (LR – Kunal Puri). 2 3. The ld.CIT(A) in confirming the disallowance in respect of brokerage paid for the transfer of the original asst and in doing so:- (a) He failed to appreciate that the assessee had only inadvertently claimed the same under section 54 instead of under section 48. (b) He failed to appreciate that there is no bar on making payment in cash for claiming deduction under section 48. 4. The ld.CIT(A) erred in upholding the addition of rupees 15 lakhs under section 69A and in doing so he failed to appreciate that amenities and movable properties which were sold along with the original assets were agreed to be transferred by a separate agreement and the fact that no stamp duty was paid on the same does not make that an unexplained credit in as much as the source and the nature of the transaction were fully explained by the appellant. 5. Without prejudice to ground no.4 the appellant further submits the ld.CIT(A) ought to have considered and adjudicated upon the claim made by the appellant to the effect that the entire amount of Rs.15 lakhs is exempt from tax since the same represented the sale of personal effect which are outside the definition of capital assets within the meaning of section 2(14). 6. The ld.CIT(A) erred in upholding the disallowance of Rs.14.5 lakhs under section 54 in respect of improvements and renovations for reasons that are impermissible and irrelevant and in doing so the ld.CIT(A) failed to appreciate that the AO himself has not raised any grounds on the improvements made and the payments that were made towards the same. 7. The ld.CIT(A) erred in confirming the disallowance under section 54 in respect of brokerage paid for purchase of the new asset for reasons that are impermissible and untenable. 8. The ld.CIT(A) erred in confirming the rejection of claim for Rs.19.70 lakhs under section 54 in respect of essential modifications made to the new asset purchased without appreciating the fact that the appellant had furnished full details of the expenditure incurred in respect of the same. The appellant prays for leave to add, delete, modify and / or adduce additional ground at any time before the appeal is disposed off. ITA No.2925/Bang/2018 Late Mohan Puri (LR – Kunal Puri). 3 For these and such other grounds that may be adduced or removed in time to time, it is requested that the Hon’ble ITAT may be pleased to examine the case in the light of justice and grant the relief sought for.” 3. The brief facts of the case are as follows: The assessee is an individual deriving income from business, capital gains and other sources. For the assessment year 2015-2016, the return of income was filed on 30.09.2015 declaring total income of Rs.15,16,330. The assessee had disclosed under the head income from long term capital gains (LTCG) a sum of Rs.6,77,702. The assessee during the relevant assessment year sold self-occupied residential house in Bangalore. In the computation of income, the assessee had disclosed sale consideration of Rs.2.42 crore under the head capital gains, which included an amount of Rs.15 lakh received from the buyers over and above the sale consideration mentioned in the sale deed. The assessee had invested a portion of the sale consideration amounting to Rs.1.05 crore towards purchase of a residential house and claimed exemption u/s 54 of the I.T.Act. 4. The assessment was completed u/s 143(3) of the Act vide order dated 29.12.2017 by determining the total income of Rs.1,01,13,599. The A.O. made an addition to the LTCG. The A.O. determined the LTCG at Rs.77,74,494 instead of Rs.6,77,702 declared by the assessee. The A.O. made disallowances on various claims of the assessee as regards the sale proceeds, cost of improvement, payment of commission etc. ITA No.2925/Bang/2018 Late Mohan Puri (LR – Kunal Puri). 4 5. Aggrieved by the order of the Assessing Officer determining the LTCG at Rs.77,74,494, the assessee preferred an appeal to the first appellate authority. The CIT(A) partly granted relief to the assessee. The CIT(A) directed the A.O. to adopt the cost of construction as determined in the valuation report and also granted benefit of exemption u/s 54 of the Act of RS.41,456 representing bank charges and membership fees. However, the CIT(A) confirmed most of the disallowances made by the A.O. 6. Aggrieved by the order of the CIT(A), the assessee has filed this appeal before the Tribunal. The learned AR has filed a paper book comprising of 97 pages enclosing therein the sale agreement dated 16.03.2014 for transfer of amenities and movables, assessee’s computation of original income and revised income, DVO’s valuation report dated 25.02.2018, the assessee’s independent valuation report for the property sold, proof with regard to brokerage, copy of the agreement dated 06.05.2014 for renovation of new asset, proof with regard to brokerage paid for purchase of the new property, invoices for additional amount spent by the assessee on the purchased property, the reference order of the AO to the DVO, copy of the agreement of sale deed dated 15.03.2014, copy of the absolute sale deed dated 25.04.2014, copy of the absolute sale deed dated 06.05.2014 and the case laws relied on. We shall adjudicate the issue raised before the ITAT as under:- ITA No.2925/Bang/2018 Late Mohan Puri (LR – Kunal Puri). 5 Cost of Improvement of cost of assets sold (Ground 2) 7. According to the assessee, he incurred a sum of Rs.6,50,000 on the assets sold in the financial year 1998-99. The A.O. denied the cost of improvement for the old assets amounting to Rs.6,50,000. The relevant observation of the A.O. reads as follows:- “Cost of Improvement 2: In the original return of income, the assessee had claimed an amount of Rs.6,00,000/- as the cost of improvement which was claimed to be incurred in F.Y. 2000- 01. Subsequently, a revised return was filed, increasing the cost of improvement to Rs.6,50,000/- and changing the year of improvement to 1998-99. During the course of scrutiny the assessee was required to furnish the necessary evidences in this regard. In support of the claim, the assessee furnished another valuation report where the cost of improvement is shown at Rs.6,50,000/-. The heading fo the valuation report reads as under: ESTIMATE OF ADDITIONS 7 ALTERATIONS WORK OF THE BUILDING SIT NO.145, SY. 67 65/45,65/3,65/2,70/5, 66/6, 66/4M66/5M66/2M 6/ N.G.E.F.H.B NAGASETTY HALLI BANGALORE INCURRED DURING 1998 (AS PER INFORMATION FURNISHED AND PHYSICAL VERIFICATION OF PROPERTY) Thus the above description goes on to show that there is no evidence either in respect of the improvements carried out, or in respect of the year in which the improvements are stated to be carried out. Basically there is no difference in the facts between the original return and revised return. At the time of filing the revised return, the assessee had the same facts as the existed at the time of filing the original return. This aspect is being dealt with separately. The descriptions in the valuation report also include items like provision split AC, painting, clearing of Debris etc., (in the year 1998-99) which by no stretch of imagination can be considered as cost of improvement for the purpose of the sale carried out in 2014-15. Be as it may, it is clear that there are no evidences in respect of this item. Apparently the assessee has told the registered valuer and the registered valuer made use of the mathematics to arrive at a figure of Rs.6,50,000 /-. ITA No.2925/Bang/2018 Late Mohan Puri (LR – Kunal Puri). 6 Thus the above description goes on to show that there is no evidence either in respect of improvement carried out, or in respect of the year in which the improvements are stated to be carried out. Basically, there is no difference in the facts between the original return and. the revised return. At the time of filing the revised return, the assessee had the same facts as this existed at the time of filing the original return. This aspect has been dealt with separately. Thus in the absence of any evidences, the cost of improvement of Rs. 6,50,000/- cannot be allowed. Given the efflux of time and the supposed physical verification carried out by the valuer, it is to be safely assumed that the improvement, if any, is covered by the valuation report as discussed in the earlier paragraph, which itself is already affected towards higher side in view of the apparent modification carried out subsequently by the buyer.” 7.1 The view taken by the AO was affirmed by the first appellate authority. The relevant finding of the CIT(A) disallowing the claim of the assessee on the cost of improvement in respect of sold / old assets amounting to Rs.6,50,000 for the financial year 1998-1999, reads as follows:- “5.1 As regards the claim of improvement of Rs.6,50,000/- by the assessee, the AO has discussed the reason for not accepting the same in his order. Though the assessee has filed a valuation report in support of his claim, as observed by the AO there was no evidence in respect of improvements carried out and the year of construction of the same. For the cogent reasons as mentioned in the assessment order and in view of the fact that the claim of the appellant is not sustained, the decision of the AO is upheld.” 7.2 Aggrieved by the order of the CIT(A), the assessee has raised this issue before the Tribunal. The learned AR submitted that the DVO vide his valuation report dated ITA No.2925/Bang/2018 Late Mohan Puri (LR – Kunal Puri). 7 22.05.2018 has determined an amount of Rs.9,35,000 and Rs.4,64,600 as cost of improvement for financial year 1990- 1991 and financial year 1998-1999, respectively. It was submitted that the A.O. has considered only the improvement made in the financial year 1990-1991. In this context, it was contended that the amount determined by the DVO for financial year 1998-1999 has to be considered. 7.3 The learned Departmental Representative supported the orders of the Income Tax Authorities. 7.4 We have heard rival submissions and perused the material on record. The assessee’s independent valuation is placed at pages 27 to 32 of the paper book. At pages 33 and 34 of the paper book, the assessee has given the description of the improvement carried out in the sold property during the financial year 1998-1999. The A.O. has referred the matter to the DVO u/s 55A of the Act on 17.11.2017. The DVO submitted the report on 22.05.2018 (subsequent to the date of assessment order). The DVO in his report dated 22.05.2018 had clearly mentioned (refer page 23 of the paper book), as follows:- “10. Final Valuation : Having considered all aspects, relevant circumstances, details and evidence available, the cost of construction of the property, Residential Building bearing No.145, NGEF Layout, 5 th Cross Road, Bangalore – 560 094 belonging to Shri Mohan Puri, Bangalore is evaluated at – 1. Probable cost of construction or residential building (i.e. during FY 1990-91 as per annexure 1) Rs.9,35,000 ITA No.2925/Bang/2018 Late Mohan Puri (LR – Kunal Puri). 8 2. Probable cost of improvement works (i.e. during FY 1998-99 as per annexure II) Rs.4,64,600” 7.5 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 is amounting to Rs.4,64,600. The Hon’ble Allahad High Court in the case of CIT v. Dr.Indra Swaroop Bhatnagar (2013) 30 taxmann.com 293 (Allahabad) 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. 7.6 In the result, ground 2 is allowed for statistical purposes. Brokerage (Rs.1,00,000) (Ground 3) 8. The assessee had claimed an amount of Rs.1 lakh as brokerage in respect of transfer of his old asset. In support of his claim the assessee had given a receipt signed by ITA No.2925/Bang/2018 Late Mohan Puri (LR – Kunal Puri). 9 Sri.S.T.Yogesh, Neetha Real Estate, Bangalore. The Assessing Officer disallowed the same since the payment was made in cash and also for the reason that the assessee has not claimed the same in the original return nor in the revised return. The CIT(A) affirmed the view taken by the Assessing Officer. 8.1 Aggrieved, the assessee has raised this issue before the Tribunal. The learned AR reiterated the submissions made before the Income Tax Authorities. 8.2 The learned DR supported the orders of the Income Tax Authorities. 8.3 We have heard rival submissions and perused the material on record. Admittedly, the brokerage of Rs.1 lakh 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. 8.4 Hence, ground 3 is dismissed. ITA No.2925/Bang/2018 Late Mohan Puri (LR – Kunal Puri). 10 Unexplained cash credit Rs.69A of the Act (Rs.15,00,000) (grounds 4 and 5) 9. The assessee had stated that he was in receipt of Rs.15 lakh over and above the sale consideration appearing in the sale deed. Though the amount has been stated to be from the buyer (buyer of the old asset), according to the A.O., no evidence was furnished in support of the claim. Accordingly, Rs.15 lakh was added u/s 69A of the Act. Alternatively, the A.O. held that this amount is also assessable u/s 56(2)(vii) of the Act. However, since the amount is already added u/s 69A of the Act, A.O. held that no further addition is made u/s 56(2)(vii) of the Act. 9.1 Aggrieved, the assessee filed an appeal before the first appellate authority. During the appellate proceedings, the assessee submitted that the amount has been received through banking channel and represents consideration towards amenities in properties transferred by the assessee. It was stated that this amount is not amenable to stamp duty and hence the same has not been included in the price indicated in the sale deed. It was also argued that this amount is received due to the transfer of personal effects which is outside the definition of capital asset within section 2(14) of the I.T.Act. A copy of the sale agreement of movable dated 16.03.2014 is placed at page 51 to 60 of the paper book. The CIT(A), however, rejected the contentions of the assessee and confirmed the view of the A.O. The relevant finding of the CIT(A), reads as follows:- ITA No.2925/Bang/2018 Late Mohan Puri (LR – Kunal Puri). 11 “7.1 The submission of the appellant has duly been considered. However, the reasons given for not showing the amount in the sale deed as part of total consideration lack conviction. Nothing prevented the appellant to claim it as consideration received for transfer of personal effect which is, as per the appellant, exempt from tax. The agreement for sale of amenities/movables was not produced before the AO. The agreement mentions that the sale consideration of Rs 15 lakhs towards the amenities will be paid by the purchaser at the time of registration of the sale deed of the property. The property has been sold on 25-04-2014 but the amount has been received subsequent to this date. The sale consideration of the property is Rs 2.27 crores as mentioned in the sales deed and accordingly TDS at 1% amounting to Rs 2.27 lakhs has been effected. Therefore, the claim that the amount of Rs.15 lakhs has been offered including the same in the sales consideration of the property does not make it so as claimed by the assessee. In fact, the appellant has not brought anything on record to establish the source of Rs 15 lakhs credited in its bank account as rightly observed by the AO. As held in many cases judicially, mere receipt/payment of any amount through banking channel does not make the transaction genuine. Therefore, action of the AO to treat the amount as income of the assessee u/s 69A of the Act is upheld.” 9.2 Being aggrieved by the order of the CIT(A), the assessee has raised this issue before the Tribunal. The learned AR submitted that the entire consideration of Rs.2.42 crore was disclosed by the assessee under the head “capital gains”. It was submitted that the amount indicated in the sale deed at Rs.2.27 crore was done at the insistence of the buyer and the difference of Rs.15 lakh represented consideration towards amenities in properties was transferred by the assessee in terms of the agreement dated 16.03.2014. 9.3 The learned DR, on the other hand, relied on the copy of the order of the ITAT, Chandigarh Bench in the case of ACIT, ITA No.2925/Bang/2018 Late Mohan Puri (LR – Kunal Puri). 12 Patiala v. Jasvir Singh & Anr. in ITA No.665/Chd/2016 & Ors. (order dated 16.01.2018) wherein the recovered cash was sought to be linked with sale of property. The Tribunal in the said case rejected the plea of the assessee and confirmed the addition made u/s 69A of the Act. 9.4 In the rejoinder, the learned AR submitted that the case law relied on by the learned DR is distinguishable on facts. It was submitted that the amount was seized from the assessee in the case considered by the Chandigarh Bench of the Tribunal, whereas in the instant case, the entire payment was made by cheque by the buyer of the property. Further, the learned AR relied on the following case laws:- (i) Smt.Suryakala Gopakumar v. ITO (2016) 48 ITR (Trib) 801 (ITAT Cochin Bench) (ii) CIT v. Intezar Ali (2013) 38 taxmann.com 103 (Allahabad) - to content that the amount received for amenities is nothing but part of sale proceeds of a capital asset and hence ought to be taxed under the head “capital gains”. 9.5 We have heard rival submissions and perused the material on record. The case law relied on by the learned DR is distinguishable on facts. The assessee in the said case was caught with cash of Rs.2,46,30,000 and the cash being recovered, he explained the same is out of sale proceeds of agricultural land. On perusal of the sale deeds, the sale consideration was disclosed only at Rs.42,37,500. On asked ITA No.2925/Bang/2018 Late Mohan Puri (LR – Kunal Puri). 13 to explain the source of remaining amount of Rs.2,03,92,500, the assessee in the said case insisted that the entire amount was relatable to the aforesaid sale of agricultural lands. Since cash was recovered from the assessee, the assessee’s version that the entire cash recovered is out of sale consideration of agricultural land was disbelieved. Accordingly, a sum of Rs.2,03,92,500 was added u/s 69A of the Act (Rs.2,46,30,000 – Rs.42,37,500). The view taken by the Income Tax Authorities was affirmed by the ITAT. 9.6 In the instant case, admittedly, the amount was received through banking channel from the purchaser of the old asset. Therefore, the source of amount of Rs.15 lakh 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 of Rs.15 lakh is nothing but linked with the sale of capital asset. Therefore, the sum of Rs.15 lakhs received over and above amount mentioned in sale deed needs to be assessed under the head “income from capital gains”. It is ordered accordingly. 9.7 In ground 5, the assessee raised an alternate plea that the entire amount of Rs.15 lakh 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) of the Act. Since in the foregoing paragraphs we have held that Rs.15 lakh is linked to the sale of capital asset, is to be ITA No.2925/Bang/2018 Late Mohan Puri (LR – Kunal Puri). 14 brought to tax as income from long term capital gains. Therefore, the ground 5 raised by the assessee is rejected. 9.8 In the result, ground 5 is rejected. Cost of improvement of assets purchased (ground 6) 10. For the new asset purchased, the assessee claims that he had paid Rs.14.50 lakh to the seller by bank channel for making some renovation at his instance. The said amount paid was claimed as part of cost of the new asset for claiming deduction u/s 54 of the Act. The assessee also produced memorandum of understanding dated 06.05.2014 whereby this payment of Rs.14.50 lakh was paid. The A.O. rejected the claim of the assessee. The relevant finding of the A.O. reads as follows:- “It is surprising to note that the assessee and the seller of the property enter into this kind of a MOU on the same day of registering the sale deed, wherein the property was sold / purchased for Rs.1,05,00,000. Even more surprising is that the amount is supposed to be paid to the sellers towards “Renovations”. It is not clear if the sellers are in the business of carrying out such renovations. It is also not clear whether the renovations had already been carried out or are supposed to be carried out by the sellers subsequent to the sale deed. Eiether way this payment fails to qualify as it is not part of the cost of residential house purchased. (i) Apparently the assessee and the seller have entered into this kind of an agreement in order to avoid / reduce stamp duty liability, if the seller has already carried out these “Renovations” – If these renovations were already carried out thereby increase in the value of the property, thereby increasing the stamp duty incidence. (this is outside the purview of this order for the time being till the assessee comes up with a clear stand in this regard). ITA No.2925/Bang/2018 Late Mohan Puri (LR – Kunal Puri). 15 (ii) If the renovations were to be carried out subsequently they are not part of the cost of residential house purchased.” 10.1 Aggrieved by the order if the Assessing Officer, the assessee raised this issue before the CIT(A). The CIT(A) confirmed the view taken by the Assessing Officer. The CIT(A) held that the payment of Rs.14.50 lakh is outside the purchase deed and is only to avoid stamp duty. Therefore, it was concluded by the CIT(A) that expenditure of Rs.14.5 lakh was not entitled to deduction u/s 54 of the I.T.Act. 10.2 Aggrieved by the order of the CIT(A), the assessee has raised this issue before the Tribunal. The learned AR submitted that the assessee had entered into a separate agreement with the seller. It was stated that this amount was paid by the assessee for the work already existing in the house on the date of sale of property and was paid through banking channels. It was further stated that the assessee has referred the new property for valuation as per point 8(d) of the reference u/s 55A of the Act. However, the DVO has not valued the improvements made on the assets purchased. 10.3 The learned Departmental Representative supported the orders of the Income Tax Authorities. 10.4 We have heard rival submissions and perused the material on record. The assessee claims that Rs.14.50 lakh has been paid to the seller of flat to make certain modifications for making it habitable. The assessee has ITA No.2925/Bang/2018 Late Mohan Puri (LR – Kunal Puri). 16 produced copy of agreement entered by the assessee and the seller, whereby a sum of Rs.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. The DVO in his covering letter dated 22.05.2018, enclosed with the valuation report has observed as under:- “Para 8(d) of your reference letter has a mention about cost of improvement on new asset. This point is not clear as no new asset has been referred to us. In case it is required a fresh case may be referred for that building.” 10.5 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. 10.6 Hence, ground 6 is allowed for statistical purposes. Brokerage on purchase of new asset (Rs.50,000) (ground 7) 11. The assessee claims that he has paid a sum of Rs.50,000 to one Sri.Saadiq Ahmed of Global Enterprises, when he purchased the new asset on 06.05.2014. The A.O. did not grant the benefit of exemption u/s 54 of the Act in respect of the above said amount since there was no address of the broker. The view taken by the A.O. was confirmed by the CIT(A). ITA No.2925/Bang/2018 Late Mohan Puri (LR – Kunal Puri). 17 11.1 We have heard rival submissions and perused the material on record. 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 Rs.69,000 and was struck off and Rs.50,000 is written in hand. Admittedly, there is no cheque payment insofar as Rs.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 Rs.50,000 to the broker for purchase of the residential flat. Therefore, we confirm the order of the CIT(A) on this issue. 11.2 Hence, ground 7 is dismissed. Modification made to the new asset (ground 8) 12. The Assessing Officer had disallowed the claim of the assessee of a sum of Rs.19,70,000 for the benefit of deduction u/s 54 of the Act, in respect of modification of new asset. The relevant observation of the A.O. reads as follows:- “Out of the total amount of Rs.20,70,000/- an amount of RS.15,00,000 is stated to be paid to Contractor for upgrades of Wardrobes, Kitchen, Living room etc. Most of these are already covered by the amount of Rs.14,50,000/- as discussed above. This amount is stated to be paid in cash in support of the claim the assessee furnished copies of certain writings under the letter head A.S.Suthar Interiors. However this document is not a bill, but is a mere write up and does not qualify as an evidence either for having done the work or for having received the amount. For these reasons this amount of Rs.15,00,000/- is not allowed as qualifying amount for section 54. An amount of Rs.1,00,000/- is claimed to be spent towards purchase of sofa set and chairs. These items do not qualify for ITA No.2925/Bang/2018 Late Mohan Puri (LR – Kunal Puri). 18 deduction under section 54 as they cannot be considered as an integral part of a house. Other expenses of Rs.92,200/-, Rs.28,500/-, Rs.30,500/-, Rs.55,000/-, and Rs.1,65,000/- have been disallowed for the following reasons. Air conditioner 92,200 Not an integral part of the house Toilet fittings 28,500 Part of Rs.14.50 lakhs Mesh work 30,500 Part of Rs.14.50 lakhs Electrical work 55,000 Part of Rs.14.50 lakhs Painting work 1,65,000 No evidences. 12.1 Aggrieved, the assessee raised this issue before the first appellate authority. The CIT(A) confirmed the view taken by the Assessing Officer. The relevant finding of the CIT(A), reads as follows:- “11. Ground of appeal 11 of the appellant pertains to rejection of the claim for deduction under section 54 in respect of expenditure amounting to Rs.19,70,000 by the AO. The appellant has claimed this amount being essential modification to property purchased and argued that the said expenditure is eligible for deduction under section 54 of the Act. The submission of the appellant on this issue has been considered. It is found that the AO has considered this claim and examined the details and evidence submitted by the assessee and has rejected the same for the reasons mentioned in the order. Having considered the facts, I find no merit in the submission of the appellant and therefore, the decision of the AO to disallow this claim is confirmed.” 12.2 Assessee being aggrieved by the order of the CIT(A) has raised this issue before the Tribunal. The learned AR submitted that the A.O. has referred the new property for valuation as per point 8(d) of the reference u/s 55A. However, the DVO has not done the same. The learned AR has placed ITA No.2925/Bang/2018 Late Mohan Puri (LR – Kunal Puri). 19 invoices of the improvements / modifications made to the new asset from pages 43 to 48 of the paper book. 12.3 The learned DR strongly supported the orders of the Income Tax Authorities. 12.4 We have heard rival submissions and perused the material on record. 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. 12.5 Hence, ground 8 is allowed for statistical purposes. 13. In the result, the appeal filed by the assessee is partly allowed for statistical purposes. Order pronounced on this 03 rd day of January, 2022. Sd/- (B.R.Baskaran) Sd/- (George George K) ACCOUNTANT MEMBER JUDICIAL MEMBER Bangalore; Dated : 03 rd January, 2022. Devadas G* ITA No.2925/Bang/2018 Late Mohan Puri (LR – Kunal Puri). 20 Copy to : 1. The Appellant. 2. The Respondent. 3. The CIT(A)-7, Bengaluru. 4. The Pr.CIT-7, Bengaluru. 5. The DR, ITAT, Bengaluru. 6. Guard File. Asst.Registrar/ITAT, Bangalore