HARISH JAGTANI, JAIPUR V. Deputy Commissioner of Income Tax, JAIPUR

ITITA 16/JPR/2022

AI Insights

The case involves Sh. Harish Jagtani, a non-resident Indian engaged in construction business, who appealed against the assessment order for the year 2018-19. The primary contention was the disallowance of Rs. 2,38,91,602 claimed as cost of improvement on a property sold, which was added to his income. The Assessing Officer initially disallowed the claim due to insufficient documentary evidence regarding the mode of payment. The Dispute Resolution Panel upheld this decision, leading to the present appeal. The Tribunal noted discrepancies in the handling of the assessee's evidence and directed a re-evaluation of the claim.

• Counselvise Citation: [2022] 140 COUNSELVISE.COM (IT) 132224 (ITAT-JAIPUR)
• Duration Of Justice: 3 month(s) 22 day(s)
• Appeal Type: Income Tax (International Taxation) Appeal
• Pronouncement Date: 13-12-2022
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 29-11-2022
• Assessment Year: 2018-2019
• Appeal Filed On: 21-08-2022
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Residential status; Principle of natural justice; Additional evidence; Cost of acquisition
• Section: 143(3); 142(1); 143(1); 144C; 143(2)

Judgement Text

vk;dj vihyh; vf/kdj.k] t;iqj U;k;ihB] t;iqj IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES,”B” JAIPUR Mk0 ,l- lhrky{eh] U;kf;d lnL; ,oa Jh jkBksM deys'k t;UrHkkbZ] ys[kk lnL; ds le{k BEFORE: DR. S. SEETHALAKSHMI, JM & SHRI RATHOD KAMLESH JAYANTBHAI, AM vk;dj vihy la-@IT(IT) A. 16/JP/2022 fu/kZkj.k o"kZ@Assessment Years : 2018-19 Sh. Harish Jagtani 104 Ashiyana Appartment, Tilak Nagar, Jaipur cuke Vs. DCIT, Circle (INT. Tax), Jaipur LFkk;h ys[kk la-@thvkbZvkj la-@PAN/GIR No.: AHXPJ 5430 D vihykFkhZ@Appellant izR;FkhZ@Respondent fu/kZkfjrh dh vksj ls@ Assessee by : Sh. Suresh Kumar Gupta (CA) jktLo dh vksj ls@ Revenue by : Sh. Ajay Malik (CIT) lquokbZ dh rkjh[k@ Date of Hearing : 30/11/2022 mn?kks"k.kk dh rkjh[k@Date of Pronouncement: 14/12/2022 vkns'k@ ORDER PER: RATHOD KAMLESH JAYANTBHAI, AM This appeal is filed by the assessee aggrieved from the order of the assessment passed u/s. 143(3) r.w.s. 144C (13) [ Here in after referred as ld. AO ] for the assessment year 2018-19 dated 29.06.2022 which in turn passed after the directions given by the Dispute Resolution Panel [ in short “DRP’] passed under Section 144C(5) of the Income tax Act, 1961 (in short 'the Act') dated 19.05.2022. 2 IT(IT)A. 16/JP/2022 Harish Jagtani, Jaipur vs. DCIT, Circle (Int. Tax), Jaipur 2. The assessee has marched this appeal on the following grounds of appeals:- “1. That, on the facts and circumstance of the case, Ld. A.O. was not justified in disallowing the of Rs. 2,38,91,602/- as cost of improvement incurred by the assessee without considering the fact that assessee is already submitted copy of bills and vouchers of cost of improvement incurred by the assessee before ld. AO as well as before Hon’ble DRP hence disallowance was based only direction of Hon’ble DRP deserves to be held bad in law and the consequent addition made deserves to be deleted. 2. That, on the facts and circumstances of the case, Hon’ble DRP was not justified in giving direction for disallowing of Rs. 2,38,91,602/- as cost of improvement incurred by the assessee. without considering the fact that the assessee is already submitted copy of bills and vouchers of cost of improvement incurred by the assessee before ld. AO as well as before Hon’able DRP hence disallowance deserves to be held bad in law and the consequent addition made deserves to be deleted. 3. That, on the facts and circumstances of the case, Ld. AO was not justified disallowing of Rs. 2,38,91,602/- as cost of improvement incurred by the assessee. without considering the fact that the assessee is already submitted copy of bills and vouchers of cost of improvement incurred by the assessee before ld. AO hence disallowance deserves to be held bad in law and the consequent addition made deserves to be deleted. 4. That levy of additional tax and interest and the thereby raising a demand consequential, is erroneous and in the alternative excessive. 5. That, the ld. AO erred in initiating penalty u/s 270 A of the Income Tax Act, 1961. 6. That the appellant craves leave to add, amend, withdraw any grounds of appeals before or during the course of hearing before the Hon’ble Bench Income Tax Appellate Tribunal Jaipur.” 3. Feeling aggrieved and dissatisfied with the order of the assessment assessee preferred this appeal on the grounds as stated here in above. The concise fact related to this case is that the assessee filed return of income on 31.03.2019 declaring total income of Rs. 1,03,12,520/-. The return was processed u/s. 143(1) of the Act, subsequently case was selected for scrutiny though CASS. The notice u/s. 143(2) of the Act was issued by the 3 IT(IT)A. 16/JP/2022 Harish Jagtani, Jaipur vs. DCIT, Circle (Int. Tax), Jaipur National e-Assessment Center. Thereafter, notice u/s. 142(1) of the Act along with the questionnaire requiring the assessee to furnish information / documents. As the residential status of the assessee being nonresident, the case was transferred from NeAC to the Circle, International Taxation, Jaipur on 24.03.2021. Fresh notices were issued and in response the assessee filed the details. 4. On examination of information / documents filed by the assessee, ld. AO observed that the assessee received sale consideration of Rs. 6,09,57,000/- and in computing the capital gain the assessee claimed Indexed cost of acquisition and also claimed indexed cost of improvement. During the assessment proceeding the assessee was asked to furnish the documentary evidence in support of indexed cost of acquisition and cost of improvement in order to verify the claim made by the assessee. From the details submitted by the assessee ld. AO observed that the assessee has claimed cost of improvement such as land levelling charges, fencing charges, tube well charges, boundary wall, guard salary etc. The source of cash / bank payments is said to be from out of cash in hand/bank available with the assessee. Assessee submitted some invoices with respect to construction work done by him on the impugned property sold. The ld. AO 4 IT(IT)A. 16/JP/2022 Harish Jagtani, Jaipur vs. DCIT, Circle (Int. Tax), Jaipur observed that these invoices do not contain details of mode of payment made. Based on this observation the ld. AO did not accept the claim of the assessee for the cost of improvement claimed by him. The relevant finding recorded by the ld. AO in the draft assessment order is reiterated here in below: “From perusal of above invoices, it is evident that these invoices do not contain any description of plot on which construction works were done by the company. These invoices do not contain details of mode of payment whether made through cash or cheque. Further, on perusal of registered sale deed, it is noticed that in the sale deed only sale of plots were mentioned. In the sale deed, nowhere it mentioned that the plot contains some construction. Therefore, the cost of improvement claimed by the assessee on the above bills is not acceptable. 5.7 Further, as per details submitted by the assessee, the assessee claimed indexed cost of improvement on improvement/expenses incurred by him. Since, the assessee did not furnish any documentary evidence viz. copy of bills, invoices, receipts etc. to verify the claim of the assessee that the said costs were paid for the improvement of the impugned plot. Therefore, the claim of the assessee with respect to cost of improvement is not acceptable. 5.8 In view of the foregoing facts and circumstances of this case, I find that despite being availing ample opportunity, the assessee could not substantiate his claim regarding Indexed Cost of Improvement with the corroborative documentary evidence. Therefore, the Indexed Cost of Improvement amounting of Rs. 4,21,97,274/- claimed by the assessee in ROI is hereby disallowed and the same is added to the total income of the assessee. Penalty notice u/s 270A of the Act for misreporting of income is issued.” 5. Feeling aggrieved, assessee filed objection against the draft assessment order before the Dispute Resolution Panel, New Delhi in terms of provision of section 144C(2)(b). The ld. AO did not consider the order of the DRP fully and claim of the assessee for cost of improvement to the 5 IT(IT)A. 16/JP/2022 Harish Jagtani, Jaipur vs. DCIT, Circle (Int. Tax), Jaipur extent of Rs. 2,38,91,602/- was not considered. The relevant observation of the ld. AO on this issue is reiterated here in below; “On perusal of the additional evidence submitted before DRP it is noted that the assessee submitted bills and vouchers in relation to the improvement expenses made. However, considering the below mentioned directions of the DRP, the issue of disallowance of indexed cost of improvement is decided accordingly. “...As observed by the AO in Paras 5.5 to 5.8 the assessee could not furnish documentary evidences in support of the cost of improvement and he also failed to furnish the same during DRP proceedings. The panel therefore finds no grounds to interfere with the conclusion of the AO subject to its directions regarding rectification of the computational errors as mentioned in paras 4.1.4 above.....” In conformity with the directions issued by the Hon’ble DRP, the assessee has not submitted (neither before AO nor before Hon’ble DRP) and documentary evidence in support of his claim of cost of improvement of Rs. 2,38,91,602/-, thus, this claim made by the assessee remains unexplained. Therefore, this claim of the assessee is hereby disallowed.” 6. Before us, the assessee contended that they have submitted all the bills to the assessing officer and from the said bills ld. AO contended that there is no mention of the source of the payment made by the assessee for these bills claimed on account of cost of improvement. Thus, the contention of the ld. AO and DRP is prejudiced. Even though these details available with the records of the ld. AO, in the DRP proceeding the said invoices were again submitted in support of the claim of cost of improvement claimed by the assessee. 7. Whereas revenue relied on the findings of the ld. AO and DRP wherein they have hold that the assessee could not furnish any 6 IT(IT)A. 16/JP/2022 Harish Jagtani, Jaipur vs. DCIT, Circle (Int. Tax), Jaipur documentary evidence in support of the cost of improvement. Based on these averments he has supported the orders of the lower authority. 8. The ld. AR of the assessee submitted that the contention of the ld. AO that the assessee has not submitted the details of the cost of improvement claimed is in correct. Based on the bills submitted commented that the assessee has not filed the details of the source of payment. Based on the submission of the bills in the paper book filed by the assessee before DRP ld. AO was directed to verify the computation error which the ld. AO has not taken in accordance with the direction and finding given by the ld. DRP at last four line of para 4.1.5 is totally contradictory. The ld. AR of the assessee drawn our attention to both the contradictory finding and the same is reiterated here in below Contrary finding of the ld. DRP Finding at para 4.1.4 The AO is directed to verify the claim of the assessee and computation submitted as above regarding the indexed cost of improvement and indexed cost of acquisition and remove the computational errors if any by passing a speaking order. Finding at para 4.1.5 (last five line) “As observed by the AO in para 5.5 to 5.8 the assessee could not furnish documentary evidence in support of the cost of improvement and he also failed to furnish the same during DRP proceedings. The panel therefore finds no grounds to interfere with the conclusion of the AO subject to its directions regarding rectification of the computational errors as mentioned in paras 4.1.4 above.” 7 IT(IT)A. 16/JP/2022 Harish Jagtani, Jaipur vs. DCIT, Circle (Int. Tax), Jaipur 9. Therefore, the assessee submitted based on that fact and details being placed on record before DRP also ld. DRP directed to verify the claim of the assessee for the indexed cost of the improvement and indexed cost of the acquisition and remove the computational error. Accordingly, the ld. DRP has directed the ld. AO to consider the claim of the assessee but finally without giving any reason and referring to the evidence placed before the panel the same was not considered and therefore, the DRP has violated the principles of natural justice. 10. The ld. AR appearing on behalf of the assessee in addition to the above oral arguments placed on record his written submission dated 14/11/2022 which is extracted in below; “The appellant is Non Resident Indian and is engaged in construction business through a Limited Liability Firm (M/s Suhap Builders and developers LLP) and is earning profit/Loss from the Limited liability partnership firm. The appellant has filed his return of income for the year under appeal declaring total income of Rs.1,03,12,520.00/- on 31 st day of March 2019. The matter was selected for scrutiny under CASS and draft proposed assessment order was passed in which various additions / disallowances were made and the appellant has disagreed with the proposed additions / disallowances of the draft order and preferred an appeal to Hon’able Dispute Resolution Panel for their direction against the proposed additions and got substantial relief from Hon’able Dispute Resolution Panel and total income was assessed by Ld A.O. at Rs. 2,13,43,390.00/- on 29.06.22 by making addition for cost of improvement after getting direction from the Hon’able Dispute Resolution Panel. In the matter Hon’able Dispute Resolution Panel directed the Ld A.O. to make assessment considering the additional evidences furnished before the Hon’able Dispute Resolution Panel. On the basis of direction given by Hon’able Dispute Resolution Panel the Ld A.O. deleted the additions passed in Draft Assessment Order except deletion of additions made for cost of 8 IT(IT)A. 16/JP/2022 Harish Jagtani, Jaipur vs. DCIT, Circle (Int. Tax), Jaipur improvement for which the Hon’able Dispute Resolution Panel considered and directed that assessee had not submitted the proof of cost of improvement at the time of assessement proceedings, however as per the facts of the case proof in support of cost of improvement were submitted at the time of assessement proceedings, more than 65% of the payments were routed through bank accounts. All the bank statements were submitted before the Ld A.O. at the time of assessement proceedings along with detailed sheet of expenditure of cost of improvement and copy of bill and bank statement. Aggrieved by the order passed on the basis of directions given by the Hon’able Dispute Resolution Panel, the appellant has preferred the present appeal against the addition so made by the Ld A.O. Details of Cost of Improvement and Indexed Cost of Improvement for allowance of which the appeal is preferred are as mentioned in the table below: S.No. Financial Year Cost of Improvement ( In Rs. ) Indexed Cost of Improvement( In Rs. ) 1. 2004-05 7,50,000.00 18,05,310.00 2. 2005-06 7,50,000.00 17,43,590.00 3. 2006-07 7,50,000.00 16,72,131.00 4. 2008-09 2,68,0000.00 53,20,876.00 5. 2009-10 36,89,000.00 67,79,784.00 6. 2010-11 5,48,350.00 8,93,121.00 7. 2011-12 6,50,000.00 9,60,870.00 8. 2012-13 5,37,199.00 7,30,591.00 9. 2015-16 1,00,000.00 1,07,087.00 10. 2016-17 8,00,000.00 8,24,242.00 11. 2017-18 30,54,000.00 30,54,000.00 Total 1,43,08,549.00 2,38,91,602.00 The above calculations were available with Ltd. A.O. on record but the Ld. A.O. did not consider calculations for cost of improvement and consequently addition for cost of improvement was not deleted as per directions given by Hon’able Dispute Resolution Panel as written on page no. 35 of the assessment order. However Ld A.O. clearly mentioned on page no. 34 of the assessment order that: “On perusal of the additional evidence submitted before DRP it is noted that the assessee had submitted bills and vouchers in relation to the improvement expenses made. However considering the below mentioned directions of the DRP, the issue of disallowance of indexed cost of improvement is decided accordingly. As observed by the AO in para 5.5 to 5.8 the assesssee could not furnish documentary evidences in support of the cost of improvement and he also failed to furnish the same during DRP proceedings. The panel therefore finds no grounds to interfere with the 9 IT(IT)A. 16/JP/2022 Harish Jagtani, Jaipur vs. DCIT, Circle (Int. Tax), Jaipur conclusion of the AO subject to its directions reading rectification of the computation errors as mentioned in paras 4.1.4 above. ...” Hence the Ld A.O. disallowed full cost of improvement as per directions received from Hon’able Dispute Resolution Panel. Submission for individual grounds is as under: 1. That, on the facts and circumstance of the case , Ld. A.O. was not justified in disallowing Rs. 2,38,91,602.00/- as cost of improvement was incurred by the assessee without considering the fact that assessee has already submitted copy of bills, vouchers in support of cost of improvement before the Ld. A.O. as well as before Hon’able DRP hence disallowance was based only on the directions given Hon’able DRP deserves to be held bad in law and the consequent addition made deserves to be deleted. 2. That , on the facts and circumstance of the case , Hon’able DRP was not justified in giving direction for disallowing of Rs. 2,38,91,602.00/- as cost of improvement incurred by the assessee without considering the fact that the assessee has already submitted copy of bills and vouchers of cost of improvement incurred by the assessee before Ld. AO as well as before Hon’able DRP hence disallowance deserves to be held bad in law and the consequent addition made deserves to be deleted. 3. That, on the facts and circumstance of the case, Ld. AO was not justified disallowing of Rs. 2,38,91,602.00/- as cost of improvement incurred by the assessee. without considering the fact that the assessee is already submitted copy of bills and vouchers of cost of improvement incurred by the assessee before Ld. AO hence disallowance deserves to be held bad in law and the consequent addition made deserves to be deleted. 4. That levy of additional tax and interest and the thereby raising a demand consequently, is erroneous and in the alternative excessive. 5. That, the Ld. A.O. erred in initiating penalty u/s 270 A of the Income Tax Act, 1961. 6. That the appellant craves right to add, amend, and withdraw any grounds of appeals before or during the course of hearing before the Hon’able Bench Income Tax Appellate Tribunal Jaipur. In support of our grounds of appeal we hereby enclosing the a set of papers/evidences in support of justification for cost of improvement like copy of bills, Bank Statements which we have already submitted before the Ld A.O. at the time of asseseement proceedings for kind perusal of your honors. 10 IT(IT)A. 16/JP/2022 Harish Jagtani, Jaipur vs. DCIT, Circle (Int. Tax), Jaipur Enclosures: 1) Copy of bank statement reflecting payment made for cost of improvement. 2) Copy of Bills of cost of improvement 3) Copy of acknowledgement of reply filed dated 22.09.2021 before Ld. A.O. reflecting the above said papers filed with the Ld. A.O. at the time of assessment proceedings. Moreover, the assessee has been co-operative throughout the assessment proceedings even when proper time was not given to submit the documents and Hon’able DRP did not consider the evidences which the assessee has submitted at the time assessment proceedings at the time of giving their directions. From above submissions it is evidently clear that the assessee has completely submitted the all evidences of cost of improvement at the time of assessement proceedings and therefore addition made by Ld. AO with direction of Hon’able DRP without any corroborative material on record, deserve to be fully deleted, and assessee prays accordingly.” 11. In addition to the above written submission dated 30.11.2022, the ld. AR appearing on behalf of the assessee submitted as under:- “The appellant is Non Resident Indian and is engaged in construction business through a Limited Liability Firm (M/s Suhap Builders and developers LLP) and is earning profit/Loss from the Limited liability partnership firm. The appellant has filed his return of income for the year under appeal declaring total income of Rs.1,03,12,520.00/- on 31 st day of March 2019. The matter was selected for scrutiny under CASS and draft proposed assessment order was passed in which various additions / disallowances were made and the appellant has disagreed with the proposed additions / disallowances of the draft order and preferred an appeal to Hon’able DRP for their direction against the proposed additions and got substantial relief from Hon’able DRP and total income was assessed by Ld A.O. at Rs. 2,13,43,390.00/- on 29.06.22 by making addition for cost of improvement after getting direction from the Hon’able DRP Assessee went before Hon’able DRP with 1to 5 grounds of objections Which are mentioned at page no. 1 and 2 of Paper Book submitted before Hon’able DRP but Hon’able DRP allowed 2 to 5 objection fully by giving direction to LD AO with assess assessee’s Income looking to all computational errors. Ground No. 1 was in two parts 1 is indexed cost of acquisition and other is indexed cost of improvement as follows: 11 IT(IT)A. 16/JP/2022 Harish Jagtani, Jaipur vs. DCIT, Circle (Int. Tax), Jaipur Indexed Cost of Acquisition (Rs.) Indexed Cost of Improvement (Rs.) Total (Rs.) 18305672.00 23891602.00 42197274.00 But Hon’able DRP allowed ground no. 1 partly i.e. Indexed Cost of Acquisition and did not consider the Indexed cost of Improvement. And given direction accordingly. the appellant has preferred the present appeal against the addition so made by the Ld A.O. In the matter Hon’able DRP directed the Ld A.O. to make assessment considering the additional evidences furnished before the Hon’able DRP. On the basis of direction given by Hon’able DRP the Ld A.O. deleted the additions made in Draft Assessment Order except deletion of additions made for cost of improvement for which the Hon’able DRP considered and directed that assessee had not submitted the proof of cost of improvement at the time of assessement proceedings, however as per the facts of the case proof in support of cost of improvement were submitted at the time of assessement proceedings, more than 65% of the payments were routed through bank accounts. All the bank statements were submitted before the Ld A.O. at the time of assessement proceedings along with detailed sheet of expenditure of cost of improvement and copy of bill and bank statement. Aggrieved by the order passed on the basis of directions given by the Hon’able DRP, the appellant has preferred the present appeal against the addition so made by the Ld A.O. Details of Cost of Improvement was Rs. 14308549.00 and Indexed Cost of Improvement was Rs. 23891602.00 for allowance of which the appeal is preferred. Calculations of cost of immprovement and Indexed cost of improvement were available with Ltd. A.O. on record but the Ld. A.O. did not consider calculations for cost of improvement and consequently addition for indexed cost of improvement was not deleted as per directions given by Hon’able DRP as written on page no. 35 of the assessment order. However Ld A.O.was agreed with the actual facts and clearly mentioned on page no. 34 of the assessment order that: “On perusal of the additional evidence submitted before DRP it is noted that the assessee had submitted bills and vouchers in relation to the improvement expenses made. However considering the below mentioned directions of the DRP, the issue of disallowance of indexed cost of improvement is decided accordingly. 12 IT(IT)A. 16/JP/2022 Harish Jagtani, Jaipur vs. DCIT, Circle (Int. Tax), Jaipur As observed by the AO in para 5.5 to 5.8 the assesssee could not furnish documentary evidences in support of the cost of improvement and he also failed to furnish the same during DRP proceedings. The panel therefore finds no grounds to interfere with the conclusion of the AO subject to its directions reading rectification of the computation errors as mentioned in paras 4.1.4 above. ...” Hence the Ld A.O. disallowed full Indexed cost of improvement as per directions received from Hon’able DRP without considering the actual facts. However we had submitted before Hon’able DRP all the evidences as per the paper book submitted before Hon’able DRP.Copy of which placed before your honours. Submission for individual grounds is as under: 1. That, on the facts and circumstance of the case, Ld. A.O. was not justified in disallowing Rs. 2,38,91,602.00/- as cost of improvement was incurred by the assessee without considering the fact that assessee has already submitted copy of bills, vouchers in support of cost of improvement before the Ld. A.O. as well as before Hon’able DRP hence disallowance was based only on the directions given Hon’able DRP deserves to be held bad in law and the consequent addition made deserves to be deleted. 2. That , on the facts and circumstance of the case , Hon’able DRP was not justified in giving direction for disallowing of Rs. 2,38,91,602.00/- as cost of improvement incurred by the assessee without considering the fact that the assessee has already submitted copy of bills and vouchers of cost of improvement incurred by the assessee before Ld. AO as well as before Hon’able DRP hence disallowance deserves to be held bad in law and the consequent addition made deserves to be deleted. 2. That, on the facts and circumstance of the case, Ld. AO was not justified disallowing of Rs. 2,38,91,602.00/- as cost of improvement incurred by the assessee. without considering the fact that the assessee is already submitted copy of bills and vouchers of cost of improvement incurred by the assessee before Ld. AO hence disallowance deserves to be held bad in law and the consequent addition made deserves to be deleted. Assessee had submitted before LD AO Copy of bank statement reflecting payment made for cost of improvement and Copy of Bills of cost of improvement at the time of assessement proceedings vide reply dated 22.09.2021 duly acknowledeged by the Income Tax Department. 13 IT(IT)A. 16/JP/2022 Harish Jagtani, Jaipur vs. DCIT, Circle (Int. Tax), Jaipur Hon’able DRP did not consider the evidences which the assessee has submitted at the time assessment proceedings at the time of giving their directions. It is evidently clear that the assessee has completely submitted the all evidences of cost of improvement at the time of assessement proceedings and therefore addition made by Ld. AO with direction of Hon’able DRP without any corroborative material on record , deserve to be fully deleted , and assessee prays accordingly.” 12. So, far as the issue disputed before us, the Dispute Resolution Panel considered the objections filed by the assessee and the relevant observations of the ld. DRP on this issue is reiterated here in below: “4.1.1 In ground number 1 the assessee has objected to the disallowance of indexed cost of improvement amounting to Rs. 4,21,97,274/-, In this connection the assessee has submitted that the documentary evidences furnished and submissions made by the assessee during assessment proceedings were not considered. The AO has discussed the rationale for disallowance of the same in para 5.1 to 5.8 of the draft assessment order. In paras 5.5, 5.6 & 5.7 of the draft assessment order the AO has made the following observations: "5.5 From the above details, it is notices that the assessee has claimed cot of improvement on expenses incurred on such as land levelling charges, Fencing charges, tube tell charges, boundary wall, guard salary etc. The assessee has claimed that the above expenses were incurred in cash hand/bank. The assessee has not submitted any documentary evidences such as bills and invoices in support of his claim. Therefore, the claim is not acceptable. 5.6 The assessee has submitted some invoices with respect to some construction work done by him on the impugned land. The snapshots of the invoices are given below. 5.7 Further, as per details submitted by the assessee, the assessee claimed indexed cost of improvement/expenses incurred by him. Since, the assessee din no furnish an documentary evidences viz. copy of bills, invoices, receipts etc. to verify the claim of the assessee that the said costs were paid for the improvement of the impugned plot. Therefore, the claim of the assessee with respect to cost of improvement is not acceptable." 14 IT(IT)A. 16/JP/2022 Harish Jagtani, Jaipur vs. DCIT, Circle (Int. Tax), Jaipur 4.1.2 The assessee has submitted that The A.O. has considered the cost of acquisition at Rs. 12,64,439/- instead of Rs. 1,95,70,111/-. In this regard the assessee submitted computation for indexed cost of improvement as under: As per Ld. AO As per Ld. AO As per Assessee and the computation of income Cost of Land Rs. 5,25,300.00 87,07,291.00 Indexed cost of acquisition of Land Rs. 12,64,439.00 1,95,70,111.00 Cost of improvement 2,24,90,540.00 1,43,08,549.00 Indexed cost of improvement 4,21,97,274.00 2,38,91,602.00 4.1.3 Accordingly it has been requested that the factual errors regarding the indexed cost of improvement be corrected. The assessee has further submitted that the AO has considered only the purchases made during the FY 2004-05 and ignored the purchases made during FY 2005-06 and FY 2006-07. Accordingly, the revised working of the indexed cost of acquisition has been submitted as under:- Financial Year Cost of Acquisition Indexed cost of Acquisition 2005-06 6,70,200.00 15,58,0772.00 2006-07 75,11,791.00 1,67,47,600.00 Total 81,81,991.00 1,83,05,672.00 4.1.4 The AO is directed to verify the claim of the assessee and computation submitted as above regarding the indexed cost of improvement and indexed cost of acquisition and remove the computational errors if any by passing a speaking order. 4.1.5 As regards, the observation and conclusion of the AO in paras 5.5 to 5.8 or the Draft Assessment order, the assessee has submitted that he is an individual and is not engaged in why business activity in India being a Non resident Indian. The above group of plots were developed jointly as a single unit for construction of an outhouse for the use by the assessee and his family members and not for any commercial use whatsoever. The assessee does not maintain any books of accounts and the funds spent on the said group of plots was for personal use of assessee and the funds for the same were incurred either directly by the assessee or the family members residing in India from the funds given to them by the assessee or by Shiv Sital Builders from the funds given to it by the assessee. DRP has considered the submissions of the assessee as well as the observations of the AO in the draft assessment order. As observed by the AO in paras 5.5 to 5.8 the assessee could not furnish documentary evidences in support of the cost of improvement and he also failed to furnish the same during DRP proceedings. The panel therefore finds no grounds to interfere with the conclusion of the 15 IT(IT)A. 16/JP/2022 Harish Jagtani, Jaipur vs. DCIT, Circle (Int. Tax), Jaipur AO subject to its directions regarding rectification of the computational errors as mentioned in paras 4.1.4 above.” 13. The ld. AR of the assessee submitted that it is evident that the ld. DRP directed AO to considered evidences and based on the above observation the ld. AO was directed to verify the claim of the assessee and computation submitted regarding the indexed cost of improvement and indexed cost of acquisition and remove the computational errors if any by passing a speaking order. The ld. AR of the assessee from the submission drawn our attention that while disallowing the figure there is computation error and the same is reiterated for the sake of brevity: As per Ld. AO As per Ld. AO As per Assessee and the computation of income Cost of Land Rs. 5,25,300.00 87,07,291.00 Indexed cost of acquisition of Land Rs. 12,64,439.00 1,95,70,111.00 Cost of improvement 2,24,90,540.00 1,43,08,549.00 Indexed cost of improvement 4,21,97,274.00 2,38,91,602.00 14. Based on these finding the ld. AR of the assessee argued that when the ld. DRP has agreed that there is computational error the ld. AO should have considered the error in the light of the observation of the ld. DRP and the invoices again placed on record. For this contention ld. AR of the assessee drawn our attention to the finding of the ld. AO in the final order and the same is reiterated here in below 16 IT(IT)A. 16/JP/2022 Harish Jagtani, Jaipur vs. DCIT, Circle (Int. Tax), Jaipur On perusal of the additional evidence submitted before DRP it is noted that the assessee submitted bills and vouchers in relation to the improvement expenses made. However, considering the below mentioned directions of the DRP, the issue of disallowance of indexed cost of improvement is decided accordingly. “...As observed by the AO in Paras 5.5 to 5.8 the assessee could not furnish documentary evidences in support of the cost of improvement and he also failed to furnish the same during DRP proceedings. The panel therefore finds no grounds to interfere with the conclusion of the AO subject to its directions regarding rectification of the computational errors as mentioned in paras 4.1.4 above.....” In conformity with the directions issued by the Hon’ble DRP, the assessee has not submitted (neither before AO nor before Hon’ble DRP) and documentary evidence in support of his claim of cost of improvement of Rs. 2,38,91,602/-, thus, this claim made by the assessee remains unexplained. Therefore, this claim of the assessee is hereby disallowed.” The above observation itself suggest that even though the details of bills / invoices placed on record the cost of improvement to the extent of Rs. 2,38,91,602/- denied to the assessee which violates the fundaments right of being heard for the denial of such claim. 15. On the contrary the ld. DR draw our attention to the following finding of the ld. DRP recorded at para 4.1.5 (last five lines): “As observed by the AO in para 5.5 to 5.8 the assessee could not furnish documentary evidence in support of the cost of improvement and he also failed to furnish the same during DRP proceedings. The panel therefore finds no grounds to interfere with the conclusion of the AO subject to its directions regarding rectification of the computational errors as mentioned in paras 4.1.4 above.” 16. In the rejoinder the ld. AR of the assessee opposed to this observation and submitted that when the ld. DRP specifically agreed for allowance of cost acquisition and cost of improvement and directed to 17 IT(IT)A. 16/JP/2022 Harish Jagtani, Jaipur vs. DCIT, Circle (Int. Tax), Jaipur considered the computational error there is no speaking order of the ld. AO so as why the same is not allowable even though the ld. AO has agrred that the assessee has filed the details in the form of additional evidence. The ld. AR also argued that the invoices were given to the ld. AO before the draft assessment order and based from that he commented that there is no mention for mode of payment. Even though, the same were also submitted before the ld. DRP and ld. DR did not controvert the fact that the invoices were not submitted before the DRP proceeding as the same is also placed before us in the paper book filed. The ld. DR also submitted that ld. AO in the draft assessment order even though the bills were submitted observed that invoice submitted do not contain the details of mode of payment made. Therefore, this primary fact also not taken care of by the ld. DRP in specific direction in the order of the ld. DRP and therefore, in these lights of the fact he has contended that this needs to be verified at the level of the AO as to how much amount of the invoices were submitted and details of the source of the same and as there is no specific finding of the ld. DRP on the issue ld. DR prayed to restore the allowability of the amount to the file of the ld. AO and he may considered the details available on record may allow the claim of the assessee regarding the cost of improvement. 18 IT(IT)A. 16/JP/2022 Harish Jagtani, Jaipur vs. DCIT, Circle (Int. Tax), Jaipur 17. We have heard the rival contentions and perused the material placed on record and also gone through the orders of the lower authorities. The only dispute raised by the assessee before us is not considering the cost of improvement to the extent of Rs. 2,38,91,602/- for working out the capital gain. For this contention ld. AR contended that all the details relevant to claim is already on record. But the said claim is disallowed in toto without pointing out a single defect or reason as to why the same is not allowable. We have also noted that while passing the draft order the cost of acquisition as well as cost of improvement not correctly worked out as tabulated elsewhere in this order. We have also noted that based on the claim of the improvement ld. AO observed in the draft order that in the invoice placed on record there is no reference of mode of payment. Before us, revenue also not controverted the claim of the assessee that the bills / invoices related to the claim for cost of improvement were placed before DRP / AO. We have also observed that while passing the final order so far as related to the claim of cost of improvement is considered the ld. AO has accepted that the additional evidence is placed on record. But as there is not specific direction of the ld. DRP he has not allowed the claim of the assessee. The bench also noted that both the parties accepted the fact that related invoices / bills and source related information is already forming part of the assessment 19 IT(IT)A. 16/JP/2022 Harish Jagtani, Jaipur vs. DCIT, Circle (Int. Tax), Jaipur records. On perusal of the records, we are of the considered view that the assessee has already placed on record the details of the cost of improvement claimed for which there is reference in draft assessment order also. The ld. AR has demonstrated before us the observation of the AO that the assessee has submitted the additional evidences also before ld. DRP at page 34 bottom lines of the final order of the ld.AO. As there is no specific finding on these issues in the order of the DRP not allowed claim. Looking to this facts and circumstances of the case, we agree with the contentions raised by the ld. DR that let that figure of the allowability of cost of improvement be verified by the ld. AO but at the same time we direct the ld. AO that he should not start inquiry on any other issue and review his order. He is specifically directed to verify the claim of cost of improvement for which details already on record and allow the claim of the assessee for cost of improvement in accordance with law and at the same time, the assessee is also directed to comply the letters / notices if any issued in this regard so that the AO verify the claim of the assessee for cost of improvement for a sum of Rs. 2,38,91,602/- and allowed the claim of the assessee to the extent of the details placed on record by the assessee. 20 IT(IT)A. 16/JP/2022 Harish Jagtani, Jaipur vs. DCIT, Circle (Int. Tax), Jaipur In terms of these observations, the ground no. 1 to 3 of the appeal of the assessee are allowed. The ground no. 4 is consequential in nature, ground no 5 is premature & ground no 6 is general in nature does not require any adjudication. In the result, appeal of the assessee is allowed. Order pronounced in the open court on 14/12/2022. Sd/- Sd/- ¼ Mk0 ,l- lhrky{eh ½ ¼ jkBksM deys'k t;UrHkkbZ ½ (Dr. S. Seethalakshmi) (Rathod Kamlesh Jayantbhai) U;kf;d lnL;@Judicial Member ys[kk lnL;@Accountant Member Tk;iqj@Jaipur fnukad@Dated:- 14/12/2022 *Ganesh Kumar vkns'k dh izfrfyfi vxzsf’kr@Copy of the order forwarded to: 1. The Appellant- Sh. Harish Jagtani, Jaipur 2. izR;FkhZ@ The Respondent- DCIT,Circle (Int. Tax), Jaipur 3. vk;dj vk;qDr@ The ld CIT 4. vk;dj vk;qDr¼vihy½@The ld CIT(A) 5. foHkkxh; izfrfuf/k] vk;dj vihyh; vf/kdj.k] t;iqj@DR, ITAT, Jaipur 6. xkMZ QkbZy@ Guard File (IT(IT)A. 16/JP/2022) vkns'kkuqlkj@ By order, lgk;d iathdkj@Asst. Registrar