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Long term capital gain.

mizbah khan (student IPCC) (98 Points)

05 July 2015

(Assuming) My father purchased a piece of land from dda in the year 1981 December. COA was Rs.12,000/- further he spent around 25lac for construction in the year 1985, 1990 & 2000. The same property. Was sold in the year 2014 for Rs. 1.4 cr. After applying the indexation there's a capital loss. Income Tax Return for the same has been prepared. Now my question is there is no physical proof of the cost of construction or improvement done to the property. COI was calculated on the rough estimate of the cost incurred. Will the department send any notice or ask for the documents for COI? Or is there any other intricacies I should know??? Please help in the matter.

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mizbah khan (student IPCC) (98 Points)
Replied 08 July 2015

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Z ( ) (2965 Points)
Replied 14 July 2015

How will you substantiate the cost incurred without the bills?

You are claiming that there was expenditure then burden of proof is also on you.

Even if you go in appeal the following provision of the Indian Evidence Act will trouble you

S101. Whoever desires any Court to give judgment as to any legal right or liability dependent on the existence of facts which he asserts, must prove that those facts exist.

(Even after applying S. 50C there is loss?)

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mizbah khan (student IPCC) (98 Points)
Replied 14 July 2015

Proof is the main issue here because maintenance of bills of construction for over 30 years was difficult. The property in substance is obviously there which was built subsequently after the land was alloted. As of 50C, the valuation has not been done but there is no concealment of sale amount and the transaction has been made at the prevailing market rate. So, I think there will still be capital loss.

Z ( ) (2965 Points)
Replied 14 July 2015

Practically what is done in such cases is .......... something which I do not want to say. But during the proceedings AO can definitely ask how you computed capital gain and will ask to substantiate your claim. The amount is not trivial

The proof of actual construction could be permission from MCD , property tax return , original registry and the current structure. But none of it will substantiate the expenditure.

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