Improvement of House can't denied based on enquiries made with neighbour : ITAT

Whether Cost of Improvement of House can be denied based on enquiries made with neighbour ?

Facts of the Case

Assessee had purchased a flat and incurred expenditure on renovation of house and claimed deduction u/s 54 of income Tax Act

Assessee did not file bills and vouchers for renovation/ Cost of Improvement of House with Assessing officer .Repairs carried by the assessee long back, five years ago and therefore, he is not able to produce evidence before the A.O

Inspector visited house, took photographs and also made enquiry with neighbours who said that they were not aware of improvements done by assessee .

Assessing Officer concluded that assessee had not carried out any improvement and accordingly, he disallowed entire amount .

Decision of ITAT

Mainly, based on the enquires made with the neighbours, AO came to the conclusion that the assessee has not carried out any improvement work and disallowed the entire expenditure claimed by the assessee.

If the A.O wanted to know exactly about the improvement works carried out by the assessee, he should have been enquired through a builder who constructed the building inspite of neighbours. 

A.O to allow the benefit u/s. 54 of the Act .Disallowance made by the Ld. CIT(A) to the extent of Rs. 5,00,000/- is fair and reasonable