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Facts
The assessees (two brothers) sold an immovable property for Rs. 7 crore in AY 2013-14. Their case was reopened under Section 148 as no income return was filed initially. They claimed various deductions for indexed costs of bank mortgage repayment, other loans, and security deposit, arguing these were wholly and exclusively incurred in connection with the property transfer, which the Assessing Officer disallowed citing lack of documentary evidence.
Held
The Tribunal observed that the assessees failed to provide supporting documentary evidence to both the AO and CIT(A). Since the CIT(A) did not decide the issues on merits, the Tribunal, invoking principles of natural justice, granted the assessees another opportunity to present their case and evidence before the Assessing Officer.
Key Issues
Whether the lower authorities erred in computing long-term capital gains by disallowing deductions for costs incurred (mortgage repayment, other loans, security deposit, transfer expenses) without sufficient documentary evidence, and the justifiability of levying interest under Sections 234A, 234B, and 234C.
Sections Cited
250, 148, 142(1), 234A, 234B, 234C
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Income Tax Appellate Tribunal, “B” BENCH, MUMBAI
Before: SHRI OM PRAKASH KANT, AM
O R D E R Per Kavitha Rajagopal, J M:
These appeals have been filed by the two different assessees, challenging the orders of the learned Commissioner of Income Tax (Appeals) (‘Ld. CIT(A)’ for short), National Faceless Appeal Centre (‘NFAC’ for short) passed u/s.250 of the Income Tax Act, 1961 (‘the Act'), pertaining to the Assessment Year (‘A.Y.’ for short) 2013-14. As the facts are identical, we hereby pass a consolidated order by taking as a lead case.
The assessee has raised the following grounds of appeal:
“1. The Ld. CIT(A) erred in upholding the Assessment order computing long term capital gain at Rs.2,25,21,780/- denying the claim of the assessee towards cost of acquisition/ cost of improvement, without appreciating the complete fact of the case.
2. The Ld. CIT(A) erred in upholding the computation of long term capital gain at Rs.2,25,21,750/-, without arriving at FMV.
3. The Ld. CIT(A) erred in upholding the Assessment order by an ex-parte order.
4. The Assessee craves leave to add, alter, amend, delete and/or modify all or any of the above grounds of appeal.”
It is observed that the appeal in has been filed belatedly with a delay of 299 days beyond the period of limitation. The assessee had filed an application for condoning the said delay along with an affidavit. Upon perusal of the same, we deem it fit to hold that the assessee had “sufficient cause” for the delay and hence the delay is condoned.
Brief facts of the case are that the assessee is an individual and sold an immovable property worth Rs.7,00,00,000/- during the Financial Year 2012-13 (“F.Y.” for short).
Further, it was noticed by the Learned Assessing Officer (“Ld. AO” for short) that the assessee did not file his return of income for the year under consideration. Accordingly, the assessee’s case was reopened by the AO by issuing notice dated 02.03.2017 u/s. 148 of the Act. During the course of assessment proceedings, notices dated 06.04.2017 & 16.05.2017 u/s. 142(1) were issued to the assessee. In response to the same, the assessee had filed his return of income for the A.Y. 2013-14 (“A.Y.” for short) on 28.08.2017 declaring capital loss of Rs.9,11,553/-. The AO noticed in the return of income that the assessee’s share in the said property sold by the assessee along with his two brothers was 1/3rd i.e. Rs.2,33,33,333/- and hence the AO issued a notice u/s. 142(1) of the Act dated 07.09.2017 to the assessee calling for explanation regarding the deduction claimed by the assessee while computing the capital gains/loss on the said sold property. In response, the assessee submitted that he along with his two brothers took a mortgage loan amounting to Rs.5,00,00,000/- from Bank of Baroda on jointly owned said property and provided the said loan amount directly to the company M/s. Raja Rani Travels Pvt. Ltd. as loan, in which the brothers are directors. Subsequently, since the company failed to repay the loan amount fully the assessee and his brothers sold the said property for Rs.7,00,000/- and repaid the outstanding loan taken from the bank. Apart from the mortgage loan the assessee and his brothers had also availed other loans from various parties for business purpose. The Ld. AO rejected the deductions claimed for bank mortgage repayment, other loans and cost of security deposit by concluding that the assessee had not furnished any supporting documentary evidences and the assessment was completed by the Ld. AO allowing only the cost of acquisition/improvement claimed by the assessee amounting to Rs.8,11,533/-.
Aggrieved, the assessee was in appeal before the first appellate authority, who vide order dated 17.06.2025 partly allowed the appeal.
The assessee is in appeal before us, challenging the order of the Ld. CIT(A).
Before us, the Learned Authorized Representative (“Ld. A.R.” for short) for the assessee commenced the arguments stating that the assessee along with his two brothers took a mortgage loan and provided the said loan amount directly to the company M/s. Raja Rani Travels Pvt. Ltd. as loan, in which the brothers are directors. Subsequently, since the company failed to repay the loan amount fully the assessee and his brothers sold the said property for Rs.7,00,000/- and repaid the outstanding loan taken from the bank. The Ld. A.R. further contended that the assessee was compelled to dispose of the property and directly settle the bank mortgage, security deposit and other loans and hence these loans are incurred wholly and exclusively in connection with such transfer. The Ld. A.R. further contended that the Ld. AO, while computing the capital gains, has not allowed the deduction in respect of the indexed cost of bank mortgage repayment of Rs.1,58,80,400/-, indexed cost of other loans Rs.52,33,333/-, indexed cost of security deposit of Rs.16,19,600/- and transfer expenses of Rs.7,00,000/- and these amounts were not the income of the assessee which fact the Ld. AO failed to appreciate. The Ld. A.R. further contended that the Ld. AO was not justified in not allowing the set off of the loans in respect of the loan amounts advanced to M/s. Raja Rani Travels Pvt. Ltd. against the capital gains computed on the transfer of the property and the Ld. AO was also not justified in levying interests u/s 234a, 234B & 234C of the Act.
The Learned Departmental Representative (“Ld. D.R.” for short), on the other hand, controverted the said fact and vehemently opposed to setting aside the issue to the file of the Ld. AO.
We have heard the rival submissions and perused the material available on record.
It is observed that the assessee had failed to furnish any explanation along with any supporting documentary evidence in support of his claim neither before the Ld. AO nor before the Ld. CIT(A). The Ld. CIT(A) has also not decided the issue on the merits of the case for the above mentioned reason. In view of the same, we are of the considered opinion that the assessee shall be given one more opportunity to present his case before the Ld. AO in view of the principles of natural justice with a direction that the assessee should cooperate with the proceeding before the Ld. AO without any undue delay by filing the relevant documentary evidences along with his submission in support of the assessee’s claim.
In the result, the appeal filed by the assessee is allowed for statistical purpose.
The finding given in this appeal i.e. will apply mutatis as well. Accordingly, both the appeals filed by the assessee are hereby allowed for statistical purposes.
Order pronounced in the open court on 23.12.2025