ARUNA KAILASHPRASAD MALPANI,MUMBAI vs. INCOME TAX OFFICER WARD 22(1), MUMBAI

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ITA 2663/MUM/2026Status: DisposedITAT Mumbai15 September 2026AY 2022-236 pages
AI SummaryRemanded

What did the Tribunal hold?

The Tribunal admitted the additional evidence, including a brokerage bill and balance sheets, as it was crucial for a just adjudication. The matter was restored to the Assessing Officer for verification of this new evidence.

What were the facts?

The assessee claimed cost of improvement and brokerage expenses for a capital asset. The Assessing Officer disallowed these claims due to lack of supporting evidence, and the CIT(A) upheld the disallowance. The assessee then sought to admit additional evidence before the ITAT.

What were the issues?

Whether the ITAT should admit additional evidence and whether the disallowances for cost of improvement and brokerage were justified without proper substantiation.

Which sections of the Income-tax Act were involved?

Section 29

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, MUMBAI BENCH “A” MUMBAI

Before: SHRI OM PRAKASH KANT & SHRI ANIKESH BANERJEE

For Appellant: Shri Akshay Pawar, Advocate, Shri Surendra Mohan (SR. DR.)

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH “A” MUMBAI

BEFORE SHRI OM PRAKASH KANT (ACCOUNTANT MEMBER) AND SHRI ANIKESH BANERJEE (JUDICIAL MEMBER) ITA 2663/MUM/2026 AssessmentYear:(2022-23) ARUNA KAILASHPRASAD MALPANI INCOME TAX OFFICER WARD 22(1) OFFICE NO. 31, M-30, DR. A. B. ROAD, OPP. OLD PASSPORT PFFICE, ROOM NO. 322, 3RD FLOOR, Vs. WORLI, MUMBAI, MUMBAI-400030, PIRAMAL CHAMBER, LALBAUG, MAHARASHTRA MUMBAI MUMBAI-400012, MAHARASHTRA Appellant Respondent

PAN No.AFQPM0041L

Shri Ajay Singh, Advocate & Appellant represented by: Shri Akshay Pawar, Advocate Respondentrepresented by: Shri Surendra Mohan (SR. DR.) Date of hearing: 08-Sep-2026 Date of pronouncement: 15-Sep-2026 ORDER PER OM PRAKASH KANT, AM

This appeal by the assessee is directed against order dated 10thJanuary, 2026 passed by the learned National Faceless Appeal Centre, Delhi (hereinafter shall be referred as the learned CIT(A)) for assessment year 2022-23, raising following grounds:-

“I. Disallowance of Cost of Improvement: 1. The Ld. CIT(A) erred in upholding the disallowance of renovation expenses being Rs. 6,14,738/- (Index cost of improvement Rs.19,48,719) on the ground that the assessee has not maintained the necessary bills and vouchers in relation to above expenditure incurred in year 2000-2001 and therefore the same was not allowable.

2.

The Ld. CIT(A) failed to appreciate that the above expenditure was incurred during the period 2000-2001 and the same was duly reflected in financial of the assessee and due to long passage of time the same was not available and therefore the disallowance ought to be deleted. II. Disallowance of Brokerage Expenditure. 3. The Ld CIT(A) erred in upholding the disallowance of Brokerage expenses of Rs.3,70,000/- made to Mudra Finserv Ltd. without appreciating that the same was incurred wholly and exclusively incurred in connection with transfer of capital asset.” 2.Briefly stated facts of the case are that assessee, an individual, filed return of income electronically on 31stJuly, 2022 declaring total income of Rs.49,27,400/-. The return was subsequently selected for scrutiny assessment and the statutory notices under the Income-tax Act, 1961 (in short "the Act") were issued and duly served upon the assessee.

3.During the course of assessment proceedings, the Assessing Officer examined the computation of the long term capital gain arising from transfer of an immovable property. While the major portion of the cost of the acquisition and cost of improvement was accepted, specific component of the claimed cost of improvement and brokerage were disallowed on the ground that the assessee failed to furnish adequate and reliable supporting evidence. In particular, disallowance was made in respect of (1) miscellaneous addition claimed as cost of improvement, (2) certain other charges, and (3) brokerage claimed to have been paid in connection with the transfer.

4.

Aggrieved by the said additions and disallowances, the assessee preferred appeal before the learned CIT(A). The learned CIT(A) sustained the disallowances, holding that the burden of proving the nature, quantum, and nexus of the expenditure with the capital asset rests squarely on the assessee; that non- availability of bills and vouchers on account of lapse of time, or payment in cash, does not discharge this burden; that materiality of amount is irrelevant to the requirement of independent substantiation; and that mere identification of the payee, absent contemporaneous agreements or corroborative material, does not establish that brokerage was incurred wholly and exclusively for the transfer. Reliance in this behalf was placed on CIT v. Calcutta Agency Ltd.(supra) and CIT v. Durga Prasad More (supra). The residuary ground was disposed of as general, and the appeal was dismissed on merits. The relevant finding of ld CIT(A) is reproduced as under:

“D1. GROUP 1 Disallowance of Cost of Improvement and Brokerage (Ground Nos. 1 to 3) Assessee's Submissions The appellant has contended that the property was in a poor condition at the time of acquisition and that various expenditures were incurred over a period of time to render the same usable. It has been submitted that such expenditure related to basic civil works and allied activities, and that the payments were made during the period 2000-2001, largely in cash. According to the appellant, although bills and vouchers were obtained at the relevant time, the same could not be preserved due to the long passage of time. It has further been argued that the impugned disallowance represents only a smallportion of the overall cost of improvement accepted by the Assessing Officer and, therefore, the claim ought to have been allowed on principles of practicality and probability. With regard to brokerage, the appellant has submitted that the payment was made in connection with the transfer of the property and that the identity of the recipient and the fact of payment are not in dispute. It has been pleaded that the disallowance was made on a hyper-technical view and that the claim deserves acceptance. Appellate Analysis and Adjudication The submissions made by the appellant have been carefully examined in the light of the assessment order and the material available on record. It is a settled legal position that allowance of cost of improvement and transfer- related expenditure is strictly evidence based. The burden to establish the nature of the expenditure, the factum of incurrence, its quantum, and its direct nexus with the capital asset squarely rests upon the assessee. In the present case, the explanation offered by the appellant that the expenditure was incurred long back and that the payments were made in cash, resulting in non-availability of bills and vouchers, is not sufficient to discharge the statutory burden of proof. While it is not uncommon that older transactions may suffer from imperfect documentation, tax adjudication cannot proceed on general practices, assumptions, or equitable considerations. The Act does not contemplate allowance of expenditure merely on the basis of assertions, probabilities, or the reasonableness of the claim. The plea based on materiality is also untenable. Each component of cost claimed is required to be independently established, irrespective of whether the amount involved is large or small. In this regard, reliance is placed on the principles laid down by the Hon'ble Supreme Court in CIT v. Calcutta Agency Ltd., wherein it was held that the onus lies on the assessee to prove the expenditure claimed, and in CIT v. Durga Prasad More, which authorises the tax authorities to examine the surrounding circumstances to test the veracity of a claim. Similarly, in respect of brokerage, mere existence of a payment entry or identification of the payee does not by itself establish that the expenditure was incurred wholly and exclusively in connection with the transfer of the capital asset. In the absence of contemporaneous agreements, correspondence, or other corroborative material establishing the role of the intermediary and the nexus of the payment with the transaction under consideration, the claim remains inadequately substantiated. In view of the above discussion, the disallowance of cost of improvement and brokerage made by the Assessing Officer is found to be in accordance with law and supported by facts on record. Accordingly, Ground Nos. 1 to 3 are dismissed. D2. Ground No. 4 - General Ground Ground No. 4 is general and residuary in nature, whereby the appellant has sought liberty to add, alter, amend, modify, delete, vary and/or withdraw any of the grounds of appeal. Such a ground does not raise any specific grievance requiring independent adjudication. It is a settled position that a general ground of this nature is consequential and does not call for aseparate finding. Accordingly, Ground No. 4 is treated as general and disposed of as such. E. FINAL DETERMINATION In the result, the appeal filed by the appellant is admitted for adjudication after condonation of delay but fails on merits. Ground Nos. 1 to 3, relating to disallowance of cost of improvement and brokerage, are dismissed for want of reliable and verifiable evidence. Ground No. 4, being general and residuary in nature, is disposed of accordingly. The appeal is therefore dismissed.”

5.

Before us, the assessee moved an application under Rule 29 of the Income Tax (Appellate Tribunal) Rules, 1963, seeking admission of additional evidence, namely, the brokerage bill of Mudra Finserv Ltd. and the assessee's balance sheets for the years ending 2008 to 2014, on the ground that the same, though relevant, could not be produced before the lower authorities and go to the root of the matter. In support of admission, reliance was placed on Smt. Prabhavati S. Shah v. CIT [1998] 231 ITR 1 (Bom.); R.S.S. Shanmugam Pillai & Sons v. CIT [1974] 95 ITR 109 (Mad.); Abhay Kumar Shroff v. ITO (1997) 63 ITD 144 (Patna) (TM); and Tek Ram (Dead) through LRs v. CIT (2013) 357 ITR 133 (SC).

6.

We have heard both sides and perused the record. We find that the additional evidence sought to be produced bears directly upon the very foundation of the disallowances in issue namely, the genuineness and nexus of the cost of improvement and the brokerage expenditure and is accordingly necessary for a just and complete adjudication of the appeal. The evidence is admitted under Rule 29 of the Income Tax (Appellate Tribunal) Rules, 1963.

7.

As this material has not been examined by the Assessing Officer, and its verification necessarily entails an appreciation of facts not undertaken at the assessment stage, we consider it appropriate that the same be tested at the first instance by the Assessing Officer rather than by this Tribunal. The order of the learned CIT(A) on the issue in dispute is set aside, and the matter is restored to the file of the Assessing Officer for verification in light of the additional evidence now admitted, and any further material or submissions the assessee may place on record. The Assessing Officer shall afford the assessee adequate and reasonable opportunity of being heard, and is at liberty to make such further inquiry as may be considered necessary.

8.

In the result, the appeal of the assessee is allowed for statistical purposes. Order pronounced in the open Court on 15/09/2026.

Sd/- Sd/- (ANIKESH BANERJEE) (OM PRAKASH KANT) JUDICIAL MEMBER ACCOUNTANT MEMBER Mumbai; Dated: 15/09/2026 M. Ranganath Vittal , Sr. P.S.

Copy of the Order forwarded to : 1. The Appellant 2. The Respondent. 3. CIT 4. DR, ITAT, Mumbai 5. Guard file. BY ORDER, //True Copy// (Assistant Registrar) ITAT, Mumbai

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