What did the Tribunal hold?

The Tribunal found that the assessee was not given a proper opportunity to present its case and that the CIT(A) had passed a hurried order. Therefore, the Tribunal set aside the CIT(A)'s order and granted the assessee one more opportunity to submit relevant documents.

The assessee claimed a significant cost of improvement for a property, which was disallowed by the Assessing Officer and upheld by the CIT(A) due to lack of corroborative documentary evidence. The assessee argued that documents were filed but not considered by the CIT(A).

What were the issues?

Whether the CIT(A) properly considered the documents submitted by the assessee and afforded sufficient opportunity for substantiating the claim for cost of improvement.

Kavin Infrastructure Service… vs Assessment Unit | ITAT Chennai 2026

Income Tax Appellate Tribunal, ‘A’ BENCH: CHENNAI

Before: SHRI ABY T. VARKEY & SHRI S.R.RAGHUNATHA

Hearing: 22.07.2026Pronounced: 03.09.2026

आदेश / O R D E R PER ABY T. VARKEY, JM: This is an appeal preferred by the assessee against the order of the Ld. Commissioner of Income Tax (Appeals)/NFAC, (hereinafter referred to as ‘Ld.CIT(A)’), Delhi, dated 24.12.2025 for the Assessment Year (hereinafter referred to as ‘AY’) 2022-23 u/s. 250 of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’).

At the outset, Ld. AR, Mr. Shanmuga Priyan, C.A., for the assessee submitted that the Ld. CIT(A) has disallowed the improvement cost amounting to ₹2,76,71,295/- on the ground, inter alia, that the assessee

No.1199/Chny/2026 (AY 2022-23) Kavin Infrastructure Service Private Limited :: 2 :: did not file any corroborative documentary evidence to make such a claim. According to the Ld. AR, the assessee had filed the relevant documents to substantiate the cost of improvement as claimed, along with the corroborative documentary evidence. Further, according to the Ld. AR, the Ld. CIT(A) had asked the assessee to file certain documents on 11.12.2025, pursuant to which the assessee had filed additional documents dated 17.12.2025, which have not been considered in the proper perspective by the Ld. CIT(A), who hurriedly passed the impugned order dated 24.12.2025 by passing a cryptic order. Therefore, he prayed for one more opportunity before the Ld. CIT(A).

Per contra, Ld. DR, Mrs. R. Anita, CIT, submitted that the assessee did not file the relevant documents to substantiate the claim of the cost incurred for improvement of the property in question, and hence the Ld. CIT(A) upheld the action of the AO, disallowing the improvement cost amounting to ₹2,76,71,295/-. Consequently, the total losses were recomputed to the tune of ₹42,65,714/- to be carried forward to the future years instead of ₹5,67,91,466/- as claimed by the assessee in its ITR. Therefore, the Ld. DR does not want us to interfere with the impugned action of the Ld. CIT(A).

Having heard both the parties and after perusal of the records, the main grievance of the assessee is against the action of the Ld. CIT(A) in not giving proper opportunity to the assessee while adjudicating the grounds of appeal raised by the assessee against the disallowance made by the AO. According to the assessee, the Ld. CIT(A) had called for certain documents vide notice dated 11.12.2025, which were duly complied by the assessee on 17.12.2025. However, the Ld. CIT(A) did not bother to appreciate the same but passed the impugned order hurriedly

No.1199/Chny/2026 (AY 2022-23) Kavin Infrastructure Service Private Limited :: 3 :: on 24.12.2025 by passing the impugned order, operative portion of the same reads as under: -

“The appellant has taken the above said grounds against the addition made against the appellant assessee during the assessment proceedings by making disallowance of Total Indexed Cot of Improvement amounting to Rs.5,25,25,752 on account of development cost involved in the sale of Property. Since, the assessee had shown Sale Consideration of Land in its ITR of Rs.2,00,00,000/- and after claiming index cost of acquisition and improvement Rs.7,67,91,466/ claimed Long Term Capital Losses to the tune Rs.5,67,91,466/-which was carry forwarded in the future years. However, the Assessee did not satisfactory explain the cost of improvement as claimed along with corroborative documentary evidences and taken the benefit of capital losses. Therefore, the cost of improvement was remained unexplained and not to be allowed as deduction in the absence of satisfactory reply and evidences. The appellant assesse was accorded sufficient and ample opportunity to explain the cost of improvement as claimed along with corroborative documentary evidences. Since, assessee did not explain the cost of improvement as claimed along with corroborative documentary evidences and had merely claimed and taken the benefit of capital losses. As no term sheets executed on 01.07.2010 with the copy of Deed was furnished before the AO or the NFAC, no bills were furnished for development charges pertaining to F.Y. 2011-12, therefore, considering the entirety of facts, circumstances and material on record and looking into preponderance of probabilities here the appellant has miserably failed to explain the same. It was for the appellant to substantiate the claim staked. Therefore, the AO is fully justified by disallowing the improvement cost amounting Rs.2,76,71,295/- and the total losses was re-calculated to the tune of Rs.42,65,714/- to be carried forward in the future years instead of 5,67,91,466/- as claimed by the assessee in the ITR. Therefore, the contention of the appellant assessee is not correct. Keeping in view of the above, the said ground has no merits. Therefore, the ground of the appellant is dismissed.” 5. From a bare reading of the operative portion of the impugned order, it reveals that the assessee was aggrieved by the addition made by the AO disallowing the total indexed cost of improvement amounting to ₹5,25,25,752/- on account of the development cost involved in the sale of the property. The Ld. CIT(A) is noted to have found that the assessee had shown the sale consideration of the land in its ITR to the tune of ₹2 crores and, after claiming the indexed cost of acquisition and improvement to the tune of ₹7,67,91,466/-, had claimed a long-term capital loss of

No.1199/Chny/2026 (AY 2022-23) Kavin Infrastructure Service Private Limited :: 4 :: ₹5,67,91,466/-, which was to be carried forward to the future years. According to the Ld. CIT(A), no term sheets executed on 01.07.2010, along with the copy of the deed, were furnished before the AO/NFAC, and no bills for development charges pertaining to FY 2011-12 were furnished before him. Thus, the assessee did not satisfactorily prove/explain the cost of improvement with supportive relevant material or evidence and had thus wrongly claimed the benefit of the capital losses. And since the cost of improvement remained unexplained, the Ld. CIT(A) concurred with the action of the AO disallowing the deduction. Accordingly, the Ld. CIT(A) was of the view that the AO was fully justified in disallowing the improvement cost amounting to ₹2,76,71,295/-, and the total loss was recalculated to the tune of ₹42,65,714/- to be carried forward to the future years instead of ₹5,67,91,466/- as claimed by the assessee in the ITR.

Before us, the Ld. AR has submitted voluminous paper book containing 473 pages and submitted that the assessee had filed all the relevant documents before the Ld. CIT(A). According to him, the Ld. CIT(A) had called for certain documents on 11.12.2025, which the assessee furnished on 17.12.2025, but the Ld. CIT(A) had not bothered to look into the same while passing the impugned order on 24.12.2025. Considering the plea of the assessee that the relevant documents have been filed and not considered by the Ld. CIT(A), and having noted that Ld. CIT(A) has disallowed the claim of the assessee for want of relevant documents, assessee deserves one more opportunity before the First Appellate Authority to prove its claim. Hence, we set aside the impugned order of the Ld. CIT(A) and give one more opportunity to the assessee to file the relevant documents to substantiate its claim as noted supra. The Ld. CIT(A) shall consider the same and pass a speaking order in accordance with law after hearing the assessee.

No.1199/Chny/2026 (AY 2022-23) Kavin Infrastructure Service Private Limited :: 5 :: 7. In the result, appeal filed by the assessee is allowed.

Order pronounced on the 03rd day of September, 2026, in Chennai. Sd/- Sd/- (एस. आर. रघुनाथा) (एबी टी. वक�) (S.R.RAGHUNATHA) (ABY T. VARKEY) �या�यक सद�य/JUDICIAL MEMBER लेखा सद�/ACCOUNTANT MEMBER चे�नई/Chennai, �दनांक/Dated: 03rd September, 2026. MM आदेश क� ��त�ल�प अ�े�षत/Copy to: 1. अपीलाथ�/Appellant 2. ��थ�/Respondent 3. आयकरआयु�/CIT, Chennai / Madurai / Salem / Coimbatore. 4. िवभागीय�ितिनिध/DR 5. गाड�फाईल/GF

Digitally signed YASHVI by YASHVIR SINGH R SINGH Date: 2026.09.17 23:04:08 -07'00'

KAVIN INFRASTRUCTURE SERVICE PRIVATE LIMITED,COIMBATORE vs. ASSESSING OFFICER, CORP CIRCLE 1, CBE, COIMBATORE

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