SURESH KUMAR CHOUDARY KOPPALI,HYDERABAD vs. DCIT., CIRCLE-3(1), HYDERABAD

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ITA 1500/HYD/2025Status: DisposedITAT Hyderabad07 August 2026AY 2022-2311 pages
AI SummaryDismissed

What did the Tribunal hold?

The Tribunal upheld the disallowance of the cost of improvement, finding that the assessee failed to provide adequate evidence to prove the expenditure incurred for enhancing the flats from semi-furnished to fully furnished.

What were the facts?

The assessee claimed a significant cost of improvement for semi-furnished flats received from a builder, which were then sold. The Assessing Officer (AO) disallowed this claim due to lack of substantiating evidence.

What were the issues?

Whether the assessee substantiated the claimed cost of improvement for the flats sold, and if the evidence provided was sufficient to prove the expenditure.

Which sections of the Income-tax Act were involved?

Section 54F

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, Hyderabad “A” Bench, Hyderabad

PER MANJUNATHA G., A.M :

This appeal filed by the assessee is directed against the order of the learned Commissioner of Income Tax (Appeals), National Faceless Appeal Centre [in short “NFAC”], Delhi, dated 24.07.2025, pertaining to the assessment year 2022-23.

2.

The brief facts of the case are that the assessee, an individual, filed his belated return of income for A.Y. 2022-23 on 30.12.2022 declaring a total income of Rs. 29,66,400/-. The case was selected for scrutiny to verify low long-term capital gain and high cost of improvement. During the course of assessment proceedings, the A.O. noticed that the assessee had sold an immovable property and computed long-term capital gain after claiming indexed cost of improvement of Rs. 2,30,94,501/- and deduction of Rs. 7,75,519/- u/s 54F of the Act. The A.O. called upon the assessee to file relevant details of computation of capital gain, along with copies of sale deeds, proof of cost of acquisition and indexed cost of acquisition, etc. In response, the assessee submitted relevant details of computation of long-term capital gain derived from transfer of property on account of the Development

3 ITA No.1500/Hyd/2025 Agreement-cum-General Power of Attorney dated 29.05.2019 entered into with M/s Lohita Construction and claimed that, as a landowner, he had received 19 semi-furnished flats, which were sold during the financial year relevant to A.Y. 2022-23 after completion of construction, for which the assessee claimed cost of improvement. The assessee also furnished certain evidences, including bills and quotations for purchase of various materials, and claimed that he had received semi-constructed flats from the builder pursuant to the JDA and sold fully completed flats, for which he had incurred expenditure towards premium vitrified flooring upgrade, modular kitchen, wardrobes, interior woodwork, gypsum false ceiling, premium CP and sanitary fittings, additional electrical and AC works, designer lighting, CCTV cameras and security.

3.

The A.O., after considering the relevant submissions of the assessee and also taking note of the various evidences, observed that the evidence filed by the assessee to prove the cost of improvement did not support the case of the assessee, as the assessee had furnished certain quotations obtained from traders and the said evidence did not contain proper name and address of the sellers, GST number, etc. Since the assessee failed to prove

4 ITA No.1500/Hyd/2025 the cost of improvement and, further, as per the sale deeds, the assessee had sold semi-furnished flats received from the builder, the cost of improvement claimed by the assessee was held to be not supported by relevant evidences. Therefore, the A.O. rejected the explanation of the assessee and recomputed the capital gain by disallowing the cost of improvement of Rs. 2,30,94,501/- claimed by the assessee.

4.

Aggrieved by the assessment order, the assessee preferred an appeal before the Ld. CIT(A). Before the Ld. CIT(A), the assessee raised various grounds and contended that the A.O. erred in disallowing the cost of improvement claimed by the assessee pertaining to the amount spent towards further construction of the property to convert the semi-furnished flats into fully furnished flats, for which the assessee had submitted that the A.O. erred in disallowing the cost of improvement claimed by the assessee. The Ld. CIT(A), after considering the material available on record and taking note of the fact that the assessee had not filed any response to the notices issued on various occasions, dismissed the appeal filed by the assessee for non-prosecution and also upheld the addition made by the A.O. towards disallowance of the indexed cost of improvement by holding that

5 ITA No.1500/Hyd/2025 the assessee had not substantiated the cost of improvement with relevant evidences. Therefore, the Ld. CIT(A) rejected the explanation of the assessee and upheld the addition made by the A.O.

5.

Aggrieved by the order of the Ld. CIT(A), the assessee is in appeal before the Tribunal.

6.

The learned counsel for the assessee, Shri S.K. Gupta, Advocate, submitted that the Ld. CIT(A) erred in sustaining the addition without appreciating the fact that the assessee had received semi-furnished flats from the builder pursuant to the Development Agreement-cum-General Power of Attorney, whereas the assessee sold fully furnished flats, for which the assessee had explained that he had incurred the expenditure towards premium vitrified flooring upgrade, modular kitchen, wardrobes, interior woodwork, gypsum false ceiling, premium CP and sanitary fittings, additional electrical and AC works, designer lighting, CCTV cameras and security. The assessee had also incurred an amount of Rs. 28,96,241/- towards NALA charges, for which challans were paid. However, the A.O. and the Ld. CIT(A), without considering the relevant evidences, rejected the details submitted by the assessee and sustained the addition. Therefore, he

6 ITA No.1500/Hyd/2025 submitted that the assessee had filed various evidences, including a valuation report from a registered valuer, to prove the additional cost of construction. Accordingly, the addition made by the A.O. should be deleted or, in the alternative, the matter may be remanded to the file of the A.O. for further verification and to decide the issue in accordance with law.

7.

The learned Senior A.R. for the Revenue, Shri Mohan Babu, the other hand, supporting the order of the Ld. CIT(A), submitted that, as per the evidence filed by the assessee, including the Development Agreement-cum-GPA, the assessee had received semi-furnished flats from the builder in exchange for land. The assessee had also sold semi-furnished flats to various customers, which is evident from one of the copies of the sale deed filed by the assessee, wherein the assessee had sold semi-furnished Flat No. 302. From the above, it is clear that what was received by the assessee from the builder was semi-furnished and what was sold by the assessee to the customer was also a semi-furnished flat without any improvement. Therefore, the argument of the assessee that he had received semi-furnished flats and sold fully furnished flats by incurring various expenditure is incorrect. Further, the assessee had also not filed any evidence to prove payment of the

7 ITA No.1500/Hyd/2025 proportionate cost for NALA. Since the assessee had not substantiated the cost of improvement with relevant evidences, the A.O. rightly rejected the claim of the assessee and made the addition. The Ld. CIT(A), after considering the material available on record, rightly sustained the addition made by the A.O. Therefore, he submitted that the order of the Ld. CIT(A) should be upheld.

8.

We have heard both the parties, perused the material available on record and had gone through the orders passed by the authorities below. The facts borne out from record indicate that the assessee had entered into a Joint Development Agreement- cum-GPA dated 29.05.2019 with M/s. Lohita Constructions for development of 4,844 square yards of land in Survey Nos. 148 and 149 and received 19 flats in exchange for the land. The assessee sold the flats received pursuant to the JDA and received sale consideration of Rs. 3,18,80,000/-. The assessee computed long- term capital gain of Rs. 9,35,070/- after reducing indexed cost of acquisition, indexed cost of improvement and also claimed deduction u/s 54F of the Act for Rs. 7,75,519/-. The A.O. allowed the indexed cost of acquisition of Rs. 71,74,910/- and also allowed the deduction claimed u/s 54F of the Act for Rs. 7,75,519/-.

8 ITA No.1500/Hyd/2025 However, the A.O. disallowed the indexed cost of improvement of Rs. 2,30,94,501/- on the ground that the assessee had failed to substantiate the indexed cost of improvement with relevant evidences. The assessee claimed that, he had received semi- furnished flats from the builder and invested further amounts towards construction and furnishing of the flats before selling them to various buyers, and the amount so spent towards improvement of the flats had been claimed as cost of improvement. The assessee submitted that he had incurred expenditure towards premium vitrified flooring upgrade, modular kitchen, wardrobes, interior woodwork, gypsum false ceiling, premium CP and sanitary fittings, additional electrical and AC works, designer lighting, CCTV cameras and security, and contended that what was received from the builder was a semi- constructed flat, whereas he sold fully furnished flats after carrying out further improvements.

9.

We have gone through the relevant Development Agreement- cum-GPA and, as per the Development Agreement, the assessee received 19 flats from the builder. As per the specifications of the building constructed by the developer, all expenses and costs to be incurred in connection with the construction were to be borne

9 ITA No.1500/Hyd/2025 by the developer. Further, as per the sample copy of the sale deed available in the paper book, the assessee had also sold semi- furnished flats to the buyers, which is evident from the relevant Schedule of Property in the sale deed dated 23.06.2021 executed between the assessee and Mr. Vasagiri Dhanunjaya in respect of sale of Flat No. 302. From the evidence filed by the assessee, including the copy of the sale deed, it appears that the assessee had received a semi-furnished flat from the builder and also sold a semi-furnished flat to the purchaser without carrying out any further construction or improvement to the flat.

10.

Coming to the various evidences claimed to have been submitted by the assessee before the A.O. The assessee furnished certain copies of bills and vouchers. Upon perusal of the relevant evidences extracted by the A.O. in the assessment order, we find that the assessee had filed quotations from various parties for purchase of bricks and also for carrying out woodwork. However, there is no evidence of actual purchase of material or payment towards labour, etc. Further, the assessee filed certain additional evidences in the form of a so-called valuation report from Mr. V.S.S. Sudhir Chakka. Upon perusal of the said so-called valuation report, we find that it is not a valuation report of the

10 ITA No.1500/Hyd/2025 building, but only a detailed estimate of the additional work to be carried out in the building, such as providing and laying rectified tiles, gypsum false ceiling, wardrobes, etc. However, there is no evidence in the form of bills and vouchers for purchase of any material or any payment to labour for carrying out such works. Therefore, in our considered view, the assessee has failed to prove or substantiate further amount invested towards construction or improvement of the building before the flats were sold to various parties, which is evident from the relevant evidences furnished by the assessee. Since the assessee has not substantiated the cost of improvement, including the proposed cost in the challan paid for NALA, in our considered view, the A.O. has rightly disallowed the cost of improvement of Rs. 2,30,94,501/- claimed by the assessee. The Ld. CIT(A), after considering the material available on record, has rightly sustained the addition made by the A.O. Thus, we are inclined to uphold the order of the Ld. CIT(A) and dismiss the appeal filed by the assessee.

11 ITA No.1500/Hyd/2025

11.

In the result, the appeal filed by the assessee is dismissed.

Order pronounced in the Open Court on 7th August, 2026.

Sd/- Sd/- श्री विजय पाल राि (मंजूनाथ जी) (VIJAY PAL RAO) (MANJUNATHA G.) उपाध्यक्ष /VICE PRESIDENT लेखा सदस्य/ACCOUNTANT MEMBER

Hyderabad, dated 07.08.2026. TYNM/sps आदेशकी प्रतततिति अग्रेतषत/ Copy of the order forwarded to:- 1. तनर्ााररती/The Assessee : SURESH KUMAR CHOUDARY KOPPALI, FLAT NO. 406, S.V.S.S NIVAS CZECH COLONY, AMEERPET, HYDERABAD-, TELANGANA 2. राजस्व/ The Revenue : DCIT., CIRCLE-3(1), O/O DCIT., CIRCLE-3(1), HYDERABAD-, TELANGANA 3. The Principal Commissioner of Income Tax, Hyderabad. 4. तवभागीयप्रतततनतर्, आयकर अिीिीय अतर्करण, हैदराबाद / DR, ITAT, Hyderabad 5. गार्ाफ़ाईि / Guard file

आदेशानुसार / BY ORDER Digitally signed by TIRUPATI TIRUPATI YAMINI YAMINI NAGA MALLESWARI NAGA MALLESWARI Date: 2026.08.11 16:33:14 +05'30' Assistant Registrar ITAT, Hyderabad

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