HOLABASAPPA DODDABASAPPA KALLEDEVAR,HAVERI vs. INCOME TAX OFFICER, WARD-1, HAVERI

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ITA 145/BANG/2026Status: DisposedITAT Bangalore06 July 2026AY 2019-20205 pages
AI SummaryAllowed

What did the Tribunal hold?

The Tribunal held that the lower authorities discarded the confirmation letter without cogent reasons or pointing out specific faults. They should have further examined or verified its genuineness, or provided an opportunity for cross-examination.

What were the facts?

The assessee claimed Rs. 2,50,000 as cost of improvement for land conversion, supported by a confirmation letter. The Assessing Officer disallowed this claim for lack of proof of payment to any authority, adding the amount to capital gains. The CIT(A) upheld this disallowance.

What were the issues?

Whether a confirmation letter for expenses is sufficient proof of payment for claiming cost of improvement, and if it can be discarded without further verification. Whether interest under sections 234A and 234B is mandatory in all reassessment cases.

Which sections of the Income-tax Act were involved?

Section 147,Section 143(3),Section 55A,Section 234A,Section 234B

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, “SMC’’BENCH: BANGALORE

Before: SHRI WASEEM AHMED & SHRI KESHAV DUBEY

For Appellant: Shri Chandra Shekar, Adv A.R
For Respondent: Shri Ganesh R Ghale, Standing Counsel for the Dept
Hearing: 09.04.2026Pronounced: 06.07.2026

PER KESHAV DUBEY, JUDICIAL MEMBER:

This appeal at the instance of the assessee is directed against the order of the ld. CIT(A)/NFAC dated 27.11.2025 vide DIN & Order No. ITBA/NFAC/S/250/2025-26/1083080957(1) passed u/s 250 of the Income Tax Act, 1961 (in short “the Act”) for the assessment year 2019-20.

2.

The assessee has raised the following grounds of appeal:-

1.

The learned CIT(A) has erred in holding that the Assessing Officer has an unfettered statutory right to refer valuation matters to the DVO, without appreciating that the power under section 55A is conditional, must be exercised judiciously, and cannot be invoked merely on subjective belief.

ITA No.145/Bang/2026 HosabasappaDoddabasappaKalledevar, Haveri Page 2 of 5 2. The learned CIT(A) has erred in confirming the levy of interest under sections 234A and 234B as mandatory, without appreciating that the return was filed in response to notice u/s 148, tax on returned income was fully paid, and the interest is purely consequential to the disputed additions.

3.

The order passed by the learned CIT(A) is bad in law as it upholds the assessment without independent reasoning, and merely reiterates thefindings of the Assessing Officer without proper judicial application of mind.

4.

The appellant craves leave to add, alter, amend or withdraw any of the above grounds at the time of hearing.

5.

The learned CIT(A) has erred in law and on 'facts in upholding the reference to the Valuation Officer under section 55A for determining the cost of construction, despite the appellant having furnished a registered valuer report, the cost being accepted for section 54F deduction, and the DVO’s valuation substantially corroborating the declared cost. In the absence of understatement, the reference is unwarranted and bad in law.

6.

The learned CIT (Appeals), NFAC, Delhi has erred in law and on facts in dismissing the appeal of the appellant and in confirming the reassessment order passed u/s 147 r.w.s. 143(3) of the Income-tax Act, 1961, without properly appreciating the facts, evidence on record and settled legal principles.

7.

The learned CIT(A) has erred in law in confirming the reference to the Valuation Officer for determining the fair market value as on 01- 04-2001, ignoring the approved valuer report and Government guideline values placed on record, and without recording any finding that the value adopted by the appellant was excessive or unreliable.

3.

Ground No.4 as raised by the assessee is general in nature and does not require any adjudication.

ITA No.145/Bang/2026 HosabasappaDoddabasappaKalledevar, Haveri Page 3 of 5 3.1 During the course of hearing, the ld. A.R. of the assessee did not press ground nos.1, 5, 6 & 7 relating to the reference to the Valuation Officer u/s 55A of the Act and accordingly the same are dismissed as not pressed.

3.2 The ground No.2 is related to interest u/s 234A & 234B of the Act, which are consequential in nature.

4.

Thus, before us, the only effective ground raised by the assessee in ground No.3 is relating to disallowance of cost of improvement amounting to Rs.2,49,925/- only.

4.1 On perusal of the assessment order, we observed that the assessee had claimed conversion cost of Rs.2,50,000/- as cost of improvement. Before both the Authorities below, the assessee had filed a confirmation letter dated 31.3.2019 of Mr. Sayadnazeer Ahmed wherein the said Mr. Ahmed confirmed to have received Rs.2,50,000/- against the conversion of land bearing Survey No.107/1A located at Devagiri village, Haveri, which includes conversion fees and other office expenses. Both the Authorities below however, did not accept the confirmation letter as the assessee had not submitted any proof of such payment to any authority and further on perusal of the sale deed, the conversion cost was mentioned to be Rs.75/- only. In view of the above, the AO in the absence of any explanation from the assessee disallowed the balance amount of Rs.2,49,925/- {Rs.2,50,000/- (-) Rs.75/-} and added the same to the income of the assessee as long term capital gain.

4.2 The ld. CIT(A)/NFAC also by reproducing the confirmation letter dated 31.3.2019 of Sayadnazeer Ahmed and on the same footing held that the confirmation letter submitted by the assessee

ITA No.145/Bang/2026 HosabasappaDoddabasappaKalledevar, Haveri Page 4 of 5 in respect of payment of Rs.2,50,000/- is not acceptable as the assessee had not submitted any proof of such payment to any authority and the so called confirmation is a self-serving document and cannot form the basis of allowance of relief on this aspect and accordingly disallowance as made by the AO was upheld.

5.

Before us, the ld. AR of the assessee vehemently submitted that both the Authorities below did not accept the confirmation letter dated 31.3.2019 of Sayadnazeer Ahmed without citing any cogent reason. The assessee had actually incurred these expenses for the conversion of the land and accordingly claimed as deduction towards cost of improvement while calculating the Capital Gain.

6.

The ld. DR relied on the orders of the Authorities below.

7.

We have heard the rival submissions and perused the materials available on record. Undisputedly, the assessee had claimed conversion expenses of Rs.2,50,000/- paid to Mr. Sayadnazeer Ahmed as cost of improvement while calculating the capital gain. The assessee had submitted the confirmation letter dated 31.3.2019 before both the authorities below obtained from the said Sayadnazeer Ahmed, wherein he had confirmed to have received Rs.2,50,000/- against conversion of land bearing Survey No.107/1A located at Devagiri village, Haveri which includes conversion fees and other office expenses. We observed that both the authorities below on the same footing that the assessee did not submit any proof of such payment to any authority had disallowed the cost of improvement as claimed by the assessee. We are of the considered opinion that as rightly contended by the ld. AR of the assessee, both the authorities below without citing any cogent reason and without pointing out any fault in the confirmation

ITA No.145/Bang/2026 HosabasappaDoddabasappaKalledevar, Haveri Page 5 of 5 letter dated 31.3.2019 had discarded the same outrightly. In our considered opinion, both the authorities below should have further examined and verified the genuineness of the confirmation letter filed by the assessee before outrightly rejecting the same. The AO could have also given opportunity to the assessee to cross examine the same. Therefore, we are of the considered opinion that in the absence of any cogent reason or without pointing out any fault in the confirmation letter, the same cannot be discarded out rightly. In view of the above, we are inclined to accept the confirmation letter filed by the assessee with regard to incurring of conversion fees and other office expenses amounting to Rs.2,50,000/- which was claimed as deduction towards cost of improvement. Accordingly, we allow this ground of appeal of the assessee and direct the AO to allow the claim of deduction towards cost of improvement amounting to Rs.2,50,000/-.

8.

In the result, appeal filed by the assessee is partly allowed.

Order pronounced in the open court on 6th July, 2026

Sd/- Sd/- (Waseem Ahmed) (Keshav Dubey) Accountant Member Judicial Member

Bangalore, Dated 6th July, 2026. VG/SPS Copy to:

1.

The Applicant 2. The Respondent 3. The CIT 4. The DR, ITAT, Bangalore. 5 Guard file By order

Asst. Registrar, ITAT, Bangalore.

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