KUSUM LATA AGARWAL,JAIPUR vs. ITO, WARD-6(1), JAIPUR, JAIPUR

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ITA 1273/JPR/2026Status: DisposedITAT Jaipur26 October 2026AY 2016-176 pages
AI SummaryPartly Allowed

What did the Tribunal hold?

The Tribunal held that the CIT(A) erred in treating the construction bills as inadmissible additional evidence. The bills were produced before the AO, and Rule 46A of the Income Tax Rules, 1962, only bars evidence not produced during the AO's proceedings. The AO's assessment order acknowledged the submission of construction bills. The existence of construction was not disputed, and the AO himself allowed section 54 exemption, which presumes a residential house was sold. Therefore, the cost of construction could not be taken at nil. However, the claim for construction cost was not accepted as is, due to unavailable bills totaling Rs. 4,65,101 and an estimate being presented as expenditure. The Tribunal also noted that part of the construction was financed by home loans, which required verification. Regarding sale and purchase expenses, brokerage on sale is deductible under section 48(i), and registration/brokerage on the new flat forms part of its cost under section 54. The matter was set aside to the AO for fresh determination of construction cost and verification of expenses, allowing the assessee to produce further evidence. Ground No. 1 was allowed for statistical purposes. Ground No. 3 (costs) was dismissed due to the assessee's non-compliance before the AO.

What were the facts?

The assessee, Kusum Lata Agarwal, filed an appeal against the order of the CIT(A) for Assessment Year 2016-17. The appeal challenged the assessment order passed by the AO under section 147 read with sections 144 and 144B of the Income Tax Act, 1961. The assessee sold a residential property for Rs. 1,17,75,000 and declared a long-term capital gain of Rs. 1,28,549. The AO reopened the case based on information from the INSIGHT portal. Despite non-response to notices, the assessee submitted construction bills. The AO allowed indexed cost of land and section 54 exemption but disallowed cost of construction and other expenses, adding Rs. 56,76,483 to the returned income. The CIT(A) upheld the AO's order, deeming the bills as inadmissible additional evidence and unreliable.

What were the issues?

1. Whether the CIT(A) erred in upholding the AO's computation of long-term capital gain by disallowing deductions for (i) brokerage expenses of Rs. 1,17,500 on sale, (ii) indexed cost of construction of Rs. 53,44,783, and (iii) registry & brokerage expenses of Rs. 2,14,200 on purchase of a new flat for claiming exemption under section 54 of the Act. Assessee's Contentions: - The sale deed and site plan confirm a constructed house of 3,350 sq. ft. - Construction bills were filed before the AO but not considered. - A cost of Rs. 24,86,100 for construction is reasonable. - Rs. 3,52,250 claimed comprised brokerage on sale and registry/brokerage on the new flat. Revenue's Contentions: - The learned DR relied on the orders of the AO and the learned CIT(A).

Which sections of the Income-tax Act were involved?

Section 147,Section 144,Section 144B,Section 54,Section 48,Section 55(1)(b)

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, ‘A’ BENCH, JAIPUR

Before: Shri Kuldip Singh & Shri Prakash

IN THE INCOME TAX APPELLATE TRIBUNAL ‘A’ BENCH, JAIPUR (PHYSICAL HEARING) Before: Shri Kuldip Singh, Judicial Member And Shri Prakash, Accountant Member

ITA No: 1273/JPR/2026 Assessment Year: 2016-17

Kusum Lata Agarwal, ITO, A-425, Malviya Nagar, Ward 6(1), Jaipur Vs Jaipur PAN: AAXPA6490P (Respondent) (Appellant)

Assessee Represented: Sh. P. C. Parwal, CA Revenue Represented: Sh. Abhimanyu Singh Yadav, Addl. CIT Date of hearing : 05-10-2026 Date of pronouncement : 26-10-2026 आदेश/ORDER

PER : PRAKASH, ACCOUNTANT MEMBER:-

1.

This appeal by the Assessee is directed against the order of the learned Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Delhi [hereinafter referred to as “the learned CIT(A)”] dated 17.03.2026 arising out of the assessment order dated 29.03.2022 passed by the Assessing Officer (hereinafter referred to as “the AO”) under section 147 read with section 144 and section 144B of the Income Tax Act, 1961 (hereinafter referred to as “the Act”).

ITA No. 1273/JPR/2026 Kusum Lata Agarwal 2. The grounds of appeal raised by the Assessee before us in the memorandum of appeal in Form No. 36 read as under:

“1. The Ld. CIT(A), NFAC has erred on facts and in law in upholding the action of AO in computing the long term capital gain on sale of residential house property at Rs.58,05,032/- as against long term capital gain of Rs.1,28,549/- declared by the assessee by not allowing the deduction of (i) brokerage expenses of Rs.1,17,500/- incurred by the assessee on sale of residential house property (ii) indexed cost of construction of Rs.53,44,783/- and (iii) registry & brokerage expenses of Rs.2,14,200/- incurred by the assessee on purchase of flat for claiming exemption u/s 54 of the Act.

2.

The appellant craves to alter, amend and modify any ground of appeal.

3.

Necessary cost be awarded to the assessee.”

3.

Briefly stated, the facts of the case are that the assessee sold her residential house at Plot No. A-425, Malviya Nagar, Jaipur for Rs 1,17,75,000 under a sale deed registered on 14.09.2015 and offered a long term capital gain of Rs 1,28,549 in her return. The case was reopened on information received from the INSIGHT portal. The assessee did not respond to the notices under section 142(1) of the Act, but filed copies of construction bills in reply to the show cause notice under section 144 of the Act. The AO allowed the indexed cost of the land and the exemption under section 54 of the Act for the new flat. He allowed nothing towards the cost of construction or the other expenses, and added Rs 56,76,483 to the returned income, as under:

Particulars As per As per AO return (Rs) (Rs) Sale consideration 1,17,75,000 1,17,75,000 Less: Brokerage on sale – – Less: Indexed cost of land 28,69,968 28,69,968 Less: Indexed cost of construction 53,24,233 Nil Less: New flat and expenses on it 34,52,250 31,00,000 Taxable long term capital gain 1,28,549 58,05,032

ITA No. 1273/JPR/2026 Kusum Lata Agarwal 4. The learned CIT(A) called for remand reports and dismissed the appeal. It was held that the bills were additional evidence inadmissible under Rule 46A of the Income Tax Rules, 1962 (hereinafter referred to as “the Rules”), and were in any case unreliable, being spread over 1992 to 2016 without PAN, bank evidence or confirmations, with bills of Rs 4,65,101 admittedly not available. The mention of 3,350 sq. ft. of construction in the sale deed was held to prove only the existence of the building and not its cost.

5.

The learned Authorised Representative (hereinafter referred to as “the learned AR”) submitted that the sale deed and the site plan record a constructed house of 3,350 sq. ft. (Paper Book Page No. 4 to 15), that the bills were filed before the AO (Paper Book Page No19 to 47) but were not considered, and that a cost of Rs 24,86,100 for this construction was reasonable. It was further submitted that the amount of Rs 3,52,250 claimed in the return comprised brokerage on the sale and registry charges and brokerage on the new flat. The learned Departmental Representative (hereinafter referred to as “the learned DR”) relied on the orders of the AO and the learned CIT(A).

6.

We have heard both parties and perused the material on record. Under section 48 of the Act, the cost of any improvement to the asset is deductible in computing the capital gain, and under section 55(1)(b) of the Act it means capital expenditure incurred by the assessee on additions or alterations to the asset. The burden of proving that expenditure lies on the assessee. But the burden must be judged on the whole record, and not by ignoring a part of it.

7.

The existence of the building is not in dispute. The learned CIT(A) has accepted at paragraph 8.12 of the impugned order that the argument of the assessee is “factually correct about the existence of construction”. The AO

ITA No. 1273/JPR/2026 Kusum Lata Agarwal himself allowed exemption under section 54 of the Act, which is available only on the transfer of a residential house. Having accepted that a house was sold, the AO could not compute the gain as if only the bare land bought in 1989 for Rs 4,27,442 had been sold. A house of 3,350 sq. ft. does not rise from the ground on its own. Its cost may be disputed in amount, but it cannot be taken at nil.

8.

Nor were the bills additional evidence. Paragraph 7 of the assessment order records as under:

“7. Further, the asseesee has submitted reply in respect of show cause notice issue u/s144 and produced the copy of construction bill. However, the assessee did not submit any relevant details in respect of cost of accusation claimed for calculating the capital gain, sale/purchase deed which was called in notice issue u/s 142(1) of the IT Act, 1961.”

Rule 46A of the Rules bars only evidence “other than the evidence produced by him during the course of proceedings before the Assessing Officer”. Bills produced before the AO fall outside the Rule, and the contrary finding of the learned CIT(A) cannot be sustained. The reason given by the AO does not touch the bills at all, and the AO in fact adopted the land cost from the details furnished by the assessee (Paper Book Page No. 18). The bills were thus never examined on merits by the AO. 9. At the same time, the claim cannot be accepted as it stands. Bills of Rs 4,65,101 are admittedly not available. The “consolidated bill” of Rs 6,61,344 is in fact an estimate of proposed work prepared by B.G. Associates on 05.12.2001 (Paper Book Page No. 35 to 39), and not evidence of expenditure incurred. The assessee has also stated that part of the construction was financed by home loans from LIC and ICICI (Paper Book Page No. 18 and 20), which is verifiable. None of these aspects has been examined, and the non-compliance of the assessee before the AO is equally responsible for this.

ITA No. 1273/JPR/2026 Kusum Lata Agarwal 10. As regards the expenses, brokerage paid on the sale is deductible under section 48(i) of the Act as expenditure incurred wholly and exclusively in connection with the transfer. Registration charges and brokerage paid on the new flat form part of its cost for the purpose of section 54 of the Act. The invoices and the registration receipt are part of the bills filed before the AO (Paper Book Page No. 45 to 47), and the AO gave no reason for denying them. The claim is allowable in principle, subject to verification of the amounts actually paid, since the figures now stated by the learned AR do not fully match the invoices and the return.

11.

We, therefore, set aside the order of the learned CIT(A) on this issue and restore the computation of the long term capital gain to the file of the AO. The AO shall determine afresh the cost of construction and improvement of the house on the bills already on record and any further evidence the assessee may produce, and shall verify and allow the expenses on the sale and on the new flat. The AO shall be free to take an independent view in accordance with law, after giving a reasonable opportunity of being heard to the assessee, who shall cooperate. Ground No. 1 is allowed for statistical purposes.

12.

Ground No. 2 is general and needs no adjudication. Ground No. 3, seeking costs, is dismissed, as the dispute arose largely from the non-compliance of the assessee before the AO.

13.

In the result, the appeal filed by the Assessee is allowed for statistical purposes.

Order pronounced in the open court on 26.10.2026

Sd/- Sd/- (KULDIP SINGH) (PRAKASH) JUDICIAL MEMBER ACCOUNTANT MEMBER 5

ITA No. 1273/JPR/2026 Kusum Lata Agarwal

Dated 26/10/2026 *Ganesh Kr., Sr. PS आदेशक���त�ल�पअ�े�षत / Copy of Order Forwarded to:- 1. Assessee 2. Revenue Ganesh 3. Concerned CIT Digitally signed by Ganesh Kumar 4. CIT (A) Kumar Date: 2026.11.02 5. DR, ITAT 11:38:35 +05'30' 6. Guard file. By order/आदेश से, सहायक पंजीकार आयकर अपील�य अ�धकरण, t;iqj

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