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Facts
The assessee reported long-term capital gains from the sale of property, claiming a cost of acquisition of Rs. 2,00,45,625/-. The AO restricted the cost of acquisition to Rs. 59,28,882/- as per the sale deed, disallowing the excess and increasing the taxable capital gains. The DRP upheld the AO's decision.
Held
The Tribunal held that the actual amount paid by the assessee, even if it differs from the registered document, should be considered for computing capital gains, provided it is supported by verifiable documents. The Revenue did not dispute the genuineness of the payments.
Key Issues
Whether the Assessing Officer was justified in restricting the cost of acquisition to the value in the registered sale deed, ignoring actual payments supported by documentary evidence.
Sections Cited
143(3), 144C(13), 48
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Income Tax Appellate Tribunal, ‘C’ BENCH: BANGALORE
Before: SHRI WASEEM AHMED & SHRI PRAKASH CHAND YADAV
PER WASEEM AHMED, ACCOUNTANT MEMBER:
This is an appeal filed by the assessee against the order passed by the AO under section 143(3)/ 144C(13) for the assessment year 2022-23.
The necessary facts are that the assessee in the present case is an individual and filed her Income Tax Return for AY 2022-23 on 16.05.2022, declaring total income at Rs. 64,86,380/- only. The assessee declared her residential status as "Non-Resident." The assessee reported
IT(TP)A No.224/Bang/2025 Page 2 of 7 long-term capital gains of Rs. 64,86,375/- from the sale of immovable property for Rs. 2,68,00,000/- only. The assessee against the sale of property claimed the indexed cost of acquisition of the property at Rs. 2,00,45,625/- based on a purchase deed dated 15.12.2006.
However, the AO noted discrepancies in the cost of acquisition. The purchase consideration, including stamp duty/registration charges, as per the sale deed, was Rs. 59,28,882/- whereas the assessee has taken the cost of acquisition at Rs. 77,14,720 only.
On question by the AO for submitting the documentary evidence to substantiate the indexed cost of acquisition, the assessee failed to provide complete documentary evidence for the claimed index cost of acquisition. Accordingly, the AO restricted the cost of acquisition to Rs. 59,28,882/- as per the sale deed and recalculated the indexed cost of acquisition to Rs. 1,54,05,374/- only. This resulted in an increase in taxable long-term capital gains to Rs. 1,11,26,626/- (from Rs. 64,86,375/- claimed by the assessee). As such, the excess indexed cost of acquisition of Rs. 46,40,251/- was disallowed by the AO and added back to the returned income of the assessee.
The assessee filed objections before the ld. DRP, which upheld the AO's decision restricting the cost of acquisition to Rs. 59,28,882/- only based on the sale deed. Hence, the AO completed the final assessment under section 143(3) r.w.s. 144C(13) of the Act, determining the total assessed income at Rs. 1,11,26,626/- only.
IT(TP)A No.224/Bang/2025 Page 3 of 7
Being aggrieved by the direction/ order of the ld. DRP/ the AO, the assessee is in appeal before us.
The Ld. AR for the assessee respectfully submits that the Assessing Officer and DRP have erred in not accepting the actual purchase cost of the property, which amounts to Rs. 77,14,720.00 only. This includes Rs. 72,00,000 towards the purchase price, Rs. 4,60,210 towards registration charges, and Rs. 54,510 towards stamp duty. All these payments were made through proper banking channels and are supported by documentary evidence, including the purchase agreement. It is submitted by the ld. AR that the authorities below have wrongly relied only on the value mentioned in the sale deed, which is lower, and have ignored the actual cost incurred by the assessee. The purchase agreement and payment proofs clearly show the true nature of the transaction, and rejecting these documents without proper justification is not correct.
The Ld. AR has placed reliance on various judicial precedents where it has been held that the actual amount paid by the assessee, even if it differs from the amount shown in the registered document, should be considered for computing capital gains. In the case of DCIT vs. A. P. Sridhar (HUF) reported in 155 taxmann.com 508, it was held that actual consideration takes precedence. Similarly, in the case of Shri Ravi Kumar Tirupati Parthasarathy vs. DCIT, in the Tribunal accepted the actual outflow made by the assessee even when the agreement was unregistered. Other cases like Vishal Aggarwal vs. PCIT reported in 150 taxmann.com 188 and Smt. Malati Venugopala Umadevi vs. ITO in also support this view.
IT(TP)A No.224/Bang/2025 Page 4 of 7
It is further submitted that the property was sold for Rs. 2,68,00,000 and for the purpose of computing capital gains, the cost of acquisition should be taken as Rs. 77,14,720 as actually incurred by the assessee. The authorities below have not brought any contrary evidence to disprove the payments made. Therefore, the disallowance based on the lower value in the sale deed is not justified.
In light of the above, the Ld. AR prays that the actual purchase cost incurred and substantiated by the assessee be accepted, and the capital gains be recomputed accordingly.
On the other hand, the ld. DR contends that the Assessing Officer (AO) was correct in restricting the cost of acquisition of the property to ₹59,28,882/- based strictly on the value mentioned in the registered sale deed dated 15.12.2006. According to the ld. DR, the provision of section 48 of the Act, which governs the computation of capital gains, allows deduction of the cost of acquisition from the full value of consideration. However, the cost must be supported by valid legal documentation and acceptable evidence. The assessee's claim of ₹77,14,720/- includes components (e.g., excess payments and registration charges) that are not reflected in the registered document and are unsupported by credible evidence during the assessment. Since the registered sale deed is a legal and binding document under the Registration Act, it forms the most authentic basis to determine the acquisition cost, and any deviation without conclusive proof cannot be accepted. The ld. DR vehemently supported the order of the authorities below.
IT(TP)A No.224/Bang/2025 Page 5 of 7
We have carefully considered the rival submissions and perused the material available on record. The sole issue for our adjudication is whether the Assessing Officer was justified in restricting the cost of acquisition of the property to ₹59,28,882/- based on the value mentioned in the registered sale deed, ignoring the assessee’s claim of ₹77,14,720/- supported by other documentary evidence.
12.1 At the outset, it is relevant to refer to the provisions of section 48 of the Income Tax Act, 1961, which provides the mechanism for computation of capital gains. The section allows deduction of the “cost of acquisition” actually incurred by the assessee from the full value of consideration received or accruing as a result of the transfer of a capital asset.
12.2 In the present case, the assessee has claimed the cost of acquisition at ₹77,14,720/-, comprising ₹72,00,000 towards purchase price, ₹4,60,210 towards registration charges, and ₹54,510 towards stamp duty. The assessee has also placed on record the relevant purchase agreement, bank transaction records, and evidence of payments made through proper banking channels to substantiate the claim.
12.3 We find that the Assessing Officer as well as the Dispute Resolution Panel (DRP) have summarily rejected the assessee’s claim and confined the cost of acquisition to ₹59,28,882/-, being the value mentioned in the registered sale deed. This action, in our view, is not justified in law.
IT(TP)A No.224/Bang/2025 Page 6 of 7 12.4 It is a settled position, as upheld in various judicial pronouncements, that the actual amount paid by the assessee, even if it differs from the amount recorded in the registered document, is to be considered for the purpose of computing capital gains under section 48 of the Act. In particular, we find support from the decisions rendered in: • DCIT vs. A.P. Sridhar (HUF) reported in 155 taxmann.com 508, where it was held that the actual consideration paid by the assessee should be considered over the value recorded in the registered deed;
• Ravi Kumar Tirupati Parthasarathy vs. DCIT in wherein the Tribunal accepted the cost of acquisition based on actual payments made, despite the absence of registration;
• Vishal Aggarwal vs. PCIT reported in 150 taxmann.com 188 and Smt. Malati Venugopala Umadevi vs. ITO in which reaffirmed the principle that substantiated and verifiable payments prevail over other payments.
12.5 In the present case, the Revenue has neither disputed the genuineness of the payments made by the assessee nor produced any contrary evidence to disprove the documents submitted. Therefore, merely relying on the registered sale deed, without examining the surrounding evidence, is contrary to the spirit of section 48 of the Act. Accordingly, we hold that the assessee is entitled to claim the actual cost of acquisition at ₹77,14,720/-, duly supported by verifiable documents. The Assessing Officer is directed to recompute the indexed cost of .
IT(TP)A No.224/Bang/2025 Page 7 of 7 acquisition accordingly and revise the computation of long-term capital gains. Hence, the ground of appeal of the assessee is allowed.
In the result, the appeal filed by the assessee is allowed.