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Facts
The Assessee, a partnership firm, sold an immovable property for Rs. 70,00,000/-. The assessment was reopened under Section 147 based on a TDS statement of Rs. 70,00,000/-. The Assessee disclosed capital gains of Rs. 10,43,896/- and a business loss, stating the total income chargeable to tax was Nil. The Assessing Officer disallowed costs of improvement and brokerage, leading to an addition of Rs. 38,19,957/-.
Held
The Tribunal noted that while the Assessee could not furnish complete details for the cost of improvement and brokerage, they provided some information. The Assessing Officer had the power to verify these costs, potentially with the help of a valuation officer. The CIT(A) dismissed the appeal without discussing merits. The Tribunal restored the matter to the Assessing Officer for re-evaluation.
Key Issues
Whether the costs of improvement and brokerage claimed by the Assessee for the sale of immovable property are allowable deductions, and if the ex-parte order of CIT(A) was justified.
Sections Cited
147, 144B, 194IA, 148, 139(1)
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, ‘SMC’ BENCH : BANGALORE
Before: SHRI PRASHANT MAHARISHI, VICE –
ORDER PER PRASHANT MAHARISHI, VICE – PRESIDENT 1.
Assessment Year 2016-17 is filed by M/s. Crystal Ice and Cold Storage against the Appellate Order passed by the National Faceless Appeal Centre, Delhi on 11.08.2025 wherein the Appeal filed by the Assessee against the re-assessment order passed u/s. 147 r.w.s. 144B of the Income Tax Act, 1961 dated 20.03.2024 by the Assessment Unit was dismissed. The Assessee is in Appeal.
The brief facts of the case show that the Ld. CIT(A) has dismissed the Appeal of the Assessee, as Assessee remained non-complainant on account of 7 notices issued by the Ld. CIT(A). The Ld. CIT(A) further noted that during the course of Assessment Proceedings, the case of Page 2 of 6 the Assessee was reopened by issuance of notice u/s. 147 of the Act. Further, the Assessee could not furnish the complete details with respect to the capital gain and therefore there is an addition of Rs. 38,19,957/- by the Ld. Assessing Officer. Thus, Assessee is in Appeal against the same.
The briefly stated facts show that Assessee is a partnership firm, specific information was received from the Risk Management Strategy that there is a TDS statement u/s. 194IA with respect to the Assessee of Rs. 70,00,000/-. Therefore, the reopening of the Assessment was made. It was found that Assessee has made sale of immovable property of Rs. 70,00,000/- during the year. However, in response to the notices the Assessee did not reply and therefore notice u/s. 148 was issued on 28.03.2023 and further various other opportunities were issued by the show cause notice etc., The Assessee partly replied the same.
The Assessee furnished the computation of income and also submitted a copy of sale of purchase deeds. Assessee also submitted that return u/s. 148 of the Act was also furnished on 26.12.2023. In the return of income, Assessee has disclosed the capital gain of Rs. 10,43,896/- and has also shown business loss of Rs. 10,55,335/- and thus stated that the income chargeable to taxes is Rs. Nil/-. In the computation of total income, Assessee submitted that it had acquired a property on 30.08.2004 which was sold on 30.09.2015 wherein the stamp duty value of the consideration was Rs. 70,00,000/-. The Assessee submitted that land was purchased in financial year 2004- 05 at a total cost of Rs. 9,17,882/-, on which shed was constructed in financial year 2005-06 at a cost of Rs. 13,52,600/- and further improvement cost was incurred in 2008-09 amounting to Rs. 4,72,698/-. The indexed cost of acquisition and improvement was computed at Rs. 58,87,104/- and resultant capital gain was worked Page 3 of 6 out at Rs. 10,43,865/-. The property was sold to Mr. Harry Dsouza and Theresa Dsouza for Rs. 70,00,000/- on which the TDS of Rs. 70,000/- was made. The Assessee submitted the purchase deed of the property also.
The Ld. Assessing Officer noted that Assessee has claimed the construction cost of shed as well as other improvements having the indexed cost of Rs. 38,19,957/- as well as deduction of brokerage cannot be allowed in absence of any documentary evidence. The Assessee in response to the show cause notice submitted that brokerage is paid to 3 persons to whom the payments are made through State Bank of Mysore account on 17, 21 and 22 July. With respect to the cost of improvement, it was submitted that the same were incurred in 2005-08 and details are not available. Further, it was submitted that when the Assessee purchased the property it was an old building around 10 years old admeasuring 900 sq.ft. This was demolished and Assessee constructed shed admeasuring 2961 sq. ft. in 2004-05. These details are available in the purchase deed and sale deed and therefore the Assessee must be allowed the above cost. The Ld. Assessing Officer submitted that Assessee did not file return u/s. 139(1) but has filed return in response to section 148 of the Act and in absence of any supporting documents, the indexed cost of improvement cannot be allowed to the Assessee. Accordingly, he disallowed the cost of improvement to the Assessee and total income was computed at Rs. 38,19,957/- by re-assessment order dated 20.03.2024.
Assessee preferred an Appeal before the Ld. CIT(A) where Assessee could not comply with the notices and he dismissed the Appeal of the Assessee as Assessee did not furnish any information.
Therefore, Assessee is in Appeal.
Page 4 of 6 8. The Ld. Authorized Representative first challenged the notice issued u/s. 148 of the Act and further the ex-parte order by the Ld. CIT(A) without discussing the merits of the case. The Ld. Departmental Representative supported the orders of the Ld. Assessing Officer stating that when the Assessee does not furnish the details there is no option available with the Ld. Assessing Officer but to disallow the claim.
I have carefully considered the rival contentions and perused the orders of the Ld. lower authorities. The above facts clearly show that Assessee purchased a plot of land on which old building was constructed. According to the sale deed, the Assessee submits that Assessee has sold constructed property wherein the construction of shed was done in 2005-06 at the total cost of Rs. 13,52,600/- .Therefore, in fact there is a difference between the property which was purchased by the Assessee, and which is sold by the Assessee. No doubt, that Assessee could not furnish the detailed cost of construction of the shed but further Assessee has given the details of cost incurred to it. Therefore, it cannot be stated that Assessee cannot be granted any cost of improvement despite knowing that the property which was purchased has undergone subsequent change and a shed is constructed over that. To determine the cost, the Assessing Officer has been given wide powers. He could have taken the help of valuation officer also. Further, with respect to the details of brokerage paid by the Assessee of Rs. 60,000/-, the Assessee has given complete details of the name of the persons along with the date of payment to these parties. The Ld. Assessing Officer has disallowed the same despite producing the above information before him.
The order of the Ld. CIT(A) cannot be sustained that despite the fact available that whatever is sold by the Assessee chargeable to tax under the head capital gain, the capital cost of the same deserves to Page 5 of 6 be granted while working out capital gain. This simple fact was not adjudicated by the Ld. CIT(A).
In view of the above facts, I restore the whole matter back to the file of the Ld. Assessing Officer with a direction to the Assessee to substantiate that a shed was constructed on the above land. This could be shown from the necessary permissions obtained from the respective municipal authorities. The Assessee could also substantiate the same by the registered valuers report. The Ld. Assessing Officer may also examine the same and if he is satisfied with the same, accept it as a cost of improvement or if not satisfied may get the help of the district valuation officer in this regard. But the cost of improvement, which is embedded in the sale price, deserves to be granted to the Assessee as deduction. The Assessing Officer may also examine the claim of the brokerage paid of Rs. 60,000/- on the basis of the information provided by the Assessee.
In the result, Appeal filed by the Assessee is allowed for statistical purposes.
Order pronounced in the open court on 30th January, 2026.