CHICKANNA GOVINDAPPA ,BENGALURU V. INCOME TAX OFFICER, WARD-5(2)(1), BENGALURU

ITA 1663/BANG/2025

AI Insights

The case involves Shri Chickanna Govindappa, the appellant, who contested the disallowance of certain deductions claimed in his income tax return for the assessment year 2016-17. The primary issues were the disallowance of Rs.7,44,000 claimed as commission and brokerage for the sale of property, and the disallowance of Rs.2,45,141 claimed as the cost of improvement on the property sold. The Income Tax Officer (ITO) initially disallowed these claims, which was upheld by the CIT(A). However, upon appeal to the Income Tax Appellate Tribunal, the Tribunal found merit in the appellant's arguments and evidence, leading to the reversal of the lower authorities' decisions.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 781153 (ITAT-BANGALORE)
• Duration Of Justice: 2 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-10-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2016-2017
• Appeal Filed On: 28-07-2025
• Laws Referred To: Income-tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: V. SRINIVASAN
• Keywords: Revised return; Bogus
• Section: 143(3); 133(6); 69C

Judgement Text

" IN THE INCOME TAX APPELLATE TRIBUNAL “SMC” BENCH : BANGALORE BEFORE SHRI PRASHANT MAHARISHI, VICE PRESIDENT ITA No.1663/Bang/2025 Assessment year : 2016-17 Shri Chickanna Govindappa, No.24, Ganigara “A” Lane, Maldar Pet, Bengaluru – 560 002. PAN: ACSPG 8001D Vs. The Income Tax Officer, Ward 5[2][1], Bengaluru. APPELLANT RESPONDENT Appellant by : Shri V. Srinivasan, Advocate. Respondent by : Shri Ganesh R. Ghale, Standing Counsel for the Revenue. Date of hearing : 23.09.2025 Date of Pronouncement : 24.10.2025 O R D E R 1. This appeal is filed by Shri Chickanna Govindappa (the assessee/appellant) for the assessment year 2016-17 against the appellate order passed by the Addl/JCIT(A)-1, Nashik [ld. CIT(A)] dated 6.6.2025 wherein the appeal filed by the assessee against the assessment order passed u/s. 143(3) of the Income-tax Act, 1961 [the Act] dated 15.12.2018 by the ITO, Ward 5[2][1], Bangalore [ld. AO] was dismissed. Printed from counselvise.com ITA No.1663/Bang/2025 Page 2 of 6 2. The only issue involved in this appeal is with respect to the addition of Rs.7,44,000 being the commission & brokerage paid by assessee for sale of property taxed u/s. 69C of the Act and further not allowing the cost of improvement of Rs.2,45,141 while computing the capital gain on the sale of property. 3. The brief facts of the case show that assessee is an individual who filed his return of income (revised return) on 2.1.2018 at a total income of Rs.12,83,890. The return was picked up for scrutiny for verification of deduction claimed from capital gain, investment in immovable property. During the year the assessee has sold a property at Vijaya Bank Layout, Bengaluru for a consideration of Rs.3.24 crores as per Sale Deed dated 24.8.2015. Against the sale of property the assessee has claimed a sum of Rs.65.62 lakhs out of which Rs 2,45,141 as cost of improvement and further deduction of commission & brokerage paid of Rs.7,44,000 which was disallowed. 4. The ld. AO examined these two claims and found that assessee did not have proper information and bills amounting to Rs.2,45,141 of improvement. The assessee has incurred cost of improvement of Rs.65,62,000 out of which 21 bills of Rs.2,45,141 were not considered as cost of improvement. The reason being that these bills are not in the name of assessee. Further, the assessee claimed that it has paid a commission of Rs.7,44,000 to 4 different persons for sale of property. The assessee submitted their PAN, address and confirmation. The ld. AO issued notice u/s. 133(6) of the Act wherein he found that these Printed from counselvise.com ITA No.1663/Bang/2025 Page 3 of 6 parties are related to the assessee, do not possess any qualification or experience and has not done any commission income prior to this. The return of income filed by the parties were also after the issue of show cause notice. Accordingly he disbelieved the above commission and disallowed the same. Assessment order was passed u/s. 143(3) of the Act on 15.12.2018. 5. The assessee preferred the appeal before the ld. CIT(A) wherein the assessee reiterated the same details and explanation. But the ld. CIT(A) confirmed the action of the ld. AO. 6. Aggrieved, the assessee is in appeal. The ld. AR, Shri V. Srinivasan, Advocate was heard from the side of the assessee and Shri Ganesh R. Ghale, Advocate, Standing Counsel for the Revenue was also heard, who supported the orders of the ld. lower authorities. 7. I have carefully considered the rival contentions and perused the orders of the ld. lower authorities. The facts clearly show that assessee has sold a property at Rs.3.24 crores. The assessee has claimed the cost of improvement of Rs.65,62,000. The ld. AO has accepted the major portion of cost of improvement, however, has not accepted that assessee could have spent Rs.2,45,141 of 21 bills as in the bill the name of the appellant was not mentioned. I find that the assessee has given complete list of total expenditure of Rs.65,62,000 comprising of almost 75 bills, out of which the ld. AO has disbelieved the sum of Rs.2,45,141 for the reason that name in the invoices of the assessee does not appear. I find that all these invoices are small bills ranging from Rs.500 to Rs.40,000. These bills are of small items such has glasses, plywood, etc. When the assessee’s cost of construction of Printed from counselvise.com ITA No.1663/Bang/2025 Page 4 of 6 Rs.65,62,000 is believed, disbelieving a sum of Rs.2,45,141 is not proper. The explanation of the assessee is also not devoid of any merit when assessee has given details of the party, copy of the bill, details of payment made, etc. Merely not mentioning the name of the assessee though assessee produces the original bill and also payment to those parties, not accepting the same, is not proper. In case of small purchases it may happen that name of the assessee might not have entered in it. All these bills are also being incurred earlier and the assessment order is passed in 2018. The AO might not have an occasion to enquire from the parties. However that may not be a case if totality of the circumstances are seen. It is also not the case of the ld AO that these materials have not been purchased by assessee for the house. In view of the above facts when the assessee has shown the total cost of improvement of Rs.65,62,000, but merely 4% of the total bills are disbelieved when the complete bills and invoices are given along with copies of invoices and the date of payment, merely that the name in the invoices of the assessee does not appear, I do not find it to uphold the order of the ld. AO in not allowing the cost of improvement of Rs.2,45,141. 8. The second issue is with respect to commission & brokerage paid of Rs.7,44,000. The facts show that assessee has claimed to have paid brokerage as selling expenses to four different parties of Rs.1,81,000 each. The assessee supported the same by filing their confirmation, who confirmed that they have rendered services for sale of this property and also received the brokerage. The ld. AO issued notice u/s. 133(6) of the Act, disallowed the same holding that he parties have furnished their return of income after the issue of show cause notice and further they do not have any experience of doing business earlier of such kind of commission. The ld. CIT(A) also confirmed the same. I find that the assessee has paid a commission of Printed from counselvise.com ITA No.1663/Bang/2025 Page 5 of 6 Rs.1,81,000 each to four different persons who have confirmed receipt of commission income and have shown the same in their return of income. Those persons might have filed ROI after the issue of show cause notice. But that does not matter at all. Non-filing of return of income by the recipient of the income which are claimed as deduction by the assessee does not improve or help the case of the Department, unless there are other contrary information available. Merely because the parties are near relatives who are not mentioned by the AO also could not have resulted into disallowance, because even if the same is paid to a relative with proper evidence and which is not excessive, unreasonable or bogus, same could not have been disallowed. Further those parties have not shown any commission income from similar kind of business in earlier year is also not relevant for the reason that many of the assessees do the business for the first time. The real substance to be seen is whether those parties have rendered the services to the assessee or not. In the information submitted u/s. 133(6) of the Act, all the parties have confirmed the same that they have rendered services of selling the above property and have received the commission. Their return of income, confirmation, etc. show that there is a commission paid by the assessee for the services rendered. There is no evidence that those parties have not rendered the service of brokerage to the assessee. Thus, it is clear that the AO has made the addition merely on the basis of assumption. The case would have been different, had the AO examined the parties and they would have denied that they have rendered any services to the assessee for sale of the properties. In such circumstances, the disallowance of the same would have been justified. However, when all the parties confirmed the transaction by showing this transaction in their respective return of income and also confirmed the same many times, in the absence of any contrary Printed from counselvise.com ITA No.1663/Bang/2025 Page 6 of 6 evidence, such disallowance could not have been made. It is also not the case of the AO that when the property is sold for Rs.3.24 crores, amount of commission paid is disproportionate or not justified. In view of this, I direct the ld. AO to delete the disallowance of commission & brokerage of Rs.7,44,000 u/s. 69C of the Act. 9. In view of the above facts, I reverse the orders of the ld. lower authorities and direct the ld. AO to delete the disallowance of Rs.2,45,141 and Rs.7,44,000. Thus, ground Nos.2 & 3 of the appeal are allowed. 10. In the result, the appeal filed by the assessee is allowed. Pronounced in the open court on this 22nd day of October, 2025. Sd/- ( PRASHANT MAHARISHI ) VICE PRESIDENT Bangalore, Dated, the 22nd October, 2025. /Desai S Murthy / Copy to: 1. Appellant 2. Respondent 3. Pr. CIT 4. CIT(A) 5. DR, ITAT, Bangalore. By order Assistant Registrar ITAT, Bangalore. Printed from counselvise.com "