SUMA SHIVALINGAIAH,BANGALORE V. INCOME TAX OFFICER, INTL. TAXATION - 1(1), MANDYA

ITITA 541/BANG/2025

AI Insights

The case involves Mrs. Suma Shivalingaiah, a non-resident, who appealed against the assessment order passed by the Income Tax Officer, which computed her long-term capital gain from the sale of an immovable property at 4,903,083 for the assessment year 2018-19. The primary contention was the incorrect computation of capital gains, where the cost of construction was not considered, and the sales commission was not allowed. The Tribunal found that the lower authorities had overlooked substantial evidence provided by the assessee, including the cost of construction and the sales commission paid. The Tribunal directed a reassessment considering these factors and allowed the credit for TDS paid.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 825349 (ITAT-BANGALORE)
• Duration Of Justice: 9 month(s) 16 day(s)
• Appeal Type: Income Tax (International Taxation) Appeal
• Pronouncement Date: 29-12-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Assessment Year: 2018-2019
• Appeal Filed On: 14-03-2025
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: ABHIJIT CHANDRASHEKHAR BHAT
• Keywords: Reassessment proceedings; Cost of acquisition; TDS
• Section: 147; 148; 143(3)

Judgement Text

"IN THE INCOME TAX APPELLATE TRIBUNAL “C” BENCH: BANGALORE BEFORE SHRI PRASHANT MAHARISHI, VICE PRESIDENT AND SHRI SOUNDARARAJAN K., JUDICIAL MEMBER IT(IT)A No.541/Bang/2025 Assessment year: 2018-19 Mrs. Suma Shivalingaiah, Behind Govt. Primary School, Thavaregere, Mandya – 571 401. PAN: HLSPS 1071R Vs. The Income Tax Officer, International Taxation Ward 1(1), Bangalore. APPELLANT RESPONDENT Appellant by : Shri Abhijit Chandrashekhar Bhat, CA Respondent by : Shri N. Balusamy, Jt.CIT (DR)(ITAT), Bengaluru. Date of hearing : 17.11.2025 Date of Pronouncement : 29.12.2025 O R D E R Per Prashant Maharishi, Vice President 1. ITA No. 541/Bangalore/2025 is filed by Mrs. Suma Shivalingaiah (the assessee/appellant) against the assessment order passed u/s. 147 r.w.s. 143(3) of the Income Tax Act, 1961 [the Act] by the Income Tax Officer, Ward International taxation 1(1), Bangalore (the ld. AO) for the AY 2018-19 on 17 January 2025 determining the total income of the assessee at ₹ 49,03,083/–. The only issue involved in this appeal is computation of long-term capital gain under section 45 of the Act. 2. The assessee is stated to be a non-resident, the case of the assessee was reopened u/s. 147 of the Act after following the due procedure under section 148A of the Act. Notice u/s. 148 of the Act was issued on 29 Printed from counselvise.com IT(IT)A No.541/Bang/2025 Page 2 of 9 April 2022, the assessee filed her return in response to that notice on 28th May 2022 declaring Nil income claiming current year loss of ₹ 6335/–. The return could not be verified hence it was treated to be an invalid return. Subsequently several notices including show cause notices were also issued to the assessee. In this case a specific information was received through Insight Portal in accordance with the risk management strategy formulated by the Central Board Of Direct Taxes wherein it is found that there is a tax deduction at source under section 194IA on ₹ 72 lakhs on sale of immovable property. Therefore it was found that the assessee has sold an immovable property for ₹ 72 lakhs. The AO found that assessee has declared a long-term capital gain of ₹ 113,258/– after claiming cost of acquisition, commission paid on sale of property. The assessee did not submit the further detail and therefore the ld. AO proceeded to compute the capital gain. 3. The assessee claimed cost amounting to ₹ 5,570,159/– and also commission expenses of ₹ 2 Lakhs against the sale consideration declared. The purchase consideration paid for acquiring the above property was stated to be ₹ 18,57,800. Assessee also claimed the cost of construction and submitted the construction agreement in support of the claim made. As the assessee did not furnish any payment details with respect to the commission agreement as well as construction activity and therefore according to the AO the cost claimed towards construction and commission expenses remains unsubstantiated. Therefore the ld. AO proposed to rework the computation of capital gain taking the cost as per sale deed of ₹ 18,57,800 and the long-term capital gain so arrived was at Printed from counselvise.com IT(IT)A No.541/Bang/2025 Page 3 of 9 ₹ 4,903,083/–. A show cause notice was issued to the assessee wherein assessee submitted its detailed reply. According to the assessee during the financial year the assessee sold residential apartment bearing No. VP 1301 at Yelahanka Hobli Bangalore North belonging to Mr Kinshuk Sikri the through registered sale deed for the sale consideration of ₹ 72 lakhs. The agreement for sale dated September 13, 2017 was submitted. It was stated that assessee has paid a commission of Rs.2 lakhs to Mr Prashant S J for assisting in the said sale of apartment and affidavit of the broker was also submitted. It was stated that assessee acquired the above apartment by entering into a sale-cum-construction agreement with one Purvankara Projects Ltd. on 9 June 2006. The agreement of the sale was for undivided share of the land for a consideration of ₹ 18,57,800 and construction agreement for a value of ₹ 2,037,400. Both these agreements were also provided. The assessee stated that registered sale deed for the undivided share of land was executed on 25 October 2013. The total consideration inclusive of registration charges and stamp duty amounting to ₹ 2,177,859 was incurred. The registered sale deed for transfer of the share of land was also submitted. The assessee also got additional interior works, the construction cost got escalated and therefore the total amount paid to Purvankara Projects Ltd amounting to ₹ 5,506,654/– the assessee also submitted statement of account issued by the Purvankara Projects Ltd with the copy of the email giving the same, providing a comprehensive breakdown of the receipts along with the corresponding dates and mode of receipt. Thus it was stated that the total cost of acquisition of the above property is ₹ 5,506,654/– it was further Printed from counselvise.com IT(IT)A No.541/Bang/2025 Page 4 of 9 stated that after the property was handed over to the assessee, assessee got some additional works done relating to kitchen cabinets and wardrobes from the carpenter wherefore the confirmation of the Carpenter was also provided. The total cost incurred for the same was ₹ 160,235/– it was further stated that the assessee did not have any income during the financial year and therefore return of income was not filed. The assessee submitted the computation of the capital gain on sale of the above property wherein according to that long-term capital gain was loss of ₹ 6335/–. 4. As assessee has claimed a refund of ₹ 47,670, same was also not allowable to the assessee according to the AO. Accordingly after considering the explanation of the assessee the ld. AO passed a draft assessment order under section 144C (1) of the Act on 12 March 2024 wherein proposing the addition of ₹ 4,903,083 as long-term capital gain u/s. 45 of the Act rejecting the refund claim made in the computation of income. 5. The assessee filed an objection against the draft order before the ld. Dispute Resolution Panel [DRP] wherein the ld. DRP passed its direction on 21 December 2024. Before the ld. DRP assessee raised several objection including the jurisdictional objection. On the merits of the case they confirmed the action of ld. AO for the reason that assessee did not submit any further details regarding the payment made for the construction of the property such as bank statement copy, bills voucher etc. Further with respect to the commission paid of Rs.2 lakhs also no evidences were submitted about the actual payment. Accordingly the Printed from counselvise.com IT(IT)A No.541/Bang/2025 Page 5 of 9 objections of the assessee were rejected. With respect to the claim of the refund of the assessee it was stated that the ld. AO has denied the deduction of claim of refund for the reason that 148 is for the benefit of the revenue and not for the benefit of the assessee. Accordingly the objections of the assessee were dismissed. 6. Based on this the final assessment order was passed wherein the long term capital gain was computed u/s. 45 of the Act of ₹ 4,903,083/– and the refund of ₹ 72,000 was denied to the assessee. The assessment order was passed on 17th of January 2025. 7. The assessee being aggrieved with the same is in appeal before us. The claim of the assessee is that assessee has given all the details available with it but the ld. AO has completely ignored the same. He submitted that the assessee has purchased the above property as per the agreement of undivided property of land, on which construction was made, cost of improvement was also made, the year wise details are also provided, but the ld. AO has computed the property capital gain without considering everything submitted before him. He submitted that even the details of payments are also available in the agreement of sale and the sales commission paid to the broker. The property purchase details clearly shows that it was constructed property as per sale deed entered into on September 13, 2017. He submitted that the computation of capital gain was made after not giving the assessee the of cost of construction and barely the cost of land was granted to the assessee as deduction. In the sale deed the assessee has sold constructed property these facts were overlooked by the ld. AO and the ld. DRP. He submitted that it defies the Printed from counselvise.com IT(IT)A No.541/Bang/2025 Page 6 of 9 common sense that the computation of capital gain is made by taking the sale value of a constructed property and construction cost is not granted as deduction to the assessee as cost of acquisition, despite providing all the proof of the cost of construction. Therefore the ld. DRP and the ld. AO has computed the sale of constructed property by only granting the cost of land and that too less than what is incurred. He therefore submitted that the computation of capital gain made by the learned lower authorities is devoid of any merit. 8. With respect to the issue of claim of refund of TDS, he submitted that the assessee originally filed its return of income but same could not be verified and even otherwise the refund of taxes to be granted as credit to the assessee. It cannot be said that in 148 proceedings in reopening of the assessment refund can be denied to the assessee. It was submitted that it is not a claim of any deduction or expenses by the assessee but asking for the refund of taxes paid by the assessee. 9. The ld. DR vehemently supported the order of the learned lower authorities and submitted that the assessee has not given details of the payment made and therefore the ld. AO and the ld. DRP are correct in making the computation of the capital gain. He submitted that with respect to the refund assessee did not file the return of income and therefore there was no claim in the return of original income and therefore the claim cannot be allowed to the assessee. 10. We have carefully considered the rival contention and perused the orders of the learned lower authorities. According to the facts stated above it is apparent that the assessee has incurred cost of acquisition of a property at Printed from counselvise.com IT(IT)A No.541/Bang/2025 Page 7 of 9 ₹ 5,506,654/– which is as per the statement of accounts provided by the developer, Purvankara Projects Ltd. This property was sold on September 13, 2017 for ₹ 72 lakhs. The sale deed was also produced before the lower authorities wherein the property sold was a constructed property. The assessee has made a further payment of ₹ 160,235 to Mr Narayanswamy for fixed furniture bare minimum for making the house habitable. The assessee has further incurred an expenditure in connection with the sale of the above property of Rs.2 lakhs being sales commission paid to Mr Prashant. All these details are produced before the assessing officer. Based on this the indexed cost of acquisition was worked out at ₹ 6,808,227, indexed cost of improvement was considered at ₹ 198,109 and therefore the long-term capital gain on sale consideration of ₹ 72 lakhs reduced by the sales commission of rupees 2 lakhs was computed at a loss of ₹ 6335. It is also a strange fact that the ld. AO has considered the sales consideration of ₹ 72 lakhs of constructed property but has only granted the cost of acquisition of the cost of land. It was not shown to us that under which provision of the law if the property is sold after construction, the construction cost cannot be granted to the assessee as deduction. Further when the assessee claims that it has incurred a sales commission of Rs.2 lakhs, gives the name of the broker also, the details of the agreements are also shown to the assessing officer, there is no reason that the above expenditure should not be allowed to the assessee from the gross sales consideration for computation of capital gain. The assessee has produced the computation of total income on sale of the above property which is as under: – Printed from counselvise.com IT(IT)A No.541/Bang/2025 Page 8 of 9 11. We direct the ld. AO to compute the capital gain after granting the assessee the cost of acquisition as well as the expenditure incurred in connection with the transfer of sales commission. He may also verify the cost of improvement incurred by the assessee. The ld. AO may verify the same and compute the long-term capital gain earned by the assessee. The assessee is also directed to submit the copy of the bank statement of the Printed from counselvise.com IT(IT)A No.541/Bang/2025 Page 9 of 9 assessee since the date of acquisition of the above property till it is sold. The ld. AO may also verify the details of the payment if required and then decide the issue afresh. 12. In the result the ground of appeal with respect to the computation of capital gain raised by the assessee is allowed as indicated above. 13. The assessee has also claimed the credit of tax deduction at source which has been not claimed by the assessee, the ld. AO is also directed to grant credit of taxes so paid in advance to the assessee. There is no provision in the Act which restricts the claim of the tax credit available to the assessee even in reassessment proceedings. It is not the escapement of income or any income or expenses which is being claimed by the assessee as deduction afresh. The ld. AO is directed to grant credit of the taxes paid. 14. In the result appeal filed by the assessee is allowed as indicated. Pronounced in the open court on this 29th day of December, 2025. Sd/- Sd/- (SOUNDARARAJAN K.) (PRASHANT MAHARISHI) JUDICIAL MEMBER VICE PRESIDENT Bangalore, Dated, the 29th December 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 "