Musheer Ahamed Vs ITO (ITAT Bangalore)
Cost of Construction Cannot Be Fully Disallowed – Matter Restored to AO for Fresh Verification & Valuation – ITAT Bangalore
ITAT Bangalore held that where construction on a property is evident from purchase and sale deeds, the cost of improvement cannot be outrightly disallowed merely due to lack of complete supporting bills. The assessee sold a property for ₹85 lakh and claimed construction cost and selling expenses, which were rejected by AO and confirmed by CIT(A) for want of documentary evidence.
The Tribunal noted that comparison of purchase and sale documents showed substantial construction (ground +2 floors), indicating that improvement cost was actually incurred. Even if exact bills were not produced, AO should determine the cost through verification or by referring the matter to the Departmental Valuer rather than denying deduction entirely. Accordingly, the issue of capital gains computation was restored to the AO with directions to examine additional evidences such as approvals, bank withdrawals and construction records, and recompute capital gains afresh. Appeal allowed for statistical purposes.
FULL TEXT OF THE ORDER OF ITAT BANGALORE
1. This appeal is filed by Mr Musheer Ahamed [the assessee/appellant ] for assessment year 2018 — 19 against the appellate order passed by the National Faceless Appeal Centre, Delhi (the learned CIT — A) dated 23 May 2025 wherein the appeal filed by the assessee against the reassessment order passed under section 147 read with section 144B of the Income Tax Act, 1961 [the Act] dated 3 March 2023 passed by the National E-Assessment Centre, Delhi (the learned assessing officer) was dismissed.
