DiyyaKrishnasayee Vs DCIT (ITAT Chennai)
The case of DiyyaKrishnasayee Vs DCIT before the Income Tax Appellate Tribunal (ITAT) Chennai revolves around the assessment of long-term capital gains (LTCG) and the inclusion of interest expenditure in the cost of acquisition. This case is significant as it delves into the intricacies of tax assessments under Section 153A read with Section 143(3) of the Income Tax Act, 1961, particularly in scenarios involving deceased taxpayers represented by legal heirs.
The appeal pertains to the Assessment Year (AY) 2006-07, originating from the order of the Commissioner of Income Tax (Appeals)-18, Chennai [CIT(A)] dated 13-04-2023. The deceased assessee, represented by her legal heir, contested the confirmation of LTCG additions by the Assessing Officer (AO).
First Round of Appeal
The deceased assessee was subjected to a search under Section 132 on 16-05-2007. During the search, a sworn statement was recorded, wherein the assessee admitted receiving Rs. 2 Crores from an individual named Shri Duraipandian. This amount, however, was not the subject of the appeal. The core issue was the assessment of LTCG on properties disposed of by the assessee.
Assessment Proceedings
The AO discovered that the assessee had sold properties for Rs. 350 Lacs, which were originally acquired in FY 1991-92 for Rs. 28.63 Lacs. Due to non-payment of loans, the bank sold these properties, retaining the entire sale proceeds towards loan settlement. The AO computed LTCG of Rs. 295.91 Lacs, rejecting the assessee’s claim that no gains were chargeable as the sale proceeds were retained by the bank.
