Athaulla Thuppada Vs ITO (ITAT Bangalore)
Records for Cost of Improvement – Reasonable Estimate Allowed; Two Houses as One – Tribunal Restores Justice in Property Sale Case – Remands Section 54 Exemption for Fresh Verification-
Bangalore examined capital gains computation where the Assessee had sold immovable property but failed to substantiate cost of improvement & exemption claim. Assessee, engaged in catering business, had not filed return for AY 2018-19. Based on information from Registrar regarding property sale, AO reopened assessment u/s 148. The return was belatedly filed on 05.09.2022 declaring sale consideration of ₹31.50 lakh. AO rejected the claim of cost of improvement of ₹9.80 lakh for lack of evidence & denied exemption u/s 54 on the ground that two houses were purchased separately, which is not permissible. CIT(A) confirmed AO’s view, discarding even the registered valuer’s report produced by the Assessee.
Before Tribunal, Assessee challenged validity of reopening, but this was rejected as the return was filed only after notice u/s 148 & not within the prescribed time. On merits, Tribunal observed that cost of improvement was claimed to have been incurred in AYs 2005-06 & 2008-09 & non-availability of records after a decade was understandable. It noted that the registered valuer’s report could not be brushed aside without counter verification by Departmental Valuation Officer. To balance equities, Tribunal directed AO to allow cost of improvement at ₹800 per sq.ft. for 918 sq.ft. area as recorded in sale deed.
