Mohsin Himmati Vs ADIT (ITAT Hyderabad)
Father’s Bank-Funded Payments Allowed as Cost of Acquisition — ITAT Hyderabad Grants Full LTCG Relief
The Hyderabad Bench of the ITAT allowed the assessee’s appeal for AY 2023-24, holding that payments made by the father of the assessee towards purchase of property, duly supported by bank statements, constitute valid cost of acquisition and cannot be disallowed while computing long-term capital gains.
Key findings of the Tribunal:
Facts of the case: The assessee (a non-resident) sold an immovable property for ₹2.31 crore. The property was purchased in 2017 for ₹1.54 crore, paid entirely by the assessee’s father in three instalments (₹25 lakh, ₹77.20 lakh and ₹52.20 lakh), claimed as gifts.
- AO & DRP’s partial disallowance: While ₹25 lakh was allowed, the remaining ₹1.29 crore was disallowed by the DRP on the ground that the opening bank balance of the father as on 01-09-2014 was not explained, due to non-furnishing of earlier bank statements.
- Admission of additional evidence: The ITAT admitted complete bank statements of the father for the missing period, holding that the evidence went to the root of the controversy and was crucial for adjudication.
- Source of funds fully explained: On verification, the Tribunal found that the father had an opening bank balance of over ₹18.74 crore, from which the impugned payments were made directly to the seller through banking channels.
- Payments directly linked to purchase deed: The sale deed clearly reflected that the amounts of ₹77.20 lakh and ₹52.20 lakh were paid towards the very same property.
- No adverse inference in year of sale: Once source and utilization were proved, the payments could not be denied as cost of acquisition in the year of sale. If at all, any enquiry could only relate to the year of payment, not the year of capital gains.
- Relief granted: The Tribunal directed the AO to allow the full cost of acquisition and recompute long-term capital gains accordingly.
Accordingly, the assessee’s appeal was allowed in full, granting substantial relief on LTCG computation.
FULL TEXT OF THE ORDER OF ITAT HYDERABAD
