Manchala Ravinder Alias Raviendra Vs DCIT (ITAT Hyderabad)
Summary: In Manchala Ravinder alias Raviendra v. DCIT, ITA No. 1078/Hyd/2025 (AY 2016-17), order dated 21.08.2026, the Hyderabad ITAT dealt with disputes concerning capital gains and business income. The assessee claimed ₹6.50 lakh as commission/transfer expenses on property sales, but the claim rested on self-made debit vouchers and complete particulars, including addresses of the alleged recipients, were not furnished; the Tribunal therefore upheld the disallowance. It also sustained rejection of development/improvement expenditure of ₹42.89 lakh allegedly incurred during 2006–2010 towards land levelling, blasting, rock cutting, JCB charges and labour expenses because supporting evidence was not produced and the assessee did not establish through an impounding order or other material that the relevant records were with the Department. The developer’s response to the Section 133(6) enquiry also disclosed no specific development expenditure. The Tribunal similarly sustained rejection of the residential-house exemption claim for want of supporting documentary evidence. However, on the computational issue, the assessee’s original return disclosed a business loss of ₹5,42,616, whereas the revised return showed business income of ₹1,06,02,100; the assessee contended that land-sale, salary and rental amounts included in net profit were again separately offered under their respective heads. Finding prima facie substance in the contention and noting that the CIT(A) had not adjudicated the ground, the ITAT restored this issue to the AO for verification and reframing of the assessment. The appeal was partly allowed for statistical purposes.
Hyderabad ITAT Rejects Unsubstantiated Commission, Land-Improvement & Residential-House Exemption Claims; Remands ₹1.06 Crore Business Income Error for Verification
In Manchala Ravinder alias Raviendra v. DCIT, ITA No. 1078/Hyd/2025 (AY 2016-17), order dated 21.08.2026, the Hyderabad ITAT considered multiple disputes relating to computation of capital gains and business income.
The assessee claimed ₹6.50 lakh as commission/transfer expenses on sale of properties. The Tribunal found that the claim was supported only by self-made debit vouchers; complete particulars and even the addresses of the alleged recipients were not furnished. Holding that an unsubstantiated claim without supporting documentary evidence could not be accepted, the ITAT upheld the ₹6.50 lakh disallowance.
The assessee had also claimed development/improvement expenditure of ₹42.89 lakh towards land levelling, blasting, rock cutting, JCB charges and labour expenses allegedly incurred during 2006–2010. He contended that the relevant books had been seized/impounded by the Income-tax Department during survey proceedings. However, he failed to produce even the impounding order or other material establishing that the records were actually with the Department. The developer’s response to the AO’s Section 133(6) enquiry also did not disclose any specific development expenditure. The ITAT therefore upheld the rejection of the cost-of-improvement claim. A related TaxGuru decision concerning the evidentiary requirement for improvement expenditure is Bhagwanbhai R. Makwana Vs ITO (ITAT Ahmedabad).
The Tribunal similarly sustained rejection of the assessee’s residential-house exemption claim, observing that it was not substantiated by supporting documentary evidence. TaxGuru has also reported decisions examining Section 54F claims supported by documentary evidence.
However, the assessee succeeded on an important computational issue. His original return showed a business loss of ₹5,42,616, whereas the revised return inadvertently disclosed business income of ₹1,06,02,100. The mistake was stated to have arisen because the net profit taken for business-income computation included amounts relating to sale of lands, salary and rental income, even though those amounts had again been separately offered under their respective heads, resulting in an apparent duplication of income.
The ITAT found prima facie substance in this contention and noted that the CIT(A) had failed to adjudicate this specific ground despite it being raised before him. It therefore restored the issue to the AO to verify the mistake and reframe the assessment accordingly. The assessee’s appeal was thus partly allowed for statistical purposes.
FULL TEXT OF THE ORDER OF ITAT HYDERABAD
The present appeal filed by the assessee is directed against the order passed by the CIT(A), NFAC, Delhi, dated 07/05/2025, which in turn arises from the assessment order passed by the Assessing Officer (for short, “AO”) under Section 143(3) of the Income-tax Act, 1961 (for short, “Act”), dated 30/12/2018 for the Assessment Year (AY) 2016-17. The assessee has assailed the impugned order on the following grounds of appeal raised before us:
“1. The Order of the learned Commissioner of Income Tax (Appeals) is contrary to the facts of the case and the Provisions of Law.
2. The learned Commissioner of Income Tax (Appeals) NFAC erred in sustaining the disallowance of the payment of Commission incurred in the Computation of Capital Gain. The learned Commissioner of Income Tax erred in holding that the Commission is not allowable simply because it is paid in cash. He failed to appreciate that the appellant has submitted the vouchers from the Brokers to whom the Commission is paid.
3 (a) The learned Commissioner of Income Tax erred in sustaining the disallowance of the expenditure incurred in leveling, rock-cutting and other expenses incurred in respect of the Ac.83 Guntas of land at Hardaspally village, Keesara Mandal, Ranga Reddy District, from which the Appellant received Plots admeasuring 11,684 Sq yards acres and guntas during the year under consideration, on account of Development Agreement entered into with M/s. Spark Realtors Private Limited.
(b) The learned Commissioner of Income Tax should have appreciated that the expenditure incurred is reflected in the Books of Accounts year after year and that the Appellant has computed the Capital Gain by adopting those amounts.
4. The learned Commissioner of Income Tax erred in sustaining the disallowance of the Exemption claimed U/s.54F of the Income Tax Act without properly appreciating that the Appellant has constructed a house at Door No. Plot No.550 J/III, Road No.92 at Jubilee Hills, Hyderabad by investing an amount of Rs.1,66,12,2721-.
5. (a) The learned Commissioner of Income Tax grossly erred in ignoring the ground raised by the Appellant in respect of the adoption of Business Income at Rs.1,06,02,100/-/- as against loss of Rs. (-)5,42,616/- declared by the Appellant in the original Return.
(b) The learned Commissioner of Income Tax should have appreciated that the Assessing Officer did not make any addition or adjustment in respect of income declared by the Appellant under the head Business and therefore the income declared under the business should have been adopted by the lower Authorities.
For these and other grounds that may be urged at the time of hearing, it is submitted that the Orders of the lower authorities be set aside or modified as may be deemed fit.”
2. Succinctly stated, the assessee had filed his return of income for AY 2016-17, declaring an income of Rs.1,10,66,820/- (after claiming current and brought forward losses). The assessee’s return of income was processed under section 143(1) of the Act. Subsequently, the case of the assessee was selected for “limited scrutiny” under CASS for verifying, viz., (i) whether the investment and income relating to securities transactions are duly disclosed; and (ii) whether the value of consideration for computation of capital gains has been correctly shown in the return of income.
3. During the course of the assessment proceedings, the AO observed that the assessee, while computing the capital gains on transfer of certain lands, had claimed deduction of transfer expenses, viz., (i) Tellapur Land: Rs.2,50,000/-; (ii) Medipally Land: Rs.2,00,000/-; and (iii) Miyapur Land: Rs.2,00,000/-. On being queried, the assessee filed with the AO “debit vouchers” to support his claim of having incurred the above mentioned transfer expenses, viz., (i) commission paid in cash to Mr. Srinivas Reddy on 23/08/2015: Rs.2,00,000/-; (ii) commission paid in cash for two flats, i.e., Flat Nos.303 and 305 on 31/03/2016: Rs.2,00,000/-; (iii) commission paid in cash to Mr. Mohan Reddy on 27/11/2015: Rs.2,00,000/-; and (iv) commission paid in cash to Mr. Naresh Reddy on 23/08/2015: Rs.50,000/-. However, the aforesaid explanation of the assessee did not find favor with the AO, for the reason that the same was supported by self-made debit vouchers which did not bear the addresses of the persons to whom the aforesaid commission was stated to have been paid, as well as was silent regarding the mode of payment or bill numbers. Accordingly, the AO, in the absence of proper details/documentary evidence, declined the assessee’s claim for deduction of transfer expenses of Rs. 6,50,000/-.
3. The AO further observed that the assessee in his return of income had claimed an expenditure of Rs.42,88,912/- towards development expenses of land. On being queried, it was the claim of the assessee that he had incurred the aforementioned expenditure for the development of the subject land transferred by him during the year under consideration. For the sake of clarity, we deem it apposite to cull out the reply filed by the assessee with the AO on the aforesaid issue, as under:
“1. The assessee owned & acres 03 Guntas of land at Haridaspally village, Kersaru Mandal, Ranga Reddy District. The Assessee to sell this property after doing some leveling. Rock cutting and spend some money in connection there with. He has conveyed 2 acres 0.03 Guntas of land to the government for the purpose of roads and common areas. In 2015 when the assessee found it difficult to carry on this work, he entrusted the Development of this property to M/s. Spark Realters Private Limited Taking into account the money spend by the assessee in doing some works relating to the leveling, the percentage on sharing was agreed by the Realters at to assessee and 40% to the Developer. The assessee has declared the capital gain in the year relevant to the assessment year 2016-17 in respect of capital gain made on entering into development of the property. In the calculation the indexed cost of construction was determined on the basis of the original cost and expenditure incurred in leveling and Rock cutting. The full value of consideration is taken at the sub Registrar’s value at Rs.550/- per yard in respect of his share of land in the development. The balance 40% of the property belong to the developer and the assessee has no concern or whatsoever in respect of that 40%
1. Details of expenditure on development of Haridaspally Land – The expenditure was incurred during 2006 to 2010 and the expenses are towards land leveling, blasting. rock cutting. JCB charges, Labour payment and other expenses The leg pertaining to the expenditure were seized by the Income Tax Department when a Survey took place in the business premises as well as the assessee’s house. Hence the details could not be furnished you will appreciate that the ledger copies of the Haridaspally land expenses were already filed with you, wherein the opening balances towards expenses reflected. We are also producing the balance sheet of the assessee for the assessment year 2016-17. In Schedule-12 annexed to the Balance Sheet, the land leveling and other expenses incurred year-wise are shown.”
4. As it was the claim of the assessee that his ledgers supporting the incurring of the expenditure towards land leveling, blasting, rock cutting, JCB charges, labour payments and other expenses during the years 2006 to 2010 were seized by the Income Tax Department in the course of the survey proceeding conducted at his business premises, the AO to verify the veracity of the said claim directed him to place on record a copy of the impounding order. However, the assessee failed to furnish the copy of the impounding order. The AO, observing that the assessee had neither placed on record any documentary evidence to support his claim of having incurred development expenses on the subject lands nor filed a copy of the impounding order supporting his claim that the documents and books of account pertaining to the years 2006-2010 in which the expenses were allegedly claimed to have been incurred were impounded by the department, declined his claim for deduction of development expenditure. Also, the AO declined the assessee’s claim for deduction under section 54F of the Act. The AO further observed that the assessee had claimed to have given the subject lands situated at Haridaspally village for development to M/s. Spark Realtors Private Limited. The AO called for a copy of the development agreement entered into by the assessee from M/s. Spark Realtors Private Limited. As is discernible from the assessment order, the AO observed that a perusal of the details filed by M/s. Spark Realtors Private Limited (supra) did not show any specific amount of expenditure spent towards the development of the assessee’s land.
5. The assessee, aggrieved with the order passed by the AO under section 143(3) of the Act, dated 30/12/2018, carried the matter in appeal before the CIT(A) but without success. For the sake of clarity, we deem it apposite to cull out the observations of the CIT(A), as under:
“4. DECISION:
4.1 I have perused the assessment order and the submissions of the appellant.
5. Ground No.2:
5.1 The assessee has sold 3 plots of land on which it has claimed commission of Rs.6,50,000/- as transfer expenses. When asked to substantiate the genuineness of the above expenditure, the assessee submitted self made voucher which did not contain the address of the persons to whom commission has been paid, mode of payment or bill no Even during appeal proceedings, the appellant has not furnished any evidence to substantiate the above expenditure towards commission expenditure for sale of the above land. Therefore, disallowance of the above transfer expenses of Rs.6,50,000/- is upheld
5.2 The Assessing Officer has also disallowed indexed cost improvement of the land stating to have been incurred towards development expenses of the land. However, no evidence regarding the cost of improvement of land has been submitted by the assessee during assessment proceedings or appeal proceedings. Furthermore, as claimed by the assessee, that such expenses for development of the land have been paid to M/s Spark Realtors Pvt. Ltd.; enquiries by the Assessing Officer u/s 133(6) did not show any specific expenses incurred by it towards the development of the said land. In view of the above, the disallowance of indexed cost of improvement of the land disallowed by the Assessing Officer is upheld. In the absence of any evidence regarding expenditure incurred towards development of the land, it is held that the Assessing Officer has correctly disallowed deduction u/s 54F. In any case, the deduction u/s 54F is allowed only when the assessee purchases or constructs a residential house within the statutory time period from the date of transfer. In this case, expenditure on development of land cannot be said to be incurred for purchase or construction of a residential house. Therefore, it is held that the Assessing Officer has correctly disallowed the claim of exemption u/s 54F.
6. In the result, appeal is dismissed.”
6. The assessee, aggrieved with the order of the CIT(A), has carried the matter in appeal before us.
7. We have heard the Learned Authorized Representatives of both parties, perused the orders of the authorities below and the material available on record.
8. Shri B Satyanarayana Murthy, CA, Learned Authorized Representative (for short, “Ld. AR”) for the assessee, at the threshold of hearing of the appeal, assailed the declining of the assessee’s claim for deduction of commission expenses of Rs.6,50,000/-. The Ld. AR, to buttress his claim that the assessee had incurred commission expenditure on the transfer of the subject land and rightly claimed the same as deduction while computing the capital gains on the transfer of the respective lands, had taken us through the debit vouchers issued by the assessee, Pages 1-4 of the APB. However, the Ld. AR, when queried about the absence of complete details of the parties to whom the commission was paid, along with their respective addresses, failed to provide any reply. However, he submitted that the said expenses were incurred in respect of the commission paid to the aforementioned persons, as they had facilitated the transfer of the land in question.
9. Apropos the declining of the assessee’s claim for deduction of development expenditure, viz., leveling, rock-cutting and other expenses that were claimed to have been incurred in respect of the 8 Acres 03 Guntas of land at Haridaspally village, Keesara Mandal, Ranga Reddy District, the Ld. AR submitted that the
assessee, to render the subject land saleable, had initially incurred the aforesaid expenditure. However, as the assessee thereafter found it difficult to carry on the development work, he entrusted the development of the property to M/S. Spark Realtors Pvt Ltd for carrying out the development, on the basis of which it was agreed to share the developed area in the ratio of 60:40 between the realtor/developer and the assessee company, respectively. Elaborating further on his contention, the Ld. AR submitted that pursuant to the development agreement, the assessee had disclosed the capital gain on the transfer of the said land in the subject year, wherein he had considered the original cost and expenditure incurred towards leveling and rock cutting as the improvement cost for computing the capital gains. The Ld. AR submitted that as the expenditure was incurred during the years 2006 to 2010 towards land leveling, blasting, rock cutting, JCB charges, labour payment and other expenses and the books of account for the said period wherein the said expenditure was recorded were seized by the Income Tax Department pursuant to a survey operation that was conducted at the business premises of the assessee, therefore, the requisite details could not be furnished. However, it was stated that the balance sheet of the assessee for the subject year, which revealed the year-wise land leveling and other expenses incurred, was filed before the AO.
10. Coming to another facet of the case, the Ld. AR submitted that the assessee had filed his original return of income on 30/12/2016, wherein he had, inter alia, disclosed a business loss of Rs. (-)5,42,616/-, which thereafter was processed by the CPC, Bengaluru under section 143(1) of the Act, dated 22/07/2017, Pages 107-112 of APB. Elaborating on his contention, the Ld. AR submitted that thereafter, the assessee had filed a revised return of income for the subject year on 31/03/2017, vide e-filing acknowledgment No.736255920310317, wherein, inadvertently, the income under the head ‘business or profession’ was wrongly disclosed at Rs.1,06,02,100/-, Pages 13-19, Page-41 of APB. The Ld. AR submitted that a serious infirmity that had crept in while computing the revised income of the assessee was that latter had wrongly taken the “net profit” as disclosed by his trading, profit and loss account for the year ending 31/03/2016 at Rs.92,39,367/-, which included incomes under the other heads of income, viz., (i) sale of fixed assets (six properties); (ii) salary income (from two concerns); and (iii) rental income. The Ld. AR submitted that thought the assessee while computing the income (revised) had separately considered the aforesaid incomes, viz., (i) capital gains on sale of lands; (ii) salary incomes; and (iii) rental income under the respective heads of income, but inadvertently had failed to exclude the same from the net profit as was disclosed in his profit and loss account for the subject year. The Ld. AR, to buttress his aforesaid contention, had taken us through the trading, profit and loss account for the year ending 31/03/2016, Page 21-22 of APB, computation of income (revised), Page 13-19 of APB and the copy of the revised return of income, Page 41 of APB. The Ld. AR submitted that though the assessee had raised the aforesaid issue before the CIT(A), he had failed to deal with and adjudicate the same.
11. Per contra, Ms. Uppaluri Meena, Learned Senior Departmental Representative (for short, “Ld. Sr-DR”) relied on the orders of the authorities below.
12. We have given thoughtful consideration to the contentions advanced by the Learned Authorized Representatives of both parties and the material available on record.
13. Apropos the claim of the assessee that the AO had erred in declining his claim for deduction of transfer expenses, viz., (i) Tellapur Land: Rs.2,50,000/-; (ii) Medipally Land: Rs.2,00,000/-; and (iii) Miyapur Land: Rs.2,00,000/-, we find that it has been the claim of the assessee that the aforesaid expenses were incurred towards commission to certain persons, viz., (i) commission paid in cash to Mr. Srinivas Reddy on 23/08/2015: Rs.2,00,000/-; (ii) commission paid in cash for two flats, i.e., Flat Nos.303 and 305 on 31/03/2016: Rs.2,00,000/-; (iii) commission paid in cash to Mr. Mohan Reddy on 27/11/2015: Rs.2,00,000/-; and (iv) commission paid in cash to Mr. Naresh Reddy on 23/087/2015: Rs.50,000/-. However, we find that the same was disallowed by the AO on the ground that the said claim was supported by self-made debit vouchers that did not bear the addresses of the persons to whom the commission was stated to have been paid, the modes of payment, or the bill numbers. We find that the assessee had neither before the authorities below nor before us placed on record any documentary evidence which would irrefutably evidence the incurring of the aforesaid expenditure. In fact, we find that the assessee, to date, has not been able to provide the addresses of the aforementioned persons to whom the alleged commission is stated to have been paid.
14. We have given thoughtful consideration and are of firm conviction that in the absence of the requisite details, the aforesaid unsubstantiated claim of the assessee of having incurred the commission expenses is nothing better than a claim raised in thin air which, in the absence of supporting documentary evidence, cannot be accepted. We thus, finding no infirmity in the view taken by the authorities below who had rightly declined the assessee’s claim for deduction of commission expenses of Rs.6.50 lakhs, uphold the same.
15. Apropos the assessee’s claim for deduction of development expenditure, viz., leveling, rock cutting and other expenses claimed to have been incurred in respect of 8 Acres 03 Guntas of land at Haridaspally Village, Keesara Mandal, Ranga Reddy District, we find on a perusal of the record that the assessee had failed to file any evidence either before the authorities below or in the course of the proceedings before us which would evidence the incurring of the said expenditure towards development of the subject land. Ostensibly, it is the claim of the assessee that he had initially on his own incurred expenses for carrying out land leveling, rock cutting, etc., for development of the aforesaid land, but had failed to place on record any material which would support the same. Although, it is the claim of the assessee that the aforesaid development expenditure towards land leveling, blasting, rock cutting, JCB charges, labour payment and other expenses were incurred during the years 2006 to 2010, and the same which was duly recorded in the books of account for the said year, but as he was subjected to survey proceedings and the aforesaid books of account had been seized by the Income Tax Department, therefore, the requisite details supporting his aforesaid claim of expenses could not be filed. We find that the AO had not summarily rejected the aforesaid claim of the assessee and had rather directed him to produce the copy of the impounding order which would evidence that the documents/books of account for the aforementioned years were seized by the Income Tax Department. However, as the assessee had miserably failed to furnish any material which would support his claim that the books of account/documents supporting his aforesaid claim for expenses were seized by the Income Tax Department and lying with them, the AO had declined the said claim for deduction. Apart from that, the claim of the assessee that he had subsequently given the subject land for development to M/s. Spark Realtors Private Limited also did not find favor with the AO. As is discernible from the record, the AO had issued notice under section 133(6) of the Act to M/s. Spark Realtors Private Limited and had called for the development agreement entered into by the assessee, but the details provided by the said developer did not reveal any specific amount of the expenditure spent towards development of the assessee’s land.
16. We have given thoughtful consideration and are of the view that as the assessee had failed to substantiate his claim for deduction of the improvement expenses which are claimed to have been incurred by him regarding the subject land, therefore, no infirmity arises from the orders of the authorities below who had rightly declined the same.
17. Apropos the assessee’s claim for deduction under section 54 of the Act, we find that as the assessee had failed to substantiate his said claim for deduction based on any supporting documentary evidence, the authorities below had rightly declined the same.
18. Coming to the Ld. AR’s contention that the CIT(A) had erred in not considering the claim of the assessee wherein he had assailed the adoption of the business income at Rs.1,06,02,100/- as against loss of Rs. (-)5,42,616/- declared in his original return of income, we prima facie find substance in the same. As observed by us hereinabove, the assessee filed the original return of income on 30/12/2016, wherein he disclosed a business loss of Rs. (-)5,42,616/-. Thereafter, the assessee revised his return of income on 31/03/2017, wherein he disclosed his business income at Rs. 1,06,02,100/-. As observed by us hereinabove, there is substance in the Ld. AR’s contention that the assessee in his revised return of income had inadvertently failed to exclude certain incomes which were separately offered to tax in the return of income under the other heads of income, viz., (i) sale proceeds of lands; (ii) salary income; and (iii) rental income, as a result whereof the “net profit” of Rs.92,29,367/- was wrongly taken as a basis for computing the business income of the assessee at Rs.1,06,02,100/-, Page 14 of APB. In our view, the aforesaid aspect has not been adjudicated by the CIT(A) despite the same having been raised by the assessee before him. We thus are of the view that the aforesaid aspect requires to be revisited and, therefore, set aside the matter to the file of the AO with a direction to verify the aforesaid claim of the assessee and reframe the assessment considering the said issue.
19, In the result, the appeal filed by the assessee is partly allowed for statistical purposes.
Order pronounced in the open court on purposes. 21st August, 2026.
