Case Law Details
Shalini Rajput Vs CIT (ITAT Delhi)
The Income Tax Appellate Tribunal (ITAT), Delhi, allowed the assessee’s appeal after holding that the Income Tax Department could not adopt contradictory positions on identical Long-Term Capital Loss (LTCL) claims arising from the sale of the same jointly owned property. The Tribunal found that the assessee’s LTCL computation was supported by documentary evidence and that an identical claim made by the co-owner had already been accepted in scrutiny proceedings.
The appeal related to Assessment Year 2022-23. The assessee had filed a return declaring income of ₹5,60,210. During scrutiny, the Assessing Officer (AO) examined the claim of Long-Term Capital Loss of ₹2,94,41,694 arising from the sale of a jointly owned property in DLF Phase-V, Gurugram. The property had been purchased jointly with the assessee’s husband for ₹3,81,81,134, with the consideration paid in instalments during Financial Years 2010-11 to 2012-13. The property was sold on 28 June 2021 for ₹4.80 crore, and the assessee disclosed her 50% share of ₹2.40 crore while claiming indexed cost of acquisition and resulting LTCL. The AO disallowed the claimed cost of improvement of ₹3,87,12,877 and recomputed the transaction as Long-Term Capital Gain (LTCG) of ₹92,71,183. The Commissioner of Income Tax (Appeals) upheld the assessment.
Before the Tribunal, the assessee submitted that the property was acquired through instalment payments over three financial years and that loans from Citibank and another lender were used to finance the acquisition. Interest paid on these borrowings had been capitalised as part of the cost of acquisition. The assessee explained that, due to limitations in the income tax return utility, indexed acquisition costs and indexed interest were reflected under the “construction cost” column, although they represented acquisition costs. Documentary evidence including the conveyance deed, sale deed, payment schedules, ledger accounts, interest certificates and computation statements was furnished to support the claim. The assessee also pointed out that her husband, a co-owner in the same transaction, had claimed identical indexed costs and interest expenditure based on the same documents and methodology, and that the Department had accepted his claim after scrutiny.
After considering the submissions and the material on record, the Tribunal observed that the Department had accepted the husband’s LTCL computation under identical facts and circumstances. It held that the Department could not take contradictory views in respect of the same property where both assessments had been completed under scrutiny. The Tribunal further held that the assessee’s computation of LTCL was supported by the requisite documentary evidence. Accordingly, it found that the AO was not justified in computing LTCG and deleting the LTCL claim. The addition was deleted, and the AO was directed to allow the assessee’s claim of LTCL amounting to ₹2,94,41,694. The appeal was consequently allowed.
FULL TEXT OF THE ORDER OF ITAT DELHI
This appeal by the assessee is directed against the order dated 13.09.2025 of the National Faceless Appeal Centre (NFAC), Delhi, [hereinafter referred to as the ‘Ld. CIT(A)] arising out of the Assessment Order dated 19.03.2024 passed under section 143(3) r.w.s. 144B of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) by the Assessment Unit, Delhi (hereinafter referred to as the ‘AO’) pertaining to Assessment Year (A.Y.) 2022-23.
2. Grounds of appeal filed by the Assessee are reproduced as under:
“1. That the Ld. CIT(A) grossly erred in upholding the disallowance of the Appellant’s claim of indexed cost of acquisition and indexed cost of improvement amounting to Rs. 3,87,12,877/-, ignoring material evidence, sale deed, payment records, loan documents, cost sheets and submissions placed on record
2. That the findings of the Ld. CIT(A) are based on misreading of records and on presumption rather than analysis of evidence, thereby rendering the order perverse.
3. The Ld. CIT(A) has exceeded the scope of appellate jurisdiction under Section 251 by introducing new grounds of disallowance-such as questioning the Appellant’s ownership share, the source of payments, and the evidentiary sufficiency of interest payments, which were never the basis of the assessment order and were not part of the AO’s reasoning. It is settled law that the first appellate authority cannot travel beyond issues adjudicated by the AO unless enhancement notice is issued. No such notice was issued; hence the findings are void.
4. That the Ld. CIT(A) failed to appreciate that the property was acquired in instalments spread over FY 2010-11 to FY 2012-13, and hence indexation was mandatorily allowable from the respective years of payment, as held in several binding precedents. The Ld. CIT(A) filed to note the submission of the Appellant that the cost of acquisition was spread across 3 years. However, only the indexed cost of FY 2010-11 was mentioned as cost of acquisition in the return filed by the Appellant, due to the limitations on the portal wherein the Assessee can mention the category of cost of acquisition only once. Hence, the cost spread across 2011-12 as well as 2012-13 is the cost of acquisition itself, as is evident from the documentary placed on record during the course of the adjudication proceedings like sale deed, etc. Therefore, the disallowance of the indexed cost of acquisition to the tune of Rs. 2,38,01,278 is contrary to law.
5. That the Ld. CIT(A) erred in law upholding the AO’s in inconsistent and arbitrary approach of granting indexation only for FY 2010-11 while denying indexation for FYs 2011-12 and 2012-13, despite identical evidence and submissions, thereby rendering the finding perverse and unsustainable.
6. That the findings of the Ld. Rs. 0 CIT(A) in para 5.9 are wholly perverse, being based on assumptions and conjectures. rather than evidence. The Ld. CIT(A) has incorrectly alleged that the Appellant’s 50% share in the property “has not been established”, despite the fact that the registered conveyance deed clearly records the names of the Appellant and her spouse as joint purchasers without any specification of unequal shares. It is a settled legal position that where a conveyance deed is silent on the ratio of co-ownership, the presumption is of equal (50:50) ownership. Moreover, the issue of ownership share was never disputed or questioned by the Ld. AO at any stage of assessment proceedings; hence, the Ld. CIT(A), by raising a new issue and making adverse observations on a point not forming part of the assessment order, has travelled beyond the scope of appellate jurisdiction, contrary to the mandate of Section 251. The finding is therefore ex facie erroneous, jurisdictionally unsustainable, and liable to be expunged.
7. That the Ld. CIT(A) has further erred in observing that it has “not been established that payments were made by the Appellant,” which is a wholly irrelevant and legally misconceived consideration for the purpose of Section 48. The computation of capital gains under Section 48 is linked to the ownership of the capital asset and the corresponding share in the sale consideration, not to the source from which the purchase consideration was paid. Even assuming (without admitting) that the husband had made a larger portion or the entirety of the payments, the Appellant, being a co-owner under a registered conveyance deed, is legally entitled to her 50% share the property and, consequently, to the deduction of her proportionate indexed of acquisition improvement. It is well-settled in cost and that the cost of acquisition follows the ownership of the asset, and not the source of funds; hence, the observation of the Ld. CIT(A) is not only factually irrelevant but reflects a fundamental misapplication of Section 48, rendering the finding bad in law and liable to be deleted.
8. That the Ld. CIT(A) erred in upholding the AO’s disallowance of interest paid on borrowed capital as part of the cost of acquisition under Section 48, despite the fact that the statutory bar (Proviso to Section 48 inserted by Finance Act 2023) is expressly prospective from 01.04.2024 and cannot apply to AY 2022-23
9. That the Ld. CIT(A) completely ignored binding judicial precedents which categorically hold that interest is allowable as cost of acquisition for years prior to AY 2024-25.
10. That the impugned order erroneously relies on the decision of Maithreyi Pai (1985 Karnataka HC), despite the clarification provided by the prospective amendment made vide Finance Act 2023.
11. The Ld. CIT(A) has erred in law and on facts in holding that the Appellant “has not established” that interest of Rs. 94,81,779/-WILS incurred by her for acquisition of the property. The finding is contrary to the documentary evidence on record, including the Citibank Interest Certificate which clearly records the Appellant as a co-borrower/guarantor. However, the Ld. CIT(A) has presumed the contrary without any basis.
12. That the Ld. CIT(A) has erred in Para 5.11 in concluding that the interest cost incurred from FY 2013-14 to FY 2021-22 cannot form part of the “cost of acquisition” under Section 48, despite the fact that such interest pertains to the very loan taken for acquiring the capital asset.
13. The Appellant craves leave to add, alter, amend and/or rescind any of the grounds above at the time of or before the hearing”
3. Although multiple grounds have been raised by the assessee, sole substantive issue pertains of disallowance of Long-Term Capital Loss (LTCL) on sale of property.
4. Brief facts of the case are that the assessee filed her return for A.Y. 2022-23 declaring income of Rs. 5,60,210/-. The case was selected for scrutiny. During the course of scrutiny, the AO examined the claim of Long-Term Capital Loss of Rs. 294,41,694/- on sale of property shown by the assessee. The assessee had purchased a property in DLF Phase-V, Gurugram, jointly with her husband for a consideration of Rs. 3,81,81,134/-, which was paid in instalments during F.Ys. 2010-11 to 201213. The property was subsequently sold on 28.06.2021 for total consideration of Rs. 4,80,00,000/- in which assessee’s share of Rs. 2,40,00,000/- was shown in the return against which, after reducing indexed cost of acquisition, LTCL of Rs. 2,94,41,694/-was claimed. The AO proposed to disallow cost of improvement of Rs. 3,87,12,877/- and reworked the Long -Term Capital Gain (LTCG) at Rs. 92,71,183/-
4.1 Aggrieved, the assessee preferred an appeal before the CIT(A), who dismissed the same vide order dated 13.09.2025. Further aggrieved, the assessee has filed appeal before the Tribunal.
5. Before us, the Ld. Counsel for the assessee has submitted the following detailed submission alongwith supporting evidences:
“1. The Appellant, jointly with her husband, purchased Property No. BLE-271 along with Parking Nos. PE1121 to PE1123 situated in The Belaire, DLF Phase-V, Gurugram for a total basic sale consideration of Rs. 3,81,81,134/- (exclusive of taxes and other charges). The consideration was paid in instalments during Financial Years 2010-11 to 2012-13 and the conveyance deed in respect thereof was executed on 15.06.2015. [Conveyanece Deed: Paperbook 1: Pg 54-78, Payment Schedule of basic cost- Paperbook 1 Pg 74. Ledger -Paperbook II Pg 2)
2. For acquisition of the aforesaid property, the Appellant and her husband had availed loans from Citibank and from Mr. K L Gulati. Interest was paid on such borrowings from year to year and was capitalised as part of the cost of acquisition of the property. [Interest Certificate: Paperbook II Page 83. Ledger of KL Gulati: Paperbook II Page 83]
3. The aforesaid property was sold vide registered sale deed dated 28.06.2021 for a total consideration of Rs. 4,80,00,000/-. Being a co-owner holding 50% share in the property, the Appellant offered her share of consideration amounting to Rs. 2,40,00,000/- while computing capital gains for AY 2022-23.[Sale Deed: Paperbook Page 22-39]
4 In the return of income filed for AY 2022-23, the Appellant computed Long-Term Capital Loss of Rs. 2,94,41,694/- after claiming indexed cost of acquisition comprising
a. instalments paid towards acquisition of the property during FYs 2010-11 to 2012-13 and
b. interest paid on loans utilised for acquisition of the property.
5. Owing to limitations in the return utility, the amounts representing indexed cost of acquisition paid over different financial years and indexed cost of interest on loans were reflected under the column captioned “construction cost”. However, the said amounts represented instalments paid towards acquisition of the property and not expenditure incurred on construction. The complete breakup of the payments and corresponding indexation was furnished during assessment proceedings. (Brealdown of payments: Paperbook II: Page 1-2, Appellant’s computation. Pg. 10. Husband’s Computation submitted during hearing]
6. The Appellant furnished all relevant documentary evidence including the conveyance deed, ledger accounts, payment schedules, interest certificates and computation explaining the indexed cost claimed under Section 48 of the Act.
7. The Appellant’s husband, being a co-owner of the same property and a party to the same transaction of purchase and sale, claimed identical indexed cost of acquisition and interest expenditure based upon the same set of documents and computation methodology. The claim was accepted by the Assessing Officer in his case. [Assessment Order of Mr. Alok Rajput, the husband, submitted during hearing]
8. However, despite identical facts, identical evidence and identical computation, the Assessing Officer disallowed the Appellant’s claim and the learned CIT(A) confirmed the disallowance.
9. It is submitted that the indexed cost of acquisition claimed by the Appellant is fully supported by documentary evidence and is allowable under Section 48 of the Act. Further, the amendment restricting inclusion of interest expenditure in the cost of acquisition is prospective in nature and has no application to AY 2022-23. This view is supported by the decision of various benches of the Tribunal in the following cases:
a. ACIT, Circle 20(2), New Delhi v. Smt. Sadhna Aggarwal [ITA 6620/DEL/2019]
b. DCIT 3 (2) (1), Mumbai v. Mr. Neville Tuli [ITA 3203/MUM/2023
C. Bani Briti Banerjee v. CIT(A), Kolkata [ITA 520/KOL/2023]”
5.1 A copy of the assessment order of Sh. Alok Rai Rajput, husband of the assessee, has also been placed before us to demonstrate that under identical facts and circumstances, computation of LTCL in his hands has been accepted after scrutiny. 5.2 Ld. Sr. DR, on the other hand, strongly relied on the orders of the lower authorities.
6. We have heard the rival submissions and perused the material available on record. We note that under identical facts and circumstances, the computation of LTCL in the hands of the assessee’s husband has been accepted in scrutiny by the Department. We are of the considered view that the Department cannot take contradictory views in the identical set of facts when the issue pertains to sale of the same property and both assessments have been completed under scrutiny. On merits also, we note that the computation of LTCL is supported by requisite documentary evidences and hence the addition on account of long terms capital gain computed by the AO is not justified and is hereby deleted. The AO is directed to allow the claim of LTCL of Rs. 2,94,41,694/-.
7. In the result, appeal of the assessee is allowed.
Order pronounced in the open court on 23.06.2026.
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