Sowmya Chalasani Vs ITO (ITAT Hyderabad)
Cost of Improvement Cannot Be Denied for Bona Fide Evidence Error: ITAT Hyderabad Remands Capital Gains Computation
The Hyderabad Bench of the ITAT allowed the assessee’s appeal for AY 2018-19 for statistical purposes, holding that the disallowance of cost of improvement while computing long-term capital gains was unsustainable where the assessee had committed a bona fide mistake in filing an incorrect valuation report.
The Assessing Officer computed LTCG of ₹8.39 crore by rejecting the assessee’s claim of cost of improvement (indexed) on the ground that the valuation report filed pertained to a different, adjacent property. The CIT(A) confirmed the addition ex-parte due to non-appearance.
Before the Tribunal, the assessee explained that both properties were situated side-by-side, leading to inadvertent filing of a wrong valuation report, and filed a Rule 29 application with correct valuation report, purchase deed, and bills evidencing improvement expenditure. The ITAT held that when rejection was based on a curable evidentiary defect, the correct material must be examined to determine the true capital gains.
Accordingly, the ITAT set aside the CIT(A)’s order and remanded the matter for fresh adjudication, directing consideration of the additional evidence and granting a reasonable opportunity of hearing to the assessee.
FULL TEXT OF THE ORDER OF ITAT HYDERABAD
