The Mumbai Bench of Income Tax Appellate Tribunal ( ITAT ) remanded matter concerning income from long-term capital gain ( LTCG ) back to the Assessing officer for verification after the commissioner of Income Tax (Appeals) admitted new evidence without complying with Section 46A of the Income Tax Rules, 1962.
Sangeeta Ganpat Sawant, a doctor by profession, declared long-term capital gains (LTCG) on the sale of immovable property during the assessment year 2018-19. The assessee claimed certain costs of improvement for the property, including amounts related to “CIDCO” (Rs. 5,57,577), “EXTENSION” (Rs. 1,56,122), and “CISCO” (Rs. 1,77,176).
Get a Handbook on TDS Including TCS as Amended up to Finance Act 2024, Click Here
The Assessing Officer (AO) disallowed a portion of these claimed costs, specifically Rs.9,54,008 because the assessee failed to provide documentary evidence to substantiate the improvement expenses.
The assessee appealed before the Commissioner of Income Tax (Appeals) [CIT(A)] who accepted additional evidence from the assessee during the appellate stage and deleted some of the AO’s disallowances without obtaining a remand report from the AO, particularly for the costs under “CIDCO” and “EXTENSION.”
Aggrieved, the Revenue challenged the CIT(A)’s decision before the Income Tax Appellate Tribunal (ITAT), arguing that the CIT(A) improperly accepted additional evidence from the assessee without following the procedure mandated under Rule 46A.
Get a Handbook on TDS Including TCS as Amended up to Finance Act 2024, Click Here
On the other hand, the assessee argued that the improvement costs were genuine and properly supported by the additional documents submitted at the appellate stage. These documents included receipts and bank statements, which were provided to substantiate the claimed expenses for “CIDCO” and “EXTENSION.”
The two-member bench comprising Amarjit Singh (Accountant Member) and Sandeep Singh Karhail (Judicial Member) noted that the CIT(A) had accepted the additional evidence provided by the assessee without following the required procedures under Rule 46A. Specifically, the CIT(A) did not allow the AO to examine or verify the new evidence through a remand report.
The Tribunal observed that while the CIT(A) had rightly considered the evidence submitted for the “CIDCO” expenses, the failure to request a remand report from the AO created a procedural error.
Get a Handbook on TDS Including TCS as Amended up to Finance Act 2024, Click Here
The Tribunal also recognized that the costs related to “EXTENSION” required further verification, as the AO had not had the chance to review the additional evidence submitted by the assessee. Therefore, the tribunal upheld CIT(A)’s decision regarding the expenses related to “CIDCO”, as the evidence provided was sufficient to substantiate the claim.
However, the Tribunal remanded the issue of the “EXTENSION” expenses back to the AO for further verification. The AO was directed to examine the evidence related to the “EXTENSION” costs and make a fresh determination based on this verification.
Subscribe Taxscan Premium to view the JudgmentSupport our journalism by subscribing to Taxscan premium. Follow us on Telegram for quick updates