In a recent ruling, the Income Tax Appellate Tribunal (ITAT), Hyderabad Bench, remanded the matter back to the Assessing Officer (AO) after observing that the AO had disallowed the claim for the indexed cost of the land on the assumption that the land cost was already included in the construction expenses.

However, the Tribunal pointed out that the balance sheet and asset records seemed to show the land cost separately. Since this is not properly checked, the tribunal directs AO to re - verify the matters.

The assessee M/s. Balaji Finance, Gadwalhad sold a property for ₹2.25 crore and claimed deductions towards the indexed cost of acquisition of land, and the cost of construction incurred over various years by referring to the balance sheet and asset schedules, that the cost of land was shown separately and was not included in the construction cost

The assessee, M/s. Balaji Finance, Gadwal, explained that the 89-day delay in filing the present appeal occurred due to serious health issues and also mentioned the merits related to the computation of long-term capital gains arising from the sale of an immovable property.

The respondent, IncomeTax Officer (ITO), opposed the condonation, arguing that no sufficient cause was shown; also, took the view that the cost of land was already included in the construction cost shown by the assessee. On this assumption, the AO disallowed the indexed cost of acquisition of land and added the amount to the taxable long-term capital gains.

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The CIT(A) upheld this view. After considering the submissions and evidence, the Tribunal observed that the delay was supported by medical records and appeared bona fide. Emphasising that substantial justice should prevail over technicalities, the Bench condoned the delay and admitted the appeal for adjudication on merits.

The Tribunal observed that the documents placed on record prima facie indicated that the cost of land was separately reflected and not included in the construction cost, as assumed by the AO. However, the Bench noted that this factual aspect required proper verification from the underlying records.

The bench, Mr Vijat Pal Rao (vice president), Mr Madhusudan Sawdia(account member), set aside the issue and restored the matter to the file of the Assessing Officer with a direction to verify whether the cost of land was actually included in the construction cost.

The AO was directed that if, upon verification, the cost of land was found to be separate, the indexed cost of acquisition must be allowed while computing long-term capital gains, in accordance with law.

Accordingly, the ITAT allowed the appeal for statistical purposes, remanding the matter back to the Assessing Officer for fresh adjudication.

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