Failure to Consider Purchase Cost & Source of Funds: ITAT Remands ₹30 Lakh Property Sale Gain and ₹10.83 Lakh Share Investment Additions for Fresh Review [Read Order]

In a recent ruling, the Hyderabad Bench of the Income Tax Appellate Tribunal (ITAT) has remanded the additions relating to property sale gains and share investments, holding that the Assessing Officer (AO) failed to consider the purchase cost and the source of funds before making the assessment.

The appeal was filed by appellant Shri Narender Rangineni against the order of the Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi, for the Assessment Year 2020‑21.

The assessee contended that the AO had treated the entire sale consideration of ₹30 lakh from a property transaction as short‑term capital gain without deducting the cost of acquisition or improvement. He also argued that the addition of ₹10.83 lakh as unexplained investment in shares under Section 69 of the Income Tax Act was unjustified, as the funds originated from the same property sale.

The Tribunal noted that the assessment was framed ex parte under Sections 147 r.w.s. 144, based solely on information from the Sub‑Registrar’s Office, and that the CIT(A) had dismissed the appeal for non‑prosecution without examining the merits. Observing that the correct income must be determined only after considering the purchase and improvement costs, the Bench directed the AO to re‑adjudicate the matter after verifying the documents, including sale and purchase deeds filed by the assessee.

Regarding the share investment addition, the Tribunal held that the source of funds should have been examined in light of the property sale transaction. It also remanded this issue for fresh consideration.

The Tribunal observed that “in the facts and circumstances of the case and in view of our order on the issue of assessment of short-term capital gains is already set aside to the record of the A.O, this issue is also set aside to the record of the A.O for fresh adjudication after considering the explanation and relevant documentary evidence to be filed by the assessee. Needless to say, the assessee shall be given an opportunity before passing the fresh order.”

The Bench comprising Vice‑President Vijay Pal Rao and Accountant Member Madhusudan Sawdia concluded that the appeal was allowed for statistical purposes, granting the assessee another opportunity to present evidence before a fresh order is passed.

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