Milind Anand Karkhanis vs ITO, Ward 1(5)

This appeal by the assessee is directed against the order of the Commissioner of Income Tax (Appeals) Addl/JCIT(Appeals-1), Coimbatore [in short ‘the CIT(A)’] dated 27.3.2026, for assessment year 2012-13. 2. Shri Puneet Sachdev, appearing on behalf of assessee, submitted that the the assessee had acquired 1/3^rd share in ancestral property during the period relevant to assessment year under appeal. Thereafter, the said property was sold at a total consideration of Rs. 34.50 lacs. The assessee got 1/3^rd share in the said sale consideration. Admittedly, the assessee had not disclosed capital gain on sale of ancestral property in the return of income. During assessment proceedings u/s. 147 of the Act, relevant documents were furnished by the assessee before the Assessing Officer (AO) to substantiate that the property sold is ancestral property and the assessee is having 1/3^rd share in the said property. The AO without giving benefit of indexation on the cost of acquisition made addition of Rs. 11.50 lacs treating entire sales proceeds (to the extent of assessee’s share) as ‘Income from other Sources’ instead of ‘Capital Gains’. The assessee carried the issue in appeal before the CIT(A). The CIT(A) in para no. 5.3 at page 15 of the impugned order accepts that the income from sale of immovable property is chargeable u/s. 45(1) under the head ‘Capital Gains’, and the AO was required to compute capital gain in accordance with provisions of sections 48, 49 & 55 of the Act, but finally dismissed appeal of the assessee. The ld. Counsel prayed for treating the said receipt of Rs. 11.50 lacs under the head ‘Capital Gains’ and also to grant benefit of indexation.

Per contra, Shri Manoj Kumar representing the department supported the impugned order and prayed for dismissing the assessee’s appeal.

Both sides heard. Orders of the lower authorities examined. Facts narrated by the assessee’s Counsel regarding acquisition of ancestral immovable property and the part of sale consideration received on sale of said immovable property by the assessee, during the relevant period are not in dispute. The limited issue for consideration is, Whether the receipts on sale of immovable property are to be taxed under the head ‘Capital Gains’ or ‘Income from Other Sources’. It is undisputed that the receipts received by the assessee are from the sale of immovable property. Therefore, the aforesaid receipts are taxable under the head ‘Capital Gains’. The solitary reason given by the CITA() to reject submissions of the assessee is that the assessee has failed to substantiate the claim of cost of acquisition and cost of improvement. The valuation report furnished by the assessee was rejected holding it to be belated. The reasons given by CIT(A) to uphold addition made by the AO and to reject valuation report are unsustainable. Considering entire facts, I deem it fit to restore this issue back to the file of the AO for denovo adjudication after considering the documents furnished by the assessee. The AO before passing fresh assessment order shall grant reasonable opportunity of making submissions to the assessee, in accordance with law. The assessee if, so desire, may furnish any other document to substantiate his claim.

In the result, impugned order is set aside and appeal of the assessee is allowed for statistical purpose.