The Bangalore Bench of the Income Tax Appellate Tribunal has restored the cost of acquisition verification for two properties and directed Section 234A interest recomputation where the return was filed under Section 148. The case involved GPFE Housing Co-operative Society Ltd. appealing against the NFAC order dated 09.02.2026 for assessment year 2015-16. The surviving dispute concerned the computation of long-term capital gains on two properties sold during FY 2014-15 for aggregate consideration of ₹2.52 crore. The assessee had claimed the receipts as exempt capital receipts, but the Assessing Officer rejected the claim and treated the entire sale consideration as long-term capital gain after adopting the cost of acquisition at NIL because the assessee could not furnish old acquisition records. The Tribunal held that the cost of acquisition cannot be mechanically taken at NIL merely for lack of old records, as the properties were identifiable and the sale deeds themselves showed their old acquisition or release in favour of the society.
The first property, sold for ₹1.78 crore, was situated at Chikkabettahalli/Vidyaranyapura and connected with sites released by the Bangalore Development Authority in 1977. The second property, sold for ₹74 lakh, was recorded in the sale deed as having been purchased by the society on 17.02.1994. The assessee submitted that the two properties were identifiable old immovable properties and that the inability to produce complete historical records could not establish that their cost was NIL. The Tribunal noted that the assessee's Senior Authorised Representative supported the CIT(A)'s order, while the learned Senior Departmental Representative relied on the assessment order but admitted that the impugned amount had neither been debited to the Profit & Loss Account nor claimed as expenditure. The Tribunal observed that proceedings concerning non-deduction of tax at source were separate from proceedings under Sections 143(3) or 144.
The Tribunal considered the computation of capital gains under Sections 45, 48 and 55 of the Act, which provide for deduction of cost of acquisition, cost of improvement and expenditure incurred wholly and exclusively in connection with transfer while computing capital gains. The learned Senior Departmental Representative supported the AO's position that the assessee failed to furnish supporting evidence, but accepted that additional material could be examined. The assessee's Senior Authorised Representative argued that the AO was duty bound to compute the gain in the manner prescribed under the Act, and that the entire sale consideration cannot be treated as capital gain unless the law permits such computation. The Tribunal held that reverse indexation method can be one of the possible methods for reasonable estimation where direct evidence of fair market value as on the relevant historical date is not available, but emphasized that the correctness of the base guidance value, locality, area, nature of property, applicable Cost Inflation Index, percentage enhancement over guidance value, and arithmetic working must be verified by the AO.
The Tribunal admitted an additional ground challenging interest under Section 234A, which the assessee contended could not be charged for the intervening period during which it had no statutory mechanism to file a valid return. The assessee filed its return for the first time on 26.04.2022 in response to notice under Section 148 dated 29.03.2022, after the statutory period under Section 139, including Section 139(4), had expired. The Tribunal relied on the principle lex non cogit ad impossibilia and cited the Mumbai Bench decision in Ms. Priti Pithawala v. Income-tax Officer 129 Taxman 79 (Mumbai), where the Tribunal held that the assessee could not be made liable to pay interest for the period during which it was not possible to file a valid return until issuance of notice u/s 148 of the Act. The Tribunal directed the AO to recompute Section 234A interest by excluding the period during which the assessee could not have furnished a valid return, and granted consequential relief to the assessee.
