Sold property but missed expense deductions in original ITR? Here’s what Mumbai ITAT ruling says
If you have sold a property and did not claim certain eligible expenses in your original income tax return, can you claim them later? A recent Mumbai ITAT ruling has answered this question in favour of a taxpayer, allowing him to claim genuine expenses that were not included in his original return.
The case, reported by TaxGuru, concerns Mahendra Pratap Singh and assessment year (AY) 2020-21, relating to financial year (FY) 2019-20. Singh had sold four residential flats in Vasudev Sky High and sought to reduce the capital gains from those sales by including expenses such as brokerage, improvement costs, and other charges.
What did Singh claim?
Singh claimed deductions totalling ₹37.16 lakh in relation to the four flats. These included brokerage paid on purchase and sale, improvement costs, and other charges.
The claims were not made in his original income tax return or in the return filed in response to the notice issued under Section 148.
However, after the assessment was reopened, Singh submitted a revised computation during the assessment proceedings and furnished documents supporting the expenses.
His revised computation showed a short-term capital loss of ₹1.25 lakh on Flat No. 1004/3, while the other three flats resulted in capital gains of ₹2.11 lakh, ₹3.86 lakh and ₹11.01 lakh, respectively.
Why did the AO reject the expenses?
The Assessing Officer (AO) rejected the expense claims and assessed the capital gains at higher amounts.
The AO cited two main reasons: the claims had not been made in the original or a revised return, and some brokerage payments were made after the respective property transactions.
The CIT(A), National Faceless Appeal Centre (NFAC), dismissed Singh’s appeal ex parte on 13 December 2025. Singh then approached the Mumbai ITAT.
Why did the ITAT allow the claims?
The Tribunal noted that the entire expenditure of ₹37.16 lakh had been paid through banking channels and that neither the AO nor the CIT(A) had disputed this fact.
It also rejected the AO’s reasoning regarding the timing of brokerage payments. The Tribunal observed that brokerage becomes payable after completion of the transaction and held that payment after the transaction, by itself, was not sufficient to reject the claim.
The Tribunal further noted that Singh had furnished supporting documents during the assessment proceedings. The AO had examined the documents and issued notices under Section 133(6) to the respective parties to verify the payments.
Can a taxpayer make a fresh claim later?
The AO had relied on the Supreme Court’s ruling in Goetze (India) Ltd. v. CIT, which restricts an assessing officer from entertaining a fresh claim other than through a revised return.
However, the ITAT relied on the Bombay High Court’s ruling in CIT v. Pruthvi Brokers and Shareholders, which distinguished the AO’s limited power from the wider powers of appellate authorities to entertain additional claims.
The ITAT held that legitimate deductions could be considered even if claimed for the first time. In Singh’s case, the Tribunal also noted that the claims had already been raised through a revised computation during assessment proceedings and that the supporting documents had been examined.
The ITAT therefore directed the AO to delete the additions and allowed Singh’s appeal. The order was pronounced on 3 August 2026.
Disclaimer: This is only for informational and educational purposes. Please consult a qualified tax expert for the latest tax laws and regulations.
