3 weeks ago
Mumbai ITAT Allows Taxpayer's Missed Expense Deduction Claims
A man named Mahendra Pratap Singh sold four apartments in Mumbai.
When he filled out his tax form, he forgot to include some of the costs from the sale.
These costs included fees paid to his broker and money spent on fixing up the apartments.
Later, he tried to add those costs so he would not have to pay as much tax.
The tax office said he could not, because he did not write them in his first form.
A tax court called the ITAT said he could.
The court saw that he paid all the costs through a bank and had receipts.
It also said it is normal to pay a broker after the sale is finished.
So the court told the tax office to accept the costs and reduce his tax.
This shows that honest mistakes on tax forms can sometimes be fixed.
The Mumbai ITAT allowed taxpayer Mahendra Pratap Singh to claim ₹37.16 lakh in expense deductions that were not included in his original income tax return.
The deductions covered brokerage, improvement costs, and other charges related to the sale of four residential flats in Vasudev Sky High for assessment year 2020-21.
The Assessing Officer had rejected the claims, citing that they were not made in the original or a revised return and that some brokerage payments were made after the transactions.
The ITAT relied on the Bombay High Court's ruling in CIT v. Pruthvi Brokers and Shareholders, holding that legitimate deductions can be considered even when claimed for the first time.
The ITAT directed the AO to delete the additions after noting the expenses were paid through banking channels and supporting documents had been verified.
The revised computation showed a short-term capital loss of ₹1.25 lakh on Flat No. 1004/3 and capital gains of ₹2.11 lakh, ₹3.86 lakh, and ₹11.01 lakh on the other three flats.
- Who
- Taxpayer Mahendra Pratap Singh, the Assessing Officer, and the Mumbai Income Tax Appellate Tribunal (ITAT), with the CIT(A) at the National Faceless Appeal Centre dismissing the earlier appeal.
- What
- The ITAT allowed Singh to claim expense deductions of ₹37.16 lakh that were not included in his original income tax return, reducing the capital gains from the sale of four residential flats.
- Where
- Mumbai, India, at the Mumbai bench of the Income Tax Appellate Tribunal.
- When
- The ITAT order was pronounced on 3 August 2026; the dispute concerned assessment year 2020-21 (financial year 2019-20), and the CIT(A) dismissed the appeal on 13 December 2025.
- Why
- Because the Tribunal held that legitimate deductions can be considered even if claimed for the first time, since the expenses were paid through banking channels and supported by documents verified by the Assessing Officer.
Taxpayer (supported by ITAT)
Tax Department (Assessing Officer)
Claiming expenses not in the original return
Taxpayer (supported by ITAT)
Genuine deductions can be considered even if claimed for the first time, as appellate authorities have wider powers than the assessing officer, per the Bombay High Court's CIT v. Pruthvi Brokers ruling.
Tax Department (Assessing Officer)
A fresh claim cannot be entertained by the assessing officer unless it is made through a revised return, as per the Supreme Court's Goetze (India) Ltd. v. CIT ruling.
Brokerage paid after property transactions
Taxpayer (supported by ITAT)
Brokerage becomes payable only after completion of a transaction, so payment after the deal is normal and not, by itself, a valid ground to reject the claim.
Tax Department (Assessing Officer)
Some brokerage payments were made after the respective property transactions, which raised doubts about whether the expenses were genuine.
Key facts
- Taxpayer
- Mahendra Pratap Singh
- Property sold
- Four residential flats in Vasudev Sky High
- Assessment year
- 2020-21 (financial year 2019-20)
- Deductions claimed
- ₹37.16 lakh (brokerage, improvement costs, other charges)
- Capital gains outcome
- Short-term loss of ₹1.25 lakh on Flat No. 1004/3; gains of ₹2.11 lakh, ₹3.86 lakh and ₹11.01 lakh on other flats
- CIT(A) decision
- Appeal dismissed ex parte on 13 December 2025
- ITAT order date
- 3 August 2026
- Key precedents
- Goetze (India) Ltd. v. CIT (Supreme Court); CIT v. Pruthvi Brokers and Shareholders (Bombay High Court)
Sources
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