ITAT Orders Fresh Assessment for ₹8.89 Crore ‘Owner Share of Flat Purchase’ Claim

The Bangalore Bench of the Income Tax Appellate Tribunal (ITAT) has directed the income tax authorities to take a fresh look into a ₹8.89 crore ‘Owner Share of Flat Purchase’ expense claimed by Hoysala Projects due to a lack of evidence. The bench has also instructed the submission of a detailed share breakdown.

An appeal was filed by the Revenue against Hoysala Projects, the appellant, regarding the deduction of “Owner Share of Flat Purchase” for the Assessment Year 2017-18 against the order of the Commissioner of Income Tax (Appeals) [CIT(A)].

During the initial tax assessment, the Assessing Officer (AO) asked the real estate company to provide a detailed breakdown and valid documentation to back up this significant claim. However, the company failed to produce the necessary evidence to justify the numbers. The AO rejected the claim and added the ₹8.89 crore back to the company's taxable income, stating that the responsibility to prove a deductible expense lies entirely with the taxpayer.

Due to the adverse order, the assessee-appellant approached the Commissioner of Income Tax (Appeals) [CIT(A)], who ruled in their favor. The appellate authority accepted the company’s argument that the required documents had been submitted offline late in December 2019. The CIT(A) noticed a double standard in the tax department's logic: they taxed the project's entire income while completely ignoring its actual related costs. Since the firm's financial records passed strict audits perfectly and identical expenses were easily approved in later years, the appeals officer officially canceled the unfair tax penalty.

The relief, however, was challenged by the Revenue department and escalated the matter to the ITAT. The tribunal noted that even after looking through the records, the actual nature and composition of this “Owner Share” expense did not reveal itself. Furthermore, the tribunal agreed with the Revenue's argument that the CIT(A) had been too quick to accept the company's claims without properly verifying the facts or asking the AO for a follow-up report.

Therefore, the bench of Prashant Maharishi, Vice President, and Keshav Dubey Judicial Member decided to send the case back to the AO's desk for a complete do-over. The tribunal has instructed the AO to verify if the company had genuinely submitted those documents offline back in 2019. If the records exist, the claim will be evaluated based on them. If not, the appellant will be required to submit a fresh, comprehensive breakdown of the flat allocations along with solid documentary proof. The matter was allowed partly.