Bangalore ITAT: Sale Consideration Cannot Be Taxed as Capital Gain Without Deducting Cost of Acquisition & Construction — 119-Day Delay Condoned

Background and Factual Matrix

In ITA No. 2259/Bang/2025 before the Income Tax Appellate Tribunal, Bangalore, the appeal was filed by Mrs. Sasihithlu Venkateshi Srilakshmiprasad for Assessment Year 2016-17, challenging the appellate order of the National Faceless Appeal Centre, Delhi (CIT(A)) dated 20.08.2025. The CIT(A) had dismissed the assessee's appeal against the reassessment order dated 21.03.2024 passed under Section 147 read with Section 144 and Section 144B of the Income Tax Act, 1961 solely on the ground that the 119-day delay in filing the appeal did not qualify as "sufficient cause."

The case originated from the assessee's status as a non-filer. The Department received information indicating that an immovable property had been sold by the assessee for a consideration of Rs. 63,00,000/-. Since no return of income had been filed, the Assessing Officer initiated proceedings by issuing notice under Section 148A of the Income Tax Act, 1961. The assessee did not respond to this notice.

Subsequently, notice under Section 148 was issued on 21.03.2023. Even during the reassessment proceedings, notices issued under Section 142(1) requiring the assessee to furnish capital gain computation and supporting documents went unanswered. In the absence of any response, the Assessing Officer independently issued notice under Section 133(6) to the property purchaser and secured a copy of the registered sale deed.

The Ex Parte Assessment and Nature of Addition

With no information available from the assessee's side regarding the purchase price of the site, cost of construction, borrowings, interest charges or any other deductible expenditure, the Assessing Officer proceeded to finalize the assessment on an ex parte basis. The entire sale consideration of Rs. 63,00,000/- was treated as either unexplained income or short-term capital gain, without allowing any deduction whatsoever — not for the cost of land acquisition, not for the cost of constructing the residential structure, and not for any transfer-related expenses.

The assessment order was passed under Section 147 read with Section 144 and Section 144B of the Income Tax Act, 1961 on 21.03.2024, fixing the assessee's total income at Rs. 63,00,000/-.

The Assessee's Personal and Financial Background

The assessee was a housewife with no professional tax advisor or Chartered Accountant engaged on a regular basis. Her position before the Tribunal was that she had purchased a site in the year 2014 and thereafter constructed a seven-square duplex residential house on that site, partly financing the acquisition and construction through borrowings from M/s. Mysore Merchants Cooperative Bank Limited. The property was ultimately sold on 21.03.2016.

According to the assessee, the transaction had in fact resulted in a loss — not a gain — when all costs including the site acquisition price, construction expenditure, and loan-related outflows were taken into account. However, because she had not participated in the reassessment proceedings at any stage, none of this information was before the Assessing Officer when the assessment was finalized.

Delay in Filing Appeal Before CIT(A)

The assessment order dated 21.03.2024 was served electronically. The assessee, however, stated that she was entirely unaware of the order having been passed. Having no Chartered Accountant or tax consultant, she was not in a position to monitor her email or comprehend the implications of online tax proceedings.