Forgot To Claim Property Sale Expenses In ITR? Mumbai ITAT Gives Taxpayer Relief

A mistake in the income-tax return does not always shut the door on a genuine deduction. In a recent case, the Mumbai Income Tax Appellate Tribunal (ITAT) allowed a taxpayer to claim Rs 37.16 lakh of expenses connected with the sale of property even though these had not been claimed in his original return.

The dispute related to assessment year 2020-21 and involved taxpayer Mahendra Pratap Singh, who had sold four residential flats in Vasudev Sky High.

While reassessment proceedings were underway, Singh submitted another computation of his capital gains. This time, he included brokerage, improvement expenditure and other costs relating to the properties.

Why The Tax Department Objected

The Assessing Officer (AO) did not allow the expenses.

One of the objections was procedural. Singh had neither claimed these amounts in the original return nor filed a revised return containing the claim. Instead, the deduction was brought in through a revised computation during the assessment proceedings, according to a recent report by Mint.

Questions were also raised over brokerage paid after the property deals had been completed.

After accounting for the expenses, Singh’s capital gains on three of the flats came down. In the case of another flat, the revised calculation resulted in a short-term capital loss.

His appeal before the Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, was subsequently dismissed ex parte. He then took the matter to the ITAT.

What Worked In The Taxpayer’s Favour

A key point before the tribunal was whether the expenses were genuine.

The ITAT found that the payments had been made through banking channels. The tax authorities had also not shown that the payments were bogus.

The tribunal was not persuaded by the argument that brokerage could be rejected merely because it had been paid after completion of the property transaction. A brokerage liability can arise on completion of a deal, and payment may follow later.

There was another important issue: could a taxpayer make a claim at a later stage if it was not part of the original return?

The ITAT distinguished what an AO can allow during assessment and the powers available to appellate authorities. While an AO may not be able to entertain certain fresh claims unless they are made through a revised return, an appellate authority can examine a legitimate claim placed before it.

In Singh’s case, the revised capital gains calculation and documents relating to the expenditure had already been submitted during the assessment. The AO had also sought information from parties connected with the payments.

The tribunal ultimately allowed Singh’s claim and directed deletion of the additions. Its order was pronounced on August 3, 2026.

The case also underlines a practical point for property sellers: keep brokerage bills, proof of improvement expenses and bank records. If a deduction is overlooked while filing the ITR, those papers may become critical later.

FAQs

Can property-related expenses missed in the original ITR be claimed later?
Yes. The Mumbai ITAT held that a genuine claim can be examined at the appellate stage if it is supported by proper documents and evidence.

Why did the ITAT allow the Rs 37.16 lakh deduction?
The payments were made through banking channels, and the tax authorities had not established that the expenses were bogus or non-genuine.

Can brokerage paid after a property sale still be claimed as an expense?
Yes. The ITAT observed that brokerage may become payable after completion of a transaction, so delayed payment alone is not enough to disallow it.