Co-Ownership with PArents Not Enough for Unexplained Investment Addition: ITAT Mumbai

Parveen Parvez Motlekar Vs Assessment Unit Income Tax Department (ITAT Mumbai)

The appeal before the Income Tax Appellate Tribunal Mumbai concerned an assessee challenging an order dated 19.06.2025 passed by the National Faceless Appeal Centre under Section 250 of the Income Tax Act, 1961 for Assessment Year 2015–16. The appeal raised multiple grounds, including the validity of reassessment proceedings under Section 148, additions under Section 69 for unexplained investment, and additions under Section 56(2)(vii)(b)(ii) relating to immovable property.

Ground No. 1, which challenged the validity of the initiation of reassessment proceedings under Section 148, was dismissed by the Tribunal due to the absence of arguments or written submissions from the assessee.

Grounds 2 to 4, which were interconnected, related to additions made under Section 69 and Section 56(2). The facts revealed that the assessee, along with her parents, had purchased a flat in Andheri West, Mumbai, through a registered agreement dated 20.02.2015 for a total consideration of Rs. 75,77,500. However, the stamp duty authority valued the property at Rs. 1,83,14,000, resulting in a difference of Rs. 1,07,36,500.

Based on this difference, the Assessing Officer (AO) made additions under Section 69 by attributing one-third of the fair market value difference, amounting to Rs. 35,78,833, as the assessee’s share of unexplained investment. Additionally, one-third of the declared purchase price, i.e., Rs. 25,25,833, was also added, leading to a total addition of Rs. 64,19,999.

The assessee contended that the entire purchase consideration was paid by her parents and that she had not contributed any funds towards the purchase. Despite this, the AO treated her as a co-owner due to her inclusion in the sale agreement and inferred beneficial ownership. However, the Tribunal observed that the AO failed to examine or verify the documentary evidence submitted by the assessee, including details indicating that payments were made by the parents through banking channels.

Given this lack of verification, the Tribunal held that the issue required reconsideration. It restored the matter to the AO with directions to verify the source of funds and adjudicate the issue afresh after providing adequate opportunity to the assessee.

Regarding the applicability of Section 56(2)(vii)(b)(ii), the Tribunal noted that the AO had not properly considered the allotment letter dated 14.12.2012, which indicated that the property had been allotted earlier to the assessee and her parents. The assessee argued that initial payments were made as early as 2009, implying that rights in the property had accrued before the date considered by the AO for valuation purposes. The AO had applied the stamp duty valuation as of 2015 without examining these contentions.

The Tribunal found that the AO had failed to adequately examine the assessee’s claims and supporting documents. Consequently, this issue was also restored to the AO for detailed verification and fresh adjudication after granting sufficient opportunity to the assessee.

The Tribunal set aside the orders of both the AO and the CIT(A) and restored the matter for fresh adjudication in accordance with its directions. The assessee was also granted liberty to raise additional grounds or submit further documents. The appeal was allowed for statistical purposes.

FULL TEXT OF THE ORDER OF ITAT MUMBAI

The present appeal has been filed by the assessee challenging the impugned order 19.06.2025 passed u/s 250 of the Income Tax Act, 1961 (`the Act’), by the National Faceless Appeal Centre, Delhi (NFAC) for the assessment year 2015-16. The following grounds are reproduced below:

“1. On the facts and circumstances of the case and in law, the learned CIT (A) erred in confirming initiation of proceedings u/s 148 by the learned AO as valid, when the appellant had satisfactorily submitted u/s 148 A(b) that the said flat was purchased by her parents and she did not contribute in it. The entire proceedings based on conjectures and surmises be set aside as void ab initio.

2. On the facts and circumstances of the case and in law, the learned CIT (A) erred in making addition u/s 69 of Rs. 28,41,166 disregarding the submission made by the appellant.

3. On the facts and circumstances of the case and in law, the learned CIT (A) erred in confirming the action of the learned AO in invoking provisions of section 56(2)(vii)(b)(ii) whereas the appellant has still not received immovable property.

4. On the facts and circumstances of the case and in law, the learned CIT (A) erred in confirming addition u/s 56(2)(vii)(b)(ii) of Rs. 35,78,833 made by AO.

5. Appellant craves leave to add, alter and/or modify the grounds of appeal on or before the date of hearing of the appeal.

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2. Ground No. 1 raised by the assessee relates to challenging the order of the Ld. CIT(A) in confirming the initiation of proceedings under Section 148 of the Act by the AO as valid. In this regard, the ld. AR had not advanced any arguments to contest this ground, and no written submissions were filed in support of this ground. Therefore, in the absence of any pleadings, this ground raised by the assessee stands dismissed.

3. Ground Nos. 2 to 4 raised by the assessee are interrelated and interconnected and relates to challenging the order of the Ld. CIT(A) in making additions under Section 69 of the Act and also invoking the provisions of Section 56(2) of the Act. Therefore, we have decided to adjudicate these grounds through the present consolidated order.

4. We have heard counsel for both the parties, perused the material placed on record, the judgments cited before us, and also the orders passed by the Revenue Authorities. From the records, we noticed that, as per the facts of the present case, the assessee, along with her parents, had purchased Flat No. 1304, Sarthak Heights, Andheri West, Mumbai, vide registered agreement dated 20.02.2015, for a total sale consideration of Rs. 75,77,500. However, the FMV as per the Stamp Duty Authority was Rs. 1,83,14,000. Therefore, additions under Section 69 of the Act were made by the AO on account of the fact that the assessee, along with her parents, had purchased the flat in question at less than the stamp duty value, resulting in a difference of Rs. 1,07,36,500.

5. On the above basis, the AO attributed 1/3rd of the Fair Market Value (FMV) difference, amounting to Rs. 35,78,833, as the assessee’s share of unexplained investment. Apart from this, the AO also added 1/3rd of the declared purchase price, i.e., Rs. 25,25,833, leading to a total addition of Rs. 64,19,999 under Section 69 of the Act.

6. Now, first of all, we deal with the addition made by the AO and upheld by the ld. CIT(A) under Section 69 of the Act. In this regard, we noticed that the assessee had specifically argued that the entire purchase consideration of Rs. 75,77,500 was paid by her parents, and the assessee did not contribute any funds. Despite these claims, the AO observed that the assessee’s name was included as a co-purchaser in the registered sale agreement, implying beneficial ownership and financial interest. However, at the same time, the AO has completely ignored the documentary evidence placed on record by the assessee, more particularly the list of details at paper book page No. 67, wherein the source of the entire amount of Rs. 75,77,500 has been mentioned and the same is reproduced herein below:

7. Since the AO has neither examined nor verified the source of the entire amount paid through banking channels by the parents, the same has been ignored. Therefore, we are of the view that this issue requires to be restored to the file of the AO to verify the source of the payments actually made while purchasing the flat in question. The AO is directed to adjudicate this ground afresh after providing adequate and sufficient opportunity to the assessee.

8. Now, as far as the applicability of Section 56(2) of the Act is concerned, we noticed that the AO has completely ignored the letter of allotment at paper book page No. 1, reproduced herein below:

Upon perusal of the said document, we found that the flat in question was allotted to the assessee and her parents i.e. Mohiddin Siddiq and Mymoona Siddiq on 14.12.2012, and some payment was also made to Sarthak Developers towards the purchase of the property. The remaining details are contained at paper book page No. 67.

9. It has been argued that the initial payment was made by the assessee through banking channels via cheque No. 969307 dated 25.08.2009, thus, the right in the property had accrued in favour of the assessee during that period itself. Therefore, the AO had wrongly applied the FMV as per the Stamp Duty Valuation as on 2015.

10. We found that the AO has not examined the specific contentions raised by the assessee and had instead rejected her claim. Therefore, we are of the view that this issue also requires in-depth verification in light of the documents submitted by the assessee. Accordingly, we restore this issue also to the file of the AO for verification and fresh adjudication after providing sufficient and adequate opportunity to the assessee.

11. The assessee is at liberty to raise any other ground or file any additional documents in support of her contentions.

12. Consequently, the orders of the AO and the Ld. CIT(A) are set aside, and the matter is restored to the file of the AO for fresh adjudication in terms indicated above.

13. In the result appeal of the assessee is allowed for statistical purposes.

Order pronounced in the open court on 25.03.2026