No Addition u/s 69 When Property Payments Flow Through Explained Bank Accounts – ITAT Deletes ₹3.29 Crore Addition

DCIT Vs Kiran Pal Khatana (ITAT Delhi)

No Addition u/s 69 When Property Payments Flow Through Explained Bank Accounts – ITAT Deletes ₹3.29 Crore Addition

The Delhi ITAT upheld the deletion of ₹3.29 crore addition made u/s 69 towards investment in two immovable properties, holding that once the payments were made through disclosed bank accounts and the credits in those bank accounts were never treated as unexplained, the Assessing Officer could not again treat the property investments as unexplained. The assessee had demonstrated that the properties were purchased through banking channels, including SBI loan proceeds and payments from disclosed SBI, HDFC and Axis Bank accounts. The Tribunal observed that the AO had not disputed the genuineness of the bank credits nor brought any material to show that the investments came from unaccounted sources.

The CIT(A), whose findings were affirmed by the Tribunal, held that the AO’s approach was based merely on presumption and lacked any incriminating material. However, based on a seized document reflecting separate “cash account” and “cheque account” entries for one of the properties, the CIT(A) sustained an addition of ₹44.32 lakh towards alleged cash payments, observing that once part of the seized document matched the registered sale deed details, the remaining contents relating to cash payments also carried evidentiary value under sections 132(4A) and 292C. Since the Revenue could not point out any perversity in the CIT(A)’s findings, the Tribunal dismissed the departmental appeal.

FULL TEXT OF THE ORDER OF ITAT DELHI

This appeal by the assessee is directed against the order of Commissioner of Income Tax (Appeals)-3, Gurgaon [in short ‘the CIT(A)’] dated 31.07.2023, for Assessment Year 2019-20.

2. The Revenue in appeal has assailed order of the CIT(A) on following solitary ground:-

“(i) Whether the ld. CIT(A) is right in deleting addition of Rs.2,29,51,720/- by holding that aforesaid payment was made from the credits appearing in bank accounts of the assessee and such credits were not found unexplained by the AO whereas the assessee could not explain the source of such investment during the course of assessment proceedings?”

3. Shri Dayainder Singh Sidhu, representing the Department submits that during Financial Year 2018-19, the assessee had purchased two properties in the name of Kiran Pal Khatana, i.e., House No. 454, Sector-9, Faridabad for a consideration of Rs.1,75,00,000/- on which the assessee had further paid stamp duty of Rs.12,25,000/-. The second property purchased by the assessee is Plot No. 9A, New Industrial Township, Faridabad for total consideration of Rs.1,32,96,000/-on which stamp duty of Rs.9,30,720/- was paid. Thus, the total value of properties purchased was Rs.3,29,51,720/-. During the course of assessment proceedings, the assessee did not offer any explanation regarding the source of funds for the aforesaid investments. Hence, the Assessing Officer made addition u/s 69 of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) in respect of aforesaid investments. The CIT(A), without conducting independent investigation, merely relied on the submissions of the assessee and deleted the aforesaid addition. The ld. DR, defending the addition made in the assessment order, prayed for reversing findings of the CIT(A) on this issue.

4. Per contra, Shri Deepesh Garg, appearing on behalf of the assessee placed reliance on the impugned order and prayed for dismissing appeal of the Revenue.

5. Both sides heard, orders of the authorities below examined. The short issue involved in the present appeal is the addition of Rs.3,29,51,720/- made by the AO u/s.69 of the Act in respect of immovable properties purchased by the assessee and deleted by the CIT(A). A perusal of the impugned order reveals that the assessee had explained the source of funds for purchase of two properties in the name of Kiran Pal Khatana during F.Y. 2018-19. As per the submissions of the assessee, the property i.e. House No. 454, Sector-9, Faridabad was purchased on 07.05.2018 for a consideration of Rs.1,75,00,000/- plus stamp duty of Rs.12,25,000/-. The assessee explained the source as bank loan of Rs.1,00,00,000/-from State Bank of India, Sector-16, Faridabad and the remaining amount was paid through banking channels, i.e., from SBI savings bank account. The details of payments are as under:-

The stamp duty amounting to Rs.12,25,000/- has been paid through HDFC Bank account no. 06191000034512 through bank instrument no. 181273158605 dated 07.05.2018.

6. Another property i.e. plot no. 9A, New Industrial Township, Faridabad was purchased from M/s M.M Fabricators P. Ltd., on 26.03.2019 for a total consideration of Rs.1,32,96,000/- plus stamp duty of Rs.9,30,720/-. The details of the payments made for purchase of said property are as under:-

The stamp duty amounting to Rs.9,30,720/- was paid through HDFC Bank Account No.06191000034512 through bank instrument No. 19005003605 dated 26.03.2019.

7. The assessee categorically stated that the details of source of funds were furnished before the Assessing Officer (AO) during the course of assessment proceedings. This fact has not been controverted by the Department nor any ground has been raised by the department in appeal with regard to violation of provisions of Rule 46A. The CIT(A) deleted the addition holding as under:-

“5.3. On going through facts of the case and material available on record, it is found that the appellant has made payments of Rs.1,87,25,000/- and Rs.1,42,26,720/- through bank accounts for the purchase of two immovable properties (H. No. 454, Sector-9, Faridabad and Plot No. 9A in NIT Faridabad). It is not the case of the AO that credits in the said bank accounts were not explained. The AO has not made any addition in respect of a credits in the bank accounts of the appellant namely SBI and HDFC bank. Once credits have been accepted as explained by the AO in respect of above bank accounts of the appellant, there is no justification for making additions in respect of payments out of above bank accounts for the purchase of above two properties. such approach of the AO is without any logic and justification. The AO could not bring on record any material of could show that payments for the purchase of above plots have been made from unaccounted sources. The additions made by the AO to the extent of Rs.3,29,51,720/- have been found based upon presumption. Such additions without the support of any findings or any incriminating material cannot be sustained. However, on-going through Page No. 76 of Annexure A1 found the seized, it is found that the appellant has made cash payments of Rs.44,32,000/- for the purchase of plot No. 9A NIT Faridabad in addition to Rs.1,32,96,000/-(consideration as per the registered sale deed). The said page contains cash account and cheque account in respect of the said transaction for purchase of Plot No. 9A measuring 1108 sq. yards. The particulars of payment made through cheque (Rs. 1,32,96,000/-), size of plot 61108 sq. yards), rates as per the sale deed (@12,000 per sq. yard) are clearly mentioned in cash account and cheque account (Page No. 76 of Annexure A1). Thus the transactions recorded in the said document are substantiated with the particulars as entered in the registered sale deed. Once part contents of the above document have been found to be true then entire documents has to be treated as reflecting the true nature of transaction. It cannot be the case that part document in respect of cheque transactions is true and remaining part of the document in respect of cash transactions is false. The document has to be read as a whole. The onus was upon the appellant to explain the contents recorded in the seized documents from him as per the provision of section 132(4A) / 292C of the Act. The appellant has not furnished any satisfactory explanation in respect of cash payments of Rs. 44,32,000/-. In the circumstances, addition of Rs. 44,32,000/-made by the AO is hereby confirmed u/s 69/69B of the Act and addition of Rs. 3,29,51,720/- is hereby deleted. Ground of appeal No. 5 is hereby allowed and Ground of appeal No. 6 is hereby dismissed.”

8. The appellant has not been able to point any perversity in above findings of the First Appellate Authority. In absence of any controverting material, we see no reason to dislodge reasoned findings of the CIT(A) on this issue, hence, the same are upheld.

9. In the result, appeal of the Revenue is dismissed being devoid of any merit. Order pronounced in the open court on Friday the 15^th day of May, 2026.