Confirming Party Cannot Be Taxed on Entire Sale Consideration-ITAT Deletes ₹3.27 Crore Addition

Mahadevbhai K. Bharwad Vs ITO (ITAT Ahmedabad)

Confirming Party Cannot Be Taxed on Entire Sale Consideration-ITAT Deletes ₹3.27 Crore Addition

The Ahmedabad ITAT deleted an addition of ₹3.27 crore made on account of an immovable property transaction, holding that the assessee could not be taxed on the entire sale consideration merely because the transaction appeared in the Department’s information system. The Tribunal found that the assessee was only a confirming party to the registered sale deed and not the owner or co-owner of the property.

The Assessing Officer had reopened the assessment based on information received through the Non-Filer Monitoring System (NMS), which reflected a property transaction of ₹3.47 crore. Since the assessee had disclosed only ₹20.20 lakh as his share of the transaction and had not responded during assessment proceedings, the Assessing Officer treated the balance ₹3.27 crore as taxable in his hands. The CIT(A) also dismissed the appeal ex parte and confirmed the addition.

Before the Tribunal, the assessee produced the registered sale deed, which showed that several persons were the actual owners and transferors, while the assessee was merely a confirming party. The Tribunal noted that Form 26AS reflected receipt of only ₹20.20 lakh by the assessee and that this amount had already been offered to tax in the return filed in response to the notice under section 148. Importantly, the Revenue failed to produce any evidence showing that the assessee had received the entire sale consideration or that he was the owner of the property.

Holding that an addition cannot be sustained solely on the basis of transaction value appearing in the Insight Portal without evidence of actual ownership or receipt, the Tribunal deleted the entire addition of ₹3.27 crore. Since the assessee had already offered the amount actually received by him to tax, no further addition was warranted.

Mere appearance of a property transaction in departmental databases does not justify taxing the entire consideration in a person’s hands. The Revenue must establish ownership and actual receipt of consideration before making such an addition.

FULL TEXT OF THE ORDER OF ITAT AHMEDABAD

This appeal has been filed by the assessee against the order of the Ld. Commissioner of Income-tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi (hereinafter referred to as “CIT(A)” for short) dated 15.07.2025, passed under Section 250 of the Income-tax Act, 1961 [hereinafter referred to as “the Act” for short], for Assessment Year (AY) 2018-19.

2. The assessee has raised following grounds of appeal :-

“1. The order passed by lower authorities is invalid, bad in law and required to be quashed.

2. NFAC erred in law and on facts in confirming reopening of assessment u/s 148 of the Act.

3. The reopening of assessment has been initiated for verification purpose and accordingly, the same is required to be quashed.

4. NFAC erred in law and on facts in confirming addition of Rs.3,27,74,798/- u/s 45 of the Act ignoring fact that share of the appellant is of Rs.20,20,202/- only.

5. Both lower authorities ought to have granted deduction for indexed cost of acquisition while computing capital gain.”

3. The brief facts, as culled out from the records, are that the assessee is an individual who did not file the return of income for the year under consideration. Subsequently, information was received by the Department through the Insight Portal under the Non-Filer Monitoring System (NMS) indicating that the assessee had sold an immovable property during the relevant year under consideration. On the basis of such information, proceedings under Section 148 of the Act were initiated. In response to notice under Section 148, the assessee filed return of income declaring total income of Rs.2,18,110/-, wherein capital gains arising from property transaction were also disclosed.

3.1 During assessment proceedings, the Assessing Officer observed that the sale consideration of the immovable property was Rs.3,47,95,000/-, whereas the assessee had declared only Rs.20,20,202/- as his share. Despite issuance of statutory notices under Sections 142(1) and 143(2), there was no compliance from the assessee. The assessment was therefore completed u/s 147 r.w.s. 144 and Section 144B of the Act, making addition of Rs.3,27,74,798/-.

4. Aggrieved by the order of the Assessing Officer, the assessee filed an appeal before the Ld. CIT(A), who, dismissed the appeal ex-parte for non-prosecution and confirmed the addition made by the Assessing Officer.

5. Aggrieved by the order of the Ld. CIT(A), the assessee is now in appeal before the Tribunal.

6. Before us, the Ld. AR submitted that that the assessee was neither the sole owner nor the principal transferor of the property. The assessee’s entitlement in the transaction was restricted to Rs.20,20,202/-, which had already been disclosed in the return of income filed in response to notice u/s 148 of the Act. The Ld. AR further submitted that the assessee was merely a confirming party to the registered sale deed and that the amount received by him had already been offered to tax. It was argued that, in the absence of any material demonstrating that the assessee had received the entire sale consideration, no addition could be made merely on the basis of information available in the Departmental database. Accordingly, it was prayed that the addition be deleted.

7. The Ld. DR, on the other hand, supported the orders of the authorities below. The Ld. DR submitted that the assessee had failed to comply with the statutory notices issued during the assessment proceedings and had not furnished any supporting evidence before the Assessing Officer. It was contended that the Assessing Officer was justified in drawing an adverse inference and completing the assessment on the basis of information available on record.

8. We have heard the rival submissions and perused the material available on record. The main issue for adjudication is whether the Assessing Officer was justified in treating the differential amount of Rs.3,27,74,798/- as taxable in the hands of the assessee. Before us, the assessee has placed on record a copy of the registered sale deed dated 10.11.2017 relating to the land situated at Village Vatva. On perusal of the said document, it is noticed that several persons are shown as executants/owners of the property and the assessee has been described only as a confirming party. As per AS26, the assessee was paid Rs.20,20,202/-.

8.1 The explanation furnished by the assessee is that he was not the owner of the land and was joined as a confirming party in the transaction. According to the assessee, he received a sum of Rs.20,20,202/- in connection with the transaction, which has already been disclosed in the return of income filed pursuant to the notice issued u/s 148 of the Act. We find that the Assessing Officer proceeded solely on the basis of information available in the Insight Portal showing a transaction value of Rs.3,47,95,000/- and, due to non-compliance during assessment proceedings, treated the differential amount of Rs.3,27,74,798/- as taxable in the hands of the assessee. However, no material has been brought on record by the Revenue to establish that the assessee was the owner or co-owner of the property, or that he had received the entire sale consideration. In fact, an amount of Rs.1,73,97,574/- has been received by six sellers and 5 confirming parties. The Revenue has not placed any evidence on record to show that any amount over and above Rs.20,20,202/- was received by the assessee. In the absence of any evidence showing receipt of the entire sale consideration by the assessee, the addition made merely on the basis of the total transaction value reflected in the information system cannot be sustained. Since the assessee has already offered for taxation the amount received by him, namely Rs.20,20,202/-, and no material has been brought on record to establish receipt of any higher amount, the addition of Rs.3,27,74,798/- made by the Assessing Officer and confirmed by the Ld. CIT(A) is held to be infructuous and liable to be deleted in the hands of the assessee. The assessee having already offered the amount of Rs.20,20,202/- received by him to tax, no further addition is called for.

9. In the result, the appeal of the assessee is allowed.

The order pronounced in the open Court on 12.06.2026