On-Money Addition Restricted to Co-owner’s Investment Share: ITAT Ahmedabad

Deepak Shankarlal Patel Vs ITO (ITAT Ahmedabad)

Ahmedabad ITAT Restricts Alleged On-Money Addition to Actual Investment Share of Co-owner

Summary: The Ahmedabad ITAT partly allowed the assessee’s appeal for Assessment Year 2014-15 concerning an addition of ₹26,57,000 made by the Assessing Officer towards alleged unaccounted cash payment for purchase of an industrial shed jointly acquired by the assessee, his father and his brother under a registered sale deed dated 06.05.2013. The CIT(A) had restricted the addition to one-third, i.e., ₹8,85,667, considering the property to be jointly owned. The Tribunal examined the registered sale deed, bank statements and payment details, which showed that the assessee contributed ₹2,34,000 (17%), his father ₹8,00,000 (58%), and his brother ₹3,41,000 (25%) towards the recorded purchase consideration. It held that where documentary evidence establishes the actual contribution of each co-owner, any addition relating to the investment, if otherwise sustainable, must be apportioned in the same ratio. As the Revenue produced no material showing equal contribution towards the alleged cash payment or contribution beyond the assessee’s documented share, the Tribunal restricted the addition to ₹4,51,690, being 17% of ₹26,57,000, and directed the Assessing Officer to grant consequential relief of ₹4,33,977.

The Ahmedabad ITAT partly allowed the assessee’s appeal arising from an addition made on account of alleged unaccounted cash payment (on-money) for the purchase of an industrial shed. The addition was based on material allegedly found during a search on a third party (Kushal Group). The Assessing Officer made an addition of ₹26.57 lakh, while the CIT(A), considering the property was jointly owned by three persons, restricted the addition to one-third, i.e., ₹8.86 lakh, in the hands of the assessee.

Before the Tribunal, the assessee contended that even if the addition was to be sustained, it should be restricted to his actual contribution towards the purchase and not merely divided equally among the co-owners. The registered sale deed and bank records established that the assessee had contributed only ₹2.34 lakh, representing 17% of the recorded purchase consideration, while the remaining investment was made by his father (58%) and brother (25%).

Accepting this contention, the Tribunal held that where documentary evidence clearly establishes the actual investment ratio of each co-owner, any addition relating to the property must be apportioned in the same ratio. In the absence of evidence showing that the alleged cash payment was made equally by all co-owners or that the assessee contributed more than his documented share, there was no justification for adopting an arbitrary one-third allocation. Accordingly, the Tribunal restricted the addition in the assessee’s hands to 17% of ₹26.57 lakh, i.e., ₹4,51,690, and directed the AO to grant consequential relief of ₹4,33,977.

FULL TEXT OF THE ORDER OF ITAT AHMEDABAD

This appeal is filed by the Assessee against the appellate order dated 16.03.2026 passed by the Commissioner of Income Tax (Appeals)/National Faceless Appeal Centre, Delhi, relating to the Assessment Year 2014-15.

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

The appellant prefers the present appeal on the following grounds, which are without prejudice to each other:

1. Addition based on third-party material – bad in law

The Ld. CIT(A) has erred in confirming addition based on alleged material found from third party (Kushal Group) without any independent verification or corroborative evidence linking the appellant

2. Violation of principles of natural justice

The authorities below erred in law in making addition without:

Providing copies of seized material, and

Granting opportunity of cross-examination

This renders the entire addition void and liable to be deleted in view of judicial precedents including Andaman Timber Industries (SC).

3. No evidence of actual cash payment

The authorities failed to bring on record any direct evidence proving that the appellant has actually paid cash of Rs 26,57,000/-

Mere entries in third-party records cannot be treated as conclusive evidence.

4. Incorrect invocation of Section 68

The addition u/s 68 is legally untenable as:

There is no credit entry in the books of appellant

The alleged transaction pertains to investment in property,

Hence Section 68 is wrongly invoked.

5. Joint ownership ignored

The authorities failed to appreciate that:

The property was jointly owned by three persons,

The registered document clearly establishes shared ownership.

Thus, entire addition cannot be made in the hands of the appellant

6. Without prejudice addition must be proportionate

Without prejudice, even if any addition is to be sustained:

CIT(A) erred in restricting addition to 1/3rd (Rs. 8,85,667/-)

The correct proportion as per registered deed is 17%

Therefore, addition should be restricted to:

Rs. 26,57,00017% Rs 4,51,690

Thus, further relief of Rs 4,33,977 should be granted.

7. Arbitrary and excessive addition

The addition sustained by CIT(A) is excessive, arbitrary and not supported by evidence or law

8. Right to add, amend grounds

The appellant craves leave to add, alter or amend any grounds of appeal at the time of hearing.

3. The undisputed facts emerging from the record are that Industrial Shed No. 55 situated at Kushal Industrial Park, Survey No. 441, Paiki Khata No. 1729, Moraiya, Taluka Sanand, was purchased vide registered sale deed dated 06.05.2013 for a total consideration of T13,75,000/- in the joint names of Shri Shankarlal Dahyabhai Patel (father), Shri Deepak Shankarlal Patel (the assessee) and Shri Mitul Patel (brother). The Assessing Officer made an addition of T26,57,000/-on account of alleged unaccounted cash payment in connection with the said purchase. The learned CIT(A), while granting partial relief, restricted the addition to one-third thereof, i.e., T8,85,667/-, on the premise that the property was jointly owned by three persons.

4. On perusal of the documentary evidence available on record, we find that the registered sale deed as well as the bank statements and payment details furnished before the lower authorities clearly establish the actual contribution made by each of the co-owners towards the recorded purchase consideration. The details are as under:

5. In our considered view, once the documentary evidence on record establishes the actual contribution made by each co-owner towards acquisition of the property, any addition relating to the investment in such property, if otherwise sustainable, has necessarily to be apportioned in the same ratio. In the absence of any material brought on record by the Revenue to establish that the alleged cash payment was made equally by all the co-owners or that the assessee contributed beyond his documented share, there is no justification for adopting an arbitrary one-third allocation merely because the property stands jointly registered. We hold that, even assuming the alleged cash component of T26,57,000/- to be attributable to the purchasers, the addition in the hands of the assessee cannot exceed his actual share of 17%. Therefore, the addition is directed to be restricted to T4,51,690/­, being 17% of T26,57,000/-, as against T8,85,667/- sustained by the learned CIT(A). The Assessing Officer is directed to grant consequential relief of T4,33,977/- to the assessee.

6. In the result, the appeal of the assessee is partly allowed.

The order is pronounced in the open Court on 09.07.2026.