Sapna Mahesh Balani Vs ITO (ITAT Pune)
Pune ITAT: Property Value Cannot Be Treated as Escaped Income Without Verifying Actual Year-Wise Payments – Reopening Beyond 3 Years Quashed as Escapement Was Only ₹12.56 Lakh
The Pune ITAT quashed reassessment proceedings and also deleted on merits an addition of ₹65.20 lakh representing the entire purchase price of a flat, holding that the AO had initiated reassessment merely on information appearing on the Income-tax Department’s INSIGHT Portal without verifying the underlying registered agreement and actual payments made during the relevant year.
The assessee, a Netherlands resident since 1983, had purchased a flat for ₹65.20 lakh. Though the agreement was registered during FY 2015-16, the purchase payments had commenced as far back as 2009. The reassessment was nevertheless initiated on the assumption that the entire ₹65.20 lakh represented investment/income escaping assessment for AY 2016-17.
The Tribunal examined the registered agreement and its payment schedule and found that major payments had been made in earlier years. Only ₹12,56,305 was paid during the relevant year. Had the AO obtained the registered document from the Registrar before reopening, this crucial fact would have been apparent.
Since the Section 148 notice for AY 2016-17 was issued on 26.04.2023, i.e. beyond three years, Section 149(1)(b) permitted reopening only where the AO possessed books, documents or evidence revealing escaped income represented by an asset etc. amounting to or likely to amount to ₹50 lakh or more. Here, the relevant year’s payment was merely ₹12.56 lakh.
The ITAT strongly criticised the AO’s reliance on the INSIGHT Portal figure. It held that a portal chart cannot by itself be treated as evidence demonstrating escaped income. The AO ought to have verified the basic facts before assuming jurisdiction. The Tribunal also referred to the CBDT Instruction dated 22.08.2022 requiring information available on departmental databases/portals to be verified before drawing an adverse inference.
Following, inter alia, the Bombay High Court decision in Sunita Purushottam Virgincar and Karnataka High Court decision in Sanath Kumar Murali, the Tribunal held that the AO had no jurisdiction under Section 149 to issue the Section 148 notice, since the alleged escaped income for the relevant year was below ₹50 lakh. Consequently, both the notice and reassessment order were held bad in law.
Addition also deleted independently on merits
The ITAT went further and examined the ₹65.20 lakh addition on merits. The builder’s ledger showed that payments had been made by the assessee’s husband, Mahesh Balani, through banking channels in US dollars. Significantly, even the AO’s remand report acknowledged that the payment details in the agreement tallied with the builder’s ledger and that the investment was funded by the husband through cheques deposited into the builder’s bank accounts.
The Tribunal held that once the assessee established that the payments were made through foreign remittances through banking channels, her initial onus stood discharged and the burden shifted to the AO. The AO produced no evidence that the assessee herself had earned such income in India. The inability to produce very old foreign bank statements—when the bank itself stated that records beyond ten years were unavailable—could not justify the addition.
Accordingly, the entire ₹65.20 lakh addition was deleted on merits as well, and the assessee’s appeal was allowed.
Key takeaway: For reopening beyond three years, the ₹50-lakh threshold under Section 149(1)(b) cannot be tested merely by looking at the gross value of a property appearing on the INSIGHT Portal. AO must verify the underlying documents and determine the income actually alleged to have escaped assessment for the relevant year. Registration of a ₹65.20-lakh property in one year cannot convert payments made in earlier years into escaped income of the year of registration.
Cases Discussed:
- Income-tax Officer v. Sanath Kumar Murali (Karnataka High Court), [2025] 172 taxmann.com 290 (Karnataka)
- Prakash Babulal Bhandari (ITAT Ahmedabad), TS-812-ITAT-2025(Ahd)]
- Nitin Jain (Delhi ITAT), ITA No.1775/ Del/ 2024
- Sunita Purushottam Virgincar 86 Ors. Vs. Income Tax Officer 86 Ors. (Bombay High Court), Writ Petition No. 496 Of 2023 vide order dated Jul 4, 2024 (2024) 120 CCH 0107 (Bom-HC)
- Principal Commissioner of Income Tax v. Abhisar Buildwell Private Limited (Supreme Court), Civil Appeal No.6580 of 2021, judgment dated 20.04.2023
- Nitin Nema vs. Principal Chief Commissioner of Income-tax (Madhya Pradesh High Court), [2023] 458 ITR 690 (Madhya Pradesh)
- Mrs. Chitra Supekar (Bombay High Court), WRIT PETITION NO.15580 OF 2022
- Naresh Balchandrarao Shinde (Bombay High Court), 146 taxmann.com 66
- Harjeet Surajprakash Girotra (Bombay High Court), WRIT PETITION NO.513 OF 2019
- Principal Commissioner of Income Tax, Central-2 v. Meeta Gutgutia (Delhi High Court), (2017) 395 ITR 526 (Delhi)
- Commissioner of Income Tax (Central)-III v. Kabul Chawla (Delhi High Court), (2016) 380 ITR 573 (Delhi)
- Commissioner of Income Tax II, Thane v. Continental Warehousing Corporation (Nhava Sheva) Ltd. (Bombay High Court), (2015) 374 ITR 645 (Bombay)
- Lok Developers (Bombay High Court), 149 taxmann.com 93
FULL TEXT OF THE ORDER OF ITAT PUNE
