ITO Vs Delnaz Homi Sukheshwalla (ITAT Mumbai)
Non-Compliance Cannot Tax the Entire Property—but Fresh Evidence Cannot Escape Rule 46A Either: ITAT Restores ₹1.26 Crore Addition
The controversy
The assessee, Ms. Delnaz Homi Sukheshwalla, was subjected to reassessment for AY 2017-18.
During the reassessment proceedings, the assessee failed to furnish the relevant explanations and documentary evidence before the AO. The assessment was therefore completed u/s 147 r.w.s. 144B on 24 January 2025.
The AO treated the entire investment of ₹1.26 crore in an immovable property as unexplained investment u/s 69 and assessed the assessee’s total income at ₹1,28,43,810.
The assessee challenged the assessment before the CIT(A)/NFAC. While the CIT(A) rejected the legal objections concerning the validity of notice u/s 148 and approval u/s 151, he deleted the entire addition on merits.
The Revenue appealed against the deletion. The assessee filed a cross-objection challenging the legality of reopening.
AO taxed the asset merely for want of compliance
The addition arose because the assessee did not furnish the documents necessary to explain the source of the property investment during assessment.
The AO consequently treated the entire purchase consideration as unexplained without separately identifying what part of the investment lacked an explained source.
Before the CIT(A), the assessee furnished explanations and documentary evidence concerning the acquisition and its funding. On examining that material, the CIT(A) found that the AO had neither considered the assessee’s explanation nor identified any specific unexplained component.
