Bharateshwar Bahubali Jinagna S.M.P. Tapagaccha Jain Trust Vs ITO (ITAT Mumbai)
Summary: The Mumbai Bench of the Income Tax Appellate Tribunal considered the assessee’s appeal against the order of the National Faceless Appeal Centre confirming an addition of ₹1,32,86,000 under section 69 read with section 115BBE of the Income-tax Act, 1961, in respect of an immovable property purchased for ₹1,25,00,000 with stamp duty of ₹7,86,000. The assessee, a public charitable trust registered under the Bombay Public Trusts Act, 1950, had declared total income of ₹5,710 and had subsequently obtained registration under section 12AA with effect from AY 2021-22.
The Assessing Officer noticed the property transaction from Form 61A furnished under section 285BA(1) and treated the entire investment as unexplained because the assessee had not furnished lender confirmations, PAN details, bank statements or evidence establishing the identity, creditworthiness and genuineness of the persons from whom loans aggregating to ₹1,32,21,000 were stated to have been received. Before the Tribunal, the assessee submitted that complete documentary evidence relating to 38 lenders, including income-tax returns, confirmations and bank statements/passbooks, could not earlier be furnished because the documents were still under compilation, and undertook to produce them.
The Tribunal noted that the requisite material had not been furnished before either lower authority and that sufficient cause for the earlier default had not been explained. Nevertheless, having regard to the nature of the controversy and the undertaking to furnish complete evidence, the Tribunal considered it appropriate in the interest of substantial justice to provide one effective opportunity to substantiate the explanation. It accordingly set aside the order of the CIT(A) and restored the matter to the Assessing Officer for fresh adjudication.
The assessee was directed to furnish particulars and supporting evidence concerning all 38 lenders and establish their identity, creditworthiness and genuineness, while the Assessing Officer was directed to examine the material and undertake further enquiry, if necessary, including requiring production of the lenders, before deciding the issue afresh after providing reasonable opportunity of being heard. The restoration was made subject to payment of ₹11,000 as costs to the Income-tax Department within one month. The Tribunal expressly stated that it had expressed no opinion on the merits of the assessee’s explanation or on the applicability of section 69 and that all contentions remained open. The appeal was consequently allowed for statistical purposes.
Cases Discussed
- Chander Arjandas Manwani Vs National Faceless Assessment Centre & ors. (Bombay High Court)
FULL TEXT OF THE JUDGMENT/ORDER OF ITAT MUMBAI
This appeal by the assessee is directed against order dated 10.03.2026 passed by the learned National Faceless Appeal Centre (NFAC), Delhi [hereinafter shall be referred to as the Ld. CIT(A)] for Assessment Year 2021-21, raising following grounds:
1. In the facts and circumstances of the case and in law, the AO erred in passing assessment order u/s 143(3) without granting an opportunity of personal hearing through video conferencing even though the same is required as per the judgement of Bombay High Court in the case of Chander Arjandas Manwani [2021] 130 taxmann.com 445 (Bombay).
2. In the facts and circumstances of the case and in law, the learned FAO erred in making an addition of Rs. 1,32,86,000/- u/s 69 r.ws 115BBE in respect of immovable property purchased thereby treating the same as unexplained investments
a. Even though the amount of addition mentioned in show cause notice is Rs. 1,25,00,000/- and addition is made for Rs. 1,32,86,000/- in the Assessment Order
b. without appreciating the fact that the immovable property is purchased by the Appellant from the loans taken from the public which is duly shown in the financials of the Appellant
c. thereby applying section 115BBE to alleged unexplained investment even though the property is purchased by the Appellant with the help of the loan taken from Public and duly recorded in the books of accounts.
d. Without issuing notice u/s 133(6) or 131.
e. Without considering the submissions made by the Appellant
f. Without appreciating the fact that the loans are taken through banking channels
g. Without appreciating the fact that the loans are repaid in the subsequent years
3. In the facts and circumstances of the case and in law, the FAO erred in charging interest u/s 234A, B, C and D and initiating penalty u/s 271AAC.
4. In the facts and circumstances of the case and in law, the learned Commissioner of Income Tax (A) erred in confirming the addition without appreciating the submissions made from time to time and various supporting documents filed by the Appellant and also without granting an opportunity of personal hearing thereby violating principles of natural justice.
2. Briefly stated, the facts of the case are that the assessee is a public charitable trust registered under the Bombay Public Trusts Act, 1950. The assessee filed its return of income for the year under consideration on 30.01.2021 declaring total income of ₹5,710/-. The return was selected for scrutiny and statutory notices under the Income-tax Act, 1961 (“the Act”) were duly issued and served upon the assessee. During the course of assessment proceedings, notice under section 142(1) of the Act was also issued. From the information available on record, the Assessing Officer (“AO”) noted that the assessee’s application for registration under section 12A of the Act, dated 13.12.2019, had been rejected by the learned CIT (Exemption), Pune, vide order dated 23.09.2020 and the assessee was, accordingly, directed to obtain fresh registration.
2.1 Before the AO, the assessee submitted that it had subsequently applied for registration under section 12AA vide application dated 21.05.2021 and was granted registration on 28.05.2021, effective from Assessment Year 2021-22. The AO further noted that, in the return of income, the assessee had disclosed interest income of ₹5,713/- and paid tax thereon in the status of an Association of Persons (AOP).
2.2 On verification of Form No. 61A, i.e. the Statement of Specified Financial Transactions furnished under section 285BA(1) of the Act, the AO noticed that the assessee had purchased an immovable property along with building from Shri Sachin Mahendra Gandhi and Shri Ashaish Mahendra Gandhi for ₹1,25,00,000/- on 22.11.2019 and had incurred stamp duty of ₹7,86,000/-. The assessee was, accordingly, called upon, vide show-cause notices dated 07.09.2022 and 13.09.2022, to explain why the investment of ₹1,32,86,000/-, comprising the purchase consideration and stamp duty, should not be treated as unexplained investment under section 69 read with section 115BBE of the Act.
2.3 In response, the assessee explained that the investment was sourced from loans aggregating to ₹1,32,21,000/- received from various persons, as detailed in Schedule-A to the balance sheet. On examination of the material furnished, the AO found that the loans had been received through banking channels during Financial Year 2019-20 and were supported by the assessee’s bank passbook. However, as the property had not been disclosed in the return of income and the assessee had not furnished confirmations from the respective lenders or established their creditworthiness and the genuineness of the loans, the explanation was not accepted. The AO accordingly treated the entire investment of ₹1,32,86,000/- as unexplained investment under section 69 read with section 115BBE of the Act.
3. Before the learned CIT(A), the assessee contended that the source of the investment had been duly explained during the assessment proceedings by furnishing the balance sheet and details of the source of acquisition of the property. The authorised representative further submitted that the addition had been made without issuing an effective show-cause notice and without affording adequate opportunity to the assessee to explain its case. It was, therefore, contended that the assessment order, to that extent, was violative of the principles of natural justice. But the learned CIT(A), after considering the submission of the assessee, confirmed the addition observing as under:
4.1 Ground Nos. 1 to 4:Addition of Rs. 1,32,86,000/- u/s 69 of the IT Act, 196 on account of unexplained investment In these grounds of appeal the appellant challenged the addition of Rs. 1,32,86,000/- u/s 69 of the Act on account of unexplained investment. The AO in the assessment order held that the appellant purchased immovable property with building from SACHIN MAHENDRA GANDHI and ASHAISH MAHENDRA GANDHI for Rs. 1,25,00,000/- on 22/11/2019 and paid stamp duty of Rs.7,86,000/-. In this regard, show cause notices were issued on different dates to explain as to why the investment of Rs. 1,25,00,000/- plus 7,86,000/- towards stamp duty registration totalling to Rs. 1,32,86,000/- should not be assessed as unexplained investment as per section 69 r.w.s 115BBE of the Income Tax Act, 1961.
The appellant contended that the said investments were made out of loans taken from various persons to the tune of Rs.1,32,21,000/-. On perusal of the submissions it was found that all the loans were received through bank transfer during the FY 2019-20 which is supported by bank passbook.
However, during the course of assessment as well as appellate proceedings, the appellant failed to produce supporting documentary evidence in respect of such loans. No confirmations from the alleged lenders, their PAN details, bank statements or proof of creditworthiness were furnished. The identity and financial capacity of the lenders therefore remain unsubstantiated. Even the appellant has not shown the property purchased in the return of income furnished by him.
In the absence of credible evidence regarding the source of the investment, the explanation offered by the appellant cannot be accepted. The burden to explain the nature and source of investment lies upon the appellant, which has not been satisfactorily discharged in the present case.
It is a settled legal position that where the appellant offers no explanation or the explanation offered is not satisfactory, the value of such investment may be deemed to be the income of the appellant. In the present case, the appellant has not discharged the onus cast upon him to explain the source of the investment with reliable evidence. The Assessing Officer has rightly invoked the provisions of Section 69.
In view of the above facts and circumstances, the addition of Rs. 1,32,86,000/- made under section 69 is hereby confirmed. The ground of appeal is dismissed.
4. Before us, the learned counsel for the assessee submitted that, in continuation of the letter dated 22.06.2026 filed on 30.06.2026, the details relating to the 38 parties from whom loans had been received could not be furnished before the AO or the learned CIT(A), as the requisite documents, including the income-tax returns, confirmations and bank passbooks of the respective lenders, were still under compilation. He, accordingly, prayed that the said documents be admitted and the matter be restored to the file of the learned CIT(A)/AO for verification, submitting that the same were necessary to substantiate the loans. He further requested that a lenient view be taken in the interest of justice.
5. We have heard the rival submissions and perused the material available on record. The controversy before us concerns the source of the investment of ₹1,32,86,000/- made by the assessee in the immovable property. The assessee claims that the investment was substantially sourced from unsecured loans received from 38 persons, whereas the Assessing Officer did not accept the explanation for want of supporting evidence establishing the identity and creditworthiness of the lenders and the genuineness of the transactions and treated entire investment in property as unexplained investment under section 69 of the Act. The Assessing Officer proceeded on the basis that the loans were not disclosed in the financial statements. The assessee, on the other hand, contends that the return was furnished in Form ITR-7, which did not contain the relevant columns for reporting balance-sheet items, and that the loans were genuine and could be substantiated by establishing the identity and creditworthiness of the lenders and the genuineness of the transactions.
5.1 We note that the assessee did not furnish the requisite supporting material either before the Assessing Officer or the learned CIT(A) and no sufficient cause has been explained by the assessee for default in filing those documents related to loan parties before the lower authorities. The learned counsel has, however, undertaken before us to furnish complete documentary evidence, including the income-tax returns, confirmations and bank statements/passbooks of the respective lenders, to substantiate the loans.
5.2 Having regard to the nature of the controversy and the undertaking given before us, we consider it appropriate, in the interest of substantial justice, to afford the assessee one effective opportunity to substantiate its explanation. Accordingly, the order of the learned CIT(A) is set aside and the matter is restored to the file of the Assessing Officer for fresh adjudication of the issue in accordance with law. The assessee shall furnish all relevant particulars and supporting evidence in respect of the 38 lenders and establish their identity, creditworthiness and the genuineness of the transactions. The Assessing Officer shall examine the material so furnished and, if considered necessary, undertake such further enquiry as may be warranted, including requiring production of the lenders, and thereafter decide the issue afresh after affording the assessee reasonable opportunity of being heard.
5.3 This restoration is, however, subject to payment of costs of ₹11,000/- by the assessee. The said amount shall be deposited with the Income-tax Department under the minor head “Other Receipts” (code- 500) within one month from the date of receipt of this order. The Assessing Officer shall verify compliance with the direction regarding payment of costs and, upon such compliance, proceed with the fresh adjudication as directed above. In the event of failure to deposit the costs within the stipulated period, the benefit of this remand shall not be available to the assessee. We make it clear that we have expressed no opinion on the merits of the assessee’s explanation or on the applicability of section 69 of the Act, and all contentions are left open.
6. In the result, appeal of the assessee is allowed for statistical purposes.
Order pronounced in the open Court on 27/08/2026.
