On-Money From Property Sale Taxable as Capital Gains, Not Section 69A: ITAT Delhi

Sandeep Kapoor Vs DCIT (ITAT Delhi)

Summary: ITAT Delhi partly allowed four connected appeals concerning Sandeep Kapoor and Shri Amarjeet Singh Kapoor for Assessment Years 2021-22 and 2023-24 and held that cash received as “on money” over and above the consideration recorded in registered sale deeds could not be assessed as unexplained money under section 69A where the source and character of the receipt were established as consideration received from the identified purchaser of the property. The Tribunal, however, held that such on-money could not escape taxation and was required to be included in the sale consideration while computing income under the head “Income from Capital Gains”.

For AY 2021-22, Sandeep Kapoor had originally filed his return declaring total income of INR 2,18,58,700/-. A search and seizure action under section 132 was carried out on 31.10.2022 on Johnson Watch & Kapoor Watch Group of cases and the assessee’s residential premises were also covered. On the basis of loose papers and material found during the search, the case was reopened by notice under section 148 dated 16.05.2023. The assessment ultimately determined total income at INR 2,68,16,550/- after various additions. The CIT(A) granted substantial relief but sustained an addition of INR 16,75,000/- under section 69A.

The disputed addition arose from sale of property bearing No. C-213, 4th Floor, Sushant Lok-1, Gurgaon, jointly owned by Sandeep Kapoor and two other persons. Sandeep Kapoor held a 25% share. The registered sale deed reflected consideration of INR 1 crore, whereas an agreement to sale found during search showed total consideration of INR 1.67 crore. The AO consequently treated the differential INR 67 lakh as on-money and assessed the assessee’s 25% share of INR 16,75,000/- as unexplained money under section 69A.

The assessee contended that once the AO himself accepted that INR 16,75,000/- represented on-money forming part of the consideration received on sale of the property, its source stood explained. It therefore had to form part of the sale consideration for computing capital gains instead of being independently assessed as unexplained money. The Revenue supported the assessment on the ground that the cash consideration was not disclosed in the regular books of account.

The Tribunal examined section 69A and observed that its application requires, among other conditions, that the assessee be found to be the owner of money, bullion, jewellery or another valuable article and that the nature and source should remain unexplained or the explanation should be unsatisfactory. In the present case, there was no dispute that the amount represented part of the consideration received for sale of the property. The identity of the purchaser was disclosed and the AO himself had treated the cash as received from the purchaser. The source of the money was therefore established. Consequently, section 69A could not be invoked merely because a portion of the sale consideration had been received in cash over and above the consideration declared in the registered instrument.

At the same time, the Tribunal noted that the assessee had computed long-term capital gains by adopting only INR 25 lakh, representing 25% of the registered consideration of INR 1 crore. His corresponding 25% share of INR 16,75,000/- in the INR 67 lakh on-money had remained excluded. Since the cash arose from sale of the jointly owned immovable property, it partook the character of sale consideration. The Tribunal therefore directed the AO to recompute LTCG by including INR 16,75,000/- as part of the sale consideration. Ground No. 4 was accordingly partly allowed.

For AY 2023-24, an addition of INR 36,66,666/- had similarly been made under section 69A, being Sandeep Kapoor’s one-third share of INR 1.10 crore on-money relating to property bearing No. C-411, Sushant Lok-1, Gurgaon. The registered consideration was INR 2 crore whereas the agreement to sale dated 01.04.2022 recorded INR 3.10 crore. Following its decision for AY 2021-22, the Tribunal directed inclusion of INR 36,66,666/- in sale consideration for computation of capital gains rather than assessment under section 69A.

The appeals of Shri Amarjeet Singh Kapoor involved corresponding additions arising from the same jointly owned properties. As both sides accepted that the issues were identical, the Tribunal applied its reasoning in Sandeep Kapoor’s appeal mutatis mutandis and directed recomputation of capital gains by incorporating the respective on-money amounts into total sale consideration. Grounds challenging reassessment or approval under section 148B on which no effective submissions were made were dismissed. All four appeals were ultimately partly allowed.

FULL TEXT OF THE ORDER OF ITAT DELHI

The captioned appeals are filed by two different Assessee arising out of the respective orders of ld. Commissioner of Income Tax (Appeals)-30, New Delhi [“Ld. CIT(A)”] passed under s. 250 of the Income Tax Act, 1961 [the Act] emanating from respective assessment orders passed by the Assessing Officer [“AO”] tabulated hereunder:

2. Since all the appeals filed by the respective assessee are having common, identical and similar issues, therefore, they are decided by a common order.

3. First we take appeal of the assessee in the case of Sandeep Kapoor in ITA No. 5647/Del/2025 [Assessment Year 2021-22].

ITA No. 5647/Del/2025 [Assessment Year 2021-22] [Sandeep Kapoor]

4. Brief facts of the case are that the assessee had e-filed his return of income u/s 139(1) on 15.03.2022, declaring total income of INR 2,18,58,700/-. The assessee is Director of M/s. Kapoor Waters Company Ltd. and a search and seizure action was carried out u/s 132 on 31.10.2022 on Johnson Watch & Kapoor Watch Group of cases and residential premises of the assessee was also covered. During the course of search, various loose papers and incriminating material were found and seized based on which the AO recorded the satisfaction and after obtaining the approval of Competent Authority, case of the assessee was re-opened by issue of notice u/s 148 on 16.05.2023. In response thereto, assessee filed return of income on 14.06.2023, declaring same income as was declared u/s 139(1) of the Act. Thereafter, notice u/s 143(2) followed by various notices u/s 142(1) alongwith the questionnaires were issued from time to time. The assessee filed replies and after considering the submissions made by the assessee and the entries found noted in the loose papers seized during the course of search, total income of the assessee was assessed at INR 2,68,16,550/- by making various additions.

5. Against the said order, assessee preferred first appeal before Ld. CIT(A), who after considering the submission made by the assessee, vide order dated 28.07.2025, has allowed substantial relief to the assessee and except the addition of INR 16,75,000/- made by AO u/s 69A of the Act, all the remaining additions were deleted.

6. Aggrieved by the order of Ld. CIT(A), assessee is in appeal before the Tribunal by taking various Grounds of appeal in present appeal.

7. Before us, no effective submissions were made in support of Ground of appeal Nos. 1 to 3 raised by the assessee therefore, the same are dismissed.

8. The only effective Ground of appeal No.4 raised by the assessee is with respect to confirmation of addition of INR 16,75,000/- made u/s 69A by holding that the said amount as unexplained receipt in the hands of the assessee.

9. Brief facts of the case are that the assessee alongwith two joint owners namely Shri Amarjeet Singh Kapoor and Shri Parvinder Singh Taneja jointly owned a property bearing No. C-213 [4th Floor], Sushant Lok-1, Gurgaon wherein assessee’s share was 25%. During the year under appeal, said property was sold for a consideration of INR 01.00 crore to Shri Pradeep Nandal. As per the agreement to sale found during the search, AO observed that this property was sold for total consideration of INR 1,67,00,000/- on 12.01.2021 and the Sale Deed was registered on 09.04.2021 for a total sale consideration of INR 01.00 crore. Therefore, the differential amount of INR 67.00 Lakhs was held as ‘on money’, received over and above the declared sale consideration and assessee’s share of 25% i.e. INR 16,75,000/- was treated as unexplained money u/s 69A of the Act.

10. Before us, Ld.AR for the assessee submits that since AO himself has treated the said sum as ‘on money’ and part of total sale consideration of the property sold by the assessee jointly with other two co-owners, therefore, the said amount should to be treated as part of sale consideration for the purpose of computing the income under the heard “Income from Capital Gains” and cannot be taxed u/s 69A of the Act as unexplained money. Ld. AR further submits that the source of the said money is explained as received from the buyer of the property and thus the provisions of section 69A are not applicable. He prayed accordingly.

11. On the other hand, Ld. CIT DR for the Revenue vehemently supported the orders of the lower authorities and submits that the assessee has received on money in cash from the sale of immovable property which was not disclosed in the regular books of accounts and therefore the same is unexplained money as per section 69A of the Act and requested for the confirmation of the action of AO in making the addition of the said sum u/s 69A of the Act.

12. Heard the contentions of both the parties at length and perused the material available on records. It is not in dispute that the assessee alongwith two other joint owners had received ‘on money’ of Rs. 67.00 lacs in cash in addition to the sale consideration declared in registered Sale Deed. Thus, the same cannot be deleted. However, it is observed that the AO made the addition u/s 69A for this on money by treating the same as unexplained money. Before going further, we first examine the provision of section 69A of the Act which reads as under:-

Unexplained money, etc.

69A. “Where in any financial year the assessee is found to be the owner of any money, bullion, jewellery or other valuable article and such money, bullion, jewellery or valuable article is not recorded in the books of account, if any, maintained by him for any source of income, and the assessee offers no explanation about the nature and source of acquisition of the money, bullion, jewellery or other valuable article, or the explanation offered by him is not, in the opinion of the Assessing Officer, satisfactory, the money and the value of the bullion, jewellery or other valuable article may be deemed to be the income of the assessee for such financial year.”

13. The provisions of section 69A are applicable in cases where the assessee is found to be the owner of any money, bullion, jewellery and other valuable article and same is not recorded in any books of accounts and the sources of such sum is not explained to the satisfaction of the AO. Thus, for making addition u/s 69A of the Act, following conditions should be satisfied:

(i) Ownership: The assessee must be found to be the owner of the money, bullion, jewellery, or other valuable article during the relevant financial year. Ownership here is not about mere possession; it means having full rights over the asset, such as the right to possess, enjoy, transfer, or use the asset for one’s own benefit. The Supreme Court has clarified that mere possession does not amount to ownership if the person does not have legal rights over the asset.

(ii) Not Recorded in Books: The asset must not be recorded in the books of account maintained by the assessee. If the asset is already accounted for, Section 69A cannot be applied;

(iii) Unsatisfactory Explanation: The assessee must either offer no explanation or an explanation that is not satisfactory to the Assessing Officer regarding the nature and source of the asset. The explanation must be credible and supported by evidence; otherwise, the addition can be made.

14. Section 69A of the Act is a deeming section and it is applicable only when all the aforesaid conditions are cumulatively found to exist. One of the important conditions to trigger the applicability of section 69A of the Act is that the assessee is found to be the owner of money, bullion, etc. or other valuable article in the financial year. The initial burden is on the Assessing Officer to establish that the assessee is the owner of the unexplained asset. This must be based on facts and evidence, not mere suspicion or presumption. Once ownership and non-recording are established, the burden shifts to the assessee to provide a satisfactory explanation for the asset’s source. If the explanation is reasonable and supported by evidence, no addition should be made.

15. In the instant case, as observed above, there is no dispute that the said amount was received as a part of sale consideration and the identity of the seller is also disclosed thus it cannot be said that the source of this sum is not explained, rather the AO himself has observed that assessee has received this cash from the buyer thus the source is duly accepted by the AO. Once the source is established, provision of section 69A cannot be invoked for making addition of sale consideration received over and above the declared sale consideration in cash.

16. It is further observed that assessee has declared LTCG from the sale of his 25% share in the said property. However, the sale consideration is taken at Rs. 25.00 lacs only (25% of Rs. 1.00 cr) and INR 16,75,000/- being 25% of on money of INR 67 Lakhs remained excluded while computing income from Capital gains. Since the on money of INR 67.00 lacs was jointly received by the assessee alongwith other two co-owners at the time of sale of immovable property owned by them, it partakes the character of sale consideration and thus, the same cannot be held as unexplained money as the source of the same is explained as from the buyer of the property whose whereabouts are mentioned in the sale deed. Therefore, the on money so received should to be treated part of the sale consideration and should be taxed as ‘Income from capital gain’ and the assessee should pay tax on LTCG from the sale of said property and not as income from other source u/s 69A of the Act. Accordingly, we allow Ground of appeal No.4 raised by the assessee and direct the AO to recompute the LTCG by considering the on- money of INR 16,75,000/- as part of sale consideration. The Ground of appeal No.4 raised by the assessee is thus partly allowed.

17. Ground of appeal No.5 raised by the assessee towards the validity of approval granted u/s 148B of the Act. Since no effective submission was made by Ld.AR in support of this ground of appeal, therefore, the same is hereby, dismissed.

18. In the result, appeal of the assessee is partly allowed. ITA No. 5648/Del/2025 [Assessment Year 2023-24] [Sandeep Kapoor]

19. Ground of appeal No.1 raised by the assessee is general in nature, hence not adjudicated.

20. Ground of appeal No.2 taken by the assessee is with respect to the addition of INR 36,66,666/- made u/s 69A of the Act being assessee’s 1/3 share in on money received of INR 1.10 crores from the sale of property bearing No.C-411, Sushant Lok-1, Gurgaon of which the Sale Deed was registered for a sum of INR 2.00 crore whereas in terms of “Agreement to Sale” dated 01.04.2022, the said property was sold for INR 3.10 crore by the assessee alongwith two joint owners having equal share. The AO made the addition for the assessee’s share of IRN 36,66,666/- as unexplained money u/s 69A r.w.s. 115BBE of the Act whereas the claim of the assessee is no addition should be made. In the alternate, assessee contended that the same should be treated as part of the sales consideration and should be added to the Capital gains declared by the assessee from the sale of subject property under the head “Income from Capital Gains”.

21. Before us, both the parties have agreed that the issue in hand is identical with the issue in ITA No.5647/Del/2025 for Assessment Year 2021-22 where under identical circumstances, the on moony received by the assessee was treated as unexplained money u/s 69A of the Act by the AO. While deciding the aforesaid appeal of the assessee in ITA No.5647/Del/2025, we have held that the on money received by the assessee should be treated sale consideration and should be taxed under the head “Income from capital gain” and not u/s 69A of the Act. Since facts are same, thus, by following the aforesaid observations in ITA No.5647/Del/2025 which are Mutatis Mutandis applicable to the facts of present case also, we direct the AO to recompute the income from Capital gains by including the on money of 36,66,666/- in the total value of sales consideration and charge tax as per the rates prescribed under the Act. The, Ground of appeal No.2 raised by the assessee is thus partly allowed.

22. Ground of appeal No.3 taken by the assessee is towards the validity of approval granted u/s 148B of the Act. Since no effective submission was made by Ld. AR in support of the ground of appeal, thus, the same is hereby, dismissed.

ITA No. 5649/Del/2025 [Assessment Year 2021-22] [Shri Amarjeet Singh Kapoor]

23. Ground of appeal No. 1 to 3 are with respect to the validity of initiation of reassessment proceedings u/s 147. Since no effective submission was made in support of these grounds of appeal, therefore, the same are hereby dismissed.

24. Ground of appeal No.4 is with respect to the addition made u/s 69A r.w.s. 115BBE of the Act of INR 16,75,000/- made towards the on money received from the sale of property jointly owned by assessee.

25. During the course of hearing before us, both the parties have fairly admitted that this issue is identical with the issue in ITA No.5647/Del/2025 for AY 2021-22 in the case of Shri Sandeep Kapoor who is the joint owner of the property and having 25% share in the property sold during the year. In the case of Shri Sandeep Kapoor, an addition of INR 16,75,000/- being 25% share was made u/s 69A r.w.s.115BBE of the Act as unexplained money. In the present case also, as the share of assessee is 25% in the said property, AO has made the addition of INR 16,75,000/- (being 25% of INR 67.00 lacs) u/s 69A r.w.s 115BBE of the Act.

26. While deciding the appeal of Shri Sandeep Kapoor in ITA No.5647/Del/2025, we have held that the on money received by the assessee should be treated sale consideration and should be taxed under the head “Income from capital gain” and not u/s 69A of the Act. Since facts are same, thus, by following the aforesaid observations in ITA No.5647/Del/2025 which are Mutatis Mutandis applicable to the facts of present case also, we direct the AO to recompute the income from Capital gains by including the on money of 16,75,000/- in the total value of sales consideration and charge tax as per the rates prescribed under the Act. The, Ground of appeal No.4 raised by the assessee is thus partly allowed.

27. Ground of appeal No.5 taken by the assessee is towards the validity of approval granted u/s 148B of the Act. Since no effective submission was made by Ld. AR in support of the ground of appeal, thus, the same is hereby, dismissed.

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

ITA No. 5650/Del/2025 [Assessment Year 2023-24] [Shri Amarjeet Singh Kapoor]

29. Ground of appeal No.1 raised by the assessee is general in nature, hence not adjudicated.

30. Ground of appeal No.2 raised by the assessee is with respect to the addition of INR 36,66,666/- made u/s 69A r.w.s. 115BBE of the Act for on money received from the sale of property jointly owned by the assessee.

31. During the course of hearing, both the parties have fairly admitted that this issue is identical with the case of Shri Sandeep Kapoor in ITA No. 5647/Del/2025 [AY 2021-22] who is one of the co- owner of the property under reference. In the case of Shri Sandeep Kapoor, addition was made u/s 69A r.w.s. 115BBE of the Act as unexplained money for his share in the subject property. In the instant case also, AO has made the addition u/s 69A r.w.s. 115BBE of the Act.

32. While deciding the appeal of Shri Sandeep Kapoor in ITA No.5647/Del/2025, we have held that the on money received by the assessee should be treated sale consideration and should be taxed under the head “Income from capital gain” and not u/s 69A of the Act. Since facts are same, thus, by following the aforesaid observations in ITA No.5647/Del/2025 which are Mutatis Mutandis applicable to the facts of present case also, we direct the AO to recompute the income from Capital gains by including the on money of 136,66,666/- to the total value of sales consideration and charge tax as per the rates prescribed under the Act. The, Ground of appeal No.2 raised by the assessee is thus partly allowed.

33. Ground of appeal No.3 taken by the assessee is towards the validity of approval granted u/s 148B of the Act. Since no effective submission was made by Ld. AR in support of the ground of appeal, thus, the same is hereby, dismissed.

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

35. In the final result, all appeals of the assessee in ITA Nos. 5647 & 5648/Del/2025 for Assessment Years 2021-22 & 2023-24 respectively, in the case of Shri Sandeep Kapoor and ITA Nos. 5649 & 5650/Del/2025 for Assessment years 2021-22 & 2023-24 respectively, in the case of Shri Amarjeet Singh Kapoor are partly allowed.

Order pronounced in the open Court on 29.04.2026.