Javadsha Hasmukhray Varaiya Vs ITO (ITAT Mumbai)
Flat Agreement Signed in One Year, Payments Made Over Eight Years: ITAT Deletes ₹28.28 Lakh Addition and Orders Limited Verification
The Entire Flat Price Was Added in One Year
The assessee had jointly agreed with his wife, Smt. Kavita Varaiya, to purchase a flat from Runwal Developers Pvt. Ltd. The agreement was dated 24 December 2009 and recorded total consideration of ₹47,81,250.
The assessee had not filed a return for Assessment Year 2010–11. Acting on information available through the Non-Filer Monitoring System/AIR, the Assessing Officer initiated reassessment. As there was no effective compliance with the notices, he completed an ex parte assessment under sections 144 read with 147 and treated the entire agreement value of ₹47,81,250 as unexplained investment under section 69.
Before the Commissioner (Appeals), the assessee explained that the flat had been purchased jointly, that its price was paid in instalments over several financial years, and that some payments came from his wife’s bank accounts. The Commissioner (Appeals) called for a remand report but ultimately confirmed the full addition, holding that the respective contributions of the joint owners had not been conclusively established.
The issue before the Tribunal was therefore whether the agreement value could be treated as an investment made by this assessee in Financial Year 2009–10.
An Agreement Is Not Proof That the Whole Price Was Paid
The assessee pointed out that, although the purchase agreement was registered in December 2009, payments continued until Financial Year 2016–17. According to the year-wise details placed before the Tribunal, only ₹19,53,300 was paid during Financial Year 2009–10, relevant to the assessment year under appeal.
The Tribunal accepted the importance of this distinction. Section 69 requires identification of an investment actually made in the relevant financial year and the person who made it. The execution of an agreement recording a total price does not, by itself, establish that the entire amount was invested in that year.
Here, the payment details showed that ₹28,27,950 of the agreement value related to subsequent financial years. The Tribunal held that this balance could not be assessed under section 69 in Assessment Year 2010–11 merely because the agreement had been executed during Financial Year 2009–10. It directed deletion of the ₹28,27,950 addition.
That was final relief in this appeal: the Assessing Officer was expressly barred from reopening or re-examining this deleted portion in the proceedings restored to him.
Who Paid the Remaining ₹19.53 Lakh?
The payments made during Financial Year 2009–10 required a separate inquiry. They comprised ₹2,00,000 paid on 8 April 2009, and ₹4,45,000 and ₹13,08,300 paid on 8 May 2009.
The assessee contended that all three payments came from his wife’s bank accounts, using her own funds. According to her affidavit, the payments of ₹2,00,000 and ₹13,08,300 came from capital withdrawn from Riddhi Siddhi Corporation, her sole proprietorship, while ₹4,45,000 came from accumulated savings or an existing bank balance. The assessee’s affidavit stated that he had supplied no funds for these payments and began contributing towards the property only in later years.
The Tribunal found prima facie support for this explanation in the affidavits, bank statements and payment schedule. However, it also noted that the Assessing Officer had not examined the complete source and bank trail, particularly the capital withdrawals from the proprietary concern. It admitted the documents as additional evidence and restored this part of the dispute for verification.
Strict Limits on the Fresh Inquiry
The Assessing Officer may verify the wife’s bank statements, the capital account and books of her proprietary concern, and the developer’s receipts or ledger confirmation. The inquiry must remain confined to the three payments totalling ₹19,53,300.
The Tribunal gave a clear direction on attribution. If verification establishes that the wife paid this amount from her own explained and identifiable sources, no addition can survive in the assessee’s hands. An addition against him would require positive material showing that some part of the money actually came from him or was routed through his wife’s account. Joint ownership alone is insufficient to attribute her investment to him.
The appeal was partly allowed for statistical purposes: ₹28,27,950 was deleted, while ₹19,53,300 remains subject to limited verification.
Author’s Comments
The ruling separates two questions that are easily conflated when a property agreement is found in a particular year: when was the money invested, and whose money was it? Neither question can be answered from the agreement value alone.
For an instalment purchase, a year-wise payment schedule can prevent later payments from being pulled into an earlier assessment year. Where spouses purchase jointly, the bank trail and underlying source records become equally important. A payment from one spouse’s account is relevant evidence, but the Assessing Officer may still examine whether that spouse independently funded it.
The result in this case should be stated precisely. The assessee has secured outright deletion of ₹28,27,950 because those payments belonged to later years. He has not yet secured deletion of the remaining ₹19,53,300. That outcome depends on the limited source verification ordered by the Tribunal.
FULL TEXT OF THE ORDER OF ITAT MUMBAI
The aforesaid appeal has been preferred by the assessee against the order dated 24.04.2026 passed by the National Faceless Appeal Centre, Delhi, for Assessment Year 2010–11, arising from the assessment order dated 14.12.2017 passed under section 144 read with section 147 of the Income-tax Act, 1961. The principal grievance raised by the assessee relates to the confirmation of addition of ₹47,81,250 made by the Assessing Officer under section 69 of the Act as unexplained investment in an immovable property purchased from M/s Runwal Developers Pvt. Ltd.
2. The relevant facts, in brief, are that the assessee had not filed his return of income for the year under consideration. On the basis of information available under the Non-Filer Monitoring System/AIR, the Assessing Officer noticed that the assessee had entered into an agreement dated 24.12.2009 with M/s Runwal Developers Pvt. Ltd. for purchase of an immovable property having an aggregate consideration of ₹47,81,250. Since there was no effective compliance with the notices issued during the reassessment proceedings, the Assessing Officer completed the assessment ex parte under section 144 read with section 147 and treated the entire agreement value as unexplained investment under section 69. Before the learned CIT(A), the assessee submitted that the property had been purchased jointly with his wife, Smt. Kavita Varaiya, that the consideration was discharged in instalments extending over several financial years and that certain payments were made from her bank accounts. The learned CIT(A) called for a remand report; however, principally taking note of the assessee’s failure to furnish complete evidence before the Assessing Officer and holding that the respective contributions of the joint owners had not been conclusively established, confirmed the entire addition of ₹47,81,250.
3. Before us, the learned counsel submitted that the approach adopted by the Assessing Officer in treating the entire agreement value as investment made during the relevant previous year is factually untenable. She pointed out that, although the agreement for purchase of the flat was registered on 24.12.2009, the consideration was payable in instalments and the payments continued up to Financial Year 2016–17. During Financial Year 2009–10, relevant to the assessment year under consideration, payments aggregating only to ₹19,53,300 were made and even these payments did not emanate from the assessee but were made exclusively by his wife, Smt. Kavita Varaiya, from her respective bank accounts. The particulars furnished before us are tabulated below:
| Financial year | Date of payment | Bank account | Amount | Stated source |
|---|---|---|---|---|
| 2009–10 | 08.04.2009 | Vijaya Bank A/c No. 50120100003312 | ₹2,00,000 | Capital withdrawal from Riddhi Siddhi Corporation |
| 2009–10 | 08.05.2009 | Vijaya Bank A/c No. 503501010009855 | ₹4,45,000 | Accumulated savings/bank balance |
| 2009–10 | 08.05.2009 | Vijaya Bank A/c No. 50120100003312 | ₹13,08,300 | Capital withdrawal from Riddhi Siddhi Corporation |
| Total | ₹19,53,300 |
4. The learned counsel further relied upon separate affidavits of the assessee and his wife. Smt. Kavita Varaiya has affirmed that she was one of the joint purchasers of the property; that the consideration was paid over the period commencing from Financial Year 2009–10 and extending up to Financial Year 2016–17; that the entire sum of ₹19,53,300 paid during the year under consideration was paid by her from her independent funds; and that no part thereof was received from or belonged to the assessee. She has further affirmed that these payments were made out of her accumulated savings and capital withdrawn from Riddhi Siddhi Corporation, of which she was the sole proprietor. The assessee has likewise affirmed that he had not provided any funds to his wife for the payments made during Financial Year 2009–10 and that his own payments towards the property commenced only in the subsequent assessment years. Copies of the relevant bank statements and year-wise payment charts have also been placed on record. The learned Departmental Representative, however, relied upon the orders of the authorities below and submitted that these material particulars and the complete evidence explaining the sources of the three payments were not furnished before the Assessing Officer and, therefore, require verification.
5. We have heard the rival submissions and perused the material available on record. The addition under section 69 has been made solely by taking the aggregate consideration mentioned in the agreement dated 24.12.2009 as the amount invested by the assessee during Financial Year 2009–10. This inference cannot be sustained. Section 69 operates with reference to an investment which is found to have been made by the assessee in the financial year immediately preceding the relevant assessment year and which is either not recorded in the books of account, if any, maintained by him or the nature and source whereof is not satisfactorily explained. Thus, before the deeming fiction contained therein can be invoked, it is necessary to identify both the investment actually made during the relevant financial year and the person by whom such investment was made. The mere execution or registration of an agreement specifying an aggregate consideration does not establish that the entire consideration stood paid or invested during that financial year, particularly where the agreement contemplates instalment-wise payments and the contemporaneous banking record indicates that payments continued over several subsequent years.
6. In the present case, the year-wise details placed before us show that, as against the total agreement value of ₹47,81,250, the amount paid during Financial Year 2009–10 was only ₹19,53,300. The remaining consideration was discharged in subsequent financial years and, therefore, cannot be regarded as an investment made during the previous year relevant to Assessment Year 2010–11. Section 69 does not permit the entire value of an asset to be brought to tax in one assessment year merely because the agreement for its acquisition was executed in that year, when the consideration was in fact paid in instalments spread over different years. Each payment has necessarily to be examined in the assessment year in which the corresponding investment was actually made. Consequently, the addition representing the balance amount of ₹28,27,950, which pertains to payments made in subsequent years, falls outside the relevant previous year and is directed to be deleted.
7. Insofar as the amount of ₹19,53,300 paid during Financial Year 2009–10 is concerned, the assessee has now produced material to show that the three payments aggregating to the said amount were made entirely by his wife from her bank accounts. The affidavits of the assessee and his wife are consistent on this aspect. The wife has not only accepted having made the payments but has also identified their sources as accumulated savings and capital withdrawals from her proprietary concern, Riddhi Siddhi Corporation. The bank statements and payment schedule furnish prima facie support to this explanation. At the same time, it is an admitted position that the complete evidence explaining the immediate and ultimate sources of these payments, particularly the capital withdrawals from the proprietary concern, was not examined by the Assessing Officer. Since these documents go to the root of the addition and are necessary for determining whether any investment made during the relevant year can at all be attributed to the assessee, they are admitted as additional evidence. However, elementary fairness requires that the Assessing Officer be afforded an opportunity to verify them.
8. Accordingly, the issue is restored to the file of the Assessing Officer for the limited purpose of verifying the source and bank trail of the three payments aggregating to ₹19,53,300 made during Financial Year 2009–10. The Assessing Officer shall verify whether the payments of ₹2,00,000 and ₹13,08,300 were made from capital withdrawn by Smt. Kavita Varaiya from her proprietary concern, Riddhi Siddhi Corporation, and whether the payment of ₹4,45,000 was made out of the pre-existing balance or accumulated savings in her bank account. He may, for this limited purpose, examine the relevant bank statements, capital account, books or other supporting records of the proprietary concern and the receipts or ledger confirmation of M/s Runwal Developers Pvt. Ltd. The scope of the restored proceedings shall remain confined to ₹19,53,300 and the Assessing Officer shall not reopen or re-examine the balance addition of ₹28,27,950, which stands deleted since the corresponding investments were made in subsequent financial years.
9. If, upon verification, it is found that ₹19,53,300 was paid by Smt. Kavita Varaiya from her own explained and identifiable sources, no addition shall survive in the hands of the assessee. Any addition in the assessee’s hands can be sustained only to the extent that positive material establishes that any part of the said payment in fact emanated from him or represented his investment routed through the account of his wife. Mere joint ownership of the property, by itself, would not justify attribution of the wife’s independently sourced investment to the assessee. The assessee shall furnish the requisite documents and extend due cooperation, and the Assessing Officer shall decide this limited issue after granting an adequate opportunity of being heard. Thus, out of the total addition of ₹47,81,250, the addition of ₹28,27,950 is deleted, whereas the issue relating to ₹19,53,300 is restored solely for verification in the terms indicated above.
10. In the result, the appeal of the assessee is partly allowed for statistical purposes.
Order pronounced on 26th September, 2026.
