Section 69 Property Addition Remanded for Fresh Verification: ITAT Mumbai

Hanoze Harish Thakkar Vs ITO (ITAT Mumbai)

Rs 2.22 Crore Property Addition Made Ex Parte: Mumbai ITAT Gives Assessee Another Opportunity, but Leaves the Merits Open

Summary: An addition of ₹2.22 crore under section 69 cannot be sustained merely by letting an ex parte assessment and an ex parte appellate order stand without examining the assessee’s explanation and supporting documents. At the same time, a remand does not mean that the investment has been accepted as explained. This is the position emerging from the Mumbai ITAT’s order in Hanoze Harish Thakkar v. ITO.

For AY 2014-15, the Assessing Officer completed the reassessment on 30 March 2022 without the assessee’s participation. Among other additions, the AO treated ₹2,22,66,300 invested in immovable property as unexplained investment under section 69. The assessee appealed, but the NFAC also disposed of the appeal ex parte on 18 December 2025, sustaining the additions. The matter then reached the Tribunal.

What Was Before the Tribunal?

The assessee had challenged additions relating to salary, interest, commission and estimated business income. However, at the hearing, the authorised representative did not press that ground. The Tribunal therefore dismissed it as not pressed. The Tribunal’s relief in this order must be read with that limitation: those additions were not examined or deleted on merits.

The assessee pressed the challenge to the property investment addition. His submission was that neither the AO nor the first appellate authority had examined the relevant facts and supporting material, as both proceedings had concluded ex parte. He sought an effective opportunity to place the documents and explanation concerning the source and nature of the investment before the AO.

There was also a separate grievance regarding TDS credit of ₹17,78,988. According to the assessee, the amount appeared in Form 26AS but had not been allowed in the tax computation attached to the reassessment order. This issue was raised through an additional ground filed before the Tribunal.

Additional Ground on TDS Admitted

The Tribunal admitted the additional ground relating to TDS credit. It noted that the ground arose from material already available on record and, following the principle laid down by the Supreme Court in National Thermal Power Co. Ltd. v. CIT [1998] 229 ITR 383 (SC), took it up for adjudication.

Admission of the ground, however, was only the first step. The Tribunal did not direct the AO to allow the entire ₹17,78,988 solely because it appeared in Form 26AS. It recognised that the claim required verification with reference to Form 26AS, the corresponding income offered to tax and other relevant records. The AO was directed to grant such credit as is admissible under law after that exercise and after giving the assessee a reasonable opportunity of hearing.

This distinction is relevant in practice. Form 26AS supports a TDS claim, but the year and income to which the deduction relates must also be examined. The Tribunal accordingly restored the matter for verification rather than deciding the quantum of credit itself.

Section 69 Addition Sent Back for Fresh Examination

On the property investment, the Tribunal noted that the assessment order and the NFAC’s appellate order had both been passed ex parte. The assessee had therefore not had an effective opportunity to place the relevant material and explanation before the authorities. In those circumstances, the Tribunal considered fresh verification and adjudication necessary.

It set aside the appellate order on the section 69 issue and restored the matter to the AO for de novo adjudication. The assessee was directed to furnish all relevant documentary evidence supporting the source and nature of the investment. The AO, in turn, was directed to examine that evidence in accordance with law, grant a reasonable hearing and pass a speaking order.

The relief is procedural, but consequential. An unexplained investment addition depends on what the evidence establishes about the investment and its source. Those questions were left for the AO to decide afresh. The Tribunal did not hold that the ₹2,22,66,300 was explained, nor did it approve the addition on merits.

Reopening Challenge Also Left Open

The assessee had separately challenged the validity of reopening under sections 147 to 151. The Tribunal did not rule on that challenge. It stated that the assessee would be at liberty to raise the legal contentions available to him in accordance with law and expressly recorded that it had not expressed any opinion on their merits.

Consequently, this order should not be cited as a ruling either upholding or invalidating the reopening. The operative directions concern fresh examination of the property investment and verification of the TDS claim. The appeal was partly allowed for statistical purposes.

Author’s Comments

The order gives the assessee a fresh opportunity, but also places the practical burden squarely on him. Before the AO, he must now produce a clear documentary trail for the property investment, explaining both its nature and the source of the funds. The AO is required to consider that material and give reasons for the conclusion reached; the earlier addition cannot simply be repeated without undertaking the examination directed by the Tribunal.

The TDS issue calls for a separate reconciliation of Form 26AS, the income offered in the relevant year and the credit claimed in the return or assessment computation. The Tribunal’s direction is to allow the credit that is legally admissible after verification, not to treat the Form 26AS figure as conclusive by itself.

The case illustrates a narrow but useful principle: where substantial additions survive through ex parte proceedings without examination of the assessee’s evidence, the Tribunal may restore the issues for a meaningful hearing. That opportunity is valuable only if the assessee uses it to put the complete facts and documents on record.

Cases Discussed/Relied Upon

• National Thermal Power Co. Ltd. v. CIT [1998] 229 ITR 383 (SC)

FULL TEXT OF THE ORDER OF ITAT MUMBAI

The present appeal is filed by the assessee against the order dated 18/12/2025 passed by the National Faceless Appeal Centre (“NFAC”), Delhi, [hereinafter referred to as “Ld.CIT(A)”] for Assessment Year 2014-15 on following grounds of appeal:

“1. In the facts and circumstances of the case and law, the Learned Commissioner of Income Tax (Appeals) [hereinafter also referred to as the CIT(A)] has erred in upholding the action of the Ld. Assessing Officer who erred in making following additions solely and merely based on Form 26A disregarding the factual and legal matrix of the case:

2. In the facts and circumstances of the case and law, the Learned CIT(A) has erred in upholding the action of the Ld. Assessing Officer who erred in making addition of Rs. 2,22,66,300/- alleging the investment in immovable property as unexplained investment under section 69 of the Income Tax Act, 1961; disregarding the factual and legal matrix of the case.

3. In the facts and circumstances of the case and law, the Learned CIT(A) has erred in upholding the action of the Ld. Assessing Officer without granting adequate and sufficient opportunity of being heard.

4. In the facts and circumstances of the case and law, the Learned CIT(A) has erred in upholding the action of the Ld. Assessing Officer who erred in reopening the assessment in gross violation of the provisions of section 147 to section 151 of the Income Tax Act, 1961.

5. The appellant craves leave to add, alter, delete or modify all or any of the above grounds of appeal.

All the above grounds are without prejudice to each other.”

2. The assessee has also filed an application dated 21/06/2026 seeking admission of following additional ground:

“In the facts and circumstances of the case and in law, the Ld. Commissioner of Income Tax (Appeals) has erred in upholding the action of the Ld. Assessing Officer who erred in not granting the credit to tax deducted at source to the tune of Rs. 17,78,988/- in the tax computation sheet (as annexed with the impugned assessment order, despite it being duly reflected in Form 26AS and there being no adverse inference made in the impugned order of re-assessment; thereby grossly violating the provisions of section 198, 199 and 205 of the Act.”

2.1 It is submitted that the aforesaid additional ground is legal in nature and arises from the material already available on record. Considering the nature of the ground and respectfully following the principles laid down by Hon’ble Supreme Court in the case of National Thermal Power Co. Ltd. v. CIT [1998] 229 ITR 383 (SC), we admit the additional ground for adjudication.

Brief facts of the case are as under:-

3. Assessment for the year under consideration was completed by the Ld.AO vide order dated 30/03/2022. The assessment was passes ex parte by the Ld.AO. In the said assessment, the Ld.AO made addition of Rs. 2,22,66,300/- u/s. 69 of the Act towards alleged unexplained investment in immovable property, apart from additions under various other heads.

Aggrieved by the Ld.AO, the assessee preferred appeal before the Ld.CIT(A).

4. The Ld.CIT(A) also passed ex parte, thereby sustaining the additions made by the Ld. AO.

Aggrieved by the Ld.CIT(A), the assessee preferred appeal before this Tribunal.

5. At the outset, the Ld.AR submitted that Ground No.1 is not pressed.

Accordingly, Ground No. 1 raised by the assessee is dismissed as not pressed.

6. In respect of Ground No. 2, the Ld.AR submitted that the addition of Rs. 2,22,66,300/- u/s. 69 of the Act was sustained without examining relevant facts and supporting material, as both the assessment as well as the first appellate proceedings were concluded ex parte. It was submitted that the assessee may be granted one effective opportunity to place the relevant documents and explanations before the Ld. AO for proper adjudication of the issue.

6.1. In respect of the additional ground, the Ld.AR submitted that TDS amounting to Rs. 17,78,988/-, though duly reflected in Form 26AS, has not been granted credit in the computation forming part of the assessment order. It was submitted that the issue requires verification from the records and appropriate credit ought to be granted in accordance with law.

6.3 The Ld. DR relied upon the orders passed by the authorities below.

We have perused the submissions advanced by both sides in light of the record placed before us.

7. Admittedly, the assessment order dated 30/03/2022 was passed ex parte. The appeal preferred by the assessee was also disposed of ex parte by the Ld. CIT(A)/NFAC vide order dated 18/12/2025. Insofar as Ground No. 2 is concerned, the addition of Rs. 2,22,66,300/- is made u/s. 69 of the Act on account of alleged unexplained investment in immovable property. Considering the fact that the assessee did not have an effective opportunity to place the relevant material and explanations before the authorities below, in our considered opinion, the issue requires fresh verification and adjudication by the Ld. AO.

7.1 We, therefore, set aside the impugned order on this issue and restore Ground No. 2 to the file of the Ld. AO for de novo adjudication. The assessee is directed to place all relevant documentary evidence in support of the source and nature of the investment before the Ld. AO. The Ld. AO shall examine the same in accordance with law and pass a speaking order after granting reasonable opportunity of being heard to the assessee.

Accordingly, Ground No. 2 is allowed for statistical purposes.

8. Coming to the additional ground relating to non-grant of TDS credit of Rs. 17,78,988/-, the issue is essentially one requiring verification of the credit appearing in Form 26AS and its allowability in accordance with the provisions of the Act. Accordingly, the Ld.AO is directed to verify the TDS credit claimed by the assessee with reference to Form 26AS, the corresponding income offered to tax and other relevant records and thereafter grant credit of such TDS as is admissible in accordance with law. Needless to say, the assessee shall be afforded reasonable opportunity of being heard.

Accordingly, the additional ground raised by the assessee is allowed for statistical purposes.

9. Insofar as Ground No. 4 challenging the validity of reopening u/s. 147 to 151 of the Act is concerned, the assessee shall be at liberty to raise all legal contentions available to it in accordance with law. We have not expressed any opinion on the merits of such contentions.

In the result, the appeal filed by the assessee is partly allowed for statistical purposes.

Order pronounced in the open court on 25-09-2026.