Girishkumar C Amin HUF Vs ITO (ITAT Ahmedabad)
Karta’s Bank Account Explains HUF’s Property Purchase: ITAT Deletes ₹30 Lakh Addition
Explained Funds Cannot Become Unexplained Merely Because the Karta Paid
The Ahmedabad ITAT deleted an addition of ₹30 lakh under Section 69, holding that the source of a property investment made by an HUF stood explained through its Karta’s personal bank account. The Tribunal found that the purchase consideration had been paid directly to the sellers through cheques, the Karta had sufficient funds, and the supporting documents were already available before the Assessing Officer.
The ruling recognises that a Karta is not prohibited from advancing funds to an HUF. On the facts of this case, the absence of a separate HUF bank account when the property was purchased did not justify treating the investment as unexplained.
Property Purchase Triggered Reassessment
The assessee was a Hindu Undivided Family. Information available with the Department indicated that it had purchased a commercial property for ₹30 lakh during the previous year relevant to AY 2018-19. Since the HUF had not filed its original return, reassessment proceedings were initiated.
In response to the notice under Section 148, the assessee filed a return on 25 July 2022, declaring total income of ₹1,000.
The registered purchase deed dated 5 March 2018 recorded the acquisition of the property from three co-owners for ₹30 lakh. When asked to explain the investment, the assessee stated that the property had subsequently been sold on 20 March 2018 for the same consideration and furnished an Andhra Bank statement.
The Assessing Officer noticed that this bank account had been opened only on 7 June 2018, after the property transactions. Concluding that the source of the purchase consideration had not been substantiated, the officer added the entire ₹30 lakh under Section 69 and taxed it at the rate specified in Section 115BBE.
First Appeal Failed for Non-Compliance
The assessee challenged the assessment before the National Faceless Appeal Centre. However, the CIT(A) recorded that the appellate notices remained uncomplied with.
Consequently, the CIT(A), by an order dated 18 November 2025, confirmed the ₹30 lakh addition and dismissed the appeal. The assessee then approached the Tribunal, challenging both the validity of the reassessment proceedings and the addition on merits.
Karta’s Personal Records Established the Funding Trail
Before the Tribunal, the assessee explained that the HUF did not have an independent bank account when it purchased the property. The consideration had therefore been paid by Shri Girish C. Amin, the Karta, directly from his individual bank account.
The supporting paper book contained the Karta’s personal income tax return for AY 2018-19, his bank statements showing cheque payments to the property sellers, and audited financial statements of M/s. Amin Enterprise, a partnership firm in which he held partnership capital.
These documents were relied upon to demonstrate both the actual payment trail and the Karta’s financial capacity.
The assessee also submitted that the property’s purchase and sale at the same price resulted in nil capital gain or loss. It further disputed an initial financial transaction reporting figure of ₹90 lakh, describing it as duplicate reporting. However, the Tribunal’s decisive reasoning concerned the documentary explanation of the ₹30 lakh investment.
Tribunal Finds the Source Explained
The Revenue defended the addition, emphasising that an HUF is a distinct taxable entity and that the assessee had furnished a bank account opened after the transaction.
The Tribunal nevertheless found that the registered purchase deed established payment of the ₹30 lakh consideration through cheques. It accepted that the HUF had no separate bank account on the purchase date and that the required funds had been provided directly from the Karta’s personal account.
Crucially, the Tribunal examined the Karta’s bank statement and found sufficient funds available. It also recorded that the same facts and documents had been placed before the Assessing Officer through a letter dated 18 November 2022.
Thus, the explanation was supported by material already on record. The Tribunal accepted the assessee’s contention and deleted the entire ₹30 lakh addition under Section 69.
Reassessment Grounds Remain Undecided
The Tribunal allowed Grounds 3 and 4 concerning the addition on merits. Having deleted the addition, it dismissed the grounds challenging the validity of reassessment as infructuous.
The appeal was accordingly partly allowed. This outcome represents substantive relief against the addition; it does not amount to a ruling either upholding or invalidating the reassessment proceedings.
Author’s Comments
The decision highlights the importance of examining the actual source of funds, particularly where an HUF’s investment is funded through its Karta. The separate taxable status of the HUF did not, by itself, displace the evidence showing who paid the sellers and whether sufficient funds were available.
Equally significant is the Tribunal’s finding that the supporting explanation and documents had already been submitted during assessment. A bank account opened after the transaction could not establish the original payment source, but the Karta’s contemporaneous bank records supplied that evidence.
The practical lesson is clear: a documented funding trail and demonstrated financial capacity can establish the source of an HUF’s investment, even when payment is made directly from the Karta’s personal account. The deletion rested on those verified facts, rather than merely on the property’s subsequent resale at the same price.
FULL TEXT OF THE ORDER OF ITAT AHMEDABAD
1. The present appeal has been preferred by the Assessee against the Order, dated 18/11/2025, passed by the National Faceless Appeal Centre (NFAC), Delhi [hereinafter referred to as the ‘CIT(A)’] whereby the Learned CIT(A) had dismissed the appeal against the Assessment Order, dated 14/03/2023, passed under Section 147 read with Section 144 of the Income Act, 1961 [hereinafter referred to as ‘the Act’] for the Assessment Year 2018-2019.
2. The Assessee has raised the following grounds of appeal:
1. That the Ld. CIT(A) has erred in law and on facts in upholding the assessment order passed by the AO where the AO has assumed jurisdiction and completed the assessment under section 147 read with section 144B of the Act without satisfying the mandatory conditions prescribed under law.
2. That the Initiation of proceedings u/s 148 and passing of order u/s 148A(d) which are upheld by the Ld. CIT(A) are bad in law, mechanical and based on incorrect and non-existing facts, thereby rendering the entire reassessment proceedings void ab initio.
3. That the Ld. CIT(A) has erred in law and on facts by upholding the order passed by the AO where the AO has treated the purchase consideration of ₹30,00,000/- as unexplained investment u/s 69 of the Act. The Ld. AO failed to appreciate that the transaction of purchase and sale of property was duly supported by registered documents, bank transactions, and the investment was made from the personal savings of the Karta of the HUF who is a person regularly assessed to tax. In view of this, the addition upheld of 230,00,000/- is prayed to be deleted
4. That the addition upheld by the Ld. CIT(A) of ₹30,00,000/- was made by the AO merely on suspicion and surmises without bringing any cogent material on record to prove that the appellant had made any unexplained investment out of undisclosed sources in view of this, the addition upheld of ₹30,00,000/- is prayed to be deleted
3. The relevant facts in brief are that the Assessee in the present case if Hindu Undivided Family (HUF). On the basis of information to the effect that during the Previous Year 2017-2018 (relevant to Assessment Year 2018-2019), the Assessee had purchased immovable commercial property for a total consideration of INR.30,00,000/-. Since the Assessee had not filed original return of income for the relevant assessment year, reassessment proceedings were initiated in the case of the Assessee. In response to the notice issued under Section 148 of the Act, the Assessee filed return of income on 25/07/2022 declaring a total income of INR.1,000/-. During the course of reassessment proceedings, the Assessing Officer examined the registered Purchase Deed, dated 05/03/2018, which disclosed that the Assessee had purchased immovable property from co-owners (Smt. Chhama Sachin Surve, Smt. Santoshkaur Kaushalkumar Shah, and Smt. Khushbu Nileshkumar Patel) for a total consideration of INR.30,00,000/-. When called upon to explain the source of the purchase consideration, the Assessee replied that the property was purchased and subsequently re-sold within 7–15 days at the exact same price of INR.30,00,000/- on 20/03/2018, and in support produced a bank statement of Andhra Bank. The Assessing Officer noted that the aforesaid bank account was opened on 07/06/2018 (post-transaction) and held that the Assessee had failed to substantiate the source of investment. Accordingly, the Assessing Officer treated the entire purchase consideration of INR.30,00,000/- as unexplained investment under Section 69 of the Act and brought the same to tax vide Assessment Order, dated 14/03/2023, at the rate of specified in Section 115BBE of the Act.
4. Being aggrieved, the Assessee preferred appeal before the Learned CIT(A) which was disposed vide Order, dated 18/11/2025. The Learned CIT(A) observed that notices issued to the Assessee remained uncomplied with, and therefore, the Learned CIT(A) confirmed the addition of INR.30,00,000/- under Section 69 of the Act while dismissing the appeal.
5. Now the Assessee has preferred the present appeal before this Tribunal.
6. During the course of the hearing it was submitted by the Learned Authorised Representative for the Assessee that the Assessee did not possess a separate bank account at the time of purchase of the immovable property on 05/03/2018. The purchase consideration of INR.30,00,000/- was directly paid by Shri Girish C. Amin, Karta of the Assessee/HUF from his individual bank account. The Learned Authorised Representative for the Assessee drew our attention to the paperbook (Pages 27 to 39) containing (i) the Personal Income Tax Return of Karta for AY 2018-19, showing that he was a regular tax payer, (ii) Personal Bank Statements of the Karta showing payment by cheque directly to property sellers, and (iii) Audited Financial Statements of M/s. Amin Enterprise, a partnership firm, in which Karta held partnership capital to establish liquidity and financial capacity. It was submitted that the property was acquired on 05/03/2018 for INR.30,00,000/- and sold on 20/03/2018 (within 15 days) at the exact same consideration of INR.30,00,000/-, resulting in ‘Nil’ capital gain/loss. The initial financial transaction reporting of INR.90,00,000/- referred to by the Assessing Officer was incorrect and duplicate reporting. Since the source of fund stood explained; and payments for purchase were make through banking channels; Section 69 of the Act had no application whatsoever.
7. Per Contra, Learned Departmental Representative strongly supported the orders of the Assessing Officer and Learned CIT(A). It was submitted that HUF is a distinct legal and taxable entity under the Act. Before the Assessing Officer, the Assessee furnished a bank account of Andhra Bank which was opened post property transaction, and failed to submit satisfactory evidence of source of funds during assessment and first appellate proceedings. Hence, the addition made under Section 69 of the Act was justified.
8. We have carefully considered the rival submissions, perused the material available on record, examined the statutory provisions, and verified the documentary evidence placed in the comprehensive paper-book.
9. A perusal of the registered Purchase Deed, dated 05/03/2018, establishes that the immovable property was purchased for INR.30,00,000/- paid by way of cheques. It is an admitted fact that as on 05/03/2018, the the Assessee/HUF did not have an independent/separate bank account (which was subsequently opened on 07/06/2018). The actual funds required for purchase of immovable property were provided by Shri Girish C. Amin, Karta of the HUF, directly from his personal bank account. A Karta is not prohibited from advancing funds to the HUF. Perusal of the bank statement of Karta shows that sufficient funds were available. We note that identical facts/documents were placed before the Assessing Officer vide Letter, dated 18/11/2022. Thus, the stand taken by the Assessee is supported by the material on record. Accordingly, accepting the contention of the Assessee, we delete the addition of INR.30,00,000/- made by the Assessing Officer under Section 69 of the Act. Accordingly, Ground Nos. 3 and 4 raised by the Assessee are allowed. Since we have deleted the addition on merits, Ground Nos. 1 and 2 challenging validity of reassessment proceedings are dismissed as infructuous.
10. In result, present appeal preferred by the Assessee is partly allowed.
Order pronounced on 28.09.2026
