Vishal Rameshbhai Sorathiya Vs ITO (ITAT Rajkot)
Property On-Money Addition Restricted to 10%; Retained Amount Taxable at Normal Rates: Rajkot ITAT
The decision in ITA No. 485/RJT/2026, concerning Assessment Year 2020-21, was pronounced on 7 October 2026 by Dr. Arjun Lal Saini, Accountant Member, and Shri Sonjoy Sarma, Judicial Member.
The relief followed the Tribunal’s earlier decision in Nitaben Kirtikumar Parekh v. ITO, ITA No. 506/Rjt/2026, which both the Bench and the assessee’s representative considered applicable to the dispute.
Background: Search Material from the R.K. Group
The assessee filed his original return under section 139(4) on 31 March 2021, declaring total income of ₹3,19,460.
Subsequently, information arising from a search conducted on 24 August 2021 in the cases of the R.K. Group of Rajkot and its associates led to reopening of the assessment. A notice under section 148 dated 21 March 2024 was issued and served, but the assessee did not file a return in response.
The departmental information included digital data and Miracle accounting software files recovered from the premises of Shri Girish Vanjani, an accountant associated with the group.
According to the assessment narrative reproduced in the order, these files contained systematic records of both accounted and unaccounted transactions relating to property projects. The data allegedly used coded amounts, with decimals inserted before the last two digits, and dates backdated by ten years to conceal the actual transactions.
Alleged Cash Payment and Assessment
On examining the ledger for the “R.K. Prime” project, the Department identified the assessee as purchaser of office unit No. RKP-817 and alleged payment of ₹3,98,000 as cash on-money.
The Assessing Officer considered the seized data corroborated because the ledger also contained banking entries corresponding to transactions reflected in the registered sale deed. Statements recorded from Shri Girish Vanjani and Shri Sarvanand Sonwani were also relied upon as confirmation that the software recorded unaccounted cash transactions.
Notices under section 142(1) and a show-cause notice dated 6 February 2025 called upon the assessee to explain the source of the alleged payment.
Although the assessee denied paying cash on-money, the Assessing Officer recorded that no satisfactory explanation or supporting evidence had been furnished. The amount was consequently added as unexplained money under section 69A read with section 115BBE.
The assessment under section 147 read with section 144, dated 15 March 2025, determined income at ₹7,17,460, against the originally returned ₹3,19,460.
First Appeal and Arguments Before the Tribunal
The assessee challenged the assessment before the CIT(A), National Faceless Appeal Centre. His appeal was dismissed by order dated 24 February 2026.
Before the Tribunal, the assessee’s representative submitted that the addition was unjustified on facts and in law and sought its deletion. The Revenue supported the orders of the lower authorities and argued that no interference was warranted.
During the hearing, the assessee’s representative also fairly submitted that the issue was covered by Nitaben Kirtikumar Parekh.
The present order does not reproduce the detailed reasoning of that earlier decision. It records that the Tribunal had granted partial relief on similar facts and proceeds to apply that approach.
Tribunal’s Findings and Relief
The Tribunal held that the issue was similar to the one considered in Nitaben Kirtikumar Parekh. Respectfully following that decision and considering the similarity of circumstances, it restricted the addition to 10% of ₹3,98,000.
The retained addition was therefore ₹39,800, resulting in relief of ₹3,58,200.
The Tribunal further directed that, considering the nature of the addition, the retained amount should be taxed under the normal provisions of the Act and not under section 115BBE.
Although the description of the precedent refers to “10% of the disclosed income”, the operative computation in this case is unambiguous: 10% was applied to the disputed ₹3,98,000 amount, rather than to the assessee’s returned income.
Decision
The appeal was partly allowed. This was substantive reduction of the addition, accompanied by relief from section 115BBE taxation on the retained amount.
The Tribunal did not delete the entire addition, quash the reopening or remand the dispute. Nor did it separately determine that the seized ledger and statements were inadmissible or that the alleged payment had been disproved.
Author’s Comments
The decision provides substantial relief, but its reasoning is brief and rests primarily on following an earlier Tribunal decision.
A significant distinction remains between the Assessing Officer’s findings concerning corroboration of the seized ledger and the Tribunal’s ultimate decision to retain only 10%. The Tribunal did not undertake a detailed discussion explaining why that percentage represented the appropriate taxable amount.
Accordingly, the order should be cited for its precise outcome: on the similar facts accepted before it, the Bench restricted the addition to 10% and directed normal taxation. It should not be expanded into a universal rule that only 10% of every property on-money payment is taxable.
For application in another case, the reasoning and factual foundation of Nitaben Kirtikumar Parekh would be particularly relevant, since that precedent supplies the principal basis for the relief granted here.
Cases Discussed
- Nitaben Kirtikumar Parekh v. ITO (ITAT Rajkot; ITA No. 506/Rjt/2026)
FULL TEXT OF THE ORDER OF ITAT RAJKOT
Captioned appeal filed by the assessee, pertaining to Assessment Year (AY) 2020-21, is directed against the order under section 250 of the Income-tax Act, 1961 [hereinafter referred to as ‘the Act’] passed by the National Faceless Appeal Centre [hereinafter referred to as ‘NFAC’], dated 24.02.2026, which in turn arises out of an order passed by assessing officer u/s. 147 r.w.s. 144 of the Act, dated 15.03.2025.
02. Brief facts of the case that the assessee filed the original return of income for AY 2020-21 u/s.139(4) of the Income Tax Act, 1961 on 31.03.2021 declaring total income of Rs.3,19,460/-. Subsequently, based on information received pursuant to Rajkot and its associates, the case was reopened u/s. 147 of the Income-tax Act, 1961, after recording reasons and obtaining approval of the Pr. Commissioner of Income Tax-1, Rajkot. Notice u/s.148 of the Income Tax Act, 1961 dated 21.03.2024 was issued and duly served upon the assessee. However, the assessee did not file any return of income in response to the said notice. The reopening was based on incriminating material seized during search proceedings, including digital data and Miracle accounting software files recovered from the premises of Shri. Girish Vanjani, accountant of RK Group. These seized Miracle files contained systematic records of both accounted and unaccounted transactions, including cash receipts and payments relating to sale of units in various projects developed by RK Group. The data was found to be maintained in coded. form, wherein amounts were recorded by inserting decimals before the last two digits and dates were backdated by ten years to conceal actual transactions. On examination of the seized ledger pertaining to the project “RK Prime”, it was found that the assessee had purchased office unit No. RKP-817 in the said project and had paid cash on-money of Rs.3,98,000/-, which was not recorded in the regular books. The seized ledger also contained entries corresponding to banking transactions reflected in the registered sale deed, thereby corroborating the authenticity and reliability of the seized data. The statements recorded from Shri. Girish Vanjani and Shri. Sarvanand Sonwani during the search proceedings confirmed that Miracle software was used to record unaccounted cash transactions of the group. During assessment proceedings, notices u/s.142(1) of the Income Tax Act, 1961 and show cause notice dated 06.02.2025 were issued to the assessee, calling for explanation regarding the source of cash payment of Rs.3,98,000/-. However, the assessee failed to furnish any explanation or supporting evidence. Although the assessee denied having paid any cash on-money, the Assessing Officer observed. that the seized ledger, corroborated by registered sale the assessee towards purchase of the office unit. In view of the above facts and failure of the assessee to explain the source of cash payment, the Assessing Officer treated the amount of Rs.3,98,000/- as unexplained money u/s.69A read with section 115BBE of the Income Tax Act, 1961 and added the same to the total income. Accordingly, the total income of the assessee was assessed at Rs.7,17,460/- as against the originally returned income of Rs.3,19,460/-.
03. Aggrieved by the aforesaid assessment order passed under section 147 r.w.s. 144 of the Act, the assessee went in appeal before the Ld. CIT(A) where the appeal of the assessee was dismissed.
04. Still, aggrieved by the order of the Ld. CIT(A), the assessee is in appeal before this tribunal.
05. At the time of hearing, the Ld. AR submitted that the impugned addition made by the Assessing Officer and sustained by the Ld. CIT(A) is not justified either in law or on facts and, therefore, the same is liable to be deleted.
06. On the other hand, the Ld. DR supported the orders of the authorities below and submitted that no interference is called for.
07. We have heard the rival submissions and perused the material available on record. We find that the issue involved in the present appeal is similar to the issue considered by this tribunal in the case of Nitaben Kirtikumar Parekh v. ITO, in ITA No. 506/Rjt/2026, wherein, on similar facts, the tribunal partly allowed the appeal of the assessee by restricting the addition to 10% of the disclosed income. In the present case also, the Ld. AR fairly submitted that the issue is covered by the aforesaid decision of the tribunal. Respectfully following the same and considering addition to 10% of the amount of Rs.3,98,000/-. Accordingly, the addition is restricted to Rs.39,800/- (10% of Rs.3,98,000/-). Further, considering the nature of the addition, the same shall be taxed under the normal provisions of the Act. Accordingly, the Assessing Officer is directed to restrict the addition to Rs.39,800/- and compute the tax thereon under the normal provisions of the Act and not under section 115BBE of the Act. The grounds raised by the assessee are partly allowed. Order pronounced in the open court on this 7
08. In the result, the appeal of the assessee is partly allowed.
Order pronounced in the open court on this 7th day of October, 2026.
