Appraisal Report Alone Insufficient for Section 69 On-Money Addition: Ahmedabad ITAT

ITO Vs Aash Satish Joshi (ITAT Ahmedabad)

The Income Tax Appellate Tribunal (ITAT), Ahmedabad, decided the Revenue’s appeals and the corresponding cross objections filed by the assessee against separate orders of the Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), for Assessment Years 2014-15 and 2015-16. The dispute arose from additions made under Section 69 of the Income Tax Act on the allegation that the assessee had paid unaccounted on-money for the purchase of land.

For Assessment Year 2014-15, the Assessing Officer (AO) reopened the assessment under Section 147 after receiving information from the Investigation Wing following a search under Section 132 in the case of the Kushal Group. According to the Investigation Wing, seized digital data, loose papers, and other material indicated that the assessee had paid on-money of ₹2,19,17,017 for the purchase of land. During the reassessment proceedings, the AO issued a show cause notice, but recorded that no reply had been received and completed the assessment under Section 144, treating the amount as unexplained investment under Section 69.

Before the Commissioner (Appeals), the assessee challenged both the validity of the reassessment and the addition on merits. The assessee submitted that replies, ledger accounts, bank statements, and objections to reopening had in fact been filed before the AO. Since the reasons for reopening and the show cause notice were both supplied on 15.03.2022 and the assessment was completed on 26.03.2022, the Commissioner (Appeals) admitted additional evidence under Rule 46A in the interest of justice after obtaining a remand report from the AO. While rejecting the legal challenge to reopening, the Commissioner (Appeals) examined the merits of the addition.

The Commissioner (Appeals) analysed the Investigation Wing’s appraisal report and compared it with the documentary evidence produced by the assessee. The report contained details relating to multiple survey numbers across Assessment Years 2014-15 and 2015-16. For each land parcel, the Commissioner (Appeals) examined the alleged cheque and cash components and compared them with the assessee’s bank statements and payment records. The Commissioner (Appeals) found that, for several survey numbers, the total consideration mentioned in the Investigation Wing’s report exactly matched the payments made through banking channels by the assessee and the co-purchaser. Payments had been made partly to landowners and partly to the confirming party, Topmost Projects Pvt. Ltd. The Commissioner (Appeals) observed that the Investigation Wing had treated the amounts paid to the confirming party as cash payments despite evidence that they were made through cheques.

In relation to Survey No. 899, which formed the basis of the addition for Assessment Year 2014-15, the Commissioner (Appeals) found that the assessee had produced bank statements showing cheque payments to both the farmers and Topmost Projects Pvt. Ltd. Although the Investigation Wing quantified a cash component of ₹2,19,17,017, the Commissioner (Appeals) held that the assessee’s payments through banking channels could not be ignored and that the alleged cash component was unsupported by any independent evidence. The assessment order also did not refer to any document recording actual cash payments or any statement establishing such payments. Accordingly, the addition under Section 69 was deleted. The Commissioner (Appeals) also noted that a similar addition in the case of the co-purchaser had been decided in favour of that assessee.

Before the Tribunal, the Revenue contended that the Commissioner (Appeals) had erred in deleting the addition. The Tribunal examined the appellate order and observed that the Commissioner (Appeals) had analysed the appraisal report and the seized material in detail. It noted the finding that the amounts identified as alleged on-money were, in fact, payments made to the confirming party through banking channels and duly recorded in the books of account.

The Tribunal also referred to its earlier order dated 29.01.2026 directing the Department to produce the seized documents relied upon for the addition, the statement of the person from whom those documents were seized, details of any action taken against the sellers who allegedly received the on-money, the status of any such proceedings, and the position regarding the co-owner’s assessment. The Tribunal recorded that, in response, the Department produced only the relevant portion of the appraisal report and did not furnish the other information sought. It further noted that the Department could not establish that any corresponding addition had been made in the hands of the sellers or produce evidence showing receipt of consideration over and above the recorded sale consideration. The assessee demonstrated that the differential amount represented payments made to Topmost Projects Pvt. Ltd. through banking channels, and this factual position remained unrebutted by the Revenue. On these facts, the Tribunal upheld the deletion of the addition and dismissed the Revenue’s appeal.

The assessee’s cross objections challenged the reassessment proceedings on legal and jurisdictional grounds, including the contention that proceedings should have been initiated under Section 153C instead of Section 147 because the material originated from a search conducted in the case of a third party. The assessee also alleged violation of principles of natural justice, reliance on borrowed satisfaction, and failure to dispose of objections to reopening. Since the Tribunal had already decided the Revenue’s appeal on merits in favour of the assessee, it kept these legal issues open for an appropriate stage, if required, and dismissed the cross objections as academic.

As the facts and issues for Assessment Year 2015-16 were identical, the Tribunal applied the same reasoning, dismissed the Revenue’s appeal, and dismissed the corresponding cross objection as academic. Consequently, both Revenue appeals and both cross objections stood dismissed.

FULL TEXT OF THE ORDER OF ITAT AHMEDABAD

The captioned appeals by the Revenue and corresponding cross objections by the assessee have been preferred against the separate orders of the Ld. Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (hereinafter referred to as “NFAC”), Delhi (hereinafter referred to as “CIT(A)”), both dated 01.01.2025 passed under Section 250 of the Income Tax Act, 1961 (hereinafter referred to as the “Act”) and relates to Assessment Year (A.Y.) 2014-15 & 2015-16. Since, the facts and issues involved in both the appeals and cross objections thereto are common and identical, hence, the captioned appeals and cross objections were heard together and are being disposed of by this common order.

2. Revenue’s appeal in ITA No. 657/Ahd/2025 for AY 2014-15 is taken as a lead case for the purpose of narration of facts.

ITA No.657/Ahd/2025

3. The Revenue in this appeal has taken the following grounds of appeal:

“1. (a) The Ld.CIT(A) has erred in law and on facts in deleting the addition of Rs. 2,19,17,017/- made by AO on account of unexplained investment in land u/s. 69 of IT Act, despite the fact that the Investigation wing after analyzing the incriminating documents seized during search action on Kushal Group shared credible information with AO that the assessee has paid on-money in purchase of land.

(b) The appellant craves leave to add, alter and/or to amend all or any the ground before the final hearing of the appeal.”

4. The brief facts of the case are that the assessee filed its Income Tax Return for the Assessment Year 2014-15 on 23.06.2015 declaring a total income at Rs. 3,73,690. Subsequently, information was received by the Assessing Officer (in short ‘the AO’) that a Search and Seizure action u/s 132 of the Act in the ‘Kushal Group of Ahmedabad’ was carried out on 25.02.2020, wherein, incriminating material in the form of digital data, loose papers, diaries, etc. was found and seized, which revealed that the assessee had paid On-money of Rs.2,19,17,017 /- to the sellers for the purchase of the land during the AY 2014-15. Hence, the case was reopened u/s 147 of the Act by the Assessing Officer (in short ‘the AO’).

5. During assessment proceedings, the AO show caused the assessee as to why the on-money paid by the assessee for the purchase of property be not added to the income of the assessee on account of unexplained investment. However, since no reply was received from the assessee, the AO proceeded to pass the assessment order on the basis of best judgment assessment u/s 144 of the Act.

5.1 The AO observed that on verification of information received from Insight Portal, it was seen that the assessee had purchased immovable property on 08.01.2014 for an amount of Rs.2,19,17,017/-. He observed that the assessee could not disclose the source of the aforesaid investment. He, therefore, treated the entire amount of Rs.2,19,17,017/- incurred by the assessee as unexplained investment and added back the same to the income of the assessee.

6. Being aggrieved by the order of the AO, the assessee preferred appeal before the Ld.CIT(A).

6.1 Before the Ld.CIT(A), the assessee not only raised the legal grounds contesting the validity of the reopening of the assessment u/s 147 of the Act, but also, contested the additions on merits. It was submitted before the Ld.CIT(A) that the AO had wrongly noted that the assessee had not filed any reply to the notices issued by him. It was pleaded that, in fact, the assessee had duly filed the replies and details alongwith the copies of ledgers and bank statements etc. to prove the source of the investment. That the assessee had also filed the objections against the reopening of the assessment. The assessee again furnished the relevant details before the Ld.CIT(A), upon which, the Ld.CIT(A) called remand report from the AO. Though, the AO opposed the admission of additional evidences, however, the Ld.CIT(A) noted that irrespective of the fact, that the submissions were also made by the assessee before the AO, the fact on the file was that the show cause notice was issued by the AO to the assessee on 15.03.2022 and also that the reasons for the reopening of the assessment were provided to the assessee for the first time on 15.03.2022, and whereas the proceedings were completed on 26.03.2022 itself.

Hence, considering the interests of justice, the additional evidences were admitted by the Ld.CIT(A) under Rule 46A of the Income Tax Rules. The Ld.CIT(A) also considered the remand report of the AO on the additional evidences furnished by the assessee and, thereafter, proceeded to decide the appeal of the assessee.

6.2 On merits, the Ld.CIT(A), after considering the submissions of the assessee, dismissed the legal grounds raised by the assessee relating to the validity of the reopening of the assessment. However, the Ld.CIT(A), considering the factual matrix of the case, deleted the addition so made by the AO by observing as under:

“Ground Number 10 is the material ground, which stands at the core of the entire controversy.

The genesis of the impugned additions is in the report of the DDIT(Inv) shared with the AD on 02/03/2021 wherein the DDIT arrived at the conclusion that On Money was paid by Sh. Ash Satishbhai Joshi and Sh. Siddharth Satishbhal Joshi for the purchase of land at Goraj. During the search on Kushal Group of Companies certain incriminating documents and details were retrieved/seized which formed part of the Appraisal Report as well. The DDIT(Inv) after finding the name of the assessee appearing therein, forwarded the Information for necessary action. The DDIT (Inv)’s letter addressed to the AO specifically mentions that the issue is being discussed in detail in Para 14.4 of the Appraisal Report, and the AO has also proceeded to make the addition on the basis of the report, it’d be in order to analyze the conclusion as appearing in the Para 14.4 of the Appraisal Report.

The report summarizes the entries in the following table

This is to be mentioned that there are two assessment years involved, 2014-15 and 2015-16.

AO has made an addition of Rs. 2,19,17,017 in AY 2014-15 and of Rs. 12,44,43,057 in the AY 2015-16. Thus, both the years put together the total addition comes to Rs 14,63,60,074. The basis of additions in both the years remains the table from the report of Investigation Wing as summarized previously. In the aforesaid summary table, it can be seen that there are entries for total of eight properties. This summary table has been created on the basis of other sheets which were extracted from the seized materials.

We first take up survey number 861, which is detailed in the file reproduced below

i) File: 029945 xlsx in Path k\saledeed\E\CARVING\sandeepagarwal pc\

DRIVE 2 Excel Files

File: Payment details sur. No 861 17.09.14.xlsx in Path kisaledeed\E\ EXTRACTION sandeepagarwal pc\PRESENT FILE EXCEL

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Thereafter there is table totaling total expenses at Rs. 2492898. Investigation report, in its final summary sheet fabulating the alleged cash payments has quantified the cash payment at Rs. 4,00,09,072 for the survey number 861, basis being the sheet reproduced just above. However, the assessee has submitted details of payments made to the landowners, and also to the confirming party, that is, Topmost Projects Pvt Ltd. As per the appellant, payment of Rs. 42,00,000 was made to the farmers and of Rs. 1,35,68,986 was made to the Topmost Projects Pvt. Ltd. Similar and identical payments were made by the brother of the appellant. Appellant has also submitted the bank statement which reflect the same. Thus the total payment made by both the buyers, the assessee and Sh. Siddharth S. Joshi together comes to Rs. 3,55,3 7,9 72. As per the investigation report total cheque payments are of Rs. 69,08,000 whereas as per the appellant an amount of Rs. 3,55,37,972 was paid by both the buyers together out of which payment of Rs. 1,77,68,968 was made by the appellant for which evidence in the form of bank statement has been provided. Thus, the quantification of cash cannot be accepted without any other supporting evidence. However, neither the assessment order, nor the extracts of the seized material refer to any document that mentions cash payments except for the summary of the officer preparing the investigation report. As we will see in the proceeding paras, in the case of many other survey numbers which form the basis of impugned additions, the total value mentioned in the investigation report has been paid entirely in cheque leaving no scope for allegation of any cash payment.

Survey No. 872(2)

For survey no. 872(2) the total amouns quantified at Rs. 1,38,82,336 out of which cheque payment is mentioned at Rs. 28,60,000 and cash payment is stated to be Rs. 1,10,22,336 However, as per the details submitted by the assessee, this land was also bought jointly with his brother Sh. Satish S. Joshi and payment of Rs. 14,30,000 was made in cheque to the landowners and payment of Rs. 55,11,168 in cheque was made to the confirming party Topmost Projects Pvt Ltd. Similar and identical payments were made by Sh. Satish S. Joshi also. The appellant has submitted bank statements which reflect the payments made to the relevant parties on various dates. Thus even as per the details submitted by the appellant, there has been a total payment of Rs. 1,38,82,336 which is exactly the same as mentioned in the summary prepared by the Investigation Report, the only difference is that though it is alleged that the payments were made in cash, the entire consideration, in the case of the appellant who is responsible only for the half of it, has been paid by cheque and the relevan bank statement reflects it amply.

Survey No. 890

Similarly, for Survey Number 890, the total consideration is shown as 1,81,51,313 out of which the report notes Rs. 51,00,000 paid by cheque and the cash component is quantified at Rs. 1,30,51,313. The facts of this are the same as Survey No. 872(2) with the total consideration paid by both the buyers together stands at Rs. 1,81,51,313. Out of this Rs. 51,00,000 was paid by cheque to the land owners and Rs. 90,75,657 was paid in cheque to the confirming party Topmost Projects Pvt Ltd. The appellant has paid its share in cheque Rs. 25,50,000 to the farmers and Rs. 65,25,657 to the confirming party, again in cheque. The evidence of payment by cheque has also been submitted in the form of bank statements. Thus, for the survey number 890 also, no scope for alleging cash payment remains because the total value of the land parcel arrived at in the investigation report has been paid through banking channels which match to the last rupee.

Survey Number 891

Survey number 891 has been mentioned in the final summary, however, it is to be noted that in a previous sheet extracted from the seized materials, it has been clearly mentioned as “Sale deed pending”. In the absence of a sale deed having been registered, assessee cannot be festooned with a liability under section 69 alleging Unexplained Investment. One cannot be expected to explain an investment which is yet to be registered in his name. The assessment order also doesn’t mention whether a sale deed for Survey Number 891 was registered or not.

Survey Number 899

Even for Survey Number 899 the assessee has provided evidence in the form of bank statements which detail that Rs 1,00,00,000 was paid to the vanous farmers on vanous dates through cheque and payment of Rs. 1,07,30,000 was made through cheque to the confirming party Topmost Projects. Similar payments are stated to be made by the Sh. Satish S. Doshi thereby making the total payments as 4,14,60,000. Investigation report pegs the total value at Rs. 4,41,77,070 and quantifies the cash payments at 2,19,17,017. However, the fact that total payment of Rs. 2.07,30.000 has been made by the appellant for his share in the land through banking channels cannot be controverted. As per the Investigation report cheque payment for the survey number 899 is stated to be Rs. 2,22,60,000 of which appellant’s share should be Rs. 1,11,30,000, whereas the appellant has made a payment of Rs. 2,07,30,000 for his share. Thus the quantification of cash cannot be accepted without any other supporting evidences.

Survey No. 968

For the survey number 968, investigation report takes the total consideration at Rs. 1,72,81,748, of which cheque part is Rs. 45,45,920 and cash payment is alleged at Rs. 1,27,36,748. As per the details submitted by the assessee, the appellant paid Rs. 22,72,960 to the land owners and Rs. 63,67,914 to the confirming party Topmost Projects Pvt. Ltd Similar and identical amount is stated to have been paid by Sh. Satish S. Joshi, bringing the total amount paid through cheque to Rs. 1,72,81,748, which is exactly the total value mentioned in the report. Appellant has paid half of it which comes to Rs. 66.40.874 through cheque and the bank statement reflects the same. Thus the allegation of cash payment is not substantiated for survey number 968 either.

Survey Number 970(1) and 970(2)

The investigation report mentions total values as Rs. 1,39,11,274 and Rs. 1,58,47,408 respectively for the survey numbers 970(1) and 970(2), total amounting to Rs. 2.97.58.682. Appellant has submitted that total payments by cheque of Rs. 2,97,58,682 were made by him and Sh. Satish S. Joshi together, of which the appellant paid half, amounting to Rs. 1,48,79,341 and has provided bank statements evidencing the said payments through cheque, to the landowners and the confirming party. Thus, no scope for any cash payments having been made remains.

6.3It is imperative to mention here that similar additions were made in the case of Satish S. Joshi, the other person with whom the properties were bought jointly. The other party. Sh Satish S. Joshi, also instituted an appeal against the action of the AD, and the appellate order in his case has been submitted by the present appellant and CIT(A) has decided the issue of cash payment and section 69 against the revenue and in favor of the assessee. Both the cases stand on identical footing and hence the decision of the CIT(A) in the case of Sn Satish S. Joshi has to be weighed in.

6.4 Now, the survey numbers discussed above, form part of two different assessment years AY 2014-15 and AY 2015-16. The present appeal is for the AY 2014-15 wherein an addition of Rs. 2.19. 17,017 has been made on the basis of investigation wing report, which means it is for the Survey No. 899. The facts related to survey number 889 has already been mentioned in preceding paras. That apart, there is no mention of any cash payment having been made. There are no excerpts from anyone’s statement to that effect. The additions have been made u/s 69, as unexplained. Though considering the fact that the appellant did not respond during the reassessment proceedings, it is very much conceivable that there was no other conclusion that the AD could have drawn, considering the facts in its entirety and the submissions and evidence adduced by the assessee during the appellate proceedings, the additions cannot be sustained. Hence the appeal of the assessee on these grounds is allowed

6.5 Ground Number 11 is general in nature and hence not adjudicated.”

7. We have heard the rival contentions of the Ld. Representatives of the parties and gone through the record. A perusal of the impugned order of the Ld.CIT(A) would reveal that the Ld.CIT(A) has discussed in detail the summary of the information and also relevant part of the Appraisal Report, which was based on the basis of material seized during search action in the case of Kushal Group of Ahmedabad and has noted that it was not a case of any on-money payment. He has noted that the amount mentioned in the summary of the Appraisal Report exactly tallied with the actual amount paid by the assessee for the purchase of property through banking channel and duly disclosed in the books of accounts of the assessee. The differential amount which has been suspected by the Investigation Wing as well as by the AO as payment of on-money, was in fact, the amount paid by the assessee to the confirming party, namely, Topmost Projects Pvt. Ltd. The said differential amount was not paid to the seller at all. It is pertinent to mention here that this Tribunal vide order dated 29.01.2026 had directed the Department not only to furnish the copies of the seized materials, based on which, the impugned addition was made in the hands of the assessee, but also, the information as to whether any action was taken in the hands of the seller of the property and who had allegedly received the on-money and the status of appeal in that case. The AR was directed to intimate about the status of the addition in the hands of co-purchaser. The order of the Tribunal dated 29.01.2026, for the sake of ready reference, is reproduced as under:

“Ld. CIT-DR is directed to produce the copy of seized documents based on which addition for on-money was made in the present case. The copy of the statement of the person from whom the documents were seized should also be brought on record. Further, the Department should also inform about the action taken in the hand of seller of property, who had received the on-money and the status of appeal in that case. The Ld. A.R. is directed to intimate about the status of addition made in the case of the co-owner.”

7.1 It is pertinent to mention here that in compliance of the order of the Tribunal, no information could be supplied by the Department, except, copy of para 14.4 of the Appraisal Report in the case of searched person, namely, Kushal Group, which contains the summary as reproduced by the Ld.CIT(A) in the impugned order as reproduced above. It is to be noted that the Ld.CIT(A) had thoroughly discussed every entry given in the Appraisal Report and found that the observations made in the Appraisal Report were totally wrong. Further, the Department could not point out that any corresponding addition has been made in the hands of the seller. There is no evidence that any on-money or any consideration over and above the sale consideration had been received by the sellers and that is why the Department has not proceeded against the sellers. The Ld. AR of the assessee duly demonstrated that the differential amount was not on-money paid to seller, rather, the same was the amount paid to the confirming party i.e. Topmost Projects Pvt. Ltd., which was duly paid through banking channel. The Ld. DR could not rebut the aforesaid factual matrix of the case. Therefore, the Ld.CIT(A) has rightly deleted the impugned addition. There is no merit in the appeal of the Revenue and the same is, accordingly, dismissed.

8. Now, coming to the cross objection of the assessee in CO No.68/Ahd/2025 for A.Y. 2014-15.

9. The assessee has raised various cross objections contesting the validity of the reopening of the assessment inter alia that the reopening of the assessment was made on the basis of seized materials found during the course of search action in the case of third party, namely, Kushal Group, therefore, the proper course before the AO was to proceed under the provisions of Section 153C of the Act and reopening of the assessment u/s 147 of the Act was bad in law. Further that, principles of natural justice have been violated as the AO failed to provide the documents relied upon to make the additions in the case of the assessee and that the reopening of the assessment being based on borrowed satisfaction of the AO was bad in law. It has also been pleaded that the assessment order has been passed without deciding the objections raised by the assessee against the reopening of the assessment.

10. Since, we have decided the appeal of the Revenue on factual matrix in favour of the assessee, therefore, the cross objections raised by the assessee on the legal/jurisdictional issues are kept open at this stage. The assessee will be at liberty to raise the same at appropriate stage, if need be. The cross objections of the assessee, at this stage, are, therefore, dismissed being rendered academic in nature.

Revenue’s appeal in ITA Nos.658/Ahd/2025 and Assessee’s Cross Objection in CO No. 69/Ahd/2025.

11. Since the facts and issues involved in above captioned appeal and corresponding cross objections are identical, hence, our finding given above will mutatis mutandis apply to this appeal and Cross Objections. Accordingly, this appeal of the Revenue is also dismissed, whereas, the corresponding Cross Objections of the assessee are dismissed being rendered academic in nature.

12. In the combined result, both appeals of the Revenue are dismissed and both Cross Objections of the assessee are dismissed being rendered academic in nature.

This Order pronounced on 06/07/2026 under Rule 34(4) of the ITAT Rules