ITAT Rajkot Quashes Reassessment Where Joint Property Investment Was Not Properly Attributed

Nilesh Harilal Manek Vs ITO (ITAT Rajkot)

Summary: The Income Tax Appellate Tribunal, Rajkot Bench, allowed the assessee’s appeal for Assessment Year 2009-10 and dismissed the Revenue’s Cross Objection arising from the same proceedings. The assessee had not filed a return of income and the Assessing Officer, on the basis of information that the assessee jointly with Ms. Nayana J. Manek had purchased an immovable property on 12.12.2008 for Rs.50,00,000/-, initiated reassessment proceedings under section 147 after issuing notice under section 148. Despite repeated notices under section 142(1), the assessee did not furnish the requisite explanation or supporting evidence.

The assessment was consequently completed under section 144 read with section 147, treating the entire Rs.50,00,000/- as unexplained investment. Before the CIT(A), the assessee furnished additional evidence under Rule 46A of the Income-tax Rules, 1962, explaining that the investment was sourced from his share of sale proceeds of another Porbandar property. The CIT(A) accepted the source of the Rs.50,00,000/- investment but determined long-term capital gain of Rs.11,35,578/- and sustained that amount while deleting the balance addition.

Before the Tribunal, the assessee challenged both the capital-gain addition and the validity of reassessment, contending that the recorded reasons did not identify his actual share in the jointly purchased property or establish that the entire Rs.50,00,000/- represented income chargeable to tax in his hands. The Tribunal treated the jurisdictional challenge as going to the root of the matter and held that the Assessing Officer had failed to establish the necessary link between the joint purchase and the conclusion that the entire investment constituted escaped income of the assessee. Since the reasons did not properly establish the precise amount of income allegedly escaping assessment, the assumption of jurisdiction under section 147 was held invalid.