Mayur Hasmukhbhai Sojitra Vs ITO (ITAT Rajkot)
Alleged Property On-Money Addition Reduced to 10% on Ad Hoc Basis; Normal Tax Rates Apply Instead of Section 115BBE
Case Details
In Mayur Hasmukhbhai Sojitra v. ITO, the Rajkot “SMC” Bench of the Income Tax Appellate Tribunal partly allowed the assessee’s appeal against an addition for alleged cash “on-money” paid towards a property transaction.
The appeal, ITA No. 151/Rjt/2026, concerned Assessment Year 2019-20 and was decided by Dr. Arjun Lal Saini, Accountant Member, on 7 October 2026. The Tribunal reduced the disputed addition from ₹30,100 to ₹3,010 and directed that the retained amount be taxed at normal income-tax rates, rather than under section 115BBE.
The relief was expressly based on an ad hoc estimate. The Tribunal also stated that its adjudication should not be treated as a precedent in any preceding or succeeding assessment year.
Background of the Dispute
The assessee had filed his return declaring total income of ₹2,43,640. Subsequently, information was flagged on the Income Tax Department’s Insight portal under the category of high-risk CRU/VRU information.
The information originated from a search and seizure operation involving various concerns of the R.K. Group. According to the Department, the search revealed that developers and builders belonging to the group had received cash on-money. The materials reportedly included digital data, documents, books of account and loose papers.
Based on the disseminated search information, the Department alleged that the assessee had paid ₹30,100 in cash towards the purchase of a unit in the “R.K. Empire” project. His assessment was accordingly reopened under section 147. In response to the notice under section 148, he again declared income of ₹2,43,640.
During reassessment, the Assessing Officer issued notices under section 142(1) and a show-cause notice requiring the assessee to explain the alleged payment.
Assessee’s Explanation and Assessment
The assessee maintained that he had not purchased any immovable property during the relevant year. On that basis, he contended that there was no occasion to explain the source of the alleged cash payment.
The Assessing Officer rejected this explanation and concluded that the assessee had paid ₹30,100 towards the purchase or booking of a unit during the relevant previous year. The amount was treated as income under section 69, with the disputed tax treatment falling under section 115BBE.
The reassessment order was passed on 19 March 2024. The assessee challenged the addition before the CIT(A), but the appeal was unsuccessful. The NFAC/CIT(A)’s order dated 18 December 2025 therefore became the subject of the appeal before the Tribunal.
Arguments Before the Tribunal
The assessee’s counsel argued that the Assessing Officer had not provided an opportunity for cross-examination during the assessment proceedings. Counsel further submitted that the assessee had furnished bank statements and property documents and had specifically denied paying any on-money.
The assessee accordingly sought deletion of the addition. The Revenue’s representative supported the Assessing Officer’s conclusions and reiterated the departmental position.
Although the cross-examination objection was recorded, the Tribunal did not separately adjudicate its legal consequences. The order does not identify the particular person whose cross-examination was sought or provide a detailed examination of the underlying search material linking the alleged cash payment to the assessee.
Tribunal’s Reasoning
After considering the submissions and material on record, the Tribunal observed that some documents and evidence furnished by the assessee were self-serving, on which reliance could not be placed.
Nevertheless, it found that the assessee deserved some relief. Taking into account the smallness of the amount and the need to protect the Revenue’s interest, the Tribunal considered an ad hoc estimated addition appropriate.
It held that applying a 10% net profit rate to ₹30,100, resulting in an addition of ₹3,010, would address the inconsistencies in the documents and evidence submitted before the lower authorities.
The Assessing Officer was therefore directed to retain an addition of ₹3,010 and apply normal income-tax rates. The Tribunal expressly excluded taxation under section 115BBE.
Decision and Scope of Relief
The appeal was partly allowed. The addition was reduced by ₹27,090, while ₹3,010 remained taxable at normal rates.
The Tribunal neither deleted the entire addition nor quashed the reopening. Its relief rested on the particular estimation adopted in this case, accompanied by an express restriction against treating the adjudication as a precedent for earlier or later assessment years.
Author’s Comments
The outcome provides substantial relief, but the reasoning requires careful reading. The disputed amount represented an alleged unexplained investment by a property purchaser. The order does not explain how a net profit rate, ordinarily associated with income estimation, relates to that alleged investment.
Consequently, the decision should not be cited as laying down a general rule that only 10% of property on-money is taxable, or that every section 69 addition can be converted into income taxable at normal rates.
The cross-examination argument also remained without a separate finding. The assessee succeeded through an ad hoc reduction, rather than through a reasoned determination that the third-party evidence was legally inadmissible. The distinction matters: the operative relief is clear, while the broader legal principle remains limited by the order’s brief reasoning and express qualification.
FULL TEXT OF THE JUDGMENT/ORDER OF ITAT RAJKOT
Captioned appeal filed by the assessee, pertaining to assessment year (AY) 2019-20, 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 (NAC) Delhi/Commissioner of Income-tax (Appeals) [in short ‘NFAC/Ld.CIT(A)’], dated 18.12.2025, which in turn arises out of an assessment order passed by the Assessing Officer u/s 147 of the Act, dated 19.03.2024.
2. The solitary grievance of the assessee in this appeal is that ld.CIT(A) erred in confirming the addition of Rs. 30,100/- u/s. 69 r.w.s. 115BBE of the Act on the alleged ground that the assessee has paid “on-money” during the year under consideration towards purchase of unit to M/s. R.K Group.
3. Brief facts qua the issue are that in this case, the assessee filed income tax return ( ITR) for A.Y. 2019-20, declaring total income of Rs.2,43,640/-. As per information flagged in Insight portal under category High Risk CRU/VRU Information” that in Search and Seizure operation was carried out in various concerns of R K Group, it was unearthed that on-money in cash was received by developers/builders of various concerns of R K Group. In search operation from impounded incriminating digital data, documents, books of accounts, loose paper etc; was found. As per search data, the assessee gave “on-money” of Rs.30,100/- in cash towards purchase of unit(s) in project “R K Empire”. Since, the materials so disseminated pertained to or related to the assessee, the case of the assessee was reopened u/s 147 of I.T. Act 1961. In response to notice u/s 148 of the Act, the assessee filed income tax return (ITR) declaring total income at Rs.2,43,640/-. During the course of reassessment proceedings, by issuing notices u/s 142(1) and show cause notice, the AO asked the assessee to explain the same.
4. In reply, the assessee submitted that he had not purchased any immovable property during the year relevant to Assessment year under consideration and no need to explain the source of cash payment of “on-money”. However, the Assessing Officer rejected the contention of the assessee and held that the assessee paid “on-money” of Rs.30,100/-, during previous year relevant to assessment year under consideration towards purchase/booking of unit in project, therefore AO treated sum of Rs.30,100/- as income of the assessee for the assessment year under consideration u/s 69 of the Income-Tax Act, 1961.
5. Being aggrieved by the said order of the Assessing Officer, the assessee filed an appeal before the Ld. CIT(A), but remained unsuccessful. Therefore, assessee is left with no other alternative but to knock on the doors of the Tribunal with this appeal praying for justice.
6. Learned Counsel for the assessee submitted that during the assessment proceedings, the assessing officer has not provided an opportunity for cross examination. The Ld. Counsel also submitted that during the assessment proceedings, the assessee submitted the bank statement and documents of the property and also stated that he did not pay the “on-money” therefore, addition made by the assessing officer may be deleted.
7. On the other hand, the Ld. DR for the Revenue has primarily reiterated the stand taken by the Assessing Officer, which I have already noted in my earlier para and is not being repeated for the sake of brevity.
8. I have heard both the parties and carefully gone through the submission put forth on behalf of the assessee along with the documents furnished and the case laws relied upon, and perused the fact of the case including the findings of the Ld. CIT(A) and other materials brought on record. I find that some of the documents and evidences, filed by the assessee, before the assessing officer, are self-servicing documents and evidences, on which reliance cannot be placed, therefore, to protect the interest of the revenue, and considering the smallness of the amount an ad hoc, estimated addition should be made in the hands of the assessee. Therefore, I find some merit in the contention of the Ld. Counsel for the assessee. Hence, I find that while the case of the assessee merits some relief, at the same time entire relief cannot be permitted to the assessee. In my view the ends of justice would be met, if a net profit rate of @10% of Rs.30,100/-, which comes to Rs.3,010/-, is adopted, since the same would take care of the inconsistencies, in the various documents and evidences submitted before the lower authorities. Therefore, in order to plug the leakage of revenue, I direct the assessing officer to make addition of Rs.3,010/-, by applying the normal rate of income tax (not under section 115BBE of the Act). It is also made clear that instant adjudication shall not be treated as a precedent in any preceding or succeeding assessment year.
9. In the result, appeal of the assessee is partly allowed, in above terms.
Order is pronounced in the open Court on 07/10/2026.
