Chandresh Vishanji Pandit Vs DCIT/ACIT (ITAT Rajkot)
Alleged Property On-Money Addition Reduced to 10% and Taxed at Normal Rates: ITAT Expressly Limits Relief to the Facts
Background
The Rajkot Tribunal reduced an addition of ₹1 lakh for alleged property on-money to ₹10,000 and directed that the reduced amount be taxed at normal income-tax rates rather than under Section 115BBE.
The relief was granted through an ad hoc estimation after considering the smallness of the amount and perceived inconsistencies in the evidence. Significantly, the Tribunal expressly stated that its adjudication should not be treated as a precedent for any preceding or succeeding assessment year.
The assessee was an individual earning income from salary, capital gains and other sources. He filed his original return on 6 December 2021, declaring total income of ₹8,35,640.
Search Findings and Reopening
The dispute originated from a search conducted on 24 August 2021 against several real-estate groups in Rajkot under an operation titled “Operation Blue Diamond”.
The search also covered the residential premises of Shri Girish Vanjani, an accountant associated with the RK Group. According to the assessment narrative, he maintained data concerning both accounted and unaccounted transactions of the group.
Documents relating to the RK Empire project, developed by R.K. Infralink LLP, were found and seized. The Department interpreted these records as containing information about cash payments made by purchasers over and above the recorded consideration.
Based on information allegedly relating to the assessee, the AO issued a notice under Section 148 on 30 March 2025. In response, the assessee filed a return on 28 April 2025, declaring income of ₹8,40,450.
Addition Made by the Assessing Officer
During reassessment, the AO examined the information received from the search and reconciled it with other seized documents. He concluded that the assessee had paid ₹1 lakh in unaccounted cash towards purchase of a unit in RK Empire during Financial Year 2020–21.
The assessment narrative referred to a coded entry in a “Miracle ledger”, which the AO interpreted by restoring two suppressed zeros.
A show-cause notice was issued asking why the alleged cash payment should not be treated as income. Although the assessee submitted a reply, the AO rejected the explanation and made an addition of ₹1 lakh under Section 69A read with Section 115BBE.
The reassessment was completed on 11 March 2026. The CIT(A), by order dated 19 June 2026, confirmed the addition.
Assessee’s Contentions
Before the Tribunal, the assessee denied paying any on-money. His counsel submitted that bank statements and property documents had been furnished during assessment to support the explanation.
A further objection concerned the absence of an opportunity for cross-examination during the assessment proceedings. The assessee sought deletion of the addition.
The Revenue supported the findings of the AO and the CIT(A).
Although the grounds also challenged the initiation of proceedings under Section 148, the Tribunal’s operative reasoning dealt with the quantum addition. It did not separately adjudicate and quash the reopening.
Tribunal’s Assessment of the Evidence
The Tribunal considered the submissions, documents and findings of the lower authorities. It observed that some documents and evidence were self-serving and could not be relied upon.
At the same time, it found some merit in the assessee’s submissions and considered that partial relief was justified. It concluded that neither complete deletion nor retention of the entire addition was appropriate in the circumstances.
The Tribunal therefore adopted an ad hoc estimated approach, referring to the smallness of the disputed amount and the need to address inconsistencies in the material.
The order does not identify in detail which documents were considered self-serving or explain how the inconsistencies established a particular amount of income.
Addition Restricted to ₹10,000
The Tribunal applied what it described as a 10% net-profit rate to the disputed ₹1 lakh, resulting in an addition of ₹10,000.
It directed the AO to tax this amount at normal income-tax rates, expressly excluding application of Section 115BBE.
The Tribunal also made clear that this adjudication was based on the smallness of the amount and was not to be treated as a precedent in preceding or succeeding assessment years.
Decision
The appeal was partly allowed. The addition was reduced from ₹1 lakh to ₹10,000, providing quantum relief of ₹90,000, together with relief from taxation under Section 115BBE on the retained amount.
The Tribunal did not completely delete the alleged on-money addition or invalidate the reassessment proceedings.
Author’s Comments
The order provides practical relief, but its reasoning requires careful presentation. Applying a net-profit percentage to an alleged property on-money payment is an unusual approach, particularly where the assessee’s stated income sources were salary, capital gains and other sources.
The order does not establish a general rule that only 10% of property on-money is taxable. Nor does it lay down a general exception to Section 115BBE for small additions. The Tribunal itself expressly confined its estimation to the circumstances before it.
The cross-examination objection was raised, but the Tribunal did not resolve it through a reasoned finding on natural justice. Accordingly, this decision is best described as limited, fact-specific estimated relief, rather than a substantive precedent validating a 10% formula for unexplained property payments.
FULL TEXT OF THE ORDER OF ITAT RAJKOT
Captioned appeal filed by the assessee, pertaining to assessment year (AY) 2021-22, 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 19.06.2026, which in turn arises out of an assessment order passed by the Assessing Officer u/s 147 of the Act, dated 11.03.2026.
2. The grounds of appeal raised by the assessee are as follows:
1. The Ld. CIT(A) erred on facts as also in law in the dismissing of ground of appeal relating to initiation of Action u/s 148 of the Act.
2. The Ld. CIT(A) erred on facts as also in law in confirming the addition of Rs.1,00,000/- made by alleging that assessee had paid “on money” through cash of Rs.1,00,000/- for purchase of property in the project RK Empire. The addition u/s 69A of the Act may kindly be deleted.
3. Brief facts qua the issue are that the assessee is an individual and filed return of income u/s 139 of the Act for the year under consideration, on 06.12.2021, declaring therein total income of Rs.8,35,640/-. The assessee has reportedly earned income from salary, capital gain and other sources during the year under consideration. As per the information available with the Department that a search and seizure action u/s 132 of the I.T. Act 1961 was carried out in the case of leading real estate builders of Rajkot and their key associates on 24.08.2021 with the title named “Operation Blue Diamond”. Under this operation various prominent builder groups were covered. During the course of action, the modus operandi of the various group namely RK Group, Ananat Group, Gangdev Group and Sucharia Group was unearthed, and their methodology of accounting was discovered. The residential premise (premise A-7) of Shri Girish Vanjani was also covered under search action u/s 132 of the Act. Shri Girish Vanjani is accountant of the RK group and maintains data of the unaccounted transactions as well as all the accounted transactions of the group. During the proceedings, at his premise, various incriminating documents pertaining to the project RK EMPIRE developed by M/s R.K. Infralink LLP were found and seized. These, documents contained information of cash (on-money) payment made by assessee in purchasing unit’s in the said project. Since, the documents seized during search action pertained to the assessee and/or the information contained therein related to assessee. Therefore, on the basis of above information, case of the assessee was reopened for assessment and notice u/s 148 of the Act was issued on 30.03.2025 after recording reason and obtaining the necessary approval of the competent authority. The assessee filed his return of income on 28.04.2025, declaring therein total income at Rs.8,40,450/- in response to the notice u/s 148 of Income Tax Act, 1961. During the assessment proceedings, AO issued notice u/s 143(2) & 142(1) to the assessee on various dates. The assessee filed reply in this regard. On the basis of the details available and its re-conciliation with other seized documents during the search action, the quantum of on-money in cash paid by assessee during the year under consideration has been derived which is tabulated hereunder:
| unit No. | NAME As Per Excel Sheet | Name As Per Document | PAN | FY 2020-2021 |
|---|---|---|---|---|
| 425 | Chandreshbhai Pandit | Pandit Chandreshabhai Vishanajbhai | ACYPP0401C | 100000 |
4. The AO issued a show cause notice to the assessee and asked as to why unaccounted cash payment (i.e. 100000/- for the year under consideration) should not be treated as income in its hands under relevant section of income Tax Act. The reply submitted by assessee has been duly considered and acknowledged but not acceptable by the AO. Hence, assessee’s failure to produce documents/ evidences in support of cash transactions to the extent of Rs.1,00,000/- during FY 2020-21, to purchase the unit no. 425 in project RK Empire developed by M/s RK Infralink LLP. Accordingly, addition of Rs.1,00,000/- (which is coded supressing two zeros in the miracle ledger reproduced in the order) (cash transactions for unit no. EMP 408) is being made to the total income of assessee for the AY 2021-22 treating the same as unexplained money within the meaning of section 69A r.w.s. 115BBE of the Act. Therefore, the AO completed the assessment u/s 147 by making the addition of Rs.1,00,000/- as unexplained money within the meaning of sec. 69A r.w.s 115BBE of the Act.
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 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.1,00,000/-, which comes to Rs.10,000/-, 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.10,000/-, by applying the normal rate of income tax (not under section 115BBE of the Act). This adjudication has been done, considering the smallness of the amount, therefore, it is 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.
