Sankara Rao Palle Vs ITO (ITAT Visakhapatnam)
Insight Portal Information Cannot Override Court Records: Section 69 Addition Deleted for Wrong Assessment Year
Background of the Case
The Visakhapatnam Tribunal deleted an addition of ₹30,90,045 under Section 69 after finding that the property investment related to Assessment Year 2017–18, whereas the authorities had taxed it in Assessment Year 2020–21.
The error arose from treating a court auction conducted on 22 September 2016 as having taken place on 22 September 2019.
Although the assessee furnished the court sale certificate and specifically explained the correct year of investment, both the Assessing Officer and the CIT(A) failed to appreciate this evidence. The Tribunal held that an investment not made during the year under consideration could not sustain the disputed addition.
Reassessment Triggered by Insight Portal Information
The assessee, a salaried employee, filed his return for Assessment Year 2020–21 declaring gross total income of ₹5,23,183.
Information flagged on the Insight Portal under the High Risk e-Verification Scheme indicated that he had made an unexplained investment or payment of ₹30,90,045 during the relevant year.
Acting on that information, the Assessing Officer initiated reassessment proceedings under Section 147 and issued a Section 148 notice dated 27 March 2024.
The officer proceeded on the understanding that the assessee had participated in a court auction on 22 September 2019 and purchased a residential property measuring 167 square yards.
Assessee Points Out the Three-Year Error
During assessment, the assessee specifically stated that the auction had taken place on 22 September 2016, rather than 22 September 2019.
He furnished the sale certificate to establish that he had successfully bid for the property during the financial year relevant to Assessment Year 2017–18.
He also explained that the investment had been funded through sources including a gold loan and thrift loan. His grounds before the Tribunal additionally referred to savings, office loans and loans from friends and relatives received through banking channels.
The fundamental objection, however, concerned the year of investment itself. Whatever enquiry might be made into its source, the transaction could not be attributed to Assessment Year 2020–21 if it had occurred three years earlier.
Lower Authorities Sustain the Addition
The Assessing Officer rejected the explanation and treated the property investment as unexplained under Section 69.
The reassessment order dated 25 January 2025 determined the assessee’s income at ₹34,77,735.
The assessee challenged the addition before the CIT(A), again relying on the court documents and the correct auction date. The CIT(A), through an order dated 15 April 2026, did not grant relief.
Before the Tribunal, the assessee contended that both authorities had ignored a decisive fact supported by documentary evidence.
Court Sale Certificate Establishes the Correct Year
The Tribunal examined the sale certificate dated 30 November 2016, together with the material referred to by the assessee, including treasury challans.
The certificate concerned a property comprising 167 square yards with an RCC building containing ground and first floors, situated at Samatha Nagar, Pedagantyada Mandal, Visakhapatnam.
It established that the assessee purchased the property through a public auction held on 22 September 2016, in execution of the decree in O.S. No. 317/2010.
The Tribunal therefore found that the investment belonged to the period relevant to Assessment Year 2017–18.
Portal Data Was Accepted Despite Contrary Evidence
The Tribunal observed that the assessee had expressly raised the correct year of investment before the lower authorities and furnished the sale certificate.
Nevertheless, they failed to take cognisance of that material and proceeded on the information gathered from the Insight Portal.
The Tribunal held that the Assessing Officer had initiated the proceedings and made the addition on the misconceived factual premise that the investment occurred on 22 September 2019.
The court document demonstrated otherwise. Since the investment had not been made during the year under appeal, the addition could not survive.
Entire Addition Directed to Be Deleted
The Tribunal directed the Assessing Officer to delete the addition of ₹30,90,045 under Section 69.
The assessee’s appeal was allowed.
The operative relief rested on the incorrect assessment year. The Tribunal did not separately determine whether every source claimed by the assessee was satisfactorily established, nor did it expressly quash the reassessment proceedings on a jurisdictional ground.
Author’s Comments
The ruling highlights the importance of verifying the date of the underlying transaction before examining its alleged tax consequences.
Information on a departmental portal may trigger scrutiny, but it must be reconciled with reliable primary evidence. Here, the court sale certificate directly established when the auction purchase occurred.
The error was therefore more fundamental than dissatisfaction with the source explanation: an earlier year’s investment had been brought to tax in a later year.
The decision also demonstrates the value of presenting a clear chronology supported by the sale certificate, payment challans and bank records. Identifying the correct transaction year can resolve a dispute before questions concerning the source of funds require adjudication.
FULL TEXT OF THE ORDER OF ITAT VISAKHAPATNAM
The present appeal filed by the assessee is directed against the order passed by the Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Delhi (for short, “CIT(A)”), dated 15/04/2026, which in turn arises from the order passed by the Assessing Officer (for short “AO”) under section 147 r.w.s 144B of the Income Tax Act, 1961 (for short “the Act”), dated 25/01/2025 for Assessment Year (AY) 2020-21. The assessee has assailed the impugned order on the following grounds of appeal before us:
“1. Ld.AO and Ld.CIT(A), NFAC erred in not considering the evidence filed to substantiate the investment in immovable property acquired in court auction for a sum of Rs.30,90,045 and wrongly invoked the provisions of Section 69A r.w.s 115BBE of the I.T Act, 1961.
2. Ld.AO / Ld.CIT(A), failed to consider the evidence establishing that the immovable property for a sum of Rs.30,90,045 was acquired in assessment year 2017-18 and not in AY 2020-21.
3. Ld.AO / Ld.CIT(A), erred in reopening the assessment U/s. 147 on wrong facts. The Order Passed U/s. 148A(d) is in gross violation of principles of natural justice and is void Abinito.
4. Ld.AO/Ld.CIT(A), wrongly observed that the assessee had participated in auction by court on 22-09-2019. The correct date of court auction is 22-09-2016.
5. Ld.AO/Ld.CIT(A), failed to appreciate that the cash was withdrawn from the bank and remitted to the Court by way of Treasury Challans as directed by the Hon’ble Addl. Senior Civil Judge, Gajuwaka, at the time of Auction.
6. Ld.AO / Ld.CIT(A), failed to appreciate that the assessee filed all the documents sought by the Ld. AO.
7. Ld.AO/Ld.CIT(A), failed to appreciate the sources of Investment were from own savings, Gold Loan, Office loan and hand loans from friends and relatives which were taken through the banking channels for a sum of Rs. 30,90,045/-.
8. The appellant craves leave to add, amend and/ or after the above ground of appeal, at any time before or at the time of hearing of the appeal.”
2. Succinctly stated, the assessee, who is a salaried employee, had filed his return of income for the AY 2020-21, declaring an income of Rs.5,23,183/- (gross total income). Thereafter, the AO based on information flagged on Insight Portal under High Risk-e-Verification Scheme, which revealed that the assessee had during the subject year had made an unexplained investment/payment of Rs.30,90,045/-, initiated proceedings under section 147 of the Act. Notice under section 148 of the Act, dated 27/03/2024 was issued by the AO.
3. During the course of the assessment proceedings, it was observed by the AO that as per the information available with the Department, the assessee had participated in an auction conducted on 22/09/2019 (sic) in EP 24/2016 in OS 317/2010 by Addl. Senior Civil Judge, Gajuwaka and had made a payment of Rs.30 lakhs in the Court in a bid for a residential property admeasuring 167 sq yds for a value of Rs.30,90,045/- during the period relevant to AY 2020-21.
4. On being queried about the source of the aforesaid investment, it was, inter alia, stated by the assessee that he had participated in the auction conducted on 22/09/2016 and not 22/09/2019. Also, the assessee to substantiate his aforesaid claim had furnished with the AO a copy of the sale certificate, dated 22/09/2016, which revealed that he was the highest bidder. Accordingly, it was the claim of the assessee that he had made a successful bid in Court auction for purchasing the subject property, i.e., residential property admeasuring 167 sq yds for a value of Rs.30,90,045/- during the period relevant to AY 2017-18, and not the year under consideration. Apart from that, the assessee submitted that the subject investment at the relevant point of time was sourced out of Gold Loan and thrift loan that was taken by him for purchasing the property.
5. However, the AO did not find favour with the aforesaid explanation of the assessee and held the investment made by him towards purchase of the subject property, i.e., residential property admeasuring 167 sq yds as his unexplained investment under section 69 of the Act and determined his income at Rs.34,77,735/-.
6. Aggrieved, the assessee carried the matter in appeal before the CIT(A) but without success.
7. The assessee, aggrieved with the order of the CIT(A) has carried the matter in appeal before us.
8. We have heard the Learned Authorized Representatives of both parties, perused the orders of the authorities below and the material available on record.
9. Shri H. Srinivasulu, Advocate, Learned Authorized Representative (for short, “Ld. AR”) for the assessee, at the threshold of hearing of the appeal, submitted that both the authorities below had grossly erred in law and facts of the case in making/sustaining the impugned addition of Rs.30,90,045/- under section 69A of the Act. Elaborating on his contention, the Ld. AR submitted that as the assessee had purchased the subject property, i.e., residential house property admeasuring 167 sq yds by participating in an auction conducted on 22/09/2016, i.e., the period relevant to AY 2017-18 and not during the year under consideration, therefore, both the authorities below had grossly erred in law and facts of the case in making/sustaining the impugned addition under section 69 of the Act. The Ld. AR to buttress his contention that the assessee had purchased the property in public auction on 22/09/2116 has drawn our attention to the sale certificate, dated 30/11/2016 a/w copies of the Treasury Challans, Page 155-162 of APB. The Ld. AR submitted that though the assessee had furnished a copy of the sale certificate and specifically submitted before both the lower authorities that the subject investment in the residential property was made in the period relevant to the AY 2017-18 and not during the year under consideration, but neither of them had considered the said material aspect and had most arbitrarily made the impugned addition in the hands of the assessee during the year under consideration.
10. Per contra, Shri A.P. Babu, Learned Senior Departmental Representative (for short, “Ld. Sr-DR”) relied upon the orders of the authorities below.
11. We have given thoughtful consideration to the contentions advanced by the Learned Authorized Representatives of both parties in the backdrop of the orders of the authorities below.
12. The controversy involved in the present appeal hinges around the sustainability of the impugned addition made by the AO under section 69 of the Act of Rs.30,90,045/-, i.e., the investment made by the assessee towards purchase of residential property admeasuring 167 sq yds vide Court case No.24/2016 for a consideration of Rs.30,90,045/-.
13. Ostensibly, the AO had initiated the proceedings against the assessee for the reason that he was in receipt of information that the assessee had made an unexplained investment/payment towards purchase of the aforesaid property during the year under consideration. Although, the assessee had in the course of the proceedings before the lower authorities specifically submitted that the subject investment was made by him in the period relevant to AY 2017-18 and had also filed with the AO a copy of the sale certificate, dated 22/09/2016, but both the authorities below had failed to take cognizance of the said material aspect and merely based on the information that was gathered by them from the Insight Portal held the subject investment as having been sourced out of the assessee’s unexplained sources under section 69 of the Act.
14. We find on a perusal of the sale certificate, dated 30/11/2016 as was filed by the assessee with the AO that the subject investment towards purchase of property admeasuring 167 sq yds with RCC building bearing D.No. LIG 205 containing Ground and First Floor, Plot No.205, Survey No.38, 38 (part) situated at Samatha Nagar, Pedagantyada Mandal, Visakhapatnam-45 was purchased by the assessee by participating in a sale conducted by way of public auction on 22/09/2016 in an execution of Decree in suit OS No.317/2010, i.e., for the period relevant to AY 2017-18. In our view, the AO had based on misconceived fact that the assessee had made the subject investment on 22/09/2019, i.e., the period relevant to AY 2020-21 had initiated the impugned proceedings and made the subject addition in the hands of the assessee.
15. We thus, in terms of our aforesaid observations are of firm view that as the subject investment had not been made by the assessee during the year under consideration, but in the period relevant to the Ay 2017-18, the impugned addition so made by the AO cannot be sustained and is liable to be vacated.
16. We thus, in terms of our aforesaid deliberations direct the AO to vacate the addition of Rs.30,909,045/- made by him under section 69 of the Act.
17. In the result, appeal filed by the assessee is allowed.
Order pronounced in the open court on 14th October, 2026.
