CHANDRA SWAMINATHAN,CHENNAI vs. ITO, NCW-22(1), TAMBARAM

आदेश / O R D E R PER ABY T. VARKEY, JM: This is an appeal preferred by the assessee against the order of the

Learned Commissioner of Income Tax (Appeals)/NFAC, (hereinafter

referred to as “the Ld.CIT(A)”), Delhi, dated 23.05.2025 for the

Assessment Year (hereinafter referred to as "AY”) 2017-18.

confirming the additions of ₹49,80,330/- & ₹10,80,000/- made by the AO

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by way of unexplained monies u/s.69A of the Income Tax Act, 1961

(hereinafter referred to as "the Act”).

assessee an individual lady had sold her apartment at Rajparis, Crystal-

Spring on 04.10.2016 to Shri K. Manoharan vide registered Sale Deed

No.10626/2016 for a sale consideration of ₹35,50,000/-, according to

which ₹33,00,000/- was received in bank and ₹2,50,000/- was received

in cash. Simultaneously in the event of such sale, the assessee had also

separately disposed off imported household utensils, electronic items etc.

of her apartment at Rajparis, Crystal- Spring to several vendors and had

realized ₹8,09,600/- in cash. The assessee is found to have deposited the

cash of ₹2,50,000/- received from sale of flat, ₹8,09,600/- received from

sale of household items, ₹1,00,000/- received by way of gift from her

husband and daughter along with her cash balance of ₹20,400/-,

aggregating to ₹11,80,000/- in her bank account. Thereafter, the

assessee invested the ibid sale-consideration, by purchasing a Residential

Flat viz., Flat No.B-3,Third-Floor, Raj Castle, Medavakkam from the seller

represented by Shri Mr. M.S. Swaminathan, Power of Attorney-holder

(PoA) of vendor, Shri Vijay Guruswami, son-in-law of the assessee at a

cost of ₹35,00,000/- vide registered deed D.No.123/2017 dated

05.01.2017. The assessee had incurred stamp duty and registration

charges of ₹2,80,330/- in relation to this acquisition of flat. The assessee

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had further spent ₹12,00,0000/- on the interiors of the newly acquired

flat. The assessee accordingly claimed to have spent ₹49,80,330/-

towards the new residential flat at Raj Castle, Medavakkam. According to

the assessee, she had re-invested the sale consideration from transfer of

her residential flat at Rajparis, Crystal- Spring in acquisition of new

residential flat at Raj Castle, Medavakkam and thus, she claimed the long

term capital gain arising from sale of her flat by way of deduction u/s 54

of the Act. It is seen that, the appellant had inter alia reported long term

capital loss of ₹7,05,542/- after claiming exemption u/s 54 of the Act and

declared total income of ₹2,01,156/-.

to have taken note of the sale of flat at Crystal-Spring apartment on

04.10.2016 for ₹35,50,000/- (₹33 lakhs through bank & ₹2.5 lakhs in

cash), which was supported by sold registered Sale Deed No.10626/2016

and thus did not dispute the long term capital gains derived therefrom.

The AO thereafter called for the details of the flat purchased at Raj Castle

to verify the deduction claimed u/s 54 of the Act. Upon examination of the

details, particularly the registered deed dated 05.01.2017 and the bank

statements, the AO noted that, the payment made towards acquisition of

flat to the vendor and the cost of interiors of ₹35,00,000/- and

₹12,00,000/- respectively was made only in the month of August 2017

and not January 2017, as stated in the registered deed. The AO required

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the assessee to explain this discrepancy and provide the source of

payment. The AO was of the view that, if the assessee had already paid

₹33,00,000/- in January 2017, as mentioned in the registered deed, then

why did she paid sums of ₹33,00,000/- and ₹12,00,000/- again in August

2017. To this, the assessee is found to have explained that, though she

had issued and handed over the cheque of ₹33,00,000/- at the time of

registration in January 2017, but the same was encashed by the seller

only on in August 2017. The assessee clarified that, the payment made in

August 2017 [whose cheque was issued in January 2017] was the sole

payment and no other sum was paid to the vendor. The assessee further

explained that, the flat which was purchased from her son-in-law had

been leased by the latter to certain tenant(s), who had sought time to

vacate the premises until they got suitable alternative accommodation.

Accordingly, she had proposed to the seller [her son-in-law] that the

cheque issued by her upon registration ought to be encashed only when

the tenant(s) vacate the flat and the physical possession is given to her.

The assessee submitted that, though she was given symbolic possession

vide registered deed in January 2017, but the physical possession was

received only in August 2017 and accordingly, the seller had encashed the

cheque then, which was issued in January 2017. The AO is noted to have

asked the assessee to adduce proof in support of this explanation. In

response, the assessee furnished a copy of the lease agreement dated

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05.01.2017 between her and the seller. The AO however doubted the

veracity of the said lease deed since it was executed on a stamp paper

dated November 2017, and the stamp paper was also issued in someone

else’s name. The AO thus disbelieved the entire transaction, as explained

by the assessee. The AO is found to have curiously not only denied the

deduction claimed u/s 54 of the Act, but he went on reject the nature and

source of payment of ₹49,80,330/- viz., the cost of purchase of flat,

stamp duty & registration charges and the cost of interior works, and

added the same by way of unexplained monies u/s 69A of the Act. The AO

is noted to have also added the cash deposits of ₹10,80,000/- in

assessee’s bank account treating it to be unexplained u/s 69A of the Act.

On appeal, the Ld. CIT(A) concurred with the findings of the AO. Being

aggrieved, the assessee is now in appeal before us, assailing the

impugned action of authorities below.

addition made by AO of ₹49,80,000/- was incomprehensible and flawed,

and that the Ld.CIT(A) did not even bother to appreciate the inherent

fallacy and improbability of the case as built by AO to saddle the huge

addition. The Ld. AR brought to our notice that, though the Ld.CIT(A)

acknowledged at Para No.5.2.2 of his order that sale consideration was

actually paid several months after the registration of Sale-Deed on

05.01.2017, but then, he curiously observed that such payment points to

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an unexplained inflow of fund at a later date, whereas the Ld. AR showed

us that there was none. The Ld. AR further rebutted the assertion of the

Ld CIT(A) that there was no evidence available regarding source of such

funds at the time of purchase in January 2017, by showing us that the

assessee had sufficient bank balance in excess of Rs 45 lakhs at that

material time. According to Ld. AR therefore, such findings rendered by

the Ld.CIT(A) to justify the impugned addition, is not only self-

contradictory, but perverse and is nothing but based on suspicion and

conjectures.

misdirected themselves on the basis of post-dated stamp-paper of

November, 2017, to disbelieve the entire transaction. He submitted that

the undisputed contemporaneous facts was that, the assessee had sold

her flat and received sum of ₹35,50,000/- from the purchaser and further

sum of ₹8,09,600/- upon sale of household items and electronics &

appliances. The Ld. AR argued that, the veracity of the registered

purchase deed of January 2017 was not in question, in as much as, the

assessee had indeed paid the stamp duty and registration charges, at that

material time. In so far as the payment of consideration towards the

purchase of flat is concerned, the Ld. AR showed us that, the said

payment was indeed cleared later on in August 2017, which is verifiable

from the bank statements, and supported by the confirmation furnished

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by the vendor. The Ld. AR submitted that, the time gap between the

execution of deed and the clearance of cheques and/or the explanation of

the same, was totally indecisive to ascertain the eligibility of exemption

claimed u/s 54 of the Act or for that matter make any addition u/s 69A of

the Act, when the fact remains that, the source of payment towards the

flat acquired by the assessee was evidently out of the proceeds of flat

sold by the assessee.

Castle apartment made in January, 2017 had not been questioned, and

that without payment of registration charges/stamp-duty of ₹35,330/- &

₹2.45 lakhs, it was impossible to register the property in assessee’s

name. The Ld. AR showed us that, even this payment was added by the

AO way of unexplained monies u/s 69A of the Act, which according to

him, exposes the whimsical attitude and arbitrary exercise of power by

the AO/Ld.CIT(A). The Ld. AR further brought to our notice that, the

source of payment of ₹49,80,330/- inter alia comprised of the cash

deposits of ₹10,80,000/- in assessee’s bank account. He submitted that,

the AO had first arbitrarily added the payment made out of such cash

deposits towards purchase of flat, while making addition of ₹49,80,330/-

by way of unexplained monies u/s 69A of the Act, and thereafter he again

added the cash deposits itself of ₹10,80,000/-, resulting in double

addition. The Ld. AR contended that, even this double addition, which was

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ex-facie evident from the records, had not been correctly appreciated by

the Ld. CIT(A) / AO, which in his view, showed the high-handed action

taken against the assessee. He thus urged that the impugned additions

were factually perverse and wants us to delete the same.

as well as that of AO, and doesn’t want us to interfere with the impugned

action of Ld CIT(A).

before us is regarding the impugned additions of ₹49,80,330/- &

₹10,80,000/- as unexplained money u/s.69A of the Act. Since both the

additions are based on facts which are inter-twined with each other, we

are taking them up together for adjudication.

the assessee had conducted two separate transactions during the relevant

year. Firstly, the assessee had sold her apartment at Crystal Spring from

which she had derived proceeds of ₹35,50,000/- comprising of

₹33,00,000/- in cheque and sum of ₹2,50,000/- in cash. This is verifiable

from the terms of the deed bearing no. 10626/2016 dated 04.10.2016.

Secondly, the assessee had executed purchase/sale deed dated

05.01.2017 in terms of which she had purchased a new residential flat at

Raj Castle Apartments on which she had expended stamp duty and

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registration charges aggregating to ₹2,80,330/-. The assessee is noted to

have claimed deduction u/s 54 of the Act on the ground that the capital

gain equivalent arising from transfer of her flat at Crystal-Spring had

been re-invested in purchase of new residential flat at Raj Castle. The

assessee is found to have furnished the relevant deeds before the lower

authorities, which are found to be verifiable from Pages 1 to 51 of the

paper book filed before us as well. It is further seen that the receipt of

₹33,00,000/- in cheque [out of total consideration of ₹35,50,000/-] upon

sale of her flat at Crystal Palace is found to be verifiable from assessee’s

bank statements as well. As regards the discharge of purchase

consideration of flat at Raj Castle Apartment is concerned, it is seen that,

the assessee is shown to have issued and handed over cheques on

05.01.2017 of Rs.35 lacs and Rs.12 lacs each, which was albeit encashed

by the vendor in August 2017.

the vendor in January 2017 along with registration and stamp duty

charges out of unexplained sources and therefore the monies of

₹49,80,330/- was added u/s 69A of the Act. We find that this assertion of

the Revenue is not based upon the facts, as is verifiable from the records

before us. We find that the vendor had confirmed the sale made in

January 2017 and that the consideration of Rs.47 lacs, in aggregate, was

received by him in August 2017. The payment of registration charges and

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stamp duty charges is also traceable to the bank statement of the

assessee. We further observe that, the assessee had sufficient bank

balance on 04.01.2017 to issue and hand over cheques of Rs.47 lacs to

the vendor on 05.01.2017. It is also not in dispute that, later on, the

vendors had encashed the cheques and the amounts were paid out of the

bank account of the assessee in August, 2017. We thus find that the

addition made by the AO u/s 69A was without any basis and on incorrect

appreciation of relevant facts and that he had misdirected himself on

irrelevant material.

the lease agreement furnished by the assessee, for explaining the delayed

encashment of cheques by the vendor. The AO found this agreement

furnished by the assessee to be an after-thought, to justify the delay in

clearance of payment and thus disbelieved not only this lease agreement,

but the entire transaction/arrangement itself. According to us, the

disputed lease agreement has no bearing on the issue at hand. It is not

the Revenue’s case that, the deed bearing no.123/2017 registered on

05.01.2017 was obtained through fraud or was sham. The payment of

stamp duty and registration charges, rather, fortifies, the veracity of the

acquisition of flat. It is also an undeniable fact that, the assessee had

sufficient bank balance on the date of registration and therefore it can be

plausibly accepted that she could have issued cheques of Rs.45 lacs on

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that date, whose receipt has been acknowledged by the seller in the

registered deed. It could be for varied reasons that, the payment was

ultimately encashed and cleared later on viz., in August 2017, but the fact

remains that, the payment was made to the bank account of the seller

alone. Indeed, the lease agreement furnished by the assessee to explain

the delay in clearance of cheques suffers from skepticism. The Ld. AR

however has rightly explained that, if the AO had doubt about the belated

presentation of cheque and wanted to verify when the vendor’s tenant

vacated Raj-Castle Apartment in August 2017, then the AO should have

confronted the vendor, whose details including PAN, Aadhar, address

details were in the possession of AO and not the assesseee. In this

context, we note that, the vendor had furnished confirmation which is

found placed at page 54 of PB, where the details of sale-consideration of

Rs 35 lakhs transferred from bank account of assessee to vendor account

dated 03.08.2017 is found placed therein and page 55 of PB gives similar

details of payment of Rs 12 Lakhs in August 2017 through bank. This

confirmation further affirms the case of the assessee that, there was no

unexplained payment made towards the purchase of the flat at Raj Castle

in January 2017 and that the cheques issued then had been encashed by

the vendor in August 2017 and therefore there was no involvement of any

unexplained monies. It is also seen that the source of payment is found to

be out of the proceeds received upon sale of flat at Crystal Spring by the

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assessee. It is also not the Revenue’s case that, the payment was not

cleared within the time limit specified in Section 54 of the Act viz., two

years from the date of sale of capital asset, which could have otherwise

resulted in denial of deduction u/s 54 of the Act. The Ld. DR was also

unable to clarify that, if for the sake of argument, it is assumed that, the

assessee had discharged the sale consideration out of unexplained

sources in January 2017, then for what purpose could have the same

amount been paid and cleared to the vendor from her bank account in

August 2017. We thus are in agreement with the Ld. AR that the case

made out by the lower authorities was bereft of logic and fraught with

conjectures and that the impugned addition of ₹49,80,330/- made u/s

69A was unsustainable.

relevant documents to prove the claim u/s 54 of the Act by adducing the

best evidence to prove the sale of her apartment in October 2016 by

producing the registered Sale-Deed dated 04.10.2016 & thereafter

purchase of flat in January 2017 by registered Purchase Deed dated

05.01.2017. It is settled position of law that a registered Sale-deed

carries with it a formidable presumption of validity and genuineness.

Registration is not a mere formality but a solemn act that imparts high

degree of sanctity to the document. Consequently, it was held by Hon’ble

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Supreme Court in plethora of cases to name one, Prem Singh and Ors

vs Birbal and Ors (2006) 5 SCC 353, that a Court must not lightly or

casually declare a registered instrument as ‘Sham’. Further, the entries in

bank statement of the assessee also corroborates both the sale and

purchase transactions executed by the assessee. The registered purchase

Deed dated 05.01.2017 between the assessee and the PoA-holder of the

vendor, has not been questioned by the latter before any court or

authority alleging fraud. Only because the assessee purchased the

property from her son-in-law who encashed the cheques issued towards

the consideration amount subsequent to registration of the property,

cannot be a ground to disbelieve such a fact, unless there is any evidence

to show that registration of purchase/sale-deed dated 05.01.2017 is

sham, which is not the case of AO. In the absence of such insinuation, the

assessee’s title of Raj-Castle Apartment from 05.01.2017, cannot be

disputed. When these are the proved facts, the assessee is noted to have

discharged the burden to prove investment of sale-consideration she

received from sale of flat in October 2016, by proving purchase of

residential flat in January 2017, and satisfied the condition precedent for

claiming capital-gain exemption u/s 54, which claim is legally tenable and

hence, in our view, ought to have been allowed.

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unjustified in denying the deduction claimed by the assessee u/s 54 of the

Act, but the addition of ₹49,80,330/- made u/s 69A of the Act is held to

be arbitrary and unsustainable, in the light of foregoing discussions. We

thus direct the AO to delete the impugned addition of ₹49,80,330/-

holding it to be erroneous and allow the deduction claimed by the

assessee u/s 54 of the Act.

deposited by the assessee in her bank account. It is seen that, the

assessee had deposited sums aggregating to ₹11,80,000/-. When asked

to provide the nature and source of the same, the assessee is noted to

have furnished confirmations of ₹50,000/- each from her husband &

daughter as gift, which was deposited in her bank account. These gifts

were accepted by the AO. In respect of the balance amount of

₹10,80,000/-, the assessee explained that, portion of it represented the

cash received upon sale of her flat i.e. ₹2,50,000/- and the balance was

represented by the proceeds from sale of expensive imported house-hold

utensils, electronic gadgets, etc., which she had to dispose of in the event

of her selling her Crystal-Spring apartment. The assessee is noted to have

provided the details of the purchasers along with the relevant bills and

invoices in support of the same. The AO however disbelieved the

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explanation of the assessee, on the ground that the assessee was unable

to furnish confirmations from the purchasers and that summons sent to

five out of eight parties had returned un-served. This action has been

confirmed by Ld CIT(A). Hence, assessee is now before us.

deposits of ₹10,80,000/- in dispute before us, as provided by the

assessee, is noted to be as under:

(i) Rs. 50,000/- gifted by husband. (i) Rs. 50,000/- gifted by daughter. (iii) Rs. 2,50,000/- cash received on sale of property to Mr.Manohar (see page No. 6 of the Sale Deed dated 04.10.2016).

(iv) Rs. 97,000/- received on sale of personal effects to smart electronics. (v) Rs.1,95,000/- received on sale of personal effects to Guna Enterprises. (vi) Rs.94,600/- received on sale of personal effects to smart electronics. (vii) Rs.1,41,000/- received on sale of personal effects to Madan Enterprises. (viii) Rs.1,43,000/- received on sale of personal effects to H. Khader and Sons.

(ix) Rs.1,39,000/- received on sale of personal effects to S.K.S. Traders.

Crystal-Spring, we find that, the said receipt is verifiable from Page no 6

of the registered sale deed dated 04.10.2016. It is also observed that this

cash receipt of ₹2,50,000/- was accepted and taken as a part of the sale

consideration by the AO, while assessing the capital gains arising on sale

of the property. We are therefore of the view that, the AO was unjustified

ITA No.2034/Chny/2025 (AY 2017-18) Mrs. Chandra Swaminathan :: 16 ::

in treating the said receipt to be unexplained and thus direct the AO to

delete the same.

represented by proceeds of ₹8,09,600/- derived by the assessee upon

sale of household items, electronic gadgets and appliances, upon the

event of disposal of her flat at Crystal-Spring. The remaining cash

deposit of ₹20,400/- [₹8,30,000 – ₹8,09,600] is found to have been

explained out of the current year’s income and cash balance of the

assessee, which we find to be correct. The Ld. AR has showed us that, the

individual value of sales to the respective vendors, to whom these second

hand items aggregating to Rs.8,09,600/- were sold, was less than

Rs.2,00,000/- and therefore we are in agreement with him, that the

assessee was under no obligation to obtain and retain their PAN details in

terms of Rule 114B of the Income Tax Rules, 1962. It is seen that, the

sales were supported by the relevant bills and vouchers and the

surrounding facts and circumstances also justified the quantum of such

sales, as she had to dispose them off upon sale of her flat in October

2016, as noted supra. The Ld. AR explained that these vendors who had

purchased these items and household effects generally deal in cash and

that the assessee did not have any continuing relationship with them,

basis which she could have obtained any further confirmations in the

manner as requisitioned by the AO or ensure their attendance of

ITA No.2034/Chny/2025 (AY 2017-18) Mrs. Chandra Swaminathan :: 17 :: summons. Given the overall facts and circumstances in this specific facts of this case, according to us, the explanation furnished by the assessee regarding the proceeds derived on sales of household items, electronic appliances and gadgets of Rs.8,09,600/- is found to be plausible. We thus hold the action of the AO in adding the same as unexplained monies to be unjustifiable. Overall therefore, the addition of Rs.10,80,000/- made u/s.69A of the Act can’t be sustained and is directed to be deleted.

Order pronounced on the 17th day of April, 2026, in Chennai.

Sd/- Sd/- (एस. आर. रघुनाथा) (एबी टी. वक�) (S.R.RAGHUNATHA) (ABY T. VARKEY) लेखा सद�य/ACCOUNTANT MEMBER �याियक सद�य/JUDICIAL MEMBER चे�ई/Chennai, �दनांक/Dated: 17th April, 2026. TLN आदेश क� �ितिलिप अ�ेिषत/Copy to: 1. अपीलाथ�/Appellant 2. ��थ�/Respondent 3. आयकरआयु�/CIT, Chennai / Madurai / Salem / Coimbatore. 4. िवभागीय�ितिनिध/DR 5. गाड�फाईल/GF

TUMMALACH Digitally signed by TUMMALACHARLA ARLA LAKSHMI LAKSHMI NARAYANA Date: 2026.04.17 NARAYANA 17:03:59 +05'30'