RAJESH VRAJLAL RATHOD,MUMBAI vs. ITO WARD 41(4)(3), MUMBAI

THE ORDER IS BAD IN LAW, ILLEGAL AND WITHOUT JURISDICTION

VIOLATION OF PRINCIPLES OF NATURAL JUSTICE

ADDITION OF Rs. 16,50,000/- U/S, 69A AS ALLEGED INVESTMENT FROM UNEXPLAINED SOURCES

DISALLOWANCE OF Rs. 1,50,000/- CLAIMED U/S. 80C OF THE ACT

DISALLOWANCE OF Rs. 16,464/- CLAIMED U/S. 80D OF THE ACT

LIBERTY

At the outset, it is observed that there is a delay of 61 days in filing the present appeal before the Tribunal. The assessee has filed an application for condonation of delay, supported by an affidavit sworn on oath dated 03.02.2026, explaining the circumstances and reasons which led to the delay. The Ld. AR submitted that the delay was neither deliberate nor intentional and relied upon the decision of the Hon'ble Supreme Court in the case of Collector, Land Acquisition v. Mst. Katiji & Ors. (1987) 167 ITR 471 (SC) / 1987 AIR 1353, submitting that when substantial justice is pitted against technical considerations, substantial justice deserves to be preferred.

Having heard both parties and upon perusal of the averments made in the affidavit, I find sufficient cause for the delay of 61 days in preferring this appeal. Following the dictum laid down by the Hon'ble Supreme Court in Mst. Katiji (supra), the delay of 61 days in filing the appeal is hereby condoned and the appeal is admitted for adjudication on merits.

I have heard the counsels for both the parties on Ground Nos. 1 and 2. The learned AR could not substantiate his arguments in respect of these grounds. Further, after going through the records before me, I find that these grounds are general in nature. I also find that there is no violation of the principles of natural justice while deciding the issues raised by the assessee. Accordingly, Ground Nos. 1 and 2 raised by the assessee are dismissed.

Ground No. 3 is directed against the addition of Rs. 16,50,000/- made by the Assessing Officer ("AO") under section 69A of the Income-tax Act, 1961 ("the Act"), which was confirmed by the learned CIT(A).

The brief facts relating to this issue are that a commercial premises being Shop No. 6 (Site Shop No. 2), admeasuring 38.08 sq. mtrs. carpet area, was owned by a partnership firm named M/s. Rathod Steel Centre. Consequent upon the demise of two out of the three partners, the partnership firm was dissolved with effect from 10.11.2016, and the said shop vested exclusively with Mr. Harshad P. Rathod, being the sole surviving partner. Subsequently, a developer, M/s. Geopreneur Corp Pvt. Ltd., approached Mr. Harshad P. Rathod for redevelopment, and an Agreement for Permanent Alternate Accommodation ("PAA Agreement") dated 20.12.2017 was entered into between the Developer and Mr. Harshad P. Rathod, which was registered on 21.12.2017. In terms of the said agreement, the Developer agreed to allot a commercial premises free of cost to Mr. Harshad P. Rathod in lieu of his rights in the shop premises, along with corpus compensation of Rs. 15,00,000/-.

The assessee was joined as one of the Confirming Parties to the PAA Agreement along with other legal heirs of the deceased partners. During the assessment proceedings, the AO treated the transaction as an acquisition/purchase of immovable property by the assessee and made an addition of Rs. 16,50,000/- under section 69A of the Act. In first appeal, the learned CIT(A) sustained the addition, holding that the assessee's plea of being a mere confirming party was factually unsubstantiated and that the assessee failed to produce corroborative proof from the builder or contemporaneous affidavits.

Before me, the ld. AR drew my attention to the registered PAA Agreement dated 20.12.2017 and specifically referred to Clause 20 thereof, wherein the Confirming Parties, including the assessee, categorically declared that:

The ld. AR submitted that the assessee joined the agreement purely as a confirming party ex abundanti cautela at the instance of the developer. The assessee neither acquired any property nor received any portion of the corpus fund or consideration, the entirety of which was agreed to be paid and directly credited to the account of Mr. Harshad P. Rathod. The assessee filed bank statements before the lower authorities demonstrating that no money was paid or received by him. Thus, according to the ld. AR, the invocation of section 69A was without jurisdiction. The ld. DR, on the other hand, strongly relied upon the orders of the lower authorities.

I have considered the rival contentions and perused the material available on record. Section 69A of the Act can be invoked where, in any financial year, the assessee is found to be the owner of any money, bullion, jewellery or other valuable article, and such money, bullion, jewellery or valuable article is not recorded in the books of account, if any, maintained by him, and the explanation offered by the assessee is not satisfactory.

In the instant case, the foundation of the addition rests on the premise that the assessee entered into an immovable property transaction. A perusal of the registered PAA Agreement dated 20.12.2017 reveals that the assessee was merely a "Confirming Party" and not the purchaser, acquirer or recipient of the property. It is well settled that a confirming party is joined to an instrument merely to confirm that he has no right, title or interest in the property and to safeguard the transferee from any future dispute. Clause 20 of the registered document unequivocally records that the assessee possessed no right, title or interest in the permanent alternate accommodation, had no objection to the premises being allotted to Mr. Harshad P. Rathod and waived all rights therein. Furthermore, there is no evidence on record to establish that the assessee either made any investment or received any part of the corpus compensation of Rs. 15,00,000/-. On the contrary, the recitals and bank records establish that the compensation was directed exclusively to Mr. Harshad P. Rathod.

The lower authorities have proceeded on conjectures and surmises without bringing any corroborative material on record to show that the assessee was the owner of any unexplained money, asset or valuable article. The jurisdictional pre-requisites for invoking section 69A of the Act are, therefore, conspicuously absent. Consequently, the addition of Rs. 16,50,000/- made under section 69A of the Act cannot be sustained and is directed to be deleted. Ground No. 3 raised by the assessee is accordingly allowed.

Ground No. 4 relates to the disallowance of deduction claimed under Chapter VI-A amounting to Rs. 1,50,000/- on account of Life Insurance Corporation ("LIC") premium payments.

The ld. AR submitted that the assessee had made payments totalling Rs. 1,71,644/- towards LIC premiums during the year under consideration and restricted the claim of deduction to Rs. 1,50,000/- as per the statutory limit. The details of the payments through the bank account were submitted before the AO and copies of the LIC premium receipts were placed before the ld. CIT(A).

I have heard both parties and verified the records. The assessee has furnished the bank statement reflecting the following debits towards LIC premium payments:

In addition to the bank debit entries, the assessee has also placed on record the relevant premium receipts issued by the Life Insurance Corporation of India. The genuineness of the payments is duly supported by documentary evidence. The disallowance of deduction of Rs. 1,50,000/- claimed under section 80C of the Act is, therefore, deleted. Ground No. 4 is allowed.

Ground No. 5 pertains to the disallowance of deduction claimed under Chapter VI-A under section 80D of the Act amounting to Rs. 16,464/- towards medical insurance premium.

The ld. AR submitted that the assessee paid a sum of Rs. 16,464/- on 31.07.2017 through banking channels to Religare Health Insurance towards health insurance premium, which is supported by the bank statement. The ld. DR supported the orders of the revenue authorities.

On perusal of the bank statement on record, the debit entry dated 31.07.2017 for Rs. 16,464/- paid to Religare Health Insurance is clearly demonstrable. The payment having been made through an approved banking channel towards health insurance coverage, the assessee is entitled to deduction under section 80D of the Act, subject to the applicable statutory conditions. In the facts of the present case, the disallowance of Rs. 16,464/- is accordingly directed to be deleted. Ground No. 5 is allowed.

In the result, the appeal of the assessee stands partly allowed.