RANJNA NAIR,MUMBAI vs. DCIT 42(3)(1) MUMBAI, MUMBAI

The relevant facts are that the assessee is a salaried employee and had not filed the original return of income for the year under consideration. Information available with the Department indicated that during F.Y. 2018-19 she had purchased an immovable property for ₹1,30,00,000 and had received salary of ₹29,77,963 from State Street Corporate Services Mumbai Private Limited and ₹2,135 from J.P. Morgan Services India Private Limited. Proceedings under section 147 were accordingly initiated and notice under section 148 was issued on 30.03.2023. In response thereto, the assessee filed her return of income on 22.04.2023 declaring total income of ₹19,09,070. The assessment was thereafter completed under section 147 read with section 144B vide order dated 26.12.2023 determining total income at ₹1,62,51,070, after making

Before the learned CIT(A), the assessee explained the circumstances which had prevented her from properly attending to the assessment proceedings and furnished additional documentary evidences in support of the respective claims. The learned CIT(A) entertained the additional evidences and forwarded them to the Assessing Officer for verification and comments. Pursuant thereto, the Assessing Officer issued a specific notice dated 04.11.2025 requiring the assessee to furnish the requisite details, in response to which the assessee filed her submissions on 07.11.2025 together with supporting documents. The Assessing Officer thereafter examined the documents and submitted a detailed remand report dated 28.11.2025. The assessee was also called upon to furnish comments thereon and, as stated in the written submissions, accepted the findings recorded by the Assessing Officer in the remand report. Thus, the additional evidences did not remain untested material produced unilaterally by the assessee. They were admitted in the appellate proceedings, referred to the Assessing Officer, subjected to scrutiny and verification by him, and definite factual findings were thereafter returned to the learned CIT(A).

Before us, the learned counsel submitted that once the Assessing Officer had examined the additional evidences and substantially accepted the explanation of the assessee, the learned CIT(A) could not have sustained the

We have heard the rival submissions and perused the assessment order, the impugned appellate order, the remand report dated 28.11.2025 and the written submissions along with the documents referred to therein. The peculiar feature of the present case is that the additions were originally made principally for absence of documentary evidence; however, during the appellate proceedings, the additional evidences were admitted and were thereafter subjected to scrutiny by the Assessing Officer himself. Therefore, the evidentiary position obtaining at the time of assessment underwent a material change in the appellate proceedings. Once the Assessing Officer, upon verification, returned specific findings on the very claims which formed the subject matter of additions, such findings constituted an integral part of the appellate record and necessarily required due consideration. We shall, therefore, deal with each issue in the light of the specific findings recorded by the Assessing Officer in the remand report.

Coming first to the exemption under section 10(13A), the Assessing Officer had disallowed the entire claim of ₹4,80,000 for want of documentary evidence. Before the learned CIT(A), the assessee furnished, inter alia, Form No.16, rent agreement, bank statement evidencing payment of rent and computation of income. These evidences were forwarded for remand verification. After examination thereof, the Assessing Officer recorded the following specific finding in paragraph 5.1 of his remand report:

We are unable to uphold the disallowance to the extent of ₹3,98,160. The issue before us is not whether the assessee should be allowed the original claim of ₹4,80,000 merely because the employer had granted exemption, but whether an amount which stood reflected in Form No.16 and which was specifically examined and verified by the Assessing Officer during the remand proceedings could still be disallowed without pointing out any infirmity in the underlying evidence. The assessee has further stated that the rent agreement and bank statement evidencing payment of rent were also furnished before the learned CIT(A). There is no finding that these documents were false or unreliable. In these circumstances, the factual foundation for denying exemption to the extent of ₹3,98,160 does not survive. Accordingly, the Assessing Officer is directed to allow exemption under section 10(13A) to the extent of ₹3,98,160. The balance claim beyond the amount so verified shall remain disallowed.

The next issue relates to deduction under Chapter VI-A. The assessee had claimed deduction of ₹3,50,000, which was entirely disallowed in the assessment order. During remand proceedings, the Assessing Officer examined

The conclusion of the learned CIT(A), to this extent, cannot be sustained. Failure to substantiate the balance claim of ₹2,00,000 may justify disallowance of that amount, but it cannot obliterate the deduction of ₹1,50,000 which stood independently verified by the Assessing Officer. There is no adverse finding against the genuineness or eligibility of this amount. We accordingly direct the Assessing Officer to allow deduction under Chapter VI-A to the extent of ₹1,50,000, while the balance amount of ₹2,00,000 shall remain disallowed.

The principal issue relates to the addition of ₹1,30,00,000 under section 69. The assessee had purchased Flat No.402, 4th Floor, Orlem Exodus Co- operative Housing Society Ltd., Dominic Lane No.1, Orlem, Malad (West), Mumbai, for total consideration of ₹1,30,00,000 under purchase agreement dated 05.12.2018. Since the assessee had not furnished complete evidence regarding the source of the purchase consideration during assessment, the Assessing Officer treated the entire investment as unexplained. During the appellate proceedings, however, the assessee furnished the purchase agreement, home-loan sanction letter issued by HDFC Bank and the relevant

The aforesaid evidence was specifically examined by the Assessing Officer during the remand proceedings. The material part of paragraph 5.3 of the remand report reads as under:

Thus, the factual position emerging from the Department’s own verification is unambiguous. Out of the total investment of ₹1,30,00,000, the source of ₹1,25,00,000 stood established through the HDFC housing loan; payments aggregating to ₹4,80,000 stood verified from the assessee’s HDFC Bank account; and the only component which the Assessing Officer found to remain unexplained was ₹20,000 paid in cash. In other words, the source of ₹1,29,80,000 stood verified in the remand proceedings.

The application of section 69 has to follow the factual determination of what part of an investment remains unexplained. Where an identifiable part of the purchase consideration is demonstrated to have emanated from a housing loan and the balance, except a small cash component, is traced through the assessee’s disclosed bank account, the entire purchase consideration cannot be deemed as unexplained investment. The statutory fiction cannot be extended to amounts whose source stands established merely because the supporting evidence was furnished at the appellate stage, particularly when such evidence was admitted by the learned CIT(A) and thereafter subjected to verification by the Assessing Officer. Once the evidence had been admitted and scrutinised, the relevant question was no longer when it was produced, but what it established.

We accordingly hold that the addition under section 69 can survive only to the extent of ₹20,000, being the amount which remained unexplained even

The last issue relates to the addition of ₹5,12,000 under the head “Income from House Property”. This adjustment comprises two distinct components, namely rental income of ₹3,12,000 and disallowance of loss of ₹2,00,000. During assessment, the Assessing Officer noticed rent of ₹26,000 per month and computed annual rent at ₹3,12,000. During remand proceedings, however, the assessee furnished the relevant bank statements and explained the actual pattern of rent received. The Assessing Officer verified the same and recorded the following finding in paragraph 5.4 of his remand report:

Once the actual rent has been verified from the bank account, there is no basis for continuing with the estimated annual rental income of ₹3,12,000 adopted in the original assessment. We accordingly direct the Assessing Officer to take the actual rental receipts at ₹2,90,000 and allow statutory deduction of 30% under section 24(a), thereby determining taxable rental income at ₹2,03,000.

As regards the separate claim of loss of ₹2,00,000, the Assessing Officer recorded in paragraph 5.4.1 of the remand report that the assessee had

Before parting, one aspect of the impugned order requires emphasis. The additional evidences in the present case were not entertained casually or acted upon without departmental verification. The learned CIT(A) himself admitted them and called for a remand report. The Assessing Officer thereafter issued an independent requisition to the assessee, received further documents, examined Form No.16, Form 26AS, the housing-loan sanction letter, bank statements and the material relating to rental income, and thereafter submitted a detailed report recording issue-wise findings. The assessee, in turn, accepted those findings. Therefore, once the very authority which had originally made the additions, upon subsequent verification of the additional evidences, recorded findings substantially accepting the assessee’s explanation, those findings could not be rendered nugatory merely because the documents had not been furnished at the original assessment stage. The learned CIT(A) was undoubtedly entitled to differ from the remand report, but such departure had to rest upon

The appellate proceedings are a continuation of the assessment process and, where relevant evidence is admitted and thereafter subjected to verification by the Assessing Officer, the adjudication has to proceed on the evidentiary record as finally constituted. The earlier absence of evidence cannot override positive verification subsequently carried out by the Department itself. Equally, however, where any part of a claim continues to remain unsupported even after remand verification, no relief can be granted merely because substantial relief has been found admissible on the other components. This is precisely why we have restricted the relief to the amounts which stand verified in the remand proceedings and have sustained the disallowances to the extent the claims remained unsupported.

Accordingly, the Assessing Officer is directed to give effect to our findings as under:

In view of the foregoing discussion, the grounds raised by the assessee are partly allowed in the terms indicated hereinabove.

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