ACIT-24(1), MUMBAI, MUMBAI vs. FIROZ MADADALI MERCHANT, MUMBAI

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ITA 1747/MUM/2026Status: DisposedITAT Mumbai13 July 2026AY 2020-215 pages

In favour of the assessee: the Revenue's appeal was dismissed. From the AI summary of this appeal.

AI SummaryDismissed

What did the Tribunal hold?

The Tribunal held that the assessee had explained the complete fund trail with documentary evidence, including sale deeds and bank statements. The Assessing Officer failed to rebut this evidence through proper inquiry.

What were the facts?

The assessee jointly purchased three immovable properties. The Assessing Officer treated a significant portion of the investment as unexplained, making an addition under Section 69. The CIT(A) deleted this addition.

What were the issues?

Whether the addition made under Section 69 for unexplained investment was justified when the assessee provided documentary evidence for the source of funds and the source of the source.

Which sections of the Income-tax Act were involved?

Section 69,Section 115BBE,Section 147,Section 144B

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, “F” BENCH, MUMBAI

Before: SHRI NARENDER KUMAR CHOUDHRY & SHRI JAGADISH

For Appellant: Shri Praveen Shetty
For Respondent: Shri Saurabh Raskar, SR. DR
Hearing: 05.05.2026Pronounced: 13.07.2026

Per: SHRI JAGADISH, A.M.:

1.

This appeal by the Revenue is directed against the order dated 13.12.2025 passed by the learned Commissioner of Income Tax (Appeals), NFAC, Delhi, arising out of the assessment order passed under section 147 read with section 144B of the Income-tax Act, 1961 for the assessment year 2020-21.

2.

The effective grievance of the Revenue is that the learned CIT(A) erred in deleting the addition of Rs.3,04,69,604/- made under section 69 read with section 115BBE of the Act.

ITA No.1747/M/2026 Firoz Madadali Merchant 3. The assessee, an individual, filed his return of income declaring total income of Rs.2,10,950/-. During the year, the assessee jointly purchased three immovable properties along with his parents. The Assessing Officer accepted the housing loans obtained from Axis Bank but treated the balance investment as unexplained and made an addition of Rs.3,04,69,604/- under section 69 read with section 115BBE holding that the assessee failed to establish the creditworthiness of the persons from whom funds were received. In appeal, the learned CIT(A) deleted the addition.

4.

The learned Departmental Representative submitted that the learned CIT(A) deleted the addition without recording proper findings and that the assessee failed to establish the creditworthiness of the lenders. Reliance was placed on the decision of the Hon'ble Supreme Court in PCIT vs. NRA Iron & Steel (P.) Ltd. The learned Authorised Representative, on the other hand, supported the order of the learned CIT(A) and submitted that the assessee had explained not only the source of investment but also the source of the source. The source of investment was explained as under:

Source Amount (Rs.) Explanation Smt. Farida Merchant sold her flat at Green Park for about Rs.60 lakh and Loan from mother 58,41,022 advanced loan of about Rs.55 lakh to the assessee through banking channels. Shri Madadali R. Merchant and Smt. Farida Merchant Repayment by father 4,63,22,668 jointly sold Shop No.10, Neelkanth Corporate IT

ITA No.1747/M/2026 Firoz Madadali Merchant

Source Amount (Rs.) Explanation Park, for about Rs.6 crore. Out of the sale proceeds received through the father's bank account, Shri Madadali R. Merchant repaid the loan earlier taken from the assessee, which constituted the source of investment in the impugned properties. Out of the above funds, Rs.3,04,69,604/- was Total funds available 5,21,63,690 utilized towards the assessee's share in the properties.

5.

We have considered the rival submissions and perused the material available on record. We find no merit in the contention of the Revenue that the learned CIT(A) deleted the addition without assigning reasons. A perusal of the appellate order shows that the learned CIT(A) has examined the documentary evidences and recorded a categorical finding that the assessee had furnished confirmations, income-tax returns, balance sheets and bank statements of both the parents before the Assessing Officer. The learned CIT(A) further recorded that the Assessing Officer neither pointed out any defect in these evidences nor conducted any enquiry under sections 131 or 133(6) of the Act before rejecting the explanation.

6.

From the material placed before us, it is evident that the assessee has explained the complete fund trail. The mother advanced loan out of 3

ITA No.1747/M/2026 Firoz Madadali Merchant the sale proceeds of her Green Park flat, whereas the father repaid the earlier loan obtained from the assessee out of the sale proceeds of Shop No.10, Neelkanth Corporate IT Park, jointly owned by both the parents. These transactions are supported by registered sale deeds, confirmations, bank statements, returns of income and balance sheets. Thus, the assessee has explained not only the source of investment but also the source of the source. Once such documentary evidence was furnished, the burden shifted upon the Assessing Officer to rebut the same by making appropriate enquiry. However, no adverse material has been brought on record except a general observation that the creditworthiness was not proved.

7.

The reliance placed by the Revenue on the decision in NRA Iron & Steel (P.) Ltd. is misplaced since, in the present case, the assessee has established the complete source of funds through cogent documentary evidence, which has remained uncontroverted. We, therefore, find no infirmity in the order of the learned CIT(A) deleting the addition of Rs.3,04,69,604/-. Accordingly, the grounds raised by the Revenue are dismissed.

8.

In the result, the appeal filed by the Revenue is dismissed.

Order pronounced in the open court on 13/07/2026.

Sd/- Sd/- (NARENDER KUMAR CHOUDHRY) (JAGADISH) Accountant Member Judicial Member

Mumbai, Dated: 13/07/2026 Ashwani Rao Sr. Private Secretary

ITA No.1747/M/2026 Firoz Madadali Merchant Copy of the order forwarded to: 1. Appellant 2. Respondent 3. The CIT 4. The CIT (Appeals) 5. The DR, I.T.A.T. By order

(Assistant Registrar) ITAT, Mumbai

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