INCOME TAX OFFICER- 41(4)(4), MUMBAI, MUMBAI vs. SATYAWAN SHRIDHAR KADAM, MUMBAI

PER OM PRAKASH KANT, AM

This appeal by the Revenue is directed against order dated 25.02.2026 passed by the learned National Faceless Appeal Centre, Delhi [hereinafter shall be referred as 'learned CIT(A)'] for Assessment Year 2015-16, raising following grounds:

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(“AO”) relied upon the information received from the Joint Sub- Registrar, Borivali-7, regarding the sale of the immovable property for ₹1,89,60,500/-, observing that non-reflection of the transaction in Form 26AS was not determinative since Form 26AS would reflect transactions on which the tax has been deducted. In view of the above, the transactions entered into by the assessee during the year under consideration amounting to Rs.1,89,60,500/- representing unexplained income and since the assessee did not file his return of income for the year under consideration, the same was treated by the ld AO as qualifying for income escaping assessment as represented in the form of asset within the meaning of provisions of section 149(1)(b) of the I.T. Act. Therefore, this case considered a fit case for issuance of notice u/s 148 of the Act for A.Y. 2015-16. Accordingly, notice u/s. 148 of the Act was issued.

2.1 During the reassessment proceedings, the assessee again denied that the transaction belonged to him and furnished a copy of the sale deed and Form 26AS. On being specifically required to explain the transaction, the assessee stated that it was a transaction between Mithanagar Kaveri Co-operative Housing Society and Zenal Construction Private Limited and that he had signed the documents only in his capacity as Secretary of the Society.

2.2 The AO, however, required the assessee to furnish, inter alia, the complete particulars of Zenal Construction Private Limited, the

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details of the person or entity receiving the sale consideration, the bank account in which the consideration was credited and all his bank statements for the relevant year. Despite notices under section 142(1) dated 24.08.2023 and 12.09.2023, the assessee did not furnish the requisite details. The AO, therefore, proceeded on the material available on record and treated ₹1,89,60,499/- as short-term capital gain in the hands of the assessee.

3.1 The learned CIT(A) accepted the explanation, observing that the registered document showed the Society as the party to the redevelopment agreement and that the assessee had signed it as Secretary of the Society and not in his individual capacity. He consequently held that any tax liability arising from the transaction, if at all, had to be examined in the hands of the Society and not the assessee, and deleted the addition observing as under:

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4.1 The learned Departmental Representative further submitted that the supplementary agreement relied upon by the learned CIT(A) was produced for the first time at the appellate stage and was therefore additional evidence. The learned CIT(A), having relied upon such evidence without affording the AO an opportunity to examine or rebut it, acted in breach of Rule 46A of the income-tax Rules, 1962 ( In short the Rules) . The matter, according to him, therefore required restoration to the file of the learned CIT(A).

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6.1 The assessee's consistent case before the ld AO was that the transaction was between Mithanagar Kaveri Co-operative Housing Society and Zenal Construction Private Limited and that he had signed the relevant document only as Secretary of the Society. That assertion, however, was not accompanied before the AO by the complete particulars which would enable the AO to ascertain the true recipient of the consideration and the precise legal and beneficial interest of the assessee in the transaction. In particular, the assessee did not furnish the details of the recipient of the consideration, the relevant bank account in which the consideration was credited, or his own bank statements, despite specific requisitions under section 142(1).

6.2 The learned CIT(A), nevertheless, accepted the assessee's explanation principally on the basis of the supplementary agreement produced before him. The crucial question, therefore, is whether that document could validly be relied upon without

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following the procedure prescribed by Rule 46A. The record shows that the supplementary agreement, on the basis of which the learned CIT(A) accepted the assessee's explanation, was furnished before the first appellate authority and was relied upon for granting substantive relief. The learned CIT(A), however, neither recorded compliance with the conditions prescribed under Rule 46A nor afforded the AO an opportunity to examine the document and verify its contents. The requirement contained in Rule 46A is not a mere procedural formality. Where an assessee produces before the CIT(A) evidence which was not produced before the AO, and the CIT(A) proposes to take such evidence into account for disposing of the appeal, the AO must be afforded a reasonable opportunity to examine the evidence, to verify its authenticity and relevance and, where necessary, to rebut the same.

6.3 In the present case, that safeguard assumes particular significance because the very document relied upon by the learned CIT(A) was used to resolve the principal factual controversy, namely, whether the assessee executed the redevelopment transaction in his individual capacity or merely represented the Society as its Secretary. The AO had not had an opportunity to examine that document in the assessment proceedings. The learned CIT(A), therefore, could not have brought the proceedings to an end by accepting the document without first giving the AO an effective opportunity to verify the same.

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6.4 There is yet another aspect which requires examination. The mere fact that the assessee signed the agreement as Secretary of the Society may be relevant, but by itself it does not conclude the question of taxability. The actual nature of the rights transferred, the consideration agreed or received, the person or entity to whom the consideration accrued, the manner in which it was dealt with in the accounts of the Society, and the assessee's individual interest, if any, are matters requiring factual verification. The AO had specifically called for the details of the person or entity receiving the consideration, the bank account into which the consideration was credited and the assessee's bank statements. Those details were not furnished. The learned CIT(A), instead of directing verification of these foundational facts, accepted the assessee's explanation on the strength of the supplementary agreement alone. In our view, such conclusion is premature. The question whether the assessee had any beneficial or taxable interest in the transaction cannot be determined merely from the capacity in which he signed the agreement, without examining the complete transaction documents and the flow of consideration.

6.5 In these circumstances, we are of the considered view that the order of the learned CIT(A) deleting the addition cannot be sustained in its present form. At the same time, the material on record does not justify affirming the addition in the hands of the assessee without first determining the true nature of the

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transaction and the person in whose hands the resultant income, if any, is taxable. We accordingly set aside the order of the learned CIT(A) and restore the matter to his file for fresh adjudication. The assessee shall furnish the complete original and supplementary agreements, complete particulars of the transaction and the recipient of the consideration, the relevant bank-account statements evidencing the receipt and flow of consideration, and such further evidence as may establish the capacity in which the assessee executed the documents and whether any beneficial interest accrued to him personally. The learned CIT(A) shall, in accordance with law, afford the Assessing Officer an effective opportunity to examine and verify the aforesaid material and to furnish his comments/remand report. The assessee shall thereafter be afforded reasonable opportunity of being heard. The learned CIT(A) shall determine, on the basis of the complete material and after recording a reasoned finding, whether any capital gain arose from the transaction, in whose hands such gain is chargeable, and the quantum thereof, in accordance with law. Needless to say, no finding is being expressed by us on the merits of the transaction or on the ultimate taxability of the capital gain in the hands of the assessee, the Society or any other person. All contentions are left open. Ground Nos. 1 to 7 are allowed for statistical purposes in the aforesaid terms.

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Order pronounced in the open Court on 27/08/2026.

Sd/- Sd/- (PAWAN SINGH) (OM PRAKASH KANT) JUDICIAL MEMBER ACCOUNTANT MEMBER Mumbai; Dated: 27/08/2026 Kunal Kr. P.S. Copy of the Order forwarded to : 1. The Appellant 2. The Respondent. 3. CIT 4. DR, ITAT, Mumbai 5. Guard file.

BY ORDER, //True Copy// (Assistant Registrar) ITAT, Mumbai