MAGARAM VAKTARAMJI CHOUDHARY,MUMBAI vs. INCOME TAX OFFICER-22(3)(2), MUMBAI

PER PAWAN SINGH, JUDICIAL MEMBER:

09.06.2025for Assessment Year (AY) 2007-08. The assessee has raised following

grounds of appeal:

“1. In the facts and circumstances of the case and in law, the Ld. National Faceless Appeal Centre (NFAC), CIT (Appeals)-51, Mumbai has erred in reopening assessment under section 147 only for verification without being in possession of any tangible material.

Magaram Vaktaramji Choudhary ITA No. 5219/M/2025 (AY: 2007-08) addition of Rs.8,08,333/ on account of Unexplained loan for purchase of property under section 69B of the Income tax Act.

A.Y. 2007-08 on 24.01.2008 declaring income of Rs. 2,53,410/-. Initially, the

return was accepted under section 143(1). Subsequently, the case was reopened

on the basis of information that assessee along with Hiralal V. Chaudhary and

Ramesh V. Chaudhary( his two brother) purchased a property that is Shop no.

53, Prabhat Centre, CBD, Belapur, Navi Mumbai on 30.12.2006 for a

consideration of Rs. 1.04 crore, having 1/3rd share each. All three co-owners

(brothers) incurred Rs. 27.00 lacs for renovation of shop (capital asset). On the

basis of such information case of assessee was reopened. Notice under section

148 was served upon the assessee. The AO recorded that no return of income

was filed, therefore, assessee was asked to attend the proceeding. The assessee

attended office of AO on 05.11.2012. The statement of assessee was recorded.

In response to question no. 4, the assessee stated that he along with his two

brothers purchased a shop having agreement value of Rs. 99.00 lacs, stamp duty

of Rs. 4.95 lacs and registration fees of Rs. 30,000/- was also spent. They have

taken a loan of Rs. 80.00 lacs from India Bulls and a balance of Rs. 24.25 lacs

from other parties. The AO recorded that on the basis of statement of assessee 2

Magaram Vaktaramji Choudhary ITA No. 5219/M/2025 (AY: 2007-08) in response to question no. 6 wherein he agreed that he has no objection if Rs.

8,08,333/- is treated as unexplained and further Rs. 76,136/- on account of

repayment of loan is added under section 69. Accordingly, the AO added Rs.

8,08,333/- under section 69B and Rs. 76,136/- under section 69C. The AO

further noted that assessee has denied his investment in the furniture. The AO

recorded that in case of co-owner, the co-owner before ACIT – 33(3), Mumbai

stated that he is carrying out business in the said shop and he spent Rs.

6,66,666/- on renovation. The AO on the basis of such alleged statement of co-

owner was also added as unexplained investment in the income of assessee on

protective basis. Thus, the AO made aggregate addition of Rs. 15,51,135/-

(8,08,333 +76,136+6,66,666).

before ld. CIT(A). Before ld. CIT(A), the assessee filed detailed written

submission on all three additions. The submissions of assessee are recorded in

para 7.2.3 of order of ld. CIT(A). The assessee objected to the reasons recoded

and against the addition made in reassessment order. The assessee stated that

copy of reasons recorded dated 27.02.2012 were furnished to him only with the

remand report dated 26.05.2017. In the reason recorded the AO mentioned that

“it is seen from the balance sheet filed in the return that investment made by the

assessee in the above mentioned property is not reflected.” Thus, the AO has

reason to believe that income to the tune of investment made in the purchase of

Magaram Vaktaramji Choudhary ITA No. 5219/M/2025 (AY: 2007-08) shop property investment and second for verification of the source of subject

property investment.

as unexplained investment, addition of Rs. 6,66,666/- made on protective basis

on factual as well as legal basis. It was stated that before AO, while recording

statement his statement, he denied the allegation, still the AO made addition of

unexplained investment and repayment of loan. The ld. CIT(A) on considering

the submission of assessee upheld the validity of reopening and additions of

unexplained investment of Rs. 8,08,33/- and repayment of loan of Rs. 76,136/-

(8,08,333+ 76,136 = 8,84,469). However, the addition of protective addition of

Rs. 6,66,666/- was deleted. The ld. CIT(A) held that assessee was unable to

justify the source of investment of Rs. 8,84,469/- and repayment of loan of Rs.

76,136/-. No evidence was furnished by assessee with respect to his claim and

repayment. Further, aggrieved the assessee has filed present appeal before

Tribunal.

the assessee and the learned Senior departmental representative (Sr DR) for the

revenue. Ground no. 1 relates to validity of reopening under section 147. The ld.

AR of the assessee submits that case of assessee for A.Y. 2007-08 was reopened

by issuing notice under section 148 dated 27.03.2012. The reasons recorded was

not provided by the AO despite repeated request. The assessee was provided

reasons recorded on the direction of ld. CIT(A) on 26.05.2017. Copy of letter of

Magaram Vaktaramji Choudhary ITA No. 5219/M/2025 (AY: 2007-08) AO containing reference of direction of ld. CIT(A) – 26, Mumbai for providing

reasons recorded is filed at page no. 35 of paper book. In the reasons recorded,

the AO recorded that as per information, in case of assessee received from ACIT

– 22(3), Mumbai that assessee has purchased a shop no. 53 Prabhat Shopping

Centre, CBDD Belapur along with his two brothers vide agreement dated

30.12.2006. Property is purchased on a consideration of Rs. 1.04 crore. Apart

from purchase price Rs. 27,00,000/- was utilised for renovation and purchase as

capital asset. All co-owners have 1/3rd shares each. The assessee has filed return

of income for A.Y. 2007-08 on 24.06.2008 declaring income of Rs. 2,53,410/- in

ITR 4. It was further recorded that from balance sheet filed in the return of

income that investment made by AO has not been reflected. Therefore, the AO

has reason to believe that investment made in purchase of shop has escaped

assessment. The ld. AR of the assessee submits that admittedly case of assessee

was reopened beyond four years from the end of relevant assessment year.

There is no reference about failure on the part of assessee. The assessment was

reopened only for verification of fact. The assessee furnished complete details of

investment. The ld. AR carried us through balance sheet of assessee showing the

fixed asset at Rs. 35,91,278/-. The ld. AR submits that there was not failure on

the part of assessee in disclosing all the materials fact necessary for assessment

while filing return of income. As per reasons recorded, the AO wanting to know

details with regard to source of fund for purchasing the asset. The AO has no

basis to make a belief that any part of income has escaped assessment due to

Magaram Vaktaramji Choudhary ITA No. 5219/M/2025 (AY: 2007-08) failure on the part of assessee to disclose fully and truly all the material

necessary for assessment. Therefore, the reasons recorded did not constitute

reason to believe that income has escaped assessment to invoke the provision of

section 148. To support his submission, the ld. AR relied upon the decision of

Jurisdictional High Court in CIT vs Smt. Maniben Valji Shah (2006) 283 ITR 453

(Bombay). On merit, the ld. AR of the assessee submits that assessee has

explained the source of investment in the shop. The AO wrongly made addition

by holding that assessee agreed for addition. The assessee never agreed for

such addition. The assessee obtained the copy of his statement recorded by AO,

copy of which is placed on record wherein the assessee clearing explained that

he has nothing to do with the furniture and fixture in the shop. So far as other

addition of Rs. 80,83,333/- and Rs. 76,136/- is concerned. The assessee

explained that such expenses were incurred from his own sources and his

income from last 20 years. The copy of capital account and balance sheet of

assessee is also placed on record. The assessee has also placed on record cash

flow statement and detail of secured or unsecured loans.

authorities. The ld. Sr. DR submits that assessee could not furnish evidence in

respect of investment of Rs. 8,08,333/- and source of repayment of loan of Rs.

76,183/-. On validity of reopening, the ld. Sr. DR supported the order of lower

authorities.

Magaram Vaktaramji Choudhary ITA No. 5219/M/2025 (AY: 2007-08) 7. We have considered the rival submissions of both the parties and have gone

through the orders of lower authorities carefully. We find that case of assessee

for A.Y. 2007-08 was reopened on 27.03.2012 on the basis of information

received from ACIT – 22(3), Mumbai. Such information was received from AO of

one of the co-owner (brother) of assessee. It is an admitted fact that case of

assessee was reopened beyond four year from the end of relevant assessment

year. A careful perusal of reasons recorded shows that AO has not recorded that

there was any omission or failure on the part of assessee to disclose fully and

truly material facts necessary for assessment. The AO in para 1 of the

assessment order has recorded that return of income was filed by assessee on

24.01.2008 for A.Y. 2007-08. It is also accepted by AO that return was accepted

under section 143(1) of the Act. We find that Hon’ble Jurisdictional High Court in

CIT vs Smt. Maniben Valji Shah (supra) held that when in the reasons recorded,

the AO wanting to know the details of source of fund with regard to purchase of

flat. Obviously, there was no question of AO having any basis to reasonably

entertain the belief that any part of income had escaped assessment and that

such escapement was by reason of omission of failure on the part of assessee to

disclose fully and truly all material fact. It was held that Tribunal was right in law

that action of AO in reopening the assessment under section 147 is invalid. Thus,

we find that ratio of decision of Hon’ble High Court is squarely applicable on the

facts of the present case. Therefore, we hold that reopening under section 147

and issuance of notice under section 148 is not valid. So far as addition on merit

Magaram Vaktaramji Choudhary ITA No. 5219/M/2025 (AY: 2007-08)

is concerned, we find that assessee while filing return of income has disclosed

the source of investment and repayment of loan. From the balance sheet of

assessee and cash flow statement, we find that investment is not from the

undisclosed source, when the assessee in its capital account has clearly shown

friendly loan of Rs. 4,65,000/- and cash in hand of Rs. 3,82,212/-. Thus,

assessee also succeeded on merit. In the result, the grounds of appeal raised by

assessee are allowed.

Order was pronounced in the open Court on 02/06/2026.

/- Sd/- S/- Sd/- /- Sd/- GIRISH AGRAWAL PAWAN SINGH ACCOUNTANT MEMBER JUDICIAL MEMBER

Mumbai, Dated: 02/06/2026 Biswajit

Copy of the order forwarded to: (1) The Assessee; (2) The Revenue; (3) The PCIT / CIT (Judicial); (4) The DR, ITAT, Nagpur; and (5) Guard file. By Order

Assistant Registrar / DDO ITAT, Mumbai