V P RAMALINGAM,PONDICHERRY vs. DCIT, CIRCLE-1,, PUDUCHERRY

The Assessee raised the following grounds of appeal : “1. For that the order of the Commissioner of Income Tax (Appeals) is without jurisdiction, is contrary to law, facts and circumstances of the case and in any case is opposed to the principles of equity, natural justice and fair play

For that the Commissioner of Income Tax (Appeals) failed to appreciate that the order of the Assessing Officer passed u/s. 147 r.w.s.144 r.w.s. 1448 is without jurisdiction.

For that the notice issued u/s.148A(b) by the Income tax Officer, Ward 3, Puducherry is without jurisdiction.

For that the order passed u/s.148A(d) by the Income tax Officer, Ward 3, Puducherry is bad in law.

For that the notice u/s.148 issued by the Income tax Officer Ward 3, Puducherry is without jurisdiction.

For that the reopening is bad in law.

For that the reassessment is bad in law

For that the reassessment order is null and void.

For that the reassessment was completed without complying with the statutory requirements of law Addition of Rs.1,94,00,000/--

Erroneous Restriction of Loan Source to 50%

Failure to Appreciate Actual Flow of Funds

Non-consideration of Joint/Co-ownership and Joint Liability

Erroneous Reliance on Name in Loan statement Instead of Substance of Transaction

Failure to Consider Documentary Evidence

Arbitrary and Unsustainable Estimation of Unexplained Investment The restriction of loan benefit to 50% and consequent treatment of the balance investment as unexplained is arbitrary, devoid of rational basis, and contrary to settled law that unexplained investment cannot be inferred when a clear and traceable banking source exists.

Violation of Principles of Natural Justice

Finding Contrary to Facts and Evidence on Record The impugned order is contrary to the facts, records, and evidence submitted and therefore deserves to be set aside. The appellant had fully discharged the burden under section 69/69B by demonstrating the identity of lender (bank), genuineness of loan transaction, and actual credit of the entire loan amount.

Addition Based on Suspicion and Not Evidence

Briefly stated facts of the case are that the appellant is an Individual deriving from the business of dealing in residential plots. The Return of Income for the Assessment Year 2012-13 was filed on 23.11.2012 declaring income at Rs.87,47,050/-. Against the said return of income, there was no scrutiny assessment.

Subsequently, the Assessing Officer formed an opinion that the income got escaped assessment from tax, based on the information that the appellant made cash deposits of Rs.2,16,95,000/- in the account maintained with the bank and sold immovable property for a consideration of Rs.56 lakhs and also purchases immovable properties for a consideration of Rs.4,39,00,000/- on 07.10.2011 and Rs.80 lakhs on 09.09.2011, accordingly, a notice u/s148 was issued on 29.0.2019. In response to the notice u/s148 of the Act, the appellant filed return of income on 25.06.2019 declaring income of Rs.87,47,050/-. Against the said return of income, the assessment was completed by the e- Assessment Unit of the Department (hereinafter called ‘AO’) vide order dated 254.09.2021 passed u/s.147 r.w.s 144B of the Income Tax Act at a total income of Rs.4,75,47,050/-. While doing so, the Assessing Officer made addition of Rs.3,88,00,000/- as unexplained investment in purchase of property as the appellant had failed to offer any explanation in support of the source of the investment.

Being aggrieved by the above assessment order, the appellant filed an appeal before the ld.CIT(A) contending that the re-assessment proceedings were invalid in law in the absence of any fresh tangible information suggesting escapement of income from tax and also contested the addition on merits. However, the ld.CIT(A) considering the recitals of the sale deed furnished by the appellant, that immovable property situated at building at No.33, Rangapillai Street, Pondicherry was jointly purchased by the appellant along with his brother V.P.Sivakohundhu, restricted the addition to 50% of unexplained investment of Rs.3,88,00,000/-, thereby sustained addition to the extent of Rs.1,94,00,000/- only.

Being aggrieved by the order of ld.CIT(A), the appellant is in appeal before us in the present appeal.

We heard both the parties and perused the material on record. The ld.Counsel submits that the re-assessment proceedings are bad in law in the absence of any fresh tangible material suggesting escapement of income from tax. It is further contended that the entire source for the investment in purchase of property is met by loan availed from the bank of Rs.3,70,00,000/- and the appellant’s own contribution of Rs.18 lakhs, thus, the source stands fully explained on the question of addition does not arise.

On the other hand, the ld.Sr.DR opposed the above submissions.

We heard both the parties and perused the material on record. The issue that arises for our consideration is whether the ld.CIT(A) was justified in sustaining the addition to the expenditure of 50% of the cost of unexplained investment of Rs.3,80,00,000/-. The contention of the appellant that the cost of investment was made by the loan availed from the bank to the extent of Rs.3,80,00,000/- and own source of investment of Rs.18 lakhs is required to be verified by the Assessing Officer. Therefore, we remit the matter back to the file of Assessing Officer for the purpose of due verification of the explanation of the appellant with regard to source of investment of immovable property. Therefore, the matter is restored to the file of Assessing Officer for denovo assessment in accordance with law after affording an opportunity of being heard to the appellant.

In the result, appeal filed by the assessee is partly allowed for statistical purpose. Order pronounced in the open Court on 26th May, 2026.