PRADEEP SHANKARANAND KANAGALI,MUMBAI vs. DCIT CIRCLE 23(2), MUMBAI

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ITA 435/MUM/2026Status: DisposedITAT Mumbai27 April 2026AY 2017-1811 pages
AI SummaryRemanded

What did the Tribunal hold?

The Tribunal found that the lower authorities had not properly examined the documentation submitted by the assessee for the loan additions and demonetization deposits. For the Section 50C addition, it was held that the AO should have referred the matter to the DVO in case of a distress sale claim.

What were the facts?

The assessee and revenue filed cross-appeals against the CIT(A)'s order concerning AY 2017-18. The appeals dealt with additions made by the AO regarding unexplained loans, addition under Section 50C for property sale, and deletion of additions related to demonetization period cash deposits.

What were the issues?

Whether the additions for unexplained loans and demonetization deposits were substantiated, and whether the AO correctly applied Section 50C without referring to the DVO.

Which sections of the Income-tax Act were involved?

Section 68,Section 50C,Section 115BBE,Section 234B,Section 234C

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, MUMBAI “C” BENCH: MUMBAI

Before: SHRI VIKRAM SINGH YADAV & SHRI RAHUL CHAUDHARY

PER VIKRAM SINGH YADAV, A.M :

These are the cross appeals filed by the assessee and the revenue against the order of the Learned Commissioner of Income Tax (Appeals)- National Faceless Appeal Centre (NFAC), Delhi [‘Ld.CIT(A)’], dated 27-11-

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2025, pertaining to the Assessment Year (AY) 2017-18, wherein respective grounds of appeal reads as under:- ITA No. 435/Mum/2026 “1. The Appellant appeals against the impugned order dated 27.11.2025 passed by the Hon Commissioner of Income-tax (Appeals)- National Faceless Appeal Centre (NFAC) Delhi under section 250 of the Income-tax Act (the Act), wherein the appeal filed by the Assessee against the assessment order u/s. 143(3) of the Act dated 29.12.2019 passed by the Assistant Commissioner of Income Tax, Circle 23(2), Mumbai was partly allowed. The Appellant is aggrieved and has preferred this appeal raising following grounds: Ground No.1 1. On the facts and circumstance of the case, The Hon Commissioner of Income Tax (Appeals) National Faceless Appeal Centre (NFAC) Delhi (hereinafter referred to as CIT(A)) erred in passing the order dated 27.11.2025 upholding the action of the Assistant Commissioner of Income Tax, Circle 23(2), Mumbai (hereinafter referred to as "Ld.AO") adding 3 genuine loans amounting to Rs. 41,13,298 as unexplained fund and added to the income of the Appellant. 2. The Ld. CIT(A) erred in upholding the impugned addition and framing the impugned order without considering the submission/documentary evidence filed at the time of assessment as well as before him in the paper book filed with him to prove the genuineness of the transactions. 3. The Appellant prays that addition of Rs.41,13,298/- made u/s. 68 in respect of 3 genuine loans taken be deleted. Ground No. 2 1. On the facts and circumstances of the case, the Ld.CIT(A) erred of in upholding the addition 1. On the facts and circumstances of the case, the Ld. Rs. 13,84,000/- u/s. 50C of the Act in total disregard to the correct factual position and submission filed before the lower authorities. 2. The Appellant prays that addition of Rs. 13,84,000/- u/s. 50C on account of difference in value adopted by Stamp Duty Authority and actual sale consideration received be deleted. Ground No.3 Without prejudice to the above grounds of appeal: 1. The Ld. CIT (A) erred in not only upholding the action of the Ld. AO in making the additions u/s. 68 but further erred in upholding the action of the Ld AO in imposing tax, surcharge, cess etc. at enhanced rate of 60% instead of

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30% by ignoring that section 115BBE substituted by Taxation Laws (Second Amendment Act), 2016 which received the assent of President on 15.12.2016 and made applicable from 01.04.2017 is not applicable to AY 2017-18 2. The Appellant submits that the rate of tax @ 60% u/s. 115BBE is applicable with effect from Assessment Year 2018-19 and not with effect from Assessment year 2017-18 as the substituted section 115BBE by Taxation Laws (Second Amendment Act), 2016 received the assent of the President on 15.12.2016. In case the additions u/s 68 are upheld the Appellant prays to seek for relief from enhanced rate @60% imposed u/s. 115BBE on loans actually accepted on or before 14.12.2016. Ground No. 4 1 The Ld. CIT(A) erred in law as well as on the facts of the case in confirming the charging of interest u/s. 234B & 234C of the Act. 2 The Interest so charged, being contrary to the provisions of law and facts, the Appellant prays kindly be deleted. ITA No. 775/Mum/2026 1. Whether on the facts and in law, the Ld. CIT(A) erred in deleting the addition of ₹1,03,92,970 made u/s 68 on account of cash deposits during the demonetization period by holding that the AO failed to point out any specific defect, despite the AO's categorical finding of non-production / non- verifiability of primary books and supporting records (cash book, sales/purchase registers, quantitative details) necessary to examine the assessee's explanation of "cash sales"? 2. Whether on the facts and in law, the Ld. CIT(A) erred in granting relief by accepting the assessee's explanation based on mere book entries/self- generated statements, without demonstrating contemporaneous primary records, thereby misapplying the statutory onus under section 68 that the explanation must be satisfactory in the AO's opinion and supported by verifiable evidence? 3. Whether on the facts and in law, the Ld. CIT(A) erred in deleting the entire addition of ₹1,03,92,970 by relying on the general permission to accept Specified Bank Notes up to 02.12.2016, without carrying out a date-wise reconciliation of deposits for the period 10.11.2016 to 30.12.2016 and without examining whether deposits after 02.12.2016 were supported by day-wise sales, stock movement, purchases, and cash flow evidence? 4. Whether on the facts and in law, the Ld. CIT(A) violated Rule 46A of the Income-tax Rules, 1962 by admitting and/or relying upon additional evidence/submissions not produced before the AO without recording reasons for admission under Rule 46A(1) and without affording the AO an opportunity

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to examine/rebut such evidence as mandated by Rule 46A(3), and thereby erred in granting relief without calling for a remand report/verification? 5. The appellant craves leave to add, alter, amend, modify or withdraw any of the above grounds of appeal at or before the time of hearing.

2.

During the course of hearing, the Ld. AR submitted that the assessee in his first ground of appeal has challenged the action of the Ld. CIT(A) in sustaining action of the Assessing Officer wherein three loan transactions amounting to Rs. 41,13,298/- have been brought to tax by the Assessing Officer. It was submitted that the first loan transaction relates to loan of Rs. 29,75,000/- taken by the assessee from BMW Financial Services for purchase of a BMW car and a copy of purchase invoice, loan sanction letter and loan amortization statement was already submitted during the course of assessment proceedings which has not been considered. It was submitted that the second loan transaction with the wife of the assessee and in support, copy of her ITR, bank passbook and copy of the loan confirmation has been duly submitted before the ld CIT(A), which has again not been considered. It was submitted that the third loan transaction was in respect of loan taken from the wife of the assessee’s chartered accountant which is in fact, loan taken in earlier years which was repaid during the year and by mistake excess amount was repaid during the year and which has been refunded, and which has been wrongly bought to tax by the Assessing Officer and confirmed by the Ld. CIT(A) ignoring the documentation in terms of ITR, Bank passbook and loan confirmation duly submitted before the ld CIT(A).

3.

Regarding the addition of Rs. 13,84,000 u/s. 50C of the Act, it was submitted that at the time of the assessment proceedings, it was submitted before the AO that it was a case of a distress sale as legal case was going in the civil court by the previous owner claiming the ownership

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over the property and even the relevant case papers were filed. It was submitted that the AO has made addition on ground that the assessee has not filed any appeal before the stamp duty authorities. It was submitted that the stamp duty is payable by the purchaser and not seller of the property and therefore, the question of assessee’s filing any appeal/objections against the levy of stamp duty before the stamp duty authority doesn’t arise. It was submitted that having known that no proceedings have been filed before the stamp duty authorities, where the assessee objects to the stamp duty valuation, the matter should have been referred to the valuation officer in terms of the provisions u/s. 50C(2) of the act and in the instance case, the AO having failed to refer the matter to the valuation officer has proceeded and determined the sale consideration in the terms of stamp duty valuation which has been summarily confirmed by the Ld. CIT(A).

4.

Regarding the ground of appeal taken by the Revenue wherein the ld CIT(A) has deleted the addition of Rs 1,03,92,970/- towards the cash deposits during the demonetisation, it was submitted that the assessee is a petrol-pump dealer of Indian Oil Corporation and major receipts are from the petrol-pump for the sale of petroleum products. The details of purchase from IOCL and sales were duly filed at the time of the assessment proceedings which clearly point out that the cash deposits are from cash sales at the petrol-pump against the purchase from IOCL. Further, once the cash sales have been accepted as per the audited accounts, there cannot be any addition u/s 68 as it would amount to double addition. It was further submitted that the notification dated 08- 11-2016 clearly spelt out that the Specified Bank Notes (SBN) would continue to be legal tender for purchase of petrol, diesel etc under the authorization of Public Sector Oil Marketing Companies and the copy of

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the notification was duly submitted. It was submitted that the assessee has accepted specified bank notes for sales at petrol-pump, only upto this date and deposited the same into bank accounts only upto this date daily, in fact three to four times daily, and necessary details in terms of the specified bank notes deposited, details of sales, details of purchase were duly submitted at the time of assessment proceedings which were not considered by the AO however the same has been duly considered and appreciated by the Ld. CIT(A) by deleting the addition in the hands of the assessee. 5. It was accordingly submitted that in so far as the appeal of the department is concerned, the same be dismissed and as far as the appeal of the assessee is concerned, the necessary relief may be provided to the assessee in terms of loan transactions and as far as the matter relating to the difference in the stamp duty value and the value as per the sale agreement, the mater may be referred to the file of the Assessing Officer with the direction to refer to the valuation officer for determining the fair market value, given the fact that the assessee has submitted that it was the case of a distress sale and stamp duty value cannot be taken as the basis for determining the fair market value for the purposes of section 50C of the Act.

6.

The Ld. DR has been heard who has taken us through the findings of the Ld. CIT(A) in the context of deletion of addition of Rs 1,03,92,970/-, being the cash deposits during the demonetization period treated as unexplained deposits brought to tax u/s 68 by the AO. It was submitted that on perusal of the findings of the Ld. CIT(A), it can be noted that he has merely reiterated the submissions so made by the assessee before him and has stated that the AO has failed to point out any specific defect in the books of accounts or bring out specific increase in cash sales during this

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period and the addition was summarily deleted. It was submitted that it is the case of the Revenue that no information/documentation was submitted before the AO and therefore, in absence of any information/documentation, the AO was left with no option but to make the addition. It was further submitted that there is no specific finding recorded by the Ld. CIT(A) admitting the additional evidences without allowing the AO an opportunity to examine the same. It was further submitted that there is also no finding recorded by the ld CIT(A) where he has examined the documentation submitted by the assessee by way of additional evidences and has thus summarily deleted the addition so made by the AO. Hence, the Revenue has filed the present appeal whereby the order of the ld CIT(A) has been sought to be set-aside as far as additions on accounts of cash deposits during the demonization is concerned.

7.

Regarding the grounds of appeal taken by the assessee relating to three loan transactions, it was submitted that the Ld. CIT(A) has recorded a finding that the assessee has only furnished name and address of the creditors and no specific details have been furnished either before the AO or before him and therefore he has rightly confirmed the addition so made by the AO. Further, regarding the addition of Rs.13,84,000/- u/s 50C, it was submitted that the assessee has not specifically requested for reference to the DVO and has relied on the findings of the AO and Ld. CIT(A).

8.

We have heard the rival contentions and perused the material available on record. Firstly, as regards the three loan transactions, it is noted that during the course of assessment proceedings, the assessee was asked to submit necessary documentation to discharge the initial onus cast on him, however, in absence of necessary documentation so

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submitted, the AO has made the addition u/s 68 of the Act. During the appellate proceedings, it was submitted by the assessee that this was the first year of e-proceedings and the AO without giving adequate opportunity and giving any personal hearing, has made the addition. Further, the assessee has explained each of three loan transactions by way of written submissions and filed supporting documentation to substantiate the same. The ld CIT(A) has however returned a finding that no documentation has been submitted before him. We therefore have a situation where there is no finding by the AO or for that matter, by the ld CIT(A) regarding documentation placed on record by the assessee and in such a situation, we are constrained to remand the matter to the file of AO to verify the documentation so placed on record and decide the matter a fresh as per law after providing reasonable opportunity to the assessee.

9.

Now, coming to the matter relating to determination of fair market value in terms of section 50C of the Act, we find that it is a consistent stand of the assessee before the AO as well as before the ld CIT(A) that it was a case of distress sale on account of civil litigation by the prior owner of the property and necessary case litigation papers were also submitted and therefore, the stamp duty value cannot be considered in disregard to distress sale consideration for the purposes of determining the fair market value of the property. We find merit in the contention advanced by the ld AR that in such a situation, where the assessee has objected to adoption of the fair market value of the property, the matter should have been referred to DVO by the AO which apparently has not happened in the instant case. In light of the same, we deem it appropriate to set-aside the matter to the file of the AO/DVO for determination of fair market value of the property after providing reasonable opportunity to the assessee.

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10.

Now, coming to matter relating to cash deposits during the demonetization period, we find that the same was one of the reasons for selection of case for complete scrutiny and in this regard, the notices were issued calling for necessary explanation/documentation to explain the nature and source of cash deposits and the AO has returned a finding that there was incomplete submissions filed by the assessee and books of accounts were not produced for verification and thereafter, he has held that bogus cash sales and fictitious cash in hand have been shown by the assessee by manipulation of books of accounts and the explanation so tendered by the assessee was not found acceptable and the cash so deposited during the demonetization period was held as unaccounted money which was brought to tax invoking provisions of section 68 of the Act.

11.

During the appellate proceedings, the assessee has contested the aforesaid findings and submitted before the ld CIT(A) that the AO has not considered the details and documentation submitted on the e-filing portal on 24/11/2019, 15/12/2019 and 18/12/2019 in terms of date wise cash deposited during the demonetization period and cash deposited during the corresponding period in earlier financial year 2015-16, details of cash deposited for financial year 2015-16 and 2016-17, monthly cash summary for two financial years, copies of bank statements with details of cash deposit and comparison thereof with earlier financial year, details of purchases from IOCL. It was further submitted that after the submission of the aforesaid submissions, no further show-cause was issued by the AO and assessment proceedings were completed on 29/12/2019 without providing any personal hearing and in violation of principles of natural justice.

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12.

Further, from perusal of the findings of the ld CIT(A) which are contained in para 6.2 of the impugned order, we find that the ld CIT(A) has referred to the assessee’s submission in terms of running of petrol pump, the fact that the notification issued by the Ministry of Finance allows the petrol pumps to accept high denomination notes and thereafter, has returned a finding that the AO has failed to point out any specific defects in books of accounts or bring out specific in cash sales during the period and has gone ahead and deleted the addition so made by the AO. We therefore have a situation where the assessee claims that he has furnished the necessary information/documentation before the AO which he has failed to consider and at the same time, the ld CIT(A) has returned a finding that the AO has failed to point out any defects in the books of accounts or for that matter and the addition so made has been summarily deleted without examining the documentation so placed on record. The explanation submitted by the assessee explaining the nature and source of cash deposits has to be tested in light of documentation so submitted by him and which has apparently not happened in the instant case. Neither any remand report was called from the AO nor any specific finding has been recorded by the ld CIT(A) examining the claim of the assessee. We are therefore of the considered view that this matter again needs to be remanded to the file of the AO to take into consideration the documentation so submitted by the assessee and any additional information/documentation so required and record a specific finding as per law regarding the nature and source of cash so deposited during the demonetisatioin period after providing reasonable opportunity to the assessee. The assessee is also directed to attend to the proceedings and file necessary information/documentation as so desired/advised and is at liberty to raise necessary factual/legal contentions as so advised.

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13.

In light of above, where we have set-aside the matter to the file of the AO in the context of all the three additions, we don’t deem it necessary to adjudicate other grounds of appeals relating to invocation of amended provisions of section 115BBE of the Act and the assessee is at liberty to raise the same before the AO which the AO shall consider and decide as per law.

14.

In the result, both the appeals filed by the assessee as well as by the Revenue are allowed for statistical purposes.

Order pronounced in the open court on 27-04-2026

Sd/- Sd/- (RAHUL CHAUDHARY) (VIKRAM SINGH YADAV) JUDICIAL MEMBER ACCOUNTANT MEMBER Mumbai, Dated: 27- 04-2026 Aditi Pandare, Private Secretary Copy to : 1) The Appellant 2) The Respondent 3) The CIT concerned 4) The D.R, ITAT, Mumbai 5) Guard file By Order

Dy./Asst. Registrar I.T.A.T, Mumbai

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