PRAKASH DAYARAM CHANDNANI,RAJKOT vs. ITO WARD 2(1)(1), RAJKOT , RAJKOT

ITA 927/RJT/2026Status: DisposedITAT Rajkot29 September 2026AY 2019-207 pages
AI SummaryPartly Allowed

What did the Tribunal hold?

The Tribunal held that the Assessing Officer possessed material of sufficient evidentiary value to conclude that the appellant had paid an unrecorded cash component of Rs. 12,64,000/- in connection with the purchase of Office No. 303 in 'The Imperia' project. The Tribunal found that the assessee had indeed paid 'on-money' for the property. However, it was held that the entire 'on-money' should not be taxed, but only the profit element. Citing Supreme Court decisions in CIT v. Williamson Financial Services and CIT v. President Industries, the Tribunal emphasized that tax is levied on income, not gross receipts. Therefore, the Tribunal directed the Assessing Officer to make the addition on account of the profit element at 10% of Rs. 12,64,000/-, amounting to Rs. 1,26,400/-, and to sustain this addition at the normal rate of income tax, not under Section 115BBE. The appeal was partly allowed on these terms.

What were the facts?

The assessee, Prakash Dayaram Chandnani, filed an appeal against the order of the National Faceless Appeal Centre (NFAC) Delhi/CIT(A) for Assessment Year 2019-20. The NFAC/CIT(A) had upheld the Assessing Officer's (AO) order passed under Section 147 of the Income Tax Act, 1961, which initiated income escaping assessment proceedings. The AO's action stemmed from information flagged in the Insight Portal indicating that during a search and seizure operation on the R.K. Group on August 24, 2021, it was unearthed that the assessee paid 'on-money' of Rs. 12,64,000/- in cash for the purchase of units in the 'The Imperia 303' project. This information was disseminated from incriminating digital data and documents. The AO reopened the assessment under Section 147 and issued a notice under Section 148 on March 31, 2023. The assessee filed a revised return declaring an income of Rs. 6,24,930/-. The AO treated the Rs. 12,64,000/- as unexplained investment under Section 69A read with Section 115BBE of the Act.

What were the issues?

1. Whether the learned CIT(A) erred in upholding the AO's action in assuming jurisdiction and initiating income escaping assessment proceedings under Section 147 of the Act by issuing a notice under Section 148. 2. Whether the learned CIT(A) erred in upholding the AO's action in passing the assessment order without providing the assessee an opportunity for cross-examination. 3. Whether the learned CIT(A) erred in upholding the AO's action in confirming the addition of Rs. 12,64,000/- on account of unexplained investment under Section 69A read with Section 115BBE of the Act. 4. Whether the learned CIT(A) erred in dismissing the appeal without following the mandate of Section 250(6) of the Act and violating the principles of natural justice. Assessee's Contentions: The addition should not be made solely based on digital data from a third party without a nexus to the assessee's explanations. The assessee never admitted to paying 'on-money' except through cheque. The assessee was denied an opportunity for cross-examination despite a specific request. Bank statements and registered property documents showing payment through banking channels were submitted. Revenue's Contentions: The Ld. DR primarily reiterated the stand taken by the Assessing Officer.

Which sections of the Income-tax Act were involved?

Section 147,Section 148,Section 143(1),Section 143(2),Section 69A,Section 115BBE,Section 250(6)

AI-generated summary — verify with the full judgment below

Cause title — parties, addresses and appearances
आयकर अपीलीय अिधकरण, राजकोट "यायपीठ, राजकोट । In The Income Tax Appellate Tribunal, “SMC” Rajkot Bench, Rajkot Before Dr. Arjun Lal Saini, Accountant Member आयकरअपीलसं./ITA No. 927/Rjt/2026 [ "नधा"रणवष"/Assessment Year: 2019-20 ] Prakash Dayaram Chandnani, ITO Ward 2(1)(1), Rajkot, 63, Gumansinhji Shopping Centre, Aayakar Bhawan, Race Course Vs. Opp. Vegetable Market Dhebar Ring Road, Rajkot, Road, Rajkot, Gujarat-360001, Gujarat-360001. "थायी लेखा सं./जी आइ आर सं./PAN/GIR No.: ACIPC2285K (अपीलाथ"/Appellant) (""यथ"/Respondent) Appellant by : Shri Fenil H. Mehta, Ld. AR Respondent by : Shri Shishir Kumar, Ld. Sr. DR Date of Hearing : 30/07/2026 Date of Pronouncement : 29/09/2026

:: ORDER :: Per,Dr. Arjun Lal Saini, AM: Captioned appeal filed by the assessee, pertaining to assessment year (AY) 2019-20, is directed against the order under section 250 of the Income- tax Act, 1961 (hereinafter referred to as ‘the Act’) passed by the National Faceless Appeal Centre (NAC) Delhi/Commissioner of Income-tax (Appeals) [in short ‘NFAC/Ld.CIT(A)’], dated 17.04.2026, which in turn arises out of an assessment order passed by the Assessing Officer u/s 147 of the Act, dated 23.03.2024. 2. The ground

The order continues below.

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