RAJAN RAMANEE,NEW DELHI vs. INCOME TAX OFFICER WARD 50(1), NEW DELHI, NEW DELHI

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH ‘C’, NEW DELHI Before Sh. S. Rifaur Rahman, Accountant Member & Sh. Raj Kumar Chauhan, Judicial Member ITA No. 2333/Del/2026 : Asstt. Year: 2012-13 Rajan Ramanee, Vs Income Tax Officer, 31, 3rd Floor, Anand Lok, Ward-50(1), New Delhi-110049 New Delhi-110002 (APPELLANT) (RESPONDENT) PAN No. AAHPR4422Q Assessee by: Sh. Rajesh Mahana, Adv., Sh. Mayank Kouts, Adv., Sh. Keshav Bhateja, Adv., Revenue by: Sh. Tarun Sharda, Sr. DR Date of Hearing: 25.06.2026 Date of Pronouncement: 22.09.2026 ORDER Per Raj Kumar Chauhan, Judicial Member: The appeal of the assessee is directed against the order dated 06.01.2026of ld. CIT(A)/NFAC, Delhi passedu/s 250 of the Income Tax Act, 1961 (hereinafter referred to as “the Act”)whereinaddition made vide assessment order dated 31.12.2019 was confirmed and the appeal of the assessee was dismissed.

2 ITA No. 2333/Del/2026 RajanRamanee &profession, capital gain, income from other sources. Subsequently, the case was reopened on the basis of information received from investigation wing, Delhi regarding multiple entities maintaining bank accounts and inter- bank/assessee transaction of very high value fund transferred/RTGS having RTGS inward immediately followed by fund transferred outwards/RTGS outwards on the same day. Subsequently, case was reopened in issuing notice u/s 148 of the Act. In compliance of the notice u/s 148 of the Act, the assessee filed return of income dated 07.11.2019 declaring income at Rs.7,15,510/-. Accordingly, notice u/s 143(2) of the Act dated 24.11.2019 was issued and reply was filed by the assesse on ITBA portal which was examined and it was observed that the assessee has shown much lesser total receipt as compared to credits in the bank account as enumerated in para 3.1 and 3.2 of the Assessment Order extracted below as under: “3.1 On perusal of the details filed by the assessee it was observed that the assessee has shown much lesser total receipt compared to credits in bank accounts as under:- S. Name A/c No. Bank Name Total Credit No. (A.Y. 12-13) 1. Mr. Rajan Ramanee 00261500011427 HDFC Bank 6,93,76,128 2. M/s AJ Placement 0262320002141 HDFC Bank 85,73,913 Consultant 3. M/s AJ Placement 00265600004420 HDFC Bank 40,000 Consultant 4. M/s AJ Placement 00262260000075 HDFC Bank 45,01,739 Consultant 5. M/s AJ Placement 023283900000011 Yes Bank 32,24,600 Consultant 6. Other bank accounts 5,73,25,709 credit Total 14,30,42,089

3 ITA No. 2333/Del/2026 RajanRamanee 3.2 The data reveals that the assessee has made cash deposits of Rs.14,30,42,089/- during the FY 2011-12. The assessee has shown following source of credits in his bank account during FY 2011-12 as under: Particulars Amount Gross receipt Rs.85,59,462/- Sale of immovable property Rs.3,19,11,719/- Unsecured loan Rs.1,28,10,773/- Total receipt by the assessee(A) Rs.5,32,81,954/- Total credits in bank acc ounts of the Rs.14,30,42,089/- assessee during FY 2011-12 (B) Excess credit remain unexplained in the bank Rs.8,97,60,135/- accounts of the assessee (B) –(A) 3. It was further observed that the assessee did not file the complete justification of credit entries in the bank accounts and had the excess credit entries in the bank account as Rs.8,97,60,131/-. Accordingly, presuming the net profit of the assessee @ 10% of the gross sale/receipt during the year, an addition of Rs.89,76,013/- being 10% of Rs.8,97,60,135/- was added as income of the assessee. Similarly, another addition was made in respect of claim of improvement cost on properties to the tune of Rs.87,34,628/- alongwith claim of deduction u/s 54F of Rs.37,40,598/-.Thus, the total addition of Rs.1,24,75,226/- was made on account of claim of improvement cost as well as claiming deduction u/s 54F of the Act on account of capital gain due to transfer of certain capital assets.

4 ITA No. 2333/Del/2026 RajanRamanee 5. Aggrieved by the impugned order, the assessee is in appeal and has raised the following grounds of appeal: “1. Ld. CIT (Appeal) has erred in law and on facts in upholding as correct the action of Assessing Officer in treating Rs.5,54,82,107/- as rectified unexplained credit and taxing the same by estimating business profit@10% treating it as business turnover. The Assessing Officer and CIT(Appeal) should have appreciated that all credits in the bank account cannot be treated as business receipts/receipts for imposing or estimating the income @10%. 2. Ld. CIT (Appeal) has further erred in law and on facts in not appreciating that appellant had duly furnished detailed explanation, confirmation and reconciliation establishing that the said all credits not constitutes business transaction. The credit left in the bank account are either cross entries withdrawn from one account and deposited in other bank account of the appellant therefore concluding 5,54,82,107/- the left out credits cannot be treated as business receipts for the purposes of calculating the estimated income @10%. Therefore, the action of the Assessing Officer is not correct and the action of the CIT (Appeal) in not appreciating and accepting the reconciliation and production of all bank account whereby the credits stands explained and the business income as returned should have been accepted. 3. That the action of the Assessing Officer, as sustained by the CIT (Appeal),has resulted in double taxation inasmuch as the same receipts have duly been subjected to tax under appropriate head of income. Since the appellant had maintained 17 bank accounts and the appellant had furnished/submitted all the bank account and the perusal/reconciliation was required to be viz a viz the deposit (Credit entries) and the withdrawals which flow one account to another therefore cannot be treated as business receipts for the purposes of estimating the income with the credit entries of the bank account only. With overall effect the addition made by the Assessing Officer and confirmed by CIT (Appeal) are incorrect, illegal and not sustainable. Therefore, order deserve to be set aside. 4. That the Ld. CIT (Appeal) has erred in law and on facts in sustaining the action of the Assessing Officer in disallowing the claim of cost of improvement in respect of interest paid on borrowed capital utilized for acquisition of the property which has to be capitalized. 5. That the Ld. CIT (Appeal) failed to appreciate that the interest paid on borrowed funds, which were directly utilized for acquisition of capital assets, forms part of the capital assets or cost of improvement in terms of section 48 of the Income Tax Act.

5 ITA No. 2333/Del/2026 RajanRamanee 6. That the Ld. CIT (Appeal) has erred both in law and on facts in upholding the action of the Assessing Officer in denying exemption claimed by Appellant under section 54/54F on the alleged ground that appellant owned multiple properties. The Assessing Officer and CIT (Appeal) both have failed to appreciate that the appellant during the year under consideration had sold 4 assets (residential/plots). Thereby there was no income from residential house owned by the appellant therefore the appellant were entitled to seek exemption under section 54/54F of the Income Tax Act as applicable as per law. The observation of assessing officer that appellant are owner of various residential properties for denial of exemption is incorrect. 7. That the denial of exemption has been made without proper verification of nature of properties and condition prescribed under section 54/54F. Additional legal ground (not specifically raised) 8. Ld. CIT (Appeal) has erred both in law and on facts upholding the action of the AO treating the as well as unsecured loan received and subsequently received back as business credits. The said facts being available but not specifically contained in the ground of appeal before CIT Appeal are being placed for consideration and are nothing but extracted legal position arising from the assessment order passed by the assessing officer who inspite of all bank account have not appreciated the credit entries and the sources thereof therefore the assessing officer did not carried out his duty of framing correct assessment of income. 9. Whereas the appellant time and again placed his arguments/submissions that the credit entries are co- related and interdependent on one bank to intra bank deposit/credits the Assessing Officer confined himself only to credit entries without examining the source thereof therefore the order of the assessing officer is devoid of justice and is not sustainable. The above grounds are subject matter of extraction of the observation made by the assessing officer and these legal ground were not raised in abovementioned ground before the CIT Appeal at first appellate stage. Above two additional grounds are legal grounds which may be permitted to be raised in the interest of justice for placing submission and arguments in the light of the celebrated judgment of National Thermal Power Corporation Vs. CIT of apex court reported as [1998] 229 ITR 383 (SC).”

6 ITA No. 2333/Del/2026 RajanRamanee 6. We have heard the ld. AR and the ld. DR and examined the record and also perused the written submissions filed by the ld. AR on behalf of assessee. We have noticed that the challenge before us is with respect to the three additions made in the assessment order. Hence, we will consider and decide each addition separately as under.

7 ITA No. 2333/Del/2026 RajanRamanee Assessing Officer for the purpose of calculation of unexplained credits have considered those very bank accounts but did not appreciate that the ledger accounts and the reconciliation so submitted clarified all those credits entry in the bank account which has been treated as cash deposits and actually does not form part of the income as no part of those deposits remain unexplained. It is further submitted that the factual aspects of these entries is also appearing in the paper book from page nos. 2 to 251 transaction wise explaining all the entries in the bank account which was subject matter of scrutiny due to information from the investigation wing. It is argued that ld.AO has not considered these material facts and evidence and the ld. CIT(A) also failed to consider the submissions made in that regard and wrongly concluded that there is unexplained credits of Rs.5,54,82,187/- and thus wrongly made addition @10% of the said amount considering the profit aspects despite that everything was explained with respect to the credit entries in the bank account and therefore said addition needs to be deleted.

8 ITA No. 2333/Del/2026 RajanRamanee 9. We have examined the Assessment Order as well as theld. CIT(A) finding to appreciate the above arguments with respect to the first addition. The ld. AO while making the said addition has observed in para 3.3 of the assessment order as under: “3.3 The assessee was asked to file the justification of entries received in bank account. However, the assessee did not file the complete justification of credit entries in bank accounts. Since, the assessee has excess credit entries in the bank account of Rs.8,97,60,135/- for which the assessee has not furnished justification of the credits. Further, on perusal of net profit of the assessee, it is seen that the assessee has net profit @ 10% of gross sale/ receipt during the year. Accordingly, it would be reasonable to assess the unexplained credits in the bank accounts @ 10% profit. Therefore the sum of Rs.89,76,013/- (being 10% of Rs.8,97,60,135/-) is being treated the income of the assessee. Penalty proceedings u/s 271(1)(c) of the IT Act is being initiated for concealment of income by furnishing inaccurate particular of income.” 10. The ld. CIT(A) has decided the three additions in para 5.2 of the impugned order, extracted below as under: “5.2. Disposition Of Grounds Of Appeal: Ground I: Addition on Account of Unexplained Bank Credits The primary grievance of the Appellant concerns the addition of 10% on unexplained bank credits. Initially, the Assessing Officer (AO) identified total credits of Rs.14,30,42,089, leading to an unexplained excess of Rs.8,97,60,135. Analysis of Rectification and Sustained Addition: Following the Appellant's application, the AO passed a rectification order on 01.04.2021,acknowledging that Rs. 3,42,78,028/- of the credits were attributable to EMI bounces and self-bank transfers. Consequently, the "Excess credit remaining unexplained" was reduced to Rs. 5,54,82,107/-. The Appellant continues to claim that further amounts, such as loans received back from family (Rs.4,50,06,200/-) and minor unsecured loan differences, should be excluded. However, I find that the Appellant has failed to provide verifiable, concrete evidence to substantiate the source, creditworthiness, and genuineness of these purported family loans. As noted in the assessment order, the transactions appeared to be an attempt at "layering" without business rationale.

9 ITA No. 2333/Del/2026 RajanRamanee The AO's decision to apply a 10% profit rate on these unexplained credits as income is deemed reasonable and is hereby SUSTAINED at the rectified amount of Rs.55,48,210/-. Ground II: Disallowance of Cost of Improvement (Rs.87,34,628) The Appellant claimed significant expenses for property improvement. The AO disallowed this claim because the Appellant failed to furnish any bills, invoices, or contractor agreements to verify the expenditure. Decision: The Appellant's contention that these costs represent interest on secured loans or builder payments is not supported by the required primary documentation (vouchers/invoices).Merely claiming that co-owners had their claims allowed does not absolve the Appellant from the burden of proof in his own assessment. In the absence of verifiable evidence, the addition of Rs.87,34,628 is UPHELD. Ground III: Disallowance of Deduction u/s 54F (Rs.37,40,598) The Appellant sought deduction under section 54F following property sales. The AO disallowed this based on the mandatory proviso of section 54F, which prohibits the deduction if the assessee owns more than one residential house on the date of the transfer. Decision: Per the records, the Appellant owned multiple properties (Pragati Tower, Ghawal Phari, etc.)at the time of the sale. Therefore, the Appellant is legally ineligible for the section 54Fdeduction. The addition of Rs. 37,40,598 is UPHELD.” 11. It is thus event from the extracts of the Assessment Order that the ld. Assessing Officer has made the addition of unexplained credits just stating that the assessee did not file complete justification of credit entries in the bank accounts. Unfortunately, the ld. CIT(A) has failed to consider the elaborate submissions made before him in that regard and has just approved the Assessment Order confirming the addition of unexplained credits, simply observing that the appellant has failed to provide verifiable, concrete evidence to substantiate

10 ITA No. 2333/Del/2026 RajanRamanee the source, creditworthiness and genuineness of these purported family loans and further observed that as noted in the assessment order, the transactions appear to be an attempt at layering without business rationale, hence upheld thesaid addition stating that the AO's decision to apply 10% profit rate on these unexplained credits as income is deemed reasonable and is accordingly sustained. The observation of the ld. CIT(A) has shown that he has simply acceded to the observation of the ld. AO and has not independently applied his mind to the submissions made and has approved the addition @ 10% profit rate in a mechanical manner. In view of these facts and circumstances, we are of the considered opinion that both the ld. lower authorities have failed to appreciate that the submissions and the evidence in respect of the addition made on account of unexplained credits especially the evidence which is being claimed to be part of the paper book from page nos. 2 to 251. Accordingly, this issue is restored to the file of the AO with the direction to consider the entire material facts and evidence contained from page nos. 2 to 251 of the paper book and accordingly decide the issue and if the contents of the documents and the submissions are found true, the addition made on account of unexplained credits be accordingly deleted after giving an effective opportunity of hearing to the assessee and considering the observation made by us as above. The

11 ITA No. 2333/Del/2026 RajanRamanee impugned order with respect to first addition of Rs.89,76,013/- is accordingly set aside and the ground in that regard is accordingly allowed for statistical purposes.

12 ITA No. 2333/Del/2026 RajanRamanee CIT(A) has not been considered and appreciated to the effect that the said cost of improvement stood explained and the appellant has rightly claimed the said cost of improvement in the returns, books of accounts as placed before the ld. lower authorities. It is further submitted that all the documents in respect of said claim form part of the paper book from page nos. 252 to 571 for appreciation so that the said claim is to be allowed. It is further submitted that in view of these material aspects, the observation that voucher, bills and documents to prove the cost of improvements were not produced, is not justified and is of no consequences. It is therefore submitted that the addition so made is required to be deleted.

13 ITA No. 2333/Del/2026 RajanRamanee especially in the absence of verifiable evidence and accordingly upheld the addition of Rs.87,34,628/-.

14 ITA No. 2333/Del/2026 RajanRamanee grounds raised with respect to claim of improvement cost are allowed for statistical purposes.

15 ITA No. 2333/Del/2026 RajanRamanee the properties which has been considered for denial of deduction u/s 54F of the Act were not the residential properties and the nature of those properties is explained in the written submissions, extracted below as under: S.No. Name of the property Nature of Property 1. G-4, G-5, Pragati Tower, Raj, Self-occupied office space New Delhi 2. B-14, Ghawal Phari, Gurgaon Vacated Land 3. B-4, Pragati Towers, Rajendra Self-occupied office space Place 4. 1002, Pragati Tower, Rajendra Self-occupied office space Place 5. 82/2/1, Ghawal Phari, Gurgaon Vacated Land 6. PNA 0113, Pinacle City, Gurgaon Flat Booking rights 16. We have examined the assessment order as well as impugned order with respect to the claim of deduction u/s 54F of the Act as contained in the para 6.2, 6.3 & 6.4 as under:

“6.2 The assessee was asked to file to furnish he details of improvement of coston properties alongwith documentary evidences and details of house properties already owned. In response to this the assessee did not file any details/bills/invoices of expenses incurred on improvement of properties. The assessee has also not submitted the evidence to claim the deduction u/s 54F of the IT Act. Further, on perusal of the computation of income for FY 2010-11 it was observed that the assessee has following house properties:- S.No. Name of the property 1. G-4, G-5, Pragat i Tower, Raj, New Delhi 2. B-14, GhawalPhari, Gurgaon 3. B-4, Pragati Towers, Rajendra Place 4. 1002, PrGATI Tower, Rajendra Place 5. 82/2/1, GhawalPhari, G urgaon 6. PNA 013, Pinac le City, Gurgaon 6.3 The mandatory conditions for claiming deduction u/s 54F is as follows:-Capital gain on transfer of certain capital assets not to be charged in case of investment in residential house. 54F. (1) Subject to the provisions of sub-section (4), where, in the case of an assessee being an individual or a Hindu undivided family, the capital gain arises from the transfer of any j long-term

16 ITA No. 2333/Del/2026 RajanRamanee capital asset, not being a residential house (hereafter in this section referred to as the original asset), and the assessee has, within a period of one year before or two years after the date on which the transfer took place purchased, or has within a period of three years after that date constructed, one residential house in India (hereafter in this section referred to as the new asset), the capital gain shall be dealt with in accordance with the following provisions of this section, that is to say,— (a) if the cost of the new asset is not less than the net consideration in respect of the original asset, the whole of such capital gain shall not be charged under section 45 ; (b) if the cost of the new asset is less than the net consideration in respect of the original asset, so much of the capital gain as bears to the whole of the capital gain the same proportion as the cost of the new asset bears to the net consideration, shall not be charged under section 45: Provided that nothing contained in this sub-section shall apply where— (a) the assessee,— (i) owns more than one residential house, other than the new asset, on the date of transfer of the original asset; or (ii) purchases any residential house, other than the new asset, within a period of one year after the date of transfer of the original asset; or (iii) constructs any residential house, other than the new asset, within a period of ' three years after the date of transfer of the original asset; and (b) the income from such residential house, other than the one residential house owned on the date of transfer of the original asset, is chargeable under the head "Income from house property". 6.4 As the assessee has more than one house property the deduction u/s 54F is not allowable to the assessee. Further, with regard to the expense claimed on improvement of immovable property, the assessee has not furnished the bills and vouchers of expenditure contract agreement with the contractor as additional expenditure incurred by the assessee for improvement of the properties. The assessee has not furnished the property wise details of expenses incurred on

17 ITA No. 2333/Del/2026 RajanRamanee improvement. The assessee has also not furnished the details of what type of improvements made by the assessee in these properties. 6.4 Since, the assessee has not furnished the desired details of expenses incurred and type of improvement the genuineness of the expenses claimed by the assessee cannot be verified. Accordingly, the amount claimed by the assessee on account of cost of improvement on properties of Rs. 87,34,628/- and deduction claimed u/s 54F of Rs. 37,40,598/- total amounting to Rs. 1,24,75,226/- is being ; disallowed and added to the income of the assessee. Charge tax at the applicable rate @20% of the Act. Penalty proceedings u/s 271(1)(c) of the IT Act is being initiated for concealment of income by furnishing inaccurate particular of income.” 17. From the extracts of the assessment order as above, we have noticed that the Assessing Officer has simply mentioned the property no. 1 to 6 but has stated nothing as to how these properties are residential houses and not the properties nature of which has been explained in written submissions explained and extracted above by us. Thus, the primary onus of showing those properties as residential house has not been discharged by the Assessing Officer and the appellant has successfully explained before us that the said properties which are being claimed as residential properties by the Assessing Officer are either office space, vacant land or flat bookings rights only. The ld. CIT(A) in his order in para 4 page 7 has noted the submissions of the assessee with respect to the denial of deduction u/s 54F of the Act and extracted below as under:

18 ITA No. 2333/Del/2026 ITA No. 2333/Del/2026 RajanRamanee

19 ITA No. 2333/Del/2026 RajanRamanee documentary evidence submitted before the AO as well as before the ld. CIT(A) and the material in that regard and the submissions made therein has not been considered either by AO or by ld. CIT(A)and the reasons given by them for making and confirming the additions on that account are unsatisfactory as being based on assumption and surmises. Nothing has been mentioned either by the ld. AO or by the ld. CIT(A) with respect to the claim that the similar deduction claimed by wife of the assessee and father of the assessee in their respective assessment has been allowed and the submission in that regard were made before the ld. CIT(A)on 20.10.2021 which has not been admittedly considered. Nothing has been mentioned by the AO or the ld. CIT(A)with respect to the allowing of such deduction by the co-owners i.e. wife and father for the property so sold. Therefore, we are of the considered opinion that the assessee has successfully made the claim for deduction u/s 54F of the amount Rs.37,40,598/- which has been unjustifiably and illegally denied by the ld. lower authorities. For the above reason, the assessee is entitled to the deduction claimed u/s 54F of the Act to the extent of Rs.37,40,598/-. The impugned order in that regard is accordingly set aside and the grounds raised by the assessee questioning the addition of Rs.37,40,598/- by disallowance u/s 54F is accordingly allowed. The addition made u/s 54F of the Act is accordingly deleted.

20 ITA No. 2333/Del/2026 RajanRamanee 20. In the result, the appeal of the assessee is partly allowed. Order Pronounced in the Open Court on 22/09/2026. Sd/- Sd/- (S. Rifaur Rahman) (Raj Kumar Chauhan) Accountant Member Judicial Member Dated: 22/09/2026 *Subodh Kumar, Sr. PS* Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(Appeals) 5. DR: ITAT ASSISTANT REGISTRAR