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

ITA 927/RJT/2026Status: DisposedITAT Raipur29 September 2026AY 2019-207 pages
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What were the facts?

The assessee, Prakash Dayaram Chandnani, filed his return of income for Assessment Year 2019-20 on September 7, 2019, declaring a total taxable income of Rs. 6,24,930. The Assessing Officer (AO) initiated reassessment proceedings under Section 147 of the Income-tax Act, 1961, issuing a notice under Section 148 on March 31, 2023. This action was based on information flagged in the Insight Portal regarding a search and seizure operation on August 24, 2021, concerning the R. K. Group. Incriminating digital data and documents unearthed during the search indicated that the assessee paid 'on-money' of Rs. 12,64,000 in cash for the purchase of units in the 'The Imperia 303' project. The AO, after obtaining approval, reopened the assessment. The assessee filed a revised return on April 20, 2023, declaring the same income. The AO subsequently added Rs. 12,64,000 as unexplained investment under Section 69A read with Section 115BBE of the Act. The National Faceless Appeal Centre (NFAC)/CIT(A) upheld the AO's action. The assessee appealed to the ITAT.

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'. However, it noted that the entire 'on-money' should not be taxed, but only the profit element, citing the Supreme Court's decision in CIT v. Williamson Financial Services and the Gujarat High Court's decision in CIT v. President Industries. 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. The addition was to be sustained at the normal rate of income tax, not under Section 115BBE of the Act. The appeal was partly allowed. The issue of jurisdiction and cross-examination was implicitly decided against the assessee by the partial allowance, but the Tribunal did not explicitly address these grounds in detail in its final holding.

What were the issues?

1. Whether the Assessing Officer had valid jurisdiction to assume jurisdiction and initiate income escaping assessment proceedings under Section 147 of the Income-tax Act, 1961, by issuing a notice under Section 148. 2. Whether the Assessing Officer passed the assessment order without providing the assessee an opportunity for cross-examination. 3. Whether the Assessing Officer erred 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 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 assessee argued that additions should not be made solely based on digital data found at a third party's premises without a nexus to the assessee's explanations. The assessee claimed he never admitted to paying 'on-money' except through cheque and that he was denied an opportunity for cross-examination. The assessee also submitted bank statements and registered property documents showing payments through banking channels, requesting deletion of the addition. Revenue's Contentions: The Revenue primarily reiterated the stand taken by the Assessing Officer.

Which sections of the Income-tax Act were involved?

Section 147,Section 148,Section 69A,Section 115BBE,Section 250(6),Section 143(2),Section 4

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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