LEENA MANOJ KUDALKAR,MUMBAI vs. INCOME TAX OFFICER- 41(3)(2), MUMBAI, MUMBAI

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ITA 8598/MUM/2026Status: DisposedITAT Mumbai13 October 2026AY 2015-165 pages

In favour of the assessee: the assessee's appeal was allowed. From the AI summary of this appeal.

AI SummaryAllowed

What did the Tribunal hold?

The Tribunal held that the addition of ₹22,66,666 under Section 69 of the Income-tax Act, 1961, was not sustainable. The Tribunal reasoned that while the assessee's name on the purchase agreement established her interest, it did not automatically mean the consideration attributable to her share came from her unexplained funds. The source of investment must be determined by how the consideration was paid and the evidence explaining those payments. The assessee's explanation was supported by the contemporaneous agreement, loan document, and banking particulars showing payments made through identified banking channels by family members. The Assessing Officer had not presented any material to contradict the assessee's explanation or show that she contributed undisclosed funds. The CIT(A) also failed to identify any defect in the payment trail. Therefore, the absence of a formal gift deed or loan agreement did not, by itself, invalidate the evidence of the bank loan and payments by family members. The Tribunal set aside the order of the CIT(A) and deleted the addition. Any grounds challenging penalty proceedings were considered premature as no penalty order was under appeal. The appeal was allowed.

What were the facts?

The assessee, Leena Manoj Kudalkar, is in appeal against the order of the CIT(A) for Assessment Year 2015-16. The appeal challenges an addition of ₹22,66,666 made by the Assessing Officer under Section 69 of the Income-tax Act, 1961, for alleged unexplained investment in a residential flat. The assessee, along with her husband and mother-in-law, purchased a flat for ₹1.28 crore. The consideration was funded by an IDBI Bank loan of ₹60 lakh and payments totaling ₹68 lakh made through HDFC Bank and TDS, with payments routed through family members' accounts. The Assessing Officer attributed one-third of the purchase price (₹42,66,666) to the assessee, allowed credit for one-third of the loan (₹20 lakh), and treated the balance ₹22,66,666 as unexplained investment. The CIT(A) sustained the addition, citing the lack of a formal document from family members regarding their payments.

What were the issues?

1. Whether the addition of ₹22,66,666 made by the Assessing Officer under Section 69 of the Income-tax Act, 1961, on account of alleged unexplained investment in the purchase of a residential flat is sustainable, considering the explanation provided by the assessee regarding the funding of the purchase. (Question of law and fact) Assessee's contentions: The assessee argued that the purchase agreement, loan document, and banking particulars evidenced the funding of the flat purchase. The IDBI Bank loan of ₹60 lakh was documented. The remaining ₹68 lakh was paid through HDFC Bank and TDS, with payments made by her husband and mother-in-law through banking channels directly to the seller. The absence of a formal gift deed or loan agreement with family members should not negate the evidence of payments made through banking channels. Revenue's contentions: The revenue, through the Assessing Officer and sustained by the CIT(A), argued that since the assessee was a co-purchaser, one-third of the purchase price was attributable to her. As the assessee had not produced a formal document establishing the nature of payments from her family members (gift, loan, or contribution), the balance amount was treated as unexplained investment.

Which sections of the Income-tax Act were involved?

Section 69

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, ‘SMC’

For Appellant: Shri Himanshu Gandhi
For Respondent: Ms. Jayshree Thakur, SR AR
Hearing: 08/10/2026Pronounced: 13/10/2026

आदेश / O R D E R PER AMIT SHUKLA (J.M): This appeal is directed against the order dated 7 July 2026 passed by the learned Commissioner of Income-tax (Appeals), National Faceless Appeal Centre, for Assessment Year 2015–16. The principal issue is the addition of ₹22,66,666 made by the Assessing Officer under section 69 of

2 ITA No.8598/Mum/2026 Leena Manoj Kudalkar the Income-tax Act, 1961, on account of an alleged unexplained investment in the purchase of a residential flat.

2.

The assessee, along with her husband and mother-in-law, purchased a flat for a total consideration of ₹1.28 crore under an agreement dated 26 November 2014. The consideration was funded partly through an IDBI Bank loan of ₹60 lakh and partly through payments made by the assessee’s family members. The agreement records payments of ₹2 lakh, ₹25 lakh and ₹39.72 lakh through HDFC Bank, together with TDS of ₹1.28 lakh, aggregating to ₹68 lakh. The loan document placed at page 35 of the paper book evidences the IDBI Bank loan. The assessee explained that she was repaying the loan and that the balance payments were made by her husband and mother-in-law through banking channels, directly towards the purchase consideration. The Assessing Officer, however, attributed one-third of the total purchase price, i.e., ₹42,66,666, to the assessee, allowed credit for one-third of the loan, i.e., ₹20 lakh, and treated the balance of ₹22,66,666 as unexplained investment. The learned CIT(A) sustained the addition, reasoning that the three persons named as purchasers should be regarded as having invested equally and that the assessee had not produced a formal document establishing whether the payments made by her family members were by way of gift, loan or contribution.

3 ITA No.8598/Mum/2026 Leena Manoj Kudalkar 3. We have considered the rival submissions and examined the material placed before us. Section 69 applies where the assessee is found to have made an investment and either offers no explanation about its nature and source or the explanation offered is not satisfactory. The assessee’s name in the purchase agreement establishes her interest in the property, but that fact, by itself, does not establish that the consideration attributable to her share was paid from her own unexplained funds. The source of the investment must be determined from the manner in which the consideration was actually paid and the evidence explaining those payments. The assessee’s explanation in the present case is not a bare assertion that she did not contribute to the purchase; it is supported by the contemporaneous agreement, the loan document and the banking particulars relating to the payments made towards the consideration.

4.

The IDBI Bank loan of ₹60 lakh is evidenced by the document placed at page 35 of the paper book. The remaining ₹68 lakh is reflected in the agreement through the HDFC Bank payments and TDS, and the accompanying banking material identifies the family members through whose accounts the payments were made. The payments were made towards the purchase consideration through identified banking channels, and the assessee’s case is that the amounts were paid directly to the seller. The Assessing Officer

4 ITA No.8598/Mum/2026 Leena Manoj Kudalkar has not brought on record any material to show that the assessee contributed undisclosed funds towards the purchase or that the payment particulars and banking records relied upon by her were incorrect. The learned CIT(A), while sustaining the addition, did not identify any defect in that payment trail or any material contradicting the assessee’s explanation. In these circumstances, the absence of a separate gift deed or loan agreement does not, by itself, displace the evidence showing that the consideration was met through the bank loan and payments made by family members. The computation adopted by the Assessing Officer allocating one-third of the purchase price and loan to the assessee and treating the difference as unexplained does not establish that the assessee made an unexplained investment of that amount. A person’s name appearing as a joint owner does not, without evidence of that person’s contribution, establish that the consideration came from that person’s unexplained funds.

5.

We accordingly hold that the addition of ₹22,66,666 under section 69 is not sustainable. The order of the learned CIT(A) on this issue is set aside and the addition is deleted. Ground No. 1 is allowed. The grounds, if any, challenging the mere initiation of penalty proceedings are premature, as no penalty order is under appeal before us. The general ground does not call for separate adjudication.

5 ITA No.8598/Mum/2026 Leena Manoj Kudalkar

6.

In the result, the appeal filed by the assessee is allowed.

Order pronounced on 13th October, 2026.

Sd/- Sd/- (G.M. DOSS) (AMIT SHUKLA) ACCOUNTANT MEMBER JUDICIAL MEMBER Mumbai; Dated 13/10/2026 KARUNA, sr.ps

Copy of the Order forwarded to : 1. The Appellant 2. The Respondent. 3. CIT 4. DR, ITAT, Mumbai 5. Guard file. //True Copy//

BY ORDER, ABHINAV Digitally signed by ABHINAV ANANT ANANT GAVANDE Date: 2026.10.24 12:21:45 GAVANDE +05'30' (Asstt. Registrar) ITAT, Mumbai

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