HITESHKUMAR BABUBHAI GAJERA,SURAT vs. INCOME TAX OFFICER, WARD - 3(2)(3), SURAT
What did the Tribunal hold?
The Tribunal noted that the assessee's authorized representative (AR) fairly agreed that certain evidences filed in Paper-Books-II & III at pages 78 to 98 were not presented before the Assessing Officer (AO). The revenue's senior Departmental Representative (DR) emphasized the CIT(A)'s finding that the assessee failed to establish the identity, genuineness, and creditworthiness of the creditors and did not comply with Rule 46A for submitting additional evidence. The DR further submitted that the evidences filed by the assessee at pages 78 to 98 of the Paper Books require verification by the AO and thus the matter should be remanded. The assessee's AR did not controvert this submission. The Tribunal, considering that the documents were not before the AO and required factual verification, deemed it appropriate to restore the matter to the AO for fresh adjudication. The AO is directed to examine these documents, verify the assessee's explanation regarding the sources of investment and unsecured loans, and consider the relevant evidence in accordance with law, providing the assessee an opportunity to be heard and furnish supporting documents. The issue of whether the addition was justified based on the evidence presented before the AO and CIT(A) was not decided on merits.
What were the facts?
The assessee, Hiteshkumar Babubhai Gajera, filed an appeal before the Income Tax Appellate Tribunal (ITAT), Surat Bench, against the order of the Commissioner of Income-Tax (Appeals)-NFAC, Delhi. The appeal pertains to Assessment Year 2016-17 and challenges the addition of Rs. 61,30,079/- made by the Income-tax Officer, Ward-3(2)(3), Surat, on account of investment in property. The assessee had declared a total income of Rs. 3,56,670/-. The Assessing Officer (AO) initiated scrutiny and observed the purchase of two properties by the assessee for a total consideration of Rs. 4,95,36,000/-. The AO questioned the source of the assessee's investment of Rs. 61,30,079/-. The assessee explained these investments were funded by loans from Shri Bharatbhai Purushottam Gajera and Shri Sureshbhai Babubhai Gajera. The AO rejected this explanation, noting that the loans were repaid before the property purchase and made the addition. The CIT(A) upheld the AO's order.
What were the issues?
1. Whether the addition of Rs. 61,30,079/- on account of investment in property is sustainable, considering the cash flow statement, evidence of investment sources, and explanation provided by the assessee (Section 143(3) of the Income-tax Act, 1961)? - Assessee's contention: The addition should be deleted as the investment was funded by explained sources, including unsecured loans. The assessee argued that cash available with family members could not be utilized by the appellant and that evidence of unsecured loans, including the identity, genuineness, and creditworthiness of depositors, was established. - Revenue's contention: The revenue, through the Ld. DR, emphasized the CIT(A)'s findings that the assessee failed to establish the identity, genuineness, and creditworthiness of the creditors and did not submit additional evidence before the AO as per Rule 46A. The revenue argued that the matter should be remanded to the AO for verification of new evidence filed before the Tribunal.
Which sections of the Income-tax Act were involved?
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, SURAT BENCH, SURAT
आदेश / O R D E R Per B.M. Biyani, A.M.: Feeling aggrieved by the order of first-appeal dated 20.07.2023 passed by learned Commissioner of Income-Tax (Appeals)-NFAC, Delhi [“Ld. CIT(A)”], which in turn arises out of the assessment-order dated 27.12.2018 passed by learned Income-tax Officer, Ward-3(2)(3), Surat [“Ld. AO”] u/s 143(3) of Income-tax Act, 1961 [“the Act”] for Assessment-Year [“AY”] 2016-17, the assessee has filed this appeal on following grounds:
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“1. The learned Commissioner of Income-tax (Appeals) has grievously erred in law and on facts in confirming the Addition of Rs. 61,30,079/- on account of Investment in property without properly appreciating the cash flow statement, evidences of Source of Investment and explanation submitted by appellant. The Addition of Rs. 61,30,079/- should therefore be deleted.
The learned Commissioner of Income-tax (Appeals) has grievously erred in law and on facts in confirming the Addition of Rs. 61,30,079/- on account of Investment in property without properly appreciating the facts that cash available with family members cannot be utilized by appellant in terms of various Provision of Law. The Addition of Rs. 61,30,079/- should therefore be deleted.
The learned Commissioner of Income-tax (Appeals) has grievously erred in law and on facts in confirming the Addition of Rs. 61,30,079/- on account of investment in property without properly appreciating the evidences of Unsecured Loan of Rs. 61,50,000/- in the form of identity of depositors, genuineness of transactions and creditworthiness of depositor established by appellant. The Addition of Rs. 61,30,079/- should therefore be deleted.”
The background facts leading to present appeal are such that the assessee-individual filed his return of AY 2016-17 declaring a total income of Rs. 3,56,670/-. The case of assessee selected for scrutiny and the Ld. AO issued notices u/s 143(2)/142(1) which were complied with by the assessee. During proceedings, the Ld. AR observed that the assessee purchased two properties situated at Block 645 & 655, Moje Dumas, Tal. – Majura, Surat for Rs. 3,13,23,600/- and Rs. 1,82,12,400/-. The Ld. AO observed that the assessee’s investments in purchase was Rs. 38,76,296/- and Rs.22,53,783/-, aggregating to Rs. 61,30,079/-. The AO asked assessee to explain the sources of such investments. In response, the assessee filed reply explaining that the loans of Rs. 39,00,000/- and Rs. 22,53,000/- taken from Shri Bharatbhai Purushottam Gajera and Shri Sureshbhai Babubhai Gajera respectively were utilized for making investment. The Ld. AO, however,
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observed that the assessee made cash deposit of Rs. 64,57,700/- in bank a/c; after deposition, the cash had been carried to other accounts; the loans explained by assessee were repaid before purchase of properties; etc. Accordingly, the AO issued another show-cause notice to assessee. In response to same, the assessee again filed reply which the AO considered. Ultimately, the Ld. AO rejected assessee’s entire submission and made addition of Rs. 61,30,079/- on account of unexplained income. Aggrieved, the assessee carried matter in first-appeal. The Ld. CIT(A), however, rejected assessee’s appeal. Still aggrieved, the assessee has come in present appeal before us.
During hearing before us, the facts of the case, the orders of lower authorities and the evidences filed in Paper-Books were deliberated by learned Representatives of both sides. After discussions, the Ld. AR for assessee fairly agreed that the evidences filed in Paper-Book-II & III at Pages 78 to 98 were not before Ld. AO. For an immediate reference, we re-produce below the Index of these Paper-Books:
4. At that stage, the Ld. DR for revenue emphasized the Ld. CIT(A)’s finding in para 5.2 of impugned order of first-appeal. For an immediate reference, we re-produce the same:
“5.2 During the course of appellate proceedings, it is the contention of the assessee that the cash deposits are explained and the investments are out of explained sources. The assessee has not been able to controvert the findings of the AO. The assessee has filed confirmations from the creditors of loans. The assessee had not submitted these evidences before the AO during the assessment proceedings. The assessee has not established; 1. Identity of creditors 2. Genuineness of transactions 3. Creditworthiness of the creditors Nor has assessee filed a separate petition under Rule 46A explaining as to under which clause of the said rule it fell. No justification for submission of additional evidence in terms of Rule 46A has been submitted by the assessee. The submission of additional evidence has to pass the test of Rule 46A which the assessee has not been able to do. In the circumstances, I do not see any reason to interfere with the assessment order of the AO. Hence, the only ground of appeal of the assessee challenging the addition of Rs.61,30,079/- is Dismissed.” 5. Further, the Ld. DR submitted that the evidences filed by assessee at Pages 78 to 98 of Paper-Books require verification by Ld. AO. Therefore, the present matter deserves to be remanded back to the file of Ld. AO for a fresh adjudication. The Ld. AR for assessee did not controvert the submission made by Ld. DR.
We have considered the rival submissions and perused the material available on record. The dispute in the present appeal relates to the addition of Rs. 61,30,079/- made in respect of investments in properties. The assessee has explained the sources of the investments, inter alia, by referring to unsecured loans obtained from the aforementioned creditors. However, the
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Ld. AO did not accept the explanation, and the Ld. CIT(A) sustained the addition, observing that the assessee had failed to establish the identity and creditworthiness of the creditors and the genuineness of the transactions.
It is an admitted position before us that the documents placed at pages 78 to 98 of Paper Books-II and III were not before the Ld. AO during the assessment proceedings. Since these documents require factual verification and may have a bearing on the assessee’s explanation regarding the sources of the investments, we deem it appropriate to restore the matter to the file of the Ld. AO for fresh adjudication. The Ld. AO shall examine the aforesaid documents, verify the assessee’s explanation regarding the sources of the investments and the unsecured loans, and consider the relevant evidence in accordance with law. The assessee shall be afforded a reasonable opportunity of being heard and shall be permitted to furnish supporting documents and explanations in support of his case. Ordered accordingly.
In result, this appeal is allowed for statistical purposes.
Order pronounced in open court on 16/10/2026
Sd/- Sd/- (SUCHITRA KAMBLE) (B.M. BIYANI) JUDICIAL MEMBER ACCOUNTANT MEMBER Surat दिन ांक /Dated : 16/10/2026 Giridhar/Sr. PS Copies to: (1) The appellant (2) The respondent (3) CIT – concerned (4) Departmental Representative (6) Guard File By order
UE Assistant Registrar/Sr.PS Income Tax Appellate Tribunal Surat Bench, Surat
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