MADHU HARESHBHAI LALWANI,ANKLESHWAR vs. ACIT-CIRCLE-2, BHARUCH, BHARUCH

PDF · subscribers
ITA 671/SRT/2026Status: PendingITAT Surat30 October 2026AY 2017-186 pages
AI SummaryPartly Allowed

What did the Tribunal hold?

The Tribunal noted that the Assessing Officer (AO) relied on the statement of the assessee's husband and impounded papers (page No.84 of Annexure BF-20) to add Rs. 12,25,000/- as cash received on the sale of the flat. However, the Tribunal observed that the assessee's husband had denied knowledge of receiving this cash in his statement (Answers to Question No.19 & 20 dated 17.03.2017). Furthermore, the assessee was not provided with the loose papers during the assessment proceedings, and the registered sale document executed on 06.10.2016 was not verified in consonance with the alleged on-money receipt. Given these discrepancies and the failure to provide documents as per Ground No.1.1, the Tribunal found that the matter requires proper verification and adjudication. Therefore, the Tribunal remanded the case back to the Assessing Officer for proper verification and adjudication, with a direction to provide the assessee an opportunity of hearing, following the principles of natural justice. Ground No.1.1 was partly allowed for statistical purposes. The other grounds were not adjudicated as they were corollary to Ground No.1.1.

What were the facts?

The assessee, Madhu Hareshbhai Lalwani, filed an appeal against the order of the Commissioner of Income Tax (Appeal) dated 25.03.2026 for Assessment Year 2017-18. The assessee is engaged in the wholesale business of Pan Masala, Tobacco, etc. The Assessing Officer (AO) made an addition of Rs. 12,25,000/- to the assessee's income under Section 69A read with Section 115BBE of the Income Tax Act, 1961, treating it as unexplained money received in cash on the sale of a flat. The assessee's return declared a total income of Rs. 27,52,330/-, including Short Term Capital Gain on the sale of the flat. The AO's assessment was based on a survey conducted on the business premises and statements recorded. The CIT(A) dismissed the assessee's appeal. The assessee's appeal before the ITAT challenges these additions and the procedural aspects.

What were the issues?

1. Whether the addition of Rs. 12,25,000/- as unexplained money under Section 69A is justified when the source of receipt (sale of flat) and the transaction are identified, and whether the AO erred by not providing the supporting documents and statements used for the addition. (Assessee's contention: The receipt cannot be characterized as unexplained money if its source is identified. The AO failed to provide crucial documents like loose papers and the complete statement of the assessee's husband, violating CBDT Instruction No. 20/2015 and principles of natural justice. Revenue's contention: The cash was deliberately kept outside the sale deed, books of accounts, and return, thus constituting unexplained money under Section 69A). 2. Whether the amended provisions of Section 115BBE, with a tax rate of 60% (plus SC & Cess), are applicable retrospectively to the sale of the flat on 06.10.2016, given that the amendment was effective from 15.12.2016. (Assessee's contention: The amended rate should be restricted to 30% for the present assessment year. Reliance on Jignesh Harshadbhai Patel vs. ITO, Nareshkumar Bisweshwarlal Agarwal vs. ACIT/DCIT, Shree Kuberji Associates, Poonam Developers vs. ACIT, and Greenfield Reality Pvt. Ltd. vs. DCIT. Revenue's contention: The amended Section 115BBE is effective from 01.04.2017 for AY 2017-18, and the effective rate of tax is approximately 83.25%, justifying the AO's levy of 60% tax). 3. Whether the CIT(A) erred in confirming the initiation of penalty proceedings under Section 271AAC(1) and passing the order without granting an effective opportunity of hearing. (Assessee's contention: The appeal order was passed without proper hearing and reasoning, violating principles of natural justice and Section 250(2).)

Which sections of the Income-tax Act were involved?

Section 69A,Section 115BBE,Section 143(2),Section 142(1),Section 131,Section 250(2),Section 271AAC(1)

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, SURAT BENCH, SURAT

Before: MS. SUCHITRA KAMBLE & SHRI B.M. BIYANI

For Respondent: Shri Ashish Kumar, Sr. DR
Pronounced: 30.10.2026

IN THE INCOME TAX APPELLATE TRIBUNAL SURAT BENCH, SURAT BEFORE MS. SUCHITRA KAMBLE, JUDICIAL MEMBER AND SHRI B.M. BIYANI, ACCOUNTANT MEMBER ITA No.671/SRT/2026 (निर्धारण वर्ा/Assessment Year: 2017-18) MADHU HARESHBHAI LALWANI ACIT-CIRCLE-2, BHARUCH SHOP NO.4, MADHUVAN INCOME TAX OFFICE- COMPLEX, NR. MANAV MANDIR, BHARUCH, HARI KUNJ, Vs. GIDC, ANKLESHWAR, STATION ROAD, BHARUCH-393002, GUJARAT BHARUCH-356069, GUJARAT अपीलधर्थी Appellant प्रत्यर्थी Respondent

Permanent Account Number of Assessee: ACGPL7317K

अपीलधर्थी द्वारा/Appellant represented by: Shri Anil K. Shah, AR प्रत्यर्थी द्वारा/Respondent represented by: Shri Ashish Kumar, Sr. DR

सुनवाई की तारीख / Date of conclusion of hearing: 05.08.2026 घोषणा की तारीख / Date of pronouncement: 30.10.2026 O R D E R PER : SUCHITRA KAMBLE, J M:

The appeal filed by the assessee is against the order passed by the Commissioner of Income Tax (Appeal), ADDL/JCIT (A), Mumbai [in short “CIT(A)”] dated 25.03.2026 for the Assessment Year (in short “AY”) 2017- 18.

2.

The assessee has raised the following grounds of appeal: “1.1. The Ld. CIT(A) has erred in law and on facts, in confirming the addition of Rs. 12,25,000/- to the appellant's income, u/s 694, alleging receipt of cash consideration on sale of flat A-801 at Samrajay, Ahmedabad, over and above amount stated in registered Sale deed of flat, without providing the copy of loose paper/material/statement based on which addition was founded, and without considering the submissions/explanations furnished by appellant.

1.2. Without prejudice to above, Ld. CIT(A) has erred in law in confirming the action of Ld. AO invoking the deeming fiction provided in section 69A and charging the tax @ 60% plus SC & Cess Le. by applying amended provisions of section 115BBE applicable w.e.f. 15.12.2016, retrospectively in respect of transaction of sale of above flat made on 06.10.2016. Ld. CIT(A) ought to have appreciated that it is undisputed fact that appellant was engaged in business of pan masala etc. under the name of "Gurunanak Stores" During the course survey at her business premises on 17.03.2017, no unexplained money, bullion, jewellery was found; Ld. AO has also not brought on record any finding/material showing any undisclosed activity than business income, and made above addition treating the same as Capital Gain. As such invocation of provisions of fiction u/s 69A r.w.s. 11588E are wholly uncalled for, and unwarranted.

1.3. That Ld. CIT(A) has erred in law in confirming the addition without appreciating that Ld. AO had not provided the copy of page no.84 of file no. BF-20 and her complete statement recorded on 11.12.2019, based on which above addition is founded. Appellant came to know about invocation of section 69A rws amended section 11588E, only after receipt of assessment order. Appellant's subsequent request dt. 19.12.2019 made to ITO, seeking copies of, her statement and page no. 84 of annexure BF-20, did not yield any result. As such impugned assessment order is passed in disregard of CBDT Instruction No. 20/2015, where in para no. 4, ITO is mandated to issue show cause notice supported by the reasons & evidences to the assessee.

1.4. Ld. CIT(A) has erred in law in not appreciating that as per section 250 (2) of the Act prescribing "Procedure in appeal" appellant is entitled to be heard at hearing of appeal. Impugned Appeal order has been passed without granting any opportunity of being heard despite appellant specifically requested for grant of opportunity of hearing, as required by principles of natural justice. Impugned appeal order is passed simply recording the written submissions of the appellant, without giving any proper and effective reasoning for not accepting these submissions. Therefore, impugned appeal order is liable to be quashed.

2.

The Ld. CIT(A) has erred in law in confirming the initiation of penalty proceedings u/s 271AAC(1) of the Act.

3.

The appellant respectfully submits that Hon'ble ITAT may be pleased to stay the operation/execution of the impugned appeal order, confirming the additions made in assessment order resulting into unlawful demand of Rs. 12,75,809/-. Appellant prays for complete stay on o/s demand till the disposal of this appeal, which is within your honor's authority, as appellant has prima facie good case as well as balance of convenience in her favor.

4.

The appellant craves leave to add, amend, alter, edit, delete, modify, or change all or any of the above grounds of appeal, which are independent and without prejudice to each other, at the time of or before the hearing of the appeal.” 3. The assessee is engaged in the wholesale business of Pan Masala, Tobacco, Chocolate, Mukhwas and Chhikani in the name and style of "M/s Gurunanak Stores". The assessee filed her Return of Income on 10.10.2017 declaring total income of Rs.27,52,330/- (after deduction under Chapter VI- A of Rs.1,60,000/-), which included Short Term Capital Gain of Rs.8,87,550/- on account of sale of Flat bearing No. A-801, Samrajaya Co- operative Society. The case was selected for scrutiny through CASS. Notices under Section 143(2) and 142(1) of the Income Tax Act, 1961 (in short “the Act”) were duly issued and served. After due process of assessment, including examination of documents filed by the Authorised Representative and recording of the statement of the assessee on oath under Section 131 of the Act on 11.12.2019, the Assessing Officer (in short “the AO”) assessed the total income at Rs.39,77,330/- by making addition of Rs.12,25,000/- being unexplained money u/s 69A r.w.s. 115BBE of the Act on account of cash received on sale of immovable property.

4.

Being aggrieved by the assessment order the assessee filed appeal before the CIT(A). The CIT(A) dismissed the appeal of the assessee.

5.

The Ld. Authoritised Representative (in short “the Ld. AR”) submitted that the AO has linked the alleged receipt of Rs.12,25,000/- with the sale of the assessee’s residential flat. The registered sale deed was executed on 06.10.2016. Thus, this is not a case where cash/money was found and the assessee was unable to explain its source. In fact, as per the Revenue, the source of Rs.12,25,000/- is the transfer/sale of the identified immovable property. Once the source as well as the transaction giving rise to the receipt is identified, such receipt cannot simultaneously be characterized as unexplained money. The Ld. AR relied upon the decision of the Tribunal in case of Jignesh Harshadbhai Patel vs. ITO (ITA No.1655/Ahd/2025 order

dated 15.05.2026). The Ld. AR has also submitted without prejudice to his principal contention that section 69A itself is inapplicable, the application of the amended rate by 60% u/s 115BBE of the Act will be restricted to 30% in the present assessment year.

5.1 The Ld. AR also relied upon the decision of Nareshkumar Bisweshwarlal Agarwal vs. ACIT/DCIT (order dated 31.10.2025 ITAT Surat), Shree Kuberji Associates [IT(SS)A Nos.28 to 31, 34 to 34/SRT/2023)], Poonam Developers vs. ACIT (ITA Nos.15 & 27/SRT/2021 – ITAT Surat) Greenfield Reality Pvt. Ltd. vs. DCIT (order dated 21.02.2020 - ITAT Ahmedabad).

6.

The Ld. Departmental Representative (in short “Ld. DR”) submitted that the cash of Rs.12,25,000/- was deliberately kept outside the registered sale deed, outside the books of accounts and outside the income of return. Thus, it is an unexplained money within the meaning of Section 69A of the Act. The Ld. DR relied upon the assessment order and the order of the CIT(A). The Ld. DR further submitted that the applicability of amended Section 115BBE, w.e.f. 15.12.2016, the said section is effective from 01.04.2017 i.e. A.Y. 2017-18 and therefore the effective rate of tax of approximately 83.25%. Thus, the AO has rightly levied the tax @ 60% u/s 115BBE of the Act.

7.

We have heard both the parties and perused all the relevant materials available on record. The assessee is in the wholesale business of Pan Masala, Tobacco, Chocolate, Mukhwas and Chhikani in the name and style of "M/s Gurunanak Stores". The assessee declared total income of Rs.27,52,330/- from business, rent income by Short Term Capital Gain on sale of flat and interest income. The AO has passed the assessment order based on the survey action u/s 133A which was conducted on the business premises of the assessee on 17.03.2017. The assessee’s and her husband’s statements were recorded on oath u/s 131 of the Act and certain papers/accounts/documents were impounded. The AO relied upon the

statement of assessee’s husband and added cash component of Rs.12,25,000/- received on sale of flat A-801 at Samrajay placing reliance on paper impounded at page No.84 of Annexure BF-20. But the AO failed to take into account that the assessee’s husband had denied the knowledge of receipt of the said cash more particularly answers to Question No.19 & Question No.20 of his statement dated 17.03.2017. In fact, the assessee was not given the loose papers at the time of assessment proceedings. The assessee has categorically given the details of the registered sale document executed on 06.10.2016 which was not verified in consonance with on money alleged to have been received and since the documents were not provided as per Ground No.1.1, the same needs proper verification. Therefore, the matter is remanded back to the file of the Assessing Officer for proper verification and adjudication as per the Income Tax Statute. Needless to say, the assessee be given opportunity of hearing by following principles of natural justice. Ground No.1.1 is partly allowed for statistical purpose.

8.

As regards the other grounds, the same are corollary to the ground No.1.1. Hence, the same are not adjudicated at this juncture.

9.

In result appeal of the assessee is partly allowed for statistical purpose.

Order pronounced in the open court on 30.10.2026

Sd/- Sd/- (B.M. BIYANI) (SUCHITRA KAMBLE) ACCOUNTANT MEMBER JUDICIAL MEMBER Surat; Dated: 30.10.2026 * Kishore, Sr. P.S. Copy of the Order forwarded to: 1. The Appellant

2.

The Respondent 3. CIT- concerned 4. DR, ITAT, Surat 5. Guard File By order, HEMA KISHORE Digitally signed by HEMA KISHORE JAKKA JAKKA Date: 2026.11.02 15:33:51 +05'30' Assistant Registrar/Sr.PS/PS ITAT, Surat Bench

More judgments on Section 69A

All 15,297 judgments and leading authorities on Section 69A →

Recent GST High Court judgments

Search GST case law →