KALKERE PUTTARAJU VAJRAMUNIE, ROYAL HERMITAGE, KALKERE B.O, KALKERE vs. DEPUTY COMMISSIONER OF INCOME TAX CENTRAL CIRCLE 1(4) BANGALORE, BANGALORE, KARNATAKA

The issue raised by the assessee in Ground Nos. 1 to 4 of the appeal are general in nature and do not require any specific adjudication. Therefore, these grounds are dismissed as infructuous.

The next issue raised by the assessee through Ground No. 5 of the appeal is that the assessment order passed under section 153A of the Act is bad in law as the assessee is not a searched person.

At the outset, we note that the learned AR of the assessee before us submitted that he has been instructed by the assessee not to press the issue raised in the captioned ground of appeal. Hence, the same is hereby dismissed as not pressed.

The next issue raised by the assessee through Grounds Nos. 6 to 10 of the appeal are interconnected and pertain to the addition of ₹ 53,43,800/- made under section 69B of the Act

The facts in brief are that the assessee, an individual, is deriving income from house property and interest income on deposit but not filed return of income. His father T. Puttaraju and others were subject to search proceeding under section 132 of the Act as on 19-08-2018 which covers residential premises of the assessee.

Accordingly, a notice under section 153A of the Act was issued to the assessee for A.Ys. 2013-14 to 2018-19. In response to the notice issued under section 153A of the Act, the assessee filed return of income for respective assessment years and for the year under consideration i.e. A.Y. 2014-15 declaring an income of ₹ 17,20,880/- being rental income and interest income.

The AO during the assessment proceeding found that in the year under consideration the assessee has purchased an immovable property for consideration of ₹ 72 Lakh. However, only ₹ 18,56200/- was paid from the assessee’s bank account toward purchase consideration and only amount of ₹ 18,56,200/- was shown in the statement of affair as new addition to fixed assets.

The assessee explained that the remaining amount of ₹ 53,43,800/- was arranged by his father as loan from friends and relatives. But the assessee failed to provide the details regarding the identity and credit worthiness of the lender. Hence, the AO treated the remaining amount of investment of ₹ 53,43,800/- as unexplained investment under section 69B of the Act and added to the total income of the assessee. Thereby, the AO completed the assessment under section 143(3) r.w.s. 153A of the Act vide order dt. 15-07-2021 assessing the total income at ₹ 70,64,680/- only.

The aggrieved assessee preferred an appeal before the learned CIT(A).

1 The assessee before the ld. CIT-A submitted that during the assessment proceedings, he explained that the property, located at No. 7, Gottigere, Bannerghatta Road, was purchased through a registered sale deed dated 21.10.2013. This investment was already disclosed in the Statement of Affairs for the year ending on 31.03.2014 under the head "Fixed Assets."

2 The assessee further submitted that the funds for the purchase of the property came partly from his bank account (₹18,56,200) and the remaining amount of ₹53,43,800/- was sourced through loans and advances from relatives and friends. Due to his father’s ill health and lack of sufficient opportunity during the assessment, the assessee could not produce confirmation letters for these loans and advances. However, a proper explanation was given during the assessment proceedings.

The assessee argued that despite providing the explanations, the AO wrongly invoked the provision of section 69B of the Act and made an addition on the ground that the source of investment was not fully disclosed in the books of account. The assessee emphasized that he was not required to maintain books of account and had already disclosed the property in his Statement of Affair.

The assessee contended that the AO failed to appreciate these facts and wrongly applied the provisions of section 69B of the Act. The ITA No.901 & 902/Bang/2025

Being aggrieved by the order of the Ld. CIT(A), the assessee is in appeal before us.

The Ld. AR for the assessee before us submitted that the appellant had purchased a property and funded the purchase through a combination of his own income and loans from friends and relatives. It is submitted that an amount of ₹18,56,200/- was paid from the appellant’s own sources, and the balance amount of ₹53,43,800/- was borrowed from various individuals whose names, PAN details, and confirmation

1 The learned AR argued that the AO made the addition of ₹53,43,800/- under section 69B of the Act only because the confirmation documents were not provided during assessment. He stressed that the appellant is now providing full details and confirmations from the lenders, and these should be taken on record as additional evidence along with supporting affidavits.

2 It was also argued that the appellant has already explained the source of the investment with proper documentation, thereby discharging the initial onus under section 69B of the Act. Once the identity and genuineness of the transaction are proven, the assessee is not required to prove the "source of the source" — i.e., where the lender got their funds from. The ld. AR relied on various court decisions, including that of the Hon’ble Delhi High Court in case of CIT v. Dwarkadhish Investment P. Ltd. in ITA No. 911 of 2010, and the judgment of Hon’ble Supreme Court in case of Sreelekha Banerjee’s vs. CIT reported in 49 ITR 112, to support this principle.

3 The learned AR further submitted that in cases where the investment has come from the appellant’s own account and partly from third parties, the appellant cannot be compelled to explain the source of funds of such third parties. Since the AO has already accepted the ITA No.901 & 902/Bang/2025

4 He also referred to Hon’ble Supreme Court rulings like CIT vs. Lovely Export P. Ltd in 11993 of 2007 and Madras High court ruling in Lalitha Jewellery Mart v. DCIT 399 ITR 425, where the courts held that if the investment is explained with proper documents, then no addition can be made. He emphasized that the provisions of section 69B of the Act are applicable only when investments are not recorded in the books of accounts. In the present case, the appellant did not maintain books of accounts, and hence the provisions of section 69B of the Act cannot be applied.

5 The ld. AR relied on the decision of the ITAT bench of Amritsar in case of Sudha Aggarwal v. ACIT in ITA No. 525/Asr/2019, where the Tribunal held that no addition under section 69B of the Act can be made if the assessee does not maintain books of accounts. He also referred to various other rulings to show that legal fiction under Section 69B of the Act must be applied strictly and cannot be extended beyond its intended scope.

6 Finally, the ld. AR contended that the addition made under section 69B of the Act is legally unsustainable, the principle of natural justice has not been followed, and the appellant has now submitted sufficient materials to prove the genuineness of the transactions. Therefore, he prayed that the addition be deleted and suitable relief be granted.

We have heard the rival contentions of both the parties and perused the materials available on record. The dispute in the present appeal revolves around the addition of ₹53,43,800/- made by the AO under section 69B of the Act, treating the same as unexplained investment in the purchase of an immovable property.

1 The admitted facts are that the assessee purchased a property during the relevant assessment year for a total consideration of ₹72,00,000/-, out of which ₹18,56,200/- was paid from his own bank account, and this amount was duly recorded in his statement of affairs. The balance amount of ₹53,43,800/- was claimed to have been financed through loans from friends and relatives. However, during the assessment and appellate proceedings, the assessee failed to furnish any confirmation letters or details of such lenders, despite having been granted sufficient opportunities, including specific notice dated 31.05.2021 by the AO and time sought before the learned CIT(A). Therefore, we are unable to accept the contention of the learned AR that proper opportunity was not provided during earlier stages of the proceedings. This argument assessee is thus rejected.

2 At the same time, in the interest of substantial justice and fair play, we admit the confirmation letters and related evidences now furnished for the first time before us in support of the assessee’s contention that the source of ₹53,43,800/- was from friends and relatives. The principles laid down by the Hon’ble Supreme Court in ITA No.901 & 902/Bang/2025

3 We also reject the argument of the learned AR that the assessee is not obliged to explain the source of investment on the ground that the property was financed by third parties. From the order of the lower authorities its appears that the sale deed clearly records the name of the assessee alone as purchaser and absolute owner. There is no documentary evidence on record suggesting that the investment was made by others on his behalf. In such circumstances, the onus squarely lies on the assessee to explain the nature and source of the full consideration paid for the acquisition of the property. Therefore, in our considered view, mere oral claims of third-party investment cannot absolve the assessee of his responsibility under section 69B of the Act.

4 The contention that section 69B of the Act is not applicable because the assessee did not maintain books of account is also without merit. The phrase "not recorded in the books of account, if any, maintained by him for any source of income" appearing in section 69B of the Act makes it clear that the requirement of recording the investment arises only if books are maintained. However, the non-maintenance of books does not take the transaction outside the scope of section 69B of the Act. The words “if any” signify that maintenance of books is not a precondition. Even if books are not maintained, the deeming provisions can still be invoked based on other evidence. In holding so, we draw support and guidance from the ruling of Hon’ble Madras High Court in ITA No.901 & 902/Bang/2025

5 In view of the above, we hold that unexplained investments can be taxed under section 69B of the Act even in cases where the assessee has not maintained books of account. Thus, the deeming fiction under section 69B of the Act remains applicable so long as the source of the investment is not satisfactorily explained.

6 Before parting, we are inclined to analyse the issue from a different angle, the provisions of section 69B of the Act provides that ITA No.901 & 902/Bang/2025

8 Now, the crucial point is whether the assessee is obliged to explain the source of the sum of ₹ 53,43,800/-, when it is demonstrated and accepted that this amount was arranged by his father from his known persons. It is settled law that legal ownership of property does not automatically make the assessee liable for explaining funds invested by someone else, provided there is evidence that the investment came from another person and that such person is identifiable and capable of making the investment. In this case, the father was subject to search, and the Department was aware of the fact the sum of ₹ 53,43,800/- was arranged by the father of the assess. No material is brought on record

In the result, the appeal of the assessee is hereby partly allowed.

The next issue raised by the assessee through Ground No. 7 of the appeal is that the assessment order passed under section 153A of the Act is bad in law as the assessee is not a searched person.

At the outset, we note that the learned AR of the assessee before us submitted that he has been instructed by the assessee not to press the issue raised in the captioned ground of appeal. Hence the same is hereby dismissed as not pressed.

The next issue raised by the assessee through Grounds Nos. 3 to 6 and 8 of the appeal are interconnected and pertain dismissal of appeal by the Ld. CIT(A) by invoking the provision of section 249(4) of the Act and passing the ex-parte order.

The relevant facts are that the assessee for the year under consideration has not filed a return of income under the provision of section 139 of the Act and failed to furnish return of income in response to the notice issued under section 153A of the Act. However, the assessee during the assessment proceeding furnished statement of ITA No.901 & 902/Bang/2025

The AO completed the assessment under section 144 of the Act assessing the total income at Rs. 24,79,352/- without allowing deduction as claimed and raised a demand of Rs. 9,85482/- consisting of tax liability of Rs. 5,72,994/- and levy of interest under section 234A and 234B of the Act for Rs. 1,83,328/- and 2,29,160/- respectively.

The aggrieved assessee preferred an appeal before the learned CIT(A).

Before the Ld. CIT(A), the assessee claimed that due to technical glitches in income tax portal the return of income was not furnished but the statement of income along with other documents was filed before the AO. Therefore, making addition of the same income and raising demand was not required. The assessee in support of the claim furnished copy of grievance filed with e-Nivaran at ITB portal and copy of statement of income. As per the statement of income, the assessee has shown total income of Rs. 24,55,060/- on which computed total tax liability along with cess at Rs. 5,65,489/- only. Against the impugned tax liability, the assessee claimed TDS credit of Rs. 2,11,075/- and accordingly computed final liability after levy of interest and fee etc at Rs. 4,16,291/- which claimed to be paid as self-assessment tax through union bank of India having challan No. 002 dated 05th November 2019. ITA No.901 & 902/Bang/2025

Being aggrieved by the order of the Ld. CIT(A), the assessee is in appeal before us.

The learned AR before us filed a copy Form-26AS and copy of challan showing deduction or collection of TDS and TCS aggregating to Rs. 2,11,075/- and payment of self-assessment taxes of Rs. 1,97,096/- and Rs. 1,57,318/- as on 9th February 2022 and 27th June 2025 respectively. The learned AR accordingly claimed that the assessee has deposited the entire tax liability of Rs. 5,65,489/- only.

On the other hand, the ld. DR vehemently supported the order of the authorities below.

We have heard the rival contentions of both the parties and perused the materials available on record. The provisions of section 249(4) of the Act provides that the appeal of the assessee shall not be admitted by the Ld. CIT(A) in a situation where the assessee fails to pay an amount equal to the amount of advance tax which was payable by him in the absence of return filed by him. Admittedly, the return was not filed by the assessee but the assessee has filed the statement of income disclosing taxable income of Rs. 24,55,060/- only. However, the assessee has not deposited an amount equal to the advance tax till the date of disposal of the appeal by the Ld. CIT(A). Thus, in our considered

Be that as it may be, it is pertinent to note that the assessee after disposal of the appeal by the Ld. CIT(A), has paid the amount of tax in the manner as discussed above. Thus, in view of the above, it can safely be concluded that the requirement mandated under the provisions to section 249(4) of the Act has been substantially complied with by the assessee subsequently. Thus, accordingly we conclude that the appeal filed by the assessee needs to be disposed of on merit of the case at the level of the Ld. CIT(A). Hence, we set aside the issue to the file of the learned CIT(A) for fresh adjudication as per the provisions of law. Thus, the ground of appeal of the assessee is partly allowed for statistical purposes.

In the result, the appeal filed by the assessee is allowed for statistical purposes.

In the combined result, ITA 901/Bang/2025 is hereby partly allowed whereas ITA 902/Bang/2025 is hereby allowed for statistical purposes.

The Applicant 2. The Respondent 3. The CIT 4. The CIT(A) 5. The DR, ITAT, Bangalore. 6. Guard file