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Facts
The Assessing Officer (AO) made an addition of Rs. 83,77,500/- to the assessee's income, treating it as unexplained investment in two jointly purchased properties. The assessee failed to provide satisfactory explanation and supporting documents during the assessment proceedings. The CIT(A) deleted the addition after the assessee provided additional evidence, including loan documents and sale proceeds of her husband's property.
Held
The Tribunal held that the CIT(A) has co-terminus powers and can examine additional evidence. The evidence produced by the assessee before the CIT(A) adequately explained the source of investment, and the CIT(A) was justified in deleting the addition. The Revenue's contention regarding violation of Rule 46A was rejected.
Key Issues
Whether the CIT(A) erred in admitting and relying on additional evidence filed at the appellate stage without giving AO an opportunity to verify, and in deleting the addition related to unexplained investment.
Sections Cited
69, 147, 144B, 143(2), 142(1), 133(6), 148A, 148, 46A
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, “F” BENCH MUMBAI
आदेश / ORDER
PER MAKARAND VASANT MAHADEOKAR, AM:
This appeal filed by the Revenue is directed against the order passed by the Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Delhi [hereinafter referred to as “CIT(A)”] dated 27.11.2025 for the Assessment Year 2017–18, arising out of the assessment order passed under section 147
The brief facts of the case are such that the assessee is an individual and resident. Information was received by the Assessing Officer through the Insight portal under the Risk Management Strategy of CBDT indicating that during the financial year 2016–17 relevant to A.Y. 2017–18 the assessee had entered into transactions relating to purchase of immovable properties. Based on the said information, proceedings under the reassessment provisions were initiated. An order under section 148A(d) was passed and notice under section 148 dated 15.03.2024 was issued. In response, the assessee filed a return of income declaring total income of Rs. 361/-. During the course of reassessment proceedings, notices under sections 143(2) and 142(1) were issued and enquiries were conducted by the Assessing Officer from the Sub-Registrar and the bank by issuing notices under section 133(6).From the information gathered, the Assessing Officer observed that the assessee, along with her husband Shri Prasanna Bhaskar Shetty, had purchased two immovable properties situated at Nanddham, Bangur Nagar, Goregaon, Mumbai, during the relevant financial year. The details as noted by the Assessing Officer are as under:
Property Purchase Stamp Duty & Consideration Registration Flat A-1, Ground Floor, Rs. 79,50,000/- Rs. 4,27,500/- Nanddham, Bangur Nagar, Goregaon
The Assessing Officer observed that the assessee, along with her husband, had purchased two residential flats at Nanddham, Bangur Nagar, Goregaon, Mumbai, for a total consideration of Rs. 1,59,00,000/-, and after including stamp duty and registration charges, the total cost amounted to Rs. 1,67,55,000/-. Since the properties were jointly purchased, the share of the assessee was determined at Rs. 83,77,500/-.
The assessee was required to explain the source of investment for the said purchase. According to the Assessing Officer, the assessee failed to satisfactorily explain the nature and source of the investment and did not furnish complete supporting evidence such as loan sanction details and financial particulars of her husband. Consequently, the Assessing Officer treated the assessee’s share of investment amounting to Rs. 83,77,500/- as unexplained investment under section 69 of the Act and completed the reassessment determining total income at Rs. 83,77,861/- vide order passed under section 147 read with section 144B dated 11.02.2025.
Aggrieved by the said assessment order, the assessee preferred an appeal before the CIT(A) During the appellate proceedings, the assessee submitted that the investment in the properties was sourced from housing loan obtained from State Bank of India amounting to Rs. 75,00,000/- and sale proceeds of Shareeka Prasanna Shetty property amounting to Rs. 95,00,000/- belonging to her husband, and furnished supporting documents including loan sanction letter, property agreements and bank statements. The CIT(A), after examining the material on record, held that the source of investment stood explained and therefore deleted the addition of Rs. 83,77,500/- made by the Assessing Officer.
Aggrieved by the relief granted by the CIT(A), the Revenue is in appeal before us. The Revenue has raised the following grounds of appeal before us:
1. Whether on the facts and in the circumstances of the case, the Ld. CIT(A) erred in law in admitting and relying upon additional evidences filed by the assessee for the first time at the appellate stage without complying with the mandatory provisions of Rule 46A of the Income-tax Rules, 1962? 2. Whether the Ld. CIT(A) was justified in granting relief to the assessee on the basis of additional documentary evidences without affording an opportunity to the Assessing Officer to examine, verify, or rebut such evidences? 3. Whether the Ld. CIT(A) erred in law in deleting the addition of Rs. 83,77,500/- relating to unexplained investment in property despite the assessee’s failure to substantiate the nature and source of such investment evidencing fund flow? 7. During the course of hearing before us, the learned Departmental Representative (DR) submitted that the learned CIT(A) had granted relief to the assessee by placing reliance on documentary evidences furnished by the assessee during the appellate proceedings. It was contended that such evidences were produced for the first time before the CIT(A) and constituted additional evidence within the meaning of Rule 46A of the Income-tax Rules, 1962.The learned DR further submitted that Shareeka Prasanna Shetty the CIT(A) admitted and relied upon these additional evidences without calling for a remand report from the Assessing Officer and without providing an opportunity to the Assessing Officer to examine or verify the same.
8. Per contra, the assessee appeared in person and submitted that all the relevant documents explaining the source of investment were furnished during the appellate proceedings before the CIT(A). The assessee further explained that she could not properly comply with the notices issued during the course of assessment proceedings due to financial difficulties and personal constraints. It was submitted that the evidences placed before the CIT(A), including documents relating to housing loan and sale of property by her husband, clearly establish the source of funds utilized for the purchase of the property. The assessee therefore supported the order of the CIT(A) and submitted that the addition was rightly deleted after examining the documentary evidences.
We have heard the rival submissions and carefully perused the material available on record including the assessment order and the order of the CIT(A). The solitary issue involved in the present appeal relates to the deletion of the addition of Rs. 83,77,500/- made by the Assessing Officer under section 69 of the Income Tax Act on account of alleged unexplained investment in purchase of immovable properties.
From the assessment order it is observed that the Assessing Officer made the addition primarily on the ground that the assessee could not satisfactorily explain the source of investment Shareeka Prasanna Shetty in two residential flats jointly purchased with her husband. The total purchase consideration of the properties including stamp duty and registration charges was determined at Rs. 1,67,55,000/-, and since the properties were jointly held, the share of the assessee was worked out at Rs. 83,77,500/- which was treated as unexplained investment under section 69 of the Act.
However, during the course of appellate proceedings before the CIT(A), the assessee furnished documentary evidences explaining the source of the investment. These included the housing loan sanction letter issued by State Bank of India, copy of agreement relating to sale of property by the assessee’s husband for Rs. 95,00,000/-, purchase agreements of the properties and bank statements reflecting the relevant transactions. After examining these documents, the CIT(A) came to the conclusion that the source of investment stood duly explained and accordingly deleted the addition made by the Assessing Officer.
The learned DR before us has contended that the CIT(A) granted relief on the basis of evidences produced during the appellate proceedings without calling for a remand report from the Assessing Officer and therefore the procedure prescribed under Rule 46A was not followed.
We have considered the aforesaid contention. It is true that Rule 46A provides a procedure where additional evidence is produced before the appellate authority. However, it is equally Shareeka Prasanna Shetty well settled that the CIT(A) possesses co-terminus powers with that of the Assessing Officer, and the appellate authority is empowered to make further enquiries or examine the evidences placed before it in order to determine the correct tax liability. The powers of the first appellate authority are not merely supervisory but are plenary in nature and co-extensive with those of the Assessing Officer.
In the present case, we find that the evidences produced before the CIT(A) were primarily documentary in nature and self- explanatory. The housing loan arrangement letter clearly demonstrated that a loan of Rs. 75,00,000/- had been sanctioned in the joint names of the assessee and her husband, and the agreement relating to sale of property executed by the husband reflected receipt of consideration of Rs. 95,00,000/-. These documents, along with the property purchase agreements and bank statements, adequately explained the source of funds utilised for acquisition of the properties.
Further, the assessee has appeared before us in person and explained that due to financial difficulties and personal constraints she could not effectively respond to the notices issued during the course of reassessment proceedings. The explanation furnished by the assessee appears to be plausible and reasonable considering the overall facts of the case. It is also evident that the addition made by the Assessing Officer was primarily on account of absence of evidences rather than on account of any adverse Shareeka Prasanna Shetty material establishing that the investment represented undisclosed income.
In our considered opinion, once the assessee had produced primary documentary evidences before the CIT(A) explaining the source of investment and the CIT(A), after examining the same, recorded a clear finding that the source stood explained, there was no legal impediment in granting relief. The evidences relied upon by the CIT(A) are self-explanatory and go to the root of the matter and therefore the absence of a remand report in the present facts does not vitiate the order of the CIT(A).
It is also settled that the purpose of appellate proceedings is to determine the correct tax liability on the basis of material available on record. The appellate authority is not expected to ignore relevant evidences merely because they were not produced during assessment proceedings, particularly when such evidences clearly explain the transaction in question.
Considering the totality of facts and circumstances of the case, we find no infirmity in the finding recorded by the CIT(A) that the investment in the property was sourced from the housing loan and sale proceeds of property belonging to the assessee’s husband. Therefore, the addition made by the Assessing Officer under section 69 was rightly deleted by the CIT(A).
In view of the foregoing discussion, we find no merit in the contention raised by the Revenue that the order of the CIT(A) suffers from violation of Rule 46A. The evidences relied upon by Shareeka Prasanna Shetty the CIT(A) are self-explanatory and the CIT(A), exercising his co- terminus powers, has rightly examined the material and granted relief to the assessee. Accordingly, we uphold the order of the CIT(A) deleting the addition of Rs. 83,77,500/- made under section 69 of the Act.
Thus, the grounds raised and appeal by the Revenue is dismissed.
Order pronounced in the open court on 09.03.2026.
Sd/- Sd/- (SAKTIJIT DEY) (MAKARAND VASANT MAHADEOKAR) VICE PRESIDENT ACCOUNTANT MEMBER Mumbai, Dated 09/03/2026 Dhananjay, Sr.PS