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Facts
The assessee, an advocate and partner in M/s. Kanga & Co., purchased an immovable property with his wife. During the A.Y. 2015-16, he paid Rs. 1,21,81,762/- towards this property, sourced from an interest-free loan of Rs. 1,00,00,000/- from an NRI friend (Mr. Mitu Misra) and withdrawals of Rs. 21,81,762/- from his partnership firm. During reassessment proceedings initiated u/s 147, the AO made an addition of Rs. 78,05,200/- u/s 69, treating it as unexplained investment, which was subsequently confirmed by the CIT(A) as a "colourable device".
Held
The Tribunal found no basis for the addition, determining that the assessee had successfully discharged his onus by demonstrating the identity and creditworthiness of the lender (an NRI whose loan was repaid) and the genuineness of the transactions through proper banking channels and documentary evidence. The Tribunal observed that the AO failed to conduct cross-verification and the CIT(A)'s reliance on the McDowell case was misplaced. Consequently, the Tribunal set aside the CIT(A)'s order and directed the AO to delete the addition.
Key Issues
1. Whether the reassessment proceedings initiated under Sections 147 and 148 were valid. 2. Whether the addition made under Section 69 for unexplained investment/cash credit, related to a personal loan from an NRI friend and partnership firm withdrawals, was justified. 3. Applicability of Section 115BBE and consequential interest under Sections 234B and 234C.
Sections Cited
147, 144B, 148, 143(3), 250, 69, 133(6), 115BBE, 234B, 234C
AI-generated summary — verify with the full judgment below
Before: SHRI NARENDER KUMAR CHOUDHRY & SHRI PRABHASH SHANKAR
PER PRABHASH SHANKAR [A.Μ.] :- The present appeal arising from the appellate order dated 26.09.2025 is filed by the assessee against the order passed by the Learned Commissioner of Income-tax (Appeals)/National Faceless Appeal Centre, Delhi [hereinafter referred to as “CIT(A)"] pertaining to assessment order passed u/s. 147 r.w.s. 144B of the Income-tax Act, 1961 [hereinafter referred to as “Act”] dated 30.03.2022 for the Assessment Year [A.Y.] 2015-16. Page 2 Α.Υ. 2015-16 Chetan Shashikant Thakkar
The grounds of appeal are as under:
On the facts and under the circumstances of the case, the Ld. CIT(A) erred in confirming the notice under section 148 of the Income Tax Act, 1961 dt. 30.03.2021 which is bad in law and without juri iction and has to be quashed and set aside.
On the facts and under the circumstances of the case, the fact that the limited scrutiny u/s 143(3) was for the specific purpose of the purchase of property which was duly assessed and hence reopening on the same issue is invalid.
(a.) On the facts and under the circumstances of the case, the Ld. CIT(A) erred in passing the Order u/s 250 and confirming the additions made in the Assessment Order u/s 147 r. w. s. 144B assessing the total income at Rs. 1,40,84,450/- as against the returned income of Rs. 19,02,690/-, which is bad in law and liable to be quashed. (b). On the facts and under the circumstances of the case, the CIT(A) erred in confirming the Assessment Order passed by the Ld. AO without considering the Appellant's detailed reply dt. 23.03.2022 during the reassessment proceedings and other evidences made available on the record, thereby violating the principles of natural justice. The entire reassessment proceedings are therefore vitiated and liable to be quashed. (c). On the facts and under the circumstances of the case, the CIT(A) erred in confirming the action of Ld. AO in initiating the reassessment proceedings u/s 147 merely on the basis of his own surmises, conjectures and assumptions without any tangible material, independent enquiry or application of mind to establish that income had escaped assessment, rendering the reopening bad in law and in contrast to the principles of natural justice.
(a). On the facts and under the circumstances of the case, the Ld. CIT(A) erred in confirming the action of the Ld. AO in treating the sum of Rs. 1,21,81,762/- being personal loan of Rs. 1,00,00,000/- and withdrawal of Rs. 21,81,762/- from the Partnership Firm as unexplained cash deposits u/s 69 of the Income-tax Act, 1961, without properly appreciating the facts and evidences placed on record. (b). On the facts and under the circumstances of the case, the Ld. CIT(A) erred in confirming the addition of Rs. 1,00,00,000/- u/s 69 as unexplained cash credit, ignoring that the said sum represented a personal loan received by the Appellant from his friend Mr. Mitu Misra (PAN: APIPM1203L), the identity and creditworthiness of whom were Page 3 Α.Υ. 2015-16 Chetan Shashikant Thakkar duly established, and the transaction was made and repaid through proper banking channels. The said addition is therefore erroneous and bad in law. (c). On the facts and under the circumstances of the case, the Ld. CIT(A) failed to appreciate that the Appellant is a partner in the law firm M/s. Kanga & Co. and that the sum of Rs. 21,81,762/- withdrawn from the said firm represented the Appellant's own funds and cannot be treated as unexplained money u/s 69. The confirmation of such addition is therefore unjustified and in contrast to the provisions of the Act. (d). On the facts and under the circumstances of the case, the Ld. CIT(A) erred in confirming the impugned addition u/s 69 without appreciating the facts that the amounts were duly explained through banking channels and partnership withdrawals. Hence, the provisions of section 69, which apply only to unexplained investments or money, are not attracted, and the addition so made is bad in law and liable to be quashed. (e). On the facts and under the circumstances of the case, the Ld. CIT(A) erred in confirming the impugned addition made by the Ld. AO without appreciating the fact that the Ld. AO had sufficient and ample powers to issue notices u/s 133(6) to the relevant parties to establish its genuineness. Hence, inculpating the assessee and making additions u/s 69 is bad in law.
On the facts and under the circumstances of the case and in law, the Ld. CIT(A) erred in confirming the action of the Ld. AO in applying the provisions of section 115BBE of the Act without appreciating that the provisions of section 69 were not applicable to the facts of the case.
On the facts and under the circumstances of the case and in law, the Ld. CIT(A) the LD. CIT(A) erred in confirming the levy of interest u/s 234B and 234C of the Income-tax Act, 1961, which is consequential in nature and liable to be deleted.
Brief facts of the case are that the assessee is an Advocate by profession, associated with the law firm M/s. Kanga & Co. as a partner. He filed return declaring total income of Rs. 19,02,690/-. It was noticed by the AO that during the year, the assessee jointly with his wife, Mrs. Page 4 Α.Υ. 2015-16 Chetan Shashikant Thakkar Shilpa Thakkar, purchased an immovable property, being a flat at 1103, Godrej Serenity, Deonar Village Road, Mumbai 400088, from Godrej Properties Limited, for a total consideration of Rs. 5,13,70,991/- inclusive of stamp duty, registration charges and other incidental expenses. Out of the total consideration, an amount of Rs. 1,21,81,762/- was paid during the relevant year towards the purchase of the said property. His case was selected for limited scrutiny of this purchase of property. During the course of reassessment proceedings, the assessee furnished detailed submissions before the AO explaining the sources of the payment along with a confirmation letter provided by Mr. Mitu Mishra stating loan being repaid by him in two tranches of Rs. 50 lacs each on 12.01.2017 and 27.03.2018.However, during the reassessment proceedings, the Assessing Officer questioned the genuineness of the interest-free loan of Rs. 1,00,00,000/- received from Mrs. Mitu Misra, despite the fact that all supporting documentary evidence had been furnished. The AO completed the reassessment by making an addition of Rs. 78,05,200/-under section 69 of the Act, treating the same as unexplained investment allegedly made towards the purchase of immovable property. The ld. CIT(A) confirmed the addition stating the transaction as colourable device and repeating the contention of the Ld. AO. Page 5 Α.Υ. 2015-16 Chetan Shashikant Thakkar
Before us, the ld.AR made oral as well as written submission. It contended at the outset that in this case, scrutiny assessment was already made earlier u accepting the returned income vide assessment order u/s 143(3) dated 12.09.2017.Reassessment proceedings u/s 147 were initiated vide notice u/s 148 dated 30.03.2021.Reasons for reopening were provided through notice u/s 143(2) dated 29.06.2021 stating that for purchase of immovable property the source documents were not provided during original assessment and hence it was fit case of reopening. In this regard, it is stated that details were duly submitted including copy of purchase agreement, bank statements, and details explaining the source of payments made towards the said property. The details of the source of payment for purchase of the property in question were from following sources: Date Received From Amount (Rs.) 27.09.2014 Mr. Mitu Misra (PAN: APIPM1203L) Personal Interest free Loan from NRE Account Indian Address: Mittal Paradise, A-1/2 First Floor, J. R. Mhatre Road, Near Ruia Park, Juhu, Andheri (West) Mumbai 400049. 1,00,00,000 07.05.2014 Kanga & Co. 1,81,762 (Appellant is a Partner in Firm Kanga & Co.; Capital Withdrawal) 02.03.2015 Kanga & Co. 20,00,000 (Appellant is a Partner in Firm Kanga & Co.; Capital Withdrawal) Total 1,21,81,762 /-
1 It is further stated that the reopening of the proceedings on the same matter, being purchase of immovable property is a review by Page 6 Α.Υ. 2015-16 Chetan Shashikant Thakkar the AO and change of opinion regarding the matter which was already decided by u/s 143(3) vide order dated 12.09.2017.As per the rulings of ITAT Mumbai in the case of Rajnish Kasturchand Ostwal v. ITO [2025] 180 taxmann.com 628 (Mumbai) Trib.), ITO v. Rajeev Suresh Ghai [2021] 132 taxmann.com 234 (Mumbai Trib.) and DCIT v. M/s. Global Band (India) [1. T. A. No. 1162/Mum/2014], once the source of funds is established as received from an NRI through documentary evidences, the source of source of the funds is not required.
2 In so far as the merits are concerned, the ld.AR has made a detailed submission. He also took us through various pages of the Paper Book submitted giving details of bank statement of the lender, bank statement of the assessee reflecting the impugned transaction. It is also stated that entire loan was returned back by the assessee as per enclosed bank statement of the assessee as well as of the lender. Confirmation of the lender, property purchase agreement with details of payments made were also submitted. Therefore, there was no cogent basis for the addition ignoring all material evidences before the AO and the ld.CIT(A).
3 The ld.DR on the other hand relied on the orders of authorities below. Page 7 Α.Υ. 2015-16 Chetan Shashikant Thakkar
On careful consideration of all material facts before us and the contentions of the ld.AR, we find that there was absolutely no basis for the impugned addition as the assessee has clearly demonstrated the identity, creditworthiness of the lender and the genuineness of the transaction, thus discharging the onus cast on him in this regard. On the other hand, the addition has been made by the AO invoking the provisions of section 69 of the Act, ignoring all the evidences placed before the AO without even making a cross verification from the lender who is NRI, having sufficient creditworthiness to lend the amount to the assessee which has also been repaid subsequently. The ld.CIT(A) has applied the ratio of the decision in the case of McDowell and Co. Ltd. 154 ITR 148(SC) holding that the impugned transaction was a colorable devise only which to our mind, is inapplicable to the facts and the circumstances of the case.
1 Considering all such facts, we find no merit in the action of the ld.CIT(A) in affirming the addition made which is apparently devoid of any merit. Therefore, we set aside the appellate order and direct the AO to delete the addition, thus allowing the grounds on merit.
As regard, the legal grounds challenging the validity of the reopening proceeding and the consequential assessment order, we do Page 8 Α.Υ. 2015-16 Chetan Shashikant Thakkar not find any reason to adjudicate the same as the assessee succeeds on merit of the case. However, the grounds are left open.
In the result, the appeal of the assessee is allowed. Order pronounced in the open court on 13/02/2026. NARENDER KUMAR CHOUDHRY (न्यायिक सदस्य /JUDICIAL MEMBER) Place: मुंबई/Mumbai दिनांक / Date 13.02.2026 Lubhna Shaikh / Steno PRABHASH SHANKAR (लेखाकार सदस्य/ACCOUNTANT MEMBER) आदेश की प्रतिलिपि अग्रेषित/Copy of the Order forwarded to : 1. 2. 3. 4. 5. अपीलार्थी / The Appellant प्रत्यर्थी / The Respondent. आयकर आयुक्त / CIT विभागीय प्रतिनिधि, आयकर अपीलीय अधिकरण DR, ITAT, Mumbai गार्ड फाईल / Guard file. सत्यापित प्रति //// आदेशानुसार / BY ORDER, उप/सहायक पंजीकार (Dy./Asstt.