Chennai ITAT Grants Full Relief: Registered Mortgage Adjustment Cannot Be Treated as Fresh Investment; Stamp Duty Guideline Value Insufficient to Trigger Section 56(2)(x) Addition

Case Reference

Ramesh Vs ITO (ITAT Chennai)
Assessment Year: 2022-23
Order Date: 13th July 2026

Background and Overview

The Chennai bench of the Income Tax Appellate Tribunal delivered a significant ruling in favour of the assessee by setting aside all additions made by the Assessing Officer and subsequently confirmed by the first appellate authority. The three principal additions under challenge related to unexplained investment in immovable property under Section 69A, the difference between purchase consideration and stamp duty value under Section 56(2)(x)(b), and cash deposits treated as unexplained money under Section 69A of the Income Tax Act, 1961.

The Tribunal's ruling carries considerable practical significance for assessees involved in property transactions where earlier debt obligations are discharged through conveyance deeds, and also for those who contest stamp duty valuations fixed by the Registration Department.

Facts of the Case

The assessee, an individual, filed his return of income for AY 2022-23 declaring a total income of Rs. 4,35,720/-. The case was flagged under the Computer Assisted Scrutiny Selection (CASS) mechanism primarily to examine two aspects:

  1. The source of funds invested in immovable properties, given that substantial property purchases were reflected in Form 26QB relative to the returned income
  2. The origin of significant cash deposits made in the assessee's bank account alongside property transactions

Assessment Proceedings

During scrutiny, the Assessing Officer observed that the assessee had acquired two immovable properties — one for Rs. 52,00,000/- and another for Rs. 1,20,00,000/-, the latter carrying a stamp duty value of Rs. 1,38,34,250/-. In addition, cash credits of Rs. 31,56,850/- were identified in the assessee's bank account.

Finding the explanations inadequate, the AO proceeded to frame the assessment under Section 143(3) read with Section 144B, determining total income at Rs. 1,04,26,820/- by making the following additions:

  • Rs. 50,00,000/- under Section 69A — treated as unexplained investment in property
  • Rs. 18,34,250/- under Section 56(2)(x)(b) — representing the excess of stamp duty value over actual purchase consideration
  • Rs. 31,56,850/- under Section 69A — treated as unexplained money in the form of cash deposits

First Appellate Proceedings

Before the Commissioner of Income Tax (Appeals), NFAC, Delhi, the assessee challenged the additions on both legal and factual grounds. The CIT(A), however, dismissed all grounds of appeal and confirmed the assessment order in its entirety. On the question of additional evidence submitted under Rule 46A, the CIT(A) rejected the same on technical grounds without examining the evidentiary merit of the documents or directing a remand to the AO for verification. Aggrieved by the order dated 05.12.2025, the assessee preferred a further appeal before the ITAT Chennai.

Issue 1: Addition of Rs. 50,00,000/- Under Section 69A — Mortgage Adjustment Treated as Fresh Investment

Assessee's Submissions

The Authorised Representative argued that the AO and CIT(A) fundamentally misread the nature of the transaction. The property had been purchased vide a registered Sale Deed dated 30.07.2021 for total consideration of Rs. 52,00,000/-. Out of this sum, Rs. 50,00,000/- was not paid afresh during the year — instead, it stood adjusted against a loan that the assessee had already advanced to the vendor, Smt. A. Manoranthini, under a registered Mortgage Deed dated 23.07.2020. The mortgage was subsequently cancelled through a registered Mortgage Cancellation Deed dated 30.07.2021. Only the remaining Rs. 2,00,000/- was paid through banking channels during the relevant previous year.