ITAT Ahmedabad Removes Section 69 Additions for NRI's Flat Purchase – Cash Source and Stamp Duty Component Proven Through Banking Records
Overview of the Case
The Income Tax Appellate Tribunal at Ahmedabad has delivered a significant ruling in favor of a Non-Resident Indian assessee by completely deleting the additions made under Section 69 of the Income Tax Act, 1961. The case pertains to Sureshkumar Kasturram Purohit Vs ITO, where the Tribunal scrutinized additions related to property acquisition by an NRI residing in the United States.
The assessee, who has been living in the USA since April 2002 and holds American citizenship, had invested in a residential apartment located at Kandawali West, Mumbai. The property was purchased from M/s. Versatile Properties Pvt. Ltd., Mumbai for a total consideration of Rs. 79,90,500/-. The booking was made in 2011, with the formal agreement executed on 20-07-2015, and payments stretched from 2011 through 2018.
Background Facts and Reassessment Proceedings
The assessee channeled funds for the property acquisition through NRE/NRO accounts maintained with HDFC Bank. Additionally, his brother, Mr. Jitesh Kumar Purohit, also a Non-Resident Indian, made certain payments toward the purchase.
Since the assessee had not filed the Return of Income for the relevant period, the tax authorities initiated reassessment proceedings by issuing a notice under Section 148 dated 23-03-2023. In response to this notice, the assessee submitted a belated return, which the Assessing Officer deemed invalid.
Draft Assessment Order and Proposed Additions
The Assessing Officer proceeded to issue a draft assessment order dated 26-03-2024 under Section 144C of the Income Tax Act, 1961, proposing to assess the total income at Rs. 57,24,172/-. This substantial addition was made under Section 69 on account of alleged unexplained investments in the property.
Proceedings Before the Dispute Resolution Panel
Dissatisfied with the draft assessment order, the assessee filed objections before the Dispute Resolution Panel (DRP). The DRP called for a remand report from the Assessing Officer and conducted a detailed examination of the documentary evidence submitted by the assessee.
After thorough verification, the DRP granted substantial relief by accepting the documentary evidence for the majority of payments. Specifically, the DRP deleted additions amounting to Rs. 51,90,500/-, finding that these investments were properly explained with supporting documentation.
However, the DRP sustained additions totaling Rs. 5,32,280/-, comprising:
- Cash deposit of Rs. 1,00,000/-
- Registration charges of Rs. 4,00,000/-
- Stamp duty of Rs. 32,280/-
The DRP concluded that these components remained unexplained and therefore confirmed the addition on these counts.
Appeal Before the Income Tax Appellate Tribunal
Aggrieved by the partial relief granted by the DRP, the assessee approached the Income Tax Appellate Tribunal, Ahmedabad, challenging the sustained addition of Rs. 5,32,280/-.
Grounds of Appeal
The assessee raised the following substantive grounds before the Tribunal:
Ground 1: The DRP erred in confirming the addition of Rs. 5,32,280/- under Section 69 despite the proposed addition of Rs. 57,24,172/- in the Draft Assessment Order. The DRP failed to appreciate the correct facts while confirming the impugned addition.
Ground 2: The DRP failed to recognize that the cash deposit of Rs. 1,00,000/- in the bank account originated from cash available with the assessee from earlier withdrawals. The addition was confirmed merely on conjectures, surmises, and suspicions without concrete basis.