ACIT CENTRAL CIRCLE 2(3), AHMEDABAD, AHMEDABAD V. SANDEEP NARSINHBHAI PATEL, AHMEDABAD

ITSSA 53/AHD/2025

AI Insights

The case revolves around an appeal by the Revenue against the order of the CIT(A) which had deleted an addition of Rs. 58,85,97,000 made by the Assessing Officer (AO) under section 69 read with section 115BBE of the Income Tax Act, 1961. The addition was alleged to be unaccounted cash paid for the purchase of land by the assessee, Sandeep Narsinhbhai Patel. The AO based the addition on a WhatsApp chat and other circumstantial evidence suggesting that the land was sold for a higher price than recorded in the sale deed. However, the CIT(A) found no direct evidence linking the assessee to any on-money transaction and noted that the WhatsApp chat did not involve the assessee but was between third parties. The Tribunal upheld the CIT(A)'s decision, emphasizing that suspicion and assumption cannot replace proof.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 775417 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 month(s) 19 day(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 09-09-2025
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2020-2021
• Appeal Filed On: 20-05-2025
• Other Referred Cases: CIT v. Durga Prasad More, Sumati Dayal v. CIT, CIT v. Jeet Construction Company, Trident Creation Pvt. Ltd. v. DCIT
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: R. P. RASTOGI
• Assessee Lawyers: BANDISH SOPARKAR
• Keywords: Unexplained investment; Fair market value; Document seized; Documents seized; Capital Gains; TDS; Search and seizure
• Section: 143(3); 142(1); 132

Judgement Text

"आयकर अपीलीय अिधकरण आयकर अपीलीय अिधकरण आयकर अपीलीय अिधकरण आयकर अपीलीय अिधकरण,अहमदाबाद \bयायपीठ अहमदाबाद \bयायपीठ अहमदाबाद \bयायपीठ अहमदाबाद \bयायपीठ ‘B’ अहमदाबाद। अहमदाबाद। अहमदाबाद। अहमदाबाद। IN THE INCOME TAX APPELLATE TRIBUNAL “B” BENCH, AHMEDABAD ]BEFORE S/SHRI T.R. SENTHIL KUMAR, JUDICIAL MEMBER AND MAKARAND V.MAHADEOKAR, ACCOUNTANT MEMBER IT(SS)A No.53/Ahd/2025 Asstt.Year : 2020-21 The ACIT, Cent.Cir.2(3) Ahmedabad. Vs. Sandeep Narsinhbhai Patel 94, Shaligram-2 Anandnagar Road Satellite, Ahmedabad. PAN : ABCPP 1764 F (Applicant) (Responent) Assessee by : Shri Bandish Soparkar, AR Revenue by : Shri R.P. Rastogi,CIT-DR सुनवाई क तारीख/Date of Hearing : 03/09/2025 घोषणा क तारीख /Date of Pronouncement: 08/09/2025 आदेश आदेश आदेश आदेश/O R D E R PER MAKARAND V.MAHADEOKAR, AM: This appeal by the Revenue is directed against the order dated 06.03.2025 of the Commissioner of Income-tax (Appeals) – 12, Ahmedabad [hereinafter referred to as “CIT(A)”] for A.Y. 2020-21 arising out of the assessment order dated 28.09.2022 framed by the Assistant Commissioner of Income Tax, Central Circle 2(3), Ahmedabad [hereinafter referred to as “Assessing Officer or AO”] under section 143(3) read with section 153C of the Income Tax Act, 1961 [hereinafter referred to as “the Act”]. 2. Facts of the Case 2.1 The assessee had filed the original return of income on 08.01.2021 under section 139(1) declaring a loss of Rs.51,29,822. For the year, the Printed from counselvise.com IT(SS)A No.53/Ahd/2025 2 assessee disclosed income under the heads “Profits and gains of business or profession,” “Capital gains,” and “Income from other sources.” A search and seizure action under section 132 was carried out on 15.10.2019 in the case of the “Land Broker & Financier Group” comprising five sub-groups identified as the Suresh R. Thakkar Group, Dhiren R. Bharwad Group, Dhaval A. Teli Group, Vijay K. Manghrani Group and Shiv L. Gogia Group. Inter alia, the residential premises of Shri Dhaval A. Teli and Shri Anil R. Mevada and the office premises of M/s. Shaival Properties Pvt. Ltd. and M/s. Dharnidhar Developers were covered. According to the AO, certain incriminating material and digital data relatable to the assessee were found and seized in the course of the said action. The AO of the searched person recorded satisfaction on 08.04.2021 and forwarded the same to the AO of the assessee; the latter recorded independent satisfaction for A.Ys. 2014-15 to 2020-21 on 08.04.2021 and issued notices under section 153C for A.Ys. 2014-15 to 2019-20 and a notice under section 143(2) for A.Y. 2020-21 on 20.04.2021. A further satisfaction note dated 28.10.2021 was recorded on the basis of material stated to have been found from the case of Shri Anil R. Mevada and M/s. Dharnidhar Developers. Copies of both satisfaction notes were furnished to the assessee on 01.07.2022 and 05.08.2022. The AO records that, since the same AO and the same assessment years were involved, material was merged to avoid parallel proceedings. The assessee’s objections to jurisdiction were disposed of by a speaking order dated 07.09.2022, after which a detailed notice under section 142(1) along with questionnaire was issued on 08.09.2022. 2.2 The core addition stems from the AO’s allegation that on-money was paid for purchase of land bearing Survey No. 361, Makarba. The AO refers to a seized page (Annexure A/1, page 3) from the residence of Shri Anil R. Mevada, which according to the AO is a notice under section 135D (of Land Revenue Code) relating to transfer of name in the property card consequent to sale of the said land to the assessee; and to the statement of Shri Anil R. Mevada recorded under section 132(4) on 16.10.2019, wherein he stated that the land was sold for Rs. 20,00,00,000/-. The AO further relies on page Printed from counselvise.com IT(SS)A No.53/Ahd/2025 3 145 of digital data seized from the office of M/s. Dharnidhar Developers, being a WhatsApp chat dated 03.05.2019 between Shri Alpesh Thakor (an employee of Shri Anil R. Mevada) and Shri Dipak R. Mevada (brother of Shri Anil R. Mevada), where the rate “71000” per square yard was stated for Survey No. 361 admeasuring 15,497 square metres. In post-search proceedings on 10.02.2020, Shri Anil R. Mevada is stated to have confirmed the said chat as pertaining to the proposed sale of the land owned by him and his brothers. The registered purchase deed is stated to have been executed on 19.09.2019 in favour of the assessee for a documented consideration of Rs. 20,00,00,000 from the sellers named therein. On these facts, the AO inferred that the market price worked out to Rs. 78,85,97,000 on the basis of Rs. 71,000 per square yard and, consequently, that the difference of Rs. 58,85,97,000/- represented unaccounted cash paid as on- money. A show-cause was issued calling upon the assessee to explain the source of the alleged total consideration and to show cause why the differential be taxed. 2.3 In reply, the assessee submitted that the entire purchase consideration of Rs.20,00,00,000 was paid through banking channels with deduction of tax at source under section 194-IA, that there was no material in the assessee’s handwriting or otherwise indicating payment of on-money, that the WhatsApp chat did not involve the assessee, and that the seller had never admitted to receipt of any amount over and above Rs.20,00,00,000. The assessee also relied on comparable instances and contended that sections 56(2)(x) and 69 had no application. 2.4 The AO rejected the defence, holding that TDS compliance on the documented price was irrelevant, that although the chat did not involve the assessee it nonetheless reflected the sellers’ quoted rate close in time to the transaction, that non-admission by the sellers was not decisive in the face of circumstantial evidence and human probabilities, and that deed values could not be treated as market values given the prevalence of on-money in the real estate sector. The AO opined that section 69B could not be invoked as the assessee did not maintain books and, therefore, the case squarely Printed from counselvise.com IT(SS)A No.53/Ahd/2025 4 fell under section 69. In support, the AO cited, inter alia, CIT v. Durga Prasad More 82 ITR 540 (SC) and Sumati Dayal v. CIT 214 ITR 801 (SC) on the approach of surrounding circumstances and human probabilities. The AO added Rs.58,85,97,000 as unexplained investment under section 69 read with section 115BBE, initiated penalty under section 271AAC, determined the assessed income at Rs.58,85,97,000 in place of the returned loss, and passed the order with prior approval under section 153D of the Additional CIT, Central Range-2, Ahmedabad. 2.5 The assessee carried the matter in appeal before the CIT(A). The assessee reiterated that there was no seized material indicating payment of on-money by the assessee, that the seller’s statement itself acknowledged consideration of Rs. 20,00,00,000, that the WhatsApp chat was between third parties and could at best suggest a proposal and not an executed transaction, and that there was no corroborative trail by way of cash withdrawals, flow of funds, or admission by the assessee. It was urged that suspicion, however strong, could not replace proof. The assessee also contended that the theory of human probabilities could not be applied in the absence of cogent material against the assessee. 2.6 The CIT(A) recorded that the addition was founded essentially on a WhatsApp chat seized from a third party, which did not contain the assessee’s name or handwriting; that there was no corroborative evidence such as cash trail or admission; that the seller’s statement under section 132(4) acknowledged sale for Rs. 20,00,00,000/- and did not admit to a higher receipt; and that, in these circumstances, the inference of on-money rested on surmise. 2.7 The CIT(A) noted that during post-search proceedings, one of the co- owners of the land, Shri Dhiren Rambhai Bharwad, had explained that though a rate of Rs. 71,000 per square yard was quoted to one prospective purchaser, namely Shri Kaushalbhai, no such transaction ultimately took place with him. The land was, in fact, sold to the present assessee, Shri Sandeep Narsinhbhai Patel, with whom Shri Kaushalbhai had no Printed from counselvise.com IT(SS)A No.53/Ahd/2025 5 connection. The Assessing Officer failed to produce any cogent evidence that the assessee had paid any cash consideration over and above the registered value of Rs. 20 crore. There was no incriminating material found during the course of search to establish that the assessee paid on-money towards the purchase of the land. The CIT(A) held that the addition made by the AO rested solely on assumption and suspicion, unsupported by any corroborative evidence. 2.8 The CIT(A) held that “suspicion cannot substitute proof” and that invocation of human probabilities in the absence of direct or corroborative evidence was misplaced. The CIT(A) placed reliance on the judgment of the Hon’ble Supreme Court in CIT v. Jeet Construction Company [278 Taxman 273/124 taxmann.com 527], wherein it was held that addition cannot be sustained merely on presumption that an assessee had earned undisclosed income or incurred expenses outside the books. Reliance was also placed on the coordinate bench decision in Trident Creation Pvt. Ltd. v. DCIT [ITA No.1078/Ahd/2009], which categorically held that additions based on suspicion, assumption of facts or entries in seized documents unconnected with the assessee, and without independent corroboration, cannot take the place of legal proof. 2.9 On this premise, the CIT(A) deleted the entire addition of Rs.58,85,97,000 made under section 69 read with section 115BBE and, consequentially, the penalty proceedings under section 271AAC did not survive. 3. The Revenue, being aggrieved, has preferred the present appeal. The grounds raised by the Revenue, as reproduced verbatim from the memo of appeal, read as under: 1) In the facts and on the circumstances of the case and in law, the Ld. CIT(A) has erred in deleting the addition of Rs. 58,85,97,000/- u/s. 69 r.w.s. 115BBE of the Income Tax Act, 1961 being unexplained investment in the form of unaccounted cash consideration paid for the purchases of land at Survey No. 361 without considering the fact of the case that the addition Printed from counselvise.com IT(SS)A No.53/Ahd/2025 6 made by the AO was based on cogent evidence, rational inference and established legal principles. 2) In the facts and on the circumstances of the case and in law the Ld. CIT(A) had failed to consider the legal precedents, including the Judgment pronounced by the Hon’ble Supreme Court in Sumati Dayal v. CIT (1995) 214 ITR 801, wherein the Court held that the test of surrounding circumstances and human probabilities should be applied in the absence of direct evidence. 3) In the facts and on the circumstances of the case and in law the Ld. CIT(A) has erred in deleting the addition by holding that the deal was executed with a person other than that of found recorded in the WhatsApp Chat not appreciating that once a particular rate is fixed for the sale/purchases of land, the same does not gets deflated in absence of any changed circumstances or factors causing negative fluctuation. 4) In the facts and on the circumstances of the case and in law the Ld. CIT(A) has erred by disregarding incriminating material seized during the course of search proceedings under section 132, which clearly indicated the assessee’s involvement in unexplained investment. 5) The Revenue craves leave to add/alter/amend and/or substitute any or all of the grounds of appeal. 4. During the course of hearing before us, the learned Authorised Representative reiterated the factual matrix as already placed on record and as duly considered by the CIT(A). The AR further submitted that the very same transaction was examined in the case of the seller of the property, Shri Anil Rambhai Mevada, and the Co-ordinate Bench has already adjudicated the issue, holding that no on-money payment was established and, therefore, no addition could be sustained. Since the seller’s case has been decided by the Co-ordinate Bench, the present issue is squarely covered in favour of the assessee. It was thus urged that the order of the CIT(A) deleting the addition deserves to be upheld and the grounds of appeal raised by the Revenue be dismissed. 5. The learned Departmental Representative supported the assessment order passed by the Assessing Officer. 6. We have carefully considered the rival submissions, perused the material on record, and duly deliberated upon the judicial precedents cited. The addition of Rs.58,85,97,000 made by the AO in the present case rests Printed from counselvise.com IT(SS)A No.53/Ahd/2025 7 exclusively on (i) a WhatsApp communication dated 03.05.2019 between an employee of one of the sellers (Shri Alpesh Thakor) and his brother (Shri Dipak Mevada), quoting a rate of Rs.71,000 per sq. yard for Survey No. 361, Makarba, and (ii) the inference drawn by the AO on the basis of human probabilities that the land could not have been sold to the assessee four months later for Rs.20 crores. 6.1 It is undisputed that the registered sale deed dated 19.09.2019 records the consideration of Rs.20 crores, duly paid through banking channels with TDS deducted under section 194-IA. It is also undisputed that no material whatsoever was found from the assessee to indicate any payment of cash or on-money. The sellers too have never admitted to receiving anything over and above Rs.20 crores. No bank withdrawal, cash trail, diary, or corroborative evidence was brought on record by the AO. The addition is thus founded purely on presumption and the so-called prevalence of on-money in real estate transactions. 6.2 At this stage, it is pertinent to note that the very same property was the subject matter of adjudication by the Co-ordinate Bench in the case of Anil Rambhai Mevada (IT(SS)A No.52/Ahd/2025 order dated 29.07.2025), one of the sellers of the land. After examining the identical seized material, the Co-ordinate Bench held as under: 9. It is found that the Ld. CIT(A) has meticulously examined each and every aspect of the transaction and given a categorical finding as to why the addition of Rs.19,61,99,000/- in respect of unaccounted cash received could not have been made. The Revenue has been unable to controvert the findings of the Ld. CIT(A). One of the contentions of the Revenue is that when the rate for the land was quoted at Rs.71,000/- in the WhatsApp chat, the property could not have been sold at a much lower rate. However, the Revenue has been unable to bring on record any evidence to substantiate the rate of Rs.71,000/- for this sale transaction. The WhatsApp chat was not with the buyer of the land but with a third person and the rate quoted therein can’t be considered as conclusive evidence for the rate. Merely because certain rate was quoted to a prospective buyer, the said rate can’t be considered as final rate for the sale transaction with another person. The Revenue has also not brought on record any evidence that any other property in the same locality was sold at the rate of Rs.71,000/- or at a comparable rate. The principle of surrounding circumstances and preponderance of probabilities required any other instance of actual sale transaction at a comparable rate. In the absence of any such evidence, the rate of Rs.71,000/- as appearing in WhatsApp chat Printed from counselvise.com IT(SS)A No.53/Ahd/2025 8 can’t be considered as sacrosanct. Neither the matter was referred by the AO to the DVO to find out the fair market value of the property. Further, if the property was sold at a rate higher than as appearing in the sale deed, then certain evidence for receipt of extra consideration should have been found in the course of search. As already mentioned earlier, no evidence of receipt of any on-money in respect of the sale consideration of the land, was found from the assessee or from the other co-owners, in the course of search. If the Revenue wanted to tax the on-money consideration of the sale transaction, the burden was squarely on the Assessing Officer to establish that the assessee had received on-money in this transaction. The buyer of the property had also not admitted having made any on-money payment in this transaction. In the absence of any such evidence, the addition as made by the Assessing Officer is based purely on suspicion and assumption of facts, which could not have been sustained. We, therefore, do not find anything wrong with the order of the ld. CIT(A) on the issue. Accordingly, the order of the Ld. CIT(A), deleting the addition of Rs.19,61,99,000/- in respect of unaccounted cash received on sale of land, is upheld and the grounds taken by the Revenue are rejected. 6.3 The facts in the assessee’s case being identical, the ratio of the above decision directly applies. 6.4 We also note that the cases relied upon by the Revenue in grounds of appeal are distinguishable. In Sumati Dayal v. CIT (214 ITR 801, SC) and CIT v. Durga Prasad More (82 ITR 540, SC), the Hon’ble Supreme Court held that surrounding circumstances and human conduct may be looked into where there are competing versions. However, those were cases where there existed positive material against the taxpayer. In the present case, there is no material against the assessee linking him to any cash payment. Reliance on general human probabilities cannot replace the requirement of some tangible evidence. Similarly, decisions like Rohini Ramnath Lele, Green Valley Builders, and Amarkumari Surana involved situations where corroborative material or comparable instances were available. Here, no such evidence exists. 6.5 On the contrary, judicial principles consistently hold that suspicion, however strong, cannot take the place of proof. The Hon’ble Supreme Court in CIT v. Jeet Construction Company [278 Taxman 273] and the Co-ordinate Bench in (ITA No.1078/Ahd/2009) have categorically held that additions cannot be sustained merely on presumption without corroborative evidence. Printed from counselvise.com IT(SS)A No.53/Ahd/2025 9 6.6 In view of the foregoing, we hold that the addition of Rs.58,85,97,000 made under section 69 r.w.s. 115BBE, founded only on an isolated WhatsApp chat between third parties and unsupported by any corroboration, cannot be sustained. The CIT(A) was justified in deleting the addition. We see no infirmity in the well-reasoned order of the CIT(A). Accordingly, the grounds raised by the Revenue fail and the appeal of the Revenue is dismissed. 7. In the result, the appeal of the Revenue is dismissed. Order pronounced in the Court on 8th September, 2025 at Ahmedabad. Sd/- Sd/- (T.R. SENTHIL KUMAR) JUDICIAL MEMBER (MAKARAND V. MAHADEOKAR) ACCOUNTANT MEMBER Ahmedabad, dated 08/09/2025 vk* Printed from counselvise.com "