ATAAT RAHAT KHAN,GURGAON V. DCIT/ACIT-INT-TAX GURGAON, GURGAON

ITA 1801/DEL/2023

AI Insights

The case involves Dr. Ataat Rahat Khan, an Indian national residing in Saudi Arabia, who purchased property from M/s Blue Rose Construction Pvt. Ltd. The Assessing Officer (AO) added Rs.1,20,00,000 as unexplained investment under Section 69 of the Income Tax Act, suspecting it was paid in cash to the builder. The CIT(A) upheld this addition, rejecting the assessee's claim that the payment was contingent upon the builder completing certain fittings and fixtures, which he failed to do. The Tribunal found that the AO and CIT(A) did not adequately verify the facts and directed a re-assessment, allowing the assessee's appeal in part.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 711848 (ITAT-DELHI)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-07-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Assessment Year: 2017-2018
• Other Referred Cases: CIT v: Lubtee India Ltd, CIT v. Shri Babul Harivadan Parikh, Valhyadhar v Manikrao, Deluxe Shipping Agency Pvt. Ltd. v. ITO, Hyfun Frozen Foods P. Ltd. v. ITO, CIT (International Taxation) -1. New Delhi v. Hersh Washesher Chadha, Garima Singh Tomar v: ITO/NFAC, DCIT v. Finlay Corporation Ltd, Union of India v. Azadi Bachao Andolan, CIT v. R.M. Muthaiah, DCIT v. Madhusudan Rao, ACIT v. Kansur Developers India Pvt. Ltd., DCIT v. Hemant Mansukhlal Pandya, CIT (International Taxation) -1. New Delhi v. Hersh Washesher Chadha, Garima Singh Tomar v: ITO/NFAC
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Reasonable cause; Reassessment proceedings; Unexplained investment; Onus to prove; TDS; Search and seizure; Initiation of penalty proceedings; Double taxation relief; Permanent establishment
• Section: 147; 144; 68; 133(6); 234B; 133A

Judgement Text

" 3 ITA No.1801/Del/2023 construction flats bought by the appellant were subject to the consideration as per the provisions of the sale deed read with agreement to sell. 10. That the Assessment Order and the CIT(A) order are passed without giving reasonable and proper opportunity to the Appellant. In any case the Appellant was prevented by sufficient reasonable cause for not filing the details/ explanations/ evidences 11. That, without prejudice to the above, on the facts and circumstances of the case and in law, the AO erred in charging interest under sections 234A, 234B of the Act. 12. That on the facts and circumstances of the case and in law, the AO erred in mechanically/ vaguely initiating penalty proceedings under section 270A and under section 271 AAC of the Act. 13. Under the facts and circumstances of the case and in law, the observations made by the CIT(A) and AO are unjust, illegal, arbitrary, bad in law and based on surmises and conjectures.” 3. In ground No.1 and 2 of the appeal, the assessee has challenged the passing of the assessment order on the lack of jurisdiction of the Assessing Officer to pass the assessment order and also that the impugned order passed was barred by limitation. However, the assessee did not make any submission in this regard. Hence, the same are not maintainable. 3.1. Resultantly, ground no.1 and 2 of the appeal are dismissed. 4. In grounds No.3 and 4, the assessee has challenged the reopening of the assessment by the Assessing Officer on the basis of wrong facts and also for not obtaining the approval u/s 151 of the Act and its communication to the assessee. However, the assessee did Printed from counselvise.com 4 ITA No.1801/Del/2023 not make any submission in this regard. Hence, the same are not maintainable. 4.1. Resultantly, ground no.3 and 4 of the appeal are dismissed. 5. Ground No.5: In this ground the assessee submits that no draft assessment order u/s 144B of the Act was served upon the assessee and as such the order passed is without following the mandatory provisions of the Act. However, the assessee did not make any submission in this regard. Further, on perusal of the documents available in the appeal folder before us, it is seen that a draft assessment order u/s 144C of the Act was passed on 17.03.2022 in this case. The said fact has also been noted by the Assessing Officer in para no.6 of the order u/s 147 r.w.s. 144 of the Act dated 23.05.2022, wherein, it is stated that no evidence was filed by the assessee to show that objections were filed before the DRP .Therefore the Assessing Officer finalized the assessment order as proposed in draft order and informed the assessee that the assessee can file an appeal before the ld. CIT(A)-43, New Delhi within 30 days of the receipt of this order. The said para no.6 is reproduced as under:- “6. A draft order on the above lines was served on the assessee with an option to file objection before the Dispute Resolution Penal (DRP) within 30 days of receipt of draft order. Records reveal that counsel of the assessee submitted his response on 13.04.2022 through system and tried to furnish explanation on the above issues. However, no evidences were filed to show that objections have been filed before the DRP and copy of such objections has not Printed from counselvise.com 5 ITA No.1801/Del/2023 been provided in this office as per law. Therefore, assessment is being finalized as proposed in the draft order and the assessee can file appeal before the Ld. CIT (A)-43, New Delhi within 30 days of receipt of this order.” 5.1. In view of the above facts, this ground of the appeal is not maintainable and hence, this ground is dismissed. 6. Ground no. 6 is against the addition of Rs.1,29,18,254/-(Rs 1,20,00,000/-u/s 69 of the Act + Rs 9,18,254/-the details as discussed in this para). In this case, the assessee had not filed his return of income and the assessee was not complying to the notices of hearing issued by the Assessing Officer. The Assessing Officer found that the assessee had received salary of Rs.7,15,000/- from M/s Clear Path Healthcare Services Pvt. Ltd., interest of Rs.31,219/- from HSBC Bank and dividend of Rs.1,72,035/- from M/s Franklin Templeton Mutual Fund and asked the assessee vide show-cause notice dated 11.01.2022 as to why the said amounts should not be added to his total income. In absence of any reply, the Assessing Officer added the above amounts. During the appellate proceedings, the assessee did not make any submission regarding the above additions. Therefore, the ground no.6 to the extent of above additions amounting to Rs.9,18.,254/-(Rs 7,15,000/- + Rs 31,219/-+ Rs 1,72,035/-) is not maintainable and the same is dismissed. As discussed later in this order, the assessee in ground no.7, 8, 9 and 10 has challenged the addition of Rs.1,20,00,000/- u/s 69 of the Act r.w.s. 115BBE of the Act which is dealt hereinafter. Printed from counselvise.com 6 ITA No.1801/Del/2023 7. Brief facts of the case:- The AO had information that the assessee had not filed his return of income and he had purchased an immovable property amounting to ₹4,70,00,000/-, for which the AO accepted the source amounting to ₹3,50,00,000/- taken as loan. However, since no documentary evidence was furnished for the balance source of investment amounting to ₹1,20,00,000/- despite opportunities given, the AO completed the assessment under section 147 r.w.s. 144 of the Act on 23.05.2022, making an edition of Rs.1,20,00,000/- under section 69 of the Act r.w.s. 115BE of the Act in respect of the undisclosed investment in aforesaid property before passing a draft order u/s 144 C of the Act on 17/03/2022 in this case for the addition of the said amount. 7.1. In this regard, the assessee in its written submission filed on 17.12.2024 explained the background of the assessee and the transaction as under:- 1. Background of the Appellant and the Transaction - The Appellant, Dr. Ataat Rahat Khan, an Indian national residing in Saudi Arabia for over 22 years, entered into an Agreement to Sell dated 21.05.2016 with M/s Blue Rose Construction Pvt. Ltd. (Builder) for the purchase of two floors of a property. The total consideration for the property was agreed at Rs4.70 Crores, contingent upon the completion of specified fittings and fixtures. During reassessment proceedings, the Assessing Officer (AO) accepted Rs 3.50.00.000/- as a loan from HSBC Bank but made an addition of Rs1.20,00,000/- under Section 69 of the Income Tax Act, 1961 ('Act'). The assessing Officer doubted the source of such an amount. The AO presumed that this amount was paid in cash to the Builder, a presumption incorrectly upheld by the CIT(A) and unsupported by cogent evidence. Printed from counselvise.com 7 ITA No.1801/Del/2023 8. Against the said order dated 23.05.2022 of the AO, the assessee preferred an appeal before the ld. CIT(A). The Ld. CIT(A) in paragraph number 5.3 of his order noted that the assessee had deducted TDS @ 1% of ₹470000 against the sale consideration and deposited as per law. Further the assessee submitted before the Ld. CIT(A) that he was committed to pay balance amount of ₹1,10,30,000/- containing two HSBC Bank Cheques of Rs.53,65,000/- bearing number 994704 dated 15.09.2016 and Rs.56,65,000/- bearing the number 994708 dated 15.09.2016 after the completion of fittings and fixtures of said flats. The assessee further submitted that after getting the registry of the said flats the builder did not complete flats with fittings and fixtures as per agreement. Therefore, as per assessee, the above mentioned two cheques were never presented or debited from assessee’s HSBC Bank account till now. Further, the Ld. CIT(A) noted that the assessee submitted few photographs as reproduced on pages number 7 and 8 of its order to submit that the furniture and fixtures in the said flats as per the terms and the conditions with the builder were not fulfilled by the builder. However, the Ld. CIT(A) held on the basis of the said pictures that the flat was well equipped and with fittings and fixtures as mentioned in the sale deed. The ld. CIT(A) also noted that the doors and windows, railings and modular kitchen pictures are substantial enough to establish the veracity of the terms and conditions mentioned in the Sale Deed. Printed from counselvise.com 8 ITA No.1801/Del/2023 8.1. The ld. CIT(A) further noted that the assessee in his submission dated 27.12.2022 submitted that the assessee could not arrange confirmation letter by builder of fully unfurnished flat handover to the assessee as the builder was untraceable. The ld. CIT(A) held that the said submission remains irrelevant as there is no mention of furnishing of flats in the sale deed and observed that the terms \"fittings & fixtures\" and \"furnishing & furniture\" have altogether different meanings and cannot be inter-related with each other. According to the ld. CIT(A) normally, if fittings & fixtures are mentioned in the sale deed agreement then there is an annexure to the Sale Deed mentioning the details and list of fittings & fixtures like fans, air conditioners, cupboards etc., which has not been annexed with the sale deed nor the details have been provided during assessment or appellate proceedings. Therefore, the ld. CIT(A) noted that the assessee had received the flats as per the terms mentioned in the sale deed. Thereafter, the ld. CIT(A) discussed about significance of sale deed and observed that generally, the parties sign the sale deed after the satisfaction and completion of the terms and conditions. According to the Ld. CIT(A) , the sale deed is a proof of the transfer of the ownership which describes the details of the property and the rights and duties of the parties and it was crucial document that establishes the transfer of ownership of a property from Seller to Buyer. Printed from counselvise.com 9 ITA No.1801/Del/2023 8.2. Further, the ld. CIT(A) observed the fact that Sale Deed has been registered in favour of Buyer is evidence enough to suggest that the Sale Consideration has been received by the Seller either in cash or cheque. The ld. CIT(A) noted that the deed mentions cheque no. 994704 dated 15.09.2016 amounting to Rs.53,65.000/- & cheque no. 994708 dated 15.09.2016 amounting to Rs.56,65.000/-having been received by the Seller before signing the agreement of registering the Sale deed. According to the ld. CIT(A), the assessee had claimed in the submission that \"he had committed to pay balance amount after the completion of fittings & fixtures of said flats,\" but according to the Ld. CIT(A) this fact was not forming part of Sale deed and in the absence of any such specific mention in the Sale deed and any other evidence; the argument of the assessee cannot be accepted. The Ld. CIT(A) also noted that the sale deeds submitted by the assessee were registered in September 2016 in the office of the Registrar/Sub Registrar V(I). Delhi/New Delhi wherein the consideration amount mentioned is Rs.2,35,00,000/- excluding Stamp Duty Paid amounting to Rs. 14,10,000/- and Value of Registration Fee amounting to Rs.2,35,000/- for each flat(floor). Therefore, according to the ld. CIT(A), it was pertinent to mention that the seller and buyer of the properties were satisfied with the terms and conditions of the sale deed and had no objection with each other with regard to the transfer of the properties. Printed from counselvise.com 10 ITA No.1801/Del/2023 8.3. Therefore, in view of the above discussion the Ld. CIT(A) inferred that the assessee’s claim of not getting the flats as per terms and conditions of the sale deed lacks substance and the remaining amount of Rs.l,20,00,000/- [apart from loan amount of Rs.3,50,00.000/-) out of total Sale consideration of Rs.4,70,00,000/-, if not paid through cheques, then the transaction is believed to be completed in some other mode and the appellant is reluctant to reveal it. Accordingly, he upheld the order of the AO in making the addition of Rs 1,20,000/- u/s 69 of the Act and dismissed the ground of appeal filed by the assessee on this issue. 9. Against the above order of the ld. CIT(A), the assessee is in appeal before us. 10. During the hearing before us, the Ld. AR filed a written submission which is reproduced as under:- 1. Background of the Appellant and the Transaction - The Appellant, Dr. Ataat Rahat Khan, an Indian national residing in Saudi Arabia for over 22 years, entered into an Agreement to Sell dated 21.05.2016 with M/s Blue Rose Construction Pvt. Ltd. (Builder) for the purchase of two floors of a property. The total consideration for the property was agreed at Rs4.70 Crores, contingent upon the completion of specified fittings and fixtures. During reassessment proceedings, the Assessing Officer (AO) accepted Rs 3.50.00.000/- as a loan from HSBC Bank but made an addition of Rs1.20,00,000/- under Section 69 of the Income Tax Act, 1961 ('Act'). The assessing Officer doubted the source of such an amount. The AO presumed that this amount was paid in cash to the Builder, a presumption incorrectly upheld by the CIT(A) and unsupported by cogent evidence. 2. No Cash Was Ever Paid which Demonstrates Bona Fide Intent - At the outset, it is submitted that no cash payment of Rs1,20.00,000/- was ever made to the Builder. The bona fide Printed from counselvise.com 11 ITA No.1801/Del/2023 nature of the transaction is firmly established by the following facts. First, the Appellant, a qualified MBBS doctor, acted with complete transparency and good faith by including cheque details (HSBC Cheque Nos. 994704 and 994708) for the balance payment of Rs1.20,00.000/- in the registered sale deeds dated 19.09.2016. It is implausible to suggest that an individual with no background in commercial malpractice would include specific cheque details in a legal document if the intent was to make a cash payment. Such conduct contradicts any logic or reasoning and clearly reflects the bona fide nature of the Appellant's actions. 3. Further, the cheques were handed over to the builder but were never presented for the encashment as the builder failed to fulfil the agreed-upon conditions of completing the fittings and fixtures. Bank statements of the Appellant already on record at Pg. 94-139 of the Paper Book conclusively prove that the amounts mentioned in the cheques were never debited from the Appellant's account. The Builder's failure to encash the cheques reflects a lack of entitlement since the payment was conditional upon the Builder delivering the property as specified. It is unreasonable to assume that the Builder would forgo encashing validly issued cheques had he been entitled to the amount, proving that the presumption of cash payment is misplaced. 4. Form Over Substance: Judicial Recognition of Bona Fide Transactions - It is respectfully submitted that, in determining the genuineness of the transaction, courts must prioritize form and transparency over mere suspicion. Including cheque details in a registered sale deed is clear evidence of genuine intent and bona fide conduct. Moreover, the department has failed to discharge its onus of proving that any cash payment of Rs1,20,00,000/- was ever made to the Builder. No notice under Section 133(6) was ever issued to the Builder to verify this fact. This lack of inquiry into the builder's records undermines the department's presumption. 5. Failure of Department to Prove that Payment of Rs. 1,20,00,000/- was ever made in cash by the Appellant - The alleged amount of Rs 1,20.00.000/- was never paid by the Appellant, and the department has failed to produce any material evidence to prove the contrary. The burden of proof lies solely with the department, which has not brought any cogent evidence on record. The conclusion of the AO and CIT(A) is based purely on assumption and suspicion, which cannot substitute for legal proof. The department has failed to discharge its onus of proving that the amount was paid in cash. Suspicion or assumption cannot replace proof. In this regard, reliance is placed on case laws such as CIT v: Lubtee India Ltd (311 TR 175) (Delhi HC), CIT v. Shri Babul Harivadan Parikh (Gujarat HC), Valhyadhar v Manikrao (1999) 3 SCC 373 (SC), Deluxe Shipping Agency Pvt. Ltd. v. ITO (ITA No. 1320/M/20), and Hyfun Frozen Foods P. Ltd. v. ITO (110 ITR (Trib) Printed from counselvise.com 12 ITA No.1801/Del/2023 37) (Ahm) which form part of the Case Law Compilation filed during the course of the hearing. 6. Cheques Were Never Encashed - The Appellant handed over to HSBC cheques (Nos. 994704 and 994708) to the Builder as conditional payment pending the completion of fittings and fixtures. The Builder's failure to fulfil these conditions prevented the cheques from being encashed. The Appellant's bank statements, available at Pg. 94-139 of the Paper Book, conclusively establish that the cheques were never presented for encashment. and no amount of Rs.1,20,00,000/- was debited from the Appellant's account. 7. Terms of Agreement to Sell and Registered Sale Deeds - An Agreement to Sell was executed on 21.05.2016 for the purchase of the Ground Floor and First Floor for a total consideration of Rs.4.70 Crores, subject to detailed specifications. It was clearly mentioned in the Agreement to Sell that materials to be used and quality of workmanship of works should be as per the detailed specifications mentioned in Annexure A to such agreement. A copy of the Agreement to Sell along with the Annexure is enclosed as Enclosure 1. 8. On 19.09.2016, two registered sale deeds were executed where Rs.3,59,70,000/- {Rs.3,50,00,000 + Rs.5,00,000 + Rs.4,70,000 (TDS); was paid, and the balance amount of Rs.1,10,30,000/- was contingent upon the completion of fittings and fixtures. The Builder's failure to meet these obligations resulted in the cheques remaining uncashed. Bank records confirm this fact and establish that the balance amount was not paid. 9. Sale Deed of Similar Property - To substantiate the actual sale consideration, a copy of sale deed entered by M/s Blue Rose Construction Pvt. Ltd. (Builder) with other buyer i.e., Reena Ghosh is enclosed as Enclosure 2. It is evident from the said sale deed that the Third Floor of the same building was sold by the Builder to Reena Ghosh only for Rs. 1,00,00,000/-. This reveals that the third floor in the same building was sold at much lower rate, reinforcing that the Appellant's property was priced higher due to fittings, fixtures and other specifications. Since the Builder failed to deliver as agreed, the differential amount was never paid. 10. DTAA benefit - Article 22 of India-Saudi Arabia Tax Treaty - Without prejudice to the contention that the amount of Rs.1,20,00,000/- was never paid by the Appellant to the Builder, it is submitted that even if it is assumed that such amount is an unexplained investment, the provisions of Section 69 of the Act are not applicable in the present case. This is based on the fact that the Appellant is a non-resident individual in India (tax resident of Saudi Arabia) and is eligible to claim treaty benefits as per the provisions of Section 90(2) of the Act. Coming to the taxability Printed from counselvise.com 13 ITA No.1801/Del/2023 under the India-Saudi Arabia tax treaty, since an income in the nature of Section 69 of the Act is not specifically taxed under any of the heads in the tax treaty in question. it is imperative to make a reference to the residuary Article 22, dealing with 'other income'. It is submitted that since the assessee is a resident of Saudi Arabia and his source of earning is outside India, the provisions of India- Saudi Arabia Double Taxation Avoidance Agreement would come into play. 11. The Appellant, being a resident of Saudi Arabia, is eligible to claim tax treaty benefits under Section 90(2) of the Income Tax Act, 1961. Article 22 of the India-Saudi Arabia DTAA governs \"other income\" not specifically covered under other articles. Unexplained investments under Section 69 are not \"income\" but an application of income, and therefore fall under Article 22(1) of the DTAA. 12. In support of the submissions made above, the Appellant seeks to rely upon judgement rendered in the case of Rajeey Suresh Ghai (2022) 192 D 348 (Mumbai ITAT): Vijavkumar Kanaivalal Matta v. ITO (ITA No. 52/MUM/2020): ITO(IT)-2(1)(1) v Shri Sandeep Dhiraila! Dhakan (I.T.A. No. 6755/Mum/2019): DCIT v. Finlay Corporation Ltd (86 ITD 626) (Delhi Tribunal): Union of India v. Azadi Bachao Andolan (2003) 132 Taxman 373 (SC); CIT v. R.M. Muthaiah (1993| 67 TAXMAN 222 (KAR.). Similar view has been taken in the following decisions as well DCIT v. Madhusudan Rao [2015] 57 taxmann.com 262 (Hyderabad - Trib.); ACIT v. Kansur Developers India Pvt. Ltd. (ITA Nos.1441 & 1442/Bang/2018) and also DCIT v. Hemant Mansukhlal Pandya (I.T.A No.4679/Mum/2016). decided on 16.11.2018. The Appellant submits that tax treaties, such as the India-Saudi Arabia DTAA. are based on reciprocity and treaty override principles. Domestic law cannot override treaty provisions that allocate taxing rights to the resident state and accordingly, if an income can be taxed only by the resident state, the source state does not have any right to tax the same. 13. In view of the above, it is submitted that unexplained investments. which are inherently in the nature of the application of income rather than earning of income, cannot thus be taxed in India under Article 221(1). The said Article clearly provides that all items of income, not specifically dealt with in other paragraphs/ aricles of the treaty, will be taxable in the State wherever the Assessee is a resident. Article 22(2) is not applicable in the present case since it deals with income which is effectively connected to the property of the permanent establishment or the fixed base that the resident may have in that country. which is not the present case. Considering the totality of the facts stipulated above, the department has even failed to prove as to how the amount of Rs.1,20,00,000/-has accrued or arisen/ deemed to accrue or arise/ received or deemed to be received in India. Thus, until and unless it is proved that the amount of Rs.1,20,00,000/- has some Printed from counselvise.com 14 ITA No.1801/Del/2023 nexus with India or has been earned in India, such amount cannot be taxed in the Appellant's hands in India. 14. Non-Maintenance of Books of Account- The Appellant is not legally required to maintain books of account. Section 69 cannot be invoked without the existence of such books, Hence, addition made u/s 69 of the Act of Rs.1,20,00,000/- is bad in law and liable to be deleted. Reliance is placed on CIT (International Taxation) -1. New Delhi v. Hersh Washesher Chadha (ITA 676/2023) (Delhi HC) and Garima Singh Tomar v: ITO/NFAC (ITA No. 38/JAB/2023). 15. Efforts to Obtain Builder's Confirmation and Constraints Faced by the Appellant - The Appellant made diligent and bona fide attempts to obtain a confirmation letter from the Builder, confirming the handover of fully unfurnished flats. However, the Builder could not be traced, and his company has since closed its operations, with the registered office being vacated. Despite the Appellant's efforts, including arranging photographs of the flats to substantiate the non-fulfilment of the agreed conditions, a confirmation letter could not be procured. It is further submitted that the Appellant, being a non-resident, faced unique constraints and limitations in following up with the builder and obtaining such confirmation. The breakdown communication and the Builder's failure to meet his contractual obligations prevented any further action on the Appellant's part. The inability to produce a confirmation letter is not a reflection of any fault or failure by the Appellant but rather a consequence of circumstances beyond his control. The Appellant stresses that he cannot prove a negative fact. Had the Appellant been on good terms with the Builder or had the Builder fulfilled his obligations under the agreement, obtaining such confirmation would not have been an issue. The Appellant has acted in good faith, and the efforts made to substantiate his claim further highlight his bona fide conduct. It is respectfully submitted that this aspect must be viewed in light of the constraints faced by the Appellant and the overall circumstances of the case. 16. Conclusion In view of the above, it is evident that the inclusion of cheque details in the sale deed demonstrates the Appellant's bona fide intent. No prudent individual, particularly an MBBS doctor, would document cheque payments and later make cash payments had the intent been otherwise. The cheques were never encashed due to the Builder's failure to fulfil contractual obligations. The department has failed to provide any cogent evidence to support its presumption of cash payment. The Appellant's bona fide conduct, corroborated by documentary evidence, negates any allegations of cash payment. Printed from counselvise.com 15 ITA No.1801/Del/2023 17. Thus, in view of the above, it is humbly prayed before your honour to kindly delete the addition of Rs.1,20,00,000/- made by the AO and allow the appeal of the Assessee.” 10.1 The Ld. CIT-DR supported the orders of the authorities below. 11. We have considered the rival submissions and perused the material available on record. Firstly, we deal with the legal issue raised by the assessee that since the assessee was not legally required to maintain books of account, section 69 cannot be invoked without the existence of such books and therefore the addition made u/s 69 of the Act of Rs.1,20,00,000/- was bad in law and was liable to be deleted. In this regard, reliance was placed on CIT (International Taxation) -1. New Delhi v. Hersh Washesher Chadha (ITA 676/2023) (Delhi HC) and Garima Singh Tomar v: ITO/NFAC (ITA No. 38/JAB/2023). 11.1. The same has been carefully perused but not found to be acceptable. The Co-ordinate Bench of the Tribunal in the case of Garima Singh Tomar v: ITO (supra) in para no.5 of its order did observe that provisions of section 68 to 69B of the Act was applicable only in those cases where the assessee is duty bound to maintain the books of accounts as per the provisions of section 44AA of the Act. The Tribunal further observed that such deeming provisions can be applied only when there is some strong clinching evidence found against the assessee like in an action u/s. 132(Search and seizure) or Printed from counselvise.com 16 ITA No.1801/Del/2023 133A (Power of survey) of the Act, revenue discovered any evidence, which the assessee was not able to explain. It was further held that in this case the explanation of the assessee was also found to be reasonable and also the fact that the Assessing Officer and the Ld. CIT(A) applied wrong provisions of the Act. In this regard, the relevant observation of the Tribunal in para no.5 and 6 are reproduced as under:- “5. It is further observed that provisions of section 68 to 69B of the Act applicable only in those cases where the assessee is duty bound to maintain the books of accounts as per the provisions of section 44AA of the Act. In this case the assessee lady is a salaried employee at State Govt. owned Medical College and is not liable to maintain the books of accounts as prescribed u/s. 44AA of the Act. Secondly the provisions of section 68 to 69B of the Act are deeming provisions and can be applied only when there is some strong glitching evidence found against the assessee. Like in an action u/s. 132(Search and seizure) or 133A (Power of survey) of the Act, revenue discovered any evidence, which the assessee is not able to explain. 6. We have gone through the order of Ld. CIT (A) and observed that the case laws on which he relied are all misplaced and not applicable on the facts of the case. It is observed that the AO wrongly applied the provisions of section 69 of the Act, which is further changed by the Ld. CIT (A) to section 69A of the Act, as the explanation of the assessee alongwith the above discussion found to be reasonable and the assessee is able to discharge her duty. Rather, the AO and the Ld. CIT (A) applied wrong provisions of the Act. Based on above, we are not inclined to confirm the orders of authorities below as the same are based on wrong application of law and the assessee’s contentions found to be bonafide. In these terms the AO is directed to delete the addition of Rs. 8.14 Lacs.” 11.2. Thus, it is seen that the Tribunal allowed relief to the assessee not only on the ground of applying the wrong section in the Printed from counselvise.com 17 ITA No.1801/Del/2023 said case but on considering the expenditure of the source of Rs.8.14 lakhs subject matter of dispute in the said appeal to be reasonable and other facts as stated in the aforesaid paras. 11.3. However, the Hon’ble jurisdictional High Court in the case of CIT (International Taxation) -1. New Delhi v. Hersh Washesher Chadha (supra) relied by the assessee has kept this question open in its order dated 12.12.2023. The relevant discussion of the Hon’ble Court in para no.2 and 7 is reproduced as under:- “2. According to the appellant/revenue, this appeal raises for our consideration the following questions of law: \"4. Whether on the facts and in the circumstances of the case and in law, the Hon'ble ITAT is justified in holding that Section 69A is not applicable to the present case? B. Whether on the facts and in the circumstances of the case and in law, the Hon'ble ITAT is justified in deleting the addition of Rs.1,32,25,533/- made by AO and affirmed by CIT(A) without appreciating that the source of credit entries of Rs.132 crores remained unexplained? C. Whether on the facts and in the circumstances of the case and in law, the Hon'ble ITAT is justified in deleting the addition of Rs. 1,32,25,533/- without appreciating that the assessee failed to file the documentary evidence related to the credit entries in the bank accounts before the AO?\" In the course of preliminary hearing, learned counsel for the appellant/revenue submitted that the proposed question 'A' may be left open, to be deliberated upon in some other case. As such, the present appeal would be confined to the proposed questions 'B' and 'C'. As discussed hereafter, both the said proposed questions are questions of facts and not questions of law, much less substantial questions of law. xxxxxxxxxxx 7. Admittedly, in the present case, the respondent/assessee is a Non-Resident Indian and his source of income in India being from interest on bank accounts and interest on income tax Printed from counselvise.com 18 ITA No.1801/Del/2023 refund, he is not obliged to maintain any books of account in India. It appears to us prima facie that the expression \"if any\" specifically used in Section 69A of the Act amplifies that where books of account are not maintained, it would not be possible to invoke this provision. But as mentioned above, learned counsel for appellant/revenue requested to keep this question open to be agitated in some better case. We accede to this request.” 11.4. Therefore, in view of the fact that the Hon’ble jurisdictional High Court has kept the question of applicability of Section 69A in a case like of the present assessee, open, this appeal is taken up on merits. 11.5. Further, the assessee took another legal plea in para no.5 of its written submission and relied upon various case laws and submitted that the Department has failed to discharge the onus of proving that the amount of Rs.1,20,00,000/- was paid in cash and that suspicion or assumption cannot replace proof. The same has been carefully considered but not found to be acceptable in view of the peculiar and distinguishable facts in the case of the assessee, regarding the claim by the assessee about the reasons given for the non-encashment of the two HSBC Bank Cheques of Rs.53,65,000/- bearing number 994704 dated 15.09.2016 and Rs.56,65,000/- bearing the number 994708 dated 15.09.2016 by the builder and also the fact that the version of the builder was neither brought by the assessee nor the same was examined by the Assessing Officer/Ld. CIT(A). Printed from counselvise.com 19 ITA No.1801/Del/2023 11.6. On merits in this case, the AO had information that the assessee had not filed his return of income and he had purchased an immovable property amounting to ₹4,70,00,000/-, for which the AO accepted the source amounting to ₹3,50,00,000/- taken as loan from HSBC Bank. However, since no documentary evidence was furnished for the balance source of investment amounting to ₹1,20,00,000/- despite opportunities given, the AO completed the assessment under section 147 r.w.s. 144 of the Act on 23.05.2022, making an edition of Rs.1,20,00,000/- under section 69 of the Act r.w.s. 115BE of the Act in respect of the undisclosed investment in aforesaid property. The Ld. CIT(A) confirmed the order on the ground that the conditions as laid down by the assessee for which two cheques HSBC Bank Cheques of Rs.53,65,000/- bearing number 994704 dated 15.09.2016 and Rs.56,65,000/- bearing number 994708 dated 15.09.2016 were handed over to the builder and the subsequent registration of the sale agreement was not possible unless both the seller and the buyer were satisfied. The ld. CIT(A) also held that the conditions as laid down by the assessee for the payment of above two aforesaid cheques remain irrelevant as there is no mention of furnishing of flats in the sale deed. The other findings of the Ld. CIT(A) for confirming the order of the Assessing Officer are discussed in par no.8 to 8.3 of this order. Printed from counselvise.com 20 ITA No.1801/Del/2023 11.7. On the other hand, the ld. AR submitted before us that the assessee is an Indian national residing in Saudi Arabia for over 22 years and entered into an agreement to sale dated 21.05.2016 with M/s Blue Rose Construction Pvt. Ltd. for the purchase of two floors of a property. Further, the ld. AR submitted that it was for the department to prove that the assessee paid cash amounting to Rs.1,20,00,000/- to the builder. However, the assessee did not appear during the assessment proceedings before the AO and did not furnish any explanation regarding the source of Rs.1,20,00,000/- which was added as unexplained investment u/s 69 of the Act r.w.s. 1115BE of the Act. Thus, in this case, the assessee did not appear before the Assessing Officer and the explanation furnished before us was never made before the Assessing Officer. Further, it is seen that the ld. CIT(A) neither called for a remand report from the Assessing Officer or got caused necessary physical verification of the flat to verify the claim of the assessee that since the builder did not carry out the necessary promised work relating to the fittings and fixtures the above two cheques amounting to Rs.1,10,30,000/- were not encashed by the builder. Moreover, no effort was made by the Ld. CIT(A) to verify the contention of the assessee from the builder for non-encashing of the aforesaid two cheques as claimed by the assessee. Therefore, in the given facts of the case, the order of the Assessing Officer and confirmed by the Ld. CIT(A) cannot be Printed from counselvise.com 21 ITA No.1801/Del/2023 sustained. Further, the facts stated by the assessee and the circumstances stated therein regarding his claim of non-encashment of the two HSBC Bank Cheques of Rs.53,65,000/- bearing number 994704 dated 15.09.2016 and Rs.56,65,000/- bearing the number 994708 dated 15.09.2016 by the builder requires factual verification. Therefore, the order of the Assessing Officer and the ld. CIT(A) are set-aside and the matter is restored to the file of the Assessing Officer to frame de novo assessment on this issue after giving reasonable opportunity of hearing to the assessee and as per law. 12. Further, the assessee has submitted his claim for DTAA benefit under Article 22 of India Saudi Arbia Tax Treaty for the first time before the Tribunal which was never raised either before the Assessing Officer or Ld. CIT(A). In this regard, the assessee has relied upon various case laws as referred in para no.10 of the written submission (as reproduced above in para no.10 of this order) filed by him. In this regard, Article-22 of the said Treaty is reproduced as below:- 1. Items of income of a resident of a Contracting State, wherever arising, not dealt with in the foregoing Articles of this Convention shall be taxable only in that Contracting State. 2. The provisions of paragraph I shall not apply to income, other than income from immovable property as defined in paragraph 2 of Article 6, if the recipient of such income, being a resident of a Contracting State, carries on business in the other Contracting State through a permanent establishment situated therein, or performs in that other State independent personal services from a fixed base situated therein, and the right or property in respect of which the income is paid is effectively connected with such Printed from counselvise.com 22 ITA No.1801/Del/2023 permanent establishment or fixed base. In such case the provisions of Article 7 or Article 14, as the case may be, shall apply. 13. It was submitted by the assessee in para no.10 of his submission that the provision of section 69 of the Act was not applicable in his case because he was a non-resident individual in India (tax resident of Saudi Arabia) and was eligible to claim treaty benefits as per the provisions of sections 90(2) of the Act. It was further submitted that since the assessee was a resident of Saudi Arabia and his source of earning was outside India and, therefore, as per the reference to the residency Article -22 of the treaty, the provisions of treaty would come into play and, therefore, no addition u/s 69 of the Act could be made in his case. 13.1. The benefit of the treaty as claimed by the assessee for the first time before the Tribunal requires factual verification by the AO regarding the assessee’s claim to satisfy the conditions as laid down in Article 22 of the Indo-Saudi DTAA. In this regard, the assessee in his written submission in para no.13 (as reproduced earlier in the order) also admits that until and unless it is proved that the amount of Rs.1,20,00,000/- has some nexus with India or has been earned in India, such amount cannot be taxed in the Appellant's hands in India. Therefore, without going into the merits of his claim, the assessee is at liberty to raise the said claim before the Assessing Printed from counselvise.com 23 ITA No.1801/Del/2023 Officer and Assessing Officer is directed to decide the claim of the assessee as per law. 13.2. Ground No. 7 to 10 of the appeal are allowed for statistical purposes. 14. Ground no.11 is against the levy of interest u/s 234A and 234B of the Act. The same is consequential in nature and the Assessing Officer will levy interest as per law. 14.1. In the result, ground no.11 is allowed for statistical purpose. 15. Ground no.12 is against the initiation of penalty proceedings u/s 270A and u/s 271AAC of the Act. This ground of appeal is premature and hence dismissed. 16. In the result, the appeal of the assessee is partly allowed for statistical purposes. Order pronounced in the open court on 22nd July, 2025 Sd/- Sd/- [VIKAS AWASTHY] [BRAJESH KUMAR SINGH] JUDICIAL MEMBER ACCOUNTANT MEMBER Dated 22.07.2025. Shekhar Copy forwarded to: 1. Assessee 2. Respondent Printed from counselvise.com 24 ITA No.1801/Del/2023 3. PCIT 4. CIT(A) 5. DR Asst. Registrar, ITAT, New Delhi Printed from counselvise.com "