KSHAMA FAMILY PRIVTE LIMITED ,MUMBAI V. ITO WARD 22(2)(1), MUMBAI

ITA 5674/MUM/2025

AI Insights

The case involves Kshama Family Pvt Ltd., a private discretionary trust, which appealed against the order of the Commissioner of Income-tax (Appeals) / National Faceless Appeal Centre, Delhi, for the assessment year 2017-18. The primary contention was the addition of Rs. 60,00,000 as unexplained investment under section 69 of the Income Tax Act, which the Assessing Officer treated as unexplained due to the failure of the assessee to substantiate the source of the investment despite multiple notices. The ITAT noted that the additional evidence provided by the assessee, which was not considered by the lower authorities due to procedural non-compliance under Rule 46A, was crucial for determining the real nature of the transaction and the financial capacity of the settlor.

• Counselvise Citation: [2026] 140 COUNSELVISE.COM (IT) 847562 (ITAT-MUMBAI)
• Duration Of Justice: 6 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-03-2026
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: Mumbai
• Assessment Year: 2017-2018
• Appeal Filed On: 12-09-2025
• Laws Referred To: Income Tax Act
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RITESH MISRA
• Assessee Lawyers: RAHUL SARDA
• Keywords: Set aside; Opportunity of being heard; Additional evidence; Unexplained investment; Source of fund
• Section: 147; 148; 144; 69

Judgement Text

"IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH “E” MUMBAI BEFORE SHRI OM PRAKASH KANT (ACCOUNTANT MEMBER) & SHRI SANDEEP KARHAIL (JUDICIAL MEMBER) ITA No. 5674/MUM/2025 Assessment Year: 2017-18 Kshama Family Pvt Ltd. C/o Universal Legal, 161- 162A, Mittal Court, Nariman Point, Mumbai – 400021. Vs. ITO, ward 22(2)(1) Piramal Chambers, Lalbaug, Mumbai – 400012. PAN No. AACTK8045K Appellant Respondent Assessee by : Shri Rahul Sarda Revenue by : Shri Ritesh Misra, CIT-DR Date of Hearing : 24/03/2026 Date of pronouncement : 27/03/2026 ORDER PER OM PRAKASH KANT, AM This appeal by the assessee is directed against order dated 18.07.2025 passed by the Ld. Commissioner of Income-tax (Appeals) / National Faceless Appeal Centre, Delhi [in short ‘the Ld. CIT(A)’] for assessment year 2017-18. The assessee revised its grounds of appeal on 02.01.2026 which are reproduced as under: 1. The National Faceless Appeal Centre (NFAC) failed to appreciate that the AO erred in making the addition of Rs. Printed from counselvise.com 60,00,000/- without appreciating that the Appellant had duly substantiated the said amount with documentary evidence. 2. If the NFAC had any doubts about the veracity of the case of the Appellant, the NFAC ough opportunity to the Appellant rather than dismiss the appeal of the Appellant. The Appellant craves leave to add, amend, alter or delete any or all the above grounds of appeal. 2. The assessee also filed additional grounds challen the jurisdiction of the notice Jurisdictional Assessing Officer. 3. Briefly stated the facts are that t discretionary trust settled for the benefit of the relatives of the settlor. Based on information flagged under the risk management system of the Department, it was noticed that the assessee had made investment in shares of Limited amounting to had not filed its return of income. 3.1 Accordingly, proceedings under section 147 were initiated and notice under section 148, along with order under section 148A(d was issued. Despite multiple statutory notices, the assessee failed to furnish the requisite details. Consequently, the Assessing Officer completed the assessment under section 147 read with section 144 and treated the investment of section 69 of the Act. Kshama ITA Nos. 5474 without appreciating that the Appellant had duly substantiated the said amount with documentary evidence. 2. If the NFAC had any doubts about the veracity of the case of the Appellant, the NFAC ought to have provided further opportunity to the Appellant rather than dismiss the appeal of the The Appellant craves leave to add, amend, alter or delete any or all the above grounds of appeal. The assessee also filed additional grounds challen the jurisdiction of the notice u/s 148 issued by Jurisdictional Assessing Officer. Briefly stated the facts are that the assessee is a private discretionary trust settled for the benefit of the relatives of the settlor. Based on information flagged under the risk management system of the Department, it was noticed that the assessee had made investment in shares of Fair Bridge Hotels (India) Private amounting to ₹60,00,000/- during the relevant year and had not filed its return of income. Accordingly, proceedings under section 147 were initiated and notice under section 148, along with order under section 148A(d was issued. Despite multiple statutory notices, the assessee failed to furnish the requisite details. Consequently, the Assessing Officer completed the assessment under section 147 read with section 144 and treated the investment of ₹60,00,000/- as unexplained under Kshama Family Pvt Ltd., 2 ITA Nos. 5474/MUM/2025 without appreciating that the Appellant had duly substantiated the said amount with documentary evidence. 2. If the NFAC had any doubts about the veracity of the case of t to have provided further opportunity to the Appellant rather than dismiss the appeal of the The Appellant craves leave to add, amend, alter or delete any or The assessee also filed additional grounds challenging issued by he assessee is a private discretionary trust settled for the benefit of the relatives of the settlor. Based on information flagged under the risk management system of the Department, it was noticed that the assessee had idge Hotels (India) Private during the relevant year and Accordingly, proceedings under section 147 were initiated and notice under section 148, along with order under section 148A(d), was issued. Despite multiple statutory notices, the assessee failed to furnish the requisite details. Consequently, the Assessing Officer completed the assessment under section 147 read with section 144 plained under Printed from counselvise.com 3.2 Before the Ld. CIT(A), the assessee furnished certain documents, including bank statements and confirmation from the settlor, Ms. Kshama Satish Shinde, to explain the source of funds. However, the Ld. CIT(A) decline (i) the assessee had not followed the prescribed procedure for admission of additional evidence under Rule 46A; and (ii) even otherwise, the material placed on record did not satisfactorily establish the financial capa Accordingly, the addition was sustained. the Ld. CIT(A) is reproduced as under: “ In these grounds of appeal, the appellant has challenged the addition of Rs.60 lakh made by the Assessing Of appellant has submitted that the amount was paid from the bank account of the account of the appellant on following dates: Date 14.07.2016 05.08.2016 09.08.2016 10.08.2016 07.09.2016 Total The appellant further, submitted that the source was the funds received from the settlers of the trust credited to the bank account as under: Date 21.04.2016 07.07.2016 03.08.2016 Kshama ITA Nos. 5474 Before the Ld. CIT(A), the assessee furnished certain documents, including bank statements and confirmation from the settlor, Ms. Kshama Satish Shinde, to explain the source of funds. However, the Ld. CIT(A) declined to grant relief on the ground that: (i) the assessee had not followed the prescribed procedure for admission of additional evidence under Rule 46A; and (ii) even otherwise, the material placed on record did not satisfactorily establish the financial capacity of the settlor to advance the funds. Accordingly, the addition was sustained. The relevant finding of the Ld. CIT(A) is reproduced as under: In these grounds of appeal, the appellant has challenged the addition of Rs.60 lakh made by the Assessing Of appellant has submitted that the amount was paid from the bank ccount of the appellant on following dates: Amount (Rs) 14.07.2016 17,00,000 05.08.2016 13,00,000 09.08.2016 10,00,000 10.08.2016 10,00,000 07.09.2016 10,00,000 60,00,000 The appellant further, submitted that the source was the funds received from the settlers of the trust credited to the bank account as under: Amount (Rs) 21.04.2016 10,000 07.07.2016 17,75,000 03.08.2016 15,15,000 Kshama Family Pvt Ltd., 3 ITA Nos. 5474/MUM/2025 Before the Ld. CIT(A), the assessee furnished certain documents, including bank statements and confirmation from the settlor, Ms. Kshama Satish Shinde, to explain the source of funds. d to grant relief on the ground that: (i) the assessee had not followed the prescribed procedure for admission of additional evidence under Rule 46A; and (ii) even otherwise, the material placed on record did not satisfactorily city of the settlor to advance the funds. he relevant finding of In these grounds of appeal, the appellant has challenged the addition of Rs.60 lakh made by the Assessing Officer. The appellant has submitted that the amount was paid from the bank ccount of the appellant on following dates: The appellant further, submitted that the source was the funds received from the settlers of the trust credited to the bank Printed from counselvise.com 08.08.2016 09.08.2016 02.09.2016 Total The appellant further, submitted that the amount came from bank account of the settlor Kshama Satish Shinde. A copy of bank account of Kshama Satish Shinde and a her was filed. These documents were not filed before the AO and no request has been made for acceptance of additional evidences under 46A of the Income Tax Rules. Further, even these documents do not prove the capacity of Ms. Ksham Shinde as no evidence of her Income has been furnished. The entries in her bank account show a trend that amounts are received and then immediately transfer to the account of Family Trust. Thus, the appellant has failed to prove the capacity of Ms Kshama Satish Shinde either before the Assessing Officer or at the appellate level. Therefore, the grounds of appeal are not tenable and are dismissed. 4. Before us, the learned counsel for the assessee filed an application for admission of additional ev of the settlor, sale deed, and confirmations of lenders, to establish the source and capacity in respect of funds contributed to the trust. It was submitted that these documents go to the root of the matter and are necessary for such additional evidence is reproduced as under: 1. Affidavit of the settlor, Ms Kshama Satish Shinde giving complete factual details and enclosing supporting material to establish the genuineness of source of amount of Rs. 63 lakhs given by her to the appellant Trust during FY. 2016 Kshama ITA Nos. 5474 08.08.2016 10,00,000 09.08.2016 10,00,000 02.09.2016 10,00,000 63,00,000 The appellant further, submitted that the amount came from bank account of the settlor Kshama Satish Shinde. A copy of bank account of Kshama Satish Shinde and a confirmation letter from her was filed. These documents were not filed before the AO and no request has been made for acceptance of additional evidences under 46A of the Income Tax Rules. Further, even these documents do not prove the capacity of Ms. Ksham Shinde as no evidence of her Income has been furnished. The entries in her bank account show a trend that amounts are received and then immediately transfer to the account of Family Trust. Thus, the appellant has failed to prove the capacity of Ms Kshama Satish Shinde either before the Assessing Officer or at the appellate level. Therefore, the grounds of appeal are not tenable and are dismissed. Before us, the learned counsel for the assessee filed an application for admission of additional evidence, including affidavit of the settlor, sale deed, and confirmations of lenders, to establish the source and capacity in respect of funds contributed to the trust. It was submitted that these documents go to the root of the matter a just adjudication of the issue. such additional evidence is reproduced as under: Affidavit of the settlor, Ms Kshama Satish Shinde giving complete factual details and enclosing supporting material to establish the genuineness of source of amount of Rs. 63 lakhs given by her to the appellant Trust during FY. 2016-17. Kshama Family Pvt Ltd., 4 ITA Nos. 5474/MUM/2025 The appellant further, submitted that the amount came from bank account of the settlor Kshama Satish Shinde. A copy of bank confirmation letter from her was filed. These documents were not filed before the AO and no request has been made for acceptance of additional evidences under 46A of the Income Tax Rules. Further, even these documents do not prove the capacity of Ms. Kshama Satish Shinde as no evidence of her Income has been furnished. The entries in her bank account show a trend that amounts are received and then immediately transfer to the account of Family Trust. Thus, the appellant has failed to prove the capacity of Ms. Kshama Satish Shinde either before the Assessing Officer or at the appellate level. Therefore, the grounds of appeal are not Before us, the learned counsel for the assessee filed an idence, including affidavit of the settlor, sale deed, and confirmations of lenders, to establish the source and capacity in respect of funds contributed to the trust. It was submitted that these documents go to the root of the matter a just adjudication of the issue. A list of Affidavit of the settlor, Ms Kshama Satish Shinde giving complete factual details and enclosing supporting material to establish the genuineness of source of the amount of Rs. 63 lakhs given by her to the appellant Trust Printed from counselvise.com 2. Copy of registered sale deed dated 22nd May 2015 in respect of purchase of agricultural land by Kshama Satish Shinde. 3. Copy of Confirmation of lender Shri Aniruddha Kri Sawant with respect to loan of Rs.15,00,000 given to Kshama Satish Shinde on 26.07.2016 through clearing in Jan Kalyan Sahkari Bank that has been repaid by Kshama Satish Shinde in subsequent years. 4. Copy of Confirmation of the lender with respect to loan of Rs.10,00,000 given to Kshama Satish Shinde on 05.08.2016 through clearing in Jan Kalyan Sahkari Bank that has been repaid by Kshama Satish Shinde in subsequent years. 5. Copy of Confirmation of Shri Jugraj Parasmal Kothari with respect to loan Satish Shinde on 04.07.2016 through RTGS from the United Bank of India and repayment of the loans by Kshama Satish Shinde in subsequent years. 5. We have considered the rival submissions and examined the material available on record. The addition in question has been made under section 69 on account of alleged unexplained investment. The explanation of the assessee is that the investment was funded by the settlor through identifiable banking channels. The Ld. CIT(A), while rejecting the claim, has primarily relied on procedural non-compliance under Rule 46A and on the perceived inadequacy of evidence regarding the financial capacity of the settlor. Kshama ITA Nos. 5474 Copy of registered sale deed dated 22nd May 2015 in respect of purchase of agricultural land by Kshama Satish Copy of Confirmation of lender Shri Aniruddha Kri Sawant with respect to loan of Rs.15,00,000 given to Kshama Satish Shinde on 26.07.2016 through clearing in Jan Kalyan Sahkari Bank that has been repaid by Kshama Satish Shinde in subsequent years. Copy of Confirmation of the lender with respect to loan of Rs.10,00,000 given to Kshama Satish Shinde on 05.08.2016 through clearing in Jan Kalyan Sahkari Bank that has been repaid by Kshama Satish Shinde in subsequent years. Copy of Confirmation of Shri Jugraj Parasmal Kothari with respect to loan of Rs.5,00,000 given by him to Kshama Satish Shinde on 04.07.2016 through RTGS from the United Bank of India and repayment of the loans by Kshama Satish Shinde in subsequent years. We have considered the rival submissions and examined the ilable on record. The addition in question has been made under section 69 on account of alleged unexplained investment. The explanation of the assessee is that the investment was funded by the settlor through identifiable banking channels. while rejecting the claim, has primarily relied on compliance under Rule 46A and on the perceived inadequacy of evidence regarding the financial capacity of the Kshama Family Pvt Ltd., 5 ITA Nos. 5474/MUM/2025 Copy of registered sale deed dated 22nd May 2015 in respect of purchase of agricultural land by Kshama Satish Copy of Confirmation of lender Shri Aniruddha Krishna Sawant with respect to loan of Rs.15,00,000 given to Kshama Satish Shinde on 26.07.2016 through clearing in Jan Kalyan Sahkari Bank that has been repaid by Kshama Copy of Confirmation of the lender with respect to 33 loan of Rs.10,00,000 given to Kshama Satish Shinde on 05.08.2016 through clearing in Jan Kalyan Sahkari Bank that has been repaid by Kshama Satish Shinde in Copy of Confirmation of Shri Jugraj Parasmal Kothari of Rs.5,00,000 given by him to Kshama Satish Shinde on 04.07.2016 through RTGS from the United Bank of India and repayment of the loans by Kshama Satish We have considered the rival submissions and examined the ilable on record. The addition in question has been made under section 69 on account of alleged unexplained investment. The explanation of the assessee is that the investment was funded by the settlor through identifiable banking channels. while rejecting the claim, has primarily relied on compliance under Rule 46A and on the perceived inadequacy of evidence regarding the financial capacity of the Printed from counselvise.com 5.1 Before us, the assessee has placed on record additional evidence, including an affidavit of the settlor, documentary proof of transactions, and confirmations from lenders, which are stated to substantiate the source of funds and the capacity of the contributor. These documents, in our considered view, are material and have a direct bearing on the issue in dispute. 5.2 It is a settled principle that where evidence goes to the root of the matter and is necessary for determining the real nature of a transaction, the same ought not to be shut out on technical considerations. The object of assessment proceedings is to ascertain the correct taxable income, and procedural requirements cannot be elevated to defeat substantive justice. 5.3 In the present case, the additional evidence seeks to explain the very foundation of the addi capacity behind the investment. Such evidence requires proper verification at the level of the Assessing Officer. 5.4 Accordingly, in the interest of justice, we deem it appropriate to set aside the order of the Ld. CIT(A) on t matter to the file of the Assessing Officer for fresh adjudication. The Assessing Officer shall examine the additional evidence and decide the issue afresh in accordance with law, after affording reasonable opportunity of being he Kshama ITA Nos. 5474 Before us, the assessee has placed on record additional including an affidavit of the settlor, documentary proof of transactions, and confirmations from lenders, which are stated to substantiate the source of funds and the capacity of the contributor. These documents, in our considered view, are material ve a direct bearing on the issue in dispute. It is a settled principle that where evidence goes to the root of the matter and is necessary for determining the real nature of a transaction, the same ought not to be shut out on technical The object of assessment proceedings is to ascertain the correct taxable income, and procedural requirements cannot be elevated to defeat substantive justice. In the present case, the additional evidence seeks to explain the very foundation of the addition, namely, the source and capacity behind the investment. Such evidence requires proper verification at the level of the Assessing Officer. Accordingly, in the interest of justice, we deem it appropriate to set aside the order of the Ld. CIT(A) on this issue and restore the matter to the file of the Assessing Officer for fresh adjudication. The Assessing Officer shall examine the additional evidence and decide the issue afresh in accordance with law, after affording reasonable opportunity of being heard to the assessee. Kshama Family Pvt Ltd., 6 ITA Nos. 5474/MUM/2025 Before us, the assessee has placed on record additional including an affidavit of the settlor, documentary proof of transactions, and confirmations from lenders, which are stated to substantiate the source of funds and the capacity of the contributor. These documents, in our considered view, are material It is a settled principle that where evidence goes to the root of the matter and is necessary for determining the real nature of a transaction, the same ought not to be shut out on technical The object of assessment proceedings is to ascertain the correct taxable income, and procedural requirements cannot be In the present case, the additional evidence seeks to explain tion, namely, the source and capacity behind the investment. Such evidence requires proper Accordingly, in the interest of justice, we deem it appropriate his issue and restore the matter to the file of the Assessing Officer for fresh adjudication. The Assessing Officer shall examine the additional evidence and decide the issue afresh in accordance with law, after affording reasonable Printed from counselvise.com 5.5 The assessee shall also be at liberty to raise all factual and legal contentions before the lower authorities. 6. In the result, the appeal filed by the assessee is allowed for statistical purposes. Order pronounced in the open Court on Sd/- (SANDEEP SINGH KARHAIL JUDICIAL MEMBER Mumbai; Dated: 27/03/2026 KRK, SR. PS Copy of the Order forwarded to 1. The Appellant 2. The Respondent. 3. CIT 4. DR, ITAT, Mumbai 5. Guard file. //True Copy// Kshama ITA Nos. 5474 The assessee shall also be at liberty to raise all factual and legal contentions before the lower authorities. In the result, the appeal filed by the assessee is allowed for statistical purposes. ounced in the open Court on 27/03/2026. Sd/- SINGH KARHAIL) (OM PRAKASH KANT JUDICIAL MEMBER ACCOUNTANT MEMBER Copy of the Order forwarded to : BY ORDER, (Assistant Registrar) ITAT, Mumbai Kshama Family Pvt Ltd., 7 ITA Nos. 5474/MUM/2025 The assessee shall also be at liberty to raise all factual and In the result, the appeal filed by the assessee is allowed /2026. OM PRAKASH KANT) ACCOUNTANT MEMBER (Assistant Registrar) ITAT, Mumbai Printed from counselvise.com "