ITAT Gives Taxpayer Second Chance to Prove ₹50 Lakh Property Purchase Source [Read Order]

The Income Tax Appellate Tribunal (ITAT) Ahmedabad has granted a taxpayer another opportunity to explain the source of funds for a ₹50 lakh property purchase made back in 2011. The tribunal set aside earlier tax orders and directed the Assessing Officer to re-examine fresh evidence about the funding arrangement.

Miteshkumar Dhanjibhai Patel, an Ahmedabad resident, his case dates back to 2011-12 when he jointly purchased a bungalow in Sola with his wife. The Income Tax Department reopened the assessment in 2018 after detecting the transaction through its data systems. Since Miteshkumar hadn't filed returns that year, the Assessing Officer treated the entire ₹50 lakh as unexplained investment under Section 69 and added it to his taxable income.

During appeals, Miteshkumar's chartered accountant Pritesh Shah presented new details - that ₹49 lakh came from the taxpayer's wife, who received it as a gift from her father Nagarbhai Patel. They submitted the father-in-law's ITR showing ₹52.28 lakh income that year, bank transfer proofs, and a signed confirmation. However, the CIT(A) rejected this without seeking a remand report from the AO or giving Miteshkumar further hearing opportunities.

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Judicial Member Suchitra Kamble and Accountant Member Narendra Prasad Sinha found this approach flawed. They noted that while Miteshkumar failed to explain the source during initial assessment, the appellate authority should have properly examined the fresh evidence instead of summarily dismissing it. The father-in-law's disclosed income appeared sufficient to explain the ₹49 lakh transfer, meriting proper verification.

The tribunal's order doesn't absolve Miteshkumar but gives him a final shot to prove his case. The AO must now thoroughly check the submitted documents - including the wife's bank statements showing the ₹35 lakh direct payment to the seller and ₹24 lakh transfer to Miteshkumar's account. The department will particularly scrutinize the father-in-law's financial capacity and the money trail.

For Miteshkumar, this means avoiding a potential ₹50 lakh tax liability if he can conclusively prove the funds weren't his undisclosed income. The case highlights how taxpayers sometimes scramble to produce evidence only at appellate stages, and how authorities must balance procedural rigor with fair hearing principles.

The AO's fresh examination will determine whether the property purchase funds were genuinely explained or whether the addition stands. Either way, the verdict underscores that appellate authorities can't ignore substantive new evidence without proper verification. In conclusion, the appeal was allowed for statistical purposes.

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