On-Money Addition Unsustainable for Post-Search Property Purchase: ITAT Deletes ₹23 Lakh Unexplained Investment Addition [Read Order]

The Ahmedabad Bench of Income Tax Appellate Tribunal (ITAT) deleted the ₹23 lakh addition made under Section 69 of the Income Tax Act, 1961 as unexplained investment in a post-search property purchase. The material found in the search cannot be applied to transactions executed after the search date and thus, the addition was held unsustainable and the assessee’s appeal was allowed.

The Assessee, Dushyantbhai Ranchhodbhai Patel, filed an appeal against the CIT(Appeals), NFAC order dated 14.07.2025 passed under Section 250 of the Income Tax Act, 1961 for the Assessment Year 2014-15.

The Assessee purchased a commercial office space on 10.12.2014 from M/s. Dev Procon Ltd. for a consideration of Rs. 43,11,743/-, with the assessee holding a 50% share and paying Rs. 21.55 Lakhs and later on, the assessee's case was reopened under Section 147 of the Income Tax Act, 1961, after four years from the end of the relevant assessment year.

TheSection 147 of the Income Tax Act, 1961 explained that: Income escaping assessment.

“If any income chargeable to tax, in the case of an assessee, has escaped assessment for any assessment year, the Assessing Officer may, subject to the provisions of sections 148 to 153, assess or reassess such income or recompute the loss or the depreciation allowance or any other allowance or deduction for such assessment year (hereafter in this section and in sections 148 to 153 referred to as the relevant assessment year).”

The Assessing Officer stated that a search action had been carried out in the case of the Dev Group on 03.01.2013. Following this search, the Dev Group approached the Settlement Commission and offered certain income on account of "on-money" received from the sale of properties. Based on this, the Assessing Officer concluded that the assessee might have paid "on-money" for the property in question and accordingly made an addition of Rs. 23,00,000/- as unexplained investment under Section 69. This addition was later sustained by CIT(A).

The Authorized Representative of the Assessee, Jaimin Shah, argued that the property was purchased on 10.12.2014, which was after the search action on the Dev Group conducted on 03.01.2013.

He stated that any income offered by the Dev Group before the Settlement Commission on account of "on-money" from sales made prior to the search, or any transaction found during the search, could have no bearing on the assessee's transaction, which occurred at a much later date. Thus, the material gathered during the search on Dev Group could not be used as a basis for making an addition in the hands of the assessee for a subsequent transaction.

On the other hand, the Departmental Representative of the Respondent, Ravindra, observed during the hearing that since the property was indeed purchased by the assessee after the search action on the Dev Group, any material found during that search could not legitimately be made the basis for an addition in the hands of the assessee.

The Tribunal consisted of Judicial Member, Sanjay Garg, heard the matter and after considering the submissions made, stated that the impugned addition made by the Assessing Officer was not sustainable in the eyes of law. Consequently, the addition of Rs. 23,00,000/- was deleted.

Accordingly, the Tribunal allowed the appeal filed by the assessee. The Order was pronounced on 17/12/2025.