The Surat bench of Income Tax Appellate Tribunal ( ITAT ) has ruled that an unsigned, undated, and unstamped Satakhat has no evidentiary value in the eyes of law, thereby deleting an addition of ₹1.19 crores made by the Assessing Officer.
The assessee, Chandrakant Chhaganbhai Gondalia filed a return on February 12, 2011, declaring an income of ₹16,88,300. On December 30, 2014, the Income Tax Department reopened the case under Section 147 of the Income Tax Act, 1961, based on information gathered during a survey conducted at the office of Turnish B Kania, Advocate.
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A hard disk impounded during the survey revealed various documents, including agreements and receipts related to the sale and purchase of property.
One of these documents indicated that the assessee and Rameshchandra Harjibhai Gondaliya had jointly purchased a property for ₹3.59 crores from Babyben Budhiyabhai Patel and others, while the registered sale deed reflected a transaction of only ₹1.20 crores.
The Assessing Officer suspected that the assessee had made an unrecorded cash payment of ₹2.39 crores, constituting undisclosed income. As a result, a notice under Section 148 was issued on the same day, and the assessee subsequently filed a return declaring the same income of ₹16,88,300 on January 27, 2015.
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The reassessment process was initiated with a notice under Section 143(2) on August 26, 2015, followed by a show cause notice regarding the alleged unexplained investment of ₹2.39 crores. In response, the assessee asserted that his financial statements accurately reflected a 50% share in the property based on a registered sale deed from October 14, 2009.
He further clarified that the impounded hard disk from Turnish B Kania’s office contained only general formats for creating documents like Satakhat and sale deeds. The assessee argued that the Satakhat in question was unsigned, undated, and falsely identified him as the seller, requesting access to the hard disk’s contents and statements from involved parties.
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Despite these explanations, the Assessing Officer rejected the assessee’s claims, relying on the notary register and the impounded Satakhat, which suggested a purchase price of ₹3.59 crores with ₹2.39 crores paid in cash. Accordingly, ₹1.19 crores, representing the assessee’s share, was added as unexplained income under Section 69B of the Act in the assessment order dated August 12, 2016.
The assessee appealed to the Commissioner of Income Tax (Appeals) [CIT(A)], challenging both the reopening of the case and the assessment. The assessee argued that the reopening was based on incorrect facts and lacked tangible evidence of income having escaped assessment.
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However, the CIT(A) upheld the reopening, stating that the material gathered during the survey justified the Assessing Officer’s belief. The CIT(A) also confirmed the ₹1.19 crores addition, citing the findings from the survey and the impounded documents.
Considering the submissions, the bench of Bijayananda Pruseth (Accountant Member) and Pawan Singh (Judicial Member) found that a similar case, PCIT vs. Shaileshkumar Ramachandra Shah, had already established that unsigned, undated, and unstamped Satakhat documents found during a survey have no evidentiary value.
The tribunal cited this precedent and directed the Assessing Officer to delete the entire addition of ₹1.19 crores. Consequently, the ITAT allowed the appeal in favour of the assessee.
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