The Mumbai bench of the Income Tax Appellate Tribunal, in a decision in the 2016-17 assessment year, overturned a Rs 55.2 lakh addition that the tax department had imposed on a taxpayer who bought a residential property jointly with his wife and father.
The reassessment was triggered when the department’s Risk Management Strategy flagged the purchase, noting that the taxpayer had not filed a return for the year in which the property was acquired. The assessment officer, after reviewing the records, treated the balance of Rs 55.2 lakh as an unexplained investment under Section 69 of the Income Tax Act, citing the lack of documentation for contributions from the wife and father.
In response, the taxpayer presented a raft of bank statements, employment income details, and pension statements from his father, proving that the funds came from a Rs 32 lakh housing loan, a Rs 11.2 lakh contribution from his father, a Rs 20 lakh contribution from his wife, and his own Rs 1.7 lakh. He also contested the officer’s use of a Rs 87.2 lakh figure, arguing that the actual payments, including VAT, summed to Rs 84 lakh.
The tribunal, after scrutinising the new evidence, found that the payments were indeed identifiable and that the property was jointly owned. It rejected the use of the higher figure, noting that the officer had not substantiated it with documentary proof. Consequently, the court declared that the Rs 55.2 lakh addition could not be treated as unexplained and deleted it from the assessment.
Raghav Bajaj, partner at Khaitan & Co, said the ruling reinforces that Section 69 is not a presumption of lack of explanation. "Before an investment can be taxed as unexplained, the taxpayer must first prove that the investment was made, and only then can the source be scrutinised," he explained.
The taxpayer, who has been a long‑time resident of Mumbai, now faces no additional tax liability for the 2016-17 year and can focus on repaying the housing loan that funded the purchase. The ruling is expected to be cited in future cases where families jointly acquire property.