The Rajkot bench of Income Tax Appellate Tribunal ( ITAT ) held that the income tax department cannot tax the entire joint property purchase in the hands of a single assessee without establishing the share of investment.
While quashing the reassessment proceedings initiated by the AO for the joint purchase of an immovable property of Rs. 50 lakhs, the tribunal said that the officer has to apply his mind to the share of the assessee and his investment before making additions entirely on the assessee.
As per the facts of the case, the assessee Nilesh Harilal Manek did not file a return for AY 2009-10. The AO during its scrutiny noticed that a property was purchased with Ms. Nayana J Manek in 2008 for Rs. 50 lakhs. The AO added the entire consideration paid for the property as unexplained in the hands of the assessee.
The CIT(A), when the appeal was filed by the assessee, admitted the additional evidence under Rule 64A of the Income Tax Rules, 1962. According to the assessee, Rs. 50 lakhs was paid from the payment he received from the sale of another immovable property.
As the sale was not offered to tax, the appellate commissioner proceeded to calculate the LTCG. It sustained the addition of Rs. 11.35 lakhs under the head LTCG and deleted the balance addition out of the total Rs. 50 lakhs.
The assessee challenged the CIT(A) order and claimed that the incurred brokerage charges were not considered by the appellate commissioner.
During the appellate proceedings before ITAT, the bench of Dr. Arjun Lal Saini (Accountant Member) and Sonjoy Sarma (Judicial Member) noted that the reasons recorded by the AO limited to the assessee’s joint purchase of immovable property for Rs. 50 lakhs. It lacked the respective share of the assessee and the other co-purchaser in the said property.
In a joint purchase, the purchase is based on their share of the investment. In this present case, it is not the case that the entire purchase was made by the assessee to tax the entire consideration paid on him alone.
According to the bench, the officer should’ve applied his mind and show the assessee’s share in investment and then tax the amount to that extent. Without such application, treating the entire joint purchase amount escaped from the hands of the assessee alone cannot be sustained.
Even if proceeding with taxing the entire amount on the assessee alone, the AO should’ve established that the whole amount was paid from the assessee’s income alone and the joint party was passive without monetary investment.
“The basic link between the information regarding the joint purchase of the property and the conclusion that Rs.50,00,000/- constituted income chargeable to tax which had escaped assessment in the hands of this particular assessee has not been properly established in the reasons recorded”, said the bench.
Thus, the tribunal held that the jurisdiction assumed under section 147 of the Income Tax Act, 1961 was found to be invalid and thus, the subsequent proceedings including the assessment framed also cannot survive.
Accordingly, the appellate tribunal allowed the appeal of the assessee quashing the assessment order and deleting the additions made, clarifying that this matter does not require a separate addition.
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Nilesh Harilal Manek vs Income-Tax Officer
CITATION : 2026 TAXSCAN (ITAT) 1322Case Number : ITA No. 857/RJT/2024Date of Judgement : 08 September 2026Coram : Dr. Arjun Lal Saini, Accountant Member And Sonjoy Sarma, Judicial MemberCounsel of Appellant : D. M. Rindani, Ld. ARCounsel Of Respondent : Ganesh Iyer, Ld. Sr. DR
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