Madras HC Stays Recovery of Unexplained Income from Property Sale Advance Refund
The Madras High Court has granted a 90-day stay on the recovery proceedings for an income tax demand raised against Faiz Wahab, who was assessed on a sum treated as unexplained income from a property sale advance refund.
Income TaxReal EstateReraAssessment OrderUnexplained IncomeReal Estate MaharashtraNov 04, 2025
The petitioner challenged an assessment order dated 26 February 2024, passed under Section 147 read with Section 144 of the Income Tax Act, 1961, along with consequential penalty orders under Sections 271AAC(1) and 272(1)(d).
The Assessing Officer had treated the amount refunded to the petitioner, originally paid as an advance for purchasing property in a real estate project promoted by M/s Omkar Ventures Pvt. Ltd., Mumbai, as unexplained income, raising a demand of ₹2.36 crore.
The Counsel for the petitioner submitted that the petitioner was a bona fide investor whose property transaction had failed, and that he had obtained a favourable order from the Maharashtra Real Estate Regulatory Authority (RERA) on 30 May 2023, directing the refund of the advance.
The counsel argued that the amount could not be treated as unexplained income and sought protection from coercive recovery to enable the filing and disposal of the statutory appeal on merits.
The Revenue opposed the plea, submitting that since an appeal under Section 246A had already been filed on 16 September 2024, the petitioner should pursue the statutory remedy instead of invoking writ jurisdiction.
Justice C. Saravanan observed that while the petitioner had an alternate remedy before the Commissioner (Appeals), interim protection was warranted to enable him to effectively pursue the appeal.
The Court therefore disposed of the writ petition, granting the petitioner 90 days' time to file and pursue the appeal before the appellate authority. It was further directed that recovery proceedings pursuant to the assessment order would remain stayed for this 90-day period, provided the petitioner files an application under Section 220(6) seeking stay of demand.
The Court clarified that if the petitioner fails to move such an application within the prescribed period, the Income Tax Department would be at liberty to proceed with recovery as per law. Accordingly, the writ petition was disposed of.
Frequently Asked Questions
What is the main issue in this case?
The main issue in this case is whether the amount refunded to the petitioner, Faiz Wahab, from a failed property transaction can be treated as unexplained income by the Income Tax Department.
What relief did the Madras High Court grant to the petitioner?
The Madras High Court granted a 90-day stay on the recovery proceedings for the income tax demand, allowing the petitioner time to file and pursue the statutory appeal.
What was the basis for the petitioner's challenge?
The petitioner challenged the assessment order on the grounds that he was a bona fide investor whose property transaction had failed, and he had obtained a favourable order from the Maharashtra RERA directing the refund of the advance.
What was the Revenue's stance in the case?
The Revenue opposed the plea, arguing that the petitioner should pursue the statutory remedy by filing an appeal under Section 246A, instead of invoking writ jurisdiction.
What conditions were set by the Court for the stay of recovery proceedings?
The Court directed that recovery proceedings would remain stayed for 90 days, provided the petitioner files an application under Section 220(6) seeking stay of demand within the prescribed period.
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