Dumb Excel Sheets” cannot justify massive additions: Mumbai ITAT

Mafatlal Mangilal Kothari Vs ACIT (ITAT Mumbai)

Dumb Excel Sheets” cannot justify massive additions – Mumbai ITAT deletes cash loan additions based on unverified third-party data

In a major relief to the assessee, the Mumbai ITAT deleted huge additions made u/s 69/69A r.w.s. 115BBE based on alleged unaccounted cash loan transactions recorded in third-party excel sheets seized during a search on the Nirmal Kumar Bardiya Group. The Tribunal held that the Revenue failed to establish any direct nexus between the assessee and the alleged transactions and observed that uncorroborated electronic entries amounted to nothing more than “dumb documents.”

The reassessment proceedings were initiated on the basis of data allegedly found in pen drives seized from a third party, containing excel sheets such as “UCHANT–MAFAT”, which the department claimed related to the assessee. The AO alleged that the assessee had entered into huge cash loan transactions outside the books and made additions running into crores under sections 69 and 69A.

Before the Tribunal, the assessee categorically denied any connection with the alleged parties and contended that the entire reopening was based merely on name similarity, third-party statements and assumptions. It was argued that references such as “MAFAT” or “MAFAT BHAI” in the excel sheets could not automatically establish identity of the assessee.

The Tribunal found serious flaws in the Revenue’s approach. It observed that the alleged linkage was attempted only through a mobile number allegedly mapped through the Insight Portal, but no material was brought on record to show how such number was attributed to the assessee by the searched person. Importantly, even the statement of Shri Radha Mohan Maheshwari did not specifically name the assessee.

The ITAT further noted that the excel sheets contained references to multiple unrelated persons and appeared to be merely internal records maintained by the searched person in connection with his own business dealings. The Bench also found that the AO had mechanically interpreted figures in the excel sheets and arbitrarily scaled up amounts without properly decoding the entries or verifying whether the figures represented different currencies such as Dollar and Rupee.

A crucial factor weighed heavily with the Tribunal – there was no independent corroborative evidence whatsoever. No cheque transactions, bank trail, confirmations, cash movement, supporting documents or counterparty evidence linking the assessee with the alleged transactions were brought on record.

The Tribunal also strongly criticized the denial of effective cross-examination. Though the Revenue claimed that opportunity was granted, the Bench held that no meaningful opportunity was actually provided to confront the third-party statements relied upon by the AO. Relying upon the Supreme Court ruling in Andaman Timber Industries and coordinate bench decisions in Sunil Nagesh Shet and Jayesh Umakant Manania, the Tribunal held that denial of cross-examination strikes at the root of the assessment and violates the principles of natural justice.

The ITAT ultimately held that third-party electronic data, unsupported by independent corroboration, cannot by itself justify additions under sections 69 or 69A. Since the entire case rested solely on unverified excel sheets and presumptions, the additions were directed to be deleted in entirety for all assessment years involved.

FULL TEXT OF THE ORDER OF ITAT MUMBAI

These six appeals comprise four appeals filed by the assessee and two appeals filed by the Revenue, arising out of separate orders passed by the learned Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi [hereinafter referred to as “CIT(A)”]under section 250 of the Income Tax Act, 1961[hereinafter referred to as “the Act”], for Assessment Years 2016–17, 2017–18, 2019–20 and 2020–21. Since common issues are involved in all these appeals, they were heard together and are being disposed of by way of this consolidated order. For the sake of convenience, Assessment Year 2016–17 is taken as the lead year.

Common Facts

2. The assessee is an individual. The assessments for the impugned years have been framed under section 147 of the Actpursuant to reopening proceedings initiated on the basis of information received from the Investigation Wing.

3. The search and seizure action under section 132 of the Act was carried out in the case of Nirmal Kumar Bardiya Group on 23.11.2021, wherein one Shri Radha Mohan Maheshwari, also known as Radha Mohan Totala, was found to be indulging in large scale cash transactions. During the course of search proceedings, “voluminous electronic data comprising of excel sheets in 7 pen drives were seized from the residence of Shri Arun Snehi, who was a close friend, associate and confidant of Shri Radha Mohan Maheshwari”.Shri Radha Mohan Maheshwari admitted the ownership of the said pen drives and the data contained therein. The Assessing Officer observed that the seized materials contained ledger accounts maintained in excel sheets reflecting unaccounted cash transactions. In particular, a folder named “School Home Work” contained a sheet titled “UCHANT-II” wherein ledger entries were maintained, and one such ledger was in the name of “Mafat”. The statement of Shri Radha Mohan Maheshwari was relied upon to state that the said entry pertained to “Mafat Bhai”, and the contact number mentioned therein was found to be registered in the name of the assessee, which according to the Assessing Officer established linkage with the assessee.

4. On the basis of the above information, the Assessing Officer formed a belief that the assessee had entered into unaccounted cash loan transactions, both taken and given, which were not recorded in the books of account. The information was stated to have been disseminated through the Insight Portal of the department in accordance with the Risk Management Strategy (RMS) formulated by CBDT. It has been specifically noted that “these ledgers represent unaccounted cash transactions that have not been recorded in the regular books of accounts” and that cheque entries appearing in such ledgers were found recorded in regular books of Shri Radha Mohan Maheshwari, whereas cash entries were not so recorded.

5. Pursuant to the said information, proceedings under section 148A were initiated, and show cause notices under section 148A(b) were issued to the assessee. The assessee, in response, denied having entered into any such transactions with the alleged parties and requested copies of statements and material relied upon, including statements of Shri Radha Mohan Maheshwari and Shri Arun Snehi. The Assessing Officer recorded that relevant materials and portions of statements were supplied through the ITBA portal and that an order under section 148A(d) was passed with prior approval of the specified authority under section 151.

6. Thereafter, notice under section 148 was issued and reassessment proceedings were carried out. During the course of assessment proceedings, the assessee reiterated denial of the transactions and sought cross-examination of the persons whose statements were relied upon. The Assessing Officer has recorded that opportunity of cross-examination was provided by issuing summons under section 131(1) and also by issuing commission under section 131(d) to DCIT, Central Circle-4, Jaipur. However, the assessee did not avail such opportunity and expressed inability to attend on account of health reasons. The Assessing Officer concluded that reasonable opportunity had been granted and that non-availment was attributable to the assessee.

7. Further, during assessment proceedings, the assessee furnished certain replies along with documents such as bank book, pass book and return of income. The authorised representative also appeared through video conference in certain years and reiterated earlier submissions. The Assessing Officer recorded that the submissions of the assessee were considered but found to be not acceptable in view of the material available on record. The Assessing Officer ultimately concluded that the assessee had entered into unaccounted cash transactions in the nature of loans and advances, both taken and given, which were not disclosed in the books of account, and accordingly treated the same as unexplained investment or unexplained money under section 69/69A read with section 115BBE of the Act. It is also recorded that such cash transactions were in violation of sections 269SS and 269T, thereby attracting penalty proceedings under sections 271D and 271E, apart from initiation of penalty under section 271(1)(c) or section 271AAC, as the case may be.

8. Year-wise details of assessment are tabulated below for the sake of ready reference:

9. The assessee preferred appeals before CIT(A). Before the CIT(A), the assessee objections to reopening of the assessment on various grounds. The assessee categorically denied having any connection with the alleged parties, stating that “he does not know Nirmal Kumar Bardiya or Shri Radha Mohan Maheshwari or Shri Arun Snehi and has not entered into any transactions with any of these persons and has neither taken nor given any cash loans, interest or commission from or to any of these persons.”The assessee further contended that the allegation linking him to the excel sheet “uchant-MAFAT” was based merely on a mobile number allegedly provided by a third party, and that “just based on mobile number it cannot be concluded that the contents of the excel sheet belongs to the appellant and the conclusion drawn is based on assumption and surmises.” The assessee also raised grievance that there was no material to demonstrate how the data in the pen drive belonged to him.

10. The CIT(A) recorded that the assessee repeatedly requested for supply of complete material relied upon and sought opportunity of cross-examination of Shri Radha Mohan Maheshwari and other persons whose statements were relied upon by the Assessing Officer. It is noted that the assessee sought copies of statements, emails, excel sheets and other evidences forming the basis of reopening.The CIT(A) took note of the fact that the assessee could not attend the cross-examination at Jaipur due to ill health and had informed the authorities by way of letters along with supporting medical documents, stating that he was suffering from heart-related ailments and was advised to avoid travel.

11. The learned CIT(A) considered the contention of the assessee that the notice issued under section 148 was barred by limitation, particularly on the ground that the alleged escaped income was below Rs. 50,00,000/- and that the proceedings were initiated beyond three years. The CIT(A), however, did not accept the contention of the assessee. It was observed that the information available with the Assessing Officer, as per the Insight Portal and investigation material, reflected alleged unaccounted transactions aggregating to Rs. 5,35,40,000/-, and therefore, the case fell within the extended time limit prescribed under section 149. The CIT(A) further held that the Assessing Officer had valid “information which suggests that income chargeable to tax has escaped assessment” within the meaning of Explanation to section 148, and accordingly upheld the validity of issuance of notice under section 148.

12. The assessee had contended that the provisions of section 148A were not applicable in view of clause (c) of the proviso, since the information emanated from search conducted in the case of a third party. The learned CIT(A) rejected the said contention and held that the Assessing Officer had followed the procedure prescribed under section 148A by issuing notice under section 148A(b), considering the reply of the assessee, and passing an order under section 148A(d) with approval under section 151. Accordingly, it was held that the reopening proceedings were in conformity with the statutory procedure.

13. The assessee had challenged the validity of notice on the ground that it was not issued in accordance with the faceless scheme under section 151A. The learned CIT(A) did not accept this objection and held that the issuance of notice by the jurisdictional Assessing Officer, pursuant to information received through centralized systems, does not render the proceedings invalid. The CIT(A) thus upheld the validity of notice under section 148 on this count.

14. The assessee had contended that the sanction granted under section 151 was invalid, unsigned and mechanical, and that approval under Explanation 2 to section 148 was not obtained. The learned CIT(A) rejected these contentions and held that the Assessing Officer had obtained approval from the specified authority prior to issuance of notice under section 148. The CIT(A) observed that mere allegation of mechanical approval or absence of signature, without substantive evidence, would not vitiate the proceedings. The challenge to sanction was accordingly dismissed.

15. The assessee raised an additional ground that approval under section 148B was not obtained before passing the reassessment order. The learned CIT(A) did not find merit in this contention and held that the reassessment proceedings were carried out in accordance with the provisions of the Act and that necessary approvals had been obtained. Accordingly, the ground was dismissed.

16. The assessee contended that the additions were based on electronic evidence (excel sheets) without complying with the requirements of section 65B of the Indian Evidence Act. The learned CIT(A) did not accept this contention and held that the information emanating from search proceedings, coupled with statements recorded and corroborative material, constituted valid evidence. The CIT(A) observed that the Assessing Officer was justified in relying upon the seized digital data and the same could not be disregarded merely on technical objections.

17. The assessee had contended that the Assessing Officer failed to provide complete material and did not grant effective opportunity of cross-examination. The learned CIT(A) held that the Assessing Officer had provided relevant extracts of statements and documents and had also afforded opportunity for cross-examination. It was observed that the assessee did not effectively avail such opportunity. Therefore, the CIT(A) concluded that there was no violation of principles of natural justice.

18. On merits, the learned CIT(A) examined the addition, in respective years, made by the Assessing Officer on account of alleged cash loan transactions. The CIT(A) accepted that the seized material indicated existence of transactions outside the books and that the assessee failed to satisfactorily explain the same. Accordingly, the addition under section 69A was upheld in principle.

19. The learned CIT(A), however, found merit in the contention of the assessee that the Assessing Officer had made double addition by treating both cash loan taken and cash loan given as separate unexplained amounts, though they represented the same set of transactions. The CIT(A) observed that such duplication resulted in inflation of income and accordingly directed the Assessing Officer to restrict the addition to one side of the transaction.

20. Aggrieved by the impugned orders passed by the learned CIT(A), both the assessee as well as the Revenue have preferred the present appeals before us. While the assessee is in appeal challenging the validity of the reassessment proceedings as well as the additions sustained under section 69/69A of the Act, the Revenue is in appeal against the partial relief granted by the learned CIT(A) in restricting the additions made by the Assessing Officer.

21. Following are the grounds of assessee in ITA No. 5895/Mum/2025 for A.Y. 2016-17:

1.1 The Ld. CIT(A) erred in confirming the validity of the notice issued under Section 148 of the Act. The issuance of the said notice is bad in law, illegal, void, without jurisdiction and barred by limitation;

1.2 The Ld. CIT(A) erred in confirming the validity of notice issued u/s.148 of the Act which is not in accordance with provisions of section 151A of the Act read with the e-Assessment Scheme. The said notice issued is illegal, void and bad-in-law, rendering all subsequent reassessment proceedings void and without jurisdiction;

1.3 The Ld. CIT(A) erred in confirming the validity of notice issued u/s.148 of the Act which is invalid as issued without obtaining proper sanction from the specified authority required as per section 151 of the Act. The sanction granted as per section 151 of the Act is unsigned. Under the circumstances and in law, the issue of said notice is illegal, void and bad-in-law;

1.4 The Ld. CIT(A) erred in confirming the validity of notice issued u/s.148 of the Act without obtaining the sanction of appropriate specified authority in terms of explanation 2 to section 148 of the Act. Under the circumstances and in law, the issue of said notice is illegal, void and bad-in-law;

2. The Ld. CIT(A) erred in confirming the validity of assessment order without appreciating that the AO failed to obtain the approval required u/s.148B of the Act. Under the circumstance, the Assessment Order passed u/s. 147 r.w.s. 144B of the Act is illegal, void, bad-in-law and liable to be quashed;

3. The Ld. CIT(A) failed to appreciate that the AO failed to provide alleged incriminating material and the data. The data provided does not contain PAN or any reference of the appellant. Further, the AO failed to provide a certificate under the Information Technology Act in respect of the digital evidence furnished as per the Evidence Act;

4. The Ld. CIT(A) erred in confirming the assessment order without appreciating that the AO failed to provide the opportunity of cross examination. Under the circumstances and in law, the Assessment Order passed u/s.147 is against the principal of natural justice and thus bad-in-law;

5. The Ld. CIT(A) erred in law and on facts in confirming the addition to the tune of Rs.2,67,70,000/- made by invoking section 69A r.w.s. 115BBE of the Act as unexplained money on account of alleged cash loan given. The addition confirmed is based on conjectures, surmises and assumptions, arbitrary, unsustainable and liable to be deleted;

6. The Ld. CIT(A) erred in facts and circumstances of the case in confirming the addition to the tune of Rs.2,67,70,000/-, without appreciating that as per the data provided to the appellant in excel sheet the amounts are not in hundreds and the alleged amount of loan was Rs.2,67,700/-. The addition is, therefore, incorrect and excessive;

7. The Ld. CIT(A) erred in not appreciating that even if the addition is to be sustained, it should be restricted to the peak of the transactions, and not the entire amount;

8. The Ld. CIT(A) erred in not adjudicating the ground in respect of erroneous and arbitrary interest levied u/s.234A of the Act. The Ld. CIT(A) failed to consider the circumstances, which is not attributable to the appellant, that caused the return of income to be filed beyond the deadline as per the notice issued u/s.148 of the Act. The interest levied u/s.234A of the Act is arbitrary, illegal and bad-in-law;

9. The Ld. CIT(A) erred in not adjudicating ground in respect of penalty proceedingsinitiated u/s. 271D of the Act. The Ld. CIT(A) failed to consider the fact that there is no contravention of provisions of section 269SS of the Act. Consequently, the penalty proceedings initiated u/s. 271D is erroneous and arbitrary;

10. The Ld. CIT(A) erred in not adjudicating ground in respect of penalty proceedings initiated u/s. 271E of the Act. The Ld. CIT(A) failed to consider the fact that there is no contravention of provisions of section 269T of the Act. Consequently, the penalty proceedings initiated u/s. 271E is erroneous and arbitrary.

22. Following are the grounds raised by the Revenue in ITA No. 7093/Mum/2025 for A.Y. 2016-17:

1. Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in directing the AO to restrict the addition to Rs. 2,67,70,000/- from Rs. 5,35,40,000/- made u/s 69A of the Income-Tax Act, on account of unexplained loans transactions from Nirmal Kumar Bardiya Group, wherein held as double entry, without verifying the genuineness with books of accounts, bank statement etc.

2. Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in directing the AO to restrict the addition to Rs. 2,67,70,000/- from Rs. 5,35,40,000/- made u/s 69A of the Income-Tax Act, on account of unexplained loans transactions without considering the fact that the action of the AO was based on the discreet report of Investigation Wing, Jaipur, that search & seizure action u/s 132 of the IT Act, 1961 conducted on Nirmal Kumar Bardiya Group, wherein it was established that all these paper companies with no real business activities, operating solely with purpose of facilitation of fraudulent financial transactions which includes providing accommodation entries in the form of unsecured loans, issuing of bogus sales bills etc. and the assessee one of such entities, who has availed such accommodation entries of loans.

3. Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in directing the AO to restrict the addition to Rs. 2,67,70,000/- from Rs. 5,35,40,000/- made u/s 69A of the Income-Tax Act, on account of unexplained loans transactions from Nirmal Kumar Bardiya Group, without considering the detailed finding given by the AO in the Assessment Order.

4. Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in not considering that as a consequence of Search findings, Nirmal Kumar Bardiya Group syndicates/paper entities were established the pattern of transactions indicates accommodation entries and circulation of unaccounted fund.

5. Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in directing the AO to restrict the addition to Rs. 2,67,70,000/- from Rs. 5,35,40,000/- made u/s 69A of the Income-Tax Act, on account of unexplained loans transactions from Nirmal Kumar Bardiya Group, without appreciating the fact that the Assessing Officer has elaborated the morus operandi of Nirmal Kumar Bardiya Group and also established the assessee‟s direct involvement in fraudulent financial transactions with bogus entities which were controlled, managed and operated by Nirmal Kumar Bardiya Group for providing accommodation entries in the form of unsecured loan, issuing of bogus sales bills without delivering actual goods.

6. The tax effect involved in this case is Rs.82,71,930/- which is above the prescribed limit as per CBDT‟s Circular No. 09/2024 Dated. 17.09.2024. However, this case falls under the exception within the ambit of exceptional clause 3.1(n), of the CBDT‟s Circular No. 05/2024, Dated. 15.03.2024, wherein it is stated that in the cases involving ^„Organized Tax Evasion‟ including of bogus LTCG/STCG/losses through accommodation entries, the decision to file appeal/SLP shall be taken on merit without regard to the tax effect and the monetary limit. Hence, the appeal u/s 253 of the Act, is being filed before Hon‟ble ITAT.

7. The appellant craves, leave to amend or alter any grounds or add a new ground which may be necessary.

23. During the course of hearing before us, the learned Authorized Representative (AR) of the assessee, while arguing Ground Nos. 5 and 6, invited our attention to the notice issued under section 148A(b) of the Act and reiterated the basis on which the reassessment proceedings were initiated by the Assessing Officer. It was submitted that the entire reopening was premised on third-party information alleged to have been received from the Investigation Wing, without there being any independent verification or tangible material linking the assessee with the alleged transactions.

24. The learned AR further drew our attention to the “Verification Details” placed at page Nos. 8–9 of the paper book and submitted that the notice under section 148A(b) of the Act was issued on 30.03.2023. However, as per the said verification report downloaded by the Assessing Officer on 24.03.2023, the status of the information was reflected as “Verification Pending”. It was thus contended that even as on the date of issuance of notice under section 148A(b), the information itself had not attained finality and was still under verification.

25. With reference to the reply filed to the notice issued under section 148A(b) of the Act dated 10.04.2023, the learned AR, submitted that the assessee had specifically raised pertinent objections and sought necessary clarifications from the Assessing Officer, which, according to him, go to the root of the assumption of jurisdiction.It was submitted that the assessee, in the said reply, categorically disputed the very basis of reopening by stating that the alleged excel sheet referred to by the Assessing Officer, namely “uchant-MAFAT”, could not be linked to the assessee merely on the basis of name similarity. The assessee had specifically contended that he was “unable to understand how it is concluded that ^„uchant-MAFAT‟ relates to me i.e. Mafatlal Mangilal Kothari” and that the reopening cannot be sustained merely on the basis of excel sheets recovered from third parties not known to him and statements recorded of such persons in the absence of any independent corroborative evidence.It was further submitted that the assessee had made specific requisitions to the Assessing Officer, inter alia, (i) to furnish all material obtained during the course of search in the case of Nirmal Kumar Bardiya Group and statements recorded of Shri Radha Mohan Maheshwari and Shri Arun Snehi or any other person relied upon, and (ii) to provide opportunity to cross-examine such persons whose statements formed the basis for reopening of the assessment. The learned AR submitted that these requests were fundamental to ensuring compliance with principles of natural justice.

26. The learned AR also pointed out that in response to the query raised by the Assessing Officer in the notice, the assessee had reiterated that he had not entered into any transactions with the alleged parties and, therefore, the requirement to furnish sources of such transactions was not applicable. The assessee had nevertheless furnished copies of bank account statements and passbooks for the relevant period.

27. The learned AR, further referring to the email dated 13.04.2023 issued by the DCIT, Central Circle–4, Jaipur, which was furnished by the Assessing Officer along with a subsequent notice under section 148A(b), submitted that the very material relied upon by the Assessing Officer itself creates serious doubt regarding the identification of the assessee.

28. The learned AR invited our attention to the contents of the said email, wherein it is stated that in the excel sheet found in the pen drive, one of the ledgers was in the name of “MAFAT”, which was later referred to as “UCHANT–AJAY MAFAT”, and that as per the statement of Shri Radha Mohan Maheshwari, the transactions recorded therein were with a person described as “MAFAT BHAI”. It was submitted that the said description does not specifically identify the assessee, and the conclusion drawn by the Assessing Officer that the said entry pertains to the assessee is based merely on inference.

29. The learned AR further drew our attention to the table contained in the said email, wherein the name is mentioned as “MAFAT BHAI” along with a mobile number, and submitted that the Assessing Officer has attempted to correlate the said mobile number with the PAN of the assessee through the Insight portal. It was contended that such correlation, in the absence of any independent corroborative evidence, cannot conclusively establish that the transactions recorded in the excel sheet pertain to the assessee.

30. The learned AR also specifically invited our attention to the concluding portion of the said email, wherein it is stated that since certain other parties (For instance – S CHOUDHARY AVISHNU) had accepted the transactions recorded in the excel sheets, the veracity of the entire excel data is presumed to be correct and, therefore, transactions relating to other persons who have not accepted the same are also treated as true. It was submitted that such reasoning proceeds on general presumption and not on any direct evidence against the assessee.

31. The learned AR further invited our attention to the contents of the excel sheet relied upon by the Assessing Officer and the statements recorded of Shri Radha Mohan Maheshwari.It was submitted that a perusal of the excel sheet clearly reveals that the entries therein pertain to various persons such as “S. Choudhary”, “Prakash”, “Naru Bunti”, “NB”, etc., and the description of transactions indicates dealings with multiple parties. The learned AR contended that there is nothing on record to demonstrate as to how these entries can be specifically attributed to the assessee. It was argued that the Assessing Officer has merely picked up a portion of the data and, based on assumptions, linked the same to the assessee without establishing any direct nexus.The learned AR further drew our attention to the summary portion of the excel sheet, wherein figures such as Rs. 2,67,700/- appear, and submitted that the Assessing Officer has arbitrarily interpreted these figures by multiplying them to arrive at an inflated amount, without any corroborative basis. It was emphasised that even on the face of the document, the entries are not self-explanatory and require independent verification, which has not been carried out.

32. The learned AR also invited our attention to the statement of Shri Radha Mohan Maheshwari, particularly the reply to Question No. 20, wherein it is stated that the entries contained in the pen drive relate to lending transactions, interest and commission pertaining to his own business activities. It was pointed out that in the said statement, no reference whatsoever has been made to the name of the assessee. According to the learned AR, this clearly demonstrates that the primary source relied upon by the Assessing Officer does not establish any connection between the assessee and the alleged transactions.

33. On the strength of the above, the learned AR submitted that the entire addition is based on third-party material, general statements and inferred conclusions, without any direct evidence linking the assessee to the transactions recorded in the excel sheets. It was thus contended that both the reopening as well as the addition made under section 69/69A are unsustainable in law.The learned AR placed reliance on following judicial precedents to substantiate this contention:

i. Sunil Nagesh Shet vs. ITO(ITA No. 4547/Mum/2023)

ii. ACIT vs. Jayesh Umakant Manania(ITA No. 6588/Mum/2025)

34. The learned AR submitted that the facts of the present case are identical, inasmuch as the addition has been made purely on the basis of third-party excel sheets and statements, without any direct evidence linking the assessee, and without granting effective opportunity of cross-examination. It was thus contended that the addition deserves to be deleted in line with the above judicial precedents.

35. On the other hand, the learned Departmental Representative (DR), strongly relying upon the information received from the Investigation Wing and the explanatory email issued by the DCIT, Central Circle–4, Jaipur, supported the action of the Assessing Officer as well as the findings recorded by the learned CIT(A).The learned DR submitted that the identity of the assessee was duly established on the basis of the statement of Shri Radha Mohan Maheshwari recorded during the course of search and post-search proceedings. It was pointed out that Shri Radha Mohan Maheshwari had categorically stated that the excel sheet titled “UCHANT–MAFAT” contains transactions entered into by him with a person referred to as “MAFAT BHAI”.The learned DR further invited our attention to the details furnished during post-search proceedings, wherein at Sr. No. 175 of the list provided by Shri Radha Mohan Maheshwari, the file name “UCHANT–MAFAT.xls” is mentioned along with the name of the person as “MAFAT BHAI” and the contact number as 9820054999. It was submitted that the said mobile number was subsequently verified by the Assessing Officer using the “i-search” functionality available on the Insight portal, which revealed that the said number was linked with the PAN of the present assessee.

36. On the strength of the above, the learned DR contended that there exists a clear and direct nexus between the assessee and the transactions recorded in the seized excel sheets. It was thus submitted that the identification of the assessee is not based on mere presumption, but is duly corroborated by the statement of the key person involved in the transactions and supported by independent verification through departmental databases.

37. The learned DR further invited our attention to the fact that summons under section 131 of the Act were issued to the assessee by the DCIT, Central Circle–4, Jaipur, during the course of post-search proceedings. It was submitted that the said summons were issued with a view to afford the assessee an opportunity to explain the transactions reflected in the seized material and to participate in the proceedings, including cross-examination. However, according to the learned DR, the assessee failed to avail the said opportunity and did not comply with the summons issued.

38. The learned DR further submitted that the very name of the excel sheet, namely “UCHANT-MAFAT”, itself contains the identifying reference to the assessee. Therefore, according to the learned DR, the assessee‟s contention that the seized material does not contain any reference to his name is factually incorrect. It was submitted that the reference “MAFAT” in the file name, read together with the statement of Shri Radha Mohan Maheshwari describing the concerned person as “MAFAT BHAI” and the mobile number linked with the assessee‟s PAN, clearly establishes the connection of the assessee with the seized excel sheet.

39. In rebuttal, the learned AR strongly controverted the contentions advanced by the learned DR. It was submitted that even as per the statement of Shri Radha Mohan Maheshwari relied upon by the Revenue, there is no clarity as to who had provided the mobile number alleged to be linked with the assessee. According to the learned AR, the source and authenticity of such mobile number remain unverified and, therefore, the alleged linkage through the Insight portal cannot be treated as conclusive evidence.The learned AR further submitted that the references appearing in the excel sheets such as “MAFAT” or “UCHANT–AJAY MAFAT” do not establish the identity of the assessee, and there is no material on record to demonstrate that these references pertain to the assessee herein. It was contended that mere similarity of name, without any corroborative evidence, is insufficient to fasten tax liability upon the assessee.The learned AR also emphasized that despite specific request made by the assessee vide letter dated 10.04.2023 (not at the fag end of the assessment), no effective opportunity of cross-examination of Shri Radha Mohan Maheshwari or any other person whose statements were relied upon by the Assessing Officer was granted. It was submitted that such denial of cross-examination strikes at the root of the matter and vitiates the entire proceedings inasmuch as the addition is primarily based on third-party statements.

40. On the strength of the above, the learned AR reiterated that the reopening as well as the addition made are unsustainable in law, being based on unverified third-party material, presumptions and without affording proper opportunity to the assessee in violation of principles of natural justice.

41. We have carefully considered the rival submissions, perused the orders of the lower authorities and the material placed on record, including the seized excel sheets, statements recorded during search proceedings, and the correspondence exchanged during proceedings under section 148A of the Act.

42. At the outset, it is an admitted position that the entire foundation of the reassessment proceedings and the consequent additions rests upon certain excel sheets seized from third parties during the course of search in the case of Nirmal Kumar Bardiya Group and the statement of Shri Radha Mohan Maheshwari. The case of the Revenue is that one such sheet titled “UCHANT– MAFAT” pertains to the assessee and reflects unaccounted cash transactions.However, upon careful examination, we find that the primary issue for adjudication is whether the Revenue has been able to establish a direct and cogent nexus between the assessee and the entries appearing in the said excel sheet.

43. In this regard, we note that the identification of the assessee has been attempted by the Assessing Officer on the basis of (i) the reference to “MAFAT” or “MAFAT BHAI” in the excel sheet and statement of Shri Radha Mohan Maheshwari, and (ii) a mobile number allegedly linked to the assessee through the Insight portal. However, no material has been brought on record to demonstrate as to how the said mobile number was attributed to the assessee by Shri Radha Mohan Maheshwari. The statement relied upon does not clarify the source of such information, nor does it specifically name the assessee.

44. Further, on a careful perusal of the excel sheets relied upon by the Assessing Officer, we find that the entries therein pertain to multiple persons such as “S. Choudhary”, “Prakash”, “Naru Bunti” and others, and prima facie represent internal records maintained by Shri Radha Mohan Maheshwari in the course of his own business activities. Significantly, even in the statement recorded during the course of search proceedings, Shri Radha Mohan Maheshwari has categorically stated that the data contained in the pen drive relates to lending transactions, interest and commission pertaining to his business, without making any specific reference to the present assessee.

45. We further observe that the last column in the excel sheet, bearing the heading “Nature”, appears to indicate classification of entries in terms of currency, namely Dollar and Rupee. However, no effort has been made either by the Assessing Officer or by the learned CIT(A) to properly decode, interpret or quantify the transactions in the correct perspective having regard to such classification. The figures have been adopted mechanically without examining whether the amounts are denominated in different currencies, without applying any conversion, and without bringing any material on record to justify the manner in which the final amounts have been computed. In the absence of any such exercise, the quantification of alleged transactions remains arbitrary and unsupported by cogent analysis. This further reinforces the conclusion that the entries in the excel sheet, in their present form, do not constitute reliable evidence to fasten tax liability upon the assessee.

46. We also find merit in the contention of the learned AR that mere similarity of name such as “MAFAT” or “MAFAT BHAI” cannot, in the absence of corroborative evidence, be treated as sufficient to fasten tax liability upon the assessee. No independent inquiry has been conducted by the Assessing Officer to establish that the entries in question pertain to the assessee, nor has any corroborative evidence such as bank transactions, cash trail, confirmation from counterparties or any documentary evidence been brought on record.

47. A pertinent aspect, which goes to the root of the matter, is that during the course of hearing, a specific query was put to the learned AR and DR as to whether, apart from the entries in the excel sheet, there exists any single instance of transaction entered into by the assessee with Shri Radha Mohan Maheshwari by cheque or in any other manner. The answer given was in the negative. This clearly demonstrates that there is no independent evidence of any transaction between the assessee and the said person.

48. We further note that the assessee had specifically requested for cross-examination of Shri Radha Mohan Maheshwari and other persons whose statements were relied upon, vide letter dated 10.04.2023. However, no effective opportunity of cross-examination was provided. Though it has been contended by the Revenue that summons were issued, the fact remains that the assessee was not afforded a meaningful opportunity to confront the material and test the veracity of the statements relied upon. In our considered view, where the addition is primarily based on third-party statements, denial of effective cross-examination constitutes a serious violation of principles of natural justice.

49. We also find that the reliance placed by the Assessing Officer on the seized electronic data is not supported by any independent corroboration. The data has been interpreted on presumptions, including scaling of figures, without establishing the basis for such interpretation. In the absence of supporting evidence, such excel sheets partake the character of “dumb documents”, which by themselves are insufficient to sustain addition.

50. The judicial precedents relied upon by the learned AR also support the above proposition that additions based solely on third-party material, without corroboration and without granting cross-examination, cannot be sustained.

51. In the case of Sunil Nagesh Shet vs. ITO (ITA No. 4547/Mum/2023), the Coordinate Bench, on identical facts involving alleged “on-money” transactions based on third-party material, has categorically held that denial of cross-examination vitiates the assessment. The Co-ordinate Bench, relying on decision of Paramjit Singh Seehra Vs ACIT (2025) 171 com 142 (Mum-Trib)and reproducing the relevant paras from the said order, observed as under:

“The assessee has relied upon the decision of Andaman Timber Industry v. CCE… where the Hon‟ble Apex Court has held that failure to give the assessee the right to cross examine the witness whose statements were relied upon results in breach of principles of natural justice which results in serious flaw thereby rendering the order a nullity… It is observed that the Assessing Officer has failed to provide the opportunity of cross examination despite the assessee’s request… We… deem it fit to quash the assessment order on the basis of violation of principles of natural justice.”(para 8)

52. Thus, the Co-ordinate Bench clearly held that where the addition is founded on third-party statements and material, failure to grant cross-examination renders the entire assessment unsustainable.

Similarly, in the case of ACIT vs. Jayesh Umakant Manania (ITA No.6588/Mum/2025), the Coordinate Bench upheld the deletion of addition made under section 69A based on electronic data retrieved from a third party. The Tribunal, while affirming the findings of the CIT(A), held as under:

“The entire addition under section 69 was made solely on the basis of certain images and loose paper notings… These electronic entries did not originate from the assessee, were not authored by him, and were not recovered from his possession… The Assessing Officer did not bring any primary evidence to establish the authorship or ownership of these notings.”

The Co-ordinate Bench further observed:

“There is no evidence of cash withdrawal from the assessee‟s accounts, any flow of unaccounted funds, any agreement or document evidencing such a transaction… Such an assumption, unsupported by ancillary evidence, does not meet the standard required for sustaining an addition under section 69A.”

53. The above findings make it abundantly clear that third-party electronic data, in the absence of independent corroboration and direct nexus with the assessee, cannot form the sole basis for addition.

54. Respectfully following the ratio laid down in the aforesaid decisions, we find that the facts of the present case are on identical footing, inasmuch as the addition has been made purely on the basis of excel sheets and statements of third parties without establishing any independent linkage with the assessee and without granting effective opportunity of cross-examination. In view of the above discussion, we are of the considered opinion that the Revenue has failed to discharge the burden of establishing that the alleged transactions reflected in the seized excel sheet pertain to the assessee.

55. Accordingly, in view of the foregoing discussion and respectfully following the judicial principles laid down in the decisions referred to hereinabove, we hold that the addition sustained by the learned CIT(A) under section 69/69A of the Act is not sustainable in law, the same having been made solely on the basis of uncorroborated third-party material without establishing any direct nexus with the assessee and in violation of principles of natural justice. The said addition is, therefore, directed to be deleted.

56. Consequently, the grounds raised by the assessee, both on the issue of validity of addition as well as on merits, are allowed. Insofar as the grounds raised by the Revenue are concerned, the grievance of the Revenue is against the action of the learned CIT(A) in granting partial relief by restricting the addition. However, once we have held that the very basis of the addition itself is unsustainable and the entire addition is liable to be deleted, the grounds raised by the Revenue do not survive for adjudication. The same are, therefore, rendered infructuous and are accordingly dismissed.

57. Since the facts, issues and the basis of additions in the other appeals for Assessment Years 2017–18, 2019–20 and 2020– 21 are identical and arise out of the same set of seized material and statements, our findings and conclusions rendered hereinabove for the lead year i.e. A.Y. 2016–17 shall apply mutatis mutandis to those years as well. Accordingly, the additions sustained in those years are also directed to be deleted and the corresponding grounds raised by the assessee are allowed.

58. Similarly, the appeals filed by the Revenue for the other years, being on identical footing and arising from the same set of facts and issues, are dismissed.

59. In the result, all the appeals filed by the assessee are allowed and all the appeals filed by the Revenue are dismissed.

Order pronounced in the open court on 05.05.2026.