Prakash Bhaguji Katkade Vs ITO (ITAT Mumbai)
Cosmos Group ‘On-Money’ Addition Deleted Again: ITAT Says Statement Alone Is Not Evidence
The Mumbai ITAT deleted an addition of ₹14.25 lakh made under section 69A in the case of Prakash Bhaguji Katkade, holding that the Revenue failed to produce any credible evidence that the assessee had paid alleged “on-money” for purchase of a flat from the Cosmos Group.
The reassessment was initiated on the basis of information received from the Investigation Wing following a search on the Cosmos Group. According to the Department, certain emails, excel sheets and statements of key persons of the builder allegedly indicated that the assessee had paid cash over and above the registered sale consideration while purchasing Flat No. 802 in Cosmos Mary Park, Thane. Based on this information, the AO treated ₹14.25 lakh, being the assessee’s 50% share of the alleged cash payment, as unexplained money under section 69A.
The assessee consistently denied having paid any on-money and produced the registered purchase agreement as well as a confirmation from the builder showing receipt of only the documented consideration of ₹72 lakh. The assessee also complained that the alleged incriminating material was never supplied and that no opportunity was granted to cross-examine the persons whose statements were relied upon.
The Tribunal found merit in these objections. It observed that the addition was based primarily on statements recorded from Cosmos Group personnel and on alleged excel-sheet data, but neither the underlying incriminating material nor any independent evidence connecting the assessee with the alleged cash payment was brought on record. The Tribunal also noted that similar additions arising from the very same Cosmos Group search had already been deleted in several earlier decisions, including Bharat Laxman Bhiwapurkar, Mamta Sharad Gupta and Monika Anand Gupta.
Following those precedents, the Tribunal held that a statement of a third party, without corroborative evidence and without permitting cross-examination, cannot justify an addition in the hands of a purchaser. It further noted that the alleged electronic evidence had not been properly proved. Accordingly, the addition was deleted in full. Since relief was granted on merits, the Tribunal treated the challenge to the reopening proceedings as academic and did not adjudicate it.
FULL TEXT OF THE ORDER OF ITAT MUMBAI
1. This appeal by assessee is directed against the order of ld. CIT(A)/ADDL/JCIT(A), Panaji dated 26.09.2025 for Assessment Year (AY) 2012-13. The assessee hasraised following grounds of appeal:
“1. The Hon CIT(A) erred in upholding the re-opening of assessment u/s 147 of the 1. Tax Act 1961, by issue of the notice u/s 148 on 29.03.2019, not appreciating that such re-opening of assessment u/s 147 was bad-in-law and the asst. order flowing therefrom, being the order u/s 143(3) r.w.s. 147 was also invalid and bad in law and hence the same was required to be quashed.
2. The Hon CIT(A) erred in upholding the addition of Rs.14,25,000/- u/s.69A of the IT Act, 1961 as unexplained money being alleged on-money paid to Cosmos Group towards purchase of flat no. 802, Cosmos Mary Park, Thane(W), ignoring the contentions of the appellant that there was no evidence of any such on-money payment and ignoring the claim of the appellant that he had not paid any such on-money towards the purchase of the said flat. The addition Rs.14,25,000/- on the above being was not warranted by facts and in law and may please be deleted.
3. The Hon CIT(A) erred in relying upon the statements of the members of the Cosmos Group without affording your appellant with opportunity to cross examine the said persons, thereby breaching the salient principles of equity, fair play and natural justice. The order framed in breach of the principles of natural justice is bad-in-law and void-ab-initio.
4. The appellant craves leave to add, alter, amend, delete and/or vary any of the above grounds of appeal at any time before the decision of the appeal.”
2. Brief facts of the case are that assessee is individual filed its return of income for A.Y. 2012-13 declaring income of Rs. 2,71,280/-. Initially, the return was accepted. Later on, the case was reopened on the basis of information received from DDIT(Inv), Unit – 1(4), Mumbai wherein it was informed that search was carried out in case of Cosmos Group on 24.09.2024. Cosmos Group is engaged in the business of development of real estate and construction. The AO recorded that during the course of search action, document relating to receipt of on-money by the assessee was found. Such details were maintained in the Gmail and yahoo mails of Cosmos Group. The AO further noted that a cash book of on-money received by Cosmos Group, which contained the flatwise and shop-wise details was prepared in Excel sheets. The statement of Karuna Khambayat, sales head of Cosmos Group was recorded, wherein she accepted that often a cash payment involve on sale of flat/shops/offices. The AO also mentioned about the statement of Suraj Parmar, one of the promotors of Cosmos Group about cash transaction. On the basis of such information, the AO noted that assessee has purchased Flat No. 802 of Cosmos Mary Park from Cosmos Group and has paid money of Rs. 34,50,000/- in two instalments that is Rs. 25,50,000/- in A.Y. 2012- 13 and Rs. 6,00,000/- in A.Y. 2013-14 over and above, the agreement value. On the basis of such information, the case of assessee was reopened after obtaining prior approval of Principal Commissioner of Income Tax (Pr. CIT) – 2, Thane. The notice under section 148 was issued on 29.03.2019. In response to such notice, the assessee filed return of income. The reasons recorded were provided to the assessee. The assessee denied of having paid of on-money against purchase of flat and make request to refer the matter to DVO. The AO recorded that as the case does not pertain to valuation of flat, therefore, request of assessee was declined.
