Shivaji Tukaram Pawale Vs ITO (ITAT Mumbai)
Mumbai ITAT: On-Money Addition Based Solely on Builder’s Statement Deleted for Denial of Cross-Examination
The Mumbai ITAT deleted the addition of ₹25 lakh made under section 69 towards alleged on-money payment for purchase of a flat, holding that the addition was based solely on the statement of the builder’s partners recorded under section 131 without furnishing a copy of the statement to the assessee or granting an opportunity to cross-examine the deponents. The Tribunal observed that the assessee had consistently denied making any cash payment over and above the documented sale consideration and had specifically requested the Assessing Officer to provide the statements and permit cross-examination. Since these requests were ignored, the Tribunal held that the principles of natural justice were violated, rendering the addition legally unsustainable. On the separate issue of deduction under section 80TTA, the Tribunal restored the matter to the Assessing Officer for verification and directed that the deduction be allowed if the assessee is otherwise eligible in accordance with law.
FULL TEXT OF THE ORDER OF ITAT MUMBAI
This is an appeal by the assessee against order dated 16-1-2026 passed by National Faceless Appeal Center (NFAC), Delhi for the Assessment Year 2017-18.
2. Basically, two issues arise out of the appeal preferred by the assessee. The first issue relates to addition of an amount of Rs.25,00,000/- representing alleged on money paid in cash towards purchase of a flat. Whereas, the second issue relates to denial of deduction claimed by the assessee under Section 80 TTA of the Income Tax Act, 1961 (in short ‘the Act’).
3. Briefly the facts are, the assessee is a resident individual. For the assessment year under dispute, assessee filed his return of income on 23-7-2017, declaring income of Rs.20,23,130/-. In course of assessment proceedings, based on information available on record, the Assessing Officer noticed that during a survey undertaken under Section 133A of the Act, in respect of partners of M/s. Lakshmi Builders and Developers, a statement was recorded under Section 131 of the Act, wherein the concerned partner admitted of receiving on money in cash over and above the declared sale consideration towards sale of flats. The information available in course of survey allegedly revealed that the assessee had paid on money of Rs.25,00,000/- to the builder for purchasing the flat. When the aforesaid information was confronted to the assessee, the assessee flatly denied of having paid any amount in cash over and above declared sales consideration of Rs.49,00,000/-. The Assessing Officer, however, was not convinced.
4. Placing heavy relying upon the statement recorded under section 131 of the Act of the partners of the builder company, he concluded that the assessee indeed had paid on money of Rs.25,00,000/- in cash and added back the amount under section 69 of the Act. Although the assessee contested the aforesaid addition before learned First Appellate Authority, however, he was unsuccessful.
5. We have considered rival submissions and perused the materials on record. A reading of the assessment order reveals that the addition of Rs.25,00,000/- was founded primarily upon the statement allegedly recorded under section 131 of the Act from two partners of M/s Lakshmi Builders and Developers. It is the case of the Assessing Officer that in the said statement, the partners of the builder company had admitted of having received cash from the buyers of flat. However, the material on record reveals that in course of assessment proceedings itself, the assessee had not only denied of having paid any cash over and above declaration sale consideration, but had also insisted upon the Assessing Officer to provide a copy of the statement recorded under section 131 of the Act, as also to grant opportunity to cross-examine the partners whose statements were relied upon. However, such request of the assessee was brushed aside both by the Assessing Officer and learned First Appellate Authority. Jurisprudence is well established that any adverse material used by the Assessing Officer for making addition has to be confronted to the assessee.
6. In the facts of the present appeal, though the Assessing Officer had heavily relied upon the statement of third parties, however, neither the statements were given to the assessee nor the assessee was given any opportunity to cross-examine the persons whose statements were relied upon. When the assessee had specifically denied of having paid any cash over and above the declared sale consideration, the Assessing Officer was duty-bound not only to supply the adverse material to the assessee, but allow him to cross-examine the persons whose statements were relied upon. The denial of such opportunity to the assessee makes the addition vulnerable. Thus, we have no hesitation in deleting the addition of Rs. 25,00,000/- made under Section 69 of the Act.
7. Insofar as the second issue relating to the claim of deduction under Section 8OTTA of the Income-tax Act, 1961 in respect of interest income is concerned, we direct the Assessing Officer to verify assessee’s claim. If, upon such verification, the assessee is found to be eligible, the Assessing Officer shall allow the deduction in accordance with the relevant statutory provision and in conformity with law.
8. In the result, appeal is partly allowed.
Order pronounced in the open court on 27/07/2026.
