Smt. Ayesha Magdlene Komanapalli Vs ACIT (ITAT Hyderabad)
Hyderabad ITAT Deletes ₹2.55 Crore “On-Money” Additions: Third-Party Seized Material Without Corroborative Evidence Cannot Sustain Addition
The Hyderabad ITAT in Smt. Ayesha Magdlene Komanapalli v. ACIT, Central Circle-3(2) allowed the assessee’s appeals for AYs 2020-21, 2021-22 and 2022-23, arising from alleged cash “on-money” payments recorded in documents seized during a search on the Vasavi Group / M/s SV Complexes LLP, the developer with whom the assessee and other co-owners had entered into a JDA.
Based on the developer’s seized records, the AO alleged that the assessee had received cash of ₹1 crore in FY 2019-20, ₹55 lakh in FY 2020-21 and ₹1 crore in FY 2021-22—aggregating to ₹2.55 crore. For AY 2020-21, ₹1 crore was consequently added as income under Section 56.
The Tribunal found that the AO had not produced any independent evidence establishing actual receipt of cash. There was no cash trail, movement of funds, confirmation of payment or contemporaneous evidence connecting the assessee with the alleged payments. Importantly, the assessee had categorically denied receipt of any cash in her statement recorded under Section 131, and the Revenue failed to rebut that denial with independent evidence.
The ITAT reiterated an important principle: the presumptions under Sections 132(4A) and 292C apply to the person from whose possession or control the documents are found; they cannot automatically be extended against a third party. Therefore, when Revenue seeks to tax another person on the basis of documents seized from a third party, the entries must be supported by independent corroborative evidence.
Following its earlier decisions in SVS Projects India Pvt. Ltd. v. ACIT and Surya Prakash Kancham v. DCIT, the Tribunal held that the additions were founded solely on third-party seized material without proof of actual receipt of cash and therefore could not be sustained in law. It directed deletion of the ₹1 crore addition for AY 2020-21, and applied the same reasoning to AYs 2021-22 and 2022-23, directing deletion of those additions as well.
Thus, the entire alleged on-money addition of ₹2.55 crore across the three years stood deleted, and all three appeals were allowed.
Cases Discussed:
- Shri Surya Prakash Kancham Vs. DCIT (ITAT Hyderabad), dated 15.05.2026
- SVS Projects India Pvt. Ltd. Vs. ACIT (ITAT Hyderabad), ITA Nos. 2139 to 2141/Hyd/2025 dated 30.04.2026
- DCIT Vs. Shivram Consultants India Pvt. Ltd. (ITAT Delhi), [(2023) 147 taxmann.com 457]
- Dharmaraj Prasad Bibhuti Vs. ITAT (Patna High Court), (2019) 109 taxmann.com 388 (Patna)
- PCIT Vs. Gaurang Bhai Pramod Chandra Upadhyay (Gujarat High Court)
- National Thermal Power Co. Ltd. Vs. CIT (SC), (1998) 229 ITR 383 (SC)
FULL TEXT OF THE ORDER OF ITAT HYDERABAD
These three appeals are filed by Smt. Ayesha Magdlene Komanapalli (“the assessee”), feeling aggrieved by the separate orders passed by the Learned Commissioner of Income Tax (Appeals)-11, Hyderabad (“Ld. CIT(A)”) all dated 18.08.2025 for the A.Ys. 2020-21, 2021-22 & 2022-23 respectively. Since the assessee has raised identical issues in all these three appeals, for the sake of convenience, these three appeals were heard together and are being disposed of by this common and consolidated order.
ITA No 1694/Hyd/2025 for A.Y. 2020-21:
2. The assessee has raised the following grounds of appeal before us:
General Grounds
1. The order passed by the learned CIT(A) is against law, facts, and principles of natural justice.
2. The learned CIT(A) failed to appreciate that the entire addition is based on uncorroborated, third-party documents seized from M/s Vasavi Group, which neither belong to nor bear any nexus with the appellant.
Ground 1: Invalid Addition under Section 56(1)
The CIT(A) erred in confirming the addition of Rs.1,00,00,000 under Section 56(1) based solely on third-party ledger entries seized from Ks S.V. Complexes LIS’, which neither belonged to nor were under the control of the appellant, without any independent verification or corroborative evidence.
Ground 2: Absence of Evidence of Actual Receipt
The CIT(A) erred in confirming the addition without any evidence of actual receipt, accrual, or benefit to the appellant, as no bank transaction, voucher, or independent verification was produced by the Department.
Ground 3: Unjustified Initiation of Penalty Proceedings
The CIT(A) erred in upholding initiation of penalty proceedings under Sections 270A and 27 IDA despite the absence of any evidence of cash receipt or violation of Section 269ST.
Ground 4: Prayer
It is prayed that the addition of Rs.1,00,00,000 under Section 56(1) be deleted in full, the penalty proceedings under Sections 270A and 27 IDA be quashed, and such other relief as the Honble Tribunal may deem fit be granted.
PRAYER
In view of the foregoing, the appellant respectfully prays that the Hon’ble Tribunal may:
-
- Allow the appeal in full.
- Delete the addition of Rs. 1,00,00,000 made under Section 56(1) and
- Grant consequential reliefs and costs of proceedings.
3. The assessee has also raised the following additional grounds before us:
6. The Ld. CIT(A) erred in sustaining the additions even though the provisions of sec. 56 will not be applicable to the present case of the appellant.
7. The Ld. CIT(A) ought to have observed the fact that the Ld. AO has not brought any corroborative evidence on record and made addition of Rs. 1,00,00,000/-, and therefore the additions made are bad in law.
8. The Ld. CIT(A) ought to have observed the fact that the Ld. AO has erred in sustaining the addition merely on the basis of Tally data found during the search, without establishing that such data constituted incriminating material showing undisclosed income of the appellant.
9. The Ld. CIT(A) ought to have observed that the Ld. AO has not offered to cross-examine the witness, which is not valid.
10. The Ld. CIT(A) ought to have observed the fact that the Ld. AO has erred in making the addition without considering the submissions made by the Appellant and the failure to consider such submission is not valid.
4. The Learned Authorized Representative (“Ld. AR”) submitted that the additional grounds so filed are admissible in view of judgment rendered by the Hon’ble Supreme Court in the case of National Thermal Power Co. Ltd. Vs. CIT (1998) 229 ITR 383 (SC). The Learned Departmental Representative (“Ld. DR”) did not raise any objection for admission of the additional grounds. The prayer for admission of additional grounds noted above which are not in memorandum of appeal are being admitted for adjudication in terms of Rule 11 of the Income Tax (Appellate Tribunal) Rules, 1963 owing to the fact that objections raised in additional grounds are legal in nature for which relevant facts are stated to be emanating from the existing records.
5. The brief facts of the case are that the assessee is an individual, filed her return of income for Assessment Year 2020-21 on 23.12.2020 under section 139(5) of the Income-tax Act, 1961 (“the Act”), declaring a total income of Rs.3,70,280/-. Subsequently, a search and seizure operation under section 132 of the Act was conducted on 17.08.2022 in the case of Vasavi Group, including M/s. SV Complexes LLP (“the developer”), during which certain documents were found and seized. On the basis of the seized material, the Learned Assessing Officer (“Ld. AO”) observed that the assessee, along with other co-owners, had entered into a Joint Development Agreement (“JDA”) with the developer. The Ld. AO further observed from the seized material that the assessee had allegedly received on-money in cash of Rs. 1 crore during Financial Year 2019-20, Rs. 55 lakhs during Financial Year 2020-21 and Rs. 1 crore during Financial Year 2021-22 from the developer. Accordingly, the Ld. AO issued notice under section 148 of the Act dated 03.10.2023. In response thereto, the assessee filed her return of income within the time stipulated in the notice. After considering the submissions of the assessee, the Ld. AO concluded that the assessee had received on-money of Rs. 1 crore in cash during the year under consideration from the developer and treated the same as income of the assessee under section 56 of the Act. Accordingly, the reassessment was completed by the Ld. A.O under section 147 of the Act vide order dated 20.02.2025 assessing the total income of the assessee at Rs. 1,03,70,280/-.
6. Aggrieved by the reassessment order, the assessee preferred an appeal before the Ld. CIT(A). The Ld. CIT(A) confirmed the addition made by the Ld. AO and dismissed the appeal of the assessee.
7. Aggrieved by the order of the Ld. CIT(A), the assessee is in appeal before the Tribunal. The Ld. AR submitted that Ground Nos. 7 and 8 raised as additional grounds challenge the addition of Rs. 1 crore made by the Ld. AO solely on the basis of documents seized from the premises of a third party without there being any corroborative evidence against the assessee. Inviting our attention to the seized material reproduced by the Ld. AO at page no. 4 of the assessment order and the discussion contained in para no. 15 thereof, the Ld. AR submitted that the entire addition has been made merely on the basis of the seized document without conducting any independent enquiry or collecting any corroborative evidence establishing that the assessee had in fact received any cash from the developer. It was submitted that the addition is based purely on suspicion and surmises and, therefore, is unsustainable in law. The Ld. AR further invited our attention to para no. 5 of the assessment order and submitted that during the post-search proceedings the statement of the assessee was recorded under section 131 of the Act on 07.02.2023, wherein the assessee had categorically denied having received any cash or on-money from the developer. It was submitted that despite such categorical denial, the Ld. AO failed to bring on record any independent evidence, such as flow of funds, bank transactions, cash trail or any other material linking the alleged payment to the assessee. Accordingly, relying upon the decision of this Tribunal in the case of SVS Projects India Pvt. Ltd. Vs. ACIT in ITA Nos. 2139 to 2141/Hyd/2025 dated 30.04.2026 and Shri Surya Prakash Kancham Vs. DCIT in ITA Nos. 2082 & 2083/Hyd/2025 dated 15.05.2026, the Ld. AR submitted that documents seized from the premises of a third party, in the absence of corroborative evidence, cannot constitute the sole basis for making an addition in the hands of the assessee and accordingly prayed that the addition be deleted.
8. Per contra, the Ld. DR relied upon the orders of the lower authorities. Inviting our attention to the seized material reproduced at page no. 4 of the assessment order, the Ld. DR submitted that the seized document was not a mere loose sheet but formed part of the books and records maintained by the developer, wherein it was specifically recorded that cash payments had been made to the assessee as well as to her husband and that certain expenditure had also been incurred by the developer on behalf of the assessee. It was further submitted that admittedly the assessee had entered into a JDA with the developer and, therefore, the cash payments recorded by the developer in its books could not be brushed aside merely on the denial made by the assessee. Accordingly, relying upon the decision of the Delhi Bench of the Tribunal in the case of DCIT Vs. Shivram Consultants India Pvt. Ltd. [(2023) 147 taxmann.com 457], the Ld. DR prayed that the orders of the lower authorities be sustained.
9. We have heard the rival submissions and perused the material available on record including the case laws relied upon. We have carefully gone through the seized material reproduced by the Ld. AO at page no. 4 of the assessment order. A perusal of the same reveals that though various transactions have been recorded by the developer, the Ld. AO has failed to corroborate the alleged payment of cash to the assessee by bringing any independent evidence on record. Except for placing reliance upon the entries contained in the seized material recovered from the premises of the developer, no material has been brought on record to establish that the assessee had actually received the alleged cash consideration. Inspite of the fact that the case of Rs. 1 crore has been received by the husband of the assessee, the Ld. A.O failed to record any statement of the husband. Further, it has been specifically mentioned in the said seized materials that, the developer has made payments on account of foreign travel and car purchase of the assessee. The Ld. A.O again did not make any enquiry to bring any evidence on record to corroborate the seized materials. We have also examined para no. 15 of the assessment order and find that the addition has been made solely on the basis of the seized document recovered from the premises of the third party. It is a settled proposition of law that the presumptions available under section 132(4A) and section 292C of the Act are confined to the person from whose possession or control the documents are found and cannot automatically be extended to a third person. Consequently, where an addition is proposed in the hands of a third party on the basis of documents seized from another person, the Revenue is under a legal obligation to support such addition by independent corroborative evidence establishing the nexus between the seized material and the alleged undisclosed income of such third party. In the present case, except the entries contained in the seized material, the Revenue has not brought on record any corroborative evidence such as movement of funds, confirmation of payment, contemporaneous documents, or any other material demonstrating that the assessee had in fact received the alleged cash consideration. On the contrary, we find that the assessee, in her statement recorded under section 131 of the Act on 07.02.2023, had categorically denied receipt of any cash from the developer. Such denial has not been rebutted by the Revenue by producing any independent evidence. We further find that an identical issue came up for consideration before the Coordinate Bench of this Tribunal in SVS Projects India Pvt. Ltd. Vs. ACIT (Supra), wherein the Tribunal at para no. 15 of the order has held as under:
“15. We have gone through the relevant arguments of learned counsel for the assessee and we found that, the additions made by the AO are on the basis of documents found from the premises of a third party. It is a well-established principle of law by the decisions of various Courts that the documents found from the premises of a third party, the rebuttable presumption as per section 132(4A) and section 292C of the Act, is not applicable. Therefore, it is necessary for the AO to support the addition with further corroborative evidence in cases, where any addition is made on the basis of third-party information. In case there is no corroborative evidence, then there is no scope for making addition on the basis of third-party evidence, because the presumption under section 132(4A) is not applicable and the assessee is not required to explain the said documents. This principle is supported by the decision of the Hon’ble Gujarat High Court in the case of PCIT Vs. Gaurang Bhai Pramod Chandra Upadhyay (supra), wherein the Hon’ble High Court clearly held that since the documents were not found or recovered from the premises of the assessee, no presumption under section 132(4A) r.w.s 292C of the Act, could be drawn against the assessee in such circumstances. A similar view has been taken by the Hon’ble High Court of Patna in the case of Dharmaraj Prasad Bibhuti Vs. ITAT, Patna reported in (2019) 109 taxmann.com 388 (Patna), wherein it was held that the presumption under section 292C of the Act, can only be drawn against such person from whose possession or control any books of accounts or other documents, money, etc. are found during the ITA Nos.2139 to 2141 and 2358 to 2360/Hyd/2025 S.V.S. Projects India Private Limited course of search. The sum and substance of the ratio laid down by various courts is that the rebuttable presumption under section 132(4A) r.w.s. 292C of the Act, cannot be pressed into service against the assessee with regard to material seized during the course of search from the premises of a third party, unless there is corroborative evidence. Therefore, in our considered view, the addition made by the AO on the basis of third-party evidence without any corroborative evidence cannot be sustained.”
10. On perusal of the above, we find that after considering the legal position governing additions based on third-party seized material, the Tribunal has held that an addition made solely on the basis of documents recovered from the premises of a third party, without any corroborative evidence, cannot be sustained. Similar view has also been taken by this Tribunal in the case of Shri Surya Prakash Kancham Vs. DCIT (Supra), wherein in para nos. 11 and 12 of the order, the Tribunal has held as under:
“11. On perusal of the above, we find that the assessee has categorically denied having received any cash from the developer. We further find that the seized document does not bear the signature of the assessee, nor is there any acknowledgment or receipt evidencing actual receipt of cash. We also find that the Ld. AO has not brought on record any independent evidence to establish the movement of cash from the developer to the assessee. No corroborative material such as bank withdrawals, confirmation, or any cash trail has been brought on record. We have gone through para no. 15 of the order of the Coordinate Bench of this Tribunal in the case of SVS Projects India Pvt. Ltd. (Supra), which is to the following effect:
“15. We have gone through the relevant arguments of learned counsel for the assessee and we found that, the additions made by the AO are on the basis of documents found from the premises of a third party. It is a well-established principle of law by the decisions of various Courts that the documents found from the premises of a third party, the rebuttable presumption as per ITA Nos.2139 to 2141 and 2358 to 2360/Hyd/2025 S.V.S. Projects India Private Limited section 132(4A) and section 292C of the Act, is not applicable. Therefore, it is necessary for the AO to support the addition with further corroborative evidence in cases, where any addition is made on the basis of third-party information. In case there is no corroborative evidence, then there is no scope for making addition on the basis of third-party evidence, because the presumption under section 132(4A) is not applicable and the assessee is not required to explain the said documents. This principle is supported by the decision of the Hon’ble Gujarat High Court in the case of PCIT Vs. Gaurang Bhai Pramod Chandra Upadhyay (supra), wherein the Hon’ble High Court clearly held that since the documents were not found or recovered from the premises of the assessee, no presumption under section 132(4A) r.w.s 292C of the Act, could be drawn against the assessee in such circumstances. A similar view has been taken by the Hon’ble High Court of Patna in the case of Dharmaraj Prasad Bibhuti Vs. ITAT, Patna reported in (2019) 109 taxmann.com 388 (Patna), wherein it was held that the presumption under section 292C of the Act, can only be drawn against such person from whose possession or control any books of accounts or other documents, money, etc. are found during the ITA Nos.2139 to 2141 and 2358 to 2360/Hyd/2025 S.V.S. Projects India Private Limited course of search. The sum and substance of the ratio laid down by various courts is that the rebuttable presumption under section 132(4A) r.w.s. 292C of the Act, cannot be pressed into service against the assessee with regard to material seized during the course of search from the premises of a third party, unless there is corroborative evidence. Therefore, in our considered view, the addition made by the AO on the basis of third-party evidence without any corroborative evidence cannot be sustained.”
12. On perusal of the above, we find that under similar facts, the Tribunal has held that where documents are found from the premises of a third party, the presumption under section 132(4A) read with section 292C of the Act cannot be applied against the assessee and that addition made solely on the basis of such third-party documents without corroborative evidence cannot be sustained. Further, in the present case the Ld. AO has not conducted any independent inquiry to establish the alleged transaction of cash received by the assessee.
Therefore, a mere entry in a loose sheet/document found unsigned from a third party in the absence of any corroborative evidence cannot be a basis for the addition in the hands of the assessee. Accordingly, respectfully following the order of the Tribunal, we hold that in the present case also, the presumption under section 132(4A) read with section 292C of the Act is not applicable in the hands of the assessee. Therefore, in the absence of corroborative evidence, the addition made by the Ld. AO solely on the basis of third-party material cannot be sustained. Accordingly, ground nos. 5 to 7 of the assessee are allowed.”
11. On a perusal of the above, we find that it has been categorically held by the Tribunal that the presumptions under sections 132(4A) and 292C of the Act are not applicable in respect of documents seized from the premises of a third party and, therefore, in the absence of independent corroborative evidence, no addition can be sustained merely on the basis of such seized material. We have also carefully considered the reliance placed by the Ld. DR on the decision of the Delhi Bench of the Tribunal in the case of DCIT Vs. Shivram Consultants India Pvt. Ltd. (Supra). In our considered opinion, the said decision is clearly distinguishable on facts and has no application to the present case. In that case, the seized draft sale deed recovered from the premises of the third party was duly corroborated by the Ld. AO with the actual transaction entered into by the assessee. The Ld. AO had brought on record that the names of the vendors, the names of the shareholders, their respective shareholding pattern and the sale consideration received through banking channels, as recorded in the original sale deed executed by the assessee, were exactly identical to the particulars contained in the draft sale deed found during the course of search. Thus, the seized material stood independently corroborated by the contemporaneous documentary evidence relating to the transaction entered into by the assessee. It was in those peculiar facts that the Tribunal upheld the addition. However, in the present case, no such exercise has been undertaken by the Ld. AO. Except relying upon the entries contained in the seized material recovered from the premises of the developer, no independent enquiry has been conducted nor has any corroborative evidence been brought on record to establish the actual receipt of cash by the assessee. Therefore, the ratio laid down in the decision relied on by the Revenue is clearly distinguishable and does not advance the case of the Revenue.
12. Therefore, respectfully following the decisions of this Tribunal in the case of SVS Projects India Pvt. Ltd. Vs. ACIT (Supra) and Shri Surya Prakash Kancham Vs. DCIT (Supra) and considering the facts of the present case, we are of the considered view that the addition of Rs. 1 crore made by the Ld. AO is founded solely on third-party seized material without any independent corroborative evidence establishing actual receipt of cash by the assessee. Such an addition cannot be sustained in law. We, therefore, direct the Ld. AO to delete the addition of Rs. 1 crore made in the hands of the assessee. Accordingly, Ground Nos. 7 and 8 of the additional grounds raised by the assessee are allowed.
13. Since we have decided the issue on merits in favour of the assessee and directed deletion of the impugned addition, the remaining grounds raised by the assessee do not call for separate adjudication and are accordingly left open.
ITA Nos. 1695 & 1696/Hyd/2025 – A.Ys. 2021-22 & 2022-23:
14. The issues raised in these two appeals are identical to the issues raised by the assessee in ITA No.1694/Hyd/2025 for the A.Y. 2020-21. Therefore, our observations and findings recorded therein shall apply mutatis mutandis to these two appeals as well. Since we have allowed the appeal of the assessee in ITA No.1694/Hyd/2025 for the A.Y. 2020-21, these two appeals of the assessee for the A.Ys. 2021-22 & 2022-23 are also allowed. Accordingly, we direct the Ld. A.O to delete the additions.
15. To sum up, all the three appeals filed by the assessee are allowed.
Order pronounced in the Open Court on 7th August, 2026.
