Nitaben Kirtikumar Parekh Vs ITO (ITAT Rajkot)
The Income Tax Appellate Tribunal (ITAT), Rajkot, in Nitaben Kirtikumar Parekh Vs ITO, partly allowed the assessee’s appeal for Assessment Year 2019-20 against an addition made under Section 69 of the Income-tax Act, 1961, towards alleged unaccounted cash consideration, commonly referred to as “on-money”, in connection with the purchase of commercial property. The Assessing Officer had treated ₹6,95,500 as unexplained investment on the basis of electronic records seized during a search of the R.K. Group. Although the Tribunal emphasised that alleged on-money payments must be supported by cogent and corroborative evidence rather than mere suspicion, it declined to grant complete relief because certain documents furnished by the assessee were considered self-serving. The Tribunal ultimately directed the Assessing Officer to restrict the addition to ₹69,955 and partly allowed the appeal.
Background of Reassessment and Search Proceedings
The dispute arose from reassessment proceedings initiated under Section 147 following information obtained during a search and seizure operation conducted against the R.K. Group. During the search, the authorities recovered digital data and ledgers maintained through Miracle Software. According to the Revenue, the electronic records contained coded entries representing unaccounted cash receipts from purchasers of units in a commercial project known as “The Imperia”.
The Assessing Officer relied upon decoded entries associated with Office No. 603 in the project. The ledger was identified by the description “IMP 603”, which the Department considered to be directly connected with the relevant property transaction. The Revenue maintained that the seized records were supported by statements of the accountant, Shri Girish Vanjani, and that the software contained actual unaccounted cash transactions in a coded format, with dates shifted backwards by ten years and amounts reduced by a factor of 100.
The alleged cash payments were recorded as follows:
| Sr. No. | Date of Alleged Payment | Amount (₹) |
|---|---|---|
| 1 | 22.09.2018 | 4,00,000 |
| 2 | 25.10.2018 | 95,500 |
| 3 | 15.11.2018 | 2,00,000 |
| Total | 6,95,500 |
On the basis of these entries, the Assessing Officer concluded that the assessee had made an unexplained investment of ₹6,95,500 during Financial Year 2018-19 which was not reflected in the regular books of account. An addition was accordingly made under Section 69 by assessment order dated 29 April 2024. The National Faceless Appeal Centre (NFAC)/Commissioner of Income-tax (Appeals), by order dated 16 October 2025, upheld the addition, leading to the appeal before the Tribunal.
Condonation of 99 Days’ Delay
Before considering the substantive dispute, the Tribunal examined the assessee’s request for condonation of a delay of 99 days in filing the appeal. The assessee’s counsel relied upon an affidavit explaining the circumstances responsible for the delay and requested the Tribunal to adopt a liberal approach. The Departmental Representative opposed the application.
After considering the affidavit, the Tribunal found that mitigating circumstances existed which justified the exercise of discretion in favour of the assessee. Consequently, the delay of 99 days was condoned and the appeal was admitted for adjudication on merits.
Assessee’s Submissions
Shri Brijesh Parekh, appearing on behalf of the assessee, challenged the addition primarily on the ground that the Assessing Officer had denied the opportunity to cross-examine the persons whose statements were relied upon. The assessee maintained that the consideration for the property had been paid through normal banking channels and that no incriminating material directly establishing payment of unaccounted cash by the assessee had been brought on record.
The assessee’s objections concerned both the evidentiary reliability of the third-party digital records and the denial of an effective opportunity to challenge the statements relied upon by the Revenue. These issues are relevant to the principles of natural justice governing additions based on third-party electronic evidence and denial of cross-examination.
The assessee accordingly requested deletion of the entire addition of ₹6,95,500.
Revenue’s Submissions
The Departmental Representative supported the findings of the Assessing Officer and relied upon the information obtained during the search of the R.K. Group. The Revenue’s case was that the decoded Miracle Software ledger, its identification with Office No. 603 and the statements recorded during the search provided sufficient material to establish unaccounted cash payments in relation to the property.
The Department therefore sought to sustain the addition confirmed by the first appellate authority.
Tribunal’s Findings on Alleged On-Money Payments
After hearing both sides and examining the available material, the Tribunal observed that an addition for alleged on-money payments cannot be justified merely on suspicion, conjecture, market perception, stamp valuation or general allegations. There must be cogent, credible and corroborative evidence establishing that consideration exceeding the documented sale consideration actually passed between the parties.
The Tribunal referred to the principle ei incumbit probatio qui dicit, non qui negat, meaning that the burden of proof rests upon the person asserting a fact and not upon the person denying it. Accordingly, the initial burden to establish that the assessee received or paid consideration outside the books of account lies upon the Revenue.
The Tribunal further observed that where consideration is paid through banking channels and is reflected in registered documents, books of account and income-tax records, an allegation of additional unaccounted cash consideration requires supporting evidence. Third-party digital entries and allegations of cash transactions must therefore be assessed in the light of their evidentiary value and corroboration.
However, the Tribunal did not accept the assessee’s evidence without reservation. It specifically observed that some of the documents and evidence submitted during the assessment proceedings were self-serving and could not be relied upon fully. The Tribunal therefore considered that the assessee deserved partial relief but not complete deletion of the addition.
Addition Restricted to ₹69,955
Taking into account the circumstances and inconsistencies in the documents furnished before the lower authorities, the Tribunal adopted what it described as a net profit rate of 10% on the disputed amount of ₹6,95,500 and directed the Assessing Officer to sustain an addition of ₹69,955.
The Tribunal stated that this approach would meet the ends of justice and address the inconsistencies in the evidence while protecting the interests of the Revenue. It also expressly directed that the adjudication should not be treated as a precedent for any preceding or succeeding assessment year.
| Particulars | Amount (₹) |
|---|---|
| Original addition under Section 69 | 6,95,500 |
| Addition sustained as expressly directed by ITAT | 69,955 |
| Relief resulting from the Tribunal’s direction | 6,25,545 |
Conclusion: The Rajkot ITAT partly allowed the assessee’s appeal, restricting the addition for alleged unaccounted on-money payments from ₹6,95,500 to ₹69,955. The order underscores the importance of corroborative evidence in cases involving alleged cash consideration and third-party digital records. At the same time, the decision reflects a fact-specific partial-relief approach because the Tribunal expressed reservations about the reliability of certain documents furnished by the assessee. The Tribunal expressly limited the precedential effect of its adjudication.
FULL TEXT OF THE ORDER OF ITAT Rajkot
Captioned appeal filed by the assessee, pertaining to assessment year (AY) 2019-20, is directed against the order undersection 250 of the Income-tax Act, 1961 (hereinafter referred to as ‘the Act’) passed by the National Faceless Appeal Centre (NAC) Delhi/Commissioner of Income-tax (Appeals) [in short ‘NFAC/Ld.CIT(A)’], dated 16.10.2025, which in turn arises out of an assessment order passed by the Assessing Officer u/s 147 of the Act, dated 29.04.2024.
2. When the matter was called for hearing, the Ld. Counsel for the assessee at the outset submitted that the appeal has been filed by the assessee belatedly. The Ld. Counsel therefore adverted my attention to the affidavit filed in this regard citing the reasons for condonation of delay and urged for a benign view and sought condonation of delay of 99 days in filling the appeal before the Tribunal. On the other hand, Ld. DR for the Revenue opposed the prayer of assessee for condonation of delay. A perusal of the affidavit gives me an impression of existence of mitigating circumstances to enable me to exercise my discretion in favour of the assessee. Accordingly, the delay is condoned.
3. The solitary grievance of the assessee, in this appeal is that Ld. CIT(A) erred in upholding the addition of Rs.6,95,200/- u/s 69 of the Act, on account of “on-money”.
4. Brief facts qua the issue are that the reassessment proceedings were initiated under section 147 on the basis of credible information emanating from a search and seizure action on R.K. Group, wherein incriminating material in the form of digital data and ledgers maintained in Miracle Software were seized. The data contained coded entries of unaccounted cash receipts against sale of units in the project “The Imperia”. The entries were decoded after due forensic analysis, and the decoded ledger clearly reflected three cash payments Rs.4,00,000/- on 22.09.2018, Rs.95,500/- on 25.10.2018, and Rs.2,00,000/- on 15.11.2018 aggregating to Rs.6,95,500/- relating to Office No. 603 in the Imperia project. The Assessing Officer has elaborately narrated the background of the seized data, corroborated, it with statements of the accountant Shri Girish Vanjani and key Miracle Software recorded actual unaccounted cash transactions of various buyers with dates backdated by ten years and amounts reduced by a factor of 100. The ledger name “IMP 603” was directly identified as pertaining to the Imperia project. In view of these facts, the Assessing Officer concluded that the assessee had made an unexplained investment of Rs. 6,95,500/-, during F.Y. 2018-19 which was not recorded in her regular books, therefore Assessing Officer made addition in the hands of the assessee of Rs.6,95,500/-, u/s 69 of the Act.
5. Aggrieved by the order of the Assessing Officer, the assessee carried the matter in appeal before the Ld. CIT(A), who has confirmed the action of the Assessing Officer, therefore assessee is in further appeal before this Tribunal.
6. Shri Brijesh Parekh, Learned Counsel for the assessee submitted that assessing officer denied the opportunity of cross-examination. Learned Counsel for the assessee submitted that payment was made through banking channel and there was no incrementing material against the assessee, therefore addition made by the assessing officer may be deleted.
7. On the other hand, the Ld. DR for the Revenue has primarily reiterated the stand taken by the Assessing Officer, which we have already noted in our earlier para and is not being repeated for the sake of brevity.
8. I have heard both the parties and carefully gone through the submission put forth on behalf of the assessee along with the documents furnished and the case CIT(A) and other materials brought on record. The assessee is an individual and he is a government employee and earned as salary, capital gain and other sources for the year under consideration. Mere suspicion, conjecture, market perception, stamp valuation, loose assumptions, or generalized allegations cannot justify an addition on account of alleged “on-money” unless there exists cogent, credible, and corroborative evidence establishing that consideration over and above the documented sale consideration actually passed between the parties.Under the Income-tax Act, 1961, the burden initially lies upon the Revenue to prove that the assessee has received or paid consideration outside the books of account. The doctrine “ei incumbit probatio qui dicit, non qui negat” applies, namely, the burden of proof lies upon the person who asserts, not upon the person who denies. Where the entire consideration is paid through normal banking channels, duly reflected in registered sale deeds, books of account, income-tax returns, and no incriminating material is found indicating circulation of unaccounted cash, courts have consistently held that addition towards alleged “on-money” cannot survive merely on presumptions. However, I note that some of the documents and evidences submitted by the assessee, during the assessment processing, were self- servicing, documents and evidences, and therefore they should not be relied fully.Hence, I find that while the case of the assessee merits some relief, at the same time entire relief cannot be permitted to the assessee. In my view the ends of justice would be met, if a net profit rate of 10% on Rs.6,95,500/- is adopted, which comes to Rs.69,955/-, since the same would take care of the inconsistencies, in the various documents and evidences submitted before the lower authorities. Therefore, in order to plug the leakage of revenue, I direct the assessing officer to make addition of Rs.69,955/-, by applying the normal rate of instant adjudication shall not be treated as a precedent in any preceding or succeeding assessment year.
9. In the result, the appeal of the assessee is partly allowed in above terms.
Order is pronounced in the open Court on 01/06/2026.
