Abhishek Sharan Vs ITO (ITAT Ahmedabad)
Uncorroborated Builder Entry Cannot Prove On-Money Payment: ITAT Deletes ₹24 Lakh Addition
The Income Tax Appellate Tribunal, Ahmedabad, deleted an addition of ₹24 lakh under sections 69A/69B relating to an alleged cash payment for purchase of a flat. The Tribunal held that an uncorroborated entry in a builder’s records or computer could not, by itself, establish that the purchaser had paid consideration exceeding the disclosed amount.
The Tribunal emphasised that where the assessee disputes having made the payment, the Department must first establish the payment through cogent and corroborative evidence. The burden cannot be shifted to the assessee to explain the source of a payment whose existence has not been established.
Facts of the Case
The assessee, a salaried individual, filed his return for assessment year 2012-13, declaring total income of ₹5,63,360 under the head “Salaries”.
He purchased Flat No. B-402 in the “Grihpravesh” project from Grihpravesh Builtech Private Limited. Payments towards the flat were made during the period from 2011 to 2016.
Based on information received from the Investigation Wing in Delhi, the Assessing Officer issued a notice under section 142(1), dated 4 December 2019, requiring the assessee to explain the source of an alleged cash payment of ₹24 lakh towards the purchase.
The Assessing Officer rejected the explanation and added ₹24 lakh under section 69A.
The CIT(A) confirmed the addition, observing that sufficient documentary evidence had not been furnished to establish the nature and source of the alleged payment. In doing so, the appellate authority treated the amount as unexplained investment under section 69B.
Assessee’s Submissions
Before the Tribunal, the assessee argued that the addition rested mainly on an entry allegedly found in the builder’s records or computer, without independent evidence confirming the payment.
He consistently denied having paid ₹24 lakh in cash. He also pointed out that there was no corresponding cash withdrawal or other evidence establishing the alleged transaction.
The assessee further submitted that he had specifically requested an opportunity to cross-examine the person or source behind the third-party material relied upon by the Department. According to him, no effective opportunity had been provided.
He maintained that the documents furnished established the actual payment trail and the sources of investment.
Documents Produced by the Assessee
The material placed before the Tribunal included the purchase agreement, purchase deed, ledger account maintained by the builder, bank statements and home-loan sanction letter.
The assessee also furnished his wife’s bank statement, copies of submissions made before the lower authorities and the reasons recorded for reopening.
The Tribunal considered these documents directly relevant to determining the actual consideration paid for the flat and the source of investment. However, it found that the lower authorities had not properly examined and reconciled them with the alleged cash payment.
The order records that the delay in filing the appeal was condoned before the substantive issues were considered.
Third-Party Entry Required Corroboration
The Bench, comprising Vice-President Dr. B.R.R. Kumar and Judicial Member Tapas Ram Misra, observed that the addition was primarily founded on an alleged entry in the builder’s records.
That entry had not been shown to be supported by independent or tangible evidence. The assessee’s consistent denial of the cash payment therefore required examination against reliable corroborative material.
The Tribunal found that the available record did not sufficiently establish that the assessee had actually made the disputed payment.
Its conclusion rested on the evidentiary deficiencies in this case, including the absence of corroboration and the failure to properly examine the purchaser’s documents.
Payment Must Be Established Before Source Is Questioned
The Tribunal identified a fundamental defect in the CIT(A)’s reasoning. The appellate authority had focused on the assessee’s failure to explain the nature and source of the alleged payment, although the very fact of payment was disputed.
Before demanding a source explanation, the Department was required to establish that the assessee had paid ₹24 lakh over and above the disclosed consideration.
The Tribunal held that the burden could not be shifted merely on the strength of an uncorroborated third-party entry.
Opportunity to Rebut Third-Party Material
The Tribunal also noted that no effective opportunity of cross-examination appeared to have been provided despite the assessee’s specific request.
Where disputed third-party material substantially forms the basis of an addition, the assessee must receive a reasonable opportunity to rebut it, particularly when cross-examination has expressly been sought.
This procedural deficiency reinforced the Tribunal’s conclusion that the addition could not stand on the material available.
Conclusion
The Tribunal deleted the ₹24 lakh addition under sections 69A/69B and allowed the corresponding grounds. It granted final relief on the addition rather than remanding the issue for another examination.
Since the assessee succeeded on merits, the grounds challenging reopening under section 148 and other procedural aspects became academic and were not adjudicated. The appeal was allowed.
FULL TEXT OF THE JUDGMENT/ORDER OF ITAT AHMEDABAD
This appeal has been filed by the assessee against the order dated 15.10.2024 passed by the Commissioner of Income Tax (Appeals)/National Faceless Appeal Centre, Delhi [hereinafter referred to as the ‘Ld. CIT(A)’], under section 250 of the Income-tax Act, 1961 (hereinafter referred to as ‘the Act’) for Assessment Year 2012-13.
2. The assessee has raised the following grounds of appeal:
1. The Learned CIT(A) has erred in confirming the invocation of section 148 of the Act by the Assessing Officer without any proper basis and approval.
2. The Learned CIT(A) has erred in law and on facts in confirming the addition of Rs.24,00,000/- as undisclosed income on the basis of an entry in a computer, which was not corroborated by any independent evidence.
3. The Learned CIT(A) and the Assessing Officer have erred in not providing an opportunity of cross-examination of the evidence, despite the assessee having specifically requested the same.
4. The Learned CIT(A) and the Assessing Officer have erred in law and on facts in ignoring the submissions of the assessee that no corresponding cash was deposited or withdrawn in respect of the alleged payment of Rs.24,00,000/- and that the addition was made merely on the basis of evidence which was not properly corroborated.
5. The Learned CIT(A) has erred in law and on facts in not providing an effective opportunity of being heard in accordance with the principles of natural justice before passing the order under section 250 of the Act, despite the assessee having specifically requested a personal hearing.
6. The Learned CIT(A) has erred in law and on facts in confirming the addition of alleged on-money merely on the observation that the assessee had not proved the source of money, although no such specific issue was the basis of the addition made by the Assessing Officer.
7. The assessee craves leave to add, amend, alter or modify any of the grounds of appeal at the time of hearing.
3. The brief facts of the case are that the assessee is a salaried individual who filed his return of income for AY 2012-13 declaring total income of Rs.5,63,360/-, comprising income under the head ‘Salaries’. The assessee had purchased Flat No. B-402 in the project “Grihpravesh” from M/s Grihpravesh Builtech Pvt. Ltd. The payments towards purchase of the said flat were made during the period from 2011 to 2016. On the basis of information received from the ADIT(Inv.)-7(3), Delhi, the Assessing Officer issued notice under section 142(1) dated 04.12.2019 requiring the assessee to explain the source of cash payment of Rs.24,00,000/- allegedly made towards purchase of the flat. The explanation furnished by the assessee was not accepted by the Assessing Officer and an addition of Rs.24,00,000/- was made under section 69A of the Act.
4. Aggrieved by the assessment order, the assessee preferred an appeal before the Ld. CIT(A). The Ld. CIT(A), after considering the submissions, confirmed the addition of Rs.24,00,000/- by observing, inter alia, that the assessee had not furnished sufficient documentary evidence to establish the nature and source of the alleged payment. The Ld. CIT(A) ultimately upheld the addition, treating the same as unexplained investment under section 69B of the Act.
5. During the course of appellate proceedings before us, the Ld. Counsel for the assessee submitted various documents in support of the explanation furnished by the assessee. The documents furnished include:
1. Affidavit for condonation of delay;
2. Submissions made before the Ld. CIT(A);
3. Submissions made before the Assessing Officer;
4. Reasons recorded for reopening;
5. Purchase agreement;
6. Purchase deed;
7. Ledger account of the assessee in the books of M/s Grihpravesh Builtech Pvt. Ltd.;
8. Bank statements;
9. Home-loan sanction letter; and
10. Bank statement of Smt. Shipra Sharma, wife of the assessee.
6. The Ld. Counsel submitted that the alleged addition of Rs.24,00,000/- was made mainly on the basis of an entry allegedly found in the records/computer of the builder and that the same was not corroborated by any independent evidence. It was further submitted that the assessee had specifically requested an opportunity to cross- examine the person/material relied upon by the Department, but no such effective opportunity was provided. It was also submitted that the documentary evidence now placed on record establishes the actual payment trail and the sources of investment.
7. We have carefully considered the assessment order, the order of the Ld. CIT(A), the submissions of the assessee and the documents placed on record. The issue for consideration is whether the addition of Rs.24,00,000/- made on account of alleged cash payment towards purchase of the flat is sustainable on the facts and circumstances of the case.
7.1 We find that the addition has primarily been made on the basis of an alleged entry found in the records/computer of the builder. The assessee has consistently disputed having made any such cash payment and has specifically submitted that there was no corresponding cash withdrawal or other evidence establishing payment of Rs.24,00,000/-. The said entry, by itself, has not been shown to have been corroborated by any independent or tangible evidence.
7.2 It is further observed that the assessee has furnished various documents, including the purchase agreement, purchase deed, ledger account maintained by the builder, bank statements, home-loan sanction letter and the bank statement of the assessee’s wife. These documents are directly relevant for determining the actual consideration paid for the flat and the source of the investment. However, the same have not been properly examined and reconciled by the Assessing Officer or the Ld. CIT(A) with the alleged cash payment of Rs.24,00,000/-.
7.3 The Ld. CIT(A) has primarily confirmed the addition on the ground that the assessee failed to establish the nature and source of the alleged payment. However, in the present case, the very factum of payment of Rs.24,00,000/- in cash has been disputed by the assessee. Therefore, before requiring the assessee to explain the source of such payment, the Department was required to establish, on the basis of cogent and corroborative evidence, that the assessee had in fact made the alleged payment over and above the disclosed consideration.
7.4 We further note that the assessee had specifically requested an opportunity to cross-examine the person or source of the third-party material relied upon by the Assessing Officer. No effective opportunity of cross-examination appears to have been provided. Where an addition is founded substantially upon third-party material which is disputed by the assessee, such material cannot be relied upon against the assessee without affording a reasonable opportunity to rebut the same, particularly when the assessee has specifically sought cross- examination.
7.5 In view of the above, we are of the considered opinion that the order of the Ld. CIT(A) confirming the addition of Rs.24,00,000/- is not sustainable. The material available on record does not establish, with sufficient corroboration, that the assessee had actually made the alleged cash payment of Rs.24,00,000/-. The documentary evidence furnished by the assessee has also not been properly examined in the context of the alleged payment.
7.6 In the light of the foregoing discussion, we hold that the addition of Rs.24,00,000/- cannot be sustained merely on the basis of an uncorroborated entry allegedly found in the records of a third party, particularly when the assessee has disputed the very factum of such cash payment and the Revenue has not brought on record any cogent and independent evidence to establish the same. The documentary evidence furnished by the assessee, which is relevant to the determination of the actual consideration paid for the flat and the sources thereof, has also not been properly examined by the authorities below. In these circumstances, the burden cannot be shifted upon the assessee to explain the source of a payment which has not been established to have been made in the first place. We, therefore, find no justification for sustaining the addition of Rs.24,00,000/- under section 69A/69B of the Act. Accordingly, the addition of Rs.24,00,000/- made under section 69A/69B of the Act is deleted and the corresponding grounds of appeal are allowed.
7.7 Since the appeal is being allowed on merits by deleting the impugned addition, the other grounds challenging the reopening under section 148 of the Act and the procedural aspects become academic in nature and, therefore, are not adjudicated upon.
8. In the result, the appeal of the assessee is allowed.
The order pronounced in the open Court on 15.10.2026.
