The ITAT Chandigarh in Amarjot Singh Sohi (HUF) vs ITO held that an addition of ₹8,00,000 under section 69 read with section 115BBE was unsustainable where it was based solely on third-party search material, namely an excel sheet and statements recorded during a search on another entity, without any independent corroboration or opportunity for cross-examination. The assessee had purchased a commercial property through banking channels and substantiated the transaction with documentary evidence including bank statements, agreement, confirmation from the seller, Form 26AS, and an affidavit denying any cash payment. Despite this, the Assessing Officer relied entirely on unverified third-party data and statements, which was upheld by the CIT(A). The Tribunal ruled that such material lacks evidentiary value without corroboration and that denial of cross-examination violates natural justice. It emphasized that the burden of proof lies on the department and cannot be discharged through presumptions. Accordingly, the addition was deleted.
Core Issue
The core issue involved in the present appeal was whether an addition of ₹8,00,000 made under section 69 read with section 115BBE of the Income-tax Act could be sustained solely on the basis of third-party search material, namely an excel sheet allegedly found during a search on the Omaxe Group and statements recorded under section 132(4), without any independent corroborative evidence and without granting the assessee an opportunity of cross-examination.
Facts of the Case
The assessee, a Hindu Undivided Family, had purchased a commercial shop from M/s Omaxe Ltd. in its project located at Mullanpur. The purchase consideration, as per the assessee, was entirely discharged through proper banking channels and duly recorded in the books of account. The payments were supported by bank statements, reflected in Form 26AS, and were also in line with the written agreement executed with the seller.
Subsequently, a search and seizure operation was conducted by the Income Tax Department on the Omaxe Group. During the course of such search, certain electronic data in the form of an excel sheet was allegedly found, which contained details of cash transactions pertaining to various buyers. Based on this material and statements recorded from officials of Omaxe Ltd. under section 132(4), it was inferred by the department that the assessee had made a cash payment of ₹8,00,000 in addition to the recorded consideration.
On the basis of this information, the assessee’s case was reopened under section 147, and notice under section 148 was issued. During reassessment proceedings, the Assessing Officer confronted the assessee with the alleged entries in the excel sheet. However, the assessee categorically denied having made any cash payment and reiterated that the entire transaction was carried out through banking channels. In support, the assessee furnished complete documentary evidence including bank statements, payment details, confirmation from Omaxe Ltd., and Form 26AS. The assessee also filed an affidavit affirming that no cash payment had been made in the said transaction.
Despite this, the Assessing Officer relied heavily on the seized excel sheet and statements of Omaxe officials. It was further alleged that the figures in the excel sheet were recorded in a suppressed manner by applying a factor of 100, and accordingly, the cash component attributable to the assessee was computed at ₹8,00,000. The Assessing Officer did not provide any opportunity to the assessee to cross-examine the persons whose statements were relied upon.
Findings of the Assessing Officer
The Assessing Officer concluded that the assessee had made an unaccounted cash payment of ₹8,00,000 for purchase of the shop. The conclusion was primarily based on the entries found in the excel sheet seized during the search and the statements recorded from Omaxe officials. The documentary evidences furnished by the assessee were disregarded, and the denial of cash payment was not accepted. Accordingly, the amount of ₹8,00,000 was treated as unexplained investment under section 69 and taxed under section 115BBE.
Findings of the CIT(A)
The Commissioner of Income Tax (Appeals), NFAC, upheld the action of the Assessing Officer. The CIT(A) concurred with the view that the seized material and statements constituted sufficient evidence to justify the addition and dismissed the assessee’s contentions regarding lack of corroboration and denial of cross-examination.
Findings of the ITAT
The Tribunal, after considering the rival submissions and material on record, deleted the addition and allowed the appeal of the assessee. It was observed that the entire case of the Assessing Officer was based on third-party material and statements recorded during the search on another entity. The Tribunal emphasized that no opportunity of cross-examination was provided to the assessee, which amounted to a clear violation of the principles of natural justice.
The ITAT further held that the burden of proving that any cash payment was made rested upon the Assessing Officer. In the present case, the assessee had discharged its onus by furnishing all primary evidences such as bank statements, agreement, confirmation from the seller, Form 26AS, and even an affidavit denying any cash payment. On the contrary, the Assessing Officer failed to bring any independent or corroborative evidence to substantiate the allegation of cash payment.
The Tribunal also noted that the excel sheet relied upon by the Assessing Officer was not supported by any verification or corroboration and, therefore, could not be treated as conclusive evidence. It reiterated the settled legal position that no addition can be made merely on the basis of presumptions, assumptions, or unverified third-party documents.
Importantly, the Tribunal observed that the assessee cannot be expected to prove a negative fact, i.e., that no cash payment was made. Once the assessee had provided all available documentary evidence supporting the transaction through banking channels, the onus shifted to the department, which remained undischarged.
Cases Relied Upon (Principles Applied)
The Tribunal applied settled judicial principles, including that additions cannot be sustained solely on third-party statements without granting cross-examination, that loose sheets or unverified electronic data have weak evidentiary value unless corroborated, and that the burden of proof for invoking section 69 lies on the Assessing Officer. It also relied on the broader principle that suspicion, however strong, cannot take the place of evidence.
Final Outcome
In view of the above findings, the Tribunal held that the addition of ₹8,00,000 was unsustainable in law and directed its deletion. The appeal of the assessee was accordingly allowed, and the Assessing Officer was directed to recompute the income.
Author Bio
