Manish Kashiprasad Seksaria Vs DCIT (ITAT Delhi)
Summary: The Income Tax Appellate Tribunal (ITAT), Mumbai Bench “D”, comprising Shri Om Prakash Kant (Accountant Member) and Shri Rahul Chaudhary (Judicial Member), decided three appeals filed by the assessee for Assessment Years 2017-18, 2018-19 and 2019-20 against the common order dated 09.08.2025 passed by the Commissioner of Income Tax (Appeals)-52. Since the issues involved in all three appeals were common, they were heard together and disposed of by a consolidated order.
The appeals arose from proceedings initiated under Section 153C of the Income-tax Act, 1961 following a search and seizure operation under Section 132 conducted on 17.03.2021 in the case of the Rubberwala Group, including M/s Rubberwala Housing & Infrastructure Ltd. (RHIL). During the search, the Revenue alleged that the assessee had purchased a shop in “Platinum Mall”, Girgaon, Mumbai, and had paid a total cash component of ₹12,64,050 over and above the recorded consideration. The alleged cash payments were attributed to different assessment years as follows:
- A.Y. 2017-18: ₹2,00,000
- A.Y. 2018-19: ₹6,58,600
- A.Y. 2019-20: ₹4,05,450
On the basis of the material allegedly recovered during the search, proceedings under Section 153C were initiated against the assessee.
The Revenue relied primarily on statements recorded during the search, particularly that of Shri Imran Ansari, an employee handling sale and registration of shops in Platinum Mall. According to his statement, the sale consideration consisted of both banking channel payments and cash components, with the allocation allegedly decided by Shri Tabrez Shaikh, Director/CMD of RHIL. The Revenue also relied upon a 16 GB pen drive recovered from Shri Imran Ansari’s residence, which was stated to contain Excel sheets recording alleged cash components received from purchasers. Shri Imran Ansari also stated that purchasers making cash payments were taken to Shri Abrar Ahmed, who received the cash and informed him so that the Excel records and diaries could be updated.
The assessee consistently denied having made any cash payment over and above the agreement value. It was submitted that the assessee had no knowledge of the third parties whose statements were relied upon. The assessee repeatedly requested copies of the statements, the electronic material and other adverse evidence relied upon by the Revenue, and sought an opportunity to cross-examine the persons whose statements formed the basis of the additions. According to the Tribunal, these requests were not accepted by the Assessing Officer. Nevertheless, relying upon the third-party statements and electronic data, the Assessing Officer made additions under Section 69 treating the alleged cash payments as unexplained investments. The Commissioner (Appeals) confirmed the additions for all three years.
Before the Tribunal, the assessee challenged both the validity of the proceedings under Section 153C and the additions under Section 69. It was argued that the incriminating material recovered from the Rubberwala Group did not implicate the assessee, that no corroborative evidence of any actual cash payment existed, and that the additions rested solely on third-party statements and Excel sheets recovered from third-party premises. It was further contended that the statements and electronic material had never been supplied to the assessee and no opportunity of cross-examination had been granted. Reliance was placed upon the Tribunal’s decision in Pravin Khetaramm Purohit v. DCIT, Central Circle, Mumbai.
After considering the rival submissions, the Tribunal found substantial merit in the assessee’s contentions. It observed that where an addition is sought to be made solely on the basis of third-party statements or material allegedly relating to an assessee, the assessee must be confronted with such material and afforded a meaningful opportunity to cross-examine the persons whose statements are relied upon. In the absence of such confrontation and opportunity, the addition cannot be sustained.
Examining the facts of the present case, the Tribunal noted that the alleged incriminating material originated entirely from third-party premises. No documentary evidence such as cash receipts, vouchers, bank records or any document emanating from the assessee evidencing payment of alleged “on-money” was recovered. The Tribunal observed that mere entries in third-party Excel sheets could not, by themselves, constitute substantive evidence unless authenticated, corroborated and independently linked to the assessee. No independent corroborative evidence establishing actual cash payment by the assessee had been brought on record. Further, neither the pen drive nor the statements of Shri Imran Ansari or Shri Tabrez Shaikh had been supplied to the assessee for inspection or cross-examination. The Tribunal held that suspicion, however strong, could not replace proof and that untested third-party admissions could not constitute the sole basis for an addition under Section 69.
The Tribunal also relied extensively upon its earlier decision in Pravin Khetaramm Purohit v. DCIT, wherein additions arising from the same Rubberwala Group search had been deleted on identical facts. It further referred to the earlier Coordinate Bench decision in Rajesh Jain, involving the same search, the same Platinum Mall project, the same employee, the same pen drive, and similar allegations of on-money. The Tribunal observed that those decisions had held that additions based solely on third-party material without corroborative evidence and without granting cross-examination could not be sustained. The Tribunal also referred to Naren Premchang Nagda v. ITO, Heena Dashrath Jhanglani, and the Supreme Court decision in Andaman Timber Industries v. Commissioner of Central Excise, wherein denial of cross-examination was held to constitute a serious violation of the principles of natural justice.
Applying those decisions, the Tribunal found that the facts of the present case were identical. The assessee had consistently denied paying any amount over and above the agreement value. The Assessing Officer had neither confronted the assessee with the complete seized material nor supplied the relevant statements or the contents of the pen drive. The information contained in the pen drive, recovered from a third party, could not be treated as credible evidence in the absence of corroboration. The Tribunal further observed that the Revenue had failed to produce any seized document specifically naming the assessee as having paid on-money or any independent evidence establishing actual payment. Since the adverse material had not been supplied, the Tribunal held that the primary requirements of natural justice had not been satisfied.
In view of these findings, the Tribunal held that the additions made under Section 69 for Assessment Years 2017-18, 2018-19 and 2019-20 were unsustainable. The Assessing Officer was not justified in making additions solely on the basis of third-party statements and electronic data recovered from third parties without supplying the complete material, establishing a reliable year-wise nexus, or bringing independent corroborative evidence on record to prove that the assessee had made the alleged cash payments over and above the documented consideration.
Accordingly, the Tribunal allowed all three appeals filed by the assessee and directed deletion of the additions made under Section 69 for all the assessment years under appeal.
Cases Discussed
- Pravin Khetaramm Purohit v. DCIT, Central Circle, Mumbai (ITAT Mumbai), ITA No. 4742/4743/4744/Mum/2025
- Rajesh Jain (ITAT Mumbai), ITA No. 3842 & 3841 & ITA Nos. 3954, 3952, 3951 and 3950/Mum/2023
- Andaman Timber Industries vs. Commissioner of Central Excise (SC), (2015) 62 taxmann.com 3
- Naren Premchang Nagda vs. ITO (ITAT Mumbai), IT Appeal No. 3265/Mum/2015 dated 08.07.2016
- Heena Dashrath Jhanglani (ITAT Mumbai), ITA No. 1665/Mum./2018 (Assessment Year 2007-08)
