Vikas Kailashchandra Gupta Vs ITO (ITAT Mumbai)
Mumbai ITAT: No Addition for Alleged On-Money Solely on Builder’s Statement Without Corroborative Evidence
The Mumbai ITAT deleted an addition of ₹7.24 lakh made in the hands of a flat purchaser, holding that an alleged on-money payment cannot be taxed merely on the basis of a builder’s statement recorded during a search and documents seized from the builder, in the absence of any independent corroborative evidence against the purchaser.
The assessee had jointly purchased a flat in the Cosmos Group’s “Horizon Twilite” project. Following a search on the builder, the Department relied on the statement of one of the promoters recorded under section 132(4), along with seized loose papers and electronic data, to allege that ₹14.48 lakh had been paid in cash as on-money. Since the property was jointly owned, ₹7.24 lakh was added in the assessee’s hands through reassessment under section 148.
The Tribunal first condoned a 22-day delay in filing the appeal, observing that the delay arose due to the serious illness of the assessee’s counsel and that a liberal approach should be adopted where sufficient cause is shown.
On merits, the Tribunal noted that no search had been conducted on the assessee, nor was any incriminating material, undisclosed cash, bank transaction or other evidence found from the assessee linking him to the alleged cash payment. The entire addition rested only on the builder’s statement and documents seized from the builder’s premises.
The ITAT held that while a statement under section 132(4) and seized material may constitute relevant evidence, they cannot, by themselves, justify an addition in the hands of a third party unless the Revenue establishes a clear nexus through independent and reliable corroborative evidence. Mere entries in the builder’s records do not prove that the purchaser actually paid on-money.
The Tribunal relied on its earlier decision in Mrs. Mopnika Anand Gupta v. ITO, arising from the same Cosmos Group search, and on the Supreme Court’s ruling in CIT v. P.V. Kalyanasundaram, reiterating that suspicion, however strong, cannot substitute legal proof and that additions based solely on a third party’s statement are unsustainable.
Accordingly, the ITAT set aside the orders of the lower authorities and directed the Assessing Officer to delete the addition of ₹7.24 lakh, allowing the assessee’s appeal.
Cases Discussed
- Mopnika Anand Gupta vs. ITO Ward1(2), Kalyan (ITAT Mumbai), ITA No.5561/Mum/2018
- CIT v. P.V. Kalyanasundaram (Supreme Court), 164 Taxman 78 (SC)
- Balakrishnan v. M. Krishnamurthy (Supreme Court), (1998) 7 SCC 123
- Collector, Land Acquisition v. Mst. Katiji & Ors. (Supreme Court), (1987) 167 ITR 471 (SC)
FULL TEXT OF THE ORDER OF ITAT MUMBAI
Present appeal filed by the assessee arises out of the order dated 29/09/2025 passed by Ld. Commissioner of Income Tax (Appeals), Agra [hereinafter referred to as “Ld.CIT(A)”] for AY 2011 12, on the following grounds of appeal:-
“1) The Ld. CIT (A) erred in not considering the fact that the impugned notice us. 148 was illegal since the reasons recorded before issuing the same were baseless, and as such, the reassessment proceedings in pursuance thereof is vitiated.
2) The Ld. CIT (A) also failed to consider that the impugned order is passed mechanically by the Ld. Assessing Officer without affording an opportunity to the appellant to defend his case, and as such, the same is liable to be annulled on account of non application of mind and violation of principles of natural justice.
3) The Ld. CIT (A) also failed to consider that the appellant was never given any opportunity to cross-examine the person who made the statement against the appellant, much less, the alleged material was never provided to him, and as such, the same is violation of principle of natural justice.
4) The Ld. CIT (A) lost sight of the fact that any statement made by and person u/s. 132(4) cannot be used against any third person and therefore the impugned addition based thereon made by the Ld. Assessing Officer is illegal.
5) The aforesaid issues is already covered under the decision of the Hon’ble Supreme Court in case of CIT Vs P.V Kalyansundasram 164 Taxman 78(SC).
6) The Ld. CIT (A) erred in overlooking the decision of the Hon’ble ITAT “SMC” Bench Mumbai, in case of Monika A. Gupta Vs Income Tax Officer Ward 1(2) Kalyan ITA No. 5561/Mum/2018, a family member of the appellant.
7) The Ld. CIT (A) thus erred in completely disregarding the decision of Hon’ble Supreme Court in the aforesaid judgment i.e. CIT Vs P.V Kalyansundasram 164 Taxman 78(SC) and the Hon’ble ITAT “SMC” Bench Mumbai in Monika A. Gupta Vs Income Tax Officer Ward 1(2) Kalyan ITA No. 5561/Mum/2018 by making not even whisper of both the said decisions in the entire order.
8) It is therefore prayed that the Hon’ble Members may be pleased to delete the impugned addition amounting to Rs. 724000/- in A.Y. 2011-12 or in alternative the Hon’ble Members may be pleased to pass any such other order or orders in favor of the appellant in the interest of justice.”
