Third-Party Excel Data Cannot Prove Unaccounted Cash Transactions Without Corroboration: ITAT Chennai

DCIT Vs SAS Hotels and Enterprises Limited (ITAT Chennai)

A Spreadsheet Entry Is Not a Cash Loan: ITAT Deletes Additions Against SAS Hotels

The dispute

A search of the Appaswamy Group led the Assessing Officer (AO) to make two sets of additions against SAS Hotels and Enterprises Limited. The first concerned alleged cash loans or receipts involving the Casagrand Group and presumed interest on those transactions. The second concerned alleged unaccounted cash from apartment sales. The Commissioner of Income Tax (Appeals) deleted both sets of additions. In a consolidated order covering assessment years 2017–18 to 2021–22, the Chennai ITAT dismissed all five Revenue appeals.

The third-party spreadsheet

The cash-loan allegation rested chiefly on Excel files in a pen drive seized from the residence of P. Ramji, a Casagrand employee, along with a statement from an Appaswamy employee that was later retracted. The AO treated spreadsheet entries as evidence of transactions involving SAS Hotels and added a total of ₹24.19 crore across four assessment years. He also added ₹73.50 lakh as alleged interest income across three years.

SAS Hotels pointed to a documented transaction that gave the entries a different context. It had received ₹12.50 crore through banking channels as an advance relating to a commercial property on TTK Road and refunded it when the transaction was cancelled. The AO had interpreted a spreadsheet notation of ₹50 lakh described as “cash conversion” as a cash transaction, although the corresponding entry in the company’s bank ledger related to the property advance.

The Tribunal held that the seized spreadsheet did not establish that SAS Hotels had advanced or received the alleged cash. The direction and nature of the supposed transactions were unclear. There was no demonstrated movement of cash, no loan agreement or promissory note, and no reliable trail showing a source or use of funds. The records also lacked coherent opening and closing balances. The general employee statement did not fill those gaps.

What Section 69 required

For an addition as an unexplained investment under Section 69, the AO first had to establish that the assessee had actually made an investment in the relevant year. Only then would the question of explaining its source arise. An ambiguous entry in a third party’s electronic record could not, on its own, prove that foundational fact.

The Tribunal also addressed the statutory presumptions concerning seized material under Sections 132(4A) and 292C. Those presumptions are rebuttable; they did not justify mechanically treating a person named in another party’s record as having carried out an unrecorded transaction. SAS Hotels had sought to cross-examine P. Ramji, but that opportunity was not provided. With no independent corroboration, the spreadsheet and statements could not sustain the additions.

The presumed interest failed for a related reason. The AO had not first proved the underlying cash loans or receipts, and there was no reliable evidence of an agreed interest rate, period, accrual or payment. The Tribunal therefore upheld the deletion of both the cash-transaction additions and the associated interest additions.

The apartment-sale additions

The AO had separately alleged that SAS Hotels received cash over and above the recorded prices of residential flats. Relying on WhatsApp messages, loose sheets, changes in an ERP system, employee statements and a price-estimation method using median rates and an assumed discount, he added ₹82.92 lakh for 2019–20, ₹3.49 crore for 2020–21 and ₹37.60 lakh for 2021–22.

The CIT(A) found no customer confirmation, unaccounted cash, parallel books or independent money trail establishing those receipts. The recorded sales were supported by registered documents, ERP records and bank receipts, while the AO had not identified specific defects in the books. Differences between estimated and recorded selling prices could not, without more, establish that buyers had paid cash.

The Tribunal noted that a coordinate Bench had already considered the same search material and estimation method in Ivar Estates Private Limited v. ACIT. Although the additions here concerned different group entities, projects and years, the Revenue identified no separate evidence proving actual cash receipts by SAS Hotels. Following that decision, the Tribunal upheld the deletion of the apartment-sale additions as well.

Author’s comment

The order turns on the gap between a lead for investigation and proof of a taxable transaction. Electronic records and employee statements may prompt scrutiny, but the AO still has to connect them to the assessee, the relevant year and an actual flow of money. That connection was missing for both the alleged Casagrand dealings and the estimated apartment-sale receipts. The decision leaves room for additions founded on properly tested, corroborated evidence; it rejects the conversion of unexplained notations and pricing estimates into income by assumption.

Cases Discussed

• M/s. Ivar Estates Private Limited v. ACIT, ITA No. 1857/Chny/2026 (ITAT Chennai) — Followed; the coordinate Bench had considered the same Appaswamy Group search material and identical methodology for estimating alleged unaccounted cash from apartment sales, and no distinguishing independent evidence was shown in SAS Hotels’ case.
• ACIT v. Bannari Amman Educational Trust, ITA Nos. 3310 to 3314/Chny/2024 and connected appeals, order dated 14.08.2025 (ITAT Chennai) — Relied upon on third-party seized material, need for independent corroboration and the effect of denying requested cross-examination.
• Rangamani Krishnan v. DCIT [2025] 176 taxmann.com 912 (Chennai-Trib.) — Relied upon for the principle that unilateral electronic records or notings recovered from a third party cannot establish undisclosed income or investment without independent evidence of the underlying transaction.
• Prema Devi, ITA Nos. 563 to 567/Chny/2023, order dated 27.06.2025 (ITAT Chennai) — Relied upon concerning the evidentiary limitations of electronic records and notings recovered from third parties.
• Andaman Timber Industries v. CCE [2015] 62 taxmann.com 3 / 52 GST 355 (Supreme Court) — Relied upon; denial of cross-examination where adverse witness material forms the basis of the action constitutes a serious violation of natural justice.
• Common Cause (A Registered Society) v. Union of India (2017) 394 ITR 220 (SC) — Relied upon concerning the limited evidentiary value of uncorroborated entries in loose sheets and similar records.
• CBI v. V.C. Shukla (1998) 3 SCC 410 (Supreme Court) — Relied upon for the evidentiary limitation of entries made in records where liability of another person is sought to be inferred without reliable supporting evidence.
• Pullangode Rubber Produce Co. Ltd. v. State of Kerala (1973) 91 ITR 18 (SC) — Cited on the principle that an admission is important evidence but is not conclusive and its maker may demonstrate that it is incorrect.
• Satinder Kumar (HUF) v. CIT (1977) 106 ITR 64 (SC) — Cited regarding the evidentiary effect of an admission made under a mistaken understanding or misconception of facts.
• CIT v. Smt. S. Jayalakshmi Ammal [2016] 74 taxmann.com 35 (Madras High Court) — Cited for the proposition that an uncorroborated statement under Section 132(4) cannot by itself sustain an addition.
• CIT Central-III v. Lavanya Land Pvt. Ltd. and Others (2017) 397 ITR 246 (Bombay High Court) — Cited concerning additions founded on statements made during search that were subsequently retracted.
• Kailashben Mangarlal Chokshi v. CIT [2008] 174 Taxman 466 (Gujarat High Court) — Cited concerning the evidentiary treatment of a retracted statement alleged to have been recorded under coercive circumstances.
• First Global Stockbroking Pvt. Ltd. v. ACIT [2008] 115 TTJ 173 (ITAT Mumbai) — Cited for the proposition that a statement may prompt further enquiry but, particularly after retraction, cannot by itself sustain an addition.
• Umacharan Shaw & Brothers v. CIT (1959) 37 ITR 271 (SC) — Relied upon for the principle that suspicion, however strong, cannot take the place of proof.
• Mehta Parikh & Co. v. ITO (1956) 30 ITR 181 (SC) — Cited in the appellate discussion concerning the evidentiary treatment of unrebutted material.
• Daulat Ram Rawatmull v. CIT — Cited in the appellate discussion concerning proof and evidentiary burden.

FULL TEXT OF THE ORDER OF ITAT CHENNAI

These five appeals preferred by the Revenue are directed against the common order dated 16.04.2026 passed by the learned Commissioner of Income Tax (Appeals)–19, Chennai [hereinafter referred to as “the ld.CIT(A)”], arising out of the separate assessment orders passed by the Deputy Commissioner of Income Tax, Central Circle-2(1), Chennai [hereinafter referred to as “the AO”], for the assessment years 2017-18 to 2021-22. Since the appeals arise out of a common appellate order, they are taken up together for hearing and are being disposed of by this consolidated order for the sake of convenience and brevity.

2. We note that the present appeals preferred by the Revenue are barred by limitation by 20 days in respect of appeal for the Asst. year 2017-18 and 21 days in other four appeals. The Revenue has filed petitions seeking condonation of the delay in filing the respective appeals, duly explaining the circumstances which occasioned such delay. We have heard the rival submissions and carefully perused the petitions filed by the Revenue, along with the reasons adduced therein for seeking condonation of delay.

3. Upon consideration of the explanations furnished by the Revenue and the facts and circumstances of the case, we are satisfied that the Revenue was prevented by sufficient cause from presenting the appeals within the prescribed period of limitation. It is a settled principle of law that, while considering an application for condonation of delay, the expression “sufficient cause” is required to be construed in a manner that advances the cause of substantial justice, provided the delay is neither deliberate nor attributable to gross negligence or lack of bona fides. In the present cases, having regard to the reasons explained in the condonation petitions, we find that the delay has been satisfactorily explained and that sufficient cause has been made out for condonation thereof.

4. Accordingly, in the interest of substantial justice, we condone the delay in filing all the aforesaid appeals preferred by the Revenue and admit the same for adjudication on merits. We shall now proceed to dispose of the appeals on merits in accordance with law.

5. The brief facts of the case as emanating from the records are that the assessee is a company engaged in the business of real estate development and hospitality. A search and seizure operation u/s.132 of the Income-tax Act, 1961 (hereinafter referred to as “the Act”), was conducted on 03.11.2023 in the case of M/s.Appaswamy Real Estates Ltd. and its group concerns, including the assessee company. Consequent to the search, the AO, on the basis of the material gathered during the search proceedings, reopened the assessments for the assessment years under consideration by issuing notices u/s.148 of the Act. In response thereto, the assessee filed its returns of income. Subsequently, statutory notices u/s.142(1) of the Act were issued calling for various details and explanations, which were furnished by the assessee. During the course of reassessment proceedings, the AO examined, inter alia, two issues relating to alleged cash loans advanced to the Casagrand Group and alleged collection of unaccounted cash from customers in connection with the sale of apartments.

6. During the course of search conducted at the residence of Shri P.Ramji, an employee of the Casagrand Group, a pen drive was found and seized. On examination of the contents of the said pen drive, certain Excel sheets containing particulars of cash inflows and outflows pertaining to the Casagrand Group were found. The said Excel sheets also contained entries purportedly relating to cash transactions between the Casagrand Group and the Appaswamy Group. On the basis of these entries, the Investigation Wing inferred that substantial cash transactions had taken place between the two groups over different financial years, involving advancement of cash loans, repayment thereof and payment of interest in cash.

7. Further, during the course of search conducted at the residence of Shri T.V.Sathyanarayana, an employee of the Appaswamy Group, a statement u/s.132(4) of the Act was recorded. In the said statement, he stated that he had received and disbursed cash on behalf of the group as per the directions of its Chairman. He further stated that representatives of the Casagrand Group used to deliver and collect cash from the office of the Appaswamy Group. However, he expressed his lack of knowledge regarding the nature and purpose of such transactions.

8. During the course of reassessment proceedings, the AO examined the entries contained in the seized Excel sheets and compared the same with certain transactions recorded in the books of account of the assessee. In particular, the AO referred to a transaction dated 16.12.2016 involving receipt of substantial amounts through banking channels from the Casagrand Group. The AO interpreted the said transaction in conjunction with the narration “cash conversion” appearing in the seized Excel sheets and considered the same as corroborative evidence of the alleged cash dealings between the two groups.

9. On the basis of the seized electronic records, the statement recorded u/s.132(4) of the Act and the transactions appearing in the books of account, the AO worked out the alleged cash loans advanced and interest income earned by the assessee for the respective assessment years. Accordingly, the AO issued show-cause notices proposing to bring to tax the alleged undisclosed interest income and unexplained investment in the form of cash loans u/s.69 of the Act.

10. In response to the show-cause notices, the assessee denied having advanced any cash loans to the Casagrand Group or having received any interest thereon in cash. It was submitted that the only transaction entered into with the Casagrand Group was a commercial property transaction relating to a property situated at TTK Road, Chennai. According to the assessee, advances in connection with the said transaction were received through banking channels and were subsequently refunded upon cancellation of the transaction.

11. The assessee further contended that the Excel sheets relied upon by the AO were third-party documents recovered from the possession of an employee of the Casagrand Group and did not form part of the assessee’s books of account. It was submitted that the entries contained therein were unverified and were not supported by any independent corroborative evidence. The assessee also pointed out that no cash, promissory notes, loan agreements, vouchers or other documents evidencing the alleged cash loans were found during the search conducted at its premises. It was, therefore, contended that the seized Excel sheets were merely rough or unverified records, commonly referred to as “dumb documents”, and could not, by themselves, form the basis for making additions in the hands of the assessee.

12. As regards the statement of Shri T.V.Sathyanarayana, the assessee submitted that the same had been obtained under coercion during prolonged search proceedings and had subsequently been retracted. The assessee also relied upon medical evidence in support of its contention regarding the circumstances under which the statement was recorded. It was further submitted that the statement did not establish the nature of the alleged transactions or substantiate the year-wise quantification of the cash loans and interest income.

13. The AO, however, did not accept the explanations furnished by the assessee. According to the AO, the seized Excel sheets contained systematic and detailed records of cash transactions and, therefore, could not be regarded as dumb documents. The AO also placed reliance on the statement recorded u/s.132(4) of the Act and held that the subsequent retraction was belated and unacceptable. The AO further observed that certain entries in the seized electronic records stood corroborated by transactions appearing in the assessee’s books of account. Accordingly, the AO concluded that the assessee had advanced unaccounted cash loans to the Casagrand Group and earned undisclosed interest income thereon.

14. Consequently, the AO made the following additions for the assessment years under consideration:

AY	Undisclosed interest income (Rs.)	Unexplained investment in the form of cash loans/receipts u/s.69 (Rs.)
2017-18	26,00,000	5,50,00,000
2018-19	44,50,000	3,25,00,000
2019-20	3,00,000	9,43,64,500
2020-21	–	–
2021-22	–	6,00,00,000

15. The second issue arising for consideration relates to the alleged collection of unaccounted cash from customers in connection with the sale of apartments. During the course of search conducted at the corporate office and other premises of the Appaswamy Group, various electronic devices, loose sheets, books of account and other documents were found and seized. On examination of the mobile phones belonging to certain sales managers, the search team found WhatsApp conversations with customers, which, according to the Investigation Wing, indicated negotiations and discussions regarding payment of a cash component over and above the sale consideration recorded in the books of account.

16. The search team also found certain loose sheets containing particulars such as unit numbers, actual price, final price, car parking charges and other details relating to the sale of apartments. According to the Investigation Wing, these documents indicated differences between the actual sale consideration allegedly agreed upon with customers and the consideration recorded in the books of account.

17. During the course of search, statements u/s.132(4) of the Act were recorded from several employees of the Appaswamy Group, including sales managers and personnel associated with its systems department. In their statements, the employees stated that cash was collected from customers over and above the recorded sale consideration and that corresponding reductions were made in the sale prices recorded in the ERP/CRM software, namely, Build Super Fast (BSF). It was further stated that, while a discount of approximately 5% was ordinarily permissible, reductions in the recorded sale price beyond the said percentage represented cash received from customers outside the books of account. According to the statements, such post-booking modifications were carried out in the software on the instructions of senior management.

18. In order to ascertain whether post-booking modifications of sale prices were technically possible in the BSF software, the implementation consultant of the software vendor was examined on oath. He confirmed that the software permitted modification of sale prices even after booking of the units. Statements were also recorded from the AGM (Systems), Vice President (Sales) and other senior officials of the group, who stated that sale prices were modified in the ERP system on management instructions. The AO also relied upon the statement of a senior executive of the group regarding the alleged receipt of unaccounted cash in connection with apartment sales.

19. During the course of reassessment proceedings, the AO examined the seized electronic data, loose sheets, ERP reports and statements recorded from the employees and senior executives. On the basis of the said material, the AO formed a view that the assessee group had been collecting cash from customers over and above the consideration recorded in its books and suppressing the actual sale consideration by subsequently reducing the prices recorded in the ERP system.

20. For the purpose of quantifying the alleged unaccounted cash receipts, the AO compared the rates appearing in the master price sheets or the inferred actual sale rates, including median rates, with the final sale prices recorded in the ERP system. After allowing a standard discount of 5%, the AO treated the difference as representing unaccounted cash received from customers. On this basis, the alleged cash receipts were quantified project-wise and year-wise. The aggregate unaccounted cash receipts attributed to the assessee for the period covering assessment years 2019-20 to 2024-25 were worked out at Rs.17,53,84,476, out of which the following amounts were attributed to the assessment years presently under consideration:

AY	Alleged undisclosed income from sale of flats (Rs.)
2019-20	82,92,000
2020-21	3,49,31,150
2021-22	37,60,100

21. Accordingly, the AO issued show-cause notices proposing to treat the aforesaid amounts as undisclosed income arising from the sale of apartments. In response, the assessee denied having received any unaccounted cash from customers and contended that the entire quantification was based on assumptions, presumptions and estimates. It was submitted that the WhatsApp conversations did not conclusively establish actual receipt of cash and that the differences in sale prices were attributable to various commercial considerations, including negotiated discounts, location-specific factors, bulk bookings, commercial expediency and prevailing industry practices.

22. The assessee further contended that no incriminating material establishing actual receipt of cash from customers had been found during the course of search. It was also submitted that the statements of the employees had been obtained under coercion and duress and were subsequently retracted by way of affidavits. The assessee, therefore, disputed both the existence of the alleged unaccounted cash receipts and the methodology adopted by the AO for quantifying the same.

23. The AO, however, rejected the explanations furnished by the assessee. The AO held that the retractions made by the employees were not supported by cogent evidence establishing coercion or duress. According to the AO, the statements had been recorded after confronting the respective deponents with the incriminating material found during the search. The AO further observed that the consistency in the statements of various employees was attributable to the common modus operandi followed by the sales team and not to any alleged coercion.

24. The AO also held that the absence of seizure of physical cash, jewellery or other assets did not negate the findings regarding unaccounted cash receipts, particularly when the same were supported by electronic evidence, internal records and sworn statements. The methodology adopted for quantification was considered reasonable by the AO, as it was based on the assessee’s own data and the explanations furnished during the course of search proceedings.

25. Accordingly, the AO concluded that the assessee had received unaccounted cash from customers in connection with the sale of apartments, which had not been recorded in its books of account. Consequently, additions of Rs.82,92,000/-, Rs.3,49,31,150/- and Rs.37,60,100/- were made to the returned income for assessment years 2019-20, 2020-21 and 2021-22, respectively.

26. Thus, the AO, after considering the seized material, statements recorded during the search and explanations furnished by the assessee, completed the assessment for assessment years 2017-18 to 2021-22 by making additions towards alleged undisclosed interest income, unexplained investment in the form of cash loans/receipts advanced to the Casagrand Group and alleged unaccounted cash receipts from the sale of apartments.

27. Aggrieved by the additions made in the assessment orders, the assessee has challenged the action of the AO in the appeal before the Ld.CIT(A).

28. Aggrieved by the additions made by the AO, the assessee preferred appeals before the ld.CIT(A). The ld.CIT(A), vide consolidated order dated 16.04.2026 passed u/s.250 of the Act, considered the submissions of the assessee, the material available on record and the judicial precedents relied upon, and adjudicated the two substantive issues as under.

29. In respect of the additions made towards alleged cash loans advanced to the Casagrand Group and undisclosed interest income, the ld.CIT(A) observed that the additions were primarily founded on Excel sheets recovered from a pen drive seized from the residence of an employee of the Casagrand Group and the statement of Shri T.V. Sathyanarayana recorded u/s.132(4) of the Act, which was subsequently retracted. The ld.CIT(A) held that the AO had failed to independently verify the contents of the third-party material or bring on record any credible evidence establishing a direct nexus between the assessee and the alleged cash transactions. It was further observed that no supporting documentation, independent enquiry or tangible evidence had been brought on record to substantiate the alleged advancement of cash loans or receipt of interest thereon.

30. The ld.CIT(A) held that unverified electronic records or third-party documents, which do not form part of the regular books of account, cannot, in the absence of independent corroboration, constitute sufficient evidence for making additions in the hands of the assessee. The ld.CIT(A) further held that the statement subsequently retracted, without independent corroborative material, could not sustain the additions. Accordingly, the ld.CIT(A) concluded that the AO had failed to establish that the assessee had actually advanced the alleged cash loans or earned undisclosed interest income. Consequently, the ld.CIT(A) deleted the entire additions made towards undisclosed interest income and unexplained investment in the form of cash loans u/s.69 of the Act for the assessment years under consideration.

31. As regards the additions made towards alleged unaccounted cash receipts from the sale of apartments, the ld.CIT(A) examined the WhatsApp conversations, loose sheets, ERP records, statements of employees and the methodology adopted by the AO for quantifying the alleged on-money receipts.

32. The ld.CIT(A) further observed that the statements of the employees relied upon by the AO had subsequently been retracted and that no independent corroboration had been obtained. It was also noted that the books of account of the assessee had been accepted without rejection and that the recorded sale consideration was supported by registered documents, ERP records and bank receipts. The ld.CIT(A) held that the substitution of the actual sale consideration with notional selling prices, by adopting median rates and extrapolating the alleged differences, was based on assumptions and estimates without cogent supporting evidence. Accordingly, the ld.CIT(A) held that the additions made towards alleged unaccounted cash receipts from the sale of apartments were unsustainable both on facts and in law. Consequently, the ld.CIT(A) directed the AO to delete the additions made for assessment years 2019-20, 2020-21 and 2021-22, respectively.

33. Thus, the ld.CIT(A) deleted the entire additions made by the AO on both the aforesaid substantive issues for the assessment years under consideration. Aggrieved by the relief granted by the ld.CIT(A), the Revenue is in appeal before us. Considering the commonality of the issues involved in the present appeals and the similarity of the grounds raised therein, as well as the submissions advanced by the learned representatives of both the parties, we deem it appropriate to adjudicate the appeals issue-wise, for the sake of convenience and to avoid repetition, as under.

Issue No.1: Addition towards undisclosed interest income / unexplained investments in the form of cash loans/receipts u/s.69 of the Act (A.Ys 2017-18, 2018-19 and 2019-20)

34. The observations of the ld.CIT(A) in deleting the additions are as under:

“6.2.14 It is also pertinent to note that the statutory presumptions contemplated u/s 132(4A) and 292C of the Act are limited in their application and operate only against the person from whose possession or control the documents are found. Such presumptions cannot be extended to implicate a third party in the absence of independent material establishing a nexus. In the present case, the excel sheets were neither found in the possession of the appellant nor shown to have been authored, maintained, or acknowledged by the appellant. Consequently, no adverse inference can be drawn against the appellant merely on the basis of such third-party material. In the absence of any corroborative evidence demonstrating that the appellant was a party to the alleged transactions recorded in the said documents, the reliance placed by the AO on these sheets is devoid of legal foundation.

6.2.15 As evident in the assessment order, it can be seen that the appellant in response to the show cause notice has specifically requested the AO to afford an opportunity to cross examine Shri. Ramji. P from whose custody the materials were seized. Whereas the AO is conspicuously silent on this aspect. At this juncture, it is more significant to rely upon the decision of the Hon’ble Apex Court in the case of Andaman Timber Industries Ltd v. CCE [2015] 62 taxmann.com 3/52 GST 355, where in it has been held as under:

“According to us, not allowing the assessee to cross-examine the witnesses by the Adjudicating Authority though the statements of those witnesses were made the basis of the impugned order is a serious flaw which makes the order nullity inasmuch as it amounted to violation of principles of natural justice because of which the assessee was adversely affected.”

8.40 In view of the above judicial precedents (supra) and the reasons elaborately set out above, we are of the considered view that, the AO’s failure to allow the assessee opportunity to cross examine this Departmental witness, Shri XXXXXX, on whose statement he was relying upon, was a serious and fundamental error which rendered the impugned addition(s) to be untenable.

6.2.16 Further, the Hon’ble jurisdictional tribunal in the case of M/s. Bannari Amman Educational Trust v. ACIT, Central Circle-3(2) Chennai in 3310 to 3314/Chny/2024 dated 14.08.2025 has relied on above decision of the Hon’ble Apex Court. Therefore, in view of the above specific decision of the jurisdictional tribunal, the undersigned holds that the failure of the AO to grant cross-examination, despite a specific request by the appellant, constitutes a procedural infirmity and a violation of the principles of natural justice.

6.2.17 A careful and comprehensive examination of the material on record clearly demonstrates that the additions made by the AO are devoid of any corroborative evidence. In the present case, the appellant was subjected to an extensive and elaborate search operation u/s 132 of the Act, covering its business premises as well as the residences of key personnel over multiple days. Despite such a detailed and intrusive search, no incriminating material whatsoever was unearthed in the hands of the appellant. Specifically, no unaccounted cash was found or seized, no documents such as promissory notes, loan agreements, receipts, vouchers or confirmations evidencing any cash transactions were discovered, and no parallel books of account or records indicating unaccounted dealings were found. Further, there is no material brought on record to establish any trail of movement of funds, either in terms of source, application, or circulation of the alleged cash. The absence of such primary evidence, despite a full-fledged search, assumes significant importance and goes to the root of the matter.

6.2.18 In stark contrast, the entire basis of the addition rests solely on certain entries found in an excel sheet seized from a third-party premises, namely an employee of another group. It is an admitted position that such material was neither found in the possession of the appellant nor forms part of its books of account. No independent verification or enquiry has been conducted by the AO to establish any nexus between the said third-party entries and the appellant. No confirmation from the alleged counterparty has been obtained, nor has any effort been made to substantiate the entries through cogent evidence. The reliance placed by the AO on such third-party material, in the absence of any corroboration from the appellant’s side, is legally untenable. It  is a settled position that entries in loose sheets or electronic data recovered from a third party, without independent evidence linking the same to the assessee, cannot be made the sole basis for addition.

6.2.19 In the present case, the AO has proceeded purely on the basis of inferences drawn from such third-party entries, without bringing on record any credible or independent material to substantiate the alleged transactions. The additions are thus based on suspicion and conjecture rather than on legally admissible evidence. The presumption u/s 132(4A) or section 292C is confined only to the person from whose possession the material is found and cannot be extended to implicate another person without supporting evidence. In view of the above, and considering that no incriminating material was found during the search in the appellant’s own case, the additions made solely on the basis of uncorroborated third-party documents cannot be sustained in law.

6.2.20 As evident in the assessment order(s) passed, it can be seen that the AO has placed reliance on the statement recorded from Shri T.V. Sathyanarayana u/s 132(4) of the Act to support the addition(s) made on this issue. However, it is an undisputed fact that the said statement was subsequently retracted by the deponent. The retraction has not been made as a mere afterthought, but is substantiated by medical records indicating that the statement was recorded while the deponent was under considerable physical and mental strain, thereby raising serious doubts as to the voluntariness and reliability of the statement at the time it was made.

6.2.21 In law, a statement recorded u/s 132(4) of the Act, though relevant, does not attain conclusive evidentiary status, particularly when it stands retracted at a later stage with plausible explanation. It is a settled principle that a retracted statement cannot, by itself, form the sole foundation for making an addition, unless it is supported by cogent, independent, and credible material evidence establishing the correctness of the contents of such statement. The burden, in such circumstances, lies heavily on the AO to demonstrate that the admission made earlier was true and was not influenced by extraneous factors. In this regard

• • In the case of Pullangode Rubber Produce Co. Ltd. vs. State of Kerala [1973] 91 ITR 18 (SC): Their Lordships while observing that admission is an extremely important piece of evidence, held that, it cannot be said to be conclusive and the maker can show that it was incorrect. [Also refer S. Arjun Singh v. CWT [1989] 175 ITR 91/[1988] 41 Taxman 272 (Del.)].
  • Satinder Kumar (HUF) v. CIT [1977] 106 ITR 64 (SC): It was held that it is true that an admission made by an assessee constitutes a relevant piece of evidence but if the assessee contends that in making the admission he had proceeded on a mistaken understanding or on misconception of facts or on untrue facts such an admission cannot be relied upon without first considering the aforesaid contention.

• • The Hon’ble Jurisdictional Madras High Court in a judgement rendered in the case of Commissioner of Income-tax, Tiruchirapalli Vs Smt. S. Jayalakshmi Ammal [2016] 74 taxmann.com 35 (Madras) has held that where addition of undisclosed income was made on basis of mere statement given by his son under section 132(4) which was not corroborated by any material evidence, neither such statement would be a conclusive evidence, nor any addition could be made.
  • In M/s. Rhythm Real Estates Pvt. Ltd & Ors. vs. Income Tax Officer, the Mumbai Bench of Income Tax Appellate Tribunal (ITAT) deleted the addition made under section 69B of the Income Tax Act, 1961 as the Assessing Officer had no other corroborative evidence indicating cash payment of on-money by the assessee.
  • In CIT Central-III v. Lavanya Land Pvt. Ltd. and Others [2017] 397 ITR 246 (Bom.), the Hon’ble Bombay High Court dismissed an appeal filed by the revenue against ITAT, Mumbai had set aside the additions made by the revenue based on the statement made by person during search which was later retracted by him.
  • Hon’ble Mumbai ITAT First Global Stockbroking Pvt Ltd vs ACIT [2008] 115 TTJ 173 Mumbai has held that

“Section 132(4)/158B(b) of the Income-tax Act, 1961 Search and seizure – General-Evidence given by him may be a good factor for probing issue further and can be a corroborative piece of evidence but solely on basis of this statement, addition in hands of assessee cannot be made, mere so where such statement is not a voluntary statement and has been retracted”

• • Hon’ble Gujarat High Court in the case of Kailashben Mangarlal Chokshi Vs.CIT [2008] 174 Taxmann 466 (Guj.) / (2008) [14 DTR 257 has held that

“Income from undisclosed sources-Addition-Addition on the basis of retracted statement under s. 132(4)-Statement under s. 132(4) recorded at midnight on the date of search-Same retracted by assessee after two months on the ground that it was recorded under coercion and duress-Explanation in the form of affidavit also furnished-AO did not consider the explanation on the ground that retraction was made after a delay of two months and made addition on the basis of statement under s. 132(4)-Not justified in the facts and circumstances of the case-It is too much to give any credit to a statement recorded at midnight when a person may not be in a position to make any correct or conscious disclosure”.

6.2.22 In the present case, the undersigned notes that no such independent corroboration has been brought on record by the AO. There is a complete absence of supporting material such as documentary evidence, transactional records, or any demonstrable flow of funds linking the appellant to the alleged transactions. The reliance placed solely on the retracted statement, therefore, lacks legal sustainability It is further pertinent to note that the AO has not addressed the categorical denial made by the Managing Director of the appellant company when confronted with the contents of the statement of Shri T.V. Sathyanarayana. The omission to consider or rebut this denial assumes significance, as it directly pertains to the veracity of the allegations sought to be drawn against the appellant. The Hon’ble Supreme Court in the case of Umacharan Shaw & Brothers v. CIT [1959] 37 ITR 271 (SC) has clearly laid down that suspicion, however strong, cannot take the place of proof, and that additions must be supported by cogent material and not mere conjecture.

6.2.23 In view of the foregoing facts and circumstances, it is evident that the addition made by the AO is not supported by any independent or credible evidence. The reliance placed solely on a retracted statement, without any corroborative material in the form of documentary evidence, transactional records, or established flow of funds, renders the foundation of the addition inherently weak and legally untenable. The failure of the AO to address or rebut the categorical denial furnished by the Managing Director of the appellant company further vitiates the evidentiary basis of the addition and undermines the conclusions drawn in the assessment order. Accordingly, considering the retraction of the statement, the absence of corroborative evidence, and the failure to establish any nexus between the appellant and the alleged transactions, the addition made by the AO cannot be sustained either in law or on facts.

6.2.24 In view of the detailed discussion made supra and the judicial precedence(s) relied upon, the undersigned is of the view that material recovered from third parties cannot, by itself, be the basis for making additions in the hands of an assessee, unless such material is independently verified and supported by credible evidence establishing a direct nexus. Further, loose sheets, scribblings, or unverified electronic data, which are not part of the regular books of account, do not possess evidentiary sanctity unless their contents are substantiated through reliable and cogent material. The underlying principle is that such documents, in isolation, remain mere notings without probative value and cannot be elevated to the status of admissible evidence capable of sustaining an addition. Applying the above settled position to the facts of the present case, it is apparent that the AO has not discharged the burden cast upon him to corroborate the contents of the thirdparty material. No supporting documentation, independent enquiry, or tangible evidence has been brought on record to validate the allegations drawn from such material. In the absence of any linkage established between the appellant and the purported transactions, the additions made are clearly contrary to the well-established legal principles governing evidentiary standards in income-tax proceedings.

6.2.25 On an overall consideration of the facts and the legal position, it emerges that the additions towards alleged undisclosed interest income and unexplained cash loans or receipts are founded entirely on unverified thirdparty documents and a statement that has subsequently been retracted. Both these elements, in the absence of independent corroboration, lack the evidentiary strength required to justify an addition. There is nothing on record to demonstrate that the appellant had, in fact, engaged in the alleged transactions or derived any such income. Consequently, the additions cannot be sustained. Accordingly, all the grounds raised upon this issue for the years under consideration are treated as allowed and the AO is directed to delete the addition(s)……”

35. Assailing the impugned orders of the ld.CIT(A), whereby the additions made by the AO towards undisclosed interest income and unexplained cash loans/receipts came to be deleted, the ld.DR vehemently supported the assessment orders. Taking us through the relevant observations and findings recorded by the AO, the ld.DR submitted that the additions were made on the basis of incriminating material unearthed during the course of search proceedings, particularly the Excel sheet relied upon by the AO, which, according to the Revenue, contained details of cash transactions, loans advanced/received and interest income not disclosed by the assessee in the regular books of account.

36. The ld.DR further drew our attention to the statements recorded during the course of search proceedings and submitted that the entries appearing in the said Excel sheet, when read in conjunction with the statements recorded by the Investigation Wing, constituted sufficient material to establish the existence of undisclosed transactions. According to the ld.DR, the AO had duly examined the seized material and the surrounding circumstances before drawing the inference that the assessee had earned undisclosed interest income and had entered into unexplained cash loan transactions. It was, therefore, contended that the additions made by the AO were founded upon material gathered during the search and could not have been deleted by the ld.CIT(A).

37. The ld.DR further submitted that the ld.CIT(A), while deleting the impugned additions, had failed to appreciate the evidentiary value of the seized Excel sheet and the statements recorded during the search proceedings in their proper perspective. It was contended that the findings recorded by the AO were supported by the material available on record and that the ld.CIT(A) was not justified in discarding the same and granting relief to the assessee. The ld.DR, therefore, submitted that the impugned orders of the ld.CIT(A) were unsustainable both on facts and in law and warranted interference by this Tribunal. In conclusion, the ld.DR vehemently prayed that the orders of the ld.CIT(A) be set aside, the additions made by the AO towards undisclosed interest income and unexplained cash loans/receipts be restored, and the appeals preferred by the Revenue be allowed.

38. Per contra, the ld.AR of the assessee, placing reliance upon the detailed written submissions filed before us, strongly supported the impugned orders passed by the ld.CIT(A). The ld.AR submitted that the ld.CIT(A), after examining the assessment orders, the material relied upon by the AO, the statements recorded during the course of search proceedings and the explanations furnished by the assessee, had passed detailed and well-reasoned orders deleting the impugned additions. It was submitted that the ld.CIT(A) had duly considered and dealt with the very contentions now reiterated by the ld.DR before this Tribunal.

39. The ld. AR further submitted that the findings recorded by the ld.CIT(A) were based upon a proper appreciation of the facts and circumstances of the case and the material available on record. According to the ld. AR, the ld.CIT(A) had examined the basis on which the AO proceeded to make the additions towards alleged undisclosed interest income and unexplained cash loans/receipts and, upon consideration of the relevant material and the submissions of the assessee, had arrived at a reasoned conclusion that the additions were not sustainable. It was contended that the Revenue had not brought on record any material capable of dislodging the findings recorded by the ld.CIT(A).

40. The ld. AR further contended that the arguments advanced by the ld.DR were substantially a reiteration of the observations made by the AO in the assessment orders, all of which had already been considered and dealt with by the ld.CIT(A). It was submitted that the Revenue had neither demonstrated any factual infirmity nor pointed out any perversity or error of law in the findings recorded by the ld.CIT(A) so as to warrant interference by this Tribunal. The ld.AR, therefore, submitted that the impugned orders of the ld.CIT(A), being detailed, reasoned and based upon the material available on record, deserved to be upheld.

41. In view of the foregoing submissions, the ld.AR vehemently prayed that the orders passed by the ld.CIT(A), deleting the additions made towards undisclosed interest income and unexplained cash loans/receipts, be confirmed and the appeals filed by the Revenue be dismissed.

42. We have heard the rival submissions and considered the material available on record, including the assessment orders, the findings recorded by the ld.CIT(A), the seized electronic records, the statements recorded during the course of search and the judicial precedents relied upon by the parties. The issue arising for our consideration is whether the ld.CIT(A) was justified in deleting the additions made by the AO towards alleged undisclosed interest income and unexplained investment in the form of cash loans/receipts u/s.69 of the Act, purportedly arising from transactions between the assessee and the Casagrand Group. Since the underlying facts and the evidentiary material relied upon by the AO are common to the assessment years under consideration, the grounds raised by the Revenue are taken up together for adjudication.

43. The genesis of the dispute lies in the search conducted in the case of the Casagrand Group, during which a pen drive was found and seized from the residence of Shri P. Ramji, an employee of the said group. Certain Excel sheets extracted from the pen drive contained entries relating to cash inflows and outflows, including references purportedly pertaining to the Appaswamy Group. The Investigation Wing interpreted these entries as evidencing cash loans advanced by the assessee to the Casagrand Group, repayment of such loans and payment of interest thereon. The AO further placed reliance upon the statement of Shri T.V. Sathyanarayana, an employee of the Appaswamy Group, recorded u/s.132(4) of the Act, and certain transactions reflected in the assessee’s regular books of account. On this basis, the AO concluded that the assessee had entered into unaccounted cash transactions with the Casagrand Group and consequently made additions towards the alleged principal amounts and interest income for the respective assessment years.

44. The ld.CIT(A), upon examining the material relied upon by the AO and the explanations furnished by the assessee, found that the additions were not supported by independent and credible evidence establishing the alleged cash transactions. The ld.CIT(A) further held that the statutory presumptions u/s.132(4A) and 292C of the Act could not automatically be invoked against the assessee in respect of electronic records recovered from the possession of a third party. The ld.CIT(A) also took note of the failure of the AO to afford the assessee an opportunity to cross-examine Shri P.Ramji, the absence of corroborative material despite an extensive search of the assessee’s premises, the retraction of the statement of Shri T.V. Sathyanarayana and the failure of the AO to establish any actual movement of unaccounted funds. Accordingly, the ld.CIT(A) directed deletion of the impugned additions. The Revenue is aggrieved by the aforesaid findings.

45. At the outset, we find that the primary material forming the foundation of the additions is the pen drive recovered from the residence of Shri P.Ramji, who was admittedly an employee of the Casagrand Group and not of the assessee. Neither the pen drive nor the Excel sheets extracted therefrom were found in the possession or control of the assessee or any of its directors or employees. There is also no material to show that the said electronic records were authored, maintained, verified or acknowledged by the assessee, or that they formed part of its regular books of account. The mere presence of a reference to “Appaswamy” in an electronic record maintained by another person does not, by itself, establish that the assessee had actually entered into the transactions purportedly recorded therein. The evidentiary value of such material must necessarily be examined in the context of its origin, authorship, contents and independent corroboration.

46. In this regard, we find considerable force in the findings recorded by the ld.CIT(A) in paragraph 6.2.14 of the impugned order concerning the scope and application of the presumptions contemplated u/s.132(4A) and 292C of the Act. The presumption arising from possession or control of books of account, documents or other material found during search is a rebuttable statutory presumption. Such presumption cannot be mechanically extended against every person whose name or reference appears in the seized material, irrespective of whether that person was in possession or control thereof. In the present case, even assuming that the contents of the electronic records may be presumed to be true in relation to the person from whose possession they were recovered, such presumption does not dispense with the necessity of establishing, through reliable evidence, that the assessee actually advanced the alleged cash loans or received the alleged interest. The AO has not brought on record any material establishing such a nexus. We, therefore, concur with the ld.CIT(A) that the statutory presumptions cannot be invoked to fasten the impugned tax liability upon the assessee merely on the strength of the third-party electronic records.

47. Our aforesaid conclusion is consistent with the principle explained by the Hon’ble Supreme Court in CBI v. V.C. Shukla [(1998) 3 SCC 410] and Common Cause (A Registered Society) v. Union of India [(2017) 394 ITR 220 (SC)], concerning the evidentiary limitations of uncorroborated entries in loose sheets and other records. Although the rules governing admissibility of evidence in ordinary judicial proceedings and income-tax proceedings are not identical, the underlying principle that an entry made by one person cannot, without reliable supporting evidence, establish the liability of another person is relevant to the present controversy. An electronic record may furnish information warranting investigation; however, the mere existence of such a record does not establish the actual occurrence of every transaction mentioned therein. The AO was, therefore, required to independently verify the entries and establish their connection with the assessee before treating the amounts recorded therein as unexplained investments or undisclosed income.

48. We further find that the issue concerning the evidentiary value of third-party material has been examined by the coordinate Bench of this Tribunal in ACIT v. Bannari Amman Educational Trust, ITA Nos.3310 to 3314/Chny/2024 and connected appeals, order dated 14.08.2025. In the said decision, this Tribunal, after considering the judgments of the Hon’ble Supreme Court in V.C. Shukla and Common Cause (supra), explained that the presumption attaching to material recovered from a searched person cannot be applied against another person merely because his name appears in such material. The Tribunal emphasised the necessity of independent corroboration before third-party notings can be acted upon to make additions in the hands of the assessee. The coordinate Bench also examined the reliability of the statements of third-party witnesses and the effect of denying cross-examination. The principles enunciated in the said decision support the findings of the ld.CIT(A) in the present case, particularly in the absence of any independent material establishing that the assessee was a party to the alleged cash transactions.

49. We also find merit in the reliance placed by the assessee upon the decisions in Rangamani Krishnan v. DCIT [2025] 176 taxmann.com 912 (Chennai-Trib.) and Prema Devi, ITA Nos.563 to 567/Chny/2023, order dated 27.06.2025, concerning the use of electronic records and notings recovered from third parties. The principle sought to be applied is that a unilateral entry in a document belonging to another person cannot, without independent evidence establishing the underlying transaction, be treated as conclusive proof of undisclosed income or investment in the hands of the person referred to therein. In the case before us, the assessee has consistently denied the alleged cash transactions, and the AO has not established the authenticity and correctness of the disputed entries qua the assessee. Consequently, the mere systematic arrangement of the entries in the Excel sheets, on which considerable emphasis has been placed by the AO, does not cure the absence of evidence establishing that the transactions actually took place between the assessee and the Casagrand Group.

50. Coming to the findings recorded in paragraphs 6.2.15 and 6.2.16 of the impugned order, we observe that the assessee had specifically requested the AO to afford an opportunity to cross-examine Shri P.Ramji, from whose residence the pen drive was recovered. The said request was material to the controversy, since the meaning, context, authorship and correctness of the disputed entries were matters which required verification from the person having custody of the electronic records. The AO, however, did not afford such opportunity, nor did he record any satisfactory reason for declining the assessee’s request. Where the Revenue seeks to rely adversely upon a third person’s records and the assessee disputes the transactions attributed to it, a fair opportunity to test the evidentiary foundation of those records assumes considerable significance. The AO could not simply accept the interpretation placed upon the entries by the Investigation Wing while denying the assessee an effective opportunity to challenge their authenticity and meaning.

51. The Hon’ble Supreme Court in Andaman Timber Industries v. CCE [2015] 62 taxmann.com 3 (SC) has held that denial of cross-examination of witnesses whose statements are relied upon against an assessee constitutes a serious violation of the principles of natural justice. The coordinate Bench in Bannari Amman Educational Trust (supra), particularly in paragraphs 8.36 to 8.40, applied the said principle in the context of income-tax proceedings and held that reliance upon an adverse third-party statement, without affording the assessee the requested opportunity of cross-examination, rendered the additions unsustainable in the facts of that case. We are conscious that the mere recovery of a document from a person’s possession does not necessarily establish that such person is its author or that he has personal knowledge of every entry contained therein. Nevertheless, in the present case, where the disputed electronic records constituted the principal foundation of the additions, the failure to examine their provenance and afford the requested opportunity to test the evidence materially prejudiced the assessee. We, therefore, uphold the finding of the ld.CIT(A) that the failure to afford cross-examination constituted a procedural infirmity.

52. We now advert to the substantive findings recorded by the ld.CIT(A) in paragraphs 6.2.17 to 6.2.19 of the impugned order. It is an important circumstance that the assessee and the Appaswamy Group were themselves subjected to an extensive search u/s.132 of the Act, covering their business premises and the residences of their key personnel. Despite such search, no unaccounted cash relatable to the alleged transactions with the Casagrand Group was found or seized. No promissory notes, loan agreements, receipts, vouchers, security documents, confirmations, parallel books of account or other contemporaneous records evidencing the alleged cash loans were discovered. Equally, no material was found establishing the source from which the assessee allegedly advanced such substantial cash amounts, the manner in which the funds were delivered, or the subsequent movement and application thereof. The ld.CIT(A) has specifically recorded these factual deficiencies, and no contrary material has been identified by the Revenue before us which would dislodge the said findings.

53. We hasten to add that the absence of recovery of cash or loan documents during search, considered in isolation, may not necessarily establish that no unaccounted transaction had taken place. However, where the alleged transactions involve substantial cash loans extending over several financial years, and the entire case of the Revenue rests upon electronic entries recovered from another person’s possession, the complete absence of corresponding evidence from the assessee’s side assumes considerable evidentiary significance. The AO has not identified any independent confirmation from the Casagrand Group establishing that it borrowed the disputed cash amounts from the assessee or paid interest thereon. Nor has the AO demonstrated any actual delivery or receipt of cash by identifying the persons involved, the circumstances of the transactions or any corresponding records maintained by the alleged counterparty. The ld.CIT(A) was, therefore, justified in holding that the third-party entries remained uncorroborated and that the AO had failed to establish the transactions attributed to the assessee.

54. We have also examined the reliance placed by the AO upon the transactions appearing in the assessee’s regular books of account, particularly the banking transactions relating to the proposed sale of the property situated at TTK Road, Alwarpet, Chennai. The assessee’s explanation is that it had received advances aggregating to Rs.12.50 crores from the Casagrand Group in connection with the proposed property transaction, including Rs.10 crores received on 15.12.2015 and further amounts aggregating to Rs.2.50 crores received up to 31.03.2017. The said advances were received through banking channels and duly reflected in the regular books of account. Upon cancellation of the proposed transaction, the advances were refunded. The AO has not brought on record any material establishing that these recorded transactions were fictitious or that the corresponding banking entries represented unaccounted cash loans advanced by the assessee. In our considered view, the existence of an admitted and accounted commercial transaction between the two groups cannot, without more, be treated as corroboration of a distinct and disputed allegation that the assessee had advanced cash loans outside its books of account.

55. In particular, the AO has relied upon an entry dated 16.12.2016 for Rs.50 lakhs appearing in the seized Excel sheets, wherein the narration “cash conversion” was recorded. The corresponding transaction was, however, found reflected in the assessee’s ledger relating to the TTK Road property advance. The AO interpreted the narration appearing in the third-party record as indicative of an arrangement involving conversion of cash and consequently treated the entry as corroborative of the alleged cash dealings. We are unable to subscribe to such reasoning. The narration entered by an employee of the Casagrand Group in an electronic record maintained on that side cannot, in the absence of supporting evidence, alter the character of a transaction which is otherwise duly reflected in the assessee’s books and banking records. The AO has not demonstrated that the amount of Rs.50 lakhs was actually delivered in cash, that the recorded banking transaction was merely an accommodation entry, or that the assessee received or advanced any corresponding unaccounted amount. The ld.CIT(A), therefore, rightly rejected the inference drawn by the AO from the said entry.

56. We find that the reliability of the AO’s interpretation is further affected by the inconsistencies pointed out in the seized Excel sheets. The expression “cash conversion” has been relied upon to infer cash dealings, whereas other entries have been interpreted as representing interest payments on cash loans. The AO has not satisfactorily reconciled the nature of the alleged cash-conversion transactions with the separate theory of interest-bearing loans. It has also been pointed out that the alleged interest entries cease after November without corresponding entries evidencing repayment of the purported principal amounts. Further, the electronic records contain references to other transactions and properties, including Sholinganallur 7.2 acres, which have not been shown to have any connection with the assessee. These discrepancies do not, by themselves, establish that every entry in the electronic records is incorrect. They do, however, demonstrate the necessity of independent verification before selecting particular entries, attributing them to the assessee and treating them as completed cash transactions. No coherent reconciliation of the opening balances, advances, repayments, interest payments and closing balances has been established by the AO with reference to reliable supporting evidence.

57. In the above factual background, we find that the AO has proceeded from the existence of certain notings in the third-party electronic records to the conclusion that the assessee had made unexplained investments in the form of cash loans. Such an inference overlooks the foundational requirement of section 69 of the Act. Before invoking the said provision, the Revenue must establish, on the material available, that the assessee had in fact made an investment during the relevant financial year which was not recorded in its books of account, if any. Only upon establishing the existence of such an investment does the question of examining the assessee’s explanation regarding its nature and source arise. In the present case, the very factum of advancement of the alleged cash loans has not been established. The AO has not demonstrated that the amounts reflected in the third-party Excel sheets actually moved from the assessee to the Casagrand Group. Consequently, the foundational factual requirement for treating the disputed amounts as unexplained investments u/s.69 of the Act remains unfulfilled.

58. We further observe that the AO has considered the disputed amounts as cash loans/receipts. The distinction between an alleged advancement of cash by the assessee and an alleged receipt of cash by the assessee is material when determining the nature of an addition and the statutory provision applicable thereto. An amount alleged to have been advanced as a loan cannot be treated as an unexplained investment merely because it appears as an outflow in a third party spreadsheet; similarly, a purported cash receipt cannot automatically be characterised as an investment u/s.69 of the Act without establishing the relevant facts. The AO was required to identify the actual transaction, its direction, its character and the basis for the year-wise quantification. In the absence of such evidence, the mere consolidation of disputed electronic entries under the description of cash loans/receipts cannot sustain the additions. We accordingly concur with the ld.CIT(A) that the additions made u/s.69 of the Act are unsupported by the requisite factual foundation.

59. The additions towards alleged undisclosed interest income also suffer from a similar evidentiary deficiency. The AO has computed interest income on the premise that the assessee had advanced interest-bearing cash loans to the Casagrand Group. However, apart from the disputed electronic entries, there is no independent evidence establishing the agreed rate of interest, the period for which interest was payable, the actual payment or accrual of interest in favour of the assessee, or the receipt thereof by any person acting on its behalf. No corresponding receipt, acknowledgement, cash record, bank deposit or other material evidencing such income has been identified. Once the alleged principal transactions themselves remain unproved, the consequential computation of interest based upon the same unverified entries cannot independently survive. The AO has not established that any income by way of interest actually accrued to or was received by the assessee during the relevant previous years. We, therefore, find no infirmity in the deletion of the additions towards alleged undisclosed interest income.

60. We shall now examine the reliance placed by the AO upon the statement of Shri T.V.Sathyanarayana recorded u/s.132(4) of the Act, which has been considered by the ld.CIT(A) in paragraphs 6.2.20 to 6.2.23 of the impugned order. In the said statement, Shri T.V.Sathyanarayana stated that he had received and disbursed cash on behalf of the Appaswamy Group in accordance with the directions of its Chairman and that representatives of the Casagrand Group used to deliver and collect cash from the office of the Appaswamy Group. However, he also expressed his lack of knowledge regarding the nature and purpose of the alleged transactions. Thus, even if the statement is considered in its entirety, it does not establish that the disputed amounts represented cash loans advanced by the assessee to the Casagrand Group, much less the precise quantum of such loans or the alleged interest income attributable to the respective assessment years. The AO has sought to interpret the statement in conjunction with the third-party Excel sheets, but neither the statement nor the electronic records independently establish the essential particulars of the alleged transactions.

61. It is further an admitted position that the statement of Shri T.V.Sathyanarayana was subsequently retracted. The assessee has also placed reliance upon medical records in support of its contention that the statement was recorded under circumstances involving considerable physical and mental strain. The AO rejected the retraction principally on the ground that it was belated. In our considered view, while the timing and circumstances of a retraction are relevant considerations in assessing its credibility, a statement recorded u/s.132(4) of the Act does not become conclusive merely because its retraction is made subsequently. The original statement, the explanation furnished for its retraction, the surrounding circumstances and the available corroborative material must be considered together. The ld.CIT(A) has examined these aspects and found that the retraction was supported by medical evidence and that the statement was not corroborated by independent material establishing the alleged cash loans. We find no basis to interfere with the said appreciation of evidence. It is not necessary for us to record a conclusive finding regarding the allegation of coercion, since the statement, even otherwise, does not establish the disputed transactions with the degree of certainty required to sustain the additions.

62. The legal position concerning the evidentiary value of an admission is well settled. The Hon’ble Supreme Court in Pullangode Rubber Produce Co. Ltd. v. State of Kerala [(1973) 91 ITR 18 (SC)] has held that an admission is an important piece of evidence, but it is not conclusive, and it is open to the maker to establish that the admission was incorrect. The Hon’ble jurisdictional Madras High Court in CIT v. Smt. S. Jayalakshmi Ammal [2016] 74 taxmann.com 35 (Mad.) has also considered the sustainability of an addition based upon a statement recorded u/s.132(4) of the Act which was not supported by material evidence. The decisions in CIT v. Lavanya Land Pvt. Ltd. [(2017) 397 ITR 246 (Bom.)], Kailashben Mangarlal Chokshi v. CIT [2008] 174 Taxman 466 (Guj.) and First Global Stockbroking Pvt. Ltd. v. ACIT [2008] 115 TTJ 173 (Mum.) further support the proposition that the evidentiary value of a retracted statement must be assessed in the light of the surrounding facts and supporting material. Applying these principles, we are of the view that the statement of Shri T.V.Sathyanarayana, which neither conclusively identifies the nature of the disputed transactions nor establishes their year-wise quantum, cannot, in the absence of independent corroboration, sustain the additions made by the AO.

63. We take note of another material circumstance, which has been specifically considered by the ld.CIT(A), is the categorical denial of the alleged cash-loan transactions by Shri Ravi Appaswamy, Managing Director of the assessee company, when confronted with the contents of the statement of Shri T.V.Sathyanarayana. The AO has not brought on record any independent material rebutting the said denial. The denial by the Managing Director is not, by itself, conclusive proof that the transactions did not take place; nevertheless, once the assessee had disputed the allegations and furnished an explanation concerning its actual commercial dealings with the Casagrand Group, it was incumbent upon the AO to examine the matter further and establish the correctness of the allegations through reliable evidence. The AO could not treat the statement of one employee as conclusive while disregarding the denial of the Managing Director without undertaking any meaningful verification. In the circumstances, the ld.CIT(A) was justified in holding that the evidentiary foundation of the additions remained unsubstantiated.

64. We also find that the principle laid down by the Hon’ble Supreme Court in Umacharan Shaw & Brothers v. CIT [(1959) 37 ITR 271 (SC)] is relevant to the present controversy. The existence of circumstances giving rise to suspicion may justify an enquiry, but suspicion cannot substitute proof of the transaction sought to be brought to tax. In the instant case, the AO has proceeded upon successive inferences: first, that the references appearing in the third-party Excel sheets necessarily pertained to the assessee; secondly, that such references represented actual cash transactions; thirdly, that the transactions were in the nature of interest-bearing cash loans; and finally, that the amounts computed from those entries constituted unexplained investments and undisclosed interest income of the assessee. Each of these conclusions required support from credible material. The mere fact that certain accounted transactions existed between the two groups does not establish the correctness of the remaining inferences. We are, therefore, in agreement with the ld.CIT(A) that the additions rest upon an unverified interpretation of third-party material rather than upon evidence establishing the alleged transactions.

65. On an overall examination of the findings recorded in paragraph 6.2.24 of the impugned order, we find that the ld.CIT(A) has correctly appreciated the distinction between material which may provide a basis for investigation and evidence sufficient to sustain an addition. It is not the proposition that electronic records recovered from a third party are wholly inadmissible or that such material can never be relied upon in income-tax proceedings. Such records may constitute relevant evidence, depending upon their authenticity, contents and connection with the assessee. However, where the assessee disputes the transactions and the records have neither been maintained nor acknowledged by it, the AO must establish their reliability and the underlying transactions through appropriate verification and corroboration. In the present case, the AO has not established the authorship and context of the disputed entries qua the assessee, obtained confirmation of the alleged loans from the counterparty, demonstrated any movement of cash, or discovered corresponding evidence during the search of the assessee. The necessary evidentiary link between the third-party records and the additions made in the assessee’s hands is, therefore, absent.

66. We further observe that the ld.CIT(A) has not deleted the additions merely on account of the denial of cross-examination or on the technical ground that the pen drive was recovered from a third party. The impugned order reflects a substantive examination of the evidence relied upon by the AO, the explanations furnished by the assessee, the circumstances surrounding the statement recorded u/s.132(4) of the Act, the contemporaneous books of account and the absence of corroborative material. The ld.CIT(A) has also examined the attempted correlation between the electronic entries and the accounted TTK Road property transaction and has recorded reasons for rejecting the interpretation adopted by the AO. These are findings arising from an appreciation of the material available on record. The Revenue has not identified any specific independent evidence which was overlooked by the ld.CIT(A) or demonstrated that the factual conclusions recorded in the impugned order are contrary to the material relied upon by the AO. A mere reiteration of the inferences drawn in the assessment orders, without dislodging the deficiencies identified by the ld.CIT(A), does not furnish a sufficient basis for interfering with the appellate findings.

67. In this context, we also find that the Revenue’s reliance upon the detailed and systematic nature of the Excel sheets does not advance its case. The manner in which a third party maintains a record may be relevant in evaluating its authenticity, but it cannot, by itself, establish that the transactions attributed to another person actually occurred. Even a systematically maintained electronic record must be examined with reference to the identity of the parties, the nature of the transactions, their dates and amounts, and the existence of supporting evidence. The AO has not satisfactorily established these essential particulars in relation to the assessee. Further, the ld.CIT(A) has not proceeded on the assumption that every entry in the seized material is necessarily false; rather, the finding is that the Revenue has failed to establish the disputed entries as transactions of the assessee. We find this distinction to be material and the conclusion of the ld.CIT(A) to be consistent with the evidentiary principles applicable to the facts of the case.

68. We have also considered the year-wise quantification of the additions made by the AO. The amounts have been computed by aggregating the entries appearing in the disputed electronic records and attributing them to the respective assessment years. However, the AO has not established, through independent evidence, the actual dates of advancement of the alleged cash loans, the amounts outstanding at the relevant points of time, the repayment of principal, or the accrual or receipt of the alleged interest. In the absence of a reliably established transaction-wise account, the year-wise allocation of the disputed amounts remains dependent upon the same unverified assumptions underlying the additions themselves. The deficiency is thus not confined to the quantum of the additions; it extends to the very existence and character of the transactions sought to be assessed. Accordingly, we find that the ld.CIT(A) was justified in deleting the additions for the respective assessment years.

69. Having considered the totality of the facts and circumstances, we are of the considered view that the ld.CIT(A), in paragraph 6.2.25 of the impugned order, has correctly concluded that the additions towards alleged undisclosed interest income and unexplained cash loans/receipts are founded upon unverified third-party electronic records and a subsequently retracted statement, neither of which is supported by independent evidence establishing the alleged transactions. The AO has failed to demonstrate that the assessee actually advanced the disputed cash loans to the Casagrand Group, received any corresponding repayments in cash, or earned the alleged interest income. The material relied upon by the AO, whether considered individually or cumulatively, does not establish the necessary factual foundation for the additions made u/s.69 of the Act or towards undisclosed interest income. We, therefore, find no error in the findings recorded by the ld.CIT(A) warranting our interference.

70. In view of the foregoing discussion, and respectfully following the principles enunciated in the judicial precedents discussed hereinabove, we uphold the common order of the ld.CIT(A) deleting the additions made by the AO towards alleged undisclosed interest income and unexplained investment in the form of cash loans/receipts purportedly arising from transactions with the Casagrand Group. Accordingly, the grounds raised by the Revenue challenging the deletion of the aforesaid additions are dismissed for all the assessment years under consideration. The findings and directions of the ld.CIT(A) on this issue stand confirmed.

Issue No.2: Addition towards undisclosed income from sale of flats (A.Ys 2019- 20, 2020-21 and 2021-22):

71. The relevant observations of the ld.CIT(A) in deleting the additions made by the AO are as under:

“6.3.16 The undersigned notes that addition made by the AO towards alleged receipt of unaccounted cash is not supported by any incriminating material placed on record during the course of assessment proceedings. While a search was conducted covering the appellant’s business premises, project sites and the residences of directors and employees, the assessment order does not identify or rely upon any seized material which directly evidences actual receipt of cash over and above the consideration recorded in the regular books of account. This factual position emerges clearly from a reading of the assessment order and remains undisputed. In the assessment order passed for the year under consideration, the AO has not referred to any seizure of any unaccounted cash, jewellery or other valuable articles representing undisclosed income. There is also no reference to any undisclosed investment, benami asset or unexplained accretion to wealth traceable to the appellant or its key personnel. In cases involving allegations of on-money receipts in real estate transactions, some corresponding evidence of possession or application of such cash would ordinarily be expected. However, no such material has been brought on record by the AO to substantiate the allegation in the present case.

6.3.17 Further, the AO has not relied upon any parallel or duplicate books of account, cash ledgers, diaries, registers or electronic data evidencing systematic recording of alleged cash collections. No buyer-wise cash receipts, acknowledgements, side agreements or documents reflecting payment of consideration outside the registered sale deeds have been identified or produced. Importantly, the assessment does not cite even a single instance where a customer has admitted to having paid cash to the appellant, nor has any purchaser been examined or confronted to corroborate the allegation of unaccounted receipts. The material relied upon by the AO primarily consists of internal communications, loose working papers and statements recorded from employees. However, these materials, in the absence of corroboration, do not by themselves establish actual receipt of cash. The assessment order does not demonstrate a direct and proximate nexus between such material and the alleged undisclosed income. There is no linkage shown between the figures referred to in such material and any actual flow of funds, either into the hands of the appellant or towards any unaccounted expenditure or investment.

6.3.18 There is no finding that such cash was used for payments to contractors, landowners or suppliers, nor is there any material to show that it was deployed for personal expenditure or investments of the directors. In the absence of evidence regarding both receipt and application of the alleged cash, the addition rests entirely on inference rather than on demonstrable facts. Therefore, it can be inferred that the addition on account of unaccounted cash receipts has been made on the basis of estimations and assumptions drawn, without the support of any incriminating evidence evidencing receipt of cash by the appellant. The undersigned is of the view that such material may give rise to suspicion or prompt further enquiry, it does not, in the absence of corroboration, constitute sufficient proof of undisclosed income. In the present case, the AO, has not brought on record any cogent material to discharge the burden of establishing that the appellant actually received unaccounted cash during the relevant previous year. Therefore, it is held that the addition made is not based on any seized incriminating material directly evidencing cash receipt, but on inferences and post-search estimations. Consequently, the addition cannot be sustained merely on the basis of presumptions, inferences or estimates, without independent and credible evidence linking the appellant to actual unaccounted cash receipts.

6.3.19 As evident in the assessment order passed, it is observed that the AO has proceeded to make the addition on the premise that the sale consideration disclosed by the appellant in respect of residential flats does not reflect the true consideration and that the flats were, in fact, sold at rates higher than those recorded in the books of account and registered sale deeds. According to the AO, the material gathered during the course of search indicated that the actual selling prices were higher and that the difference between such alleged prices and the disclosed consideration represented unaccounted cash received by the appellant. Proceeding on this assumption, the AO has adopted an estimated “median rate” as the alleged actual selling price and has computed the addition by comparing such rate with the prices recorded by the appellant. In arriving at the said conclusion, the AO has disregarded the primary documentary evidence produced by the appellant, namely the registered sale deeds executed in favour of individual purchasers, the corresponding sale agreements entered into with customers, the contemporaneous entries in the appellant’s ERP and accounting systems, and the bank statements evidencing receipt of consideration through banking channels. These documents collectively form a complete and consistent chain of evidence demonstrating the actual consideration received on sale of the flats. The undersigned notes that the assessment order does not record any finding that these documents are fabricated, unreliable or otherwise untrue.  There is also no allegation that the consideration mentioned in the registered documents was understated with the consent or connivance of the purchasers.

6.3.20 A close reading of the assessment order further reveals that the “median rate” adopted by the AO does not emanate from any seized document evidencing completed transactions at such rate. The AO has not identified any specific document recovered during the course of search which records sale of a flat at the assumed median price. The said rate is neither reflected in the appellant’s books of account nor in its ERP system, which records customer- wise and flat-wise sale consideration. The undersigned is of the view that the “median rate” is thus an inferential figure arrived at by the AO by analysing internal communications and working papers, without establishing that such rate was actually realised in any concluded sale transaction.

6.3.21 It is also an admitted position that the AO has not rejected the books of account maintained by the appellant. The assessment order does not invoke the provisions of section 145(3) of the Act, nor does it contain any finding that the books are incorrect, incomplete or not in accordance with recognised accounting principles. On the contrary, the assessment accepts the books of account for determining business results, except for the limited purpose of substituting the sale consideration with an estimated figure. Such selective acceptance of books is legally untenable, as the AO cannot simultaneously accept the books as reliable and yet disregard the most fundamental entry therein relating to sale consideration.

6.3.22….

6.3.23….

6.3.24 The undersigned observes that the assessment order does not record any reasoned finding as to why the explanations offered by the appellant during the course of assessment proceedings were not acceptable. There is no analysis to prove that the factors cited by the appellant could not have resulted in variations in sale prices. Instead, the AO has proceeded to apply a uniform or median rate across multiple transactions, thereby overlooking the fact that uniform pricing is alien to the real estate business and that negotiated pricing is the norm rather than the exception. Such an approach results in replacing actual transaction values with a hypothetical benchmark, without any supporting evidence. From the manner in which the assessment has been framed, it is evident that the AO has effectively substituted his own notion of what the selling price of the flats ought to have been, in place of the prices actually realised and duly documented by the appellant. This amounts to assessing income on the basis of presumed or idealised pricing rather than on real income that has accrued or been received. At this juncture, it is appropriate to rely upon the decision rendered by the Hon’ble ITAT, Kolkata in the case of Fort Projects P Ltd vs Deputy Commissioner of Income-tax – [2013] 29 taxmann.com 84 (Kolkata – Trib.) wherein the Hon’ble ITAT, Kolkata has held as under.

“the decision to sell a particular flat at a particular price was taken out of commercial expediency and it cannot be questioned by the Department without any tangible evidence. It is for the assessee to decide how to conduct the business. The AO cannot put himself in the armchair of the businessman and judge how business should be conducted or at what price a particular product should be sold”.

Thus, it can be held that it is well settled that the AO cannot sit in the armchair of the businessman and determine the price at which a product should be sold, unless there is clear and cogent evidence of suppression or understatement of consideration.

6.3.25 On a careful consideration of the entire material on record, the undersigned finds that the addition has been made solely on the basis of an assumed and notional median rate, without reference to any incriminating material evidencing receipt of higher consideration and without rejection of the books of account. The sale consideration recorded by the appellant is supported by statutory documents, contemporaneous accounting records and bank receipts, and no defect has been pointed out therein. In the absence of evidence establishing that the appellant actually received consideration in excess of what is recorded, the substitution of recorded sale prices with an estimated rate is not legally permissible. Therefore, it is held that the action of the AO in adopting an assumed median selling price and computing alleged undisclosed income on that basis is not supported by facts or law. The addition, being founded on notional assumptions rather than on real income and corroborative evidence, is therefore unsustainable in the eyes of law.

6.3.26….

6.3.27….

6.3.28 The undersigned, after carefully considering the detailed submissions of the AR, the manner in which the AO placed reliance on the statements of the employees, the material available on record, and the judicial precedents cited, finds that the statements in question were recorded during the course of the search proceedings and were immediately retracted, i.e., within ten days from the date of receipt of copies of the sworn statements, through duly sworn affidavits explaining the circumstances under which such statements were made. The undersigned also finds that neither the Investigation Officer nor the AO has made any attempt to examine the deponents afresh after the retractions were filed instead the AO merely relied on the statements which were retracted subsequently. The undersigned also notes that the AO has not brought on record any independent or corroborative evidence to substantiate the allegations allegedly arising from the statements. There is no material linking any specific customer to any cash payment, nor is there any evidence demonstrating receipt or application of unaccounted funds by the appellant. In the absence of such corroboration, and particularly in view of the prompt and categorical retractions, the evidentiary value of the original statements stands substantially weakened.

6.3.29….

6.3.30 From the above, it is evident that the clarification letter was filed during the course of the search proceedings itself. Neither the Investigation Officer nor the AO took any steps to controvert or rebut the clarification furnished by Shri Ravi Appasamy, and the said clarification letter has not been discussed or even adverted to in the assessment order. It can therefore be reasonably inferred that the clarification was not considered by either the Investigation Officer or the AO while framing the assessment. It is a well-settled principle that a statement recorded during search, when subsequently retracted, cannot by itself form the sole basis of an addition unless it is corroborated by independent and credible evidence. The Hon’ble Apex Court in the case of Kasmira Singh v. State of Madhya Pradesh AIR 1952 SC 159, has observed that the correct way to approach a case of confession is to marshal evidence against the accused excluding the confession altogether from consideration. Where the case can be decided independent of confession, then, it is not necessary to take help of confession. This principle assumes greater importance in search assessments, where additions must be rooted in material unearthed during the search and not merely on oral statements.

6.3.31 In this regard, reliance is drawn from the decision of the Hon’ble Apex Court in the case of Mehta Parikh & Co v. ITO (1956)30 ITR 181 (SC) wherein, it was held that

“once an Affidavit is filed, and if the deponent is neither called for cross examination nor confronted, it is not open to the Revenue to challenge the correctness of the same”.

6.3.32 The above view was followed in the case of Daulat Ram Rawatmull v. CIT(1973) 87 ITR 349 (SC) in which it was held that

“once an affidavit is furnished, it should be presumed to be a correct statement of facts. If these facts are to be controverted, either the deponent must be examined or evidence contrary to facts must be led. In the absence of these the affidavits could not be ignored”.

6.3.33 By applying this settled position of the law to the facts of the present case, the undersigned is of the view that the AO was not justified in placing reliance on retracted employee statements, without further verification and without independent corroboration. In view of the above findings, the undersigned holds that the action of the AO in relying upon the sworn statements of employees, which were subsequently retracted and remained uncorroborated, is not sustainable. Such statements, in the absence of independent supporting evidence and without affording the appellant an opportunity of cross-examination, cannot be used to sustain the addition. Accordingly, the reliance placed on these statements is rejected and the addition founded thereon is unsustainable.

6.3.34….

6.3.35….

6.3.36….

6.3.37….

6.3.38 The undersigned after carefully considering the detailed submissions of the AR, examined the nature and contents of the WhatsApp chats and loose electronic records relied upon by the AO, and the assessment order and the judicial precedence(s) relied. The undersigned finds that the AO has relied upon these electronic communications without demonstrating that they record or evidence actual receipt of unaccounted cash. On a plain reading, the chats reflect internal discussions and customer interactions typical of a sales environment and do not establish completed transactions involving cash receipts outside the books of account. More particularly, the AO has not brought on record any independent corroborative evidence to substantiate the inferences drawn from the electronic material. There is no linkage/ nexus revealed between the WhatsApp chats or loose electronic records and any specific sale transaction, customer payment, or flow of unaccounted funds.

6.3.39 In view of the above, the undersigned is of the view that the reliance placed by the AO on WhatsApp chats and loose electronic records, without proper authentication and without independent corroboration, is not justified. Such material, in isolation, does not constitute incriminating evidence of receipt of unaccounted cash. Therefore, the addition made relying upon such material is unsustainable.

6.3.40….

6.3.41….

6.3.42 As evident in the assessment order, the AO has proceeded to quantify the alleged undisclosed cash receipts from the sale of residential flats by adopting a uniform and project-wise estimation methodology, rather than by identifying actual instances of cash receipt supported by concrete evidence. The AO first formed a broad premise, primarily on the basis of sworn statements recorded from certain employees of the appellant group particularly the sales person(s), that discounts normally offered to customers were limited to about 5% and that any reduction in the sale price beyond such level represented cash received outside the books. Proceeding on this assumption, the AO sought to compute the alleged cash component embedded in the sale of flats across various projects and assessment years. For this purpose, reliance was placed on three loose sheets of paper allegedly seized from the office premises of the Appasamy Group. On an analysis of these loose sheets, the AO inferred that the figure described as “Fixed Rate” or “Actual Rate” represented the true sale price of the flat, while the “Flat Rate” represented the amount received through banking channels. The difference between these two figures was treated by the AO as the cash component allegedly received from the customer. By way of illustration, where the “Fixed Rate” was Rs.21,300/- per sq. ft. and the “Flat Rate” was Rs.20,830/- per sq. ft., the difference of Rs.470/- per sq. ft. was assumed to be cash received. Having drawn this inference from the loose sheets, the AO extrapolated the same logic to the Buyer Abstract Analysis Reports generated from the ERP software used by the appellant. The AO noticed variations in the rates at which flats were sold and concluded that such variations arose on account of price reductions granted by the CRM or sales team, which, according to him, were compensated by collection of cash from customers.

6.3.43 Thereafter, the AO adopted a further step in the quantification process by substituting the rates reflected in the Buyer Abstract Analysis Reports with what he termed as the “actual selling price” of the flats. This “actual price” was not derived from any seized document or recorded transaction but was computed by the AO by determining a “median rate” per square foot at which flats in a particular project were allegedly sold. For instance, in respect of the Alteeza project, a median rate of Rs.7,999/- per sq. ft. was arrived at, while for the Capella project, a median rate of Rs.9,600/- per sq. ft. was adopted. The AO then treated this median rate as the benchmark or true sale price for all flats in the respective project. Wherever the recorded sale rate of an individual flat, as per books and ERP data, was lower than the adopted median rate, the differential amount was treated as undisclosed cash received by the appellant. This exercise was carried out project-wise, and in respect of projects such as Capella, The Bloomingdale Phase 2, Trellis North and Trellis South, the median rate was uniformly substituted in place of the recorded rate to compute the alleged cash component. Using this methodology, the AO aggregated the differences across all flats and across multiple assessment years, arriving at a total alleged undisclosed cash receipt of Rs.102.04 Crores for the appellant group as a whole for AYs 2016-17 to 2024-25. Out of this, a sum of Rs.17,53,84,476/- was attributed to the appellant for the AY(s) 2019-20 to 2024-25, and Rs. 82,92,000/-, Rs.3,49,31,150/- & Rs.37,60,100/- was allocated to the AY(s) 2019-20, 2020-21 & 2021-22. It is also evident from the assessment order(s) passed that the median rate itself was not static and was revised upward at different stages even within the same project, without recording any specific basis or rationale for such revision. These revised median rates were nevertheless used as the benchmark to re-compute the alleged cash component, thereby inflating the quantified amount.

6.3.44 The undersigned finds that the AO has computed the alleged unaccounted income by applying an assumed rate or difference uniformly across multiple transactions, without bringing on record any seized material relatable to each such transaction. The assessment order does not set out any factual basis for treating all transactions alike or for presuming that each transaction involved receipt of unaccounted cash. The undersigned is of the view that the computation has been carried out in a mechanical and formulaic manner, without considering transaction specific factors or commercial considerations. The AO has not established any rational nexus between the seized material, (if any), and the transactions to which the extrapolation has been applied. In the absence of such nexus, the extrapolation undertaken lacks evidentiary support and cannot be sustained. The approach adopted by the AO results in quantification of income based on assumptions and guesswork rather than on real income supported by evidence. Such arbitrary extrapolation is not permissible under the scheme of the Act, particularly in the context of a search assessment where additions must be firmly rooted in material unearthed during the search. Therefore, it is held that the quantification of the addition, being based on illogical extrapolation and mechanical application of assumptions without transaction-specific seized material, is unsustainable both on facts and in law.

6.3.45 In addition, during the course of appellate proceedings, the AR assailed the very basis of the estimation made by the AO by, contending that the appellant maintains regular and audited books of account in the ordinary course of business, supported by a robust ERP system, registered sale deeds, customer agreements and complete banking records, and that at no point has the AO recorded any dissatisfaction regarding their correctness or completeness or invoked section 145 of the Act. It was specifically contended that no defect has been found in the method of accounting, no discrepancy has been pointed out in quantitative details of flats sold, and no mismatch has been identified between sale agreements, registered sale deeds, ERP records and bank receipts, thereby clearly demonstrating that the books of account were accepted in toto. The AR further submitted that while the AO relied upon the same books for accepting turnover and allowing business expenditure, he selectively disregarded the recorded sale consideration and substituted it with assumed or hypothetical prices, which is legally impermissible as the AO cannot approbate and reprobate without valid reasons. On an objective examination of the record, it is found that the AO has indeed not pointed out any specific defects, yet proceeded to estimate income by adopting notional selling prices without any cogent legal or factual basis, rendering the addition made on a purely estimated basis legally untenable.

6.3.46 On a cumulative and holistic consideration of the facts, material on record and the submissions made during the appellate proceedings, it is evident that the addition of Rs. 82,92,000/-, Rs.3,49,31,150/- & Rs.37,60,100/- for the AY(s) 2019-20, 2020-21 & 2021-22 was made by the AO as undisclosed income from sale of residential flats is based on assumptions and estimates, without support from any incriminating or corroborative evidence. No unaccounted cash, undisclosed investment, parallel books, or customer confirmations were found or brought on record to substantiate the allegation. The addition is founded on sworn statements of employees which were subsequently retracted, or was any independent corroboration obtained. Further, the books of account have been accepted without rejection, and the recorded sale consideration is supported by registered documents, ERP records and bank receipts. The substitution of actual consideration with notional prices and the quantification based on illogical extrapolation are contrary to settled legal principles and commercial realities. Therefore, the addition(s) of Rs. 82,92,000/-, Rs.3,49,31,150/- & Rs.37,60,100/- for the AY(s) 2019-20, 2020-21 & 2021-22 are unsustainable in the eyes of law both on facts and legality. Accordingly, the grounds raised upon this issue are treated as allowed and the AO is directed to delete the addition of Rs. 82,92,000/-, Rs.3,49,31,150/- & Rs.37,60,100/- made for the AY(s) 2019-20, 2020-21 & 2021-22 respectively.”

72. The ld.DR vehemently supported the assessment order and urged the Tribunal to set aside the order of the ld.CIT(A) and restore that of the AO. Accordingly, the ld.DR prayed that the grounds of appeal raised by the Revenue on this issue be allowed.

73. The ld.AR for the assessee submitted that the AO had made additions of Rs.82,92,000/-, Rs.3,49,31,150/- and Rs.37,60,100/- for the assessment years 2019-20, 2020-21 and 2021-22, respectively, on the allegation that the assessee had received unaccounted cash consideration from customers over and above the recorded sale consideration in respect of residential flats.

74. The ld.AR submitted that the issue involved in the present appeals is squarely covered in favour of the assessee by the decision of the Coordinate Bench of this Tribunal in the case of M/s.Ivar Estates Private Limited v. ACIT, ITA No.1857/Chny/2026, relating to assessment year 2023-24, vide order dated 18.08.2026. It was submitted that M/s. Ivar Estates Private Limited is also a constituent of the Appaswamy Group and that the additions made in its hands, as well as those made in the hands of the present assessee, emanated from the very same search conducted on the Appaswamy Group on 03.11.2023. Elaborating further, the ld.AR contended that the additions made in both cases rested upon an identical evidentiary foundation and the same alleged modus operandi of receipt of unaccounted cash consideration on the sale of residential flats. The AO had relied upon the statements recorded from the employees and officials of the Appaswamy Group, the alleged theory of allowing a discount of 5%, the ERP/BSF data, WhatsApp conversations, loose sheets and buyer abstract analysis. The AO had further proceeded on the premise that the sale prices were subsequently reduced in the ERP system and had adopted a median selling rate in substitution of the actual sale consideration recorded in the books of account for the purpose of estimating the alleged unaccounted cash receipts. It was submitted that these very materials and the methodology adopted by the AO formed the basis of the additions in the case of M/s. Ivar Estates Private Limited, which had already been considered by the Coordinate Bench.

75. The ld.AR further submitted that the AO had not independently quantified the alleged undisclosed cash receipts in the hands of each group entity on the basis of separate and distinct incriminating material. On the contrary, the AO had undertaken a common exercise of quantification for the Appaswamy Group as a whole by adopting the median-rate methodology and had thereafter attributed the amounts so determined to the respective group entities and assessment years. In this regard, the ld.AR invited attention to the findings recorded by the ld.CIT(A), wherein it was noted that the AO had quantified the alleged undisclosed cash receipts of the Appaswamy Group at approximately Rs.102.04 crores and had allocated the respective amounts to the present assessee for the assessment years under consideration.

76. It was, therefore, contended that the additions made in the hands of the present assessee and those made in the hands of M/s. Ivar Estates Private Limited did not arise out of independent transactions supported by distinct evidence, but constituted parts of the same group-wide exercise of estimation and allocation undertaken by the AO pursuant to the search. The ld.AR submitted that, since the Coordinate Bench of this Tribunal had already adjudicated upon the identical issue arising from the same search and the same evidentiary foundation in the case of the group concern, the decision rendered therein was squarely applicable to the facts of the present case.

77. The ld.AR, accordingly, submitted that the ld.CIT(A) was justified in deleting the additions made towards alleged undisclosed cash consideration received on the sale of residential flats for the assessment years 2019-20, 2020- 21 and 2021-22, respectively. He, therefore, prayed that, following the decision of the Coordinate Bench in the case of M/s. Ivar Estates Private Limited (supra), the orders of the ld.CIT(A) on this issue be upheld and the corresponding grounds raised by the Revenue in the respective appeals be dismissed.

78. We have heard both the parties, perused the materials available on record and gone through the orders of the authorities below. We have also carefully considered the decision of the Coordinate Bench of this Tribunal in the case of M/s. Ivar Estates Private Limited v. ACIT, ITA No.1857/Chny/2026, relating to assessment year 2023-24, vide order dated 18.08.2026, relied upon by the ld.AR for the assessee. The issue arising for our consideration is whether the ld.CIT(A) was justified in deleting the additions made by the AO towards alleged undisclosed income from the sale of residential flats for the assessment years 2019-20, 2020-21 and 2021-22, respectively.

79. On examination of the assessment orders, we find that the additions made by the AO in the hands of the assessee emanate from the search conducted in the Appaswamy Group on 03.11.2023. During the course of search, the Investigation Wing found certain loose sheets, electronic records, WhatsApp conversations and ERP/BSF data and recorded statements from various employees and officials of the group. On the basis of the said materials, the AO concluded that the group had collected unaccounted cash from customers over and above the sale consideration recorded in the regular books of account. For the purpose of quantifying the alleged undisclosed cash receipts, the AO adopted a median selling rate in respect of the various projects undertaken by the group and compared the same with the actual sale consideration recorded in the ERP system, after allowing a standard discount of 5%. The differential amount was treated as unaccounted cash received from customers. By adopting the aforesaid methodology, the AO quantified the alleged undisclosed cash receipts of the Appaswamy Group as a whole at Rs.102.04 crores for the assessment years 2016-17 to 2024-25 and thereafter attributed the respective amounts to the respective individual group entities on the basis of the projects undertaken by them and the relevant assessment years.

80. We further find that the AO had attributed an aggregate amount of Rs.17,53,84,476/- to the present assessee for the assessment years 2019-20 to 2024-25, out of which additions of Rs.82,92,000/-, Rs.3,49,31,150/- and Rs.37,60,100/- were made for the assessment years 2019-20, 2020-21 and 2021-22, respectively. Thus, it is evident that the additions made in the hands of the present assessee were not the result of an independent exercise of quantification based on separate and distinct incriminating material relating exclusively to the assessee. On the contrary, the additions formed part of the common exercise of estimation undertaken by the AO for the Appaswamy Group as a whole, and the amounts so quantified were subsequently allocated to the respective group entities and assessment years.

81. We find that an identical issue arising out of the very same search conducted in the Appaswamy Group had come up for consideration before the Coordinate Bench of this Tribunal in the case of M/s.Ivar Estates Private Limited v. ACIT (supra), relating to assessment year 2023-24. The said company is also a constituent of the Appaswamy Group, and the addition made in its hands towards alleged undisclosed cash receipts from the sale of residential flats was founded upon the same evidentiary material and the identical methodology adopted by the AO in the present case. The material relied upon by the AO, namely, the statements recorded from the employees and officials of the group, the alleged practice of allowing discounts exceeding 5%, the ERP/BSF data, WhatsApp conversations, loose sheets and Buyer Abstract Analysis Reports, constituted the common foundation for the additions made in the hands of the various group entities. The AO had also adopted the same median-rate methodology for estimating the alleged cash component in the sale consideration and attributing the resultant amounts to the respective entities. The Coordinate Bench, after considering the issue, deleted the addition made towards alleged undisclosed cash receipts in the case of M/s.Ivar Estates Private Limited.

82. In the present case, we find that the ld.CIT(A) has examined the entire material relied upon by the AO and has recorded categorical findings that the alleged receipt of unaccounted cash was not established by any direct or independent corroborative evidence. The ld.CIT(A) has observed that no buyer- wise cash receipts, acknowledgements, parallel books of account or other records evidencing actual collection of cash from customers were brought on record by the AO. Further, no purchaser was examined to establish that any consideration over and above the amount recorded in the registered sale deeds had been paid to the assessee. The ld.CIT(A) has also taken note of the fact that the statements of the employees relied upon by the AO were subsequently retracted and that no further examination or independent verification was undertaken to substantiate the allegations contained therein. The ld.CIT(A) has further found that the AO had neither rejected the books of account maintained by the assessee nor pointed out any specific defect in the recorded sale consideration supported by the registered sale deeds, customer agreements, ERP records and banking transactions.

83. We also find that the ld.CIT(A) has specifically examined the methodology adopted by the AO for quantifying the alleged undisclosed income. The ld.CIT(A) has observed that the median selling rate adopted by the AO was an inferential figure and was not established to be the actual consideration received in any concluded sale transaction. The AO had proceeded to substitute the recorded sale consideration with such estimated rate and treated the resultant difference as unaccounted cash receipts, without establishing a direct nexus between the seized material and the individual transactions to which the estimation was applied. The ld.CIT(A), therefore, held that the additions were founded upon assumptions and extrapolation rather than on cogent evidence establishing actual receipt of unaccounted consideration by the assessee. On a consideration of the findings recorded by the ld.CIT(A), we do not find any infirmity in his conclusion that the additions made by the AO, on the basis of the aforesaid methodology, were unsustainable.

84. More importantly, we find that the very foundation of the additions made in the present case has already been considered by the Coordinate Bench of this Tribunal in the case of M/s. Ivar Estates Private Limited (supra). Although the additions have been made in the hands of different group entities and relate to different assessment years, the underlying search material, the alleged modus operandi and the methodology adopted by the AO for quantification remain identical. The mere fact that the AO has attributed the estimated undisclosed cash receipts to the respective group entities on the basis of the projects undertaken by them does not, by itself, distinguish the present case from that of M/s.Ivar Estates Private Limited. The project-wise and year-wise allocation represents the consequential quantification of the alleged undisclosed income and does not alter the common evidentiary foundation upon which the additions were made. Therefore, the difference in the quantum of additions or the assessment years involved cannot constitute a distinguishing feature warranting a different conclusion, when the substantive issue and the basis of the additions remain the same.

85. In this regard, we are of the considered view that, when an identical issue arising out of the same search and founded upon the same material has already been adjudicated upon by a Coordinate Bench of this Tribunal, the principle of judicial discipline requires us to follow the decision rendered therein, unless there are distinguishing facts or circumstances warranting a different view. In the present case, no such distinguishing material has been brought to our notice by the Revenue. The ld.DR has also not demonstrated that the additions made in the hands of the present assessee are supported by any separate or independent evidence establishing actual receipt of unaccounted cash, which was not the subject matter of consideration before the Coordinate Bench in the case of M/s.Ivar Estates Private Limited (supra). In the absence of any such distinguishing feature, we see no reason to depart from the view taken by the Coordinate Bench on the identical issue.

86. In view of the foregoing discussion and respectfully following the decision of the Coordinate Bench of this Tribunal in the case of M/s. Ivar Estates Private Limited v. ACIT (supra), we are of the considered opinion that the ld.CIT(A) was justified in deleting the additions made by the AO towards alleged undisclosed income from the sale of residential flats. Accordingly, we uphold the orders of the ld.CIT(A) deleting the additions for the assessment years 2019-20, 2020-21 and 2021-22, respectively. Consequently, the corresponding grounds of appeal raised by the Revenue on this issue for all the three assessment years are dismissed.

87. In the result, all the five appeals preferred by the Revenue in ITA Nos. 3965, 3990, 3991, 3992 and 3993/Chny/2026, pertaining to the assessment years 2017-18, 2018-19, 2019-20, 2020-21 and 2021-22, respectively, stand dismissed.

Order pronounced on 28th September, 2026 at Chennai.