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Facts
Appeals by husband and wife involving identical issues. In ITA No. 4440/Mum/2025 (AY 2014-15), assessment was completed u/s. 143(3), but later proceedings u/s. 153A were initiated after a search. The addition was based on an employee's statement of cash payment for jewellery. Similarly, for ITA No. 4441/Mum/2025 (AY 2017-18), an addition was made regarding diamond bangles based on an employee's statement of cash payment.
Held
The Tribunal held that the addition was made solely based on the statement of a third-party employee without corroborative evidence. The assessee's denial of cash payment and the lack of incriminating material found during the search weigh against the addition. Previous decisions on similar facts also supported deletion of such additions.
Key Issues
Whether additions made solely on the basis of a third-party employee's statement, without corroborative evidence and despite the assessee's denial, are sustainable.
Sections Cited
143(3), 132(1), 153A, 131, 132(4)
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Income Tax Appellate Tribunal, “A” BENCH, MUMBAI
Before: SHRI SAKTIJIT DEY & MS. PADMAVATHY S.Shri Amit Jatia &
(Assessment Year: 2017-18) Smt. Smita Jatia The Asst. CIT, Central Circle 7(1) 1001, Tower-3, 10th Floor, Mumbai One International Center, Vs. Senapati Bapat Marg, Prabhadevi, Delisle Road S.O., Mumbai-400 013 PAN/GIR No. ADDPJ 8102 C (Appellant) : (Respondent) Appellant by : Dr. K. Shivaram & Shri Shash Bekal Respondent by : Shri Rajesh Kumar Yadav Date of Hearing : 20.11.2025 Date of Pronouncement : 03.12.2025 O R D E R Per Saktijit Dey, Vice President: Captioned are appeals relating to two different assessee’s, arising out of separate orders of learned Commissioner of Income Tax (Appeals), Mumbai. While relates to assessment year (A.Y.) 2014-15, A.Y. 2017-18.
& 4441/Mum/2025 (AYs. 2014-15 & 2017-18) Shri Amit Jatia & Smt. Smita Jatia 2. Since, appellants are closely related, being husband and wife and issues arising for consideration are more or less identical, they have been clubbed together and disposed of in a common order, for the sake of convenience.
At the outset, we will take up relating to Shri Amit Jatia. Through, multiple grounds have been raised by the assessee, both on legal issues as well as on merits, however, we intend to proceed on merits and, if warranted, the legal issues would be considered.
Briefly, the facts are, the assessee is a resident individual. In the assessment year under dispute, the assessee had filed his return of income on 30.07.2014, declaring income of Rs.1,87,59,370/-. Assessment in case of the assessee was completed u/s. 143(3) of the Act, vide order dated 23.09.2016, accepting the income returned. Subsequently, on 17.04.2018, a search and seizure operation u/s. 132(1) of the Act was done in case of Jatia Group and assessee was also covered under such search action. As a result of such search and seizure operation, proceedings u/s. 153A of the Act were initiated on the assessee. In response to the notice issued u/s. 153A of the Act, the assessee filed a return of income, declaring income of Rs.1,07,34,660/-. The reduction in income was due to the fact that assessee’s employer had recovered an amount of Rs.80,24,710/- towards excess remuneration paid.
Be that as it may, a search action was undertaken in case of Firestar International Pvt. Ltd., in course of which, a statement was recorded on 15.01.2017 from Mr. Saurabh J. Shah, working as an Executive. In the statement recorded, the concerned employee stated that in addition to the bill amount paid in cheque towards sale of jewellery, cash was also paid. In this context, the concerned person provided a list having details of date & 4441/Mum/2025 (AYs. 2014-15 & 2017-18) Shri Amit Jatia & Smt. Smita Jatia of purchase, customer name and details of the amount paid in cash and cheque. As per the said list, it was found that assessee’s wife Smt. Smita. Jatia had paid an amount of Rs.28,80,000/- in cash and Rs.19,20,000/- in cheque, out of total amount paid of Rs.48 lacs towards purchase of earrings and rings.
Basis the statement recorded u/s. 131 of the Act, wherein the Assessing Officer (A.O. for short) also referred to the excel file recovered from the computer/laptop found in the premises of Firestar International Pvt. Ltd. Further, the AO found that in course of search and seizure operation conducted in case of Jatia Group and the assessee, a statement u/s. 132(4) of the Act was recorded from Smt. Smita Jatia wherein, to a query made by the A.O. regarding the purchase of jewellery from Firestar International Pvt. Ltd., Smt. Smita. Jatia stated that the jewellery was purchased by her husband Shri Amit Jatia, the present assessee. In support, she also furnished the bill towards purchase of such jewellery and also stated that the purchase price was paid through cheque and no amount was paid in cash. The A.O., however, did not accept the claim of Smt. Smita. Jatia that no cash amount was paid over and above the bill amount. Thus, basis the statement recorded from Mr. Saurabh J. Shah, employee of Firestar International Pvt. Ltd., the A.O. ultimately concluded that the assessee had paid an amount of Rs.28,80,000/- in cash, over and above, the amount paid in cheque towards purchase of jewellery. Hence, he added back the amount to the income of the assessee.
Though, the assessee contested the addition by filing an appeal before ld. first appellate authority, however, he was unsuccessful.
& 4441/Mum/2025 (AYs. 2014-15 & 2017-18) Shri Amit Jatia & Smt. Smita Jatia 8. Before us, ld. Counsel appearing for the assessee submitted that in the search and seizure operation conducted in case of the assessee, no incriminating material whatsoever was found indicating payment of cash towards purchase of jewelry. He submitted, solely relying upon the statement of a Thirty Party and some documents found in course of search operation in case of a third Party, the A.O. has made the addition without bringing on record any other corroborative evidence to demonstrate the actual payment of cash by the assessee. He submitted, while dealing with identical nature of additions made in case of other assessee’s, relying upon the materials found in course of search and seizure operation conducted in case of Firestar International Pvt. Ltd., the Tribunal has deleted the addition made by the A.O. In this context, ld. Counsel relied upon the following decisions: 1. Shri Avinash Nivrutti Bhosale vs. DCIT (in & 530/Mum/2021 vide order dated 18.11.2023) 2. Smt. Rekha Ganesh vs. ACIT (in vide order dated 20.09.2024)(Bang)(Trib)
The ld. Departmental Representative (ld. DR for short) strongly relied upon the observations of the A.O. and ld. first appellate authority.
We have considered rival submissions and perused the materials available on record. A careful reading of the assessment order reveals that based on the statement recorded from an employee of Firestar International Pvt. Ltd. and some materials found in course of search and seizure operation conducted in case of the said company, the A.O. has concluded that in addition to the amount paid in cheque towards purchase of jewellery, the assessee had paid excess amount in cash. Except the solitary statement of the concerned employee, who no doubt is a third party, the A.O. has not brought on record any other material to establish that the assessee indeed had paid cash over and above the & 4441/Mum/2025 (AYs. 2014-15 & 2017-18) Shri Amit Jatia & Smt. Smita Jatia amount paid in cheque, which is reflected in the purchase bill. In course of search and seizure operation carried out in case of the assessee, assessee’s wife Smt. Smita. Jatia, in a statement recorded u/s. 132(4) of the Act, while admitting the purchase of jewellery by her husband, has not only produced the bill, but had also categorically stated that except the amount in cheque, no additional amount was paid in cash. Pertinently, in course of search and seizure operation conducted in case of the assessee, no incriminating material was found indicating payment of cash by the assessee towards purchase of jewellery. When the assessee has categorically denied of having paid any cash, over and above the amount reflected in the purchase bill, simply relying upon the statement recorded from a third party, that too the employee of the person searched, the A.O. could not have concluded that the assessee indeed was paid the cash. Interestingly, the A.O. while making the addition has stated that the assessee could not produce any documentary evidence to support his claim of non-payment of cash for purchase of jewellery. We fail to understand as to how the assessee can be asked to prove the negative and that too with documentary evidence. It would be further relevant to observe, while deciding the appeal in case of Shri Avinash Nivrutti Bhosale (Supra) involving identical nature of addition made by the A.O. relying upon the search and seizure operation in case of Firestar International Pvt. Ltd., the Tribunal having gone through the relevant facts has deleted the addition made holding as under: 48. Considered the rival submissions and material placed on record, the issue involved in this ground also similar to the facts in the ground nos 1,3, and 5 raised by the assessee. The decision reached in the para nos 28 to 30. However, in the issues raised here, the addition was made relying on the statement recorded from the employee of the Nirav Modi Group, wherein it was stated by the employee that the assessee has paid more than the invoiced amount. No corroborative evidence found in the hands of the assessee during the search action initiated in the case of assessee however, assessee had repeatedly asked for the documents and statements recorded from the search conducted in the case of Nirav Modi Group but it was never provided to the assessee. It is well settled procedure that the addition cannot be made in the hands of the assessee by relying on the material or statement of third parties without giving an opportunity to & 4441/Mum/2025 (AYs. 2014-15 & 2017-18) Shri Amit Jatia & Smt. Smita Jatia the assessee to rebut or cross examin the other parties. It is held in the case of Sant Lal (supra) held as under: 11. We have perused the impugned order and notice that the ITAT has given a finding of the fact that the case of the respondent is covered with the decision of the ITAT in the cases of Mahabir Prasad Gupta (supra) and Ashok Prasad (supra). The relevant portion of the impugned order read as under: “4. In the circumstances and fact of the case, we are of the view that the case is fully covered with the decision of ITAT in the cases of Mahabir Prasad Gupta (supra) and Ashok Prasad Gupta (supra) and further observed that Revenue could lay its hands on the diary of Sh. Brij Mohan Gupta where names of persons were recorded in quoted words and revenue could not establish the name of the assessee from such quoted words. Though the Revenue has placed on record statement of Sh. Brij Mohan Gupta, Ram Avtar Singal and Rajiv Gupta but still Revenue has failed to establish link between the information noted in abbreviated form and the assessee. The diary was neither found from the promises of the assessee nor in the hand writing of the assessee any third person may write the name of any person at his sweet will, in such circumstances assessee cannot be put to any liability on the action of the third person, the same has to be corroborated by the Revenue which has not been done in the present case. In the circumstances and facts of the case, we do not find any infirmity in the order of the Ld. CIT(A) who has rightly deleted the additions so made by the AO. Accordingly, all the grounds of the Revenue are dismissed.
12. In case of the Mahabir Prasad Gupta (supra), this Court has examined the facts and concluded that the concurrent finding of the facts cannot be disturbed as there was no material which could justify the assessment order. The relevant portion of the said order which reads as under: 13. The above submissions fail to persuade this Court to interfere with the matter. Concurrent findings of fact have been rendered by the CIT (A) as well as by the ITAT. Nothing has been pleaded in the memorandum of appeal to persuade the Court to hold that those findings are perverse or contrary to the facts on record. Secondly, there is not a whisper in the order of the AO about any bag recovered from the premises of the Assessee during the search of the Assessee's premises on 22nd March 2006. There is no such averment even in the memorandum of appeal filed before this Court. The material referred to in the order of the AO is that which was recovered from the premises of Mr. Brij Mohan Gupta and nothing else. That material has been discussed threadbare in the order of the CIT (A). Detailed reasons have been given as to why that material was insufficient to link the Assessee with "MP Gupta? whose name finds mention in the diary and the documents seized from the premises of Mr. Brij Mohan Gupta.
14. Consequently, the Court is not persuaded to permit the Revenue, for the first time, before this Court to set up an entirely different case of there having been a bag seized from the premise of the Assessee which according to the Revenue contained incriminating material against the Assessee."
In view of the aforesaid facts and the concurrent findings given by the CIT (A) and ITAT, it is evident that the Revenue has not been able to produce any cogent material which could fasten the liability on the respondent. The CIT(A) has also examined the assessment record and has observed that the AO did not make any further inquiry/investigation on the information passed on by the DCIT, Central Circle-19, New Delhi. No attempt or effort was made to gather or corroborate evidence in this relation. From the above, it is clear that the information found in the case of third party cannot be relied without giving proper opportunity to the assessee and even the evidence found from the third & 4441/Mum/2025 (AYs. 2014-15 & 2017-18) Shri Amit Jatia & Smt. Smita Jatia party could not be traced or no cogent material was unearthed during the search conducted in the premises or establishment of the assessee. Therefore, there is no merit in the submissions of the tax authorities to substantiate the above additions. We are not inclined to further in the other submissions made by the assessee. Accordingly the grounds raised by the assessee are allowed.
Identical view was expressed by the co-ordinate bench in case of Smt. Rekha Ganesh (supra), while deciding similar dispute. Thus, having taken note of the factual position as well as the decisions of the co-ordinate bench referred above, we are inclined to hold that the addition made is purely on the basis of conjuncture and surmises, without any supporting material.
In view of the aforesaid, we are inclined to delete the addition. Since, we have decided the issue on merits in favour of the assessee, the grounds raised on legal issues, having became academic and are left open. Hence, the appeal is allowed in terms indicated above. is concerned, the facts are more or less identical. Suffice to say, in course of search and seizure operation conducted in case of the assessee, amongst the jewellery found was a pair of diamond bangles purchased from Firestar International Pvt. Ltd. As observed by the AO., in the assessment order, the bangles were valued by the Departmental Valuer at Rs.15,53,133/- as against the purchase price of Rs.8,72,850/-. Relying upon the statement recorded from Mr. Saurabh J. Shah, an employee of Firestar International Pvt. Ltd., wherein, he stated that the assessee had purchased the bangles for an amount of Rs.17,25,000/- and the excess amount of Rs.8,62,000/- was paid in cash, the A.O. concluded that the assessee indeed has paid cash of Rs.8,62,500/- towards purchase of the bangle and, accordingly, added back to the income of the assessee.
Though, the assessee contested the aforesaid addition before ld. first appellate authority, however, she was unsuccessful.
We have heard the parties and perused the materials on record. As could be seen from the facts on record, in course of search and seizure operation carried out in case of the assessee, a pair of diamond bangles was found. Apparently, the Departmental Valuer seized one bangle and left out the other. The Departmental Valuer valued the bangle at Rs.7,76,566/-. When this fact was confronted to the assessee, in the statement recorded u/s. 132(4) of the Act, the assessee not only stated that the pair of bangles was purchased for a consideration of Rs.8,72,850/-, but also furnished supporting evidence by way of purchase bill. It was further stated by the assessee that the Departmental Valuer has erroneously valued the bangle at Rs.7,76,566/-. The assessee stated that the other bangle left out by the Department was valued by another registered valuer at Rs.4,39,000/-. Hence, the value of two bangles would work out to Rs.8,78,000/-, which is more or less equal to the invoice value. The A.O., however, did not accept the contention of the assessee. Relying upon the statement recorded from the employee of Firestar International Pvt. Ltd. the A.O. added back an amount of Rs.8,62,500/-, being the amount allegedly paid in cash over and above the invoice value to Firestar International Pvt. Ltd. While deciding the appeal of assessee’s husband (supra), we have held that solely relying upon the statement of a third party, addition cannot be made, more so, when the assessee denies of having paid any cash. The principles equally apply to the present assessee also.
Thus, basis the detailed reasoning recorded in case of assessee’s husband (supra), we hold that the addition made by the A.O. is, unsustainable. Accordingly, we delete the & 4441/Mum/2025 (AYs. 2014-15 & 2017-18) Shri Amit Jatia & Smt. Smita Jatia addition. Since, we have decided the issue on merits, grounds raised on legal issues having become academic are left open. Hence, the appeal is allowed as indicated above.
In the result, both the appeals are allowed. Order pronounced in the open court on 03.12.2025 Sd/- Sd/- (Padmavathy S.) (Saktijit Dey) Accountant Member Vice President Mumbai; Dated : 03.12.2025 Roshani, Sr. PS Copy of the Order forwarded to : 1. The Appellant 2. The Respondent 3. The CIT(A) 4. CIT - concerned 5. DR, ITAT, Mumbai 6. Guard File BY ORDER,