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Facts
The assessee booked a flat and paid an amount as 'on money'. The AO initiated reassessment proceedings based on information from a search and seizure action. The AO added a portion of the 'on money' as unexplained investment, which was confirmed by the CIT(A).
Held
The Tribunal held that the addition was made solely on the basis of third-party statements without providing an opportunity for cross-examination, thus violating the principles of natural justice. The Tribunal relied on a coordinate bench decision with identical facts.
Key Issues
Whether the addition of 'on money' as unexplained investment is sustainable without providing opportunity for cross-examination of third-party witnesses. Whether the reassessment proceedings and subsequent additions were based on sound legal reasons.
Sections Cited
69, 148, 132, 143(1)(a), 115BBE, 250(6), 142(1), 144, 131
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Income Tax Appellate Tribunal, MUMBAI BENCH “C”, MUMBAI
Before: SHRI VIKRAM SINGH YADAV & SHRI. RAJ KUMAR CHAUHAN
O R D E R PER RAJ KUMAR CHAUHAN (J.M.): 1. This appeal is filed by the appellant/assessee against the order dated 12.09.2025 of National Faceless Appeal Centre (NFAC), Delhi [hereinafter referred to as the “CIT(A)”], passed under section 250 of the Income Tax Act, 1961 [hereinafter referred to as “the Act”] for the A.Y.
The brief facts as culled out from the proceedings of authorities below are that the assessee is an individual and filed his return of income for the year under consideration on 29.07.2016 declaring total income at Rs. 16,14,750/-. However as per the information available with the department, the assessee has booked the flat No. 5301 on 27/07/2015 and has paid on money of Rs. 1,00,70,400/- during the financial year 2015-16 relevant to A.Y. 2016-17 and the said transactions are remained unverified. Further, the case was originally selected for scrutiny on the ground that whether the investment and income relating to properties are duly disclosed. However, the original scrutiny order was passed on 10/12/2018 stating that return of income was accepted. Thereafter, notice u/s. 148 dated 20/03/2023 on the basis of information received by the department and also due to search and seizure action u/s 132 of the Act on Ruparel Realty Group and its related entities (RR group) was also carried out on 25.11.2021. During the course of search it is stated to be found that the RR group was involved in large scale on-money transactions where it accepts cash against sale of its flats. The details of Piyush Sharma the flat buyers of Project Ruparel Ariana registered under the group company, namely, Shree Sukhakarta Developers Pvt. Ltd. was found where assessee has booked the flat No. 5301 on 27/07/2015 and has paid „On money” of Rs.1,00,70,400/- to the said company. The assessee stated that she was the co-owner in the said property accordingly AO added Rs. 50,35,200/- as unexplained investments. It is stated that the said reassessment is merely passed on presumptions, assumption, conjectures, suspicious and on surmises on the basis of a dump pieces of paper without any corroborative and cogent evidence. The loose sheet of papers/excel sheet and some noting therein do not indicate that the cash was actually changed hands. It is asserted by the assessee that the flat no. 5301 was purchased from Shree Sukhakarta Developers Pvt. Ltd. for a consideration of Rs. 1,71,52,000/- plus some other charges vide purchase agreement dated 19.11.2019. It is further stated that Mr. Milind Mahendra Ruparel is not the director of the Shree Sukhakarta Developers Pvt. Ltd and he is not the party to signatories of the Agreement which was registered on 19/11/2019. Thus, the AO issued the notice u/s 148 by recording the reasons merely on the basis of information received from DDIT (Inv), Unit 6(3), Mumbai without making any independent inquiry or investigation thereof and it was Piyush Sharma issued without application of mind and the AO has merely acted upon borrowed satisfaction, hence the reassessment order framed by the AO is bad in law, illegal and without jurisdiction. The AO with notice u/s 148A(b) provided only list of documents on which AO had relied, but AO had neither provided any documents nor provided any copy of statements of Milind Mahendra Ruparel on whose statement‟s basis the assessment was reopened. The AO had denied the opportunity of cross examination of third parties on the ground that the builder/developer from whom the flat was purchased was assessee‟s witness, hence the opportunities of cross examinations were denied. Before the AO, assessee has stated that she was the co-owner of the property and the other co-owner is her husband Mr. Narendra Sharma and they had jointly purchased the said property and the advance money or Rs. 10 lakhs was paid by her husband via cheque no. 698988 which was cleared on 30.07.2015. It is further stated by the assessee that the revenue has issued notice to her husband Mr. Narendra Sharma u/s. 142(1) of the Act on 25.07.2023, 11.09.2023 and notice u/s 144 of the Act on 01.11.2023 proposing to add 100% amount of Rs.1,00,70,400/- as on money in her husband as well as in her case leading to 200% addition in both co- owner files which lead to double taxation. The AO did not consider the Piyush Sharma submission of the assessee and stated that since the assessee has not produced any evidence of payment of purchasing the immovable property such as bank statement, receipt of immovable property purchase deed etc. with respect to 50% of share, hence the 50% of the alleged on money amount i.e. Rs. 50,35,200/- was added to the income of the assessee u/s. 69 of the Act.
Aggrieved by the order of AO, assessee preferred the appeal before Ld. CIT(A) who dismissed the appeal of the assessee on the ground that reopening was on tangible reasons, hence Ground no. 1 was dismissed. With respect to Ground No. 2 regarding addition of Rs. 50,35,200/-, the same was also dismissed on the ground that assessee has failed to provide satisfactory explanation or documentary proof of its source of payment and the addition is well supported by seized documents in search detailing cash received over and above agreement values and assessee has failed to produce credible evidence negating the source of unexplained investment.
Aggrieved by the impugned order, the assessee is in appeal before us and has raised the following grounds of appeal:-
Piyush Sharma “1. The order dated 12/09/2025 passed by the Hon'ble CIT(Appeal) NFAC, Delhi bearing no. ITBANFACIS/250/2025-26/1080679087 under section 250 of the Income Tax Act, 1961 is unreasonable, arbitrary and against the provision of Income Tax Act, 1961 and therefore liable to be quashed.
2. On the facts and circumstances of the case and in law, the Hon'ble CIT(A) has erred in confirming addition of Rs. 50,35,200/- as 'on money' transactions and added as unexplained investments under section 69 of the Income Tax Act 1961, ignoring the facts that :
(a) Addition is made on the basis of statement of third party recorded at the back of the Appellant.
(b) No opportunity of cross verification was provided to the Appellant.
(c) There is no other evidence or documents available with the Assessing officer for making addition except the third party statement.
(d) Principle and natural justice is grossly violated while making addition.
3. The Appellant craves to alter, add, delete, substitute, or modify and other grounds of appeal prays to be allowed to add, amend, modify, rectify, delete any grounds of appeal at the time of hearing”
5. The Assessee has raised basically two grounds, Ground no. 1 pertains to validity of reopening and Ground No. 2 pertains to the addition made u/s 69 of the Act. Firstly we proceed to decide ground no. 2. We have heard Ld. AR and Ld. DR and examined the record. At the outset, Ld. AR submitted that the addition made by the AO is not sustainable because the addition has been made on the statement of third party i.e. Mr.
Piyush Sharma Milind Mahendra Ruparel and no opportunities of cross examination was provided by the AO despite the request made therein and all the payments as per the agreement to sale for the consideration amount was made through banking channel. Ld. AR submitted that the principle of natural justice has not been followed with respect to the alleged online payment as the addition has been made on the statement of third party. In support of his arguments, Ld. AR relied on the judgment of Coordinate Bench of ITAT Mumbai in dated 26.03.2024 wherein on identical facts the assessee had purchased flat from same developer Ruperal Ariana, Mumbai and the addition on alleged online payment in that case has been deleted by the Ld. CIT(A) and the appeal of the revenue was dismissed by the Coordinate Bench of ITAT Mumbai. Ld. AR vehemently argued that none of the essential condition of section 69 has been fulfilled because the addition made on the statement of third party, in the absence of cross examination, has violated the principle of natural justice. Further, the addition made on the loose sheet of papers /excel sheet, is wholly irrelevant as evidence being not admissible and has no evidentiary value.
Piyush Sharma 6. On the other hand, Ld. DR stated that the material collected during the raid was sufficient to make addition which has established the online payment and supported the orders passed by the lower authorities.
We have considered the rival submissions and examined the record. We have perused the relevant para i.e. 4.5 and 4.6 of the assessment order and noticed that the AO has not given sufficient reasons for making addition u/s 69 of the Act. The said paragraphs are extracted below:-
“4.5 Point-wise rebuttal of reply of the assessee including analysis of any case law relied upon.
The total consideration for the flat, as stipulated in clause KK of the Purchase Agreement, stands at Rs.1,71,52,000. This sum, exclusive of stamp duty, registration charges, and associated fees, was diligently remitted to Shree Sukhakarta Developers Pvt. Ltd. It is crucial to note that no on-money transaction of Rs.50,35,200/- (50%), as alleged, has taken place. Assessee has admitted that she has purchased immovable property from sh. Sukhakharta Develaover pvt.Ltd. But she has not produced any evidence of payment of purchasing the immovable property such as bank statement, receipt of immovable property purchase deed etc. Even though that she has purchased property (50% ½ half share with her husband) is admitted.
4.6 Conclusion drawn.
As discussed above it is clear that during the search operation and post search enquiries it is hold that Ruparel Reality Group accepts cash excess from registry amount. In the case of the assessee the cash on amount is Piyush Sharma Rs.1,00,70,400/-, assessee is co-owner of the property with her spouse, hence 50% of the same Rs.50,35,200/- is added to the income of the assessee under section 69. Sr. Description Amount (Rs.) No. 1 Income as per Return of Income filed Rs.16,14,750/- 2 Income as computed u/s 143 (1)(a) Rs.16,14,750/- 3 Variation in respect of issue of cash on Rs.50,35,200/- payment for purchase of property as above discussed 4 Total income / Loss determined as per the Rs.66,49,950/- above proposal 8. We have also considered the relevant para 5.6 to 5.8 of the order of Ld. CIT(A) which is extracted below:-
“5.6 From the proper appreciation and evaluation of the findings of the AO and reply /submission of the appellant furnished during appellate proceedings, it is seen that the AO has added 50% share i.e., Rs. 50,35,200/- of the alleged “on money” paid for Flat No. 5301 as unexplained investment under section 69 read with section 115BBE, as the appellant has failed to provide a satisfactory explanation or documentary proof for its source of payment. Payments claimed through banking channels covered only earnest money and agreed registered consideration, but the “on money” alleged exceeded such records. The addition is well supported by seized documents in search detailing cash received over and above agreement values. Failure of the appellant to produce credible evidence negating the source of the unexplained investment. It is relevant to rely upon following judicial precedents that sustain additions on unexplained investments where explanations are inadequate:
CIT vs. Rajesh Jhaveri Stock Brokers P. Ltd. 292 ITR 500 (SC)
ITO vs. Smt. Manju Sharad Kale 134 taxmann.com 268 (Mumbai Trib.)
The appellant’s contentions are mainly denial without substantive cash flow evidence sufficient to disbelieve the search record-based material. Accordingly, the finding of the AO in making the addition of Rs. 50,35,200/- u/s 69 of the IT Act is upheld. Therefore, this ground of appeal is dismissed.
5.7 Ground no. 3: Vide this ground of appeal, the appellant has raised the issue of Alleged Violation of Natural Justice Due to Denial of Cross- Examination Opportunity.
5.8 In the present case, the appellant has contended that opportunity to cross-examine third parties (whose statements formed basis for reopening) was denied, violating natural justice. However, it is noted that the AO considered the builder/developer as witness and reasoned cross examination of other third parties was not warranted since appellant had transactions with the builder and the material facts were sufficiently recorded. Courts have held that like opportunity is not an unqualified right and AO’s discretion to refuse cross-examination if it is unnecessary or beyond scope does not violate natural justice. In this regard, the following judicial decisions are relied upon:
CIT vs. Sterlite Industries India Ltd. 385 ITR 556 (SC) Sunita Jain vs. ITO 35 taxmann.com 292 (Ahmedabad Trib.) Mohan Polyfab Pvt. Ltd. vs. ITO 107 TTJ 864 (Ahmedabad Trib.)
Further, as the statements were extraneous documents by persons not parties to the agreement, reliance on them supplemented with the builder's
On perusal of the reasons given by the Ld. lower authorities as discussed above, we are of the considered opinion that both the authorities has not given legally justified reasons for making the addition. The order of Ld. CIT(A) does not conform with the provision of Section 250(6) of the Income Tax Act, 1961 because the Ld. CIT(A) has failed to state the point for determination and has not decided the confirmation of the addition on the basis of sound legal reasons. The assessee has relied the judgment of Coordinate Bench of ITAT Mumbai in (supra) wherein the facts are identical as the assessee had purchased flat from same developer Ruperal Ariana, Mumbai and the opportunities of cross examination was not offered and the addition on alleged online payment in that case has been deleted by the Ld. CIT(A). The relevant portion of the order of Coordinate Bench of ITAT Mumbai is reproduced below:-
“7. The third ground in appeal by the Revenue relates to alleged on-money paid by the assessee to Ruparel Realty Group for purchase of flat No.3802, at Ruparel Araina, Mumbai. A search action was carried out on Ruparel Realty Group and its related entities. As a part of search the residence of Parikshit Sharma one of the employee in Siddhi Vinayak Infrastructure Realty Co. , a part of Ruparel Realty Group was also covered. Some pockets Page | 11 Piyush Sharma diaries were found and seized from the residence of Parikshit Sharma. In the statement recorded u/s. 132(4) of the Act he admitted that the entries in the diaries pertaining to Ruparel Realty Group. The extract of his statement is placed on record at pages 89 to 92 of the paper book filed by the assessee. At pages 90 to 91 an excerpt of the table is given from the diary seized from the residence of Parikshit Sharma. A perusal of table excerpt reveals that against flat No.3802 two amounts have been mentioned i.e. Rs.50,00,000/- on 24/02/2021 and Rs.40,20,000/- on 25/02/2021. The said amount is stated to be on-money received from customers. The ld.Counsel for the assessee pointed that neither the seized material nor the opportunity of cross examination of Parikshit Sharma was allowed to the assessee. We find that the Assessing Officer in conclusion to para-3 has recorded that summons were issued u/s. 131 to Mr. Parikshit Sharma and video conferencing was scheduled on 19/12/2022 at 3.30 pm, however, the assessee and the witness did not attend the proceedings. The ld. Counsel for the assessee vehemently argued that no effective opportunity of cross examination was provided. The fact of providing video conferencing was merely an eyewash. The said proceedings were marred by technical glitches. The assessee was not able to connect, thus it was not an effective opportunity. No material is brought on record by the Department that an effective opportunity to corss examine Parikshit Sharma was allowed to the assessee. The addition has been made purely on the basis of statement of Parikshit Sharma and diary seized from his residence. It is a well settled principle of natural justice that the addition cannot be made on the basis of evidence collected at the back of the assessee, without affording opportunity of cross examination. The Hon’ble Apex Court in the case Andaman Timber Industries vs. CCE in Civil Appeal No.4228 of 2006 decided on 09/09/2015 held that failure to give the assessee right to cross examine the witness whose statements are relied to make addition is a breach of principle of natural justice. It is a serious Page | 12 Piyush Sharma flaw which renders the order a nullity. Similar view has been expressed by the Hon'ble Jurisdictional High Court in the case of H.R.Mehta vs. ACIT(supra). Thus, in view of our above observations coupled with reasons given by the CIT(A) for deleting the addition, we find no merit in ground No.3 of appeal.
In the result, appeal of the Revenue is partly allowed for statistical purpose.”
It is evident from the observation of Ld. CIT(A) that the opportunities of cross examination was not required because the Courts have held that like opportunity is not an unqualified right and AO‟s discretion to refuse cross-examination if it is unnecessary or beyond scope, does not violate natural justice. We have noticed that the AO has denied the cross examination on the ground that Mr. Milind Ruparel was party to the agreement of sale and was witness of the assessee itself, hence the opportunities of cross was not necessary. The contention of the assessee in that regard shows that Mr. Milind Ruparel whose statement‟s basis addition was made against the assessee, was not the party to sale agreement and was not even the director of builder Shri Sukhakarta Developers Pvt. Ltd. In these facts, we are of the considered opinion that the revenue should have afforded opportunities to cross examine the person on whose statement‟s basis the alleged addition was made.
Piyush Sharma Therefore, respectfully following the decision of Coordinate Bench of ITAT Mumbai in (supra), we direct to delete the addition so made by the AO and the impugned order accordingly set aside. Hence, Ground no. 2 is decided in favour of the assessee.
With regard to Ground no. 1, since we have decided ground no. 2 in favour of the assessee, the legality of reopening pales into insignificance as the same is rendered as academic.
In the result, appeal filed by the assessee is allowed in above terms. Order pronounced in the open court on 02.12.2025