NILESH JASVANTLAL PAREKH,MUMBAI vs. ASST COMM OF INCOME TAX, 27(2), MUMBAI

आदेश / ORDER PER: MAKARAND VASANT MAHADEOKAR, AM

This appeal by the assessee is directed against the order dated 30.09.2025 passed under section 250 of the Income-tax

2 ITA No. 7526/Mum/2025 Nilesh Jasvantlal Parekh Act, 1961[hereinafter referred to as "the Act"] by the learned Addl./JCIT(A), Agra[hereinafter referred to as "the CIT(A)"], for the assessment year 2011-12. The impugned appellate order arises from the reassessment order dated 20.12.2018 passed by the Assistant Commissioner of Income Tax, Circle 27(2), Mumbai[hereinafter referred to as "Assessing Officer"], under section 143(3) read with section 147 of the Act. 2. Briefly stated, the assessee filed his return of income on 17.01.2012 declaring total income of Rs.1,22,61,961/-. The assessment was originally completed under section 143(3) of the Act on 26.11.2013, determining the total income at Rs.1,45,78,830/-. Subsequently, the Assessing Officer received information from the Joint Commissioner of Income Tax (OSD), Central Circle 6(4), Mumbai, that the assessee had allegedly made cash payment of Rs.20,00,000/- to the Indiabulls Group towards acquisition of a residential property in its project during the financial year 2010-11.The information was stated to have emanated from a search conducted under section 132 of the Act on the Indiabulls Group on 13.07.2016. During the search, the statement of Shri Ashok Kumar Sharma, Group CFO of the Indiabulls Group, was recorded under section 132(4) of the Act. According to the Assessing Officer, Shri Ashok Kumar Sharma admitted receipt of on-money by the Indiabulls Group and stated that an unaccounted amount of Rs.20,00,000/- had been

3 ITA No. 7526/Mum/2025 Nilesh Jasvantlal Parekh received from the assessee towards purchase of an apartment in the project. 3. On the basis of the aforesaid information, the Assessing Officer recorded reasons and, after obtaining the requisite approval, reopened the assessment under section 147 of the Act. Notice under section 148 was issued on 27.03.2018. In response, the assessee, by letter dated 13.04.2018, requested that the original return filed on 17.01.2012 be treated as the return filed in response to the notice under section 148. The reasons recorded for reopening were thereafter communicated to the assessee. 4. During the reassessment proceedings, notices under sections 143(2) and 142(1) were issued on 05.07.2018 and 17.10.2018, respectively. In response, the assessee furnished the return of income, bank statements and an agreement for purchase of Flat No.2201, 22nd Floor, Indiabulls Sky, Senapati Bapat Marg, Elphinstone Road (West), Mumbai, for a consideration of Rs.5,33,71,536/-. The assessee also furnished a bank statement reflecting payment of Rs.63,86,500/- during the relevant previous year. It was explained that approximately Rs.1,00,00,000/- had been paid out of the assessee’s own funds and the balance consideration was financed through a loan from Indiabulls Housing Finance.

4 ITA No. 7526/Mum/2025 Nilesh Jasvantlal Parekh 5. The Assessing Officer issued a show-cause notice dated 27.10.2018 requiring the assessee to explain why the alleged cash payment of Rs.20,00,000/- should not be treated as unexplained investment. The assessee, by letter dated 29.10.2018, denied having paid any part of the consideration in cash and requested an opportunity to cross-examine the person who had allegedly admitted receipt of cash from the assessee. The Assessing Officer thereafter issued summons under section 131 dated 07.12.2018 to Shri Ashok Kumar Sharma and the assessee, requiring them to attend on 14.12.2018 at 11:30 a.m. According to the Assessing Officer, the assessee did not attend on the appointed date and time. 6. The Assessing Officer observed that the purchase of the property from the Indiabulls Group was not in dispute. He further observed that the electronic data found in the laptop of Shri Ashok Kumar Sharma and the statement recorded from him under section 132(4) indicated receipt of on-money by the Indiabulls Group in respect of units sold in its various projects, including the transaction of the assessee. The Assessing Officer, therefore, rejected the denial of the assessee and treated the alleged cash payment of Rs.20,00,000/- as unexplained investment under section 69 of the Act. Consequently, the total income was assessed at Rs.1,65,78,830/- by the order dated 20.12.2018 passed under section 143(3) read with section 147 of the Act.

5 ITA No. 7526/Mum/2025 Nilesh Jasvantlal Parekh 7. Aggrieved by the reassessment order, the assessee preferred an appeal before the learned CIT(A) on 21.01.2019. Before the learned CIT(A), the assessee disputed the validity of the reopening as well as the addition made under section 69. The assessee contended that no cash payment had been made; that the statement of Shri Ashok Kumar Sharma and the underlying material had not been supplied; and that no effective opportunity of cross-examination had been afforded, since the postal communication fixing the cross-examination on 14.12.2018 was allegedly despatched only on 15.12.2018. 8. The learned CIT(A) held that the reassessment was based on tangible material received pursuant to the search on the Indiabulls Group. According to the learned CIT(A), the statement recorded under section 132(4), read with the seized electronic material, had a live nexus with the transaction of the assessee. The learned CIT(A), therefore, held that the reopening was based on fresh information and did not constitute a mere change of opinion. Accordingly, the challenge to the validity of the reassessment proceedings was rejected. 9. As regards the grievance concerning cross-examination, the learned CIT(A) observed that summons under section 131 dated 07.12.2018 had been issued to the assessee and Shri Ashok Kumar Sharma for appearance on 14.12.2018 and that the Assessing Officer had expressly offered an opportunity of cross- examination. The learned CIT(A) further observed that no

6 ITA No. 7526/Mum/2025 Nilesh Jasvantlal Parekh contemporaneous request seeking rescheduling of the cross- examination had been shown to have been made before completion of the reassessment proceedings. He also held that the addition was not based solely upon the statement of Shri Ashok Kumar Sharma but was supported by the seized electronic material. The learned CIT(A), therefore, rejected the contention regarding violation of the principles of natural justice. 10. On the merits of the addition, the learned CIT(A) held that the denial of the assessee was insufficient to dislodge the evidentiary value of the statement recorded under section 132(4), read with the seized electronic records relating to receipt of on- money from purchasers in the Indiabulls projects. It was further observed that the assessee had not produced any contemporaneous confirmation from the builder or other cogent material negating the alleged cash component. According to the learned CIT(A), proof of payment of the recorded consideration through disclosed sources did not, by itself, exclude the possibility of an additional cash payment. 11. The learned CIT(A) also rejected the grievance concerning non-supply of the statement. He observed that the reasons supplied to the assessee disclosed the substance of the allegation and that the addition was corroborated by the seized electronic material. Holding that no demonstrable prejudice had been established, the learned CIT(A) sustained the addition of

7 ITA No. 7526/Mum/2025 Nilesh Jasvantlal Parekh Rs.20,00,000/- made under section 69 of the Act and dismissed the appeal of the assessee.

8 ITA No. 7526/Mum/2025 Nilesh Jasvantlal Parekh of the said notice, referred to certain specific information allegedly obtained from the Investigation Wing regarding payment of Rs.20,00,000/- in cash by the assessee, neither the statement of the concerned person nor the underlying material forming the basis of such information was furnished to the assessee. The learned AR further invited our attention to the assessee’s reply dated 29.10.2018, placed at page 85 of the paper book, wherein the assessee categorically denied having paid any amount in cash and specifically requested the Assessing Officer to afford an opportunity to cross-examine the person who had allegedly admitted receipt of Rs.20,00,000/- in cash from the assessee. 14. The learned AR further invited our attention to the summons dated 07.12.2018 issued under section 131 of the Act, whereby the assessee was required to appear before the Assessing Officer on 14.12.2018 at 11:30 a.m. for the purpose of cross-examining Shri Ashok Kumar Sharma. Referring to the speed-post envelope and the consignment-tracking report placed in the paper book, the learned AR submitted that the postal article containing the summons was booked only on 15.12.2018, namely, after the date fixed for appearance and cross- examination. He, therefore, contended that no effective opportunity of cross-examination was afforded to the assessee and that the observation of the Assessing Officer regarding the assessee’s failure to attend on the appointed date was contrary to the documentary evidence on record. The learned AR further

9 ITA No. 7526/Mum/2025 Nilesh Jasvantlal Parekh submitted that this specific grievance, supported by the postal- tracking details, was also raised before the learned CIT(A); however, the learned CIT(A) rejected the same and sustained the addition. 15. The learned AR further referred to paragraphs 7.5 and 7.6 of the impugned order and submitted that the learned CIT(A) had, in effect, cast an impossible burden upon the assessee to prove a negative fact. The assessee had categorically denied having paid any amount in cash and had furnished evidence regarding payment of the recorded consideration through disclosed sources. According to the learned AR, once the assessee denied the alleged cash payment, it was incumbent upon the Revenue to furnish the statement and the seized electronic material relied upon and to establish, on the basis of cogent evidence, that such payment had actually been made. The assessee could not be required to obtain a confirmation from the builder negating a cash transaction which, according to him, had never taken place. 16. The learned AR further submitted that the learned CIT(A) erred in treating the reasons recorded for reopening as sufficient disclosure of the material relied upon. Neither the statement of Shri Ashok Kumar Sharma nor the alleged seized electronic records were supplied to the assessee. Without access to such material and an effective opportunity to cross-examine the person whose statement was relied upon, the assessee could not reasonably be expected to rebut the allegation. It was thus

10 ITA No. 7526/Mum/2025 Nilesh Jasvantlal Parekh contended that the learned CIT(A) had wrongly shifted the burden of proving the alleged cash payment from the Revenue to the assessee and sustained the addition merely for want of evidence disproving an unsubstantiated allegation. 17. Per contra, the learned Departmental Representative relied upon the orders of the authorities below and supported the addition made by the Assessing Officer and sustained by the learned CIT(A). 18. We have considered the rival submissions and perused the material available on record. The controversy concerns the addition of Rs.20,00,000/- under section 69 of the Act on account of an alleged cash payment made by the assessee towards the purchase of Flat No.2201 in the project known as “Indiabulls Sky”. The Assessing Officer made the addition principally on the basis of information received from the Investigation Wing, the statement of Shri Ashok Kumar Sharma, Group CFO of the Indiabulls Group, recorded under section 132(4) of the Act and certain electronic records allegedly found during the search conducted on the Indiabulls Group. 19. The learned AR first referred to the show-cause notice dated 27.10.2018, placed at pages 82 and 83 of the paper book. We find that paragraph 3 of the said notice merely communicates the allegation that, according to the information received, the assessee had paid Rs.20,00,000/- in cash in respect of the

11 ITA No. 7526/Mum/2025 Nilesh Jasvantlal Parekh property purchased in the project “Sky 882”. The notice does not reproduce the relevant portion of the statement of Shri Ashok Kumar Sharma, identify the particular seized electronic record relating to the assessee or furnish a copy of either of them. Thus, the show-cause notice disclosed the allegation against the assessee, but not the primary material on which that allegation was founded. 20. There is a material distinction between communicating the substance of an allegation and furnishing the evidence proposed to be used in support of that allegation. Knowledge of the allegation enabled the assessee to deny it, but without the statement and electronic records, the assessee could neither examine their contents nor effectively rebut their authenticity, interpretation and alleged connection with his transaction. Therefore, the finding of the learned CIT(A) that communication of the reasons had enabled the assessee to know the case against him does not answer the grievance concerning non-supply of the foundational material. 21. The assessee, in his reply dated 29.10.2018, categorically denied having paid any part of the consideration in cash. He further stated that the show-cause notice was based upon the admission of a key person of the builder and specifically requested an opportunity to cross-examine such person. The observation of the learned CIT(A) in paragraph 7.6 that the assessee had not established that any contemporaneous request

12 ITA No. 7526/Mum/2025 Nilesh Jasvantlal Parekh for supply of the statement or cross-examination was made during the assessment proceedings is, therefore, contrary to the documentary material available on record. 22. The subsequent events further demonstrate that the Assessing Officer himself considered cross-examination necessary and issued summons under section 131 dated 07.12.2018, requiring the assessee to appear on 14.12.2018 at 11:30 a.m. The summons expressly stated that Shri Ashok Kumar Sharma had also been summoned and that the assessee would be permitted to cross-examine him on the date and at the time specified therein. 23. However, the speed-post envelope and the consignment- tracking report placed before us show that the postal article containing the summons was booked only on 15.12.2018. Thus, the summons was despatched after the date fixed for appearance and cross-examination. In these circumstances, the statement in the assessment order that the assessee failed to attend on the appointed date does not reflect the complete factual position. An opportunity communicated after the date fixed for availing it cannot be regarded as a real and effective opportunity. 24. The learned CIT(A) rejected this contention by observing that the assessee did not make any subsequent request for rescheduling the cross-examination. In our considered view, this reasoning cannot be sustained. The assessee had already made a specific request for cross-examination in his reply dated

13 ITA No. 7526/Mum/2025 Nilesh Jasvantlal Parekh 29.10.2018. Having fixed the cross-examination for 14.12.2018 but despatched the summons only on 15.12.2018, the Assessing Officer could not place the consequence of such delayed despatch upon the assessee. The assessee could not reasonably be expected to seek rescheduling of an appointment of which he had no effective prior notice.

“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.” (para 6) 26. The jurisdictional Hon’ble Bombay High Court in H.R. Mehta v. ACIT (2016) 387 ITR 561 (Bom.) has held that an assessee is entitled to the material proposed to be used against him as well as an opportunity to cross-examine the person whose statement is relied upon. The relevant observations are: “the denial of such opportunity goes to root of the matter and strikes at the very foundation of the reassessment” (para 17) 27. In the present case, the violation is not confined merely to the denial of cross-examination. The statement itself and the alleged seized electronic records were never furnished to the assessee. The assessee was thus deprived of both components of

14 ITA No. 7526/Mum/2025 Nilesh Jasvantlal Parekh an effective opportunity, namely, access to the evidence used against him and an opportunity to test the statement through cross-examination. 28. The learned CIT(A) sought to sustain the addition on the reasoning that the statement of Shri Ashok Kumar Sharma was corroborated by seized electronic records relating to the project and the assessee’s unit. However, the impugned order does not identify the particular electronic record, its contents, the manner in which the assessee’s transaction was recorded therein or the basis on which the figure of Rs.20,00,000/- was attributed to the assessee. More importantly, such material was never furnished to the assessee. An undisclosed document cannot be treated as corroborative evidence against the assessee merely because it has been referred to in the assessment order. 29. We also find merit in the contention of the learned AR that the learned CIT(A) effectively required the assessee to prove a negative. In paragraph 7.5 of the impugned order, the learned CIT(A) observed that the assessee had not produced any contemporaneous counter-evidence from the builder or any confirmation negating the alleged cash component. The assessee had categorically denied having paid any cash. In such circumstances, he could not reasonably be required to obtain a confirmation from the builder that a transaction which, according to him, never occurred had not taken place.

15 ITA No. 7526/Mum/2025 Nilesh Jasvantlal Parekh 30. It is true that evidence showing payment of the recorded consideration of Rs.5,33,71,536/- through disclosed sources does not, by itself, conclusively disprove the possibility of an additional cash payment. However, the absence of such conclusive disproof does not establish that the alleged cash payment was actually made. The existence of the unaccounted investment is a foundational fact which the Revenue was required to establish before calling upon the assessee to explain its source. Section 69 cannot be invoked merely because the assessee is unable to produce evidence disproving an allegation founded upon material withheld from him. 31. In the present case, no document evidencing payment of Rs.20,00,000/- was found from the possession or premises of the assessee. No cash trail has been identified, no corresponding withdrawal or source has been established and no independent inquiry from the builder has been brought on record. The assessee’s name is alleged to appear in electronic records recovered from a third party, but neither those records nor the relevant extract thereof was furnished to the assessee. The statement relied upon was also not supplied or tested through cross-examination. Once such untested material is excluded from consideration, no independent evidence remains to establish that the assessee had made the alleged cash payment. 32. The learned CIT(A) also held that no prejudice had been demonstrated by the assessee. We are unable to agree. The

16 ITA No. 7526/Mum/2025 Nilesh Jasvantlal Parekh material was relied upon to make and sustain an addition of Rs.20,00,000/-. The assessee was denied an opportunity to examine the contents of that material, question its authenticity and context, and cross-examine the person whose statement was relied upon. The prejudice is inherent in the use of undisclosed and untested material as the foundation of the addition. 33. We have also considered whether the matter should be restored to the Assessing Officer for providing the material and granting cross-examination. The Assessing Officer had sufficient opportunity during the reassessment proceedings to furnish the material and afford an effective opportunity of cross-examination. The assessee had specifically sought cross-examination on 29.10.2018. Even thereafter, the summons fixing cross- examination was despatched only after the scheduled date. The grievance was again specifically raised before the learned CIT(A), together with the postal-tracking evidence, but the defect was not cured. In these circumstances, restoring the matter would amount to providing the Revenue another opportunity to fill the deficiencies in the case already made. We, therefore, do not consider it appropriate to remit the issue for a fresh examination. 34. As regards Ground No.4 challenging the validity of reopening under sections 147 and 148 of the Act, the learned AR contended that the reassessment was based upon borrowed satisfaction and that the Assessing Officer had not independently examined the information received from the Investigation Wing.

17 ITA No. 7526/Mum/2025 Nilesh Jasvantlal Parekh Since we have deleted the addition on merits and no further addition survives in the reassessment order, adjudication of the validity of reopening would be academic. We, therefore, leave the legal issue raised in Ground No.4 open without expressing any opinion thereon.

Order pronounced in the open court on 13.08.2026.

Sd/- Sd/- (CHALLA NAGENDRA (MAKARAND VASANT PRASAD) MAHADEOKAR) JUDICIAL MEMBER ACCOUNTANT MEMBER Mumbai, Dated 13.08.2026 ANKIT, PS

आदेश की प्रतितिति अग्रेतिि/Copy of the Order forwarded to : 1. अपीलाथी / The Appellant 2. प्रत्यथी / The Respondent. 3. संबंधधत आयकर आयुक्त / The CIT(A)

18 ITA No. 7526/Mum/2025 Nilesh Jasvantlal Parekh आयकर आयुक्त(अपील) / Concerned CIT 4. धिभागीय प्रधतधनधध, आयकर अपीलीय अधधकरण, मुम्बई/ DR, ITAT, Mumbai 5. 6. गार्ड फाईल / Guard file.

आदेशानुसार/BY ORDER, सत्याधपत प्रधत //True Copy// 1. उि/सहायक िंजीकार ( Asst. Registrar) आयकर अिीिीय अतिकरण, मुम्बई / ITAT, Mumbai