RAMAN KUMAR DHAWAN, LUDHIANA,LUDHIANA vs. THE INCOME TAX OFFICER WARD 5(1), LUDHIANA, PUNJAB

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ITA 26/CHANDI/2026Status: DisposedITAT Chandigarh14 July 2026AY 2019-20206 pages
AI SummaryAllowed

What did the Tribunal hold?

The Tribunal held that the addition was unsustainable as it was based solely on an uncorroborated third-party statement without any documentary evidence or opportunity for cross-examination. A registered sale deed carries a presumption of correctness which was not rebutted by the Revenue.

What were the facts?

The assessee sold a plot of land for a registered sale deed value of Rs. 1,17,500. However, a third party stated that the actual consideration was Rs. 8,00,000. The Assessing Officer made an addition based on this statement, treating it as unexplained money.

What were the issues?

Whether an addition under Section 69A can be made solely on the basis of an uncorroborated third-party statement without affording cross-examination, and if reassessment proceedings under Section 147 were validly initiated.

Which sections of the Income-tax Act were involved?

Section 69A,Section 115BBE,Section 147

AI-generated summary — verify with the full judgment below

IN THE INCOME TAX APPELLATE TRIBUNAL, CHANDIGARH BENCHES, “SMC” CHANDIGARH HEARING THROUGH: HYBRID MODE BEFORE: SHRI. LALIET KUMAR, JUDICIAL MEMBER आयकर अपील सं./ ITA No. 26 /Chd/2026 िनधा�रण वष� / Assessment Year : 2019-20 Raman Kumar Dhawan बनाम The ITO 7378 Street No. 8, Quality Chowk Ward 5(1), Ludhiana Shimlapuri, Ludhiana, Punjab-141008 �ायी लेखा सं./PAN NO: CHJPD9249J अपीलाथ�/Appellant ��थ�/Respondent िनधा�रती की ओर से/Assessee by : Shri Sudhir Sehgal, Advocate राज� की ओर से/ Revenue by : Dr. Ranjit Kaur, Addl. CIT, Sr. DR (Virtual Mode) सुनवाई की तारीख/Date of Hearing : 24/06/2026 उदघोषणा की तारीख/Date of Pronouncement : 14/07/2026 आदेश/Order PER LALIET KUMAR, J.M: This is an appeal filed by the Assessee against the order of the Ld. CIT(A), NFAC, Delhi dt. 16/12/2025 for the Assessment Year 2019-20. 2. In the present appeal Assessee has raised the following grounds:

1.

That the Ld. CIT(A) has grossly erred in confirming the order of Assessing Officer in confirming the addition of Rs.8 lacs on account of alleged excess sale consideration of plot" received at the time of making sales to Smt. Priyanka Verma and Sh. Rohini Kumar Verma in equal shares. 2. That the Ld. CIT(A) has failed to appreciate the detailed submissions as filed before him on 13.05.2024, alongwith case laws and papers book, consisting of to 24 pages and which have been ignored summarily by the CIT(A). 3. That the Ld. CIT(A) has failed to consider and appreciate the affidavit filed by Sh.Rohini Kumar Verma and the assessee and merely relied upon the statement of Sh. Rohini Kumar Verma, at the back of assessee and the same is not justified at all in view of the judgment of Andaman Timber Industries, reported in 281 CTR 241 (SC). 4. That the Ld. CIT(A) has erred in not considering the documents as filed by the assessee in the form of affidavit and copy of sale deed of plot before the Assessing Officer. 5. That the Ld. Assessing Officer has erred in reopening the assessment u/s 147 merely on the basis of statement at the back of the assessee and has

failed to appreciate that there was no tangible material leading the alleged escapement of assessment and, thus, the reopening of the assessment is bad in law. 6. Notwithstanding the above, the Ld. Assessing Officer has erred in assessing the income u/s 69A and applying the rates as per the provisions of Section 115BBE when the alleged income of Rs. 8 lacs was assessed as Long Term Capital Gain. 7. That the appellant craves leave to add or amend the grounds of appeals before the appeal is finally heard or disposed off.

3.

Briefly the facts of the case are that the assessee is an individual engaged in construction activities who declared a total income of Rs.4,56,840/- for AY 2019-20. Following an investigation, the Income Tax Department intercepted information from a cash requisition under Section 132A against a third party, Shri Rohni Kumar Verma. Shri Verma stated under oath that his wife had purchased a 50-square-yard property from the assessee for an actual consideration of Rs.8,00,000/-, whereas the registered sale deed dated October 11, 2018, reflected a transaction value of only Rs.1,17,500/-. Based on this, the Assessing Officer (AO) initiated reassessment proceedings under Section 147 of the Act.

3.1 In his assessment order dated 26/03/2024, the AO rejected the assessee’s technical and merit-based objections. The AO held that the reopening was validly backed by concrete documentary evidence (the sale deed) combined with a sworn statement. On merits, he observed that the assessee failed to explain the Rs.6,82,500/- discrepancy or disclose the transaction in his filed ITR-4 SUGAM. Treating the suppressed on-money of Rs.8,00,000/- as unexplained investment/money under Section 69A, the AO applied the tax rates of Section 115BBE, determining the final taxable income to be Rs.12,56,840/-.

4.

Against the order of the AO the assessee went in appeal before the Ld. CIT(A). The Ld. CIT(A) dismissed the assessee's appeal. The Ld. CIT(A) held that the reopening was valid and that principles of natural justice were satisfied since the assessee was confronted with the adverse material. On the merits, the CIT(A) confirmed the addition of Rs.8,00,000/- under Section 69A read with Section 115BBE, ruling that the buyer's initial statement was contemporaneous and reliable, while a subsequent retraction affidavit produced during the appellate stage was a self- serving afterthought.

5.

Against the order of the Ld. CIT(A) the assessee preferred in appeal before the Tribunal.

6.

During the course of hearing the Ld. AR submitted that the reassessment under Section 147 was bad in law and void ab initio, as it was based on borrowed satisfaction and vague third-party information without any independent tangible material establishing escapement of income. On the merits, the Ld. AR contended that both lower authorities grossly erred by making an addition of Rs.8,00,000/- based entirely on a statement recorded behind the assessee's back during Section 132A proceedings, while failing to provide an opportunity for cross-examination. He argued that relying on an uncorroborated third-party statement without cross- examination violates the principles of natural justice and runs directly contrary to the Hon'ble Supreme Court’s judgment in Andaman Timber Industries (281 CTR 241). Furthermore, the Ld. AR pointed out that the Ld. CIT(A) summarily ignored a detailed 24-page paper book along with clear affidavits from both the assessee and the buyer confirming that a vacant plot, not a house, was sold for the registered value of Rs.1,17,500/-. Without prejudice, he argued that the AO committed a patent illegality by calculating the addition under the head of Long-Term Capital Gains while simultaneously taxing it as unexplained money under Section 69A read with Section 115BBE.

7.

Per contra, the Ld. DR relied upon the orders of the lower authorities. Ld. DR submitted that the Section 147 proceedings were validly initiated based on specific, tangible information from the Investigation Wing, Jalandhar. He argued that the reopening was justified by a glaring mismatch between the physical registration deed and a sworn statement from the buyer's husband indicating an actual transaction value of Rs.8,00,000. The Ld. DR maintained that the ratio of Andaman Timber Industries is inapplicable because the assessee was confronted with the adverse material via a statutory Show Cause Notice but failed to provide any objective evidence to explain the discrepancy. He further argued that the 24-page paper book and the subsequent retraction affidavit from the buyer were rightly rejected as self-serving, engineered afterthoughts designed during appellate proceedings to evade tax liability. Concluding his arguments, the Ld. DR submitted that since the unrecorded on-money was kept completely outside the regular financial streams and omitted from the assessee's ITR-4 SUGAM, the AO was fully

justified in assessing the Rs.8,00,000/- under Section 69A and applying the stringent penal tax rates of Section 115BBE.

8.

I have heard the rival submissions and have carefully perused the orders of the authorities below, the material placed on record and the judicial precedents relied upon by both the parties. The solitary issue arising for our consideration is whether the addition of Rs.8,00,000/- made under section 69A of the Income Tax Act, 1961 on account of alleged receipt of on-money in the sale of immovable property is sustainable in law.

8.1 At the outset, I find that the entire addition has been founded upon the statement of Shri Rohni Kumar Verma, the husband of the purchaser, recorded by the Investigation Wing, wherein he allegedly stated that the property had been purchased for Rs.8,00,000/-, whereas the registered sale deed reflected a consideration of Rs.1,17,500/-. Admittedly, no document whatsoever evidencing payment of any amount over and above the registered consideration was recovered either from the assessee or from the purchaser. There is no seized material, no diary, no cash trail, no bank transaction, no receipt, no agreement to sell or any contemporaneous documentary evidence suggesting payment of alleged on-money. The Revenue has sought to sustain the addition solely on the basis of an uncorroborated third-party statement.

8.2 It is a settled proposition of law that however strong a suspicion may be, it cannot take the place of legal evidence. An addition under section 69A cannot rest merely on conjectures or on an isolated statement unless the same is supported by independent and cogent evidence. The burden lies squarely upon the Revenue to establish with credible material that the assessee was found to be the owner of unexplained money which was not recorded in the books of account. In the present case, except for the statement of a third party, no evidence has been brought on record to establish that the assessee actually received Rs.8,00,000/- or any amount in excess of the consideration mentioned in the registered sale deed.

8.3 I further notice that the registered sale deed, executed before the statutory authority under the Registration Act, specifically records the sale consideration at Rs.1,17,500/-. A registered document carries a presumption of correctness unless disproved by cogent evidence. The Revenue has failed to rebut this documentary

evidence by producing any legally admissible material. The mere assertion of the purchaser or his relative, without any corroboration, cannot override a duly executed and registered conveyance deed.

8.4 The assessee has consistently maintained that what was sold was only a vacant plot and not a constructed residential house. The registered sale deed also supports this stand and only mention a plot . Even assuming for the sake of argument that there was some discrepancy in the description of the property by the purchaser in his statement, such discrepancy by itself cannot constitute proof of payment of undisclosed consideration. The Revenue was required to establish the flow of money from the purchaser to the assessee, which it has completely failed to do. In my view the contents of registered can not be contradicted on the basis of oral statements of the third party.

8.5 Further the assessee specifically sought an opportunity to cross-examine Shri Rohni Kumar Verma, whose statement forms the sole foundation of the impugned addition. Such opportunity was admittedly not afforded. It is now well settled by the Hon'ble Supreme Court that where an addition is based upon the statement of a third party, denial of the opportunity of cross-examination amounts to violation of the principles of natural justice and renders such statement incapable of being relied upon against the assessee. Once the statement itself becomes inadmissible for want of cross-examination, the very substratum of the addition disappears.

8.6 The learned Commissioner (Appeals), instead of examining whether any corroborative evidence existed, proceeded to uphold the addition by treating the statement of the purchaser as conclusive. In our considered opinion, such an approach is legally unsustainable. I failed to appreciate how the sole statement particularly one which remained untested by cross-examination, cannot by itself constitute substantive evidence for making an addition under section 69A. In my view no investigation has been made regarding withdrawal of cash, availability of funds or any surrounding circumstances indicating payment of on-money. In absence of such enquiries, the addition rests merely upon assumptions and presumptions, which cannot be sustained in law.

8.7 Considering the totality of the facts and circumstances, I am of the considered opinion that the Revenue has failed to discharge the burden cast upon

it to establish that the assessee received any consideration over and above the amount mentioned in the registered sale deed. The addition has been made merely on the basis of an uncorroborated third-party statement recorded behind the back of the assessee and without affording effective opportunity of cross-examination. Such an addition cannot be sustained either on facts or in law.

8.8 Accordingly, I set aside the order of the learned Commissioner (Appeals) and direct the Assessing Officer to delete the addition of Rs.8,00,000/- made under section 69A read with section 115BBE of the Act. Since the addition itself has been deleted, the consequential tax liability arising therefrom shall also stand deleted.

9.

In the result the appeal of the assessee is allowed . Order pronounced on 14/07/2026 Sd/- ( LALIET KUMAR) JUDICIAL MEMBER AG आदेश की �ितिलिप अ�ेिषत/ Copy of the order forwarded to : अपीलाथ�/ The Appellant 1. ��थ�/ The Respondent 2. आयकर आयु�/ CIT 3. आयकर आयु� (अपील)/ The CIT(A) 4. िवभागीय �ितिनिध, आयकर अपीलीय आिधकरण, च�ीगढ़/ DR, ITAT, CHANDIGARH 5. गाड� फाईल/ Guard File 6.

BY ORDER, ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL KENDRIYA SADAN, SECTOR-9A CHANDIGARH

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