MOHANDAS PONNIL THAZHATATHIL,NAVI MUMBAI vs. DCIT 15(1)(1), MUMBAI

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ITA 2492/MUM/2026Status: DisposedITAT Mumbai30 April 2026AY 2018-196 pages

In favour of the assessee: the assessee's appeal was allowed. From the AI summary of this appeal.

AI SummaryAllowed

What did the Tribunal hold?

The Tribunal held that additions based solely on third-party statements without an opportunity for cross-examination violate principles of natural justice. Following its own precedents in similar cases involving the same builder, the Tribunal found the addition to be bad in law.

What were the facts?

The assessee purchased a flat and the AO reopened the case based on information from a search in the builder's premises, alleging on-money payment. The AO added Rs. 11,50,000/- based on third-party statements without providing an opportunity for cross-examination.

What were the issues?

Whether additions can be made based on third-party statements without providing the assessee an opportunity to cross-examine the deponent. Whether reassessment proceedings were validly initiated based on borrowed satisfaction.

Which sections of the Income-tax Act were involved?

Section 69,Section 147,Section 132,Section 148

AI-generated summary — verify with the full judgment below

IN THE INCOME-TAX APPELLATE TRIBUNAL, MUMBAI “J (SMC)” BENCH, MUMBAI BEFORE SHRI SANDEEP GOSAIN, JUDICIAL MEMBER AND SHRI BIJAYANANDA PRUSETH, ACCOUNTANT MEMBER ITA No.2492/MUM/2026 (AY:2018-19) Mohandas Ponnil Thazhatathil, A- vs. DCIT 15(1)(1), Aayakar Bhavan, M.K. 2/502, Madhavi CHS, Plot 3, Sector Road, Mumbai-400 020. 19A, Navi Mumbai-400 706. PAN/GIR No: AAAPT3129M (Appellant) (Respondent) Assessee by Shri P.P. Jayaraman Revenue by Shri Aditya Rai ( SR. DR) Date of Hearing 30.04.2026 Date of Pronouncement 08.06.2026 O R D E R PER BIJYANANDA PRUSETH, AM:

This appeal filed by the assessee emanates from the order passed under

section 250 of the Income-tax Act, 1961 (in short, ‘Act’) by the National Faceless

Appeal Centre [in short, ‘CIT(A)’], dated 11.12.2025 for the assessment year

(AY) 2018-19.

2.

The grounds of appeal raised by the assessee are as under:

“1. That on the facts and circumstances of the case and in law, the Ld. CIT(A) erred in upholding the addition made by Ld. Assessing Officer (AO) u/s 69 of the Income Tax Act, 1961 (the Act). 2. That the Ld. CIT(A) grossly erred in law by ignoring the violation of the Principles of Natural Justice, as the Appellant was never provided an opportunity to cross examine the person (the key person of the Bhagawati Group) whose statement was the sole basis for the impugned addition. 3. That on the facts and circumstances of the case and in law, the Ld. CIT(A) erred in upholding the validity of reassessment proceedings u/s 147 of the Act. The reopening is bad in law as it was based on borrowed satisfaction i.e. based on information received

ITA No. 2492/Mum/2026 Mohandas Ponnil Thazhatathil from the builder, without any further investigation and without any independent application of mind by the Assessing Officer (AO). 4. That the Ld. CIT(A) erred in confirming the addition of Rs. 11,50,000 made u/s 69 of the Act, despite the fact that the addition is based solely on a third party statement recorded behind the back of the Appellant, which has no evidentiary value against the Appellant. 5. That the addition is based on assumptions, without independent verification, corroborative material, OR any linkage to the appellant. 6. That the Appellant craves leave to add, amend, alter, OR withdraw any of the grounds of appeal at OR before the time of hearing.”

3.

Facts of the case, in brief, are that the assessee filed return of income for the AY 2018-19, declaring total income at Rs.5,64,380/-. In view of the information emanating from the search and seizure action u/s 132 of the Act in case of Bhagwati Developers and group concerns on 15.10.2018 that the assessee had paid earned money of Rs.23,00,000/- for purchasing of flat bearing No.C- 0502, Bay Bliss from Bhagwati Developers, the case was reopened and notice u/s 148 was issued on 25.04.2025. In response, the assessee filed return declaring the same total income of Rs.5,64,380/-. The assessee submitted that the property was purchased jointly with Shri Ajit Kumar Nair. He submitted that no amount was paid in cash and the entire consideration totaling to Rs.81,76,171/-was paid in cheque/NEFT and RTGS. The assessee denied having paid any on-money to Bhagwati Developers. However, the AO did not accept the contention of the assessee and relying upon the report of the Central Circle-1(3), Mumbai and the statements of Shri Kulin Shantilal Vora and Shri Manji K. Patel, where it was admitted that on-money was received by the builder, he added Rs.11,50,000/-,

ITA No. 2492/Mum/2026 Mohandas Ponnil Thazhatathil being 50% of the consideration paid in cash for purchase of residential flat, C- 0502, Bay Bliss, u/s 69 r.w.s. 115BBE of the Act. 4. Aggrieved by the order of AO, the assessee filed appeal before the CIT(A). The CIT(A) has reproduced the submission of the assessee and dismissed the ground in respect of addition of Rs.11,50,000/- u/s 69 of the Act. He observed that the information emanating from a valid search, supported by sworn statements and corroborative records, constitute sufficient material to sustain an addition. The error in computation of income was set aside to the file of AO for verification. The other grounds were dismissed. In the result, he partly allowed the appeal of the assessee. 5. Aggrieved by the order of CIT(A), the assessee filed appeal before the Tribunal. The Ld. AR has filed factual paper book containing 94 pages and also

filed copies of various decisions of ITAT relating to similar issue, where the

addition made by the AO were directed to be deleted. The decisions relied upon by the Ld. AR are as follows: (i) Kundal Raghubir Bhandari in ITA NO

3646/MUM/2023; (ii) Bhagawati-M-Jain in ITA No. 2408/MUM/2025; (iii)

Mithlesh Amarnath Maurya in ITA No. 7731/Mum/2025; (iv) Rekha Narayan Dhama in I.T.A. No. 485/Mum/2025; (v) Kalpesh C. Shah in ITA No. 1581-1582&

1583/MUM/2022; (vi) Meena Lalit Jain in ITA No. 7355-7356 & 7357/Mum/2025; (vii) Nirmala Pennechand Sarda in ITA No. 7291/MUM/2025; (viii) Bhavana Vikram

Jain in ITA No.6363-6364-6365/MUM/2025; (ix) Sudha Aswal in ITA No.

21/DDN/2026 and (x) Arvind Khetaram Purohit in ITA Nos. 4747 &

ITA No. 2492/Mum/2026 Mohandas Ponnil Thazhatathil 4746/MUM/2025. He submitted that the facts being similar, the order of CIT(A)

may be set aside.

6.

On the other hand, the Ld. SR. DR relied on the decision of lower

authorities.

7.

We have heard both sides and perused the materials on record. We have

also deliberated on the decisions relied upon by the Ld. AR. We find that there

are a number of decisions pronounced by the ITAT from the FY 2023-24 onwards,

wherein the co-ordinate Benches have decided the similar issues pertaining to on-

money payment to Bhagwati Developers in favour of different assessees. The

relevant part of the decision in case of Kundal Raghubir Bhandari (supra) may be

reproduced below for ready reference:

“18. Considered the rival submissions and material placed on record, we observe that there was a search action in the case of the builder Shri Kulin S Vora and in that case the builder has accepted that they have received on- money from the various projects conducted by them and he has disclosed the name of all the flat owners. The Tax Authorities proceeded to make the addition based on the above declaration of receipt of on-money in the hands of the Flat Owners. Assessee being one of the flat purchaser, the assessment was reopened However, no cross examination opportunity was given to the assessee. In this case, no such opportunity was granted to the assessee and only the statement recorded were supplied to the assessee and in fact, it was asked the assessee to bring the builder before the Assessing Officer. After careful consideration, we observe that the assessee is or will never in a position to bring any builder before the tax authorities, it is the duty of the tax authorities if they want to rely on statement to arrange for the cross examination and opportunity to be extended to the assessee. Apart from the above statement of the builder and whatever they have declared in their assessment was with the authorities, this information was never available with the Assessing Officer in this case, hence, there is no evidences available in the hands of the Tax Authorities against the assessee except the statement of the builder. The additions proposed by the Assessing Officer merely relying on the statement of the builder. Therefore, in our considered view the addition cannot be made without bringing proper material on record or 4

ITA No. 2492/Mum/2026 Mohandas Ponnil Thazhatathil bringing on record the proper joint statement from the builder as well as the assessee wherein assessee should be one of the party should concede that they have made the on-money. In this case merely relying on the statement of the third party and without giving opportunity to the assessee to prove its point of view, which is against the natural justice. In this situation, the addition cannot be made in the hands of the assessee. Therefore, we are inclined to treat the assessment order as bad in law which was made purely on the basis of assumption and unverified statement of the third party. Accordingly, appeal filed by the assessee is allowed.”

7.1 In the subsequent decision dated 10.03.2026 in case of Bhagwati M. Jain

(supra), for AY 2018-19, the Tribunal has allowed appeal of the assessee where

on-money of Rs.21,99,000/- was paid by the assessee to a concern of the

Bhagwati Developers group. The other decisions at serial Nos.3, 4 and 10, relied

upon by the Ld. AR, are also on the same issue and support the case of the

appellant. The Ld. DR has not been able to bring on record any contrary fact or

decision on the subject issue. Hence, following the above decisions, the ground

of the assesse is allowed.

7.2 Since we have allowed the appeal on merit, the other grounds become

academic in nature and do not require adjudication.

8.

In the result, the appeal of the assessee is allowed.

Order is pronounced on 08.06.2026.

Sd/- Sd/- (SANDEEP GOSAIN) (BIJYANANDA PRUSETH) JUDICIAL MEMBER ACCOUNTANT MEMBER *Aniket Chand; Sr. PS MUMBAI Date: 08.06.2026 Copy of the Order forwarded to: 1. The Assessee 2. The Respondent 5

ITA No. 2492/Mum/2026 Mohandas Ponnil Thazhatathil 3. The CIT(A) 4. CIT 5. DR/AR, ITAT, MUMBAI 6. Guard File

By Order

Assistant Registrar ITAT, MUMBAI

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