MAHESH BECHARA KAROTRA,NAVI MUMBAI vs. I.T.O.28(2(1), JURISDICTIONAL OFFICER, NAVI MUMBAI, NAVI MUMBAI

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH “J(SMC)” MUMBAI

BEFORE SHRI OM PRAKASH KANT (ACCOUNTANT MEMBER) AND SHRI ANIKESH BANERJEE (JUDICIAL MEMBER)

ITA No. 1732/MUM/2026 Assessment Year: 2016-17

Mahesh Bechara Karotra, Income Tax Officer, Ward Shop No.03, MAhaver Heights, 28(2)(1), Jurisdictional Officer, Sector 07, Ghansoli, Vs. Navi Mumbai, 609, Bhavani Navimumbai – 400709, Chambers, Kedarmal Road, Maharashtra. Malad (East), Mumbai Maharashtra. PAN NO. ANLPK 8248 G Appellant Respondent

Assessee by : Shri Pritesh Mehta, CA Revenue by : Ms. Jayshree Thakur

: 29/06/2026 Date of Hearing : 30/06/2026 Date of pronouncement ORDER PER OM PRAKASH KANT, AM

This appeal by the assessee is directed against the order dated 30.01.2026, passed by the learned, Commissioner of Income-Tax (Appeals) – National Faceless Appeal Centre, Delhi [in short, ‘the Ld. CIT(A)’], for Assessment Year (in short ‘A.Y’), 2016-17, raising the following grounds:-

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the Act on 15.10.2018 in the case of M/s Bhagwati Developers and its group concerns, the Investigation Wing allegedly unearthed material indicating that the developer had adopted the practice of collecting part of the sale consideration in cash over and above the amount reflected in the registered sale deeds. Based on such information, the Assessing Officer reopened the assessment under section 147 of the Act and alleged that the assessee had paid on- money of ₹17,60,000/- in cash for acquisition of the aforesaid property. Since, according to the Assessing Officer, the assessee failed to explain the source of the alleged cash payment, the same was treated as unexplained investment under section 69 of the Act.

“The essential conditions for applicability of Section 69 are

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(1) The assessee must be in possession of investment in any form (here: immovable property in cash) (2) The investment is not recorded in the books of account (3) The assessee fails to furnish satisfactory explanation about the nature and source of investment. (4) The AO forms a belief that income has escaped assessment on this account. All four conditions stand satisfactorily fulfilled in the present case. On-money in real estate is a well-recognized phenomenon in the Indian property market where developers accept partial consideration in cash outside the registered sale deed. This is deliberately structured to: Page 44 of 49 ANLPK8248G- MAHESH BECHARA KAROTRA A.Y. 2016-17 ITBA/NFAC/S/250/2025-26/1085363147(1) - Evade stamp duty and registration fees - Avoid tax compliance - Facilitate tax evasion on the builder's side - Enable tax evasion on the purchaser's side The remand report of the Assessing Officer has explicitly noted as follows "Now, paying and receiving ON MONEY in cash itself is unaccounted transaction and same is never ever shown in regular books and accounts of both payer and payee. Hence, the appellant submitting his On bank statements for FY 2015-16 is merely a self serving declaration and Act which does not have any evidentiary value. "This observation is factually accurate and legally sound. On-money transactions, by their very nature, are designed to remain off the books. Search action findings on M/s Bhagwati Developers revealed the following critical facts emerged 1. The developer was systematically collecting on-money across multiple projects. 2. On-money was exclusively collected in cash before agreement registration or allotment letter issuance. 3. After cash collection, sale agreements were executed at circle rate/stamp duty value. 4. The actual transaction value was significantly higher than registered value. 5. Parts of the consideration were not accounted in regular books. 6. Project-wise breakup of cash components was captured during post search proceedings. Page 45 of 49 ANLPK8248G- MAHESH BECHARA KAROTRA A.Y. 2016-17 ITBA/NFAC/S/250/2025-26/1085363147(1)

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These findings constitute contemporaneous documentary evidence (seized during search) of the on-money practice followed by the developer and received by the appellant. Burden of Proof and Evidentiary Standards indicate Initial Burden on Department. Under Section 69, it is the responsibility of the Assessing Officer to establish that the assessee is in possession of an investment and demonstrate that the investment is not recorded in books to show that the explanation offered is not satisfactory. In the present case, possession of property is established from search findings and agreement dated 24.08.2015. The on-money component (Rs.17,60,000) is not recorded in any books maintained by the appellant. The appellant has offered no satisfactory explanation despite multiple opportunities. Therefore, once the department establishes the above facts, the burden shifts to the appellant to explain i.e. 1. The nature of the investment 2. The source of funds used for investment 3. Documentary evidence supporting the explanation However, the appellant's response has been wholly inadequate as appellant’s submissions are confined to claims that property was purchased for Rs.85,00,000 (agreement value) and no on-money was paid and Bank statements show the funds were traceable and Developer confirmation confirms no outstanding dues. However, these submissions completely fail to address the core issue, the existence of cash payment of Rs.17,60,000 found during the search action on the developer. The original evidence regarding the on-money transaction derives from direct search conducted on M/s Bhagwati Developers on 15.10.2018 and Statements of concerned persons of the developer were recorded during search. Relevant material was seized detailing project-wise cash components. Project- wise breakup of cash component specifically attributed to the appellant's property. The contemporary evidence, captured at the time of actual transactions and obtained from the payer organization itself (the developer) and seized during lawful search action and crossverified against actual property transaction dates and amounts, the appellant argument placing reliance on the Registered Sale Deed showing Rs.85,00,000 as Page 46 of 49 ANLPK8248G- MAHESH BECHARA KAROTRA A.Y. 2016-17 ITBA/NFAC/S/250/2025-26/1085363147(1) consideration which is fundamentally flawed. The Hon’ble Supreme Court and High Courts have consistently held that registered sale deeds reflect only the declared consideration. On-money, being a tax-evasion mechanism, is intentionally omitted from registered deeds. In multiple cases involving real estate transactions, courts have held that registered deeds cannot be the sole basis to determine actual consideration paid. On-money transactions, almost by definition, do not find place in registered documents and absence of mention in registered deed does not negate existence of on-money. If the appellant's argument were accepted, on-money could never be taxed because, by design, it never appears in registered documents. This would create a loophole enabling systematic tax evasion in the real estate sector. The appellant reliance bank

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statements showing traceable transfers (from home loan and personal contributions) are merely self-serving declarations without probative value in this context as the bank statements show transfers to the developer/lawyer, not the on-money payment in cash. Real estate on-money transactions are structured as official component i.e. declared amount shown in books and traced through banks and undisclosed component i.e. cash payment made separately, often handed directly to developer representatives. Developer Confirmation Letter from M/s Bhagwati Developers stating that "no funds are outstanding with respect to that property after payment of Rs.85,00,000".This confirmation has minimal evidentiary value for several reasons especially self-serving in nature as the confirmation is obtained by the appellant himself and is therefore self-serving. The same developer's documents and statements, seized during the search action, reveal the on-money payment of Rs.17,60,000. The confirmation cannot be reconciled with these contemporaneous search findings. The confirmation was provided years later (in 2022), whereas the search was conducted in 2018. The developer has clear incentive to support the appellant's version to avoid generating additional tax exposure. The developer's On seized documents show the on-money breakup project-wise. An oral/written confirmation cannot override the documentary evidence seized during search. Various courts have held that when official records contradict appellant’s provided confirmations, the official records take precedence. Once the Assessing Officer raises a question as to the source of investment, the burden is on the appellant to explain the nature and source of the investment. If the explanation is not satisfactory, the investment can be treated as income under section 69. In the present case, the AO has raised a specific and detailed question about the source of on-money of Rs.17,60,000. The appellant's bare denial and subsequent bank statement citations Page 47 of 49 ANLPK8248G- MAHESH BECHARA KAROTRA A.Y. 2016-17 ITBA/NFAC/S/250/2025-26/1085363147(1) fall short of satisfactory explanation. The case laws submitted by the appellant in support of his contention also not on the same facts as that of appellant’s case. Whereas in the case of appellant, specific information was gathered by the Investigation Wing of the department that M/s. Bhagwati Developers and its group concerns are engaged in receiving on-money on various residential and commercial projects and modus operandi was established concretely by the department through their investigations conducted during the search as well as post-search investigations. The Assessing Officer submitted a detailed remand report dated 11.08.2025 analyzing the additional evidence filed by the appellant during remand proceedings under direction of the CIT(A). The AO correctly analyzed that the case does not fall under Rule 46A for admission of additional evidence.AO refused to admit evidence that should have been admitted stating that as appellant failed to show sufficient cause even after providing sufficient opportunity, why he failed to utilize the same. Even the additional evidences presented by appellant namely Property Purchase Deed, AO stated that same cannot be accepted as sole evidence because on-money is intentionally excluded from registered deeds. I am in agreement with AO as property deed showing Rs.85,00,000 is probative of registered consideration but not of absence of on-money. The deed cannot override search evidence from the developer. The bank statement for FY 2015-16

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relied upon by appellant as additional evidence also rejected by AO stating that bank transfers prove the registered amount was paid through formal channels. They do not prove absence of cash on-money payment, which by nature remains unbanked. AO further stated that sources of payments for Rs.85,00,000 are explained (home loan + personal contribution), but the sources of Rs.17,60,000 on-money remain unexplained. As the appellant has not provided any explanation for the source of on-money cash payment, I am in agreement with AO as the mere fact that registered consideration was funded from legitimate sources does not explain the undisclosed on-money. Based on the detailed analysis above, I find Reopening Jurisdiction Valid as the reopening of assessment under Section 147 r.w.s 151 is validly invoked on the basis of information obtained during search on M/s Bhagwati Developers. Therefore, jurisdictional requirement is satisfied. Page 48 of 49 ANLPK8248G- MAHESH BECHARA KAROTRA A.Y. 2016-17 ITBA/NFAC/S/250/2025-26/1085363147(1) The Procedural Compliance Complete as the AO provided adequate notice and opportunity of hearing one full hearing under Section 143(2) and three separate notices under Section 142(1) and one show-cause notice under Section 144 with final warning via Physical service and speed post to ensure receipt. Therefore, procedural compliance is complete and unimpeachable. The evidence of On- Money Substantial and Credible as the evidence establishing on-money payment of Rs.17,60,000 is derived from search action on the actual developer and contemporaneous (dated 15.10.2018) based on seized documents and statements specific to the appellant's property along with Project-wise quantification. This evidence is substantially more credible than appellant's post-hoc denials and confirmations. The Appellant's explanation is inadequate as it amounts to bare denial without documentary support and misplaced reliance on registered deed which inherently excludes on-money and bank statements proving only registered consideration without negating payment of on-money and post-hoc developer confirmation completely unreliable against search evidence. None of these addresses the specific evidence from developer's search. The On-Money clearly falls Under Section 69 as the on-money cash payment is an investment in immovable property and is not recorded in appellant's books and is inadequately explained and was made from undisclosed sources. After careful consideration of the entire case, addition under Section 69 of Rs.17,60,000 on account of unexplained on-money investment in property purchase is here by confirmed as the addition represents the appellant's undisclosed income for the Financial Year 2015-16 (A.Y. 2016-17).In view of the above, the sole ground of appeal and additional grounds raised during the course of the present appeal is hereby, dismissed.” 4. Before us, the learned counsel for the assessee submitted that the entire addition has been made solely on the basis of statements recorded during the course of search in the case of the developer

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and certain alleged seized material, none of which was independently confronted or proved against the assessee in accordance with law. It was contended that neither any opportunity to cross-examine the persons whose statements have been relied upon was afforded nor was any independent enquiry conducted by the Assessing Officer to establish that the assessee had in fact made any cash payment over and above the consideration recorded in the registered sale deed.

4.1 The learned counsel further submitted that an identical issue arising out of the very same search conducted in the case of M/s Bhagwati Developers came up for consideration before the Coordinate Bench of the Tribunal in the case of Kundal Raghubhir Bhandari v. ITO (ITA No.3646/Mum/2023, Assessment Year 2017- 18), wherein the Tribunal, after examining the identical search material and statements, held that no addition could be sustained merely on the basis of the statement of the developer without any independent corroborative evidence and without affording the assessee an effective opportunity to cross-examine the maker of the statement.

4.2 Per contra, the learned Departmental Representative strongly relied upon the orders of the Assessing Officer and the learned CIT(A). It was submitted that the search conducted on M/s Bhagwati Developers had conclusively established the modus operandi adopted by the developer for collection of on-money in

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cash and that the seized material specifically identified the assessee as one of the purchasers who had allegedly made such payment. It was accordingly contended that the authorities below were justified in invoking the provisions of section 69 of the Act.

“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

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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 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.”

5.1 In the said decision, which also arose from the very same search conducted in the case of M/s Bhagwati Developers, the Coordinate Bench held that an addition in the hands of a flat purchaser cannot be sustained merely on the basis of the statement of the builder or the material found during the search in the builder's case unless such material is independently corroborated by evidence establishing actual payment by the purchaser. The Tribunal (supra) further held that where reliance is placed upon the statement of a third party, the principles of natural justice require that an effective opportunity of cross-examination be afforded to the assessee. In the absence of such opportunity and in the absence of independent corroborative material, no adverse inference can legally be drawn.

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5.2 The Revenue has not brought to our notice any distinguishing feature in the facts of the present case vis-à-vis those considered by the Coordinate Bench. Admittedly, except for the material recovered during the search in the case of the developer and the statements recorded therein, no independent evidence has been brought on record to demonstrate that the assessee had actually paid any amount over and above the consideration reflected in the registered sale deed. Neither any incriminating material was recovered from the assessee evidencing such payment nor was any opportunity afforded to the assessee to cross-examine the persons whose statements constitute the very foundation of the impugned addition. It is well settled that while information received from a search conducted in the case of a third party may constitute a valid basis for initiating enquiry, the addition ultimately made in the hands of an assessee must rest upon legally admissible evidence establishing the assessee's own undisclosed investment. Suspicion, however strong, cannot substitute proof. Likewise, an addition founded exclusively upon an untested third-party statement, without compliance with the principles of natural justice and without any independent corroboration, cannot be sustained. 5.3 Respectfully following the decision of the Coordinate Bench in Kundal Raghubhir Bhandari (supra), rendered on identical facts arising from the very same search, and there being no distinguishing feature brought to our notice by the Revenue, we set aside the order of the learned CIT(A) and direct the Assessing

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Officer to delete the addition of ₹17,60,000/- made under section 69 of the Act. 6. In view of our decision on the merits of the addition, the legal grounds challenging the validity of the reassessment proceedings have become academic and, therefore, do not call for separate adjudication.

Order pronounced in the open Court on 30/06/2026.

Sd/- Sd/- (ANIKESH BANERJEE) (OM PRAKASH KANT) JUDICIAL MEMBER ACCOUNTANT MEMBER Mumbai; Dated: 30/06/2026 M. Ranganath Vittal , Sr. P.S.

Copy of the Order forwarded to : 1. The Appellant 2. The Respondent. 3. CIT 4. DR, ITAT, Mumbai 5. Guard file.

BY ORDER, //True Copy// (Assistant Registrar) ITAT, Mumbai