HARISH CHANNAPPA SHETTY,NAVI MUMBAI vs. ITO, WARD 28(1)(1), MUMBAI, NAVI MUMBAI

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ITA 1760/MUM/2026Status: DisposedITAT Mumbai30 June 2026AY 2016-174 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 the addition made by the Assessing Officer was bad in law as it relied solely on the third-party statement without providing the assessee an opportunity for cross-examination. The addition was deleted.

What were the facts?

The Assessing Officer reopened the assessment based on a search action where a builder admitted to accepting on-money. The assessee was identified as a purchaser who allegedly made such a cash payment.

What were the issues?

Whether an addition can be made based on a third-party statement without providing the assessee an opportunity for cross-examination. Whether the addition made as unexplained investment is sustainable.

Which sections of the Income-tax Act were involved?

Section 147,Section 69,Section 250

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, MUMBAI BENCHES, MUMBAI

Before: HON’BLE NARENDER KUMAR CHOUDHRY

For Appellant: Shri Rajesh Shah, Ld. A.R
For Respondent: Shri Kiran K. Chhatrapati, Ld. Sr. D.R
Pronounced: 30.06.2026

आदेश / ORDER

PER NARENDER KUMAR CHOUDHRY, JUDICIAL MEMBER:

This appeal has been preferred by the Assessee against the order dated 02.01.2026, impugned herein, passed by the National Faceless Appeal Centre(NFAC)/Ld. Commissioner of Income Tax (Appeals) (in short Ld. Commissioner) u/s 250 of the Income Tax Act, 1961 (in short ‘the Act’) for the A.Y. 2016-17.

2.

In the instant case, the Assessing Officer (in short, "the AO") reopened the assessment of the Assessee under section 147 of the Act, on the basis of the search and seizure action conducted on 15.10.2018 in the case of M/s. Bhagwati Developers and its group concerns. During the course of the said search, the statement of Shri Kulin Shantilal Vora, who was looking after the sales of various projects of the Bhagwati Group, was recorded. In his statement, Shri Vora admitted that the Group had accepted on-money in cash in respect of sale of various properties and alleged that the Assessee was one of the purchasers, who had made such cash payment.

3.

Based on the aforesaid search and seizure action and the statement of Shri Kulin Shantilal Vora, the AO ultimately made an addition of ₹13,94,000/- under section 69 of the Act, as unexplained investment, alleging that the Assessee had paid the said amount in cash over and above the consideration paid through banking channels for purchase of the property.

4.

We observe that an identical issue arising out of the very same search and seizure action and based upon the statement of Shri Kulin Shantilal Vora came up for consideration before the Hon'ble Coordinate Bench of the Tribunal in the case of Kundal Raghuveer Bhandari Vs. ITO (Intl. Tax), Ward-1(2)(1) in ITA No. 3646/Mum/2023 for Assessment Year 2017-18. The Hon'ble Coordinate Bench, after considering the entire material available on record, vide order dated 27.03.2024, deleted the identical addition by observing and holding as under:

“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 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.

We find that the facts and circumstances of the present case, the basis of reopening, the evidence relied upon by the AO and the nature of the addition are identical to those considered by the Hon'ble Coordinate Bench of the Tribunal in the case of Kundal Raghuveer Bhandari (supra). The Revenue has also not brought any distinguishing material on record warranting a different view. Thus, respectfully following the aforesaid decision of the Hon'ble Coordinate Bench, we are unable to concur with the findings recorded by the AO in the assessment order as well as those affirmed by the Ld. Commissioner in the impugned order. Accordingly, we set aside the assessment order and the impugned order on this issue and direct the AO to delete the addition of ₹13,94,000/- made under the Act.

6.

In the result, the appeal filed by the Assessee is allowed.

Order pronounced in the open court on 30.06.2026.

Sd/- NARENDER KUMAR CHOUDHRY JUDICIAL MEMBER (Tarun Kushwaha) Sr. Private Secretary Copy to: The Appellant The Respondent The CIT, Concerned, Mumbai The DR Concerned Bench

//True Copy// By Order

Dy/Asstt. Registrar, ITAT, Mumbai.

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