SUNSTONE DEVELOPERS JOINT VENTURE,MUMBAI vs. ASSISTANT COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE 2(4), MUMBAI

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ITA 3210/MUM/2026Status: DisposedITAT Mumbai18 June 2026AY 2015-20166 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 could not be sustained as it was based solely on a third-party statement without providing the assessee with a copy or an opportunity to cross-examine. Reliance on such statements without corroborating evidence violates principles of natural justice.

What were the facts?

The Assessing Officer made an addition of Rs. 1 crore as 'on money' received from a flat purchaser, based on a statement recorded during a survey and an email. The assessee, a real estate developer, challenged this addition.

What were the issues?

Whether an addition can be made solely on the basis of a third-party statement without providing the assessee with an opportunity to cross-examine the deponent. Whether Section 68 is applicable when no sum is credited in the assessee's books.

Which sections of the Income-tax Act were involved?

Section 68,Section 143(3),Section 147,Section 133A,Section 131,Section 271(1)(c)

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, MUMBAI BENCHES “G”, MUMBAI

Before: Justice (Retd.) C V Bhadang, Hon’ble & Shri Prabhash Shankar, Hon’ble

For Appellant: Shri Fenil Bhat
For Respondent: Shri Kavan Limbasiya, Sr. DR
Hearing: 11.06.2026Pronounced: 18.06.2026

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES “G”, MUMBAI Before Justice (Retd.) C V Bhadang, Hon’ble President & Shri Prabhash Shankar, Hon’ble Accountant Member ITA No. 3210/Mum/2026 for A.Y. 2015-16 Sunstone Developers Joint Venture, ACIT Central Circle 2(4), Ackruti Sunstone, Vs. Mumbai Near MIG Cricket Club, Bandra (East), Mumbai 400 051. PAN AAGAS3312L (Appellant) (Respondent) Appellant By : Shri Fenil Bhat Respondent By : Shri Kavan Limbasiya, Sr. DR Date of Hearing : 11.06.2026 Date of Pronouncement : 18.06.2026 ORDER Per Justice (Retd.) C V Bhadang, President: By this appeal, the appellant -assessee is challenging the order dated 29.01.2026 passed by the Commissioner of Income Tax (Appeal) (CIT(A)’ for short) which in turn arose out of an assessment order dated 30.12.2017 passed by the Assessing Officer (‘AO’ for short) under Section 143(3) of the Income Tax Act, 1961 (‘Act’ for short) thereby making the impugned addition of Rs.1,00,00,000/- u/s. 68 of the Act as the alleged “on money” received from a flat purchaser. The appeal pertains to A.Y. 2015-16.

2.

The appellant is a company engaged in the business of real estate development and slum rehabilitation. The appellant filed its Return of Income (RoI) for the relevant assessment year declaring income as “Nil”.

2 ITA No. 3210/Mum/2026 Sunstone Developers Joint Venutre 3. It appears that information was received from DDIT (Inv.) Mumbai about a survey u/s. 133A of the Act being carried out on the premises of M/s. Shah Coal Pvt. Ltd. and M/s. Aarti Logistics Pvt. Ltd. on 17.09.2014. During the said survey proceedings, a mail regarding transaction relating to the Sunstone Developers was found in the inbox of Shri Jatin Rajnikant Shah, accountant of the company vide email id irs12660@gmail.com. It appears that a statement u/s. 131 of the Act was recorded on 17.09.2017 in which he stated that Mr. Vinay R Shah, Director of the company had paid Rs.1 crore for purchase of flat from the present assessee Sunstone Developers Joint Venture. Shri Vinay R Shah, Director of the company, is purchaser of two flats namely Flat nos. 305 and 306 from the assessee. Shri Vinay R Shah also confirmed that the said mail was sent by him from his email ID jrs60@rediffmail.com. The record showed working of the investment made by Shri Vinay R Shah with the present assessee in which Mr. Shah was intending to purchase five flats in the project of the present appellant at a purchase price of Rs. 19,000 per sq. ft. Out of this the payment @15000 per sq. ft was to be made by cheque and the balance in cash.

4.

On the basis of the said statement and the disclosures made in the survey action u/s. 133A the case was re-opened and statutory notices were issued. The appellant in response sought copies of the statement and the email which the AO was proposing to rely on. The appellant also sought an opportunity to cross-examine Shri Vinay R Shah. The AO framed assessment u/s. 143(3) r.w.s. 147 of the Act thereby making impugned addition of Rs 1 crore on account of alleged ‘on money’ received from Shri Vinay R Shah.

5.

In appeal, the same has been confirmed.

6.

We have heard parties. Perused record.

3 ITA No. 3210/Mum/2026 Sunstone Developers Joint Venutre 7. It is submitted by the learned AR that the impugned addition could not have been made merely on the basis of a statement of a third party viz. Shri Vinay R Shah and that too without furnishing the statement and granting opportunity to cross-examine. It is submitted that this is clearly in breach of principles of natural justice as a result of which the impugned addition cannot be sustained. The learned AR pointed out CBDT Instruction No.286/2/2003- IT(Inv.II) dated 10.3.2003 stating that reliance shall not be solely placed on the statements recorded in the search/survey proceedings. The learned AR has placed reliance on the decision of the Supreme Court in C Vasantlal & Co. vs. CIT (45 ITR 206)

8.

It is submitted that in any case the impugned addition cannot be made u/s. 68 of the Act as there is no sum credited in the books of account of the assessee, which the assessee can be said to have failed to explain.

9.

The learned DR has submitted that the addition is not only based on the statements but there was also an email recovered which has been relied upon by the learned AO.

10.

We have considered the submissions made. This appeal may not detain us long as the ground on the basis of which the impugned addition is challenged is no longer res integra. Indisputably, the addition is based on the statements recorded during the survey action u/s. 133A on M/s. Shah Coal Ltd and the statements of Shri Jatin Shah and Shri Vinay R Shah. The appellant had disputed the receipt of the ‘on money’ by filing a reply dated 7.12.2017, which the learned AO has found to be not acceptable. This is purportedly on the ground that Shri Vinay R Shah had admitted that he paid due taxes on the same. The entire reasoning in support of the impugned addition can be found in para 4 and 5 of the assessment order as under:

4 ITA No. 3210/Mum/2026 Sunstone Developers Joint Venutre “4. Assessee reply vide letter dated 07.12.2017 is duly considered but was not found tenable, as Mr. Vinay R. Shah had admitted and had paid due taxes on the same. Hence, it is clear that assessee has taken on money from Mr. Vinay R. Shah during F.Y. 2014-15 relevant to A.Y. 2015-16 of Rs. 1 crore. Therefore, the above unaccounted cash receipts treated as unaccounted cash credit /s. 68 of the IT Act and added back to the total income of the assessee. Initiate penalty proceedings u/s. 271(1)(c) of the IT Act for concealment of income.

5.

Assessee is an AOP. During the year under consideration assessee shown only Income from Business or Profession.” It can thus clearly be seen that except the statement of Shri Vinay R Shah and the fact that he had paid due taxes on the alleged ‘on money’ paid by him, there is no other material brought on record by the learned AO to make the impugned addition.

11.

The CBDT instruction in this regard reads as under:

SECTION 132 OF THE INCOME - TAX ACT, 1961 – SEARCH AND SEIZURE - GENERAL CONFESSION OF ADDITIONAL INCOME DURING THE COURSE OF SEARCH AND SEIZURE AND SURVEY OPERATION INSTRUCTION F. NO. 286/2/2003-IT (INV. II), DATED 10-3-2003 Instances have come to the notice of the Board where assessees have claimed that they have been forced to confess the undisclosed income during the course of the search & seizure and survey operations. Such confessions, if not based upon credible evidence, are later retracted by the concerned assessees while filing returns of income. In these circumstances, such confessions during the course of search & seizure and survey operations do not serve any useful purpose. It is, therefore, advised that there should be focus and concentration on collection of evidence of income which leads to information on what has not been disclosed or is not likely to be disclosed before the Income-tax Department. Similarly, while recording statement during

5 ITA No. 3210/Mum/2026 Sunstone Developers Joint Venutre the course of search & seizure and survey operations no attempt should be made to obtain confession as to the undisclosed income. Any action on the contrary shall be viewed adversely.

Further, in respect of pending assessment proceedings also, Assessing Officers should rely upon the evidences/materials gathered during the course of search/survey operations or thereafter while framing the relevant assessment orders.”

12.

It is trite that if the AO proposes to rely on a third-party material or statements, the copies of the same have to be supplied to the assessee and opportunity to cross examine has to be granted wherever claimed. In the present case, there is nothing on record [at least in the assessment order] to suggest that the copies were furnished to the appellant or an opportunity to cross-examine was granted to the assessee. The Supreme Court in Kishin Chand Chellaram (125 ITR 713) held that evidence which is used against the assessee must be provided to the assessee with an opportunity to confront/cross- examination if claimed. It is not necessary to multiply authorities on this point.

13.

In that view of the matter, the impugned addition cannot be sustained. The appeal is accordingly allowed. The impugned order is hereby set aside. The addition stands deleted.

Order pronounced in the open court on 18.06.2026

Sd/- Sd/- [Prabhash Shankar] [Justice (Retd.) C V Bhadang] ACCOUNTANT MEMBER PRESIDENT Mumbai, Dated : 18th June, 2026 SA

6 ITA No. 3210/Mum/2026 Sunstone Developers Joint Venutre

Copy of the Order forwarded to : 1. The Appellant. 2. The Respondent. 3. The PCIT, Mumbai. 4. The CIT 5. The DR, ‘G’ Bench, ITAT, Mumbai BY ORDER

//True Copy// (Assistant Registrar) Income Tax Appellate Tribunal, Mumbai

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