Loading judgment…
Facts
During a search and seizure action on 'RPS Infraprojects' group, including a partner of the assessee LLP, loose papers and a WhatsApp Excel sheet were recovered, indicating alleged on-money receipts from flat sales and cash payments for brokerage. Based solely on these documents, the Assessing Officer (AO) made significant additions under Section 69A (unexplained money) and Section 69C (unexplained expenditure). The assessee challenged these additions, providing documentary evidence such as sale agreements, cancellation deeds, and bank statements, which contradicted the AO's findings, and argued that the seized data was unverified and unreliable.
Held
The Tribunal upheld the deletion of additions by the Ld. CIT(A), ruling that uncorroborated WhatsApp messages or loose papers, without independent supporting evidence or inquiry, cannot form a valid basis for initiating proceedings or making additions under the Income Tax Act. The Tribunal noted that the assessee provided comprehensive documentary evidence and explanations, including the fact that the individual from whom the electronic data was seized denied knowledge, and the alleged brokers denied receiving cash, thereby demonstrating the revenue's failure to provide corroborative material.
Key Issues
Whether additions made under Sections 69A and 69C of the Income Tax Act, based solely on uncorroborated WhatsApp messages and loose papers found during a search, are legally sustainable when the assessee provides contrary documentary evidence and the revenue fails to provide corroborative material.
Sections Cited
132, 153C, 153A, 69A, 69C, 250, 115BBE, 43CA, 142(1), 133(6), 34, 65B, 138, Rule 27
AI-generated summary — verify with the full judgment below
Detected automatically from the text. The count shows how many other judgments on BharatTax rely on the same authority.
Income Tax Appellate Tribunal, MUMBAI BENCH “G”, MUMBAI
Before: SHRI NARENDRA KUMAR BILLAIYA, ACCOUNT MEMBER & SHRI ANIKESH BANERJEE
Date of hearing : 12/06/2025 Date of pronouncement : 23/07/2025 ORDER
2 ITA 3106,3108 & 3109/Mum /2023 Saarrthi Reality and Infra LLP & Others Per Anikesh Banerjee, JM:
All three appeals are filed by the revenue and have same nature of fact & common issue. So, we proceed to dispose of all the appeals by a common order.
(Assessment Year: 2019-20) The instant appeal was filed by the revenue as against the appellate order dated 09.06.2023 passed by the Commissioner of Income Tax (Appeals) – 53, Mumbai [hereinafter, referred to as ‘the Ld. CIT(A)”], passed U/s 250 of the Income tax Act, 1961 [for brevity, the “Ld. CIT(A)], relating to the Assessment Year 2019-20 arising out of the assessment order passed by the Ld. Deputy Commissioner of Income tax, Central Circle-5(1), Mumbai (for brevity, the “Ld. AO”), passed under section 153C of the Act.
The revenue has raised the following grounds of appeal:
1. Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) has erred in deleting the addition of Rs. 3,58,00,000/- made by the assessing officer u/s 69A as alleged on money received on sale of flats, without considering the facts and circumstances of the case that there was sufficient incriminating material in the form of loose papers, excel sheet entries and statements recorded during the search and post search proceeding to establish that the assessee has received cash over and above the value as per the sale deed?
1. Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) has erred in deleting the addition made by the assessing officer u/s 69A of the Act on account of alleged on money received on sale of flats without considering his/her own findings in the same order whereby the contention of the assessee in challenging the authenticity and credibility of incriminating material in the form of loose papers, excel sheet entries, WhatsApp Chats and statements recorded during the search and post search proceeding were rejected by the Ld. CIT(A)?”
3 ITA 3106,3108 & 3109/Mum /2023 Saarrthi Reality and Infra LLP & Others 3. Brief facts of the case are that a search and seizure action u/s 132 of the Act was conducted in the case of ‘RPS Infraprojects and others’ Group on 15.11.2019 including search and seizure carried out in the case of Shri Tarun Vohra who is Partner of M/s Serene Value Homes LLP who in turn 50% partner in the assessee LLP. During search and seizure action u/s 132 of the Act in the case of Shri Tarun Vohra certain loose papers and extracts of Whatsapp chat were recovered and seized. On verification of the seized documents, information regarding financial transactions pertained to M/s. Saarrthi Realty and Infra LLP was noticed. Thereafter, the case of the assessee was selected for scrutiny u/s 153C r.w.s. 153A of the Act and notice u/s 153C of the Act was issued on 21.04.2022. In response, the assessee has filed return of income on 03.06.2022 declaring total loss of Rs.77,754/-. The assessee is a Limited Liability Partnership and engaged in the business of development of residential units under a redevelopment scheme. The assessment u/s 153C of the Act was finalized on 29.03.2023 and total income was assessed at Rs.3,58,00,000/- after making addition of Rs. 3,58,00,000/- u/s 69A of the Act on the ground that assessee had received cash over and above the agreement value on sale of flats. The Ld. AO observed that assessee has failed to explain the contents of the Excel sheet or produce documentary evidence of payment not received in cash. The Ld. AO further stated that on verification of the WhatsApp message in the form of an Excel sheet it is found that the Actual sale value of the flats at Signature Tower situated at Model Colony is different from Agreement Value. The differential amount was received as cash as reflected in the excel sheet, which is as under:
4 ITA 3106,3108 & 3109/Mum /2023 Saarrthi Reality and Infra LLP & Others S.R.No Flat No Agreement Cash Received Actual Sale Value as per excel Value sheet 1 Flat No. 701 2,30,00,000 1,08,00,000 3,38,00,000 2 Flat No. 801 2,05,00,000 1,85,00,000 3,90,00,000 3 Flat No. 901 1,80,00,000 65,00,000 2,45,00,000 Total 6,15,00,000 3,58,00,000 9,73,00,000 The Ld. AO relied solely on the contents of the WhatsApp message in the form of an Excel sheet which was found in a mobile phone with a SIM card registered in the name of Shri Tarun Vohra, which showed receipt of cash amounts over and above the registered sale values of three flats. Finally, the Ld. AO confirmed amount to Rs. 3,58,00,000/- U/s 69A of the Act r.w.s. 115BBE of the Act. and framed assessment U/s 153C of the Act. The aggrieved assessee filed appeal before the Ld. CIT(A). The Ld. CIT(A) allowed the appeal of the assessee and deleted the addition. The Ld. CIT(A) rejected the assessee’s contention that action u/s 153C of the Act, but the appeal was allowed on merit. Being aggrieved the revenue filed an appeal before us. The assessee has not filed any cross-objection or cross-appeal in respect of this issue in response to the revenue’s appeal. Hence, the Ld. AR of the assessee in accordance with Rule 27 of the Income Tax Appellate Tribunal Rules, 1962 submitted letter dated 28-05-2025 filed on 29-05-2025 which is reproduced as below: - “1) A search and seizure action u/s 132 of the Act was conducted by DDIT(Inv.), Unit 4(4), Mumbai in the case of 'RPS Infraprojects and others' Group on 15-11-2019 The Search & Seizure action in case of 'RPS group' also includes search and seizure in case of Shri Tarun Vohra (one of the partners of Serene Value Homes LLP which in turn partner of the Appellant LLP). During the course of the search conducted at the 5 ITA 3106,3108 & 3109/Mum /2023 Saarrthi Reality and Infra LLP & Others premises of Mr. Tarun Vohra, one of the mobile phones, the SIM card of which belonged to Mr. Tarun Vohra, contained a WhatsApp message in the form of an Excel sheet. in the opinion of the Search Team, this document was considered incriminating and was found to pertain to the appellant firm.
2) Before the Ld. AO and Ld. CIT(A) it was submitted that said phone number was being used for various online website classified listings such as, nobroker.com, magicbricks.com, 99acres.com and also for job portals such as naukri.com which is used for recruitments. The phone number also served the purpose of anonymously listing in some of the classifieds. On this phone number responses from classified listings, from estate agents, brokers, property consultants, and jobseekers were solicited for enquiries. Hence, any whatsapp received on this phone has doubtable veracity.
3) Based on the WhatsApp message, an addition of Rs. 3,58,00,000/- was made under section 69A of the Act, treating the same as unexplained money received on account of the sale of three flats.
4) In the course of Assessment Proceedings, Appellant LLP has submitted complete details of sale of flats, Flat no.901: The said agreement was cancelled and thus the question of cash consideration does not arise. The copy of cancellation deed is submitted Please note that after the cancellation, this flat no 901 was sold on 29-09-2020 i.e. one year after the date of search & therefore, there can not be any presumption about receipt of cash as regards sale of this flat and therefore the said proposed addition of Rs. 65,00,000/- does not sustain at all.
After cancellation of booking for flat 901, the same was sold to another party for a consideration of Rs. 1,90,00,000/-. This was above the value adopted by the State Government for the purpose of stamp duty and hence, the said transaction is in compliance with the provisions of the section 43CA of the Act.
Flat no. 801: the agreement value specified is 2,05,00,000/- however the correct agreement value is Rs. 2,30,00,000/- the data itself found in the said sheet is incorrect.
The flat registered is above the respective value adopted by the State Government for the purpose of stamp duty and hence, the said transaction is in compliance with the provisions of the section 43CA of the Act. Thus, the data mentioned in the table mentioned above is full of errors and cannot be relied upon.
Flat no.701: The value against flat no. 701 mentioned in the above table are incongruous and the figures mentioned is flawed. The flat registered is above the respective value adopted by the State Government for the purpose of stamp duty and hence, the said transaction is in compliance with the provisions of the section 43CA of the Act. The above table is divergent from actual fact and hence should not be considered of any value.
To justify these facts, the documentary evidence was submitted during the course of Assessment Proceedings, which is also being enclosed herewith: a) Copy of Sale agreements for sale of flat No. 901 (Enclosed at page no.60-131 of PB)
6 ITA 3106,3108 & 3109/Mum /2023 Saarrthi Reality and Infra LLP & Others b) Copy of Cancellation Deed for Flat No.901 (Enclosed at page no.132-233 of PB) c) Copy of Sale Agreements for Sale of Flat No 801 (Enclosed at page no.234-307 of PB) d) Copy of Ledger Account of the Parties for Sale of Flat No. 901,801 & 701(Enclosed at page no.308-310 of PB) e) Copy of Bank Statements highlighting the receipts for Sale of Flat Nos. 901, 801 & 701 (Enclosed at page no.311-333 of PB)”
The Ld. DR argued and stands in favour of the impugned assessment order. The Ld. DR argued that the Ld. AO further stated that on verification of the WhatsApp message in the form of an Excel sheet it is found that the actual sale value of the flats at Signature Tower situated at Model Colony is different from Agreement Value. The differential amount was received as cash as reflected in the excel sheet, which is amount to Rs. 3,58,00,000/-. The Ld. DR prayed for upholding the addition.
Ld. AR argued filed the paper books which are kept in record. The Ld. AR argued in respect of the three flats submitted as under:
Flat No. 901 – The original agreement was cancelled. The flat was sold only on 29.09.2020, i.e., post-search. Thus, no presumption of on-money can be drawn. The sale was above stamp duty value and compliant with section 43CA of the Act. Flat No. 801 – The agreement value was Rs.2.30 Cr, not Rs.2.05 Cr as mentioned in the “Excel sheet”. The sale consideration was also above stamp duty value. Flat No. 701 – The agreement was at a price exceeding stamp duty value. The figures in the Excel sheet were incorrect and inconsistent with actual sale records.
7 ITA 3106,3108 & 3109/Mum /2023 Saarrthi Reality and Infra LLP & Others Documentary evidence including sale agreements, cancellation deed, ledger accounts, and bank statements were submitted in support. The assessee has also clarified that the mobile number on which the message was found was used for online listings and job portals etc. Its contents cannot be attributed to business operations of the assessee. Moreover, in the statement recorded during search, Shri Tarun Vohra denied knowledge of the Excel sheet and clarified that any reference to cash pertained only to initial token payments of nominal value (Rs. 11,000–15,000).
The Ld. AR respectfully relied on the order of the appellate authority relevant paragraphs of the impugned appellate order are reproduced as below:-
“4.25. Coming to the merits of the case, the findings of the AO have already been given above. According to the AO, the appellant is in receipt of on-money in respect of 3 flats aggregating Rs.3,58,00,000/-. 4.26. Out of the 3 flats, the appellant has pointed out that in respect of flat no.901, the agreement was cancelled, and the property was sold later in 2020. The whatsapp message is of February 2019. The appellant has also submitted that as against the registration amount of Rs.2.05 crores shown in the whatsapp message as sales amount for flat no.801, it was actually Rs.2.30 crores. Thus, there are material differences in the facts and figures. The appellant has admitted that the sim card was registered in the name of Shri Tarun Vohra; yet it has been explained that it was used for various online classified weblistings and the messages received therein are of doubtable veracity. The statement of Shri. Tarun Vohra recorded during the course of search on 06.11.2019 shows that he has repeatedly denied having accepted cash or having knowledge of such document. He has also stated that he is not involved in day to day operations and is not aware of the sheet. Although has stated in qn.no.11 that "the payment is made through banking and some cash may also be accepted", he has clarified the same in reply to qn.25 that he was referring to initial bookings of 8 ITA 3106,3108 & 3109/Mum /2023 Saarrthi Reality and Infra LLP & Others Rs.11,000/- to Rs.15,000/-. It is also noted that not all the flats are sold as per the whatsapp chat I excel sheet. Seen in this background, the appellant's claim does seem plausible.
4.27. In the case of ACIT vs Grasim Industries Ltd in for AY 1992-93 dated 17.11.2006, (https://indiankanoon.org/doc/874242/), the Hon'ble ITAT held as follows:
"The task of the Tribunal would, therefore, be to analyse the materials relied on by both the sides and evaluate the relative merits and reliability. It is sometimes in the nature of a comparative exercise to measure the degree of reliability between the materials relied on by the revenue and the materials relied on by the assessee. This degree of reliability seems to be the crucial test in the present case in applying the principles of preponderance of probability. We think that this is the way to proceed to find a balance of convenience on which alone it might be possible for us to come to a fair decision.".
Eventually, the Hon'ble Tribunal held that balance of convenience was apparently tilting in favour of the assessee and ruled as such. 4.28. Applying the above ratio, given the set of facts before me, I am of the view that balance of convenience lies in favour of the appellant. There are enough doubts posed by the appellant in the findings of the AO because of which the additions deserve to be deleted. Accordingly, the additions made by the AO u/s.69A stands deleted
The Ld. further argued that the Ld. CIT(A) rejected the assessee’s contention that action u/s 153C should not have been taken on the basis of the WhatsApp message in the form of an Excel sheet, which was found on one of the mobile SIM cards belonging to Mr. Tarun Vohra, and which allegedly contained some details regarding sale of flats. The assessee has not filed any cross-objection or cross-appeal in respect of this issue in response to the department’s appeal. Hence, the Ld. AR of the assessee in accordance with Rule 27 of the Income Tax Appellate Tribunal Rules, 1962 submitted letter dated 28-05-2025 filed on 29-05- 2025. The AR argued that the addition made under Section 69A of the Act, based solely on unverified electronic data and in the absence of any corroborative
9 ITA 3106,3108 & 3109/Mum /2023 Saarrthi Reality and Infra LLP & Others evidence—does not constitute admissible or credible material. Consequently, the action initiated by the revenue against the assessee company lacks evidentiary value, is contrary to law, and the impugned notices issued under Section 153C of the Act are liable to be quashed as being void, illegal, and unsustainable in law.
We have heard the rival submissions and perused the material available on record. The addition in question is solely based on an unverified WhatsApp message extracted from a mobile phone number that is not directly associated with the operational team of the assessee. The individual concerned, Shri Tarun Vohra, has categorically denied any knowledge of the document and clarified that the references to cash therein pertained merely to token booking amounts. The assessee has duly furnished comprehensive documentary evidence substantiating its claim, including sale agreements, cancellation deeds, and corresponding banking transactions. It is also pertinent to note that all transactions were executed at values exceeding the stamp duty valuation and were fully compliant with the provisions of section 43CA of the Act. Upon a careful appraisal of the facts and the evidentiary material on record, we observe that the WhatsApp message relied upon by the Ld. Assessing Officer was retrieved from the mobile device of Shri Tarun Vohra, who was subjected to a search. However, the revenue has failed to bring on record any corroborative material to substantiate the contents of the said message. The impugned document has neither been affirmed by any independent inquiry nor confirmed by any of the parties named therein. In the absence of any supporting material or confirmation, such a WhatsApp message cannot be regarded as a reliable or admissible piece of evidence to warrant an addition under section 69A of the Act.
10 ITA 3106,3108 & 3109/Mum /2023 Saarrthi Reality and Infra LLP & Others The Ld. AR has placed reliance on the judgment of the Hon’ble Supreme Court in Common Cause v. Union of India [77 taxmann.com 245 (SC)], wherein it was held:
“20. It is apparent from the aforesaid discussion that loose sheets of papers are wholly irrelevant as evidence being not admissible under Section 34 so as to constitute evidence with respect to the transactions mentioned therein being of no evidentiary value. The entire prosecution based upon such entries which led to the investigation was quashed by this Court.
21. We are constrained to observe that the Court has to be on guard while ordering investigation against any important constitutional functionary, officers or any person in the absence of some cogent legally cognizable material. When the material on the basis of which investigation is sought is itself irrelevant to constitute evidence and not admissible in evidence, we have apprehension whether it would be safe to even initiate investigation. In case we do so, the investigation can be ordered as against any person whosoever high in integrity on the basis of irrelevant or inadmissible entry falsely made, by any unscrupulous person or business house that too not kept in regular books of account but on random papers at any given point of time. There has to be some relevant and admissible evidence and some cogent reason, which is prima facie reliable and that too, supported by some other circumstances pointing out that the particular third person against whom the allegations have been levelled was in fact involved in the matter or he has done some act during that period, which may have co-relations with the random entries. In case we do not insist for all these, the process of law can be abused against all and sundry very easily to achieve ulterior goals and then no democracy can survive in case investigations are lightly set in motion against important constitutional functionaries on the basis of fictitious entries, in absence of cogent and admissible material on record, lest liberty of an individual be compromised unnecessarily. We find the materials which have been placed on record either in the case of Birla or in the case of Sahara are not maintained in regular course of business and thus lack in required reliability to be made the foundation of a police investigation.”
Further reliance has been placed on the decision of the Coordinate Bench of the ITAT Mumbai 'F' Bench in ACIT v. Jayant Hiralal Shah, date of pronouncement 06.12.2024, wherein it was held:
17. We heard the parties and perused the record. We notice that the AO has made addition on the basis of whatsapp chat between Shri Shailendra Rathi and Shri Nilesh Toshniwal. However, the assessee has 11 ITA 3106,3108 & 3109/Mum /2023 Saarrthi Reality and Infra LLP & Others denied those transactions. The AO, however, proceeded to make the additions of Rs.1.05 crores and Rs.1.00 crore based on the third party evidences. We notice that the assessee has claimed that the date of whatsapp chat relating to Rs.1.05 crores was 11.03.2021, while the AO has taken the date as 11.3.2020. Hence, there is confusion about the date of the alleged transaction relating to Rs.1.05 crores. With regard to the amount of Rs.1.00 crore, the whatsapp chat shows that Shri Shailendra Rathi has only requested Shri Nilesh Toshniwal to pay Rs.1.00 crore to the angadia Shri Vinod, meaning thereby, there is no proof that the said transaction was completed. In that case, no addition of Rs.1.00 crore was warranted. In any case, both the transactions were related to uncorroborated whatsapp chat, which have been denied by the assessee and the AO did not bring any material to corroborate the transactions. Accordingly, as per the various case laws relied upon by the Ld.CIT(A), the AO could not have made the addition of Rs.2.05 crores. Accordingly, we are of the view that the Ld.CIT(A) was justified in deleting the addition of Rs.2.05 crores.
Similarly, in Nimesh Umakant Umakant Manania v. DCIT-20(1), date of pronouncement 24.01.2025, the bench held:
10. Accordingly, following the decision rendered by the co-ordinate bench in the case of Kalyanji Velji HUF (supra), we hold that the AO could not have made the impugned additions in all the three years on the basis of uncorroborated dumb document. Further, these additions are also liable to be deleted in view of non-compliance of the procedure prescribed u/s 65B of the Indian Evidence Act.
The Ld. AR respectfully relied on the order of Coordinate bench of ITAT-Surat, in ACIT v. Shanker Nebhumal Uttamchandani [2024] 161 taxmann.com 536 (Surat- Trib), it was held:
"7. We have independently examined the facts of the case. We find that the Assessing Officer has not recorded in the assessment order whether such image/photo was received by assessee in WhatsApp image or it was sent. The source of image was not investigated by Assessing Officer. Assessing Officer nowhere mentioned whether such image was confronted to the assessee during the search action or his statement was recorded for such image. Thus, in absence of any corroborative evidence, we do not find any justification for making such addition. Hon'ble Supreme Court in Common Cause v. Union of India (2017) 394 ITR 220 SC also held that loose sheets of papers are wholly irrelevant as evidence being not admissible
12 ITA 3106,3108 & 3109/Mum /2023 Saarrthi Reality and Infra LLP & Others under section 34, so as to constitute evidence with respect to transaction mentioned therein being of no evidentiary value. Thus, we affirm the order of ld. CIT(A) on our aforesaid additional observation."
Respectfully following the ratio laid down in the judicial precedents, we find merit in the petition filed by the assessee under Rule 27 of the Income Tax Appellate Tribunal Rules, 1963. It is a settled position that an uncorroborated WhatsApp message, in the absence of any independent supporting evidence, cannot constitute a valid basis for initiating proceedings under section 153C of the Act. Accordingly, the addition made under section 69A of the Act pursuant to the assessment framed under section 153C is hereby quashed. Since the assessee has succeeded on the legal ground, the issue on merits is left open for academic consideration. In the result, the appeal filed by the revenue stands dismissed.
(Assessment Year: 2019-20)
& (Assessment Year: 2018-19)
Both the appeals were filed by the revenue as against the orders of the Ld. Commissioner of Income Tax (Appeals) – 53, Mumbai [for brevity, the “Ld. CIT(A)”] order passed U/s 250 of the Income tax Act, 1961 (for brevity, the “Act”) on dated 09.06.2023 for AY 2018-19 & 2019-20. The impugned orders emanated from the order of the Ld. Dy. Commissioner of Income Tax Central Circle 5(1), Mumbai [for
13 ITA 3106,3108 & 3109/Mum /2023 Saarrthi Reality and Infra LLP & Others brevity the “ld. AO”], order passed under section 153C of the Act, date of order 30/03/2023.
Both the appeals have same nature of fact & common issue. We heard together and disposed of together. The for AY 2019-20 is taken as lead case.
The revenue has raised the following grounds of appeal:
“1. Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) has erred in deleting the addition of Rs.1,49,92,100/- made by the assessing officer u/s 69A as alleged on money received on sale of flats, without considering the facts and circumstances of the case that there was sufficient incriminating material in the form of loose papers, excel sheet entries and statements recorded during the search and post search proceeding to establish that the assessee has received cash over and above the value as per the sale deed?
2. Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) has erred in deleting the addition of Rs.1,42,09,910/- made by the assessing officer u/s 69C of the IT Act on account of brokerage/commission paid in cash to the brokers on sale of flats, without considering the facts and circumstances of the case that there was sufficient incriminating material in the form of loose papers, excel sheet entries, WhatsApp chats and statements recorded during the search and post search proceeding to establish that the assessee has received cash over and above the value as per the sale deed?
14 ITA 3106,3108 & 3109/Mum /2023 Saarrthi Reality and Infra LLP & Others 2. Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) has erred in deleting the addition made by the assessing officer u/s 69A of the Act on account of alleged on money received on sale of flats & u/s 69C of the IT Act on account of brokerage/commission paid in cash to the brokers on sale of flats, without considering his/her own findings in the same order whereby the contention of the assessee in challenging the authenticity and credibility of incriminating material in the form of loose papers, excel sheet entries, WhatsApp Chats and statements recorded during the search and post search proceeding were rejected by the Ld. CIT(A)?”
Brief facts of the case are that a search and seizure action u/s 132 of the Act was conducted in the case of ‘RPS Infraprojects and others’ Group on 15.11.2019, including search and seizure carried out in the case of Shri Tarun Vohra, Director of the assessee company. During search and seizure action u/s 132 of the Act in the case of Shri Tarun Vohra certain loose papers were recovered and seized. On verification of the seized documents, information regarding financial transactions pertained to M/s. Sarvapriya Leasing Pvt Ltd was noticed. Thereafter, the case of the assessee was selected for scrutiny u/s 153C r.w.s. 153A of the Act and notice u/s 153C of the Act was issued on 21.04.2022. In response, the assessee has filed return of income on 06.06.2022 declaring total income at Rs.4,38,98,690/- . The assessee is engaged in the business of development of residential units under a redevelopment scheme. The assessment u/s 153C of the Act was finalized on 31.03.2023 and total income was assessed at Rs.7,31,00,700/- after making addition of Rs. 1,49,92,100/- under section 69A of the Act & Rs.1,42,09,910/- u/s 69C of the Act on the ground that assessee had received cash over and above the agreement value on sale of flats and brokerage paid in cash
15 ITA 3106,3108 & 3109/Mum /2023 Saarrthi Reality and Infra LLP & Others respectively. The Ld. AO observed that assessee has failed to explain the contents on loose papers or produce documentary evidence of payment not received in cash. The Ld. AO further stated that on verification of the loose papers, it is found that the assessee has worked out brokerage on the sales value of the flat to various brokers/agents. As per the chart mentioned in the seized document, total brokerage of Rs.1,42,09,910/- was worked out on the consideration against each flat. Besides, on-money of Rs.1,49,92,100/- was also identified and added by the AO. The same was worked out as under:
Sr. Agreement Difference Agreement Deal Value No Flat No Value Being on Date Excluding taxes . Money 1 04.05.2018 B-602 1,45,00,000 1,40,00,000 2 04.06.2018 B-501 1,40,00,000 1,60,00,000 20,00,000 3 26.04.2018 A-301 1,11,00,000 1,28,07,400 17,07,400 4 02.06.2018 B-401 1,40,00,000 1,43,14,400 3,14,400 5 02.06.2018 B-701 1,20,00,000 1,63,14,400 43,14,400 6 03.07.2018 B-302 1,68,21,000 1,68,21,000 0 7 06.09.2018 B-202 1,40,00,000 1,58,34,900 18,34,900 8 22.02.2019 A-402 1,06,76,000 1,26,76,000 20,00,000 Total 10,70,97,000 11,87,68,100 1,21,71,100 The Ld. AO has worked out the difference of Rs.28,21,000/- being difference in Sale Consideration of Flat B-302 (Area 68.08 Sq Meters) Sold to Mr. Kishore D. Soda for Consideration of Rs. 1,68,21,000/- & that of flat No B-202 of similar area sold to Mr.
16 ITA 3106,3108 & 3109/Mum /2023 Saarrthi Reality and Infra LLP & Others Amit Wadhwani for Consideration of Rs. 1,40,00,000/- & allegedly treated the difference between Sales Consideration of these two flats as “On Money Receipts”. Details as regards addition of Brokerage of Rs.1,42,09,910/-.
Sr Agreement Brok Deal Value Brokerage Name Flat Project No Date % excluding Amt No. Name taxes 1 04/05/2018 2% 14000000 280000 Shravan B-602 Raj Ekjyot Aggarwal Sukriti 2 04/06/2018 2% 16000000 320000 Neha B-501 Raj Ekjyot Lalwani Sukriti 3 26/04/2018 2% 12807400 256148 Vijay A- Raj Ekjyot Prabhu 301 Sukriti 4 02/06/2018 2% 14314400 286288 Mr. Jani B-401 Raj Ekjyot Sukriti 5 02/06/2018 2% 16314400 326288 Mr. Jani B-701 Raj Ekjyot Sukriti 6 03/07/2018 2% 16821000 336420 Kishore B-302 Raj Ekjyot Sodah Sukriti 7 06/09/2018 2% 15834900 316698 Lalit B-202 Raj Ekjyot Bhandari Sukriti 8 22/02/2019 2% 12676000 253520 Hemant A- Raj Ekjyot Chavan 402 Sukriti Total 23,75,362/-
17 ITA 3106,3108 & 3109/Mum /2023 Saarrthi Reality and Infra LLP & Others The assessee has transferred one office and one shop to Mr. Vicky Wadhavani of Rs.2,45,00,000/- and Rs.1,80,00,000/- totaling to Rs.4,25,00,000/-. As the Sarvpriya Leasing Pvt. Ltd. has 50% shareholding in the project which means Rs.2,12,50,000/- has been adjusted against the brokerage of Mr. Vicky Wadhavani. In view of the above, brokerage of Rs.1,18,34,548/- (Rs.2,12,50,000-Rs.94,15,452) (As brokerage of Rs.43,15,000 disallowed separately in Ekjyot Properties for AY 2019-20) (As brokerage of Rs. 51,01,452/- disallowed separately in relevant AY’s of the assessee) added to the total income. The Ld. AO relied solely on the contents of the loose papers which was found during the course of search in the case of Shri Tarun Vohra. During the course of search contents of the loose papers duly explained by Mr. Dheeraj Vohra while recording of his statement u/s 132(4) of the Act in reply to Question No.
Further, during the assessment, the assessee submitted before the AO that a marketing staff member of M/s. Sai Estate Consultants Chembur Private Limited had visited the office of the assessee and had dropped the said chart showing the projected sales he would procure and the brokerage payable to him @2% of the sale price. The assessee submitted that the estimated realizable value of 8 flats was Rs. 11.88 crores, whereas the actual sale consideration received was Rs.10.71 crores, resulting in a marginal shortfall of 9.83%. It was explained that the estimates were based on prevailing market trends and inputs from M/s. Sai Estate Consultants Chembur Pvt. Ltd., who also computed their brokerage on the basis of these projected prices. Due to sluggish market conditions in the real estate sector, the flats had to be sold at lower rates, except for Flat Nos. -302, and A-202, which fetched the expected prices. The assessee emphasized that the shortfall was commercially accepted and not indicative of any unaccounted transaction. It was 18 ITA 3106,3108 & 3109/Mum /2023 Saarrthi Reality and Infra LLP & Others also submitted that no brokerage was actually paid to M/s. Sai Estate Consultants, either in cash or cheque, and litigation is pending between the parties regarding their alleged brokerage claim. In reply to notice 142(1) of the Act the assessee has submit that the assessee sold flat to Mr. Kishor Sodah on 03.07.2018 for consideration of Rs 1,68,21,000/- and to Mr. Amit Wadhwani on 14/05/2019 for consideration of Rs 1,40,00,000/-. There is a considerable-time gap of around 11 months between the sales of these properties to Mr. Amit Wadhwani and to Mr. Kishore Sodah. Further Mr. Amit Wadhwani is also a real estate broker and the brokerage value of his flat was discounted in his sale price. Further Mr. Kishore Sodah's flat is on higher floor with better light & ventilation hence commanding a fairly better price. The Ld. AR stated that, the sales for these properties were declining and therefore sales were made at the reduced price for clearing the unsold inventory on our hand. The same is evident from the fact that during the 11-month period between sales to Mr. Kishore Sodah and Mr. Amit Wadwani only 2 flats could be sold.
In response to notice u/s 142(1) dated 13.02.2023 during the assessment proceeding, the assessee has submitted copy of FIR. On careful perusal of the FIR filed by Mr. Vicky Bhagwan Wadhavani, it is observed that the assessee has appointed Mr. Wadhawani as a broker to sell the flats at Raj Ekjyot Sukriti Building. As per the oral agreement, 30 flats were to be sold as against the commission of Rs.2,45,40,082/- and Rs.17,40,000/- (totaling to Rs.3,10,10,497/- including GST) from the other project of Mr. Tarun Vohra. The assessee has decided to give the office No.1, A-Wing in Raj Ekjyot Sukriti Building for the consideration of Rs.2,45,00,000/-. The said document was registered on 21.05.2019 against the sales and marketing fees to be received from Sarvapriya Leasing Pvt Ltd. Further,
19 ITA 3106,3108 & 3109/Mum /2023 Saarrthi Reality and Infra LLP & Others one more shop No.1, A-Wing in Raj Ekjyot Sukriti Building was given to Mr. Vicky Wadhavani for a consideration of Rs.1,80,00,000/- vide agreement dated 27.08.2019. The above office and shop are transferred to Mr. Vicky Wadhavani against the total amount due from Mr. Vohra for commission/brokerage of Rs.3,10,10,497/-.
The Ld. AR argued that the assessee has transferred one office and one shop to Mr. Vicky Wadhavani of Rs.2,45,00,000/- and Rs.1,80,00,000/- totaling to Rs.4,25,00,000/-. As the Sarvpriya Leasing Pvt. Ltd. has 50% shareholding in the project which means Rs.2,12,50,000/- has been adjusted against the brokerage of Mr. Vicky Wadhavani. In view of the above, the brokerage of Rs.1,18,34,548/- (Rs.2,12,50,000-Rs.94,15,452) (As brokerage of Rs.43,15,000 disallowed separately in Ekjyot Properties for AY 2019-20) (As brokerage of Rs. 51,01,452/- disallowed separately in relevant AY’s of the assessee) paid in lieu of the office and shop should not be disallowed and added to total income of the assessee. Aggrieved assessee filed before the Ld. CIT(A). The Ld. CIT(A) has allowed the appeal of the assessee. The relevant extract of the decision of Ld. CIT(A) is reproduced as under:
“D.9. I have considered the facts of the case, findings of the AO and the submissions of the appellant. On similar lines as in AY 2017-18, the arguments and contentions of the appellant as regards evidentiary value of the documents and opportunity of being heard are rejected. D.10. As regards the merits of the case, the findings of the AO are similar to AY 2017-18 and AY 2018- 19, discussed above as far as 2 issues are concerned. The finding of the AO is that Rs.1,21,71,100 on- money has been collected and 2% brokerage (Rs.23,75,362) has been paid in cash. The number of flats are 8. With all other facts and circumstances remaining the same and the appellant stating that it could not fetch the prices as expected, I am of the view that balance of convenience lies in favour of the appellant. Accordingly, the additions made by the AO u/s.69A in respect of Rs.1,21,71,100/- and u/s.69C in respect of Rs.23,75,362/- stand deleted.
20 ITA 3106,3108 & 3109/Mum /2023 Saarrthi Reality and Infra LLP & Others D.11. Apart from the above, the AO noted that as per the FIR filed by Sai Estate Consultant, it has already been paid Rs.1,18,34,548/- in cash. Hence, the AO treated this sum also as unexplained expenditure u/s.69C of the Act. This issue was discussed extensively while adjudicating AY 2016-17 in earlier part of this combined order as follows: “As regards FIR filed by Shri Vicky Bhagwan Wadhwani, the appellant has pointed out that during the course of proceedings for AY 2019-20 (held alongside), a detailed reply has been given to the AO vide appellant’s letter dated 27.03.2023. The appellant has given a detailed sequence of events of pending litigation with Shri. Amit Bhagwan Wadhwani & his group (Shri Amit Bhagwan Wadhwani and Shri Vicky Bhagwan Bhagwani are directors of Sai Estate Consultants Chembur P Ltd). The appellant has brought out details of litigation under Negotiable Instruments Act for the dishonoured cheques given by Wadhwani for purchase of flat, recovery suits before Hon’ble Bombay HC etc. It is also noted that M/s. Sai Estate Consultants has denied in response to notice u/s.133(6) that they have accrued / received any commission income. The appellant has also stated that sales of these 2 flats has been cancelled after due notice in public domain, bringing the very basis of addition of receipt of on-money under question.”. On account of the same reasoning, the addition of Rs.1,18,34,548/- u/s.69C is not sustained.
D.12. Besides, the AO noted that Mr. Kishor D Soda had booked a flat measuring 68.08 square meters for Rs.1,68,21,000/- whereas Shri Amit Bhagwan Wadhwani had booked a flat for same measurement at Rs.1,40,00,000/-. Accordingly, after a discussion on this issue, the AO was of the view that the appellant had accepted cash of Rs.28,21,000/- over and above the agreement value. For the reasons mentioned in the preceding para and also that an addition cannot be made on presumptive basis, this addition of Rs.28,21,000/- u/s.69A also stands deleted.”
The Ld. CIT(A) rejected the assessee’s contention that action u/s 153C should not have been taken based on the loose papers, which do not have any evidentiary value, but the appeal was allowed on merit. Being aggrieved the revenue filed an appeal before us. The assessee has not filed any cross-objection or cross-appeal in respect of this issue in response to the revenue’s appeal. Hence, the Ld. AR of the assessee in accordance with Rule 27 of the Income Tax Appellate Tribunal Rules, 1962 submitted letter dated 28-05-2025 filed on 29-05-2025.
21 ITA 3106,3108 & 3109/Mum /2023 Saarrthi Reality and Infra LLP & Others 16. The Ld. DR vehemently argued and fully relied on the order of the Ld. AO.
The AR argued that the addition made under Section 69A of the Act, based solely in the absence of any corroborative evidence—does not constitute admissible or credible material. Consequently, the action initiated by the revenue against the Appellant company lacks evidentiary value, is contrary to law, and the impugned notices issued under Section 153C are liable to be quashed as being void, illegal, and unsustainable in law. The Ld. AR respectfully relied on the order of the Hon’ble Supreme Court in Common Cause v. Union of India [77 taxmann.com 245 (SC)], held that:-
“20. It is apparent from the aforesaid discussion that loose sheets of papers are wholly irrelevant as evidence being not admissible under Section 34 so as to constitute evidence with respect to the transactions mentioned therein being of no evidentiary value. The entire prosecution based upon such entries which led to the investigation was quashed by this Court.
We are constrained to observe that the Court has to be on guard while ordering investigation against any important constitutional functionary, officers or any person in the absence of some cogent legally cognizable material. When the material on the basis of which investigation is sought is itself irrelevant to constitute evidence and not admissible in evidence, we have apprehension whether it would be safe to even initiate investigation. In case we do so, the investigation can be ordered as against any person whosoever high in integrity on the basis of irrelevant or inadmissible entry falsely made, by any unscrupulous person or business house that too not kept in regular books of account but on random papers at any given point of time. There has to be some relevant and admissible evidence and some cogent reason, which is prima facie reliable and that too, supported by some other circumstances pointing out that the particular third person against whom the allegations have been levelled was in fact involved in the matter or he has done some act during that period, which may have co-relations with the random entries. In case we do not insist for all these, the process of law can be abused against all and sundry very easily to achieve ulterior goals and then no democracy can survive in case investigations are lightly set in motion against important constitutional functionaries on the 22 ITA 3106,3108 & 3109/Mum /2023 Saarrthi Reality and Infra LLP & Others basis of fictitious entries, in absence of cogent and admissible material on record, lest liberty of an individual be compromised unnecessarily. We find the materials which have been placed on record either in the case of Birla or in the case of Sahara are not maintained in regular course of business and thus lack in required reliability to be made the foundation of a police investigation.
The Ld. AR further respectfully relied in the case of Hon'ble Supreme Court in the case of Commissioner of Income Tax (Appeals) 11 Bengaluru & Ors. v. Sunil Kumar Sharma, SLP Diary No. 21526/2024, dated 20-08-2024, wherein it has been held as under:
“Section 153C, read with section 153A, of the Income-tax Act, 1961 - Search and seizure - Assessment of any other person (Recovery of loose sheets of paper) - Assessment years 2012- 13 to 2018-19 - High Court held that it is established in law that a sheet of paper containing typed entries and in loose form, not shown to form part of books of account regularly maintained by assessee or his business entities, do not constitute material evidence and, therefore, action taken by revenue against assessee based on material contained in diaries/loose sheets, was contrary to law and, thus, impugned notices under section 153C were required to be set aside, as same were void and illegal - Whether SLP filed against impugned order of High Court was to be dismissed.”
Furter the Ld. AR respectfully relied on the decision of coordinate bench of ITAT-Mumbai in the case of assessee’s group concern in similar issue in DCIT, Central Circle-5(1), Mumbai v. Ekjyot Properties, 3107/Mum/2023, in para 13 of the order it has been held as under:
“13. The proceedings u/s 153C of the Act was initiated in the case of the assessee firms on the basis of three loose paper no. 39 to 41 found and seized from this search action in the care of RPS Group and Shri Tarun Vohra one of the partners of the assessee firm. The AO has taken the loose paper 39 as the basis for computing most of the additions. In respect of loose paper no. 39, the assessee explained that Shri Amit Wadhwani the Real Estate Broker made proposal for selling flats at a higher price and expected a brokerage of 5% on the sale value of the flats, however, the same could not be materialized
23 ITA 3106,3108 & 3109/Mum /2023 Saarrthi Reality and Infra LLP & Others as the same was merely a proposal. In respect of other loose paper, the assessee submitted that the same were prepared for management purpose to reconcile the bank balance on 15.09.2016 with a view to find out the cash flow for the payment to be made for various purposes. It was also submitted that these papers do not reflect any cash payment.”
We heard the rival submission and considered the documents available in records. The proceedings under section 153C of the Act, were initiated in the case of the assessee firm on the basis of a loose paper found and seized during the course of a search conducted in the case of RPS Group and Shri Tarun Vohra, one of the directors of the assessee. The Ld. AO relied solely on the said loose paper to compute additions under section 69A and 69C of the Act. The assessee explained that the document pertained to a proposal made by one Shri Amit Wadhwani, a real estate broker, for selling flats at a higher price, expecting a brokerage of 2% on the sale value. However, the proposal did not materialize and remained unexecuted. As recorded in para 6.7 of the impugned assessment order, the Ld. AO issued a notice under section 133(6) of the Act to M/s. Sai Estate Consultants. In response, M/s. Sai Estate Consultants categorically denied having accrued or received any commission income from the assessee during F.Y. 2013– 14 to F.Y. 2019–20 or having raised any invoices towards such brokerage. Similarly, Sai Estate Consultants Chembur Pvt. Ltd., where both Shri Amit and Shri Vicky Wadhwani are directors, also denied receipt of any brokerage or commission. Regarding the reference to an FIR mentioned by the Ld. AO, the Ld. CIT(A), at paras 4.23 and 4.24 (page 61 of the appellate order), recorded the assessee’s detailed submission, stating that there existed a dispute between the assessee and M/s. Sai Estate Consultant concerning dues on account of sale of shops/flats in a project named "Raj Ekjyot Sukriti." It was explained that the cheques issued by Sai Estate Consultant were dishonoured, leading the assessee to file a criminal complaint
24 ITA 3106,3108 & 3109/Mum /2023 Saarrthi Reality and Infra LLP & Others under section 138 of the Negotiable Instruments Act. The assessee had also initiated civil recovery suits before the Hon’ble Bombay High Court on 09.06.2022 and 30.08.2022. In retaliation, a counter-complaint was filed by Sai Estate Consultant. During the assessment proceedings, the Ld. AO again issued notice under section 133(6) dated 16.03.2023 to M/s. Sai Estate Consultants, seeking details of flats sold and brokerage received. In response, vide letters dated 22.03.2023 and 24.03.2023, Sai Estate Consultants reaffirmed that no flats were sold through them, and no brokerage was received from the assessee. The assessee obtained copies of the said notices and replies from the Ld. AO, vide letter dated 26.06.2024. Thus, the reply of the broker clearly substantiates the assessee’s contention that the proposal was not acted upon and no brokerage was ever paid. Despite this, the Ld. AO made additions of Rs.1,49,92,100/- under section 69A of the Act on account of alleged cash received over and above the agreement value, and Rs.1,42,09,910/- under section 69C of the Act towards alleged brokerage payment, solely based on the loose paper, without conducting any independent inquiry or bringing any corroborative evidence on record. We have considered the facts and perused the record. Respectfully following the ratio laid down in binding judicial precedents, we find merit in the petition filed by the assessee under Rule 27 of the Income Tax Appellate Tribunal Rules, 1963. It is a settled position in law that a loose paper, without any independent corroboration or inquiry, cannot form the valid basis for initiating proceedings under section 153C of the Act.
Accordingly, the addition made under section 69A & 69C of the Act, pursuant to the assessment framed under section 153C, is hereby quashed on legal grounds. Since the assessee has succeeded on the legal issue, the grounds raised on merits are rendered academic and are accordingly left open.
25 ITA 3106,3108 & 3109/Mum /2023 Saarrthi Reality and Infra LLP & Others 21. In the result, the appeal filed by the revenue bearing is dismissed.
The facts and circumstances in the appeal is identical to the facts and circumstances narrated above, therefore, the decision arrived at above, shall apply mutatis mutandis to this appeal also.