Loading judgment…

BHAGWANTI LALITKUMAR JAIN ,MUMBAI vs ACIT, CENTRAL CIRCLE 4(2), MUMBAI | BharatTax

BHAGWANTI LALITKUMAR JAIN ,MUMBAI vs. ACIT, CENTRAL CIRCLE 4(2), MUMBAI

ITA 8655/MUM/2025Status: DisposedITAT Mumbai25 February 2026AY 2019-20Bench: SHRI OM PRAKASH KANT (Accountant Member), MS. KAVITHA RAJAGOPAL (Judicial Member)1 pages

AI SummaryAllowed

Facts

The assessee purchased shops from M/s. RHIL for Rs.14,01,560/-. The Assessing Officer (AO) made an addition of Rs.4,90,350/- under section 69 of the Income Tax Act, 1961, as unexplained investment towards 'on money' payment, based on third-party information obtained during a search. The CIT(A) upheld this addition. The assessee appealed this decision.

Held

The Tribunal held that the addition was made solely on the basis of third-party information without any corroborative evidence. The AO failed to provide the assessee an opportunity for cross-examination of the third parties whose statements were relied upon, which is a violation of natural justice. The Tribunal also noted that similar issues in identical facts for other group entities were decided in favor of the assessee.

Key Issues

Whether the addition of 'on money' payment is sustainable solely on the basis of third-party information without corroborative evidence and without providing an opportunity for cross-examination.

Sections Cited

153C, 147, 148, 69, 115BBE, 132, 143(2), 142(1), 65B, 132(4)

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, “B” BENCH, MUMBAI

Before: SHRI OM PRAKASH KANT, AM

For Appellant: Shri Arun Kanti Datta, CIT-DR

For Respondent: Shri Arun Kanti Datta, CIT-DR

Hearing: 19.02.2026Pronounced: 25.02.2026

O R D E R Per Kavitha Rajagopal, JM:

The captioned appeals are filed by the assessee, challenging the order of the Learned Commissioner of Income Tax [‘Ld. CIT(A)’ for short] passed u/s. 250 of the Income Tax Act, 1961 (‘the Act') pertaining to the Assessment Year (‘A.Y.’ for short) 2018-19 & 2019-

20.

As the facts are identical, we hereby pass a consolidated order by taking pertaining to A.Y. 2019-20 as the lead case.

2.

The assessee has raised the following grounds of appeal: “1. The Ld. CIT(A) failed to appreciate that the notice issued by the jurisdictional AO is bad- in-law and illegal;

2. The Ld. CIT(A) erred in upholding the validity of the notice issued and assessment framed under Section 153C of the Act. The Ld. CIT(A) failed to appreciate that provisions of section 147 r.w.s. 148 of the Act is applicable and not the provisions of section 153C. The issuance & 8656/Mum/2025 Ms. Bhagwanti Lalitkumar Jain of the said notice and consequent assessment farmed u/s.153C is bad in law, illegal, without jurisdiction and void ab-initio;

3. On the facts and circumstances of the case and in law, the Ld. CIT(A) failed to appreciate that the AO has not referred to any incriminating material in the satisfaction note issued to the Appellant;

4. The Ld. CIT(A) erred in confirming the assessment order by not appreciating that the Assessing Officer (AO) had failed to provide the opportunity for cross-examination of the third party whose statement and/or material was relied upon to frame the assessment. Under the circumstances and in law, the Assessment Order passed u/s.153C is against the principal of natural justice, bad-in-law and liable to be quashed;

10. I have considered rival submissions and perused material on record. Undisputedly, the genesis of the addition made of ` 42 lakh on account of alleged payment of on–money in cash towards purchase of a flat lies in a search and seizure operation conducted in case of Hiranandani Group and related persons. Though, in the assessment order the Assessing Officer has not discussed in detail the nature of incriminating material / evidence available on record to indicate payment of on–money in cash by the assessee to M/s. Crescendo Associates, however, from the show cause notice dated 4th March 2015, which is reproduced by the Assessing Officer in the assessment order, it appears that the incriminating materials are in the form of pen drive found and seized from the residence of one of the employees of Hiranandani Group and a statement recorded under section & 8656/Mum/2025 Ms. Bhagwanti Lalitkumar Jain 132(4) of the Act from Shri Niranjan Hiranandani, Director and Promoter of the Group, wherein, the details of on– money paid by buyers / prospective buyers to Hiranandani Group concerns are mentioned and further, in the statement recorded under section 132(4) of the Act on 14th March 2014, Shri Niranjan Hiranandani, has admitted receipt of on–money in cash towards sale of flats / shops. Thus, it is clear that except these two pieces of evidences the Assessing Officer had no other evidence on record which demonstrates that the assessee had paid on–money in cash for purchase of the flat. It is further relevant to observe, from the assessment stage itself the assessee has requested the Assessing Officer to provide him with all adverse materials and full text of the statement recorded under section 132(4) of the Act from Shri Niranjan Hiranandani. The assessee had also requested the Assessing Officer for allowing her to cross–examine Shri Niranjan Hiranandani and other parties whose statements were relied upon. Apparently, this request of the assessee was not acceded to by the Assessing Officer. When the assessee took up the aforesaid issue before the first appellate authority, the learned Commissioner (Appeals) in letter dated 18th July 2016, had clearly directed the Assessing Officer to provide the assessee all adverse materials / documentary evidences available with him indicating payment of on–money. However, on a perusal of the remand report dated 23th June 2017, a copy of which is at Page–53 of the paper book, it is very much clear that the Assessing Officer has completely avoided the issue and there is no mention whether the assessee was provided with all the adverse material and if, not so, whether he has provided them to the assessee as per the directions of the learned Commissioner (Appeals). Thus, from the aforesaid facts, it is patent and obvious that the addition of ` 42 lakh made on account of on– money payment in cash is without complying with the primary and fundamental requirement of rules of natural justice. It is well settled proposition of law that if the Assessing Officer intends to utilize any adverse material for deciding an issue against the assessee he is required to not only confront such adverse materials to the assessee but also offer him a reasonable opportunity to rebut / contradict the contents of the adverse material. Further, the assessment order reveals that the Assessing Officer has heavily relied upon the statement recorded from Shri Niranjan Hiranandani, for making the disputed addition. However, it is the allegation of the assessee, which prima–facie appears to be correct, that the Assessing Officer has not provided the full text of such statement recorded and has also not allowed the assessee an opportunity to cross–examine Shri Niranjan Hiranandani, and other persons whose statements were relied upon. This, in my view, is in gross violation of rules of natural justice and against the basic principle of law. In this context, I may refer to the decision of the Tribunal, Mumbai Bench, in Nikhil Vinod Agarwal (supra). Thus, for the aforesaid reason, the addition made cannot be sustained.

11. Even otherwise also, the addition made is unsustainable because of the following reasons. As discussed earlier in the order, the basis for addition on account of on–money is the information contained in the pen drive found during the search and seizure operation and the statement recorded under section 132(4) of the Act. As regards the information contained in the pen drive, it is the & 8656/Mum/2025 Ms. Bhagwanti Lalitkumar Jain contention of the assessee that the said pen drive was not found from the possession of the assessee but in course of search and seizure operation conducted in case of a third party. Therefore, in absence of further corroborative evidence to establish that the contents of the pen drive are correct and authentic to the extent that the assessee paid on–money in cash, no addition can be made under section 69B of the Act. Further contention of the assessee is that in the statement recorded under section 132(4) of the Act, Shi Niranjan Hirandani has not made any reference to the assessee, therefore, in absence of any other corroborative evidence to establish that assessee has paid on–money in cash, no addition can be made. I find substantial merit in the aforesaid submissions of the assessee. In my view, neither the information contained in the pen drive nor the statement recorded under section 132(4) of the Act from Shri Niranjan Hiranandani are enough to conclusively establish the factum of payment of on–money by the assessee. At best, they can raise a doubt or suspicion against the conduct of the assessee triggering further enquiry / investigation to find out and bring on record the relevant fact and material to conclusively prove the payment of on–money by the assessee over and above the declared sale consideration. Apparently, the Assessing Officer has failed to bring any such evidence / material on record to prove the payment of on–money by the assessee. More so, when the assessee from the very beginning has stoutly denied payment of on–money in cash. Notably, while dealing with a case involving similar nature of dispute concerning similar transaction with another concern of Hiranandani Group, the Tribunal in case of Shri Anil Jaggi v/s ACIT (supra) has held as under:– ……..