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Facts
The assessee purchased a property for Rs. 30,06,000/-. The Assessing Officer (AO) made an addition of Rs. 54,10,800/- on account of alleged on-money payment based on seized loose papers from a third party. The assessee denied paying any on-money and stated that the loose papers were irrelevant and not linked to her.
Held
The Tribunal held that the AO cannot make additions on account of alleged on-money payments solely based on loose papers seized from a third party without corroborative evidence linking the assessee. The Tribunal noted that the loose papers were not directly related to the assessee, and there was no independent investigation or evidence to support the AO's claim.
Key Issues
Whether the addition of alleged on-money payment is sustainable solely on the basis of loose papers seized from a third party without corroborative evidence?
Sections Cited
69, 132, 143(3), 254(1)
AI-generated summary — verify with the full judgment below
PER PAWAN SINGH, JUDICIAL MEMBER;
This appeal by assessee is directed against the order of ld.
CIT(A)/NFAC dated 23.09.2025 for Assessment Year (AY) 2023-24. The assessee has raised following grounds of appeal:
“1. That on the facts and circumstances of the case as well as in law, the Id CIT (A), NFAC, Delhi [CIT (A)) has erred in upholding the validity of the assessment order u/s 143(3) of the Act passed by the Income Tax Officer, Ward-42(2) (4). Mumbai (JAO), whereas the assessment order so passed is clearly invalid, bad-in-law and contrary to the provisions of law. Appellant prays for quashing the assessment order so passed.
That on the facts and circumstances of the case as well as in law, the id CIT (A) has erred in upholding the addition made by the A.O. of Rs. 54,10,800/-u/s 69 of the Act in the name of on-money payment for purchase of shop. whereas neither any such on-money was paid by appellant nor there has been any finding of any such on-money paid by the appellant. Addition so made and sustained is wrong, unjustified and contrary to the settled law. Appellant prays for deleting this wrong and unjustified addition.
Without prejudice to generality of ground no '2' above, that the Id. CIT (A) has erred in not considering the case laws relied upon by the ITA 7291/Mum/2025 (AY 2023-24) Nirmala Pennechand Sarda
appellant (assessee) in the written appeal submission filed before Id. CIT (A) and in upholding the addition by taking the view contrary to the law laid down in the case laws so relied upon.
Without prejudice to generality of ground no '2' above, that the Id. CIT (A) has erred in upholding the addition made by the A.O of Rs. 54,10,800/- on the basis of seized material of third party, whereas said seized materials pertain to earlier years and there is nothing in the impugned seized material to infer on-money payment by the appellant and that too in the year under appeal.
(5) Appellant craves leave to add, alter, delete or modify any ground of appeal.”
Brief facts of the case are that assessee is individual and filed her return of income for A.Y. 2023-24 declaring income of Rs. 54,10,800/-. Case was selected for scrutiny. During assessment, the assessing officer (AO)
recorded that a search action under section 132 was carried out in Surana Group in Surat on 08.12.2023. In the said search action, certain incriminating material of unaccounted transaction pertaining to real estate business of Surana Group was found and seized from the residential premises of Pawankumar Rameshwarlal Lahoti. Out of such incriminating material, certain evidence pertains to project “IFC” that is international finance centre, which is commercial complex. As per the information available on GujRera website, it consists of one tower having 195 units. The project was developed in Vesu area of Surat. The AO also received information from DDIT, Unit-4, Surat that assessee purchase a unit in the project developed by Surana group and has paid on-money as. During the assessment, the assessing officer issued show cause notice which were complied by the assessee with relevant documentary evidence. The AO in para 5.1 of assessment order recorded that in the search action on Surana Group, various evidences were found wherein 2
ITA 7291/Mum/2025 (AY 2023-24) Nirmala Pennechand Sarda amounts were written in coded form with suppression ranging from one zero to seven zeros. In the search action, statement of Snehkumar Chhajer was recorded, who disclosed and decoded such zeros. The AO further recorded that financial year-wise summary sheet of receipt of payments were prepared. The assessing officer further recorded that three (3) different set of evidence were found; namely summary sheet, detailed receipts and payments and unit-wise receipt of project “IFC”.
The summary sheets were prepared which contained year wise consolidated transactions. The AO scanned such detail on page no. 5 of assessment order under. The AO also scanned other incriminating material summary of different financial year where the amount of on- money transaction relating to unit-wise sale / booking was recorded under the narration “P”. The AO scanned such summary for the period of F.Y. 2019-20 to 2023-24 on page no 6 of his order. The AO also scanned certain other details and the statement of Pawankumar Rameshwarlal Lahoti and Snehkumar Chhajer in assessment order and took his view that his statement under section 132(4) is an important piece of evidence. In para 8 of the assessment order, the AO recorded that as per information from DDIT, Investigation Unit-4, the assessee purchased immovable property of Rs. 30,06,000/- i.e. Unit No. 613 & 614 in “IFC” project developed by S.S. Enterprise, a group concern of Surana group.
On show cause notice, the assessee mentioned that she has purchased office bearing floor no. 713 which is on 6thfloor and as per approved plan bearing no. 613 having built-up area of 48.22 square meter and carpet
ITA 7291/Mum/2025 (AY 2023-24) Nirmala Pennechand Sarda area is 46.56 square meter. On the basis of such reply and the various incriminating evidence, the AO was of the view that assessee has made payment of Rs. 54,10,800/- as on-money for purchase of Unit No. 613 & 614 in project of “IFC”. The AO further issued show cause notice as to why such on-money should not be treated as unexplained investment vide show cause notice dated 23.03.2025. The assessee filed her reply dated 24.03.2025. In the reply, the assessee submitted the loose papers no. 177 to 182 of B-18 which is stated to be found and seized in case of Surana Group, those papers are neither relevant nor such papers have any evidentiary value. She has no concern with any loose papers. Such loose papers are ex-facie rough loose papers. She has nothing to do with such loose papers. The loose papers contained the name of “Manishji” which is unrelated to assessee. She has not paid any unaccounted money. Merely, on the basis of such rough jotting on rough loose papers found from third person, it cannot be said that unaccounted money was paid by assessee. Further, she is informed that such loose papers are not found and seized during search action in case of person from whom she purchased office. Such loose papers were seized from third person. The statement of builder from whom the assessee purchased is not recorded.
There is no basis for inferring payment of unaccounted money reply of assessee was not accepted by assessing officer. The AO relied on modus operandi explained by Snehkumar Chhajer and that name of purchaser / investor against respective unit is mentioned with amount of on-money paid against booking / purchase of units in project of “IFC”. The ITA 7291/Mum/2025 (AY 2023-24) Nirmala Pennechand Sarda assessing officer thereby added Rs. 54,10,800/- as on-money on account of unexplained investment under section 69 in the assessment order passed on 31.03.2025.
Aggrieved by the additions in the assessment order, the assessee filed appeal before ld. CIT(A). Before ld. CIT(A), the assessee challenged the jurisdiction of AO as faceless on the ground that all the proceedings were taken in a faceless manner, however, the assessment order was passed by jurisdictional assessing officer. On merit, the assessee challenged the validity of addition of on-money. On the validity of addition, the assessee in her written submission submitted that sole basis for making addition are the loose papers being page no. 177 to 182 of Annexure B-18 seized from the residential premises of Pawankumar R. Lahoti which was considered to be secret office of Surana Group. The copies of loose papers are pasted / scanned of page no. 6 of assessment order which is not legible. The legible copy of loose papers is pasted on page no. 5 of show cause notice. As per such loose papers, S.S. Enterprises from sale office / unit project of “IFC” and the jottings “613/14-manishji – 108.216” on page no. 179 (first line), is the detail of sale amount received in respect of office no. 617 and 614. Such figure of “108.216” in this jotting has been decoding as Rs. 1,08,21,600/- (1.08 crores) which has been bifurcated equally between office no. 613 & 614 that is Rs.
54,10,000/- for each of the office. As office no. 613 has been purchased by assessee, the AO presumed that same has been purchased for Rs.
54,10,800/- and by assuming this entire amount as ‘on-money’ and ITA 7291/Mum/2025 (AY 2023-24) Nirmala Pennechand Sarda made addition on account of unexplained investment. By doing such hypothecation in respect of such loose papers seized from third party, wrong unjustified and presumptive addition has been made. Even while making such addition, the amount paid through banking channel as per registered sale deed of Rs. 30,06,000/- has also not been reduced. The assessee reiterated that she has not paid any on-money and the addition made by AO is grossly wrong unjustified and contrary to the settled law.
The assessee further stated that there is nothing in the loose papers recovered from third party about the assessee. The name of assessee is not mentioned. There is not even a whisper of assessee about payment of on money by assessee. The sole basis of making addition by AO is the rough jotting “613/14-manishji – 108.216” on page no. 179. The addition is nothing but presumption / hypothecation by ld. AO. Further, actual number of office purchased by assessee as per plan is 713 and not 613.
The assessee has purchased only one unit. There is nothing in the jotting that such details are for purchase of office and are in respect of sale amount. The ld. AO has to prove conclusively that any unaccounted investment was in fact made by assessee beyond any doubt and that it has been made in the year under assessment. Thereafter, only the onus shifts to the assessee to explain the source of conclusively proved investment. To support her submission, the assessee relied on the decision of Hon’ble Gujarat high Court in Ushakant N. Patel vs CIT (2006)
154 Taxman 55 (Guj). The assessee also stated that loose papers found from third party as no evidentiary value to support such submission
ITA 7291/Mum/2025 (AY 2023-24) Nirmala Pennechand Sarda relied upon the decision of Hon’ble Apex Court in Common Cause vs Union of India (2017) 77 taxmann.com 245 (SC), DCIT vs Sunil Kumar Sharma (2024) 159 taxmann.com 179 (Karnataka) and DCIT vs Prarthana Construction Pvt. Ltd. in Tax Appeal No. 79/200 (Gujarat-HC).
In without prejudice submission, the assessee submitted that it is settled law that no addition on account of on-money can be made in the hands of buyers of flats, shops or units merely on the basis of details/records maintained by the builder or on his disclosure or admissions of on- money. To support such view, the assessee relied on the decision of Gujarat High Court in PCIT vs Kaushik Nanubhai Majithia in Tax Appeal No. 20 of 2024 (Gujarat-HC), Anil Jaggi vs ACIT (2018) 89 taxmann.com 266 (Mumbai-Trib) and Jawaharbhai Atmaram Hathiwala vs ITO (2010)
128 TTJ 68 (Ahmadabad), Dr. Huseina Dawoodi vs ITO (2017) 83 taxmann.com 54 (Mumbai-Trib). The assessee also submitted that she has purchased office as per prevailing market value determined and accepted by stamp valuation authority. There is no finding of AO that fair market value of the office purchased by assessee was much higher than the consideration paid by assessee. There is no iota of finding that any such ‘on-money’ was paid. The assessee finally submits that even as per AO jottings on the seized paper no. 172 to 182 of Annexure B-18 are in respect of payment received during financial year 2018-19 to 2012-22.
Thus, the addition made is wrong, unjustified and without any basis. The AO has not even deducted the duly accounted consideration paid
ITA 7291/Mum/2025 (AY 2023-24) Nirmala Pennechand Sarda through banking channel, which shows that addition has been made mechanically.
The ld. CIT(A) after considering the submission of assessee upheld the addition made by assessing officer. The ld. CIT(A) noted that despite assesses denial and argument that loose papers are irrelevant and inadmissible, the AO relied on legal principal, Income Tax Authorities are not bound by strict rule of evidence and can act on such material, if the assessee is given fair opportunity to explain. The AO found explanation of assessee as unsatisfactory and thereby treated on-money payment as unexplained investment under section 69 adding to taxable income. On various submission of assessee that addition is made on third party and irrelevant and inadmissible evidence which cannot be formed basis, the ld. CIT(A) held that AO has brought on record material seized during search proceedings including loose papers, diaries and coded financial entries maintained by key persons of Surana Group wherein they have admitted in their statement under section 132(4) that they were maintaining parallel unaccounted books and acceptance of on-money.
The modus operandi including summary sheet, unit-wise receipts and decoding of figures is corroborated by multiple independent evidences and statement on record. The ld. CIT(A) by referring certain case law wherein it has been held by Superior Courts that statement recorded 132(4) have evidentiary value if corroborated and properly recorded statement shows that unexplained investment established on ITA 7291/Mum/2025 (AY 2023-24) Nirmala Pennechand Sarda preponderance of probability under section 69 and upheld the addition.
Further, aggrieved the assessee has filed present appeal before Tribunal.
We have heard the submission of learned Authorised Representative (ld.
AR) of the assessee and the learned Senior Departmental Representative (ld. Sr. DR) for the Revenue and with their assistance have gone through the orders of lower authorities carefully. The ld. AR of the assessee submits that he has raised a legal ground about validity of assessment order but he is not pressing such ground of appeal as the same may be treated and same may be dismissed has not pressed. Considering the statement of ld AR of the assessee Ground No.1 of the appeal is dismissed as not pressed. Ground no. 2 relates to addition of Rs.
54,10,800/-. The ld. AR of the assessee submits that addition is made absolutely on the basis of assumption and presumption. There is no basis of making addition of alleged on-money. The assessee has purchases shop no. 713 which is 48.22 square meter and carpet area of 46.56 square meters. The assessee purchased such shop on total sale consideration of Rs. 30,06,000/-. The assessee has not made any other payment except the sale consideration shown on the registered sale deed. There is no evidence of actual payment of any on-money in addition to the sale consideration shown on the sale deed. Neither, the person who was searched made any statement nor his any key person named the assessee about payment of on-money. The AO relied upon page no. 177 to 188 Annexure B-18, though such details is not readable (visible) in the assessment order, however, in the show cause notice
ITA 7291/Mum/2025 (AY 2023-24) Nirmala Pennechand Sarda issued to the assessee at the fag end of assessment proceeding that is on 26.03.2025, the AO provided such detail, copy of show cause notice dated 23.03.2025 is filed on record as per page no. 16 to 23 of paper book. The ld. AR of assessee while referring certain noting on right side on top of PB 20 (part of show cause notice) submits that there is reference “613/14-manishji – 108.216” on page no. 179 perhaps this figure is the sole basis of making addition against the assessee. There is no person namely “Manish Ji” related to assessee. The assessee does not know any such person nor the AO has shown any relationship with such name. Perhaps, the AO on the basis of figure 108.2.16 decoded it as Rs, 1,08,21,6000/- and half of the amount is added in the name of assessee.
The ld. AR submits that there is no logic for making such addition. The AO has not explained anywhere about 613/14. Accidentally 613 matches with the office purchased by assessee, perhaps the AO presumed that such jotting / rough figure relates to assessee. The figure relates to two units, the assessee has purchased only one unit. The ld. AR further submits that as per summary prepared by AO such amount of receipt relates to F.Y. 2018-19 to 2021-22, surprisingly, addition is made in F.Y.
2022-23 that is A.Y. 2023-24 without specifying any reason. The assessee has purchased such unit/ officer for a consideration of Rs.
30,06,000/-. The assessee purchased such unit at market rate. There is no allegation of AO that the assessee purchased such unit in less than the prevailing market rate.
ITA 7291/Mum/2025 (AY 2023-24) Nirmala Pennechand Sarda
The ld. AR of assessee submits that Mumbai Tribunal in Anil Jaggi vs ACII (supra) held that mere admission of amounts recorded in pen drive as addition of unexplained income would not lead to drawing of adverse inference that unexplained investment was made by assessee for purchase of property, particularly when no evidence was produced to justify the said payment by assessee. Ahmadabad Tribunal in Jawaharbhai Atmaram Hathiwala vs ITO in also held that addition on unaccounted money cannot be made merely on the basis of jotting in seized document found from developer and admission of builder. Further, Hon’ble Karnataka High Court in CIT vs Sunil Kumar Sharma (supra) also held that loose papers and diaries have no evidentiary value and no action can be taken in law merely on the basis of jotting in loose papers / diary. Special Leave Petition (SPL) filed by department against such decision has been dismissed by Hon’ble Apex Court. The Hon’ble Gujarat High Court in PCIT vs Kaushik Nanubhai Majithia (supra) also held that addition of unaccounted investment (on- money payment) cannot be made merely on the basis of excel sheet found from developer and admission of builder. The ld. AR submits that he also relied upon various submissions made before ld. CIT(A). and prayed to delete the entire addition.
On the other hand, ld. Sr. DR for the revenue submits that during the search action on Surana Group of Surat various incriminating material was found and seized. During the search action, statement of Snehkumar Chhajer and Sanjay Surana was recorded in the statement, the key
ITA 7291/Mum/2025 (AY 2023-24) Nirmala Pennechand Sarda person of Surana Builder admitted about receipt of on-money on sale of various shops and units. On the basis of seized material and the amount written in coded form, the AO decoded such coded form and found that in the figure written in the coded form “000” were missing. The AO arrived at the figure of Rs. 1.08 crore which were mentioned against unit no. 613/614 and accordingly half of the amount that is Rs. 54,10,800/-, which was added on account of on-money / unexplained investment by assessee. The ratio of case law relied by ld. AR are not applicable on the facts of the present case as there is sufficient evidence on the basis of incrimination material found during the search action.
In the short rejoinder submission, the ld. AR of the assessee submits that the jotting / rough writing mentioned on such loose papers is not connected with the assessee. The assessee has purchased unit no. 713, which is shown as 613 in the approved plan and the imaginary figure arrived by decoding the coded figure, is based on presumption. The AO in show cause notice himself left the column blank in F.Y. 2022-23. The transaction of assessee about purchase of office no. 613 is added in F.Y.
2022-23 (A.Y. 2023-24) against assessee.
We have considered the submissions of both the parties and have gone through the orders of lower authorities carefully. We have already recorded the basis of addition by assessing officer in para 3 above and the confirmation of such addition by ld. CIT(A) in para-5 above. On independent consideration of fact and the material placed before us, we find that the sole basis of addition of on-money is against the assessee is ITA 7291/Mum/2025 (AY 2023-24) Nirmala Pennechand Sarda various writing on page no. 177 to 182 of Annexure B-18 which is allegedly supported by the statement of key person of Surana Group. We find that that from the incriminating material, the AO prepared summary sheet of transaction of different financial year which were found and seized, where amount of on-money transaction for the period F.Y. 2019- 20 to F.Y. 2023-24 was prepared by AO in the following manner:
F.Y. “P” in receipts Total 2018-19 25,45,12,782 2019-20 37,31,18,414 2020-21 58,02,95,149 2021-22 64,56,23,474 185,35,49,819 2022-23 2023-24 8,66,54,754 8,66,54,754 Total 1,94,02,04,573 1,94,02,04,573 11. As per AO, the total on-money received by builder is only upto 2021-22 and for F.Y. 2023-24 only. There is no on-money in F.Y. 2022-23 (A.Y.
2023-24). Surprisingly, the case of assessee wherein addition is made by ld. AO relates to A.Y. 2023-24. The AO has not brought any material on record to connect the addition in A.Y. 2023-24 as to how the same are relied with other years. We further found that there is writing on page 5 of show cause notice dated 23.03.2025 “613/14-manishji – 108.216” on page no.
The assessee while objecting for making the basis of such writing for addition of Rs. 54,10,800/- on the ground that name of assessee is not mentioned on such writing, it is with relation to some Manishji. This noting does not specify whether it is complete consideration or figure of on-money. On careful perusal of assessment order, we do not find any reference either in the form of statement of any material information on record to connect the assessee with name
ITA 7291/Mum/2025 (AY 2023-24) Nirmala Pennechand Sarda “Manishji”. However, we find that assessee in all fairness right from the beginning accepted that she has purchased office no. 713, which is as
per approved plan is 613. However, she denied payment of any unaccounted money. We are conscious of the fact that AO is not bound any technical rule of evidence however, the additions cannot be made on mere presumption without bringing any corroborative evidence on record. It is not the case of AO that assessee purchased office unit at the lower rate than the rate prescribed by the stamp valuation authority.
Further, the AO has not proved on record that prevailing market was much more than the rate determined by stamp valuation authority.
We find that in Anil Jaggi vs ACIT (supra) the co-ordinate bench of Mumbai Tribunal held that addition of unaccounted investment (on- money payment) cannot be made merely on the basis of excel-sheet found from developer and admissions of developer. Further Ahmadabad Tribunal in Jawaharbhai Atmaram Hathiwala vs ITO (supra) also held that addition on unaccounted money cannot be made merely on the basis of jotting in seized document found from developer and admission of builder. Further, we find that Hon’ble Karnataka High Court in CIT vs Sunil Kumar Sharma (supra) also held that loose papers and diaries have no evidentiary value and no action can be taken in law merely on the basis of jotting in loose papers / diary. The Hon’ble Gujarat High Court in PCIT vs Kaushik Nanubhai Majithia (supra) also held that addition of unaccounted investment (on-money payment) cannot be made merely on the basis of excel sheet found from developer and admission of ITA 7291/Mum/2025 (AY 2023-24) Nirmala Pennechand Sarda builder. Thus, in view of aforesaid factual and legal discussion, we do not find any justification for making of addition of unexplained investment / on-money in absence of corroborative evidence or independent investigation by assessing officer particularly when there is no name of assessee either in the seized material or her name was not specified for payment of on-money by any key person of Surana Group.
Thus, in view of the peculiar facts of the case, we do not find any justification for making such addition. In the result, the addition made by assessing officer are directed to be deleted.
In the result, the appeal of assessee is allowed. Order pronounced in the open court on 11/02/2026 Sd/- Sd/- (ARUN KHODPIA) (PAWAN SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER Mumbai; Dated 11/02/2026 Biswajit, Sr PS