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Facts
The assessee purchased a flat for Rs. 2 Crores through banking channels. During reassessment, an addition of Rs. 27,00,000 was made to his income as unexplained investment, alleging a cash payment for the flat. This addition was based on statements from the builder's employees during a search and vague electronic data, despite the assessee's denial and payment through legitimate sources.
Held
The Tribunal held that the addition, based solely on uncorroborated third-party statements and seized electronic data without allowing cross-examination, was not sustainable. Relying on a Supreme Court precedent, it affirmed that such evidence cannot be used against the assessee as it violates principles of natural justice. Consequently, the Revenue lacked sufficient evidence to sustain the addition.
Key Issues
Whether an addition to income, made on the basis of uncorroborated third-party statements and electronic data without providing an opportunity for cross-examination, can be legally sustained.
Sections Cited
Income Tax Act, 1961: Section 147, Income Tax Act, 1961: Section 271AAC, Income Tax Act, 1961: Section 132, Income Tax Act, 1961: Section 132(4)
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Income Tax Appellate Tribunal, “A” BENCH, CHANDIGARH
Before: HON’BLE SHRI LALIET KUMAR, JM & HON’BLE SHRI KRINWANT SAHAY, AM
O R D E R Krinwant Sahay (Accountant Member) Appeal in this case has been filed by the Assessee against the order dated 20.2.2025 passed by the ld. CIT(A), National Faceless Appeal Centre (NFAC), Delhi for A.Y. 2017-18.
2. Grounds of appeal are as under:- 1) Addition has been made with regard to cash payment to builders amounting to Rs. 27,00,000 in cash, over and above the amount mentioned in the Buyers Agreement. a) The addition is made on the basis of statements which are recorded at the back of assessee. Statement given by Shri Monu is the basis of addition. Here it is worthwhile to mention here that neither Assessing Officer has made any independent inquiry into the property purchase transaction, nor b) Gave an opportunity of being heard to assessee. c) The addition is simply made on the basis of statement of third parties, without giving an opportunity of cross examination of such parties. d) During the assessment proceedings Rs. 27,00,000 has been added to the total income of the assessee on account of Cash Payment to Homeland Heights for purchase of Flat. The addition to the total income has been made on surmises and conjectures which should not be allowed. It is very humbly requested to delete the addition of Rs. 27,00,000 as unexplained investment in the purchase of flat. 2) That the learned Assessing Officer has erred in initiating the penalty proceedings under Section 271 AAC of the Act. 3) That the appellant craves the right to add or amend any ground of appeal before it is finally disposed off.
2. The appeal is against the only one relevant issue raised through aforesaid grounds of appeal, made by the Assessing Officer and sustained by the Ld. CIT(A) of Rs. 27 lacs on account of cash payment to M/s Homeland Buildwell Private Limited.
Brief facts of the case, as per the order of the Ld. CIT(A), are as under: - 1. That the assessee Shri Gurmukh Singh Bhatti, is the holder of PAN No. AOFPB6049H and is a Salaried employee and regular income tax payee for the last so many years. For the A/Y 2017-2018 he filed his income tax return on 31.10.2017 and declared total income of Rs 14,52,280 and paid taxes for Rs. 2,68,505.00.
That the assessee Shri Gurmukh Singh Bhatti, alongwith his wife Mrs. Gurwinder Kaur booked one Flat with Homeland Heights on 02.02.2017 and he was allotted Flat No 60, on 6th Floor in Tower No 1. This flat was measuring 4189 square feet and total purchase price was agreed on Rs 2,00,00,000 (Rs. Two Crores only). The assessee paid all Sales consideration by account payee cheque and bank transfers. The source of the same is own accumulated savings of the family and bank loan for Rs One Crore. The assessee has not paid any single penny by way of cash for the purchase of flat. Flat Cost and Sources 3. That the assessee Shri Gurmukh Singh Bhatti, alongwith his wife Mrs. Gurwinder Kaur booked one Flat with Homeland Heights on 02.02.2017 and he was allotted Flat No 60, on 6th Floor in Tower No 1. This flat was measuring 4189 square feet and total purchase price was agreed on Rs 2,00,00,000 (Rs. Two Crores only) as per the below mentioned details: Area of Flat 4189 square feet or 15.39 marla. (1 square feet 0.00367309 marla)
1. Basic Sale Price (Rs.) + = 4649 per square feet=Rs. 1,94,73,660.00 Power Backup (Rs.) 30 per square feet = Rs. 1,25,670.00 Club Membership Charges = Rs. 75,000.00 Car Parking Charges = Rs. 2,00,000.00 Interest Free Maintenance Security = Rs. 1,25,670.00 = 30 per square feet Net Sales Amount =Rs. 2,00,00,000.00 This sale amount is exclusive of Stamp Duty, Service Tax and other applicable charges.
That the assessee Shri Gurmukh Singh Bhatti and his Wife Mrs. Gurwinder Kaur have paid the sales consideration amount from accumulated savings of the family for the last so many years and out of the bank loan. 7. Income tax assessment case was reopened for reassessment under section 147 of the Income Tax Act, 1961 after recording the reason, which is re-produced hereunder: 8. As per information available with this office, you have made payment in cash amounting to Rs. 27,00,000/- during the F.Y. 2016-17 in lieu of purchase of Flat No. 60, Tower -1 to companies namely M/s Homeland Build Well Pvt. Ltd. and M/s A.B. Alcobave Pvt. Ltd. owned and run by Sh. Himant Jindal, Sh. Umang Jindal S/o Sh. Himant Jindal and Sh. Abhay Jindal S/o Sh. Himant Jindal. As per categorical admission of customer Relationship Manager of A.B. Alcobave Pvt. Ltd., the discounted price of the Flat, which is basically the cash component and is unaccounted money which is out of books. As such, this payment of Rs. 27,00,000/- appears to be unaccounted and made out of books.
8. A search was conducted under section 132 of Income Tax Act 1961 in the case of Homeland Group. Homeland Group owned two projects in Mohali, one is Homeland Heights Sector 70 Mohali and other one is CP-67, Commercial Project in Sector 67 Mohali. Both these projects are run under the umbrella of AB Alcobev Private Limited and HL Buildwell Private Limited (formerly known as Homeland Buildwell Private Limited). Both these companies are represented by Shri Hemant Jindal, Shri Umang Jindal son of Shri Hemant Jindal and Shri Abhay Jindal son of Shri Hemant Jindal. Shri Monu (Customer Relation Manager), Shri Sanjeev Garg (the accountant) and Shri Amit Gupta (Sales Manger), who were employees of Homeland Group were interrogated by the Departments and in their respective statements recorded on oath under section 132 (4) of the Income Tax Act, 1961 have admitted that cash has been accepted for almost all the sales made in homeland heights and CP-67 project. It is worthwhile to mention here that directors of both companies have categorically denied the receipt of cash in the sale of flats and commercial shops in their projects. Income Tax Department also found some documents from the laptop of Shri Umang Jindal Macbook, the information obtained from the laptop is no where mentioned in the assessment order. Some excel sheet is also extracted by the Income Tax department from the laptop of Shri Monu, in which cash is mentioned against the name of some flat owners. Some loose sheets showing receipt of cash is also obtained from the Samsung J6+ mobile of Shri Sanjeev Garg. Moreover the statements given by Mr. Monu, Mr. Sanjeev Garg and Mr. Amit Gupta are vague in itself. We are re-producing the same, "and almost all the sale of Flats, they (Homeland Group) have received Cash payments that is black component which is unaccounted out of books.
1. The ratio of black to white varies in some case, it can be upto 50-60%. For example, if a flat is sold for Rs 75,00,000 (the white component) the price is written on the agreement to sell and the sale deed. The discounted price is basically the cash component which in this example would be roughly Rs 75,00,000 (making black component) making the entire cost of one flat to be Rs 1.50 Crore. As per the statement they use the word 'DISCOUNT' and 'CA' for denoting cash component..... On the basis of statement of Mr. Monu, the assessee's case is re-opened under section 148. The statement of Mr. Monu in itself is very vague as: a) It does not exactly specify the quantum of ratio of black and white money involved in Sale deed. b) It does not specify that in the sale of each and every flat there is black and white component. As the statement reads, and almost all the flats.... c) The term almost does not mean the whole, all the flats in totality, some of the flat owners like me have not paid even a single rupee in black, in cash. Whatsoever the amount is paid, that is paid from the duly declared sources and through banking channels. d) The relevant portion of the statement is highlighted and is attached herewith for your kind consideration. …… a) that neither Assessing Officer has made any independent inquiry into the property purchase transaction, nor b) Gave an opportunity of being heard to the assessee and c) The addition is simply made on the basis of statement of third parties, without giving an opportunity of cross examination of such parties d) No document is shown to the assessee which shows the receipt of cash of Rs 27,00,000 by the company officials e) No reference is made to Valuation Cell for valuation of the property prices as on 02.02.2017 that is on the date of booking of flat for Rs 2 Crores. f) No relevant material is placed on the record that the assessee has paid Rs 27,00,000 in Cash to M/s Homeland Build Well Private Limited. g) No evidence is placed on the record which bears the signatures of the assessee or the company officials showing receipt of Rs 27,00,000 as paid by the assessee for purchase of flat h) No defects have been mentioned in the Income Tax return filed by the assessee. i) The Assessing Authority should have brought about the comparative figures in the locality that is the rate of Homeland Heights should have been compared with the rates of other societies in Sector 70 and with the rates prevailing in the nearby areas of Sector 70. j) During the assessment proceedings Rs 27,00,000 has been added to the total income of the assessee on account of CASH Payment to Homeland Heights for purchase of Flat. The addition to the total income has been made on surmises and conjectures which should not be allowed. It is very humbly requested to delete the addition of Rs 27,00,000 as unexplained investment in the purchase of flat. k) The re-assessment proceedings initiated against the assessee under section 147 of the Income Tax Act 1961 are void ab inito that is bad in law from the beginning, since the statement which is recorded at the back of the assessee is vague and no opportunity of being heard is provided to the assessee, which is against the principles of natural justice. The statement neither specifies that assessee has paid any thing over and above the agreed price of Rs 2,00,00,000 for purchase of flat.
4. The Ld. CIT(A) in the appellate order has given findings on this issue as under:- “The appellant has cited some judicial decisions to argue that the addition based on suspicion and entry in loose paper can not be considered as sufficient evidence. However, it is found that the details and information as regards cash payment by the assessee for purchase of immovable property has emanated from the search proceedings. These digital/ documentary evidence has been duly corroborated by the statements recorded from the relevant persons of the group searched. In a criminal proceeding the prosecution has to prove the guilt of an accused person beyond reasonable doubt but in a civil proceeding the matter is decided on the basis of preponderance of probabilities. Therefore, in the case at hand, it is observed that the AO has based his decision on sufficient evidence to make the addition in the case of the appellant which has to be upheld”.
During proceedings before us, ld. Counsel for the Assessee argued the case on the lines of the written submissions filed. He also brought it on record that this case is squarely covered by the order of the Coordinate Bench of the Tribunal in the case of ‘Paramjit Singh Mongla, Mohali vs ITO’ for A.Y. 2016-17 order dated 25.03.2025
The ld. DR relied on the orders of the authorities below.
We have considered the findings given by the Assessing Officer in the assessment order and the Ld. CIT(A) in the appellate order. We have also considered the arguments and written submissions filed by the ld. Counsel for the Assessee. We have also considered the arguments made by the ld. DR during the proceedings before us.
In our considered view, this case is squarely covered by the decision of the Coordinate Chandigarh Bench of the ITAT in the case of ‘Paramjit Singh Mongla, Mohali vs ITO’ Paramjit Singh in which it has been held as under: - “7. On due consideration of the facts and circumstances, we find that only evidence alleged to be possessed by the Revenue is some details unearthed from the computer of Shri Monu whose erstwhile employer was the developer from whom assessee has purchased the flat. We observe that the authenticity of such details in laptop of a third person will always remain doubtful without sufficient corroborative evidence. There is no direct evidence possessed by the revenue. The concerned employee has already left the job of the developer. The AO has neither supplied the alleged copies of those documents recovered from the laptop of Shri Monu nor he has put Shri Monu for cross-examination of the assessee. It is not established on the record whether assessee has made any payment to Shri Monu. Only a chart prepared by an employee was recovered but that cannot be the evidence, solely on whose basis addition can be made. At this stage, we deem it appropriate to make reference to the judgement of Hon'ble Supreme Court in the case of Andaman Timber Industries Vs Commissioner of Central Excise 281 CTR 241 (S.C.) wherein the Hon'ble Supreme Court has propounded that if a witness was not put for cross-examination, then statement recorded against a person from his back will not be used in evidence. Para 6 of the judgement reads as under : “6. According to us, not allowing the assessee to cross- examine the witnesses by the Adjudicating Authority though the statements of those witnesses were made the basis of the impugned order is a serious flaw which makes the order nullity inasmuch as it amounted to violation of principles of natural justice' because of which the assessee was adversely affected. It is to be borne in mind that the order of the Commissioner was based upon the statements given by the aforesaid two witnesses. Even when the assessee disputed the correctness of the statements and wanted to cross-examine, the Adjudicating Authority did not grant this opportunity to the assessee. It would be pertinent to note that in the impugned order passed by the Adjudicating Authority he has specifically mentioned that such an opportunity was sought by the assessee. However, no such opportunity was granted and the aforesaid plea is not even dealt with by the Adjudicating Authority. As far as the Tribunal is concerned, we find that rejection of this plea is totally untenable. The Tribunal has simply stated that cross-examination of the said dealers could not have brought out any material which would not be in possession of the appellant themselves to explain as to why their ex- factory prices remain static. It was not for the Tribunal to have guess work as to for what purposes the appellant wanted to cross-examine those dealers and what extraction the appellant wanted from them.”
8. Thus the Revenue did not possess sufficient evidence in support of its case. The addition made to the total income of the assessee is not sustainable.
Accordingly, we allow the appeal and delete the addition. 9. In the result, appeal of the assessee is allowed.”
As the matter has already been decided by the Coordinate Bench of the Tribunal in the same group of search case pertaining to ‘Paramjeet Singh Mogla vs ITO’ (supra), which are having similar facts to the instant case. Therefore, we do not find any reason to deviate from the findings given by the Coordinate Bench of the Tribunal in the case captioned above vide order dated 25.03.3025. Accordingly, Assessee’s appeal on this issue is allowed.
In the result, Assessee’s appeal stands allowed. Order pronounced on 07. 01.2026