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2026 Supreme(Online)(ITAT) 4464
INCOME TAX APPELLATE TRIBUNAL (MUMBAI BENCH)
Om Prakash Kant, AM, Kavitha Rajagopal, JM
Sejal Paresh Chopra – Appellant
Versus
Assistant Commissioner of Income Tax – Respondent
ITA No.7061/M/2025 | ITA No.7062/M/2025
For the Appellants/Petitioners: Shri Vimal Punmiya, AR
For the Respondents: Shri Vivek Perampurna, CIT-DR
Addition as unexplained investment cannot be made solely on uncorroborated third-party search material without direct nexus, corroborative evidence, or cross-examination opportunity, violating natural justice principles.
Headnote:(A) Income Tax Act, 1961 - Sections 69, 132, 153C, 132(4A), 292C - Search and seizure - Addition as unexplained investment - Addition of Rs.6,00,000/- made u/s 69 on basis of pen drive data and statements seized from third party during search on builder group - Assessee denied cash payment, submitted banking records and registered sale deed showing payments through cheque - No corroborative evidence, direct nexus or seized material pertaining to assessee - No opportunity for cross-examination of third parties - Electronic evidence inadmissible without certificate u/s 65B Evidence Act - Presumption u/s 132(4A) not applicable to third party material - Addition deleted as made solely on uncorroborated third party information, violating natural justice. (Paras 2, 3, 6-10)
(B) Principles of natural justice - Reliance on third party statements/documents - Mandatory to confront assessee with adverse material and provide cross-examination opportunity - Failure renders addition unsustainable. (Paras 8, 10, 13, 18-21)
(C) Assessment u/s 153C - Requires satisfaction that seized documents pertain to assessee and bear on total income determination - Third party data without corroboration insufficient. (Paras 6, 10)
Facts of the case:
Assessee purchased shop for consideration higher than stamp duty value, paid entirely through banking channels. Search on builder group yielded pen drive from key employee and statements admitting on-money collection from buyers including assessee. AO made addition u/s 69 u/s 153C proceedings, upheld by CIT(A). Assessee denied cash payment, no corroboration or cross-examination opportunity provided.
Findings of Court:
Addition deleted following coordinate bench decisions on identical facts involving same group. No material seized from assessee, no independent evidence of cash payment, statements not confronted, no cross-examination allowed.
Issues: Validity of addition based on uncorroborated third party pen drive data and statements; applicability of presumption to third party material; compliance with natural justice and electronic evidence requirements.
Ratio Decidendi: Addition cannot be sustained solely on third party material without corroboration, direct nexus to assessee, or cross-examination opportunity. Electronic records require certification for admissibility. Principles of natural justice mandate confronting assessee with relied-upon evidence.
Result: Appeals allowed.
| Table of Content |
|---|
| 1. assessee challenges addition based on third-party pen drive data. (Para 2) |
| 2. search on builder group leads to s.153c notice and addition. (Para 3 , 4 , 5) |
| 3. parties argue over nexus and corroboration of third-party evidence. (Para 6 , 7) |
| 4. tribunal follows coordinate benches; no corroborative evidence. (Para 8 , 9 , 10 , 11) |
| 5. pendrive data inadmissible without confrontation or verification. (Para 12 , 13) |
ORDER
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) 2019-20 & 2020- 21. As the facts are identical, we hereby pass a consolidated order by taking ITA No.7061/M/2025 pertaining to A.Y. 2019-20 as the lead case.
2. The assessee has raised the following grounds of appeal:
“1.That the Ld. CIT(A) erred in law and on facts rejecting and keeping the additions of Rs.600000 under Section 69 of the Income tax Act, 1961 on the basis of search and seizure action under Section 132 was carried out on the business group of the Builder, M/s. Rubberwala Housing & Infrastructure Ltd(RHIL) and on its one of Director and on residence of one key employee Mr. Imran Ansari. During the search, certain electronic data in the form of a pen drive was seized from the premises of third party being called as Key Employee. The pen drive allegedly contained certain excel sheets and files reflecting notings of transactions, including some entries that purportedly indicated receipt of cash (on money) from various customers including the appellant. Tax Implications including Interest and Penalty Rs.748981 Subsequently, the AO issued a notice under Section 142(1) / 153C to the appellant based on this information. The AO alleged that the appellant had made cash payment over and above the registered value for purchase of property from the Builder. However, the appellant categorically denied having made any cash payment and furnished complete details including registered sale agreement, bank statements showing payments by cheque, and other supporting records. Despite the appellant s explanation and the absence of any corroborative evidence, the AO proceeded to treat the alleged cash amount as unexplained investment under Section 69 and made an addition of Rs.600000 in the assessment order dated 15/03/2024.
The CIT(A) upheld the addition without proper appreciation of the facts and law, leading to the present appeal before the Hon'ble Appellate Tribunal.
2. That the AO and CIT(A) grossly erred in holding that the pen drive data seized from the third party constitutes incriminating material against the appellant without bringing any corroborative evidence or establishing any direct nexus between the appellant and such data. Addition u/s 69 cannot be made solely on third party pen drive data without corroboration. The entire basis of the addition rests on the alleged entries found in a pen drive seized from the builder. It is settled law that material seized from a third party cannot automatically be treated as evidence against another person unless it is proved that the material belongs to or pertains to such person. In the instant case, the AO has not established any nexus between the appellant and the alleged pen drive data. No independent evidence such as bank withdrawals, receipts, or statements from the appellant or builder substantiates the allegation of cash payment.
3. That the AO and CIT(A)failed to discharge the burden of proof required under no cash payment or on money was ever paid to the builder. The presumption under Section 132(4A) 2920 is available only in respect of documents or assets found in the possession or control of the person searched. In the present case, the search was conducted on the builder, not the appellant. Therefore, no presumption can be drawn that the contents of the pen drive represent true tra
