ITAT Mumbai Strikes Down Additions for Want of Proof
Ajay Kumar Agrawal
Nehru Place, New Delhi
(For Professional Circulation)
03 January 2026
The decision of the Mumbai Bench of the Income Tax Appellate Tribunal, Mumbai Bench in Jayantilal Purohit v. Deputy Commissioner of Income Tax, Central Circle–4(2), Mumbai (ITA Nos. 5682, 5683 and 5684/Mum/2025, order dated 30 December 2025) once again reinforces the settled legal position that additions under Section 69 of the Income-tax Act, 1961 cannot be sustained merely on the basis of third-party statements or uncorroborated electronic data recovered during search proceedings conducted in the case of another person. The ruling assumes particular significance in cases involving alleged “on-money” payments in real estate transactions, where Revenue authorities frequently rely upon statements recorded under Section 132(4) and loose electronic records without independent verification.
The assessee, engaged in trading of healthcare products through his proprietary concern, had purchased two shops in the Platinum Mall project developed by Rubberwala Housing and Infrastructure Ltd. Search and seizure proceedings under Section 132 were conducted in the case of the Rubberwala Group, including at the residence of one of its employees, Shri Imran Ansari, who was handling the sale and registration of shops. During the search, a pen drive containing Excel sheets allegedly detailing cash and cheque components of shop sales was seized, and statements were recorded wherein Shri Imran Ansari stated that shop transactions involved a cash component allegedly decided by the directors of the developer.
On the basis of this material, proceedings under Section 153C were initiated against the assessee, and the Assessing Officer, completing the assessment under Section 144 read with Section 153C, made additions under Section 69 for Assessment Years 2017–18, 2018–19 and 2019–20, treating the alleged cash components as unexplained investments. These additions were confirmed by the Commissioner (Appeals), primarily relying upon the statement of Shri Imran Ansari and the data found in the seized pen drive.
At the core of the controversy lay the interpretation and application of Section 69, which empowers the Assessing Officer to deem unexplained investments as income where the assessee is found to have made investments not recorded in the books of account and fails to offer a satisfactory explanation as to their nature and source. It is well settled that the initial burden lies squarely on the Revenue to establish, through credible, cogent and corroborated material, that such unexplained investment has in fact been made by the assessee.
The Tribunal, while adjudicating the appeals, undertook a detailed factual and legal analysis. It first noted that no transaction relating to the purchase of the shops had taken place during Assessment Years 2017–18 and 2018–19, as the booking and payments commenced only in December 2018, relevant to Assessment Year 2019–20. On this short but decisive ground alone, the additions for the earlier two years were held to be wholly unsustainable in law.
More importantly, even for Assessment Year 2019–20, the Tribunal found that the Revenue’s case rested entirely on third-party statements and an uncorroborated Excel sheet recovered from the possession of an employee of the developer. The assessee had consistently denied having paid any cash over and above the documented consideration, which itself exceeded the applicable stamp duty valuation. The Tribunal emphasized that neither the statement of Shri Imran Ansari nor the seized electronic data was ever confronted to the assessee, and no opportunity of cross-examination was afforded despite specific requests. Further, no independent evidence was brought on record to demonstrate any actual cash outflow by the assessee.
Relying upon a long line of precedents, including earlier coordinate bench decisions in Rajesh Jain, Praveen Khetaramm Purohit, and other connected matters arising from the same Rubberwala Group search, the Tribunal reiterated that untested third-party statements, howsoever detailed, cannot by themselves constitute “credible evidence” for the purposes of Section 69. The Tribunal also drew strength from the principle laid down by the Hon’ble Supreme Court in Andaman Timber Industries, holding that denial of cross-examination of a witness whose statement is relied upon constitutes a serious breach of natural justice, rendering the resultant addition legally untenable.
The Tribunal further observed that electronic records recovered from third-party premises must satisfy basic evidentiary standards and must be corroborated by independent material directly linking the assessee to the alleged transaction. Mere suspicion, however strong, cannot take the place of proof. At best, such material may justify further inquiry or investigation, but it cannot, in the absence of corroboration, sustain the deeming fiction embedded in Section 69.
In conclusion, the Tribunal held that the Revenue had failed to discharge its burden of proving that the assessee had made any unexplained investment by way of alleged on-money payment. Accordingly, the additions made under Section 69 for all three assessment years were deleted in entirety, and the appeals were allowed. The order was pronounced on 30 December 2025.
This ruling assumes considerable importance in the current assessment landscape, particularly in search-related proceedings under Sections 153A and 153C. It underscores that while statements recorded during search and seized electronic data may trigger inquiry, they cannot, without confrontation, cross-examination and corroborative evidence, form the sole basis for adverse additions. Section 69, being a deeming provision with serious civil consequences, must therefore be applied strictly and in consonance with the principles of natural justice.
Disclaimer
This article is intended solely for professional and academic discussion. The analysis is based on the facts as recorded in the reported decision and the prevailing judicial position as on the date of writing. It does not constitute legal advice or a professional opinion on any specific set of facts. Readers are advised to independently examine the relevant statutory provisions and judicial precedents before taking any action.
[N.B: All statements, opinions, and analysis presented in this article represent the independent personal views of the author and do not necessarily reflect the views of publication or its editorial team.]
