Ahmedabad ITAT Strikes Down On-Money Addition Under Section 69 Where Seized Documents Failed to Establish Any Link with the Assessee
Background and Overview
The Ahmedabad bench of the Income Tax Appellate Tribunal delivered a significant ruling in the case of ITO Vs Chirag Jitendra Shah (ITAT Ahmedabad), pertaining to Assessment Year 2020-21, wherein an addition of ₹1,33,80,000/- made by the Assessing Officer under Section 69 of the Income Tax Act, 1961 on account of alleged on-money payment for the purchase of a residential flat was set aside. The Tribunal dismissed the Revenue's appeal and affirmed the order passed by the Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi, rejecting the Revenue's entire line of reasoning as being rooted in presumption rather than evidence.
This case arises from a search and seizure operation conducted on the Shivalik Group and raises fundamental questions about how far seized digital records can be used to make additions in the hands of third parties who are not even named in those documents.
Facts of the Case
Search Conducted on the Shivalik Group
A search action was carried out on the Shivalik Group on 10.02.2022. In the course of this search, various documents, digital files, and devices were recovered from multiple premises. Statements of several individuals were also recorded during and after the search.
Discovery of the Digital Evidence
Among the seized material was a Sony Pendrive (16GB) retrieved from Shivalik House. Upon forensic recovery of deleted data from this pendrive, several Excel files were extracted. One of these files, named "LEGACY.xlsx", became the central piece of evidence relied upon by the Assessing Officer.
In this Excel file, Unit No. B-101 was listed with an entry of ₹2,67,000/- under the column titled "AMOUNT CASH".
The Assessing Officer then cross-referenced this Excel data with a WhatsApp image — specifically "WhatsApp Image 2018-11-20 at 13.09.06.jpeg" — retrieved from a seized computer identified as "Harshida Office Desktop", also found at Shivalik House.
The AO's Methodology and Addition
The Assessing Officer noted that for certain other flat units — namely B-502, B-601, and A-302 — the cash amounts appearing in the LEGACY.xlsx file exactly matched the cash brokerage figures reflected in the WhatsApp image. On this basis, the AO concluded that the Shivalik Group had followed a practice of paying brokerage in cheque for the registered sale price while paying brokerage in cash for the unaccounted (on-money) component, calculated at approximately 2% of the total cash consideration.
Applying this extrapolated methodology to Flat No. B-101, the AO inferred that the cash brokerage entry of ₹2,67,000/- represented 2% of an alleged cash on-money payment. Accordingly, the AO computed the alleged on-money amount as ₹1,33,80,000/- and added the same to the assessee's income under Section 69 of the Income Tax Act, 1961, treating it as unexplained investment.