Cash Addition Under Section 69 Annulled When Based Solely on Third-Party Excel Sheet: ITAT Mumbai

Overview of the Dispute

The Mumbai Bench of the Income Tax Appellate Tribunal (ITAT Mumbai) examined an addition made under Section 69 in the case of Kulsum Aaqib Memon Vs DCIT for Assessment Year (AY) 2021-22. The Assessing Officer (AO) had treated a sum of ₹5,00,000 as unexplained investment, alleging that it was a cash component paid for purchase of a shop in a project of the “Rubberwala Group”.

This addition was not based on any direct evidence involving the assessee. Instead, it relied entirely on:

  • An Excel sheet seized during a Section 132 search in the Rubberwala Group, and
  • Statements of third parties, namely employees and promoters of that group.

The Tribunal ultimately set aside the CIT(A)’s order and deleted the addition, holding that the action of the Revenue was arbitrary and contrary to settled principles of law and natural justice.

Background: Assessment and Search Proceedings

Return Filing and Initial Assessment Context

  • The assessee filed her return of income for AY 2021-22 declaring total income of ₹7,97,970.
  • A search and seizure operation under Section 132 was conducted on 17.03.2021 in the case of “Rubberwala Group and others”.
  • During this operation, the Revenue authorities came across an Excel sheet and other materials in relation to sale of shops in “Platinum Mall building, Girgaon, Mumbai”.

Based on this search, the department claimed that the assessee had acquired a shop and that a cash payment of ₹5,00,000 had allegedly been made during AY 2021-22 as part of the purchase consideration.

Consequently:

  • Proceedings under Section 153C were initiated in the case of the assessee.
  • Assessment under Section 143(3) r.w.s. 153C culminated in an addition of ₹5,00,000 under Section 69 as alleged unexplained investment.

Findings of AO Leading to Addition

The AO inferred that:

  • The assessee was one of the purchasers of a shop in Platinum Mall.
  • According to the Excel sheet maintained by key personnel of the Rubberwala Group, cash of ₹5,00,000 was received from the assessee during AY 2021-22.

On that basis alone, the AO:

  • Treated ₹5,00,000 as unexplained investment under Section 69,
  • Added it to the assessee’s income for AY 2021-22, and
  • Completed the assessment accordingly.

The assessee’s categorical denial of having paid any cash in that year was rejected by the AO.

First Appeal Before CIT(A)

The assessee challenged the assessment order before the CIT(A)-52, Mumbai. Her key contentions were:

  • She had not purchased any shop during AY 2021-22.
  • Actual purchases were of Shop Nos. 204 and 215, in financial year 2021-22, relevant to AY 2022-23.
  • The total consideration of these shops was ₹21,17,700, paid entirely through banking channels.
  • The stamp duty valuation/market value of the property was only ₹12,80,192, which was lower than the actual purchase price, thus ruling out any under-reporting or need for cash payments.
  • No cash payment of ₹5,00,000 was ever made to “Rubberwala Housing & Infrastructure Ltd.” or any entity of the Rubberwala Group.

Despite these submissions, the CIT(A) chose to affirm the AO’s view and sustained the addition under Section 69.

The assessee then took the matter in further appeal to the ITAT Mumbai.

Assessee’s Arguments Before ITAT

Documentary Evidence of Actual Shop Purchase

The assessee’s Authorised Representative (AR) produced a detailed paper book (pages 1–109) and argued that:

  1. No transaction with Rubberwala Group in AY 2021-22
    • The assessee did not purchase any shop nor make any payment, cash or otherwise, to the Rubberwala Group during AY 2021-22.