ITAT Mumbai Nixes On-Money Addition Based Only on Excel Data and Third-Party Statements

Background of the Dispute

The case concerns an appeal by Abdul Razzaq Nadvi Vs DCIT (ITAT Mumbai), where the core controversy revolved around an addition of ₹64,00,000 made as alleged cash “on-money” for purchasing a commercial unit from the Rubberwala Group. The Assessing Officer invoked Section 69 of the Income Tax Act 1961, treating the alleged cash component as unexplained investment.

This addition stemmed from a search operation on the Rubberwala Group, where digital and oral evidence was gathered from group personnel. The Mumbai Bench of the ITAT ultimately held that such an addition, made solely on the basis of excel-sheet entries retrieved from a third party’s pen drive and statements of that third party, could not survive without independent corroboration and without allowing cross-examination to the assessee.

Search on Rubberwala Group and the Origin of the Addition

A search and seizure action under Section 132 was carried out on 17.03.2021 on the Rubberwala Group, including:

  • Premises of M/s. Rubberwala Housing & Infrastructure Ltd (RHIL)
  • The residence and office of Shri Tabrez Shaikh, Director/Promoter of RHIL
  • The residence of Shri Imran Ansari, an employee engaged in handling sale and registration of shops in the “Platinum Mall” project

During this action:

  • A 16 GB pen drive was seized from the residence of Shri Imran Ansari.
  • The pen drive contained excel files, including a file titled “consolidated 1 2 3 balance”, with multiple worksheets such as “Master”, “Payment”, and “Cheque”.
  • The “Master” sheet contained detailed data spread across 98 columns, documenting sales-related information of shops in the Platinum Mall project.

In his statement recorded under Section 132(4), Shri Imran Ansari:

  • Admitted that he had been associated with Rubberwala Group since 2010.
  • Accepted that he maintained data relating to shop sales in excel sheets stored on the seized pen drive.
  • Explained that the sale consideration of shops had two components— cash component and banking channel component—allegedly finalised by Shri Tabrez Shaikh and communicated orally.
  • Stated that he updated the excel sheets contemporaneously as and when payments were received—both cash and cheque.

Further, it was noted in group-level proceedings that:

  • Alleged cash payments from shop buyers were recorded in the excel sheets.
  • Phone numbers against respective shop purchases were mapped to specific buyers.
  • On this basis, the Department sought to link certain excel entries with various purchasers, including the present assessee.

Assessment Proceedings in the Assessee’s Case

Property Purchase and Alleged On-Money

In the instant case, the assessee had purchased Shop No. 1403 in a project named Fuego developed by M/s. Hilton Infrastructure, an entity of the Rubberwala Group, Mumbai.

Key facts:

  • The assessee produced the registered agreement and bank statements to demonstrate that consideration was paid through banking channels.
  • The Department, however, alleged that the assessee had also paid ₹64,00,000 in cash as on-money over and above the recorded consideration.
  • The addition of ₹64,00,000 was made as unexplained investment under Section 69 in an assessment framed under Section 153C.

The assessed income was computed as follows:

  • Income as per return of income: ₹6,94,830
  • Addition under Section 69 towards alleged cash on-money: ₹64,00,000
  • Total assessed income: ₹70,94,830

Grounds Raised Before CIT(A) and ITAT

The assessee’s challenge before the appellate authorities was broadly on the following lines: