ITAT Mumbai on Section 69: No Additions Without Direct Evidence Against Assessee
Background of the Dispute
The case of Ajaram Adararam Mali vs DCIT (ITAT Mumbai) concerns additions made under Section 69 of the Income Tax Act 1961 based purely on material and statements gathered during a search on a third party – the Rubberwala Group – and not from the assessee himself.
A search under Section 132 was carried out on 17.03.2021 in the Rubberwala Group and related entities, including M/s Rubberwala Housing and Infrastructure Ltd. (RHIL). During this action, the Department relied on:
- An excel sheet recovered from a pen drive found at the residence of an RHIL employee, Imran Ansari, and
- Statements recorded from Imran Ansari and Shri Tabrez Shaikh, Director/Promoter of RHIL.
The Revenue treated the excel data and these statements as proof that the assessee had allegedly paid “on-money” (cash) over and above the agreement value for purchase of a commercial shop in the Platinum Mall project and made additions under Section 69 for Assessment Years (AYs) 2017-18 to 2019-20.
The ITAT Mumbai was called upon to decide whether such additions could stand when:
- No incriminating material was seized from the assessee
- The assessee denied making any unaccounted cash payments
- The assessee was not allowed to examine or cross‑examine the third parties whose statements were used against him
The Tribunal ultimately deleted the entire addition of ₹17,61,000/- spread over three assessment years.
Facts in Brief
Property Purchase and Alleged Cash Payments
- The assessee purchased Shop No. 108, 1st Floor, Platinum Mall, Girgaon, Mumbai.
- The agreement value was recorded at Rs. 18,09,000/-.
- The stamp duty authority determined the valuation at Rs. 13,29,597/-.
During the search in the Rubberwala Group, the Department claimed to have detected cash (on-money) payments linked to several buyers in the Platinum Mall project based on an excel sheet:
- Total alleged cash (on-money) attributed to the assessee: Rs. 17,61,000/-
- Alleged year-wise break-up:
- AY 2017-18: Rs. 1,00,000/-
- AY 2018-19: Rs. 9,71,000/-
- AY 2019-20: Rs. 6,90,000/-
Assessments were reopened and completed under Section 153C read with Section 143(3), and these amounts were added as unexplained investments under Section 69, taxed at the rate prescribed under Section 115BBE.
The assessee had originally filed a return declaring total income of Rs. 4,18,940/- for AY 2017-18 and categorically denied making any cash payments over and above the registered agreement value.
Basis of Addition by the Assessing Officer
Evidence Relied Upon
The Assessing Officer (AO) did not have any seized material from the assessee. Instead, he relied entirely on:
Excel Sheet from Pen Drive
- A 16 GB Sandisk pen drive was found at the residence of Imran Ansari, an employee/key person of RHIL responsible for sales and registration of shops in Platinum Mall.
- An excel file named “consolidated 1 2 3 balance” was retrieved.
- The sheet allegedly contained:
- Name of buyers
- Shop number and area
- Agreement value
- Cash payments
- Cheque payments
- Balance cash receivable
- Balance cheque payments receivable
Statements of Key Persons
- Imran Ansari, in a statement recorded under
Section 132(4)on 17.03.2021, stated that:- He was working with Rubberwala group since 2010
- He handled sales and registration of shops in Platinum Mall
- The excel file maintained by him related to the cash and cheque components of shop sales in the project
- Shri Tabrez Shaikh, Director/Promoter of RHIL, in his post-search deposition on 19.08.2021, allegedly:
- Confirmed the accuracy of the excel file
- Accepted that RHIL received cash (on-money) not recorded in the books
- Offered 8% of such cash receipts as additional income of the group
- Imran Ansari, in a statement recorded under