Pune ITAT Strikes Down ₹10 Lakh On-Money Addition: Incomplete Seized Documents and Unverified Statements Cannot Sustain Tax Demand

Case Overview

Case Name: Ashutosh Pandurang Patil Vs ITO (ITAT Pune)
Assessment Year: 2023-24
Date of Order: 24th June, 2026
Forum: Income Tax Appellate Tribunal, Pune Bench

The Pune Bench of the Income Tax Appellate Tribunal delivered a significant ruling in favour of the assessee by directing deletion of a ₹10,00,000 addition that had been made on the ground of alleged cash payment — commonly referred to as "on-money" — towards the purchase of a residential flat. The Tribunal concluded that the Revenue had fundamentally failed to discharge its burden of proving that any cash consideration had actually been exchanged, and that the materials relied upon by the Assessing Officer were legally insufficient to sustain the impugned addition.

Background and Factual Matrix

Who Is the Assessee?

Ashutosh Pandurang Patil (PAN: APBPP0957M), an employee of Mahindra and Mahindra Limited posted at their Pune operations, filed his return of income under Section 139(1) of the Income Tax Act, 1961 for Assessment Year 2023-24, declaring a total income of ₹23,68,910/-. During the relevant period, the assessee had acquired a residential flat in Pune on 31st March, 2022.

How Did the Case Come Under Scrutiny?

The assessee's case was not selected for scrutiny through the ordinary random-selection route. Instead, it was flagged for compulsory complete scrutiny based on intelligence received from the Investigation Wing, which had conducted a search and seizure operation against SSD Group on 4th May, 2023. During this search, incriminating documents were discovered at the residence of one Yash Jhan Giyani, an employee of the SSD Group. Information derived from these seized materials was disseminated to the Assessing Officer, who thereafter initiated scrutiny proceedings against the assessee under Section 143(3) read with Section 144B of the Income Tax Act, 1961.

The assessment order was passed on 04.02.2025. The assessee challenged the assessment before the Learned Commissioner of Income Tax (Appeals), NFAC, Delhi [Ld.CIT(A)], whose order dated 27.01.2026 under Section 250 of the Act upheld the addition. The assessee then approached the Tribunal.

The Core Dispute: Alleged Cash Payment of ₹10 Lakhs

Revenue's Position

The Assessing Officer alleged that the assessee had made an off-the-books cash payment of ₹10,00,000 to SSD Promoters and Builders — the developer of the "Sai Vista" project — over and above the amount stated in the registered sale agreement for Flat No. E-503. This allegation was primarily anchored on:

  1. Loose papers — specifically, Bundle No. 1, Page Nos. 5 and 6, found during the search — which were reproduced in a scanned format at Page No. 10 of the assessment order.
  2. Statement of Mr. Kanhaiyalal Matani, a representative of the builder, recorded during the course of the search proceedings, particularly Questions No. 9 and No. 10 and the corresponding answers.

Assessee's Defence

The assessee categorically and consistently denied having made any cash payment whatsoever to the builder. To substantiate this denial, the following documentary evidence was placed on record:

  • Copy of the Registered Sale Agreement for Flat No. E-503 (Page 75 of the paper book)
  • Housing Loan Sanction Letter (Page 76 of the paper book)
  • Payment receipts issued by Sai Vista (Page 91 of the paper book)
  • ICICI Bank account statements (Page 92 of the paper book)
  • State Bank of India home loan account statements
  • A detailed chart mapping all sources of funds used for the flat purchase