The Income Tax Department wanted ₹90 lakh from a Mumbai property buyer. It had a developer’s loose papers and nothing else. The Mumbai bench of the Income Tax Appellate Tribunal (ITAT) has now deleted the addition, ruling that documents recovered from a third party cannot by themselves establish that the buyer paid unaccounted “on-money” in cash.
The case involved Sanjeet Kumar Kedarnath Gupta, who bought a commercial unit in GNP Galaxy Phase I jointly with his brother. The property was registered through an agreement dated 6 August 2020 for ₹50 lakh.
Trouble came from a search the department carried out on the GNP Group and its associated entities on 23 September 2021. Officials recovered loose papers and electronic records that allegedly recorded payments received from buyers. On that basis the department alleged Gupta had paid ₹90 lakh in cash as on-money, and it reopened his assessment for AY2019-20.
Gupta denied paying any cash. He said the entire consideration went through banking channels. The documents belonged to the developer, he argued, and could not on their own be treated as evidence against him.
What the tribunal found
The tribunal agreed. It said the department produced no independent evidence that Gupta had actually handed over ₹90 lakh in cash. No cash was found with him. There were no receipts acknowledging a cash payment, no matching bank withdrawals and nothing else showing unaccounted money changing hands. The seized papers came from a third party, and Gupta was neither their author nor their custodian.
The bench also noted that the department relied on statements recorded from people connected with the developer, yet never let Gupta cross-examine them before making the addition.
The ITAT leaned on the Supreme Court’s decision in KP Varghese vs ITO for the point that the burden of proving undisclosed income lies with the department. A taxpayer cannot be asked to prove a negative by showing that no unaccounted payment was made.
Section 69A, which deals with unexplained money, did not apply either. The statutory conditions were missing: no unexplained money was found with the taxpayer, and nothing corroborative tied him to the alleged payment.
For the wider rule, the tribunal cited two more Supreme Court rulings, Common Cause vs Union of India and CBI vs V.C. Shukla. Entries in loose papers or private records cannot establish liability unless independent evidence backs them up. It also cited the Bombay High Court’s ruling in Ashok Commercial Enterprises vs ACIT, which held that additions cannot rest solely on third-party documents or statements.
Mint, which reported the order, noted that documents recovered in a search may justify further inquiry. They cannot automatically be treated as proof that a buyer paid on-money. Before alleging undisclosed income, the department has to establish the transaction through credible, independent evidence.
