A buyer who paid ₹50 lakh by bank transfer for a commercial unit in Mumbai was told he owed tax on another ₹90 lakh in cash. The proof? Loose sheets found at someone else’s premises. The Mumbai bench of the Income Tax Appellate Tribunal (ITAT) has said that is not enough. In Sanjeet Kumar Kedarnath Gupta v. ITO, it deleted the ₹90 lakh addition, holding that suspicion, however strong, cannot stand in for evidence.
Gupta and his brother had bought a commercial gala in GNP Galaxy Phase-I from a developer. The registered agreement, dated 6 August 2020, showed a price of ₹50 lakh, and the payments went through normal banking channels.
Then the Income Tax Department searched the GNP Group under Section 132. Officials found loose papers at the premises of another entity linked to the group and read them as a record of “on-money”, cash taken above the recorded price when units were sold. Using information uploaded to the Insight Portal under the Risk Management Strategy, the department started reassessment under Sections 147 and 148A. The Assessing Officer treated the notings on the seized sheets as real cash dealings involving Gupta and proposed the ₹90 lakh addition.
Gupta’s defence
Gupta denied it outright. The papers came from a third party, not from him, and he neither wrote nor held them. No independent evidence showed any cash payment. Nobody let him cross-examine the people from whose premises the documents were seized. He also pointed to a mismatch: the department tied the alleged on-money to AY 2019-20, while the actual agreement and bank transactions came much later.
The first appellate authority, the CIT(A), sided with the department. It called the loose papers sufficient circumstantial evidence and said Gupta had to rebut the presumption they created. It confirmed the addition.
What the tribunal decided
The ITAT looked at it as a question of evidence and burden of proof. A taxpayer, it said, cannot be made to prove that an event never happened. The burden sits with the department to show a taxable transaction took place. Loose sheets and rough notings found in a search have limited value unless independent material backs them up, and one scrap of paper does not prove money changed hands.
On Section 69A, the tribunal found the basic conditions absent. The provision applies where money or valuables belonging to the taxpayer remain unexplained. Here the papers were not found with Gupta, he did not write or own them, and no cash transfer was shown.
It also faulted the lack of cross-examination. When the department relies on third-party documents or statements against a taxpayer, natural justice requires a chance to challenge them.
Why buyers will care
Search assessments often produce additions built on diaries, loose sheets, spreadsheet printouts and handwritten notes from third parties. The commentary on the ruling lists what a taxpayer facing such an addition should check: whether the document is theirs, whether they wrote or signed it, whether any corroboration exists, whether cross-examination was offered, and whether the legal conditions of Sections 69, 69A, 69B or 69C are really met.
The Tax Talk, which reported the case, put it this way: a person’s name on somebody else’s paper does not create a tax liability. Loose papers can start an inquiry, it said, but only credible evidence can sustain an assessment.
Sources
- ITAT Holds Third-Party Loose Papers Are Insufficient Without Corroboration | StudyCafe
- Can Loose Papers Alone Create a ₹90 Lakh Tax Liability? Mumbai
