Third-Party Excel Sheets Without Corroboration Cannot Justify Income Tax Additions

The assessee, Shri Kamalkumar Ramkumar Agarwal, filed his return for A.Y. 2016-17 declaring an income of Rs. 15,26,480. His case was later reopened based on information from a search conducted on the Navratna Organisers and Developers Pvt. Ltd. (NODPL) group. During that search, an Excel sheet was recovered from a laptop belonging to an employee, which allegedly contained coded entries of “on-money” made by property buyers.

The Assessing Officer (AO) correlated these entries with the assessee’s purchase of a villa in the ‘Kalhaar Blues and Greens’ project and concluded that Rs. 56,60,500 was paid in cash over and above the registered sale deed value. This amount was added to the assessee’s income as unexplained investment under Section 69. The CIT(A) upheld the addition, prompting the assessee to move the Tribunal.

Issue Before Tribunal: Whether an addition can be made under Section 69 solely based on an unsigned, unverified Excel sheet recovered from a third party (the builder’s employee) without any independent corroborative evidence linking the assessee to the alleged cash payment.

ITAT Held: The Income Tax Appellate Tribunal (ITAT) allowed the appeal and deleted the addition of Rs. 56,60,500. The Bench observed that the entire case rested on a third-party Excel sheet that did not bear the name or signature of the assessee. The Revenue failed to provide any independent evidence, such as cash withdrawals from the assessee’s accounts or any acknowledgement of receipt.

The Tribunal noted that the developer’s admission before the Settlement Commission could not automatically fasten liability on the assessee without positive proof of his involvement. Relying on PCIT v. Kaushik Nanubhai Majithia, the Tribunal held that “dumb documents” found with third parties lack evidentiary value unless corroborated. The denial of cross-examination of the person who prepared the Excel sheet was held to be a violation of the principles of natural justice.

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