Additions under Sections 69C and 69B deleted as uncorroborated third-party digital sheet lacked evidentiary value

ITAT Ahmedabad (AT) upheld the order of CIT(A) deleting additions u/s 69C and 69B made on the basis of an unsigned Excel sheet found on the laptop of a third-party employee of a developer group. The Tribunal held that the AO failed to establish that the digital sheet belonged to the assessee, that its entries related to the assessee, or that any on-money was actually paid. Emphasizing that uncorroborated third-party loose sheets or digital data lack evidentiary value absent independent corroboration and opportunity of cross-examination, ITAT accepted the factual finding that construction costs were borne by the developer and that sale consideration was duly bifurcated, thereby dismissing the Revenue's appeal.

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1. ISSUES PRESENTED AND CONSIDERED

1.1 Whether the reassessment notice and proceedings were vitiated for want of proper sanction under section 151 in the context of the substituted reassessment regime, TOLA, and the legal fiction created by the Supreme Court in respect of notices issued between 01.04.2021 and 30.06.2021.

1.2 Whether reassessment under section 147, leading to additions under sections 69B and 69C on account of alleged "on-money" for land and construction, could be sustained when a prior assessment under section 153A had already examined the same property transaction and when the additions were based solely on an unsigned third-party Excel sheet and general disclosure by the developer group, without independent corroboration or nexus to the assessee.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1 - Validity of sanction under section 151 for reassessment notice issued in the transitional period

Legal framework (as discussed):

2.1 The Tribunal considered the substituted provisions of sections 147-151, the effect of the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020 (TOLA), and the Supreme Court decisions in Union of India v. Ashish Agarwal and Union of India v. Rajeev Bansal, in light of the binding judgment of the Gujarat High Court in Dhanraj Govindram Kella v. ITO.

2.2 The High Court in Dhanraj Govindram Kella held that where reassessment notices issued under the old law between 01.04.2021 and 30.06.2021 are saved by the legal fiction created by the Supreme Court, the sanction obtained from the authority under section 151(1)(i) (Principal Commissioner / Principal Director / Commissioner / Director) is to be treated as valid, provided the three-year limitation from the end of the relevant assessment year fell within the extended window covered by TOLA. Approval of the Principal Chief Commissioner is not mandatory in such cases.

Interpretation and reasoning:

2.3 The assessee's additional grounds challenged jurisdiction on (i) the alleged incompetence of the sanctioning authority under section 151 and (ii) the contention that the Revenue ought to have invoked section 263 instead of section 147.

2.4 The Tribunal noted that the assessee's contentions as to invalidity of approval under section 151 were "identical" to those rejected by the Gujarat High Court in Dhanraj Govindram Kella, and that the factual matrix of the present case fell within the framework explained in that judgment, namely: the notice was issued in the covered period and the approval had been obtained from an authority falling under section 151(1)(i) within the TOLA-extended limitation.

2.5 Applying the ratio of Dhanraj Govindram Kella, the Tribunal held that the approval obtained by the Assessing Officer under section 151(1)(i) satisfied the statutory requirement and could not be assailed on the ground that sanction of the Principal Chief Commissioner was necessary.

Conclusions:

2.6 The additional grounds of the assessee challenging the validity of the reassessment on the basis of want of proper sanction under section 151, and generally questioning the jurisdiction to proceed under section 147, were rejected and dismissed.

Issue 2 - Sustainability of additions under sections 69B and 69C based on third-party unsigned digital data and general group disclosure, in the backdrop of prior scrutiny under section 153A

Legal framework (as discussed):

2.7 The Tribunal referred to judicial principles laid down inter alia in:

(a) PCIT v. Kaushik Nanubhai Majithia (Guj.), holding that an unsigned Excel sheet seized from a third party has no evidentiary value against an assessee unless it is duly corroborated and specifically linked to the assessee;

(b) ITO v. Bharat A. Mehta (Guj.), where it was held that notings in the books or records of another person reflecting alleged on-money payments cannot justify additions in the hands of an assessee absent clear evidence of actual payment by the assessee;

(c) Various Tribunal decisions (including Kiritkumar Champaklal Shah v. ITO; Deputy Commissioner of Income-tax, Central v. Mahalaxmi Infracontract Ltd.; Pradeep Amrutlal Runwal; Regency Mahavir Properties; Vinit Ranawat) consistently holding that loose papers, unsigned Excel sheets, or digital data seized from third parties cannot, without independent corroboration and opportunity of cross-examination, form the sole basis for additions under sections 69, 69B, or 69C.

Interpretation and reasoning:

2.8 The Tribunal noted that, for the year in question, the assessee had purchased only an open plot of land (Plot/Unit No. 117 in the Kalhaar Blues & Greens project) under a registered deed dated 04.08.2016. There was no purchase of a constructed villa by the assessee during the year.

2.9 In assessment under section 153A read with section 143(3), the Assessing Officer had already scrutinized the same transaction in depth: calling for the purchase deed, source of funds, bank statements and other details, and, after examination, accepted the transaction without any addition.

2.10 The subsequent reassessment additions under sections 69C (Rs. 1,05,00,000 as alleged unexplained expenditure towards construction) and 69B (Rs. 35,01,500 as alleged unexplained investment in land) were founded solely on an unsigned Excel sheet stated to have been recovered from the laptop of a third party (an employee of the developer group) and on the fact of a general disclosure by that group before the Settlement Commission.

2.11 The Tribunal emphasized that the Assessing Officer had not:

(i) demonstrated that the Excel sheet belonged to the assessee;

(ii) established that the specific entries in the sheet related to transactions of the assessee; or

(iii) produced any independent evidence to show that the assessee actually paid any on-money to the developer.

2.12 There was also no opportunity afforded to the assessee to cross-examine any person whose statements or data were relied upon, and no corroborative material such as bank trail, cash flow, or contemporaneous records linking the alleged on-money to the assessee was brought on record.

2.13 On the contrary, the registered sale deed dated 22.01.2021, placed on record, showed that construction on the said plot was carried out entirely by the developer at its own cost, and at the time of ultimate sale the purchasers made separate payments-land consideration to the assessee and construction consideration directly to the developer. This factual position negatived the allegation that the assessee had borne construction cost or paid any "construction on-money".

2.14 In light of the above, and following the binding precedents that unsigned, third-party digital data and loose documents, without corroboration and nexus, cannot form the sole basis of additions, the Tribunal concurred with the CIT(A)'s view that the impugned additions were based on presumptions and conjectures, rather than on legally sustainable evidence.

Conclusions:

2.15 The Excel sheet relied upon by the Assessing Officer was held to be an unsigned, unverified third-party digital document, with no established nexus to the assessee, and insufficient in law to sustain additions under sections 69B and 69C.

2.16 Having regard to the prior detailed scrutiny of the same transaction in the section 153A assessment, the absence of any independent corroborative evidence of on-money, and the clear documentary record showing that construction was neither carried out nor funded by the assessee, the Tribunal upheld the deletion of the additions of Rs. 1,05,00,000 under section 69C and Rs. 35,01,500 under section 69B.

2.17 The Revenue's appeal on merits was dismissed, and the order of the Commissioner (Appeals) deleting the additions was affirmed.

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