The Income Tax Appellate Tribunal, Agra, has reaffirmed that an addition under Section 69 of the Income Tax Act cannot rest on unverified, third-party electronic data lacking independent corroboration or procedural fairness. This ruling reinforces the foundational principle that tax assessments must be grounded in credible, substantiated evidence, not speculative inferences from search-derived materials.
Background & Facts
The Dispute
The appellant, Ranjana Gupta, a senior citizen aged 78, was assessed for Assessment Year 2021-22 after the Income Tax Department conducted a search under Section 132 at the premises of Omaxe Group on 14.03.2022. During the search, a hard disk was seized from Omaxe’s office in Kalkaji, New Delhi, containing Excel files detailing unaccounted transactions. One of these files listed the appellant’s name as having made a cash payment of Rs.16,28,700 towards the purchase of Unit No. MCCL/BLOCK-2A/121A in the Metro City Commercial 2 project, Lucknow.
Key Facts
- The appellant filed her original return for AY 2021-22 on 27.12.2021, declaring income of Rs.6,60,640 from interest only.
- No cash withdrawal records, bank transfers, or physical evidence of cash payment by the appellant were found in her possession or records.
- The appellant denied making any cash payment to Omaxe Group and submitted bank statements showing payments of Rs.9,89,450 via banking channels for the same property.
- Omaxe Group issued a written confirmation dated 10.04.2024 stating that no cash payment was received from the appellant.
- The appellant filed a sworn affidavit affirming that she never made any cash payment to Omaxe Group.
- The Assessing Officer (AO) did not conduct independent verification of the Excel data, nor did he cross-examine Omaxe employees whose statements were relied upon.
- The AO made an addition of Rs.16,28,700 under Section 69 of the Income Tax Act, 1961, on the ground that the source of the cash payment was unexplained.
Procedural History
- 27.12.2021: Assessee filed original return declaring income of Rs.6,60,640.
- 14.03.2022: Search conducted under Section 132 at Omaxe Group premises; hard disk seized containing Excel files.
- 29.03.2024: Notice under Section 148 issued to the assessee.
- 28.02.2025: Show cause notice under Section 69 issued proposing addition of Rs.16,28,700.
- 05.04.2025: Assessee replied with bank statements, Omaxe confirmation, and affidavit.
- 24.10.2025: Order of the Ld. CIT(A) sustained the addition.
- 16.06.2026: ITAT Agra allowed the appeal and deleted the addition.
Relief Sought
The appellant sought deletion of the addition of Rs.16,28,700 under Section 69, arguing that the Revenue failed to establish the transaction’s existence through credible evidence and violated principles of natural justice by denying cross-examination.
The Legal Issue
The central question was whether an addition under Section 69 of the Income Tax Act can be sustained solely on the basis of an unauthenticated, third-party Excel sheet from a search, without independent corroboration, documentary evidence linking the assessee to the payment, or an opportunity for cross-examination.
Arguments Presented
For the Appellant
The appellant’s counsel argued that the Excel sheet from Omaxe’s hard disk was not authored by the assessee, bore no signature, and was not part of her books of account. Relying on CBI v. V.C. Shukla (3 SCC 410), he contended that loose sheets or uncorroborated entries cannot form the sole basis for tax liability. He emphasized that the Revenue failed to produce evidence of cash withdrawal, movement, or actual delivery of Rs.16,28,700 by the assessee. He further cited M/s. Amarjot Singh Sohi - HUF v. ITO (ITAT Chandigarh, 07.01.2026), where a similar addition was deleted for lack of corroboration and denial of cross-examination. The affidavit and Omaxe’s written confirmation were submitted as unchallenged evidence of the appellant’s position.
For the Respondent
The Revenue relied on the findings of the AO and CIT(A), arguing that the presence of the appellant’s name in the Excel file during a search operation was sufficient to raise a presumption under Section 69. It contended that the burden of proof shifted to the assessee to explain the source, which she allegedly failed to do. No independent evidence or rebuttal to the affidavit or Omaxe’s confirmation was offered.
The Court's Analysis
The Tribunal observed that the entire case against the appellant rested on an unverified Excel entry from a third party’s seized device. It noted that the Revenue had not produced any bank withdrawal slips, witness statements corroborating cash delivery, or physical evidence of the transaction. The AO did not verify the authenticity of the Excel file, nor did he summon or cross-examine the Omaxe employees whose statements were referenced.
"The assessee has furnished all the documentary evidences as available with him to support the contention that all the payments were made through banking channels only. The confirmation of payment has duly been furnished by the assessee from M/s Omaxe Ltd... The assessee could not be asked to prove the negative."
The Tribunal explicitly followed the reasoning in M/s. Amarjot Singh Sohi - HUF v. ITO, holding that the Revenue bears the burden of proving the existence of unaccounted cash payments. Mere inclusion of a name in a third-party file, without corroboration, is insufficient. The Tribunal emphasized that the principles of natural justice require the assessee to be given an opportunity to confront and cross-examine witnesses whose statements are relied upon. The failure to do so rendered the proceedings defective.
The Tribunal further held that the appellant’s affidavit and Omaxe’s written confirmation, both unchallenged by the Revenue, created a strong prima facie case in her favor. The burden of proof under Section 69 is not discharged by speculative inference from unverified digital data.
The Verdict
The appeal was allowed. The Tribunal set aside the orders of the AO and CIT(A) dated 24.10.2025 and deleted the addition of Rs.16,28,700 under Section 69 of the Income Tax Act. The case was directed to be recomputed without the impugned addition. No costs were awarded.
What This Means For Similar Cases
Third-Party Digital Data Alone Is Insufficient
- Practitioners must challenge additions based solely on search-derived Excel sheets or digital files lacking authentication, signatures, or independent verification.
- The mere presence of a name in a third-party database does not shift the burden of proof to the assessee.
Cross-Examination Is Mandatory for Witness Statements
- If the Revenue relies on statements recorded under Section 132(4), the assessee must be granted an opportunity to cross-examine those persons.
- Failure to provide this opportunity renders the assessment void under principles of natural justice, as held in Kunal Ragahubir Bhandari and DCIT v. Yograj Arora.
Affidavits and Third-Party Confirmations Carry Weight
- Sworn affidavits from the assessee, coupled with written confirmations from the counterparty (e.g., builder, seller), are strong evidence that cannot be ignored unless rebutted with credible material.
- The Revenue cannot rely on assumptions; it must produce positive evidence of cash payment.
Burden of Proof Remains on the Revenue
- Section 69 does not permit presumptions without foundation. The Revenue must establish the transaction’s existence before the burden shifts.
- In cases involving real estate, where payments are often made in installments, the timing of payment and property registration must be aligned with credible documentation.
