The Income Tax Appellate Tribunal, Delhi, has clarified that additions under Section 69A of the Income Tax Act cannot be sustained when based exclusively on retracted statements of third parties, absent independent corroboration or verification. This ruling reinforces the principle that the burden of establishing unexplained investment lies squarely with the Revenue, and mere possession of unsigned documents by a relative does not shift that burden to the assessee.
Background & Facts
The Dispute
The appeals arise from assessment orders passed under Section 153A of the Income Tax Act, 1961, for Assessment Years 2019-20 and 2020-21. The Assessing Officer (AO) made additions of Rs. 3.50 crores and Rs. 1.29 crores respectively, treating cash payments for the purchase of a property as unexplained income under Section 69A. The payments were alleged to have been made by the assessee, Abhishek Gupta, to one Shri Bittu Chawla for the acquisition of Upper Ground and First Floor at 307, Block-3, Paschim Vihar, New Delhi, for a total consideration of Rs. 4.79 crores.
Key Facts
- A search and seizure operation under Section 132 was conducted on 19.03.2021 at the residential and business premises of Subhash Chander Gupta, father of the assessee.
- During the search, a receipt cum agreement (Annexure A-1) dated 19.03.2021 was seized, purporting to show the assessee’s purchase of the property.
- The document was not signed by the assessee and contained no fingerprints, signatures, or acknowledgments from him.
- The agreement stated that Rs. 2.50 crores was paid on 01.03.2019, Rs. 1.00 crore on 20.03.2019, and Rs. 1.00 crore on 28.09.2019.
- Subhash Chander Gupta, during his statement under Section 132(4), claimed the cash used for these payments came from proceeds of Rs. 27.99 crores received from the sale of property by M/s Hector Enterprises Ltd., of which he was a director.
- The assessee denied ever entering into the agreement or making any cash payments.
- Subhash Chander Gupta later retracted his statement.
- In a separate proceeding (ITA No. 1692/Del/2024), the Co-ordinate Bench of ITAT Delhi deleted the addition of Rs. 27.99 crores against M/s Hector Enterprises Ltd., holding that retracted statements without corroboration cannot form the basis of an addition.
- The AO made no independent inquiry with the seller Bittu Chawla, land revenue authorities, or bank records to verify the transaction.
Procedural History
- 19.10.2019: Assessee filed return for AY 2019-20 declaring income of Rs. 1,58,870.
- 24.03.2022: AO passed assessment order under Section 153A for AY 2019-20, making addition of Rs. 3.50 crores under Section 69A.
- 17.03.2022: AO passed assessment order under Section 153A read with Section 143(3) for AY 2020-21, making addition of Rs. 1.29 crores under Section 69A.
- 31.10.2025: Commissioner of Income Tax (Appeals)-30 dismissed the assessee’s appeals.
- 18.05.2021: Review petition before CIT(A) dismissed.
- 06.05.2026: Judgment pronounced by ITAT Delhi.
Relief Sought
The assessee sought deletion of the additions of Rs. 3.50 crores for AY 2019-20 and Rs. 1.29 crores for AY 2020-21 under Section 69A, arguing that the evidence was based on an unsigned, unverified, and retracted statement with no independent corroboration.
The Legal Issue
The central question was whether an addition under Section 69A of the Income Tax Act can be sustained when based solely on a retracted statement of a third party, without independent verification of the alleged transaction or corroboration from documentary or testimonial evidence.
Arguments Presented
For the Appellant
The assessee’s counsel argued that the agreement was never signed by the assessee, and no evidence proved he was a party to the transaction. The AO failed to verify the existence of the property transaction with the seller, Bittu Chawla, or with land records. The statement of the father was retracted, and the Co-ordinate Bench of ITAT had already deleted a similar addition against M/s Hector Enterprises Ltd. on the ground that retracted statements cannot form the basis of an addition without corroboration. Reliance was placed on CIT v. Gian Gupta and CIT v. Kulwant Rai to establish that the burden of proving the transaction lies with the Revenue, and an unsigned document found in a relative’s possession cannot be attributed to the assessee.
For the Respondent
The Revenue contended that the agreement and receipts were found during a search, and the father’s statement provided a plausible source for the cash. The AO was entitled to rely on the document and the statement, and the assessee’s failure to explain the source justified the addition. The Revenue argued that the mere existence of the document in the father’s possession, coupled with the assessee’s silence, was sufficient to invoke Section 69A.
The Court's Analysis
The Tribunal examined the nature of the evidence relied upon by the AO. It noted that the agreement was not signed by the assessee, nor was there any proof that he had ever possessed or acknowledged it. The statement of Subhash Chander Gupta, upon which the entire addition hinged, was later retracted. Crucially, the AO made no independent inquiry to verify the transaction with the seller, the property registry, or the source of funds from M/s Hector Enterprises Ltd.
"The Income Tax Appellate Tribunal also examined this issue once again and came to the conclusion that as the transaction itself never took place, there would be no question of investment and, therefore, no question of any unexplained investment."
The Tribunal relied on CIT v. Gian Gupta, where the Delhi High Court held that if the transaction itself did not materialize, there can be no unexplained investment. The Court emphasized that the onus is on the Revenue to prove the existence of the transaction and the unexplained nature of the payment. The Tribunal further cited CIT v. Kulwant Rai, which held that an agreement not signed by the assessee cannot be attributed to him.
The Tribunal observed that the Co-ordinate Bench’s decision in ITA No. 1692/Del/2024, which deleted the addition against M/s Hector Enterprises Ltd. on identical facts, was binding in principle. The AO’s failure to conduct independent verification rendered the addition speculative and legally unsustainable.
The Verdict
The assessee succeeded. The Tribunal deleted the addition of Rs. 3.50 crores for Assessment Year 2019-20 and Rs. 1.29 crores for Assessment Year 2020-21 under Section 69A. The orders of the AO and CIT(A) were set aside. The Tribunal held that no addition can be made under Section 69A based on a retracted statement without independent corroboration or verification of the alleged transaction.
What This Means For Similar Cases
Retracted Statements Are Insufficient Alone
- Practitioners must challenge any Section 69A addition based solely on a third party’s retracted statement.
- The Revenue must produce independent evidence - bank records, property registry entries, seller testimony - to substantiate the transaction.
- Mere possession of unsigned documents by a relative does not shift the burden to the assessee.
Independent Verification Is Mandatory
- AO must make inquiries with sellers, land revenue departments, and financial institutions before making additions.
- Failure to verify the existence of the transaction renders the addition void, regardless of the amount involved.
- Tribunals will follow Co-ordinate Bench rulings on identical factual matrices, reinforcing consistency in adjudication.
Unsigned Documents Carry No Weight
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Any agreement, receipt, or MoU not signed by the assessee cannot be used to attribute liability.
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The Tribunal reaffirmed that the assessee cannot be held liable for transactions he did not enter into, even if documents are found in a family member’s possession.
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The judgment reinforces that Section 69A requires proof of actual investment, not speculative assumptions.
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Practitioners should routinely demand proof of transactional authenticity in search-based assessments.
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This ruling provides a strong precedent for challenging additions in cases involving family members’ documents found during searches.
