Introduction
The Income Tax Appellate Tribunal (ITAT), Ahmedabad Bench, in the case of Bharatkumar Mansukhbhai Solanki vs. ITO, Ward 7(2)(1), Ahmedabad (ITA No. 1390/AHD/2025, Assessment Year 2016-17), delivered a significant decision on reassessment additions made purely on the basis of third-party admissions and unverified documents. The Tribunal, presided over by Shri Narendra Prasad Sinha, Accountant Member, and Shri Tapas Ram Misra, Judicial Member, pronounced its order on 06.08.2026, holding that the Assessing Officer cannot sustain an addition under Section 69 of the Income Tax Act without establishing a direct nexus between the assessee and the alleged on-money payment. This commentary examines the facts, reasoning, and legal impact of this ruling.
Facts of the Case
The assessee filed his return of income for A.Y. 2016-17 on 30.07.2016, declaring total income of Rs.5,94,660/-. The case was reopened under Section 147 read with Section 144B of the Act based on information that the assessee had entered into financial transactions with Navratna Organisers and Developers Pvt. Ltd. (NODPL). A search action under Section 132 was conducted on the Navratna Group on 11.04.2017, during which receipt of on-money by the Group was admitted, and NODPL subsequently filed a settlement application disclosing such receipts.
The assessee had purchased a unit/villa at “Kalhaar Blues and Greens,” developed by NODPL. The Assessing Officer alleged that the assessee paid on-money of Rs.54,76,000/- in cash towards the purchase. Despite the assessee’s denial, the Assessing Officer made an addition of Rs.54,76,000/- under Section 69 and completed the assessment on 18.05.2023 at a total income of Rs.60,70,660/-. The first appellate authority, the National Faceless Appeal Centre (NFAC), Delhi, dismissed the assessee’s appeal, leading to the second appeal before the ITAT.
Grounds 1 and 2, which challenged the validity of the reassessment proceedings and the alleged time-barred notice under Section 148, were not pressed by the assessee and were dismissed. The core dispute before the Tribunal centered on Grounds 3 to 5 – the addition of Rs.54,76,000/-, the applicability of Section 115BBE, and the lack of opportunity for cross-examination.
Reasoning of the ITAT
The Tribunal’s reasoning is a decisive rejection of assessment orders based on unsubstantiated third-party material. The key legal pillars of the decision are as follows:
1. Third-party admission cannot replace specific evidence against the assessee
The Tribunal noted that the case of the assessee was reopened only on the basis of a list of purchasers submitted by NODPL before the Settlement Commission. However, the Assessing Officer failed to refer to any specific entry in the alleged excel-sheet showing that the assessee had paid cash on-money of Rs.54,76,000/-. The admission made by NODPL was general in nature – it admitted receiving on-money from various customers, but there was no specific admission that the assessee had made such a payment. The ITAT held that a general admission by a third party cannot fasten liability on a co-owner of property without independent corroborative material.
2. Unverified excel-sheet has no intrinsic evidentiary value
The Tribunal relied heavily on the coordinate bench decision in Munjal Mrugesh Jaykrishna (ITA No.1793/Ahd/2024 dated 19.03.2025). In that case, the Tribunal observed that the “decoding” of the excel-sheet was done by the Department itself and the search party had not given any authenticity to it. The statement of Shri Murlidhar Marutibhai Trivedi, the accountant of NODPL, could not be provided to the assessee. The Tribunal held that documents found during a search, especially loose excel-sheets or codes, cannot be used against an assessee unless they are authenticated and directly linked to the transaction in question. The reliance on such unverified material violates the principles of natural justice, particularly when no opportunity of cross-examination is afforded.
3. No incriminating evidence found during search against the assessee
The Tribunal recorded that no evidence was found during the search action regarding payment of on-money by the assessee. Neither the details of any cheque payment made by the assessee were reflected in the excel-sheet, nor was the Assessing Officer able to correlate any payment made by the assessee to NODPL with any seized material. This is a crucial finding – an assessment order cannot be sustained on suspicion or on the strength of a third party’s settlement application alone. The burden lies on the Revenue to establish the unexplained investment in the hands of the assessee, and mere probabilities are insufficient.
4. Incorrect attribution of the entire on-money to a 1/3rd co-owner
Even assuming that some on-money was paid, the Assessing Officer erred in making the addition of the entire Rs.54,76,000/- in the hands of the assessee when he was only a 1/3rd co-owner of the property. The Tribunal observed that the assessee’s share was only one-third, and the addition could, at best, have been restricted to his proportionate share. However, since there was no foundational evidence of payment at all, this observation reinforced the unreasonableness of the assessment order.
5. Binding precedents from the Coordinate Bench and the Gujarat High Court
The assessee placed reliance on the decisions of the Ahmedabad ITAT in Ashokkumar Prahladbhai Patel (ITA No. 1300/Ahd/2025) and Kaushik Nanubhai Majithia (ITSS No. 21/Ahd/2021), as well as the Gujarat High Court in Kaushik Nanubhai Majithia (Tax Appeal No. 20 of 2024). The Tribunal, following these precedents, held that no addition could be made merely on the basis of an excel-sheet found from NODPL or the admission made by NODPL before the Settlement Commission. Third-party documents have no evidentiary value without corroboration and without a connecting link to the assessee.
6. Consequence on Section 115BBE and ancillary grounds
Since the addition of Rs.54,76,000/- itself was deleted, the consequential applicability of Section 115BBE could not survive. Ground 6, which challenged the levy of interest under Sections 234B and 234C, was dismissed as consequential to the addition. The Tribunal’s operative finding is that once the primary addition fails, the ancillary tax and interest consequences cannot stand independently.
Conclusion
The ITAT’s decision in Bharatkumar Mansukhbhai Solanki is a strong reaffirmation of the fundamental principle that an assessment order must be based on evidence, not assumptions. The Tribunal partly allowed the appeal by deleting the addition of Rs.54,76,000/- made under Section 69. The case clarifies that third-party admissions before the Settlement Commission, unverified excel-sheets, and statements not subject to cross-examination cannot be used against an assessee in reassessment proceedings. The Assessing Officer must establish a clear nexus between the assessee and the alleged on-money payment, especially where the assessee is only a fractional co-owner. This ruling provides meaningful protection for taxpayers facing reassessment based on generalized search findings and settlement commission disclosures.
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