Reassessment based on unsigned third-party Excel sheet quashed; On-money allegations on plot purchase deleted

ORDER

Siddhartha Nautiyal, Judicial Member. – This appeal has been filed by the Department against the order passed by the Ld. Commissioner of Income Tax (Appeals)-11, (in short “Ld. CIT(A)”), Ahmedabad vide order dated 21.02.2025 passed for A.Y. 2017-18.

2. The Department has raised the following grounds of appeal:

“1) The Ld. CIT(A) has erred in law and on facts by quashing the assessment proceedings under Section 147, despite the fact that the additions made were based on incriminating seized digital data found during the search, which dearly falls within the ambit of material that justifies tine issuance of a notice under Section 148.

2) In the facts and on the circumstances of the case and in law, the ld.CIT(A) has erred in deleting the addition ofRs.1,05,00,000/- u/s,69C of the Act being unexplained expenditure without considering the incriminating documents found & seized during search proceedings & statement of the Shri Murlidhar Trivedi recorded during search proceedings, also, the Ld.CIT(A) has not appreciated the meticulous findings of the

3) In the facts and on the circumstances of the case and in law, the ld.CIT(A) has erred in deleting the addition of Rs.35,01,500/- u/s.696 of the Act being unexplained investment without considering the incriminating documents found & seized during search proceedings & statement of the Shri Murlidhar Trivedi recorded during search proceedings, also, the Ld.CIT(A) has not appreciated the meticulous findings of the AO.”

4) The Revenue craves leave to add/alter/armed and/on substitute any or all of the grounds of appeal.””

3. The brief facts of the case are that the assessee, Abhipushp Properties Pvt. Ltd., filed its return of income for A.Y. 2017-18 declaring NIL income, which was later subjected to assessment under section 153A of the Act pursuant to a search action under section 132 of the Act conducted in the Navratna Group on 11.04.2017. During the 153A proceedings, the Assessing Officer specifically scrutinized the assessee’s purchase of Unit/plot No. 117 in the Kalhaar Blues & Greens (KBG) project by issuing detailed questionnaires under section 142(1) of the Act asking the assessee to produce the purchase deed, to give the source of funds for the purchase of plot, bank statements, and other transaction details. After examining these records, the Assessing Officer accepted the assessee’s explanation and completed the assessment under section 153A r.w.s. 143(3) on 17.12.2019 without making any addition. Subsequently, on the basis of information from the Insight Portal regarding alleged on-money payments of Rs. 1,40,01,500 (comprising Rs. 35,01,500 towards land and Rs. 1,05,00,000 towards construction) said to have been paid by the assessee to Navratna Organisers & Developers Pvt. Ltd., the Assessing Officer reopened the assessment by issuing a notice under section 148 (later deemed as 148A(b) in terms of UOI v. Ashish Agarwal (SC). The Assessing Officer relied upon an Excel sheet allegedly found during the search from the laptop of Shri Murlidhar Trivedi, an employee of the Navratna Group, and on the fact that Navratna Group had declared ? 210 crores as unaccounted receipts before the Income Tax Settlement Commission. Based on these documents, the Assessing Officer passed the reassessment order under section 147 on 30.05.2023 and made additions of Rs. 1,05,00,000 under section 69C of the Act as unexplained expenditure and Rs. 35,01,500 under section 69B of the Act as unexplained investment, treating the difference between registered value and values appearing in the Excel sheet as on-money payments.

4. In the appellate proceedings, the CIT(Appeals) examined the entire factual matrix in detail and found first that the reopening itself was invalid because it was based on the very same facts and documents that were examined thoroughly in the 153A assessment, where no addition was made. The CIT(Appeals) held that reopening on the same facts amounts to a clear change of opinion, which is impermissible under law, and relied on binding decisions including CIT v. Kelvinator of India Ltd. (SC), Dy. CIT v. Bajaj Allianz Life Insurance Company Ltd. (SC), and other judicial precedents upholding that section 147 of the Act cannot be used as a tool for review. The CIT(Appeals) then observed that the factual assumption forming the basis of reopening was incorrect, because the assessee had not purchased a constructed villa as alleged; rather, the purchase deed dated 04.08.2016 clearly showed that the assessee had only purchased an open plot of land, and the subsequent sale deed dated 22.01.2021 showed that the construction on the plot was carried out entirely by NODPL at its own cost, and that the buyers made payments for construction directly to NODPL, not to the assessee. Thus, the assessee neither incurred construction cost nor received any construction-related consideration, making the allegation of on-money factually improbable. The CIT(Appeals) further held that the additions made on the strength of an unsigned Excel sheet seized from a third party without any corroborative material had no evidentiary value, relying on several authoritative decisions including the Gujarat High Court in Pr. CIT v. Kaushik Nanubhai Majithia [Tax Appeal No. 20 of 2024, dated 29.01.2024], where it was held that third-party digital data or loose sheets cannot be used against an assessee in the absence of independent evidence or cross-examination. The CIT(Appeals) also noted that the Assessing Officer failed to establish any link between the assessee and the alleged on-money transactions and did not provide the assessee an opportunity to cross-examine persons on whose statements or data the additions were founded. The CIT(Appeals) held that the reassessment was based on incorrect facts, presumptions, and conjectures, and that the additions were unsustainable in law as there was no incriminating material belonging to the assessee. Accordingly, the CIT(Appeals) quashed the reassessment order in entirety and directed deletion of both additions under sections 69B and 69C. Interest and penalty grounds were held to be consequential or premature and were accordingly dismissed, resulting in the appeal being partly allowed in favour of the assessee.

5. The Department is in appeal before us against the order passed by CIT(Appeals) partly allowing the appeal of the assessee.

6. We have heard the rival contentions and perused the material on record The assessee has raised an additional ground of appeal challenging the validity of the reassessment on the basis that (i) the sanction under section 151 was not granted by the competent authority, namely the Principal Chief Commissioner of Income Tax, and therefore the assumption of jurisdiction under section 148 is bad in law, and (ii) the reassessment is invalid because, in the assessee’s view, the correct course available to the Revenue was to invoke section 263 of the Act and not section 147. These additional grounds are purely legal in nature and are sought to be raised under section 254 of the Act. However, in view of the authoritative pronouncement of the Hon’ble Gujarat High Court in Dhanraj Govindram Kella v. ITO (Gujarat), the contention that the reassessment notice is void for want of proper approval under section 151 cannot be accepted. The Hon’ble High Court, after an exhaustive examination of the substituted reassessment provisions (sections 147 to 151), the effect of TOLA, and the interplay of the Supreme Court decisions in Ashish Agarwal (supra) and UOI v. Rajeev Bansal (SC), has held that where the original notice issued under the old regime between 01.04.2021 and 30.06.2021 stood saved by virtue of the legal fiction created by the Supreme Court, the sanction obtained by the Assessing Officer from the authority specified under section 151(1)(i) namely, the Principal Commissioner / Principal Director/Commissioner/Director shall be treated as valid, provided the three-year time limit fell within the extended period covered by TOLA. The High Court categorically rejected the argument that sanction of the Principal Chief Commissioner was mandatory in such cases and held that the test for determining the competent authority under section 151 is to examine whether the three-year time limit from the end of the relevant assessment year fell between 20.03.2020 and 31.03.2021; if so, then the approval under section 151(i) is sufficient in law. In the present case, the assessee’s additional grounds are identical to the contentions rejected by the Hon’ble High Court. Since the facts of the instant case also fall within the framework explained in Dhanraj Govindram Kella (supra), and since the approval granted by the authority under section 151(1)(i) squarely satisfies the legal requirements as interpreted by the High Court, the additional grounds raised by the assessee are dismissed.

7. Accordingly, the additional grounds of appeal sought to be raised by the assessee are rejected and stand dismissed.

8. On Merits, we have carefully considered the rival submissions, examined the entire factual matrix, and perused the material available on record. It is an undisputed fact emerging from the assessment records that the assessee had purchased only an open plot of land bearing Plot/Unit No. 117 in Kalhaar Blues & Greens (KBG) under a registered deed dated 04.08.2016, and no constructed villa was purchased by the assessee during the year under appeal. The assessment order passed under section 153A r.w.s. 143(3) dated 17.12.2019 categorically demonstrations that the Assessing Officer had already examined in detail the transaction relating to this plot, having called for the purchase deed, source of funds, bank statements, and other documents, and after being fully satisfied, accepted the transaction without making any addition. In the subsequent reassessment proceedings, the additions of Rs. 1,05,00,000 under section 69C and Rs. 35,01,500 under section 69B have been made solely on the basis of an unsigned Excel sheet allegedly found during the search from the laptop of a third party, namely Shri Murlidhar Trivedi, an employee of Navratna Group, combined with the fact that the group admitted certain unaccounted receipts before the Income Tax Settlement Commission. However, the Assessing Officer has not brought any independent evidence to establish (i) that the said Excel sheet belongs to the assessee, (ii) that the entries therein relate to the assessee, or (iii) that any amount of on-money was ever paid by the assessee to the developer. The law on this issue is well settled that third-party loose sheets, unsigned digital data or uncorroborated documents cannot be used as evidence against an assessee unless supported by independent evidence, and unless the assessee is offered cross examination of the persons whose statements or documents are relied upon. The Hon’ble Gujarat High Court in Kaushik Nanubhai Majithia (supra) held that an unsigned Excel sheet seized from a third party has no evidentiary value and cannot form the basis of an addition unless it is shown to be corroborated and linked to the assessee. Similarly, in ITO v. Bharat A. Mehta (Gujarat), the Court held that entries or notings in the books of another person showing alleged on-money payments cannot justify additions in the hands of an assessee without cogent evidence demonstrating actual payment. The Ahmedabad Tribunal has applied these binding principles consistently, such as in Kiritkumar Champaklal Shah v. ITO (2025 TaxPub (DT) 331, Ahd Trib), specifically holding that mere reliance on Excel-sheet data found during third-party search and on the builder’s admission before the Settlement Commission is insufficient to sustain additions without corroboration and without cross-examination. In the case of Dy. CIT, Central v. Mahalaxmi Infracontract Ltd. (Ahmedabad – Trib.), the Ahmedabad ITAT held that where Assessing Officer made addition under section 69C of the Act on ground that assessee had paid interest in cash to a third-party, since said addition was made solely on basis of unsigned Excel sheets recovered from premises of third party, without any further corroborative evidence, same was to be deleted. In the case of Pradeep Amrutlal Runwal v. Tax Recovery Officer (Pune – Trib.), the IT AT held that where the Assessing Officer made additions in the case of the assessee on the basis of notings in loose papers found during the search proceedings in case of third party against the name of assessee, as there was no evidence to suggest that payments were made by the assessee additions so made were not justified. In the case of Regency Mahavir Properties v. Asstt. CIT (Mumbai), the ITAT held that no addition under Section 69 can be made on the basis of documents being found from premises of third party in absence of any document evidencing the fact that assessee had paid any cash as on-money to said party for purchase of property. In the case of Vinit Ranawat v. Asstt. CIT  (Pune-Trib.), the ITAT held that no addition can be made in the hands of the assessee on the basis of papers found with the third party when there was no business connection between the assessee and that third party.

9. Applying these settled principles, we are of the considered view that there is merit in the conclusion of the CIT(Appeals) that the Excel sheet relied on by the Assessing Officer is an unsigned, unverified, third-party digital file, not shown to have any nexus with the assessee. The Assessing Officer has not proved that any money was actually paid by the assessee. On the contrary, the sale deed dated 22.01.2021, placed on record, shows that construction on the plot was carried out by NODPL entirely at its own cost, and that when the assessee eventually sold the unit, the buyers made separate payments towards land to the assessee and towards construction directly to NODPL. This factual finding dismissed the theory of alleged “construction on-money” paid by the assessee.

10. Considering all these facts, on merits, we uphold the order of the CIT(Appeals) deleting the additions of Rs. 1,05,00,000 under section 69C and Rs. 35,01,500 under section 69B, and the appeal of the Revenue on this issue is dismissed.

11. In the result, the appeal filed by the Revenue is dismissed.