ITAT Overturns ₹48 Lakh Income Tax Addition Based on Unreliable Real Estate Broker's Excel Sheet
The Ahmedabad bench of the Income Tax Appellate Tribunal (ITAT) has granted relief to a homebuyer who faced an income tax addition of ₹48 lakh. The addition was made based on an Excel sheet recovered from a real estate broker, which the ITAT deemed insufficient without corroborative evidence.
Rajsheel Jitendra Patel, the assessee, was subjected to reassessment proceedings for the assessment year 2019-20 after the Income Tax Department flagged information from a search conducted in the cases of Shivalik, Shilp, and Sharda Group. During the search, documents and electronic data were seized from a third party, Shri Manish Brahmbhatt, who was alleged to be a real estate broker.
Among the seized material was an Excel sheet that, according to the Assessing Officer (AO), reflected an on-money cash component of ₹48,89,877 paid by the assessee for the purchase of a residential unit in the project “Sky City Floris.” Relying on this Excel sheet, the AO treated the amount as unexplained investment under section 69 and taxed it under section 115BBE.
The AO also made a separate addition of ₹1.56 crore by treating the assessee’s share of sale consideration received from a jointly owned property as unexplained income under section 56, and denied the assessee’s claim for exemption under sections 54 and 54EC. These additions were confirmed by the Dispute Resolution Panel.
Before the ITAT, the assessee argued that the entire on-money addition was based only on a third-party Excel sheet recovered from an alleged broker with whom the assessee had no dealings. The assessee argued that no statement of the broker was supplied, no opportunity of cross-examination was granted, and no corroborative evidence such as cash withdrawals, confirmations from the seller, or flow of funds was brought on record.
The assessee also argued that the Excel sheet itself was unreliable as it mentioned a seller different from the one recorded in the registered sale deed.
On the issue of ₹1.56 crore, the assessee argued that the property sold was jointly owned with his wife, which was clearly established through society resolutions, share certificates, registered sale deed, and Index-2 records. They argued that the receipt represented genuine sale consideration taxable under capital gains and that the assessee had made eligible investments to claim exemptions under sections 54 and 54EC, supported by proper documents.
The revenue counsel relied on the orders of the AO and the DRP and argued that the seized material constituted credible information justifying the additions.
After examining the record, the bench comprising Siddhartha Nautiyal (Judicial Member) and Makarand V. Mahadeokar (Accountant Member) observed that the on-money addition was made exclusively on the basis of an uncorroborated Excel sheet recovered from a third party.
The tribunal observed that the seller’s name mentioned in the Excel sheet did not match the seller in the registered sale deed, which seriously affected the credibility of the document. The tribunal also observed that no independent corroborative evidence was produced and that the denial of cross-examination of the alleged broker weakened the Revenue’s case.
With respect to the ₹1.56 crore addition, the tribunal observed that the assessee had produced sufficient documentary evidence to establish joint ownership, receipt of sale consideration, and eligible investments for claiming exemption. The tribunal explained that once the receipt arose from the transfer of a capital asset and was supported by registered documents, it could not be taxed as unexplained income under section 56 of the Income Tax Act.
In view of these findings, the tribunal deleted both additions and allowed the assessee’s appeal in full, granting relief to the homebuyer.
