The Rajkot Bench of the Income Tax Appellate Tribunal (ITAT) has held that additions towards alleged unaccounted “on-money” payments cannot be sustained merely on the basis of an unsigned Excel sheet recovered from a third party during search proceedings, particularly when no corroborative evidence exists and the assessee was not granted an opportunity to cross-examine the persons connected with the document. 

The bench of Dr. Arjun Lal Saini (Accountant Member) has referred to the Gujarat High Court’s judgment in PCIT v. Kaushik Nanubhai Majithia, where the High Court had held that proceedings based on an unsigned Excel sheet found during a search on a developer could not be sustained in the absence of corroborative material. The High Court had also found fault with the Revenue for not supplying statements recorded during the search and for failing to establish the nature and authenticity of the spreadsheet entries.  The High Court had concluded that the mere fact that a developer had paid tax on amounts reflected in an Excel sheet did not establish that corresponding payments had actually been made by the assessee. The Tribunal noted that the facts before it were materially similar. 

The reassessment proceedings were triggered on the basis of an Excel file named “Trinity” allegedly recovered during a search conducted on a third party. According to the Revenue, the spreadsheet contained details of flats sold in a real estate project known as “Trinity Towers” and reflected alleged on-money transactions. The Assessing Officer relied on entries in the spreadsheet to make additions in the hands of the assessees. 

The assessees challenged the additions, contending that the Excel sheet was neither found from their possession nor bore their signatures or approval. They further argued that the alleged entry relating to on-money pertained to Flat No. C-402, whereas one of the assessees had purchased Flat No. C-401, demonstrating factual inconsistency in the Revenue’s case. 

Before the Tribunal, the assessees submitted that the entire addition rested upon an unsigned spreadsheet prepared unilaterally by a third party. They argued that such material could not automatically be attributed to them without independent evidence establishing the authenticity of the entries and the existence of actual transactions. They also emphasized that no opportunity for cross-examination had been provided despite the Revenue relying on statements and materials recovered from third parties. 

The assessees relied heavily on the Gujarat High Court’s decision in Kaushik Nanubhai Majithia, where proceedings initiated solely on the basis of an unsigned Excel sheet found with a third party were disapproved. 

The Tribunal observed that no documentary evidence had been brought on record to establish that the assessees had actually paid or received the amounts reflected in the spreadsheet. It noted that the Revenue had failed to produce any material demonstrating that the alleged transactions had genuinely taken place. 

Referring to its earlier ruling in R C Heights Pvt. Ltd., the Tribunal reiterated that rough notings in an unsigned Excel file, without supporting evidence, cannot constitute a valid basis for making additions. The Tribunal emphasized that the spreadsheet was recovered from a third party, did not contain signatures of any concerned person, and lacked any nexus connecting it with the assessees. 

The Tribunal further observed that the presumption available under Section 132(4A) of the Income Tax Act could not be invoked against the assessees because the material was not seized from their premises. It also noted that courts have consistently held that entries in third-party records, without corroboration, cannot by themselves justify additions. 

Holding that the issue was fully covered by the binding precedent of the Gujarat High Court and its own earlier coordinate bench decision, the ITAT deleted the additions made by the Assessing Officer. The Tribunal observed that the Revenue had failed to produce any fresh material capable of distinguishing the present case from the earlier rulings. Consequently, all three appeals were allowed.

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