The Pune Bench of the Income Tax Appellate Tribunal (ITAT) has held that an Assessing Officer (AO) cannot sustain an addition under Section 69 of the Income Tax Act by alleging that the property was purchased in cash by merely citing unverified information received from the Investigation Wing without confronting the assessee with any incriminating material or conducting an independent inquiry. 

The bench of  Vinay Bhamore (Judicial Member) and Dr. Dipak P. Ripote (Accountant Member) has partly allowed the appeal filed by the assessee for Assessment Year (AY) 2023-24 and directed deletion of the addition of ₹6 lakh made towards alleged unaccounted cash payment for purchase of commercial premises. 

The assessee, an individual, had filed his income tax return declaring a total income of ₹9.53 lakh for AY 2023-24. The case was selected for compulsory scrutiny.

Buy Now: INCOME TAX E-COMPILATION – JUNE 2026

During assessment proceedings, the AO received information from the Investigation Wing alleging that the assessee had made an “on-money” cash payment of ₹6 lakh, along with cheque payments, to M/s Deepak Builders and Developers for purchasing a unit in the “Star Plus B” project. 

The assessee, however, categorically denied making any cash payment. He clarified that he had purchased a unit in Star Plus A, not Star Plus B. The payments made were only through banking channels. The information relied upon by the department itself contained factual discrepancies.

The assessee produced bank statements showing cheque payments of:

Rejecting the explanation, the AO concluded that the assessee had paid ₹6 lakh in cash; and ₹5.60 lakh by cheque, aggregating ₹11.60 lakh towards purchase of the property.

Treating the amount as unexplained investment under Section 69 read with Section 115BBE, the AO added ₹11.60 lakh to the assessee’s income and initiated penalty proceedings under Section 271AAC. 

The Commissioner of Income Tax (Appeals) accepted that the cheque payment allegation was incorrect but upheld the addition of ₹6 lakh, observing that materials found during the search on the builder and statements recorded during the search suggested that the assessee had paid cash over and above the recorded sale consideration. 

The Tribunal carefully examined the assessment records and found several serious deficiencies in the assessment.

It observed that although the AO repeatedly referred to information arising from a search conducted on the builder, the assessment order failed to identify any specific seized document, any incriminating material, any statement recorded under Sections 132(4) or 131 naming the assessee, or any evidence showing that the assessee had actually paid ₹6 lakh in cash.

The Tribunal noted that the AO merely made vague references to information allegedly received from the Investigation Wing without bringing any concrete evidence on record.

The Bench also found merit in the assessee’s contention that he had purchased premises in Star Plus A, whereas the departmental allegation related to Star Plus B, thereby casting serious doubt on the reliability of the information relied upon by the department. 

The ITAT held that the assessee had consistently denied making any cash payment and that no documentary evidence had ever been confronted to him during assessment proceedings.

The Tribunal observed that an addition cannot be sustained merely on suspicion or vague references to a third-party search.

It held that the addition was based only on surmises and conjectures rather than legally admissible evidence.

Accordingly, the Tribunal directed the AO to delete the addition of ₹6 lakh and allowed Grounds 1 to 4 raised by the assessee. 

The assessee had also argued that since the information arose from a search on a third party, proceedings should have been initiated under Section 153C rather than under the regular scrutiny provisions of Section 143.

The Tribunal rejected this contention, observing that the assessment order merely contained a vague reference to search information without identifying any specific seized document. In the absence of such material, the Tribunal found no merit in the jurisdictional challenge and dismissed Ground No. 5. 

The Pune ITAT partly allowed the appeal by deleting the ₹6 lakh addition made under Section 69 for alleged cash payment; holding that additions cannot be sustained on vague investigation inputs unsupported by specific seized material or independent enquiry; and dismissing the assessee’s jurisdictional challenge regarding initiation of proceedings under Section 143 instead of Section 153C. 

Membership Required to Access Case Details & Order Copy

To view the complete Case Details and Download Order Copy, you must have an active membership. Please subscribe to continue.

Read More: Beneficiary of Private Trust Can’t Claim Share of Trust Loss Unless Trust’s Income or Loss Is First Determined: ITAT