No Income Addition Can Be Made Based on Statement from Builder's Accountant: ITAT

Moneylife Digital Team 01 April 2025

Economy & Nation

In a significant ruling, the Mumbai bench of the income-tax appellate tribunal (ITAT) recently held that income additions cannot be made solely based on a statement given by a builder's accountant. The decision reinforces the principle that unverified third-party statements cannot be the sole basis for tax assessments.

The case pertained to Aarti Sudarshan Soni, who had challenged the income-tax (I-T) department's addition of Rs33 lakh as income based on a statement given by an accountant of Shah Housecon Pvt Ltd, a builder, without corroborative evidence.

In an order, the ITAT bench of Amit Shukla, judicial member and Padmavathy S, accountant member, says, "It is relevant to mention here that it is a settled position that the assessee (Ms Soni) cannot be required to substantiate a negative fact and that the assessing officer (AO) ought to have conducted necessary further enquiries in support of the alleged claim that the assessee has made on-money payments. In view of this discussion and respectfully following the decision of the co-ordinate bench, we hold that the addition made by the AO is not sustainable and liable to be deleted."

Ms Soni, who reported income from house property and interest, filed a tax return for assessment year (AY)14-15 with an income declaration of Rs615,200. She purchased a flat from Shah Housecon for Rs1.27 crore as per an agreement dated 15 February 2014.

A survey on 11 November 2024 at the premises of Shah Housecon by the I-T department led to the recording of a statement from Binesh Balakrishnan, a senior accountant, alleging that Ms Soni had made an additional payment of Rs33 lakh as 'on-money' over the agreement value. Based on these claims and documents found during the survey, the AO added this amount as an unexplained investment under Section 69 of the Income Tax Act in Ms Soni's tax returns.

She denied the allegation, submitting bank statements and an affidavit confirming that she had made no such extra payment. She also requested the AO to summon relevant parties for cross-examination, but the AO refused and confirmed the addition, citing the non-appearance of the summoned parties. The commissioner of I-T (appeals) (CIT(A) upheld this decision, prompting Ms Soni to approach the Mumbai bench of ITAT.

She reiterated that there is no difference between the registered value and the stamp duty value of the property and, therefore, the AO is not correct in making an addition under section 69 of the Act without any basis.

The ITAT ruled in favour of MS Soni, holding that income additions cannot be made solely based on an accountant's statement without corroborative evidence, reinforcing that tax assessments must be supported by verifiable proof rather than assumptions or third-party claims.

(Case No. ITA No3233/Mum/2024 Date: 21 February 2025)

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