In a significant relief to a homebuyer, the Income Tax Appellate Tribunal (ITAT) Mumbai has deleted an addition of ₹25 lakh made on account of alleged cash “on-money” paid for purchase of a flat. The Tribunal held that the tax department could not sustain the addition merely on the basis of the builder’s statement when the homebuyer had consistently denied paying any cash and was never given an opportunity to cross-examine the persons whose statements were relied upon.
The case pertains to Assessment Year 2017-18 and involves Shivaji Tukaram Pawale, a resident individual who purchased a flat from M/s Lakshmi Builders and Developers. The declared sale consideration was ₹49 lakh. During a survey conducted under Section 133A of the Income Tax Act on the partners of the builder firm, a statement was recorded under Section 131 in which the partners allegedly admitted receiving cash over and above the documented sale price from flat buyers. Based on this information, the Assessing Officer concluded that Pawale had paid ₹25 lakh in cash and added the amount under Section 69 as unexplained investment.
Pawale flatly denied having paid any amount in cash beyond the ₹49 lakh shown in the registered documents. He specifically requested the Assessing Officer to provide a copy of the partners’ statement recorded under Section 131 and to grant him an opportunity to cross-examine them. Both requests were rejected by the Assessing Officer as well as the first appellate authority (National Faceless Appeal Centre).
The ITAT Mumbai ‘C’ Bench, comprising Vice President Saktijit Dey and Accountant Member Girish Agrawal, examined the matter and found the addition unsustainable. The Tribunal noted that the entire addition rested primarily on the third-party statements of the builder’s partners. When the assessee had specifically denied the allegation, the tax authorities were duty-bound to confront him with the adverse material and allow cross-examination. Failure to do so violated the principles of natural justice and rendered the addition vulnerable. Accordingly, the Tribunal deleted the entire ₹25 lakh addition under Section 69.
The order, pronounced on 27 July 2026, reinforces a settled legal position: a builder’s admission during survey or statement cannot automatically be used against a homebuyer without giving the buyer a fair opportunity to rebut it.
In the same appeal, the Tribunal also dealt with a secondary issue concerning the claim of deduction under Section 80TTA on interest income. It directed the Assessing Officer to verify the claim and allow the deduction if the assessee is found eligible under the law. The appeal was thus partly allowed.
The ruling is relevant for homebuyers facing similar tax additions based solely on builders’ statements regarding on-money. It underlines that denial by the buyer, coupled with non-supply of the adverse material and denial of cross-examination, can prove fatal to the addition.
Also Read: Builder Confirmed No Cash, IT Department Didn’t Believe Homebuyer
