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On-money addition without cross-examination: is it valid?

On-money addition u/s 69: ITAT Mumbai holds a search-based addition on a buyer cannot stand without cross-examining the witness relied on.

CA Sunil Maloo

In short

Where an Assessing Officer adds alleged on-money to a property buyer's income under section 69 or 69C, relying on a third party's statement and seized electronic data from a search on the seller, the addition cannot be sustained unless the buyer was given an opportunity to cross-examine the person whose statement is relied upon and the data is independently corroborated. The Income Tax Appellate Tribunal, Mumbai, so held in Ganesharam Galbaram Mali v. DCIT, Central Circle 4(2), Mumbai (ITA Nos. 8347–8349/Mum/2025, order dated 12 March 2026), upholding the validity of the section 153C assessments themselves but deleting the additions, following its own coordinate-bench decisions on the same Rubberwala Group search and the Supreme Court's ruling in Andaman Timber Industries v. Commissioner of Central Excise, Kolkata-II. A seller's admission of having collected on-money explains the seller's own position; it does not by itself fix liability on a named buyer without material connecting that buyer to a cash payment.

A search under section 132 on a Mumbai developer group can generate assessments not only against the group itself but against dozens of buyers who have nothing to do with the search beyond having bought a shop or office from it. A recurring question in these matters is what evidence is enough to fix such a buyer with an on-money addition — and the Income Tax Appellate Tribunal, Mumbai, has now answered it in a consistent and growing line of orders arising from one search: the Rubberwala Group search of 17 March 2021.

Holdings at a glance

  • The section 153C assessments of the buyers were held valid — the satisfaction note recorded by the Assessing Officer was found to meet the statutory requirement.
  • The on-money additions under section 69 or 69C were nonetheless deleted: a search-based addition resting on a third party’s statement and unauthenticated electronic data cannot stand without independent corroboration.
  • Denial of an opportunity to cross-examine the person whose statement is relied upon is a breach of natural justice, following the Supreme Court’s ruling in Andaman Timber Industries v. Commissioner of Central Excise, Kolkata-II, and by itself is enough to unravel the addition.
  • A seller’s own admission of having received on-money explains the seller’s position; it does not, without more, fasten liability on a specific named buyer.
  • This is not an isolated ruling. Coordinate benches of the Tribunal have reached the identical result across at least half a dozen appeals arising from the same search since November 2025.

What happened in the Rubberwala Group matters

The Rubberwala Group, through M/s Rubberwala Housing and Infrastructure Ltd, developed a commercial project called Platinum Mall. Following the search on 17 March 2021, the department recorded the statement of Shri Imran Ansari, an employee of the group handling sales and registration, and seized a pen-drive said to contain data of cash collections from unit buyers.

On the strength of that statement and the pen-drive data, the Assessing Officer of the searched group recorded satisfaction that the material pertained to individual buyers, and the buyers’ own Assessing Officers reopened their cases under s.153C — the provision through which material found in someone else’s search is used to assess a third person. In Ganesharam Galbaram Mali v. DCIT, Central Circle 4(2), Mumbai (ITA Nos. 8347–8349/Mum/2025, Mumbai “G” Bench, coram Shri Anikesh Banerjee, Judicial Member, and Shri Jagadish, Accountant Member, heard 9 March 2026 and pronounced 12 March 2026), the additions ran to ₹4,00,000, ₹41,29,520 and ₹25,39,680 for AY 2017-18, 2018-19 and 2019-20 respectively — a total of ₹70,69,200 — treated as unexplained investment under s.69C.

Why the s.153C notice survived

The Tribunal did not accept a challenge to the reopening itself. A proper satisfaction note had been recorded, and the jurisdictional requirements for assessing a person other than the one searched were met — the standing point on when such a challenge succeeds and when it does not is set out at s.153C — assessment of a person other than the searched person: the satisfaction note has to exist on the file, be recorded by the right officer at the right stage, and show application of mind to why the material pertains to the other person. Here it did. That finding is worth noting for its own sake — a buyer facing a s.153C notice arising from someone else’s search should not assume the notice itself is void merely because the material originates from a third party’s premises.

Why the addition still failed

Validity of the notice is a jurisdictional question, decided separately from whether the addition it leads to is actually supported by evidence — and on that second question the Tribunal found nothing to support the department’s case. The reasoning, consistent across the Tribunal’s own record in these matters, rested on three points.

The material was never confronted to the buyer. Neither the pen-drive data nor Shri Ansari’s statement was put to the assessee, and no opportunity was given to test either. The Tribunal recorded that “the assessee was not provided an effective opportunity to confront such material or to cross-examine the person whose statement was relied upon, despite specific requests made during the course of proceedings” — and applied the Supreme Court’s holding in Andaman Timber Industries v. Commissioner of Central Excise, Kolkata-II (Civil Appeal No. 4228 of 2006, decided 2 September 2015, (2016) 15 SCC 785), that denial of cross-examination of a witness whose statement is relied upon is a serious breach of natural justice capable of rendering the resulting order a nullity, not a mere procedural lapse curable after the fact.

An entry in a third party’s record is not proof against the buyer. The Tribunal held that “the mere existence of entries in a third-party document or digital record, without any independent corroborative evidence demonstrating actual payment of cash by the assessee, cannot be treated as conclusive evidence against the assessee.” No receipt, diary, acknowledgment or other document connecting this particular buyer to an actual cash payment was found in the buyer’s own possession, or otherwise independently verified.

The seller’s admission does not travel automatically to the buyer. The developer group’s own disclosure of having collected cash may say something about the group’s affairs; it does not, without more, establish that any specific buyer paid it. As the Tribunal put it, such an admission “cannot automatically fasten liability upon the purchaser unless there is independent material demonstrating that the purchaser had actually made such payment.”

A settled line, not a one-off

Ganesharam Galbaram Mali is one of a run of decisions on the same search. In Akhraj Pukhraj Chopra v. DCIT, Central Circle 4(2) (ITA No. 5553/Mum/2025 and connected appeals, AY 2019-20 and 2020-21, coram Shri Pawan Singh, Judicial Member, and Ms Padmavathy S, Accountant Member, pronounced 12 November 2025), the Tribunal reached the identical result on a ₹2,00,000 addition — s.153C upheld, addition deleted for want of corroboration and cross-examination. In Bhagwanti Lalitkumar Jain v. ACIT, Central Circle 4(2) (ITA Nos. 8655–8656/Mum/2025, AY 2018-19 and 2019-20, Mumbai “B” Bench, coram Shri Om Prakash Kant, Accountant Member, and Ms Kavitha Rajagopal, Judicial Member, pronounced 25 February 2026), a ₹4,90,350 addition under s.69 was deleted on the same reasoning. The Ganesharam Galbaram Mali bench itself recorded that it was following its coordinate benches in Bharat Solanki (ITA Nos. 6363–6365/Mum/2025, dated 23 December 2025) and Akhraj Pukhraj Chopra. For a search that produced dozens of near-identical notices, the department’s own record before the Tribunal is now consistently against it on this point.

What this means in practice

For a buyer who has received a s.153C notice arising from a search on the seller: the notice is not automatically bad merely because the material comes from someone else’s premises, but a challenge to the satisfaction note is worth examining on its own facts under s.153C, separately from the merits of any addition. On the addition itself, the practical questions to press at the assessment or first-appeal stage are narrow and concrete — was a copy of the statement relied upon actually furnished, was cross-examination sought and refused, and is there anything beyond the third party’s own record that connects this buyer, specifically, to a cash payment. Absent an affirmative answer to that last question, the growing weight of Tribunal authority on this search is that the addition does not survive.

The stakes in getting this right are not confined to the addition itself. Income sustained under s.69 or s.69C is taxed at the special rate under s.115BBE — 60 per cent plus surcharge and cess for AY 2017-18 onward, with no deduction and no set-off of loss — so an addition that looks modest in absolute terms can carry a demand well out of proportion to it. That is precisely why the evidentiary threshold at the addition stage, rather than argument about the rate afterward, is where these matters are actually won or lost.

Order: Ganesharam Galbaram Mali v. DCIT, Central Circle 4(2), Mumbai, ITA Nos. 8347–8349/Mum/2025 (ITAT Mumbai, “G” Bench), dated 12 March 2026 — Indian Kanoon.

Section 153COn-moneyCross-examinationSection 69Real estateSearch assessment

This note is general commentary on the law as at 07 September 2026 and is not advice on any matter. The position in a particular case depends on its own facts.

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Common questions

Frequently asked.

Can an on-money addition be made only on the basis of a seller's employee's statement?

Not on its own. The Income Tax Appellate Tribunal, Mumbai, in the Rubberwala Group line of cases has repeatedly held that a statement recorded from a third party during a search on the seller, without independent corroboration and without the buyer being given a chance to cross-examine, cannot sustain an addition under section 69 or 69C in the buyer's hands.

Is cross-examination mandatory before relying on a third party's statement in a search-based assessment?

Yes, where the statement is the foundation of the addition. Following the Supreme Court's ruling in Andaman Timber Industries v. Commissioner of Central Excise, Kolkata-II, denial of an opportunity to cross-examine a witness whose statement is relied upon is treated as a serious violation of natural justice that can render the addition unsustainable, not a mere irregularity.

Does upholding a section 153C notice mean the resulting addition is also valid?

No. Validity of the section 153C assessment turns on whether a proper satisfaction note was recorded; that is a jurisdictional question decided separately from whether the addition itself is supported by evidence. In Ganesharam Galbaram Mali, the Tribunal upheld the section 153C assessments but still deleted the additions for want of evidence.

What evidence does the department need to sustain an on-money addition against a specific buyer?

Something connecting that buyer to an actual cash payment — a receipt, a diary entry, an admission, or other material found in the buyer's own possession or otherwise corroborated. An Excel sheet or pen-drive entry recovered from a third party, without the buyer's name independently verified against such material, has repeatedly been held insufficient by itself.

If an on-money addition under section 69 is sustained, what tax rate applies?

Income assessed under section 69 or 69C is taxed at the special rate under section 115BBE — 60 per cent plus surcharge and cess for assessment year 2017-18 onward — with no deduction for expenditure and no set-off of loss. That is why the evidentiary threshold for making the addition in the first place carries so much weight.