ITAT Deletes ₹14.25 Lakh Tax Addition Against Thane Flat Buyer in Alleged On-Money Case

Mumbai, June 10, 2026: In a significant ruling for property buyers and taxpayers, the Income Tax Appellate Tribunal (ITAT) has deleted a ₹14.25 lakh income tax addition made against a Thane resident over an alleged cash payment during the purchase of a residential flat.

The tribunal held that the Income Tax Department failed to provide sufficient evidence linking the buyer to any alleged "on-money" transaction and observed that statements alone cannot be treated as proof without proper verification.

What Was the Case About?

The dispute relates to a flat purchased in Thane's Cosmos Mary Park project. The property was jointly purchased by the taxpayer and his wife for ₹72 lakh and was registered in April 2012.

During a later search operation conducted on the Cosmos Group, tax authorities claimed to have discovered records indicating that certain buyers may have paid cash amounts over and above the documented sale value of properties.

Based on information gathered during the search, the Income Tax Department alleged that the buyer had paid ₹28.5 lakh in cash while purchasing the flat. Since the taxpayer owned a 50% share in the property, an addition of ₹14.25 lakh was made to his income as unexplained money.

Tribunal Finds Lack of Evidence

While defending himself, the taxpayer submitted a confirmation letter from the developer stating that only ₹72 lakh had been received for the flat purchase.

The ITAT observed that the tax department relied primarily on statements made by officials of the builder and references to electronic records allegedly found during the search.

However, the tribunal noted that copies of the alleged incriminating documents were neither placed on record nor provided to the taxpayer during assessment proceedings.

The bench further pointed out that the email records cited by the department were not produced before the assessing authorities.

Why the Ruling Matters

One of the key observations made by the tribunal was that statements recorded from third parties cannot automatically be treated as evidence against a taxpayer unless they are subjected to cross-examination.

The tribunal held that in the absence of independent and verifiable evidence directly linking the buyer to an alleged cash transaction, the tax addition could not be sustained.

As a result, the taxpayer's appeal was allowed and the ₹14.25 lakh addition was deleted.

Impact on Property Buyers

Tax professionals believe the ruling could have broader implications for real estate-related tax disputes involving allegations of "on-money" payments.

The order reinforces the principle that tax authorities must establish a clear connection between a taxpayer and any alleged undisclosed transaction through credible evidence rather than relying solely on statements or unverified records.

Experts say the decision may provide relief to property buyers facing similar disputes arising from investigations conducted on developers and real estate companies.

Final Word

The ITAT's ruling highlights the importance of documentary evidence in tax proceedings and sends a strong message that allegations alone are not enough to justify additions to a taxpayer's income.

For property buyers, the decision serves as a reminder that appellate authorities continue to scrutinize tax assessments closely, particularly in cases involving alleged cash transactions in the real estate sector.