Unverified Third-Party Pen Drive Data Cannot Justify Income Tax Addition Without Confronting Taxpayer: ITAT [Read Order]
ITAT held that additions based solely on third-party pen drive data and unverified statements, without confronting the taxpayer, are not legally sustainable
![Unverified Third-Party Pen Drive Data Cannot Justify Income Tax Addition Without Confronting Taxpayer: ITAT [Read Order]](https://images.taxscan.in/h-upload/2025/06/07/2041626-unverified-third-party-pen-drive-data-justify-income-tax-confronting-taxpayer-itat-taxscan.webp "Unverified Third-Party Pen Drive Data Cannot Justify Income Tax Addition Without Confronting Taxpayer: ITAT [Read Order]")
The Mumbai Bench of the Income Tax Appellate Tribunal (ITAT) set aside an addition made under Section 69A of the Income Tax Act, 1961, ruling that third-party data from a pen drive and statements cannot be used against the taxpayer without being properly confronted. Shital Dhorda, the assessee, had purchased a residential flat along with three family members from Natraj Realtors....
The Mumbai Bench of the Income Tax Appellate Tribunal (ITAT) set aside an addition made under Section 69A of the Income Tax Act, 1961, ruling that third-party data from a pen drive and statements cannot be used against the taxpayer without being properly confronted.
Shital Dhorda, the assessee, had purchased a residential flat along with three family members from Natraj Realtors. The property was registered during the assessment year 2012–13. The case was reopened by the Assessing Officer (AO) under Section 148 based on information received from a search conducted on the Kamala Group. It was alleged that Dhorda had paid Rs. 1.29 crore in cash over and above the registered value, as reflected in a pen drive found during the search.
The AO’s counsel argued that the pen drive contained records of cash payments and that statements made under Section 132(4) by Kamala Group employees confirmed these transactions. They argued that she was never shown the pen drive, statements, or any related documents, nor was she given the opportunity to cross-examine the individuals whose statements were used against her.
They also pointed out that she paid a higher-than-market rate for the flat and that no independent inquiry was conducted by the AO. They challenged the reopening itself, arguing there was no valid "reason to believe" and that the proceedings were based entirely on unverified third-party information.
The two-member bench comprising Shri Sandeep Gosain (Judicial Member) observed that the AO had not shared any of the incriminating material with the assessee and relied only on statements and a pen drive that were never tested or corroborated. It held that such evidence cannot be treated as credible unless the taxpayer is confronted with it and given an opportunity to respond.
The tribunal further observed that denying access to the alleged evidence and the opportunity to cross-examine witnesses violated the principles of natural justice. It relied on several earlier ITAT decisions holding that unverified third-party data without supporting evidence cannot justify an addition under Section 69A of the Income Tax Act.
Income Tax 2025: Will It Save You Money or Cost You More? Find Out Inside! Click here
The tribunal ruled that the addition made by the AO was not sustainable in law and directed the deletion of Rs. 32,28,750 added as unexplained investment. The appeal was allowed.
ITAT held that additions based solely on third-party pen drive data and unverified statements, without confronting the taxpayer, are not legally sustainable.
Support our journalism by subscribing to Taxscan premium. Follow us on Telegram for quick updates
