Income Tax Appellate Tribunal limits use of third-party Excel records

The Income Tax Appellate Tribunal (ITAT) has issued rulings reinforcing that tax additions cannot be sustained solely on the basis of Excel spreadsheet entries recovered from third-party searches.

In Mumbai, the ITAT ruled in favor of Kapadia Brothers, a garment trading firm, regarding a ₹27.85 crore tax addition. The Revenue had relied on Excel records found during a search at a separate entity, JM Jain LLP, to allege unexplained purchases and capital. The Tribunal found that the Revenue failed to establish a specific financial trail or movement of cash, noting that search presumptions cannot be automatically applied to unsearched third parties without independent corroboration.

Similarly, the Delhi Bench of the ITAT deleted a ₹34.03 lakh addition for PSS Solutions Pvt. Ltd. under Section 69A of the Income-tax Act. The Revenue’s case was based on a third-party Excel sheet suggesting trading profits, yet no actual unexplained cash, bullion, or jewelry was discovered in the possession of the assessee. The ruling emphasizes that while digital information may trigger investigations, it must satisfy specific statutory conditions to justify deeming provisions.