Unverified Third-Party Pen Drive Data Cannot Justify Income Tax Addition Without Confronting Taxpayer: ITAT

The Mumbai Bench of the Income Tax Appellate Tribunal (ITAT) has ruled that an income tax addition cannot be justified based on unverified data from a third-party pen drive without confronting the taxpayer with the evidence. This landmark decision came in a case where an addition was made under Section 69A of the Income Tax Act, 1961, for unexplained money, based on data found on a pen drive belonging to a third party. The ITAT emphasized that the principles of natural justice require that the assessee be given an opportunity to rebut any adverse evidence. The tribunal held that the assessing officer's reliance on such unverified data, without allowing the taxpayer to cross-examine the third party or challenge the authenticity of the data, was a violation of these principles. This ruling is a significant victory for taxpayers, as it protects them from arbitrary additions based on unsubstantiated and uncorroborated third-party information.