ITAT Chennai Deletes 75% Additions Against IG3 Infra Over Unverified Cash Entries In Seized Excel Sheet

On 16 October, the Income Tax Appellate Tribunal (ITAT), Chennai, dismissed the Revenue's appeals against IG3 Infra Limited, holding that cash transactions recorded in a seized Excel sheet could not be attributed entirely to the company without reliable verification and entity-wise segregation.

A Bench comprising Judicial Member Manu Kumar Giri and Accountant Member S.R. Raghunatha dismissed the Revenue's appeals for Assessment Years (AYs) 2019-20 and 2020-21. It observed:

“In these circumstances, the mere fact that the electronic record was found in a computer located at the premises of M/s.IG3 Infra Limited cannot, without further examination, justify attributing every transaction recorded therein exclusively to the assessee-company. The AO has neither undertaken a satisfactory entity-wise segregation of the entries nor demonstrated that the amounts attributed to the assessee-company were actually received by it or represented expenditure claimed by it as a deduction.”

The case arose from a search and seizure operation conducted at the IG3 Group's premises on 3 November 2020. During the search at IG3 Infra's Chennai business premises, officials seized an Excel file titled “Others” from a computer used by accounts executive R. Ramamoorthi. The file recorded cash receipts, payments and running balances involving multiple parties, with aggregate receipts of Rs. 13.51 crore across several financial years.

The Assessing Officer (AO) relied on the Excel file, statements recorded during the search and physical cash of Rs. 71,11,060 found at the premises. The file showed a closing cash balance of Rs. 70,50,484. The AO treated the similarity between the two figures as corroboration of the entries and alleged that expenditure recorded in the company's accounts had been returned in cash.

Consequently, the AO made protective additions of Rs. 3,69,77,575 for AY 2019-20 and Rs. 9,14,90,284 for AY 2020-21 in IG3 Infra's hands.

The company argued that the Excel file contained transactions involving multiple group entities, including cash withdrawals from disclosed bank accounts, routine business transactions, loans and other receipts and payments.

The Commissioner of Income Tax (Appeals), through orders dated 20 February 2026, restricted the additions to 25% of the amounts assessed by the AO and deleted the remaining 75%. The Revenue challenged this relief before the Tribunal, contending that the entire receipts represented undisclosed income and that IG3 Infra had failed to provide a satisfactory transaction-wise reconciliation.

The Tribunal held that the closing balance in the Excel file, despite its proximity to the physical cash found during the search, did not establish that the cumulative receipts over several years represented fresh undisclosed income. The AO had also failed to establish that the transactions recorded in the file belonged exclusively to IG3 Infra or that the amounts attributed to it had actually been received by the company or represented expenditure claimed as a deduction.

Rejecting the Revenue's challenge to the 25% estimation, the Bench noted that the CIT(A) had considered the seized material, search statements, physical cash and the company's failure to explain all transactions satisfactorily. It held that the Revenue had not established that the remaining 75% represented undisclosed income or inadmissible expenditure attributable to IG3 Infra.

Accordingly, the ITAT upheld additions of Rs. 92,44,394 for AY 2019-20 and Rs. 2,28,72,571 for AY 2020-21, directing deletion of the remaining Rs. 2,77,33,181 and Rs. 6,86,17,713, respectively, and dismissed the Revenue's appeals.

Counsel for Appellant: Mr. R. Venkataraman, CA

Counsel for Respondent: Ms. Nayani Swapna, CIT, Departmental Representative