Addition for cash payments to builder deleted by ITAT for want of clinching evidence

Addition for cash payments made to builder for purchase of residential house – ITAT deletes addition for want of any clinching evidence

ABCAUS Case Law Citation:
ABCAUS 3787 (2023) (08) ITAT

Important Case Laws relied upon:
Dinesh Kumar Goyal vs. UOI & Others 453 ITR 535
Laxmi Narain Agency vs. Income Tax Officer & Others 450 ITR 650
Canyon Financial Services Ltd. vs. ITO [2017] 399 ITR 202 / 249 Taxman 493/155 DTR 73

In the instant case, the assessee had challenged the order passed by the CIT(A) in confirming the action of the Assessing Officer (AO) in making an addition u/s 69 of the Income Tax Act, 1961 (the Act) towards alleged cash payments made to the builder for purchase of residential flat.

The appellant assessee was a retired employee. A search & seizure operation u/s 132 of the Act was conducted on a group of companies and its key person took place in which various incriminating documents and digital data were found and seized.

On verification of digital data found in the computer of the said key person, it was noticed that it contained a ledger copy, wherein, in addition to cheque payment, date-wise cash payment received from the appellant assessee towards purchase of a flat was found. It was noticed that the assessee had paid large amount of cash on different dates.

Based on such information, the Assessing Officer initiated proceeding u/s 153C of the Act in respect of the assessee.

In course of assessment proceedings, the Assessing Officer confronted the seized document and called upon the assessee to explain as to why the cash payment made towards purchase of flat should not be treated as income of the assessee u/s 69 of the Act.

In reply, though the assessee flatly denied of having made any cash payment over and above the cheque payments, however the Assessing Officer was not convinced.

Ultimately, relying upon the seized material, the Assessing Officer concluded the assessment by adding back the amount of said cash to the income of the assessee.

The first appellate authority did not find merit in the submissions of the assessee and upheld the addition.

The Tribunal observed that admittedly, the incriminating material was not seized from the assessee. Further, from the incriminating material i.e. the ledger copy, it was observed that it depicted certain payments in cheque and in cash. The cheque payments mentioned in the ledger copy were of two banks.

The Tribunal noted that from the stage of assessment proceedings itself the assessee had flatly denied its involvement in the transactions recorded in the ledger copy seized from the third party. The assessee had specifically submitted that the bank accounts mentioned in the ledger copy did not belong to him or his wife. It was the specific case of the assessee from the very beginning that he had purchased the flat and paid entirely through banking channel from his bank accounts of himself and wife and those banks were not the bank as recorded in the ledger.

The Tribunal noted that in the face of such specific denial by the assessee not only before the Assessing Officer but before the first appellate authority, no further inquiry or investigation was made by them to rebut the contention of the assessee. No further corroborative evidence had been brought on record to establish that the entries in the ledger copy seized from a third party are genuine and correct.

Further, no statement had been recorded from the third party from whom the incriminating material was seized with regard to the entries in the ledger copy. There was nothing on record to suggest that the third party from whom the ledger copy was

seized admitted of having received the cash payment from the assessee. Even assessee’s repeated request to cross examination had been cold shouldered by the Department Authorities.

The Tribunal found that except the ledger account stated to have been seized, no other corroborative material was brought on record by the Departmental Authorities to establish that the entries appearing in the ledger copy were genuine and the assessee had actually made the cash payment.

Merely because the payments made by cheque appearing in the ledger copy and actually made by the assessee tallied, it cannot lead to the conclusion that the assessee had also made the cash payments. More so, when from the very beginning the assessee had vehemently denied of having made the cash payments.

The Tribunal opined that, in absence of any clinching evidence to show that the assessee had made the cash payments, the addition of so called cash payment could not have been made.

Accordingly, the ITAT directed that the impugned addition u/s 69 towards unexplained money be deleted being wholly unsustainable.

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