Amount shown payable & receivable by both parties, not unexplained money – ITAT

Once investment amount reflected as payable and receivable in the books of accounts of both parties, no addition can be made towards unexplained money u/s 69A of the Act.

In a recent judgment, ITAT Hyderabad deleted addition u/s 69A observing that once the investment amount is reflected in the regular books of accounts of the assessee as payable and as in the books of the vendor as receivable, there cannot be any presumption of unexplained money under section 69A of the Act.

ABCAUS Case Law Citation:
4865 (2025) (11) abcaus.in ITAT

In the instant case, the assessee had challenged the order passed by the CIT(A) in confirming addition made by Assessing Officer (AO) under section 69A of the Income Tax Act, 1961 (the Act)

the assessee was an individual deriving income from business. The case of the assessee was selected for limited scrutiny in CASS.

During the year under consideration, the assessee had inter alia purchased one flat from one party vide sale deed. The AO was not convinced with regard to the sources for investment in the purchase of the flat. He treated the said amount as unexplained money under section 69A of the Act and, accordingly completed the assessment under section 143(3) of the Act.

Before the Tribunal, the assessee submitted that since the assessee was a partner in the partnership firm from which the flat was purchased, the firm had passed a general entry in its books of accounts by debiting the account of the assessee-partner towards the sale consideration against the transfer of the flat. Therefore, the consideration was not paid in cash/cheque, but duly accounted in the books of the partnership firm.

It was further stated that in registered sale deed it was specifically mentioned that the vendor had received the full sale consideration, which was only in the context to the book entry passed in the accounts of the partnership firm.

Further, the attention of the bench was drawn to the audited financial statements of the firm where the balance sheet for the relevant year clearly reflected sale consideration receivable from the assessee, and in the balance sheet of the assessee the said amount was shown as payable to firm.

Therefore, it was argued that the flat was acquired through accounted book adjustment in the books of the partnership firm where the assessee was a partner, there was no undisclosed investment by the assessee and the addition made under section 69A of the Act is factually and legally unsustainable and liable to be deleted.

In view of the corresponding entry in the audited books of the firm and in the books of the assessee, the Tribunal opined that once the consideration is fully reflected in the regular books of accounts of the assessee as well as the vendor, there cannot be any presumption of unexplained money under section 69A of the Act. The registered sale deed stating that the consideration had been received only confirms the accounted book entry, and does not indicate any unrecorded monetary flow.

The Tribunal rejected the objection of the Revenue that the assessee had not filed the confirmations from the firm, as without having any substance, as from the audited balance sheet of the firm it was clearly evident that the firm had recorded the amount as receivable from the assessee. Furthermore, the Revenue had not brought on record any material evidence to show that any actual amount had changed hands.

Accordingly, the Tribunal deleted the addition under section 69A of the Act towards the purchase of the flat.

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