2021 (4) TMI 724 - AT - Income Tax

Addition u/s 69B - Cash transactions in the seized documents during a search operation - cash against sale of flat - As argued disputed flat, whose booking has been cancelled prior to search of the builder, belonged to the wife of the assessee - HELD THAT - We find that addition in the hands of the assessee is based upon search seizure operation at the premises of Nish Developers Private Limited. The source is a pen drive entry recovered from an employee of the said developer. The said pen drive purported to have an entry that cash against sale of flat was received from the assessee who is having's office at Kalbadevi. After detailed submission ld. CIT(A) has found that actually the wife of the assessee had booked a flat in the property of the said developer. That the said booking was done by making cheque payments. That the booking was cancelled and the amount of booking was duly refunded by the developer to the wife of the assessee. CIT(A) has found that this shows that the entry, that on money was paid for sale of flat to the assessee is not at all correct and is a result of a mistaken identity. He found that the said entries for on money cash payments are all dated after the cancellation of booking by the wife of the assessee and refund of money to her by the developer. Hence, he was of the opinion that there is no reason why after the cancellation of booking anybody would pay on money cash amounts. CIT(A) has also noted that AO has not disputed the details about the booking of flat by the wife of the assessee, the cancellation thereof and the refund of booking amount to her by the developer. Learned CIT(A) also noted that the assessee's address is also not the same as mentioned in the said pen drive. The above reasoning of the ld. CIT(A) in deleting the addition in the hands of the assessee are cogent. When no material has been found that assessee has made any booking for the flat, a mere entry in a pen drive of a third party cannot ipso facto fasten the liability of on money transaction upon the assessee without further corroborative material brought on record. As a matter of fact as noted by the learned CIT(A) the other materials further support the view that the addition in the hands of the assessee is not sustainable in as much as there was a booking of flat by the assessee s wife with the same developer which was duly cancelled and booking was refunded prior to the entry of on money cash transaction. - Decided against revenue.

Summary

Issues Involved:
1. Legitimacy of cash transactions in seized documents during a search operation.
2. Deletion of addition made on grounds of undisclosed investments under Section 69B of the Income Tax Act, 1961.

Issue-Wise Detailed Analysis:

1. Legitimacy of Cash Transactions in Seized Documents:

The Revenue questioned whether the CIT(A) was justified in concluding that the cash transactions recorded in the seized documents during a search operation did not belong to the assessee. The case involved information from the Dy. Director of Income Tax (Investigation) regarding a search and seizure operation at M/s Nish Developers Pvt. Ltd., which revealed unaccounted cash transactions amounting to ?181.66 crores. A pen drive and loose papers seized from an employee of the developer contained details of these transactions, including an entry indicating that the assessee paid ?5.50 crores in cash for a flat booking. The Assessing Officer (AO) added this amount to the assessee's income under Section 69B of the Income Tax Act, stating that the assessee failed to explain the source of the cash payment.

2. Deletion of Addition Made on Grounds of Undisclosed Investments:

The CIT(A) deleted the addition, noting that the flat booking was made by the assessee's wife, Smt. Varsha Parmar, who paid ?51 lakhs by cheque and later canceled the booking, receiving a refund before the search operation. The CIT(A) found it implausible that the assessee would continue making cash payments after the booking was canceled. The CIT(A) also noted discrepancies, such as the assessee not having an office in Kalbadevi, as mentioned in the pen drive. The CIT(A) concluded that the cash transactions recorded in the pen drive did not belong to the assessee and directed the deletion of the ?5.50 crores addition.

Judgment Analysis:

1. Legitimacy of Cash Transactions in Seized Documents:

The ITAT upheld the CIT(A)'s decision, emphasizing that the addition was based on a pen drive entry from a third party without corroborative evidence directly linking the assessee to the cash transactions. The ITAT noted that the AO did not dispute the details of the booking and cancellation by the assessee's wife, nor did the AO provide any material evidence to prove that the cash payments were made by the assessee. The ITAT found the CIT(A)'s reasoning cogent and supported by the facts, including the cancellation of the booking and refund before the alleged cash payments.

2. Deletion of Addition Made on Grounds of Undisclosed Investments:

The ITAT agreed with the CIT(A) that the addition under Section 69B was not sustainable. The ITAT highlighted that the booking was canceled, and the refund was received before the search, making it illogical for the assessee to continue making cash payments. The ITAT also noted that the AO did not conduct any further investigation or provide the assessee with an opportunity to cross-examine the statements of third parties. The ITAT referenced similar cases where additions based on the same search were deleted, reinforcing the decision to uphold the CIT(A)'s order.

Conclusion:

The ITAT dismissed the Revenue's appeal and treated the assessee's cross-objection as infructuous. The judgment emphasized the need for corroborative evidence and proper investigation before making additions based on third-party documents. The ITAT's decision reinforced the principle that mere entries in seized documents, without direct evidence, cannot justify additions under Section 69B.