2025 (4) TMI 798 - AT - Income Tax

Unaccounted cash receipts on sale of land - incriminating documents were found and seized in search action - As argued assessee cannot be held liable for having received any on-money in cash in connection with sale of land as the assessee has not sold the land to the K. Star Group entity which is actually the second buyer or subsequent buyer - CIT(A) deleted the addition - HELD THAT - The assessee cannot be held liable for having received any on-money in cash in connection with sale of land as the assessee has not sold the land to the K. Star Group entity which is actually the second buyer or subsequent buyer. Therefore CIT(A) held that there is no justification for making an addition on account of receipt of on money in cash in the hands of the assessee as the assessee has sold the land to three individuals as an agricultural land and not sold to any K. Star Group entity which might have acquired the same in a subsequent sale transaction to which the assessee is not a party and for that reason the assessee cannot be made liable. Therefore ld CIT(A) deleted the addition. In the wake of above delineation we see no error in the conclusion drawn by the CIT(A) in this regard. The CIT(A) in our view has rightly deleted the addition. We thus decline to interfere with the conclusion so drawn by the CIT(A) whose order is under challenged by the revenue. Therefore we dismiss the appeal of the revenue.

Summary

ISSUES PRESENTED and CONSIDERED

The core legal issues considered in this judgment include:

• Whether the addition of Rs. 6,00,52,600/- as unaccounted cash receipts, based on alleged unaccounted cash investment in land by the assessee, was justified.
• Whether the documents seized from a third party during a search operation can be used as evidence against the assessee without corroborative evidence or opportunity for cross-examination.
• Whether the reassessment proceedings initiated under section 147 of the Income Tax Act were valid, given the claim of non-disclosure of material facts by the assessee.

ISSUE-WISE DETAILED ANALYSIS

1. Addition of Unaccounted Cash Receipts

Relevant legal framework and precedents: The addition was made under the assumption of unaccounted cash investment based on documents seized during a search operation. The legal framework involves sections 147 and 148 of the Income Tax Act, which deal with income escaping assessment and reassessment proceedings.

Court's interpretation and reasoning: The Tribunal examined whether the seized documents, which were unsigned and found at a third party's premises, could substantiate the addition. The Tribunal emphasized that unsigned documents without corroborative evidence are inadmissible as they are considered "dumb documents."

Key evidence and findings: The seized documents indicated a higher land purchase value than declared. However, these documents lacked signatures and were not directly linked to the assessee's transaction.

Application of law to facts: The Tribunal applied precedents that unsigned documents and third-party information without corroboration cannot form the basis for additions. The Tribunal noted the absence of direct evidence linking the assessee to the alleged unaccounted cash receipts.

Treatment of competing arguments: The Revenue argued that the seized documents indicated unaccounted cash transactions. The assessee contended that the documents were unrelated and lacked evidentiary value.

Conclusions: The Tribunal concluded that the addition was unjustified due to the lack of admissible evidence directly linking the assessee to the alleged unaccounted cash receipts.

2. Validity of Reassessment Proceedings

Relevant legal framework and precedents: Section 147 of the Income Tax Act allows reassessment if income has escaped assessment due to non-disclosure of material facts. The Tribunal considered the jurisdictional High Court's ruling in Kantibhai Dharamshibhai Narola Vs ACIT, which emphasized the need for independent reasons to believe income has escaped assessment.

Court's interpretation and reasoning: The Tribunal noted that the reassessment was based on borrowed satisfaction from third-party information without independent verification. The Tribunal highlighted the absence of evidence showing the assessee's failure to disclose material facts.

Key evidence and findings: The Tribunal found no evidence of the assessee's involvement in subsequent transactions or failure to disclose material facts.

Application of law to facts: The Tribunal applied the principle that third-party information alone does not justify reassessment without independent verification and reasons.

Treatment of competing arguments: The Revenue argued that the reassessment was justified based on seized documents. The assessee contended that the reassessment lacked a valid basis as it relied on unverified third-party information.

Conclusions: The Tribunal concluded that the reassessment was invalid due to the lack of independent reasons and evidence of non-disclosure by the assessee.

SIGNIFICANT HOLDINGS

The Tribunal held that:

• The addition of Rs. 6,00,52,600/- as unaccounted cash receipts was unjustified due to the lack of admissible evidence directly linking the assessee to the alleged transactions.
• The reassessment proceedings under section 147 were invalid as they were based on borrowed satisfaction from unverified third-party information without independent reasons to believe income had escaped assessment.

Core principles established:

• Unsigned documents and third-party information without corroborative evidence cannot form the basis for additions.
• Reassessment proceedings require independent reasons to believe income has escaped assessment, not merely third-party information.

Final determinations on each issue:

• The Tribunal dismissed the Revenue's appeal, upholding the CIT(A)'s decision to delete the addition of Rs. 6,00,52,600/-.
• The Tribunal affirmed the invalidity of the reassessment proceedings initiated under section 147.