Seized Documents Lack Information About Receipt Of Money: Mumbai ITAT Deletes Addition

The Mumbai Bench of Income Tax Appellate Tribunal (ITAT) has deleted the income tax addition of Rs. 1.61 crores on the grounds that the seized documents lack information as to date and mode of receipt of “on money.”.

The bench of Anikesh Banerjee (Judicial Member) and B.R. Baskaran (Accountant Member) has observed that the entries made in the document fall short of certain material facts, viz., date and mode of receipt of “on money," who had paid the money, to whom the money was paid, date of agreement, etc.

The appellant/assessee company is in the business of manufacturing plastic containers. The original assessment was completed by the AO. Subsequently, the Assessing Officer received certain information relating to survey operations conducted in the hands of M/s. Shah Housecon Private Limited. The company is a builder and developer. It had undertaken three housing projects. The assessee had purchased three flats or shops in one of the housing projects named "Levels,” located in Malad (East).

During the course of the survey action, certain documents were found from the accountant of the builder. The documents contained the details of cash received from the buyers of the flats. In that statement, a sum of Rs. 1.61 crore was noted as cash receipts against the flat numbers purchased by the assessee. The date of issue of the allotment letter is January 7, 2013. Based on the information, the assessing officer took the view that the assessee had paid the amount in cash. The AO reopened the assessment for that year by issuing notice under Section 148 of the Income Tax Act.

The assessee contended that the purchase value of flats is also supported by the valuation report issued by a registered valuer, and this report supports the case of the assessee that there was no necessity to pay part of the consideration in cash as the purchase was done at market rates. The addition could not have been made on the basis of a recording done at the end of the builder, when the purchase consideration matches the market rates and no other evidence corroborating those entries was found.

The tribunal held that the pen drive was found during the course of search operations conducted, and the builder has offered the alleged on-money receipts as its income. The action taken by the builder would not automatically support the presumption that the concerned assessee has paid money.

The tribunal held that the addition of Rs. 1.61 crore made by the AO is not sustainable in law and directed the AO to delete the addition.

Counsel For Appellant: Vimal Punmiya & Rahul Punmiya

Counsel For Respondent: Dinesh A. Chourasia

Case Title: Yash Synthetics Private Limited Versus Assistant Commissioner of Income Tax

Case No.: ITA NO.268/MUM/2024

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