Mumbai ITAT Quashes Addition Due to Lack of Proof About Money Receipt from Seized Documents

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

The bench of Anikesh Banerjee (Judicial Member) and B.R. Baskaran (Accountant Member) has remarked 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 petitioner company is engaged in the business of manufacturing plastic containers. AO completed the original assessment. Thereafter, the Assessing Officer obtained certain information associated with survey operations conducted in the hands of M/s. Shah Housecon Private Limited.

The company is a builder and developer. It has launched three housing projects. The taxpayer had purchased three flats or shops in one of the housing projects named “Levels,” located in Malad (East).

At the time of the survey action, specific documents were discovered from the accountant of the builder. The details of cash received from the buyers of the flats are included in the documents.

In that statement, a sum of Rs. 1.61 crore was noted as cash receipts against the flat numbers purchased by the taxpayer. January 7, 2013, is the date of issue of the allotment letter. Based on the information, the assessing officer opined that the taxpayer had paid the amount in cash. The AO reopened the assessment for that year via issuing a notice u/s 148 of the IT Act.

The taxpayer argued that the value of the purchase of the flats is indeed kept via the valuation report issued via the registered valuer, and this report supports the matter of the taxpayer that there was no need to pay part of the consideration in cash as the purchase was done at market rates.

Based on the recording performed by the builder the addition can not be incurred when the purchase consideration corresponds to the market rates and no other proof corroborating those entries was discovered.

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As per the tribunal, the pen drive was discovered at the time of investigation, and the builder had proposed the alleged on-money receipts as its income. Builders’ action shall not automatically keep the presumption that the related taxpayer has paid money.

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