No Addition without any Corroborative Evidence indicating Payment of On–Money: ITAT [Read Order]

In M/s. Rhythm Real Estates Pvt. Ltd & Ors. vs. Income Tax Officer, the Mumbai Bench of Income Tax Appellate Tribunal (ITAT) deleted the addition made under section 69B of the Income Tax Act, 1961 as the Assessing Officer had no other corroborative evidence indicating cash payment of on–money by the assessee.

The assessee engages in the business of Real Estate Development. In the returns filed by the assessee, it was declared a loss of Rs. 44,492/-. The Assessment in case of the assessment was completed under Section 143(3) of the Income Tax Act,1961 computing the income at nil after disallowing the loss claimed. They assessee made cash payments towards on-money for purchasing landed property in New Delhi. Upon the report of the Director of Revenue Intelligence (DRI), Mumbai, on the basis of recovery of a hard disk and a pen drive during a search conducted, the Assessing Officer reopened the assessment under section 147 by issuing a notice under Section 148 of the Income Tax Act, 1961. Therefore, in the course of assessment proceedings, the Assessing Officer proposed to treat the cash payment made on account of on–money, etc., as an unexplained investment of the assessee under section 69B of the Act. The Assessing Officer rejecting the objections of the assessee and relying upon the information received from the DRI treated the cash payment of Rs.8.87 Crores as the unexplained investment under section 69B of the Act and added back to the income of the assessee.

The learned Commissioner of Income Tax (Appeals) (CIT(A)) after considering the submissions of the assessee upheld the validity of reopening under section 147 of the Act. However, as regards the validity of the addition made of Rs.8.87 Crores is concerned, the learned Commissioner (Appeals) called for a remand report from the Assessing Officer. After considering the submissions of the assessee and taking note of the Assessing Officer’s observations in the remand report, the learned Commissioner (Appeals) deleted the addition made under section 69B of the Income Tax Act, 1961. Being aggrieved by order of the learned Commissioner (Appeals) both the Revenue as well as the assessee appealed before ITAT. While the Revenue has challenged the deletion of addition made by the Assessing Officer under section 69B of the Act, the assessee has called into question the decision of the learned Commissioner (Appeals) in upholding the validity of re–opening of assessment under section 147 of the Act.

 The bench comprising of Judicial Member Saktijit Dey & Accountant Member Rajesh Kumar observed that the Assessing Officer (A.O) hadn’t produced any other evidence to indicate payment of on-money by the assessee. It also noted the Assessing Officer (A.O) had neither made any independent inquiry with the sellers of the landed property nor made any inquiry to ascertain the market rate of the land in that locality.

Upholding the decision of the Commissioner of Income Tax (Appeals) (CIT(A)), the bench held that in the absence of any evidence on record to prove the payment of on-money by the assessee, the addition made under section 69B of the Income Tax Act,1961 cannot be sustained.