Addition u/s 69 of Income Tax Act shall not be made on basis of  ledger account seized from  third party on absence of clinching Evidence of Cash Payments towards Purchase of Flat: ITAT [Read Order]

The Income Tax Appellate Tribunal (ITAT) Lucknow bench held that addition under Section 69 of Income Tax Act should not be made on the basis of a ledger account seized from the third party in the  absence of clinching evidence of cash payments towards purchase of flat.

Assessee, Mahendra Lalka a retired IPS Officer, was a salaried employee. A search & seizure operation under Section 132 of the Income Tax Act was conducted  in the case of “SSS (Satyam, Sangini, Saligram) group of companies where certain incriminating  documents and digital data were found and seized.

On verification of digital data found in the computer of the said key person, it was noticed that it contained a ledger copy, wherein, in addition to cheque payment, date-wise cash payment received from the assessee towards purchase of a flat was found.

Based on such information, the Assessing Officer initiated proceeding  under Section  153C of the Income Tax Act in respect of the assessee. In the course of assessment proceedings, the Assessing Officer confronted the seized document and called upon the assessee to explain as to why the cash payment made of Rs.17 lacs towards purchase of flat should not be treated as income of the assessee  under Section  69 of the Income Tax Act. However the assessee denied it.

The Assessing Officer concluded the assessment by adding back the amount of Rs.17 lacs to the income of the assessee.

Aggrieved by the order, the assessee filed an appeal  before the Commissioner of Income Tax (Appeal){ CIT(A)} . who uphold the addition. Thereafter the assesee filed a second appeal before the tribunal.

Before the bench A. P. Sinha,  counsel for the assessee submitted that the Assessing officer could not be made the addition in absence of  clinching evidence towards the cash payments towards purchase of a flat. The  bank accounts referred to in the seized document did not belong to the assessee.

Further the addition made by the AO based on the ledger account of a third party found during the search proceedings .Thus the  AO could  not substantiate that the cash entered in the ledger account was sale proceeds with assessee.

Sanjeev Krishna Sharma, Counsel for the revenue supported the decision of lower authorities.

It was observed by the tribunal that  the incriminating material leading to the present addition is a ledger copy found in the desktop/laptop of a third party .  The incriminating material was not seized from the assessee.

The amount for purchase of flat paid it entirely through a banking channel from his bank account held with State Bank of India and ICICI Bank and bank account standing in the name of his wife held with Bank of India.

Moreover there was nothing on record to suggest that the third party from whom the ledger copy was seized admitted of having received the cash payment from the assessee.

The tribunal reviewed the facts and submissions of the both parties and the single  member bench of Saktijit Dey, ( Vice President ) held that the addition was made on the cash payments on  purchase of flat in absence of clinching evidence.

To Read the full text of the Order CLICK HERE

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