The Mumbai bench of the Income Tax Appellate Tribunal (ITAT) has ruled that the tax authorities were justified in adding income to the assessee’s return due to inadequate evidence for cash payments and partnership formation and found that the assessee had failed to provide any documentary evidence to support his claims and that the tax authorities had properly followed the law in making the addition.
The assessee, M/s Steecon Infrastructure, a partnership firm, entered into a memorandum of understanding for a property in Sardarpura Jodhpur on 13/04/2011. They were accused of making several cash payments, including a substantial amount of Rs. 1,44,00,000/-. A dispute arose, and the property was sold to others.
The assessee filed a civil suit to recover the total amount, including the alleged cash payment. The Assessing Officer treated the payments as undisclosed income. Unsatisfied with the Commissioner’s decisions, the assessee filed an appeal before the appellate tribunal.
The assessee argued that the allegations against them were unsupported by expert opinions and should not have been dismissed by the Assessing Officer. They argued that the alleged cash payments were made as part of a civil suit to recover money from another party and that the other party, Shri Gulab Singh Bhandari, denied receiving any cash payment.
They also argued that the partnership firm’s formation was not justified as the payments were made before business operations began.
The Department argued that the assessee made claims of cash payments in a civil suit and that the factual statement made in court should be considered valid. They argued that Shri Gulab Singh Bhandari’s denial of cash receipt was irrelevant and that the assessee’s claim of Rs. 1,44,00,000/- should be considered true unless proven otherwise.
The tribunal examined the validity of the Assessing Officer’s reasons for treating the payments as undisclosed income. They also considered the potential for the claim to strengthen the suit against the other party involved and the reasonableness of adding the payments to the partnership firm’s income.
The two-member bench comprising Aby T Varkey (Judicial Member) and Om Prakash Kant (Accountant Member)dismissed the assessee’s allegations of alleged cash payments as undisclosed income due to lack of expert opinion support and also rejected the assessee’s claim of cash payments in a civil suit. The matter was settled out of court, and the ITAT assessed the reasonableness of adding alleged undisclosed cash payments to the firm’s income and dismissed the appeal, upholding the Assessing Officer’s decision.
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