ITAT upholds CIT(A) Decision Deleting Rs. 3.80 Crore On-Money Addition in Land Purchase, citing Lack of Evidence linking Assessee to Cash Transaction [Read Order]

The Visakhapatnam Bench of Income Tax Appellate Tribunal ( ITAT ) upheld the Commissioner of Income Tax (Appeals) [CIT(A)]'s decision to delete the addition of Rs. 3.80 crore made by the Assessing Officer ( AO ) regarding on-money in a land purchase transaction, citing the lack of evidence linking the assessee to the alleged cash transaction.

The Revenue-appellant appealed against the CIT(A) order for the Assessment year 2022-2023 dated 07.-08-2024.In this case,Yerra Rajesh,respondent-assessee, filed his return of income for the said assessment year, declaring a total income of Rs. 1,06,29,050/-.

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A search was conducted on the group of M/s. Meenakshi Agro Chemicals, and the assessee’s case was subsequently centralized. Notices were issued under sections 143(2) and 142(1) of the Act, calling for details.

The assessee had purchased land in Guntur for Rs. 1,62,80,000/- from four brothers. However, during the search, an Excel sheet was seized, indicating an additional cash payment of Rs. 3,80,05,000/- (on-money), which was confirmed by two of the sellers in their statements.

The assessee denied paying any on-money beyond the sale deed consideration. Despite this, the AO, based on the seized evidence and seller statements, concluded that the on-money had been paid and taxed it as undisclosed income under section 69 read with section 115BBE of the Act.

Comprehensive Guide of Law and Procedure for Filing of Income Tax Appeals, Click Here

The assessee filed an appeal before the CIT(A) against the AO's order, reiterating similar arguments. The CIT(A) partly allowed the appeal, relying on the Andhra Pradesh High Court's ruling in K.V. Lakshmi Savitri Devi (ITA No. 563 of 2011) and the ITAT Visakhapatnam Bench's decision in P. Koteswara Rao v. DCIT (ITA Nos. 251 & 252/Vizag/2012).

The tribunal reviewed the case and found that the AO based the addition of Rs. 3,80,05,000/- on an Excel Sheet seized during a search, but the document lacked any reference to the assessee or the property. The AO also relied on the sellers' returns, which included the on-money, but failed to provide corroborative evidence linking the assessee to the payment.

The appellate tribunal cited the Andhra Pradesh High Court’s decision in K.V. Lakshmi Savitri Devi, which ruled that entries without a clear connection to the taxpayer cannot be used as proof.

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The two member bench comprising Duvvuru RL Reddy ( Judicial Member ) and S.Balakrishnan ( Accountant Member ) noted that no incriminating material was found at the assessee's premises, and the AO did not conduct independent inquiries. It distinguished the case from B. Kishore Kumar v. DCIT, as the assessee in this case did not admit to paying on-money. The tribunal upheld the CIT(A)'s decision to delete the addition and dismissed the Revenue’s appeal.

To Read the full text of the Order CLICK HERE

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