Lack of Corroborative Evidence for Addition of Rs.4.93 Cr as Unaccounted Property Investment: ITAT Dismisses Revenue Appeals [Read Order]

The Chennai Bench of the Income Tax Appellate Tribunal (ITAT) has dismissed nine appeals filed by the Revenue ruling that lack of corroborative evidence for additions totaling Rs. 4.93 crore made by the Assessing Officer (AO) for alleged unaccounted investments in immovable property by three assessees.

The case pertains to K. Rethinam, S. Ramachandran, and Jagannathan Sekar, (assessees) partners of SRS Mining, who faced scrutiny for assessment years (AYs) 2015-16, 2016-17, and 2017-18.

The AO made additions of Rs. 1,10,00,000 for AY 2016-17 and Rs. 3,83,33,330 for AY 2017-18, alleging unaccounted cash payments to Shri Gopu Rajagopal for property purchases from M/s. Kara Property Ventures LLP.

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The AO relied on entries in a register seized from SRS Mining’s office and a sworn statement by Gopu Rajagopal recorded on 21.12.2016, claiming cash payments of Rs. 14.80 crore were made for apartments.

Gopu Rajagopal retracted his statement via a notarized affidavit on 03.01.2017, citing coercion and exhaustion during interrogation. The AO also noted that Gopu Rajagopal admitted Rs. 3.30 crore under the PMGKY Scheme 2016.

Aggrieved by the AO’s orders, the assessees appealed to the Commissioner of Income Tax (Appeals) [CIT(A)] . The CIT(A) deleted the additions, citing lack of evidence linking the cash payments to the assessees and the invalidity of the retracted statement.

Aggrieved by the CIT(A)’s order, the Revenue appealed to the ITAT. The counsel for the Revenue argued that the CIT(A) erred in deleting the additions, as the seized register and Gopu Rajagopal’s initial statement sufficiently evidenced the unaccounted payments.

The Revenue contended that the retraction was invalid and that consistency with Gopu Rajagopal’s assessment necessitated the additions.

The counsel for the assessees contended that the seized register, found at SRS Mining’s premises, did not specify that the payments were made by the partners. The counsel for the assessees emphasized the retraction of Gopu Rajagopal’s statement and the absence of corroborative evidence.

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The two-member bench, comprising Manu Kumar Giri (Judicial Member) and Jagadish (Accountant Member), observed that the seized register contained numerous cash payment entries, with no specific indication that the payments to Gopu Rajagopal were made by the assessees.

The tribunal observed that under Sections 132(4A) and 292C, the presumption that seized materials belong to SRS Mining does not extend to the partners without evidence of their involvement.

The tribunal further held that the retracted statement of Shri Gopu Rajagopal, a third-party witness, lacked evidentiary value, especially without cross-examination or corroboration.

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The tribunal concluded that the AO failed to discharge the burden of proving the cash payments with cogent evidence, rendering the additions legally unsustainable. The tribunal upheld the CIT(A)’s order to delete the additions.

The appeals of the revenue were dismissed.

To Read the full text of the Order CLICK HERE

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