In a recent ruling, the Madras High Court quashed a tax demand of ₹14.58 crore over an alleged undisclosed cash receipt related to a land sale transaction citing insufficient evidence provided by the Revenue Department.
Ranvir Ranjith Shah filed a writ petition challenging the income tax assessment order dated 28.03.2024 for the assessment year 2018-19. The petitioner’s father, Ranjith Popatial Shah, was a regular income tax assessee and passed away on 21.06.2018.
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Following his father’s death, the petitioner filed the income tax return for the assessment year 2018-19. The Income Tax Department issued a notice under Section 148 of the Income Tax Act, 1961, alleging an undisclosed cash receipt of Rs. 14,58,00,000 from the sale of land by the petitioner’s father.
The petitioner denied the allegation stating that all transactions were conducted through cheques and capital gains tax had been paid for the assessment year 2017-18. Despite the explanation and evidence submitted by the petitioner, the department passed an assessment order demanding tax on the alleged undisclosed cash receipt.
The petitioner filed an appeal against the assessment order and sought a stay on the tax demand but the stay application was rejected by the assistant commissioner of the income tax. The assistant commissioner directed the petitioner to pay 20% of the demand and file a fresh stay application for the remaining amount.
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The petitioner filed a writ petition challenging the rejection of the stay application and the demand raised in the assessment order. The petitioner submitted that the tax demand was baseless as no evidence supported the claim of cash receipt and the stay application was wrongly rejected.
The respondents argued that the petitioner failed to prove the non-receipt of cash and the stay application was rejected as per law.
Justice Krishnan Ramasamy observed that the tax authorities did not present sufficient proof beyond the notice annexure to support the alleged cash transaction. The court considered the petitioner’s father’s death before the alleged transaction and the lack of evidence from revenue.
The court set aside the impugned order and directed the petitioner to deposit 10% of the disputed tax demand within four weeks. The court granted a stay on the assessment order until the disposal of the appeal. The court directed the Assistant Commissioner of Income Tax to proceed with the appeal process and dispose of it on merits and by the law.
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