Brokerage Addition of ₹20.30 Lakh by Relying on Rough Jottings Without Corroborative Evidence Unsustainable: ITAT [Read Order]

The Ahmedabad Bench of the Income Tax Appellate Tribunal (ITAT) deleted the addition of Rs. 20,30,000/- on account of alleged unaccounted brokerage income made by the Assessing Officer (AO), ruling that the addition based solely on rough jottings seized during a search, without any corroborative evidence, was unsustainable.

Divyang Dipakkumar Vyas (assessee) was involved in a search and seizure operation under Section 132 of the Income-Tax Act, 1961, conducted on September 28, 2021, in the case of the "B. Safal Group and City Estate Management Group," which also covered the assessee's premises.

The AO made an addition of Rs. 20,30,000/-, alleging it was the assessee's 20% share of an alleged unaccounted brokerage income of Rs. 84,00,000/- earned by the City Estate Group (in which the assessee was a partner). This addition was based on alleged rough jottings or loose papers.

The assessee had appealed to the Commissioner of Income Tax (Appeals) [CIT(A)], who upheld the addition. Aggrieved by the CIT(A)'s order, the assessee appealed to the ITAT. The assessee challenged the assessment order, contending that the addition was void, illegal, without jurisdiction and a violation of natural justice.

The bench, comprising Dr. B.R.R. Kumar (Vice-President) and Siddhartha Nautiyal (Judicial Member), observed that the addition was based solely on alleged rough jottings or loose papers seized during the search.

The Tribunal found that, on identical facts and issues, a coordinate bench had deleted a similar addition in the case of Shri Pravin Bavadiya. In this case it was held that additions based on loose papers were unsustainable because the seized material lacked corroborative evidence such as names of buyers/sellers or properties.

The Tribunal in the present case noted that the addition was based on estimated brokerage income drawn from the same seized material and without any independent corroborative evidence.

The bench observed the similarity in the present case no specific transactions, parties, or confirmations were brought on record to establish that the assessee actually received the alleged brokerage income.

The tribunal concluded by following the coordinate bench's order that there was no evidence on record to establish that the assessee actually received the alleged brokerage income. Therefore, the bench deleted the brokerage addition. The appeal of the assessee was allowed.

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