No Income Tax Addition of On-Money Payment on basis of Dumb Document: ITAT [Read Order]

The Hyderabad Bench of the Income Tax Appellate Tribunal (ITAT) has held that an addition towards alleged on-money payment for purchase of immovable property cannot be sustained solely on the basis of a dumb document seized during search proceedings, in the absence of any corroborative evidence.

During a search conducted in the case of a third party, Dr. Amidyala Lingaiah, a loose sheet was seized, the contents of which were alleged to pertain to the assessee-firm, M/s. Rutuja Projects. Based on the said document, proceedings under Section 153C of the Income Tax Act, 1961 were initiated against the assessee.

The Assessing Officer (AO) inferred from the contents of the seized paper that the assessee had paid consideration over and above the amount recorded in the registered sale deeds for acquisition of certain properties and consequently made an addition towards alleged unexplained investment.

On appeal, the Commissioner of Income Tax (Appeals) [CIT(A)] deleted the addition after observing that the AO had failed to bring on record any independent material or evidence to establish that any on-money payment had actually been made by the assessee. The CIT(A) held that the addition was based solely on unsubstantiated notings contained in the seized document.

Challenging the deletion, the Revenue contended before the Tribunal that certain details recorded in the seized document corresponded with the area of the property and cheque payments reflected in the registered sale deeds, thereby lending credibility to the document.

The assessee, however, submitted that the seized paper was merely a dumb document and that no corroborative evidence had been found during the search to establish payment of any unaccounted consideration. It was further contended that the registered sale deeds recorded the actual consideration paid and the Revenue had failed to dislodge the evidentiary value of such registered documents.

The Tribunal of Ravish Sood, Judicial Member and Madhusudan Sawdia Accountant Member observed that “We thus, are of firm conviction that now when it has been the claim of the assessee firm that it had not paid any on-money, i.e., amount in excess of that disclosed in the registered sale deed for which it had purchased the subject property from Dr. Amidyala Lingaiah, the AO was by no means justified to dislodge the said claim without placing on record any irrefutable secondary evidence which would disprove to the hilt the veracity of the said claim.”

The Bench relied on the decision of the Principal Commissioner of Income Tax (PCIT) vs. Tarun Kumar Goyal. In the said case, the High Court, held that the addition of on-money payment made in the assessees' hands on the basis of a mere dumb document, which is not corroborated by any other evidence, was not sustainable, dismissed the revenue’s appeal. The Tribunal upheld the order of the CIT(A) deleting the addition and dismissed the Revenue’s appeal.

Support our journalism by subscribing to Taxscan premium. Follow us on Telegram for quick updates