ITAT deletes Section 69A additions for alleged on-money in property sale lacking direct evidence linking cash to assessee

ITAT Chennai held that AO erroneously made additions u/s 69A for alleged on-money receipt on property sale. The addition was based solely on seized documents from third party showing cash transfer to Bangalore occurring 9 days after property registration, without any direct evidence linking cash to the assessee. ITAT ruled that suspicion cannot substitute evidence, citing SC precedent. Legal presumption u/s 132(4A) and 292C applies only to searched person, not third parties. Since seized material contained no reference to assessee's name or specific property, no adverse inference could be drawn. CIT(A)'s deletion of additions was upheld.

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Issues Involved:

1. Deletion of addition made under Section 69A of the Income Tax Act towards receipt of unaccounted money on sale of property.
2. Validity of the "dumb document" as evidence for making additions.
3. Applicability of legal presumptions under Sections 132(4A) and 292C of the Income Tax Act.

Summary:

Issue 1: Deletion of Addition under Section 69A

The Revenue challenged the deletion of Rs. 51,53,55,000/- added under Section 69A of the Income Tax Act, alleging it as unaccounted money received from the sale of property. The Assessing Officer (AO) inferred the receipt of on-money based on a seized cash book from M/s. Polisetty Somasundaram, which showed a cash payment of Rs. 51,53,55,000/- to Bangalore. The AO argued that the proximity between the date of property sale (23.12.2015) and the cash payment (31.12.2015) indicated receipt of on-money by the assessee.

The Commissioner of Income Tax (Appeals) [CIT(A)] deleted the addition, stating that the cash book was a "dumb document" without any reference to the assessee or the property transaction. The CIT(A) found no corroborative evidence to support the AO's claim and noted that both the buyer and the seller denied any on-money transaction.

Issue 2: Validity of the "Dumb Document"

The Tribunal upheld the CIT(A)'s view that the cash book was a "dumb document," lacking any details about the purpose or recipient of the cash. The Tribunal emphasized that additions based on such documents without corroborative evidence or admission by the involved parties are unsustainable. The Tribunal cited judicial precedents supporting the view that suspicion, however strong, cannot replace evidence.

Issue 3: Applicability of Legal Presumptions

The Revenue argued that the legal presumptions under Sections 132(4A) and 292C of the Income Tax Act should apply to the seized document. The Tribunal rejected this argument, noting that these provisions apply only to the person from whose possession the documents were seized. Since the document was seized from a third party (M/s. Polisetty Somasundaram) and not the assessee, the presumptions could not be extended to the assessee.

Conclusion:

The Tribunal dismissed the Revenue's appeal, upholding the CIT(A)'s decision to delete the addition made under Section 69A. The Tribunal found that the AO's conclusions were based on suspicion and lacked corroborative evidence. The Tribunal also dismissed the assessee's cross-objection as infructuous, given the dismissal of the Revenue's appeal.

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