Addition of on-monies in apartment sale overturned after stray notings and retracted statement failed to substantiate undisclosed receipts.

Addition for alleged receipt of on-monies was overturned because the purported apartment sale never materialized, so inference of undisclosed receipts lacked foundation; consequence: additions in the individuals hands were unjustified. The Tribunal found that stray pencil notings seized from a third party constituted a dumb document lacking complete, unambiguous information and without corroborative evidence, so the assessing officer failed to discharge the onus of proof; consequence: seized material could not sustain income additions. The assessees retracted statement was held unreliable and could not validate the impugned addition; consequence: all revenue grounds dismissed.

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Issues: Whether the addition of Rs.11.50 crores made under Section 69A of the Income-tax Act, 1961 on the basis of pencil notings found in third-party seized material and an original statement recorded under Section 132(4) (later retracted) is sustainable against the assessee.

Analysis: The seized entries originated from third-party premises and lacked the assessee's handwriting, signature, or other particulars identifying the recipient; contemporaneous inquiry under Section 133(6) showed that the purported property transactions did not materialise and payments were refunded. The presumption under Section 132(4A) applies against the searched person and cannot, without corroboration, be mechanically extended to another person named in third-party notes. Judicial principles invoked include the requirement that revenue discharge the burden of proof to show actual receipt of monies and that entries in loose third-party papers are 'dumb documents' absent corroborative, reliable evidence. The assessee's earlier recorded statement under Section 132(4) was validly retracted and the retraction was supported by subsequent affirmation during examination under Section 131; consequently that statement does not furnish reliable corroboration. Separately, the legal principle that tax must be imposed on the right person requires that, where payments relate to transactions of an entity (the developer/LLP), inference of receipt cannot be drawn against an individual signatory without cogent evidence linking the amounts to that individual.

Conclusion: The addition of Rs.11.50 crores under Section 69A in the hands of the assessee is unsustainable; the deletion of the addition by the first appellate authority is upheld and the Revenue's appeal is dismissed. The assessee's cross-objections are dismissed as infructuous.

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