Alleged cash "on-money" in shop purchases: s.69 additions across AYs 2017-18 to 2019-20 struck down for lack of proof

Additions under s.69 for alleged cash "on-money" paid for purchase of shops were examined. For AYs 2017-18 and 2018-19, the Tribunal found no material indicating any cash payment in those years; the sale agreements and bank statements showed the purchase transaction occurred only in FY 2018-19 relevant to AY 2019-20, hence the s.69 additions for AYs 2017-18 and 2018-19 were deleted. For AY 2019-20, the addition based solely on a third-party search statement and an Excel sheet recovered from that third party was held unsustainable, following co-ordinate Bench precedent that third-party documents alone cannot support such addition; the addition was deleted and the assessee's appeals were allowed.

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1. ISSUES PRESENTED AND CONSIDERED

(i) Whether additions under section 69 for alleged "on-money" cash payments towards purchase of shops could be sustained for assessment years 2017-18 and 2018-19 when the underlying purchase/booking transaction occurred in the subsequent year.

(ii) Whether addition under section 69 for assessment year 2019-20 could be sustained when the Revenue's case rested solely on third-party statements recorded during search and an Excel sheet found in a pen drive seized from a third party, without independent corroboration and without confronting such adverse material to the assessee.

2. ISSUE-WISE DETAILED ANALYSIS

Issue (i): Sustainability of section 69 additions in assessment years 2017-18 and 2018-19 despite purchase transaction occurring later

Legal framework: The Tribunal considered section 69 in the context of whether an unexplained investment (alleged cash component) could be attributed to years in which no purchase-related transaction was shown to have occurred on record.

Interpretation and reasoning: The Tribunal examined the sale agreements and banking records placed on record and found that the booking and payments related to the shops occurred in the financial year 2018-19 relevant to assessment year 2019-20. It noted cheque payments for booking and subsequent instalments prior to execution/registration of sale agreements, and found no material suggesting any cash "on-money" payment in the earlier two years. The record indicated that the transaction between the assessee and the builder took place only in the later year.

Conclusions: Since the purchase transaction itself was found to have taken place in assessment year 2019-20 and there was no supporting material for any cash payment in assessment years 2017-18 and 2018-19, the additions under section 69 for those two years were held unsustainable and were deleted.

Issue (ii): Whether section 69 addition for assessment year 2019-20 can be based only on third-party statement and uncorroborated Excel data from a pen drive, without confronting the material to the assessee

Legal framework: The Tribunal evaluated the evidentiary basis for section 69 addition where the alleged investment was inferred from third-party search material and statements, and considered the requirement of reliability/corroboration and adherence to principles of natural justice (including confronting adverse material and opportunity to rebut/cross-examine) as part of its decision on merits.

Interpretation and reasoning: The Tribunal found that the Revenue's sole reliance was on the statement of a third party recorded during search and the Excel sheet found in a pen drive seized from that third party. The Tribunal treated the Excel data as uncorroborated and noted the absence of independent evidence establishing that the assessee paid cash over and above the agreement value. It further accepted the contention that the adverse statement/material was not confronted to the assessee. The Tribunal also relied on co-ordinate bench decisions on identical facts arising from the same search material, which had held that such uncorroborated third-party electronic data and statements, without proper confrontation and without independent support, could not sustain an addition under section 69.

Conclusions: In the absence of independent corroboration and in view of the reliance on untested third-party statement/electronic sheet not confronted to the assessee, the addition under section 69 for assessment year 2019-20 was held unsustainable. The Tribunal deleted the section 69 additions for assessment years 2017-18 to 2019-20.

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