ITAT Deletes Rs. 58.5 Lakh “On-Money” Addition: Unsigned Agreement Held Inadmissible

A search conducted on 17.08.2020 in the case of Pranjil Batra led to seizure of an alleged agreement to sell concerning a commercial property at Greater Noida sold by Amit Jain and Nidhi Jain (AY 2019–20). The property had been purchased for Rs. 79,78,030 and later sold through a registered sale deed for Rs. 75,00,000.

The seized agreement reflected a total consideration of Rs. 1,92,00,000, including Rs. 1,15,00,000 in cash. Based on this, proceedings under Section 153C were initiated and Rs. 1,17,00,000 was treated as undisclosed “on-money,” resulting in addition of Rs. 58,50,000 each as short-term capital gains. The CIT(A) upheld the addition, relying on matching cheque details between the agreement and the sale deed.

Issue Before Tribunal: Whether an unsigned and unwitnessed agreement to sell, recovered from the purchaser during search, constituted valid incriminating material under Section 153C to justify addition of alleged unaccounted cash consideration.

Tribunal’s Decision: The Tribunal found the seized agreement to be legally deficient and unreliable. The document was signed only by the sellers and not by the purchasers, bore no witness signatures, and lacked execution details. Further, at the time of the alleged agreement, transfer permission from the Greater Noida Industrial Development Authority had not even been obtained.

The Tribunal also noted absence of independent inquiry from the purchasers, no verification of market value, and no dispute regarding declared cost of acquisition. It held that for an admission to be conclusive, it must be unambiguous. The impugned document, being inchoate and unenforceable, lacked evidentiary value. Mere similarity in cheque particulars between the agreement and sale deed was insufficient to indicate receipt of cash consideration.

Therefore, the additions of Rs. 58,50,000 each were deleted. The penalty proceedings under Sections 270A and 271D were also set aside. All appeals of both assessees were allowed.

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