ITAT Deletes Rs 24.70 Lakh Addition for Alleged On-Money Payment as AO Failed to Prove Cash Transaction

The Income Tax Appellate Tribunal (ITAT) Mumbai held that an addition under Section 69 for alleged on-money payment cannot be sustained merely on the basis of third-party statements or seized documents unless the Revenue establishes actual payment through corroborative evidence.

The assessee purchased a flat for a recorded consideration of Rs 41 lakh but the Investigation Wing alleged that the assessee had paid an additional Rs 24.70 lakh in cash as on-money to the builder, Sabari Developers LLP. The allegation stemmed from material seized during a search conducted on Sabari Developers LLP. During the search, one of the partners of the builder allegedly admitted that cash payments had been received from certain flat purchasers and a chart reflected a cash component relating to the assessee’s flat. Consequently, the assessment was reopened on the basis of information received.

The AO treated Rs 4.70 lakh as an unexplained investment under Section 69 of the Income Tax Act and made an addition accordingly. The Revenue Department examined the seized documents and the partner’s statement and held that it constituted sufficient evidence to justify the addition.

The Tribunal observed no independent evidence was brought on record to establish that the assessee had actually paid any amount in cash. Moreover, the Revenue failed to produce any corroborative material demonstrating actual payment of cash by the assessee.

The ITAT held that Where the assessee produces a builder’s confirmation showing receipt of consideration through banking channels and the same remains unrebutted, the burden lies upon the Department to prove the alleged cash transaction. In the absence of such proof, the addition is liable to be deleted. Accordingly, the Tribunal allowed the appeal and deleted the addition of Rs 24.70 lakh made as an unexplained investment under Section 69 of the Income Tax Act.