ITAT Deletes Rs 10 Lakh Addition as Revenue Fails to Prove Alleged Cash Payment for Flat Purchase 

The Income Tax Appellate Tribunal (ITAT) Pune has deleted the addition, observing that reliance on incomplete seized documents and denial of cross-examination rendered the addition legally unsustainable and the revenue has failed to establish the alleged cash transaction with cogent evidence.

The assessee is an employee of Mahindra & Mahindra Ltd and purchased a residential flat. Later, he filed his return of income for assessment year 2023-24. His case was selected for scrutiny on the basis of information received from the Investigation Wing after a search conducted on the SSD Group. Based on the seized papers, the AO alleged that the assessee had made an unaccounted cash payment of Rs 10 lakh to the builder in addition to the recorded sale consideration. The assessee has denied making any cash payment and submitted the registered sale agreement, housing loan sanction letter, bank statements, payment receipts and a detailed payment chart to establish that the entire purchase consideration had been paid through banking channels.

The Tribunal observed that the AO had relied upon only summarised copies of seized papers without furnishing the complete documents to the assessee. It found that the documents did not establish that they are related to the project or that the assessee had made any cash payment. The Tribunal further noted that the statement of the third party did not specifically implicate the assessee in making any cash payment. It also observed that the assessee was not given an opportunity to cross-examine the witness, which weakens the evidentiary value of the statement.

Since the assessee had produced bank statements, loan records and payment receipts showing that the entire payment had been paid through banking channels, the burden shifted to the revenue to prove that there had been an alleged cash payment. The Tribunal held that the Revenue failed to prove the same and relied on the principle that no addition can be made merely on suspicion without establishing that any unaccounted consideration had actually passed between the parties. Accordingly, it directed the AO to delete the addition of Rs 10 lakh and allowed the appeal of the assessee.