ITAT Holds Alleged Cash Payment Cannot Sustain Addition Without Independent Enquiry or Material Evidence:

The assessee had originally filed his return of income declaring total income of Rs 46,62,390, and the assessment under Section 143(3) was completed on 29 December 2009. Subsequently, based on information received from the DGIT (Investigation), Mumbai concerning alleged cash payments made in connection with purchase of a flat from the Hiranandani Group, the assessment was reopened under Section 147 of the Income Tax Act.

The AO alleged that the assessee had made an undisclosed cash payment of Rs 76,92,500 to M/s Crescendo Associates, the builder, towards purchase of the flat. The assessee denied making any such on-money payment and challenged both the reopening and the proposed addition. The AO ultimately made an addition of Rs 76,92,500 under Section 69 of the Act. The CIT(A) sustained the addition. 

Before the Tribunal, the assessee submitted that his purchase payments were made through a home loan and that there was no evidence establishing payment of cash to the builder. The Tribunal noted that the facts of the present case were identical to Rajesh Ravjibhai Patel Case. In that case, the Tribunal had held that material found in the possession of a third party could be sufficient for forming a belief for reopening an assessment, but such material by itself was insufficient to sustain an addition without further enquiry and corroboration.

The Tribunal further observed that where the assessee had denied making the cash payment and furnished details showing payments through a home loan, the AO was required to conduct further enquiry with the builder and bring material on record to establish that the assessee had actually made the alleged cash payment. 

[related id="categorically"]

The Tribunal found that the assessee had categorically denied making any on-money payment and that the payments towards the flat were made from a home loan. It held that the addition under Section 69 could not be sustained merely on the basis of uncorroborated data or entries in third-party books without independent material establishing the alleged cash payment. Accordingly, it directed the AO to delete the addition of Rs 76.92 lakh.