ITAT Deletes Addition for Alleged On-Money Payment Due to Lack of Evidence Against Buyer

The Income Tax Appellate Tribunal (ITAT) has ruled in favour of an assessee, deleting an addition of Rs 7.24 lakh made on account of alleged on-money payment for a property. The addition was based on material seized from a builder and a statement from their promoter, but the ITAT found no independent evidence linking the assessee to the alleged cash payment. The Tribunal emphasised that suspicion alone is insufficient and that the tax department must provide concrete proof of the assessee's involvement.

In the case of Vikas Kailashchandra Gupta v. ITO, a search and seizure operation was conducted on the Cosmos Group. During the search, statements were recorded from one of the group’s promoters, and certain loose papers and electronic data were seized. Based on the seized material, the Department alleged that cash of Rs. 14.48 lakh had been paid towards the purchase of a flat jointly owned by the assessee and his wife.

Since the property was jointly held, the Assessing Officer treated 50% of the alleged cash payment, amounting to Rs. 7.24 lakh, as income that had escaped assessment in the hands of the assessee. The addition was made during reassessment proceedings and was subsequently confirmed by the CIT(A).

Before the ITAT, the assessee argued that no search had been conducted in his case and that no incriminating material relating to the alleged payment had been found from his possession, bank accounts, books of account or other records. It was contended that the addition was based only on the statement of the builder’s promoter and material seized from the builder.

The Tribunal observed that a statement recorded during a search and material seized from a third party may constitute relevant evidence. However, an addition in the hands of another person cannot be sustained unless there is reliable and independent evidence establishing a clear connection between the seized material and that person.

The ITAT noted that the Department had not produced any evidence showing the actual movement of cash from the assessee to the builder. It had also not established the availability of undisclosed cash with the assessee or found any corroborative evidence from his financial records.

Relying on its earlier decision in Mrs. Mopnika Anand Gupta v. ITO and the Supreme Court ruling in CIT v. P.V. Kalyanasundaram, the Tribunal held that suspicion, however strong, cannot replace legal proof. Mere entries in the builder’s records or statements made by the builder were insufficient to establish that the purchaser had actually paid on-money.

Accordingly, the ITAT set aside the orders of the lower authorities and directed the Assessing Officer to delete the addition of Rs. 7.24 lakh. The appeal was allowed.

Key Takeaway: An addition for alleged on-money payment cannot be sustained merely on the basis of statements or records found during a search conducted on the builder. The Department must establish the purchaser’s actual involvement through credible and independent corroborative evidence. Suspicion alone cannot substitute legal proof.

Disclaimer: This AI-generated summary is for informational purposes only. Please view the attached original judgment for the complete text and authoritative interpretation.