MUMBAI: The Income Tax Appellate Tribunal (ITAT) has overturned a Rs 14.25 lakh addition made against a Thane resident concerning an alleged cash payment for a flat purchase. The tribunal concluded that the I-T department was unable to produce evidence directly linking the buyer to any “on-money” transactions.
The Mumbai bench of the ITAT ruled in favor of the taxpayer, who had bought a flat in Cosmos Mary Park, Thane, jointly with his wife for Rs 72 lakh in April 2012. Following a search of Cosmos Group, the real-estate developer, I-T investigators claimed to have located records suggesting cash payments exceeding the documented sale price for certain transactions.
Based on information from the investigation branch, the I-T officer alleged that the buyer had made a cash payment of Rs 28.5 lakh during the 2011-12 financial year. Since the taxpayer co-owned 50% of the property, that amount was added to his income as unexplained, attracting a high tax rate.
In response to a show-cause notice, the Thane resident provided confirmation from the builder stating they received Rs 72 lakh for the flat. However, this evidence was dismissed, with the I-T officer leaning on findings from the I-T investigation wing and statements by Cosmos officials who indicated cash payments were made by buyers.
The ITAT bench, comprising Pawan Singh and Makarand Vasant Mahadeokar, noted that the addition of Rs 14.25 lakh to the taxpayer’s income was primarily based on statements from Cosmos officials and references to electronic records allegedly obtained during the search.
The bench highlighted that none of the supposed incriminating material was presented as evidence or shared with the taxpayer. It also pointed out that the Gmail and Yahoo mail records cited by the I-T department were not produced during the assessment process.
The taxpayer denied making any cash payments and provided a confirmation from the builder asserting that the Rs 72 lakh was received for the flat purchase, as noted by the ITAT bench.
In granting the appeal, the tax tribunal asserted that statements alone cannot serve as valid evidence against a third party unless they undergo cross-examination. It also mentioned that similar additions against other buyers in real estate transactions have previously been annulled by other ITAT benches.
Tax experts believe this ruling could affect numerous disputes following real-estate investigations, particularly those making claims of ‘on-money’ payments, thereby bolstering taxpayers’ positions. The ruling emphasizes that the I-T department must present credible and independently verified evidence showing any cash payments beyond the officially recorded sale price for such additions to withstand appellate review.
