Ahmedabad: An income-tax appeal for the 2016-17 assessment year has resulted in relief for a taxpayer after an appellate tribunal set aside an income addition made on allegations of cash “on-money” (unaccounted sum) paid for a property purchase, holding that the tax department relied on a general third-party material without direct evidence.The dispute began with the filing of a return on Nov 30, 2016, declaring income of Rs 4,87,98,100. A scrutiny assessment under Section 143(3) was completed on Oct 4, 2018, accepting the returned income as filed. The matter resurfaced after the assessing authority received information linked to a search under Section 132 conducted on April 4, 2017, on a real estate group. During that search, the group admitted to receiving on-money in certain transactions and later made disclosures in settlement proceedings.Based on this information, the taxpayer’s case was reopened under Section 147. The taxpayer denied paying any cash component. Despite the denial, the assessing authority made an addition of Rs 19,62,500 as proportionate on-money allegedly paid in cash for the property, treating it as unexplained money under Section 69A.A reassessment order under Section 143(3)/147 dated March 25, 2022, recomputed total income at Rs 5,07,60,600. The first appellate authority at the National Faceless Appeal Centre dismissed the appeal by order dated April 21, 2025, prompting a second appeal.Before the Income Tax Appellate Tribunal (ITAT), the taxpayer argued that no evidence of cash payment was found during the search and that the addition was based only on a general statement of an accountant and a list of purchasers submitted by the developer during post-search proceedings.It was also argued that other co-owners faced the reopening of cases on the same grounds but were not subjected to any such addition, making the department’s approach inconsistent.The tribunal examined the recorded reasons for reopening and noted the absence of any specific reference to an entry showing the alleged cash payment. It found that the case was reopened primarily on the basis of a third-party statement and a purchaser list, without corroborating material tying the taxpayer to any on-money payment.Relying on earlier tribunal findings in a similar matter involving the same developer, the tribunal in its order highlighted procedural lapses, including failure to supply the third-party statement to the taxpayer, which raised natural justice concerns. It also cited a high court view that an unsigned Excel sheet or third-party disclosure, without corroborating material and without establishing actual payment by the purchaser, cannot justify the addition.CA Sulabh Padshah said the decision will benefit a large number of assessees facing tax litigation based solely on a third party’s confession, without any direct evidence against them.
