Loading judgment…
Facts
The Revenue made additions for cash purchases under Section 40A(3) and notional rental income based on a retracted police statement. The CIT(A) deleted these additions, finding no incriminating material or corroborative evidence. The Revenue appealed this decision.
Held
The Tribunal held that the additions were made without incriminating material or corroborative evidence, relying solely on a retracted police statement. Following previous coordinate bench decisions and the Apex Court ruling in Abhisar Buildwell (P) Ltd., the Tribunal dismissed the Revenue's appeal.
Key Issues
Whether additions can be made for cash purchases and notional rental income in a search assessment without incriminating material or corroborative evidence, based solely on a retracted statement.
Sections Cited
40A(3), 153A, 143(3)
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, Mumbai “D” Bench, Mumbai.
Before: Shri Pawan Singh (JM) & Shri Omkareshwar Chidara (AM)
“In the absence of incriminating material and also in the absence of corroborative evidence, whether addition can be made under section 40A(3) and notional rental income in a search assessment completed under section 143(3) r. w.s. 153A ?”
Even though the Revenue has taken 8 grounds, the sum and substance is mentioned in the above question.
From the assessment order/Ld. CIT(A) order, it is observed that there is no incriminating material except the sworn statement recorded in police station which was retracted later. The Ld. AO relied on the statement of one of the partner who has stated that with the unaccounted cash being carried on by him to the extent of Rs. 1.4 crore, he is going to purchase gold by cash. This statement was recorded in police station by Revenue because the police caught the appellant with the cash and informed Revenue. Subsequently, the statement was retracted by the appellant stating that the cash which is being carried in the vehicle is nothing but the sale proceeds of 2 Ronak Gold gold which is already recorded in the books of account. The Ld. AO disbelieved the version of appellant (after retraction) and made addition. The second issue/addition relates to notional value of the house property which was not let out.
The Ld. CIT(A) deleted these two additions stating that this is a search assessment and there is no incriminating material. The addition regarding cash purchases under section 40A(3) had no basis except the statement in the police station, and there is no corroborative evidence. It was also stated that the statement was recorded from the appellant in a police station under duress. The statement was retracted later. There is no corroborative evidence for the additions made by Ld. AO with respect to cash purchases and notional rental income. Hence, Ld. CIT(A) deleted the additions made by Ld. AO.
Aggrieved by the order of Ld. CIT(A), the Revenue filed an appeal before ITAT. The Ld. DR relied on the order of Ld. AO. The Ld. AR of the appellant has stated that both the issues were covered in their favour in earlier years assessments on same issues and filed a copy of the same. A perusal of the ITAT order, (ITA No. 5194 to 5197 and 5200 dated 3.12.2024) shows that there is an elaborate discussion on both the issues i.e., cash purchases and notional rent, where the Coordinate Bench has adjudicated the same in favour of the appellant with the following reasons :- a) There is no corroborate evidence of cash purchases to be disallowed under section 40A(3) except the statement recorded in police station and the same is retracted later.
b) There is no incriminating material relating to cash purchase and notional rental value added by Ld. AO. c) The Coordinate Bench relied on the decision of Hon'ble Apex Court in the case of Abhisar Buildwell (P) Ltd. and deleted both the additions made by Ld. AO and confirmed the decision of Ld. CIT(A), vide its order supra.
3 Ronak Gold 6. Since the facts and circumstances are same, respectfully following the decision of Coordinate Bench (above), the Revenue’s appeal is dismissed.
The Revenue’s appeal is Dismissed.
Order pronounced in the open Court on 25/09/2025.