DCIT, CENTRAL CIRCLE-1, JAIPUR, JAIPUR vs. ADVANCE STRIPS PVT LTD, JAIPUR

ITA 1742/JPR/2025Status: DisposedITAT Jaipur15 June 202615 pages
AI SummaryAllowed

What were the facts?

The assessee, M/s Advance Strips Pvt. Ltd., and the Revenue are in cross-appeals against the order of the CIT(A) dated 19.02.2024 for Assessment Year 2019-20. The assessee derives income from rent and had no active business operations. A search and seizure action on 'Om Kothari Group' revealed WhatsApp chats and data suggesting unaccounted cash transactions related to the sale of industrial land. The assessee purchased two plots from M/s Om Metals Infotech Pvt. Ltd. (later M/s Ultrawave Projects Private Limited) for Rs. 4.50 Crores. The Assessing Officer (AO) alleged that the assessee paid 'on money' in cash, estimating the total actual purchase consideration at Rs. 27,04,89,600/- based on an average rate of Rs. 30,000/- per sq. mtr., leading to an addition of Rs. 22,54,89,600/- under Section 69. The assessee denied cash payments and challenged the AO's rate determination and denial of cross-examination. The CIT(A) restricted the addition to Rs. 9,51,50,257/- by adopting a proportionate 'on-money' component based on the seller's assessment.

What did the Tribunal hold?

The Tribunal held that the additions made by the AO and partially sustained by the CIT(A) were based purely on conjectures, surmises, uncorroborated third-party digital data, and without affording the right of cross-examination. The Tribunal found force in the assessee's submissions that the AO failed to establish any trail of cash movement from the assessee or to the seller, and no evidence of unaccounted investments or unexplained expenditure was found. The Tribunal cited the Supreme Court's decision in Andaman Timber Industries, holding that denying cross-examination of witnesses whose statements are the primary basis of assessment is a fatal flaw. The Tribunal also noted that the CIT(A)'s approach of sustaining the addition on a proportionate basis, relying solely on the seller's assessment, was fallacious, as there was no independent adjudication of cash payment by the assessee. The Tribunal further observed that the MOU dated 15.11.2017, which stipulated a consideration of Rs. 5,000/- per sq. mtr., was neither discussed nor controverted by the lower authorities. Consequently, in the absence of reliable evidence that cash exchanged hands over and above the sale consideration mentioned in the registered sale deed, the addition of Rs. 9,51,50,257/- confirmed by the CIT(A) was directed to be deleted. The Revenue's appeal was dismissed as infructuous.

What were the issues?

1. Whether the addition of Rs. 22,54,89,600/- made by the AO on account of alleged unaccounted cash payment for the purchase of plots is sustainable in law, considering the reliance on WhatsApp chats and digital data without corroborative evidence and denial of cross-examination to the assessee? 2. Whether the CIT(A) was justified in sustaining a part of the addition (Rs. 9,51,50,257/-) based on the seller's assessment, without independent verification of cash payment by the assessee? Assessee's contentions: The assessee argued that the WhatsApp chats and digital data did not pertain to it, and the AO's determination of the average rate of Rs. 30,000/- per sq. mtr. was arbitrary, as it pertained to a later period than the sale agreement. The assessee emphasized the violation of natural justice due to the denial of its request for cross-examination of persons whose statements and decoded chats formed the basis of the addition. The assessee also relied on an MOU dated 15.11.2017, which stipulated a land allotment at Rs. 5,000/- per sq. mtr. to settle a dispute. Revenue's contentions: The Revenue, through the AO, relied on the WhatsApp chats and data to infer cash transactions and applied an estimated higher rate to determine the actual purchase consideration. The CIT(A) partially upheld the addition by considering the seller's assessment.

Which sections of the Income-tax Act were involved?

Section 69,Section 132,Section 131,Section 115BBE,Section 250,Section 153C(3)

AI-generated summary — verify with the full judgment below

ITA No. 1422 and 1742/JPR/2025 M/s Advance Strips Pvt. Ltd: IN THE INCOME TAX APPELLATE TRIBUNAL; JAIPUR BENCHES, "B" BENCH, JAIPUR BEFORE SHRI SANJAY GARG, JUDICIAL MEMBER SHRI RATNESH NANDAN SAHAY, ACCOUNTANT MEMBER ITA No: 1422/JPR/2025 Assessment Year: 2019-20, M/s Advance Strips Pvt: Ltd. Vs. DCIT, E-774, Road No. 13, VKI Area, Central Circle-1, Jaipur 302013 Jaipur Rft c 4. /PAN: AABCA4829P ITA No. 1742/JPR/2025 (Assessment Year: 2019-20) Vs. Mls Advance Strips Pvt: Ltd. E- 774, Road No. 13, VKI Area; Jaipur 302013 Shri P.C. Parwal, FCA Mrs. Alka Gautam; CIT DCIT , Central Circle-1, Jaipur Assessee by Revenue by Date of Hearing Date of Pronouncement 26.03.2026 15.06.2026 [O RD E R] Per_Saniay Garg_Judicial Member: The captioned cross-appeals have been preferred by the Assessee and the Revenue against the order of the Ld: Commissioner of Income Tax (Appeals) [hereinafter referred to as "Ld. CIT(A)"] dated 19.02.2024 passed u/s 250 of the Income Tax Act; 1961 (hereinafter referred to as "Act") for the Assessment Year (AY) 2019-20. Since facts and issues involved in both these appeals are common and ITA No. 1422 and 1742/JPR/2025 M/s Advance Strips Pvt: Ltd. identical, hence t

The order continues below.

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