DCIT., CENTRAL CIRCLE-3(1), HYDERABAD vs. UNITED DEVELOPER, HYDERABAD

Facts

The assessee, a real estate firm, was subjected to proceedings under Section 153C following search operations on a related entity, M/s Jitender Roller Flour Mills. An incriminating document (Page 38 of Annexure A/JRFM/05) was recovered from a part-time accountant's laptop at the third party's premises, allegedly indicating unaccounted on-money receipts totaling Rs. 22.45 Crores from the sale of 275 commercial shops. The Assessing Officer made additions of Rs. 9,45,37,047/- for A.Y. 2016-17 and Rs. 11,75,42,953/- for A.Y. 2017-18, which the CIT(A) partially upheld by restricting the addition to 12% of the cash portion as embedded profit.

Held

The Tribunal held that the AO erred in making additions solely based on the unsubstantiated contents of a document seized from a third party without any independent corroborative evidence. It emphasized that presumptions under Sections 132(4A) and 292C of the Act apply only to the person from whom the document is seized, not to a third party. The Tribunal found that the AO failed to discharge the heavy onus to prove the alleged on-money by examining purchasers or the document's author, who denied its relation to the assessee. Consequently, the Tribunal vacated the additions made by the AO for both assessment years and allowed the assessee's cross-objections.

Key Issues

1. Whether additions based on an incriminating document seized from a third party without corroborative evidence are sustainable. 2. The applicability and scope of presumptions under Section 132(4A) and Section 292C of the Income Tax Act regarding documents seized from a third party. 3. Whether the AO discharged the burden of proof to establish that the assessee received unaccounted on-money.