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

Facts

The assessee, a real estate firm, was subjected to search proceedings under Section 132 and Section 153C. Incriminating material (Page 38 of Annexure A/JRFM/05) was recovered from a part-time accountant's laptop at a third party's premises, indicating undisclosed cash receipts ('on-money') from the sale of commercial shops. The AO made an addition of Rs. 21.20 crores (Rs. 9.45 crores for AY 2016-17 and Rs. 11.75 crores for AY 2017-18) for these alleged unaccounted sales. The CIT(A) sustained the addition but restricted it to 12% of the cash portion of sales.

Held

The Tribunal held that the AO failed to provide corroborative evidence to substantiate the additions, relying solely on an unsubstantiated document seized from a third party's premises. The presumption under Section 292C does not extend to third parties without independent verification. As the AO did not examine purchasers or the document's author, the additions made cannot be sustained. The assessee's cross-objections were allowed, and the revenue's appeals were dismissed as academic.

Key Issues

1. Whether additions based on an unsubstantiated document (loose sheet) seized from a third party's premises without corroborative evidence are sustainable. 2. Whether the presumption under Section 292C of the Income Tax Act applies to a third party.