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Facts
A search and seizure operation under Section 132 revealed incriminating material, leading to a Section 153A notice. The Assessing Officer (AO) made additions of Rs. 40,00,000 and Rs. 10,00,000 based on alleged cash payments, which the assessee claimed were refunds from cancelled property agreements. The AO rejected the explanation due to the absence of cancellation deeds, and the CIT(A) upheld the additions citing confirmation letters lacking PAN/address proof.
Held
The Tribunal held that if the confirmation letters were defective, the CIT(A) should have allowed the assessee an opportunity to rectify them or directed the AO to examine the parties under Section 131. The mere absence of a cancellation deed does not automatically render the explanation false. The matter was remanded to the AO for de novo adjudication with a reasonable opportunity of hearing for the appellant.
Key Issues
Whether the additions of Rs. 40,00,000 and Rs. 10,00,000 were justified, and whether the authorities erred in rejecting the assessee's explanation regarding refunds from cancelled property agreements based on insufficient documentation.
Sections Cited
132, 153A, 143(3), 131
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Income Tax Appellate Tribunal, COCHIN BENCH
Before: SHRI INTURI RAMA RAO, AM & SHRI MANU KUMAR GIRI, JM
O R D E R Per: Inturi Rama Rao, AM This appeal filed by the assessee is directed against the order of the Commissioner of Income Tax (Appeals)-3, Kochi [CIT(A)] dated 28.08.2025 for Assessment Year (AY) 2011-12.
Brief facts of the case are that the appellant is an individual. The search and seizure operations u/s. 132 were conducted in the residential premises of the appellant on 29.04.2016. It was stated that during the course of search and seizure operations certain incriminating materials were found and seized. Based on the Mohammed Kutty Pudukkudi incriminating material found, a notice u/s. 153A of the Income Tax Act, 1961 (the Act) was issued to the appellant for AY 2010-11 to AY 2015-16. In response to the notice u/s. 153A, the appellant filed return of income, the details of which are extracted by the AO at page 2 of the assessment order. In response to notice u/s. 153A the assessee filed return of income for AY 2011-12 on 06.10.2017 declaring income of Rs. 6,98,640/- against the original returned income of Rs. 3,48,000/-. Against the said return of income, the assessment was completed by the ACIT, Central Circle-2, Kozhikode (hereinafter called "the AO") vide order dated 30.12.2017 passed u/s. 143(3) r.w.s. 153A of the act at a total income of Rs. 58,46,340/-. While doing so, the AO made addition of Rs. 50,00,000/- based on the seized material CHN/IT/023/15- 16/RR/A3-Page 12-17 and CHN/IT/023/15-16/RR/A3-Page 24-26. According to the AO the seized material reflects payments of Rs. 40,00,000/- in cash by the appellant to one Shri Yousaf Haji. When the appellant was called upon to explain the source of the said cash payment it was stated that the said amount of Rs. 40,00,000/- was refunded by the said Yousaf Haji on 11.08.2010 on cancellation of the agreement for purchase of property and the said amount was paid by the appellant in FY 2009-10. Similarly, the seized document CHN/IT/023/15-16/RR/A3-Page 24-26 reflected refund of advance amount of Rs. 10,00,000/- given to one Smt. Thithumma. However, the said explanation was rejected by the AO by stating that the Mohammed Kutty Pudukkudi appellant had failed to produce cancellation deed in respect of the above two transactions. The AO, accordingly, made addition of Rs. 40,00,000/- and Rs. 10,00,000/- each in the assessment order.
Being aggrieved, an appeal was filed before the learned CIT(A), who vide the impugned order confirmed the action of the AO merely on the ground that the confirmation letter given by Shri Yousaf Haji did not contain PAN, address proof, etc. Similarly, the learned CIT(A) confirmed the addition of Rs. 10,00,000/- on the ground that the confirmation letter of Smt. Thithumma did not contain PAN, Address proof, etc.
Being aggrieved, the appellant is in appeal before this Tribunal in the present appeal.
The learned counsel for the assessee submits that the appellant had entered into an agreement of purchase of property from Shri Yosuf Haji and paid a consideration of Rs. 40,00,000/- as detailed below:- a By cash on 04.09.2009, out of the cash Rs. 20,00,000/- available as per the statement of cash flow b Vide cheque No. 765970 dated 04.09.2009 Rs. 10,00,000/- of NRE A/c. No. 10611787840 of SBI, Tirur Branch c Vide cheque No. 765971 dated 05.09.2009 Rs. 10,00,000/- of NRE A/c. No. 10611787840 of SBI, Tirur Branch Mohammed Kutty Pudukkudi 6. Since the transaction had not materialized, Shri Yousaf Haji refunded the amount of Rs. 40,00,000/- in cash on 11.08.2010 and confirmation letter to this effect was filed before the AO and CIT(A). However, the learned CIT(A) merely confirmed the addition on the ground that the confirmation letter given by Shri Yousaf Haji does not contain PAN, address proof, etc. Similarly, it is submitted that appellant had entered into another agreement for purchase of property from Smt. Thithumma, W/o. Kandath Alavi Haji, Kattukulangara, Tirur, Malppuram Dist. And paid Rs. 10,00,000/-, as per agreement dated 25.01.2011 vide cheque No. 1765975 dated 28.01.2011 of NRE A/c. No. 10611787840 of SBI Tirur branch. Since the transaction had not materialized, Smt. Thithumma refunded Rs. 10,00,000/- on 15.02.2011 and confirmation to this effect was filed by the appellant. Therefore, he submitted that if the AO doubted the veracity of the confirmation letters filed by the appellant, he should have issued summons to the witnesses u/s. 131 of the Act and examined the parties and then should have reached the conclusion as to the genuineness of the explanation.
On the other hand, the learned CIT-DR opposed the above submissions.
We have heard the rival contentions and perused the material available on record. The issue that arises for our consideration is whether the CIT(A) was justified in confirming the additions of Rs. Mohammed Kutty Pudukkudi 40,00,000/- and Rs. 10,00,000/- made by the AO based on the material found and seized during the course of 132 operations in the case of the appellant. It is undisputed fact that the seized material indicated the receipts of Rs. 40,00,000/- and Rs. 10,00,000/- respectively in cash. The appellant had filed explanation in support of the above transactions stating that Rs. 40,00,000/- reflected the amount of refund received from one Shri Yousaf Haji on cancellation of the purchase deed. The appellant filed a confirmation letter to this effect from the said Yousaf Haji. The AO had doubted the veracity of the explanation solely on the ground that in the absence of any cancellation deed the explanation cannot be believed. On further appeal before the CIT(A), the CIT(A) had not believed the explanation only on the ground that the confirmation letter given by Yousaf Haji did not contain PAN, address proof, identify, etc. Identical facts also exist in the case of addition of Rs. 10,00,000/-. We are of the considered opinion that if the confirmation letters produced by the appellant is defective for the reason that it did not contain PAN, address proof, identity, etc. the CIT(A) ought to have given an opportunity to the appellant to produce confirmation letters containing these details. Alternatively, it is always open to the AO to direct the appellant to produce the said parties before him for examination. The mere fact that there was no cancellation deed cannot lead to the conclusion that the explanation is wrong or false. In these circumstances, we are of the considered opinion that the Mohammed Kutty Pudukkudi matter requires remand to the file of the AO for de novo adjudication in accordance with law after affording reasonable opportunity of hearing to the appellant.
In the result, the appeal filed by the assessee stands partly allowed for statistical purposes.
Order pronounced in the open court on 19th November, 2025.