INCOME TAX ACT, 1961

Income from undisclosed sources- Addition under section 69-Addition on basis of statement and incriminating material found during search

Assessee purchased a flat at housing scheme which was developed by developer. A search action was carried out at business premises of developers and certain papers were seized. It was found that assessee had made certain payment including payment made during the year. AO found that during the year assessee has shown payment to developer and difference payment was not shown in the books of account. He issued show-cause notice to assessee proposing to add this amount being unexplained payment made by assessee to developer. Assessee called for copy of statement of partner of developer, wherein he had confirmed to have received 'on money' on booking/sale of the flat to assessee and the same was given to assessee. After this, the assessee made a final submission wherein he denied out rightly to have made any payment of 'on money' for purchase of flat in society developed by developers. AO did not accept the submission of the assessee and concluded that in view of clinching evidences in the form of seized loose paper and also in the light of the statement made by partner of developer there was no doubt about the payment of 'on money' made by the assessee and added the said amount to the total income treating the same as payment made out of undisclosed income. Held: No evidence could be brought on record by Revenue to show that in fact assessee had paid on money to the developers. No document containing signature of the assessee or handwriting of the assessee to corroborate the above making of payment by the assessee was found during the course of the search. Merely recording made by a third party or statement of a third party could not be treated as so sacrosanct so as to read as a positive material against the assessee. Therefore, addition in the hands of the assessee on account of on-money was not justified.

Income-tax Act 1961 Section 69

Decision: In favour of Assessee.
A.Y. 1999-2000

Jawaharbhai Atmaram Hathiwala v. Income Tax Officer