DCIT, Central Circle, Ghaziabad vs KDP Infrastructure Pvt. Ltd. – ITA 6084/DEL/2019: Final Tribunal Order Involving Unexplained Cash Payments for AY 2012-13

DCIT, Central Circle, Ghaziabad vs KDP Infrastructure Pvt. Ltd. – ITA 6084/DEL/2019

Case Number: ITA 6084/DEL/2019

Appellant: DCIT, Central Circle, Ghaziabad

Respondent: KDP Infrastructure Pvt. Ltd., New Delhi

Assessment Year: 2012-13

Result: Final Tribunal Order

Case Filed on: 2019-07-17

Order Pronounced on: 2020-11-27

Background and Issues

This case involves the appeal filed by the DCIT, Central Circle, Ghaziabad, against KDP Infrastructure Pvt. Ltd., concerning unexplained cash payments and investments recorded in the financial year relevant to the assessment year (AY) 2012-13. The case was heard by the Income Tax Appellate Tribunal (ITAT) Delhi Bench, presided over by Shri N.K. Billaiya, Accountant Member, and Shri Amit Shukla, Judicial Member.

Summary of Appeals and Arguments

The revenue’s appeal primarily revolved around the deletion of an addition of Rs. 1.75 crores made by the Assessing Officer on account of unexplained cash payments identified during search proceedings. The alleged payments were linked to the purchase of land by KDP Infrastructure Pvt. Ltd.

The Assessing Officer’s conclusions were drawn from seized documents, which indicated that cash payments had been made to five individuals in connection with land acquisitions. These payments were recorded as Rs. 1.75 crores in cash and Rs. 2.25 crores via cheques, totaling Rs. 4 crores.

Upon receiving the assessments, the appellant was asked to reconcile these payments with its books of accounts. The assessee contended that all payments, including those made in cash, were duly recorded in its regular books of accounts, supported by the necessary documentation such as ledger accounts and registered land deeds.

CIT(A)’s Findings

The Commissioner of Income Tax (Appeals) [CIT(A)], after reviewing the submissions and remand reports, sided with the assessee. The CIT(A) confirmed that the total consideration paid for the land, including the cash component, was accurately reflected in the audited books of accounts. The CIT(A) dismissed the Assessing Officer’s concerns, ruling that since the cash payments were duly recorded in the books, the provisions of Section 69 of the Income Tax Act, 1961, which deals with unexplained investments, did not apply.

ITAT’s Final Order

The ITAT reviewed the orders of the lower authorities and found no merit in the revenue’s appeal. The Tribunal concluded that the revenue had failed to produce substantial evidence to challenge the findings of the CIT(A). It observed that the Assessing Officer’s suspicion alone, without concrete evidence, was insufficient to sustain the addition of Rs. 1.75 crores as unexplained cash payments.

In its order, the Tribunal emphasized the need for the Assessing Officer to establish clear and irrefutable evidence when making such significant additions under Section 69. The Tribunal reiterated that when an assessee’s accounts are audited and reflect all transactions, including cash payments, the burden of proof rests heavily on the revenue to prove any discrepancies or concealment.

The Tribunal also noted that the initial surrender of the amount by the director of KDP Infrastructure Pvt. Ltd. during the search proceedings, which formed the basis of the Assessing Officer’s additions, was later retracted. The Tribunal agreed with the CIT(A) that this retraction, supported by the records in the books of accounts, rendered the addition unsustainable.

Conclusion

The appeal by the revenue in ITA 6084/DEL/2019 was dismissed by the Tribunal, upholding the CIT(A)’s decision to delete the addition of Rs. 1.75 crores. The Tribunal’s decision reaffirmed the importance of evidence-based assessments and cautioned against arbitrary additions based on assumptions or uncorroborated statements.

This ruling underscores the critical role of documented evidence in tax assessments, particularly in cases involving significant cash transactions. The decision also highlights the Tribunal’s stance on upholding the principles of natural justice and ensuring that assessments are conducted based on facts rather than presumptions.

DCIT, Central Circle, Ghaziabad vs KDP Infrastructure Pvt. Ltd. – ITA 6084/DEL/2019: Final Tribunal Order Involving Unexplained Cash Payments for AY 2012-13