Esque Finmark Pvt. Ltd. Vs ITO (ITAT Mumbai)
Suspicion Is Not Evidence: ITAT Deletes Rs. 3.68 Crore ‘On-Money’ Addition Based on Flat Allotment Letters
The Mumbai ITAT deleted an addition of ₹3.68 crore made on account of alleged unaccounted cash receipts from prospective flat purchasers, holding that the Revenue cannot presume receipt of on-money merely because the consideration mentioned in allotment letters exceeds the advances reflected in the books of account.
The assessee, a real estate developer engaged in a redevelopment project at Kalachowki, Mumbai, had issued allotment letters to prospective purchasers. The Investigation Wing noticed that the total consideration mentioned in the allotment letters was substantially higher than the advances recorded in the books and concluded that the difference of ₹3.68 crore represented cash received by the assessee. Based on this information, reassessment proceedings were initiated and the addition was made.
Before the Tribunal, the assessee explained that the documents relied upon by the Department were merely allotment letters and not agreements for sale. The project had become embroiled in disputes and litigation, construction had stalled, and therefore only advances had been received from the proposed purchasers. The balance consideration mentioned in the allotment letters was never realized. The assessee also pointed out that no revenue had been recognized as the project had not reached the stage of completion.
The ITAT found that the entire addition was based on assumptions. There was no statement from any purchaser admitting payment of cash, no seized material, no diary, no receipt, no cash ledger and no other evidence showing receipt of on-money. The Tribunal emphasized that an allotment letter only records the proposed consideration and does not establish actual receipt of the entire amount.
Holding that the Revenue had failed to discharge the burden of proving actual receipt of cash, the Tribunal observed that the addition rested merely on conjectures and the theory of what the AO believed should have happened in the normal course of business. Reiterating that suspicion, however strong, cannot substitute evidence, the ITAT deleted the entire addition of ₹3.68 crore
FULL TEXT OF THE ORDER OF ITAT MUMBAI
