Jashvantiben Manojbhai Makwana Vs ITO (ITAT Rajkot)
Only Profit Element of Alleged On-Money Taxable: ITAT Rajkot Restricts Addition to 30%
The Income Tax Appellate Tribunal partly allowed the assessee’s appeal for AY 2021-22, restricting an addition made under section 69A on account of alleged on-money payment found in a third-party ledger seized during a search.
The reassessment was initiated based on a digital “dump ledger” recovered from a builder during a section 132 search, allegedly showing cash payment of ₹80,000 by the assessee for purchase of a shop. The Tribunal noted serious infirmities: the ledger was unsigned, editable, and incomplete, and the assessment relied substantially on a third-party statement without furnishing its copy to the assessee or granting cross-examination, amounting to a procedural lapse.
While observing that the search statement broadly corroborated the seized material, the Tribunal held that the entire on-money cannot be treated as income; only the profit element embedded therein can be taxed. Considering the smallness of the amount, the assessee’s background, and with both sides agreeing to an estimated approach, the Tribunal directed the AO to tax 30% of ₹80,000 (₹24,000) at normal rates. The balance addition was deleted, and the order was clarified to be case-specific and non-precedential
FULL TEXT OF THE ORDER OF ITAT RAJKOT
