ITAT deletes Addition of ‘On Money’ due to Lack of Information about Receipt of Money

The case involved Yash Synthetics Private Limited, a plastic container manufacturing company, which purchased three flats or shops in a housing project named “Levels” located in Malad (East) from M/s. Shah Housecon Private Limited, a builder and developer. During a survey conducted at the builder's premises, documents were found indicating cash receipts from buyers of flats, with Rs. 1.61 crore noted as cash receipts against the flats purchased by Yash Synthetics. Based on this information, the Assessing Officer (AO) reopened the assessment, assuming that Yash Synthetics had paid the amount in cash.\r

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Yash Synthetics contended that the purchase value of the flats was supported by a valuation report, and no cash payment was necessary as the purchase was made at market rates. The company argued that the addition made by the AO was unjustified as the entries in the documents lacked crucial details such as the date and mode of receipt of 'on money,' the parties involved, and the date of the agreement. The Income Tax Appellate Tribunal (ITAT) agreed with Yash Synthetics, ruling that the addition of Rs. 1.61 crore made by the AO was unsustainable in law due to the insufficient information provided in the documents. Therefore, the ITAT deleted the income tax addition.