Facts of the Case

The Revenue filed multiple appeals against orders of the Income Tax Appellate Tribunal (ITAT) concerning Assessment Years 2006-07 and 2007-08 relating to M/s GTM Builders & Promoters Pvt. Ltd. and connected entities/persons. The assessee was engaged in real estate development.

A search and seizure operation was conducted on the GTM Group on 12 December 2006, following which proceedings under Section 153A were initiated. The Assessing Officer (AO) made several additions, including:

  • Addition of ₹5.34 crore on account of alleged bogus share application money
  • Addition of ₹1.92 crore on account of alleged cash received from a housing society
  • Additions relating to alleged cash components in land purchases
  • Additions for unexplained investments, advertisement expenditure, and jewellery stock

Issues Involved

  1. Whether additions under Sections 68 and 69 could be sustained based on seized documents and statements without corroborative evidence.
  2. Whether share application money and financial transactions were genuine and supported by documentary proof.
  3. Whether alleged cash payments in property transactions could be presumed without concrete evidence.
  4. Scope of High Court interference with factual findings of the ITAT under Section 260A.

Petitioner’s (Revenue’s) Arguments

The Revenue argued that the ITAT erred in deleting additions despite seized material and statements indicating accommodation entries and unexplained investments. It contended that the assessee had failed to establish genuineness and creditworthiness of share applicants and that incriminating documents showed unaccounted cash transactions in land purchases and dealings with housing societies.

Respondent’s (Assessee’s) Arguments

The assessee maintained that all transactions were duly supported by documentary evidence, including confirmations, PAN details, bank records, and agreements. It argued that most share application funds were received through banking channels and, in several cases, later refunded.

Regarding alleged cash components and housing society transactions, the assessee contended that there was no proof of actual payment of cash and that the additions were based merely on assumptions.

Court Order / Findings

  • The ITAT had thoroughly examined the evidence and recorded factual findings regarding identity, genuineness, and creditworthiness of share applicants.
  • Many amounts received as share application money were refunded or adjusted, undermining the allegation of accommodation entries.
  • Alleged cash components in land purchases were not supported by corroborative evidence; seized documents contained estimates rather than proof of payment.
  • Additions relating to housing societies were based on presumptions without evidence of actual cash receipt by the assessee.
  • Advertisement expenditure was recorded in books and paid through banking channels.
  • Jewellery stock belonged to a separate incorporated entity, and no basis existed to tax it in the assessee’s hands.

Important Clarification

The judgment reiterates that additions in search assessments must be founded on credible evidence and cannot rest on suspicion, conjecture, or uncorroborated statements. It also underscores the limited scope of High Court review over factual determinations made by the Tribunal.

This ruling is particularly significant for real estate developers and corporate taxpayers facing search-based assessments involving alleged cash components and accommodation entries.

Link to download the order - https://www.mytaxexpert.co.in/uploads/1772177385_PRINCIPALCOMMISSIONEROFINCOMETAXCENTRAL3VsMSGTMBUILDERANDPROMOTERSPVT.LTD..pdf 

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