ACIT vs. Trilok Chaudhary, ITA No. 1450/Del/2024 (A.Y 2012-13)
The Income Tax Appellate Tribunal (ITAT) Delhi Bench ‘D’ has delivered a significant ruling in the case of ACIT vs. Trilok Chaudhary (ITA No. 1450/Del/2024 and C.O. No. 97/Del/2024 for A.Y. 2012–13), wherein it upheld the deletion of a Rs. 10 crore addition made under Section 69A of the Income Tax Act, 1961, and dismissed the Revenue’s contention regarding procedural violations under Rule 46A.
Background of the Case
A search and seizure operation under Section 132 was conducted on 17.09.2013 in the case of the assessee, Mr. Trilok Chaudhary. During the course of the search, an MoU dated 29.06.2011 was found, executed between the assessee and M/s Megatech Realities Pvt. Ltd. The MoU mentioned a cash payment of Rs. 10 crore made by the company to the assessee in connection with the aggregation of agricultural land in Sectors 63A, 64, and 65 of Gurgaon, Haryana.
Based on this MoU, the Assessing Officer (AO) treated the amount as unexplained cash belonging to the assessee and made an addition of Rs. 10 crore under Section 69A in the assessment order dated 31.03.2021.
CIT(A)’s Findings
The assessee filed an appeal before the CIT(A), contending that he was acting merely as a land aggregator or broker and that the Rs. 10 crore belonged to the company, not to him. Supporting this claim, the assessee submitted:
- An affidavit and statement of the Managing Director of Megatech Realities.
- Financials and ledger confirmations from the company acknowledging the transaction.
- Details of landowners and amounts paid to them on behalf of the company.
The CIT(A) accepted these contentions and observed that:
- The assessee acted as a facilitator or conduit for acquiring land on behalf of the company.
- The cash did not belong to the assessee and had been transferred directly to landowners.
- The amount was reflected in the books of Megatech Realities and therefore could not be taxed again in the hands of the assessee.
Accordingly, the entire addition of Rs. 10 crore under Section 69A was deleted.
Revenue’s Appeal Before ITAT
The Revenue challenged the order of the CIT(A), raising two primary grounds:
- The CIT(A) erred in deleting the Rs. 10 crore addition despite the assessee’s failure to substantiate the source of the cash.
- The CIT(A) violated Rule 46A of the Income Tax Rules by admitting additional evidence without providing the AO an opportunity to rebut it.
ITAT’s Ruling
The Tribunal, after thoroughly examining the facts and contentions, upheld the order of the CIT(A). Key observations include:
1. Nature of the Transaction
- The ITAT agreed with the CIT(A) that the assessee acted as a land aggregator.
- It held that merely receiving cash to be passed on to landowners on behalf of a developer does not imply ownership of such cash.
- Since the transaction did not materialize and the land was not acquired, no income accrued to the assessee under the accrual method of accounting.
2. Acceptance in Company’s Books
- The Rs. 10 crore was duly accounted for in the books of Megatech Realities Pvt. Ltd.
- The assessee’s role was limited to executing the MoU and facilitating payments to landowners.
3. On Violation of Rule 46A
- The Tribunal held that the CIT(A) had invoked powers under Rule 46A(4) to requisition evidence on its own.
- As per law, where additional evidence is called for by the appellate authority, the bar under Rule 46A(1) does not apply.
4. Judicial Precedents
- The Tribunal relied on Kulwant Rai v. CIT (2007) 163 Taxman 583 (Del), reiterating that additions based merely on suspicion and without disproving the assessee’s explanation cannot be sustained.
Assessee’s Cross Objection Dismissed
The assessee had filed a cross objection (C.O. No. 97/Del/2024) challenging the validity of the assessment on technical grounds such as:
- Lack of approval under Section 153D,
- Non-issuance of notice under Section 153C,
- Absence of Document Identification Number (DIN),
- Applicability of Section 292BB.
However, since the main addition was already deleted and the Revenue’s appeal was dismissed, the ITAT held the cross objection as infructuous.
Conclusion
This ruling reinforces the principle that additions under Section 69A must be substantiated with cogent evidence showing ownership and unexplained nature of cash. It also affirms the appellate authority’s discretion to call for necessary evidence in the interest of justice without falling foul of Rule 46A.
The ITAT’s dismissal of both the Revenue’s appeal and the assessee’s cross objection reflects a balanced approach in upholding substantive justice while ensuring procedural fairness.