Hyderabad ITAT on JDA Search Additions: Cash Entries in Developer’s Tally and Unsigned Papers Insufficient for Section 56 Additions
Background and Context
The Hyderabad Bench of the Income Tax Appellate Tribunal (ITAT) in Surya Prakash Kacham Vs DCIT examined whether additions under Section 56 could be sustained solely on the strength of Tally data and loose sheets seized from the premises of a real estate developer, where the assessee was merely a landowner party to a Joint Development Agreement (JDA).
Two appeals were filed by the assessee for A.Ys. 2022-23 and 2023-24 against orders of the CIT(A)-11, Hyderabad, both dated 01.09.2025. The key dispute in both years related to:
- Addition of Rs. 50,00,000/- in A.Y. 2022-23
- Addition of Rs. 3,49,09,950/- in A.Y. 2023-24
Both sums were brought to tax as “Income from Other Sources” under Section 56, allegedly representing cash consideration received by the assessee from the developer in relation to a JDA.
The Tribunal delivered a common order as the assessee, facts, and legal issues were substantially the same for both years.
Facts of the Case
Assessee and JDA Arrangement
- The assessee is an individual.
- For A.Y. 2022-23, the assessee filed a return of income on 30.12.2022 declaring total income of Rs. 91,51,060/-.
- The assessee entered into a Joint Development Agreement-cum-Irrevocable General Power of Attorney with Vasavi Infracon (
the developer) on 25.05.2022. - Under the JDA, the assessee, as landowner, agreed to allow development of land, with consideration structured predominantly in the form of a share in built-up area to be received in the future, not cash.
Search in Developer’s Group and Seizure
- A search and seizure operation under
Section 132was conducted on Vasavi Group, Hyderabad on 17.08.2022. - During this search, certain documents and electronic data (including Tally records) were seized from the premises of the developer.
- Post-search, the assessee’s statement was recorded under
Section 131on 02.02.2023.
Basis for Reopening and Additions
On examining the seized material and the assessee’s statement, the Assessing Officer (AO):
Formed a belief that the assessee had received
- Rs. 50,00,000/- in connection with the JDA (relevant to A.Y. 2022-23); and
- Aggregate cash of Rs. 3,49,09,950/- in the subsequent year (A.Y. 2023-24),
which had escaped assessment.
Initiated reassessment proceedings under
Section 147and issued notice underSection 148dated 12.10.2023.Completed reassessment for A.Y. 2022-23 on 14.02.2025, making an addition of Rs. 50,00,000/- under
Section 56as “Income from Other Sources” and assessed total income at Rs. 1,41,51,060/-.On similar footing, for A.Y. 2023-24, the AO made an addition of Rs. 3,49,09,950/- under
Section 56based on Tally data and seized records from the developer’s premises.
Nature of Seized Material
The additions stemmed from:
- Tally data and loose documents found in the premises of the developer; and
- A specific loose paper allegedly reflecting payment of Rs. 50,00,000/- to the assessee.
Crucially:
- The seized loose sheet did not bear the assessee’s signature.
- There was no written acknowledgment or receipt signed by the assessee.
- No bank withdrawals, confirmations, or other independent evidence were brought to link any actual cash movement from the developer to the assessee.
Proceedings before CIT(A)
The assessee challenged the reassessment orders before the CIT(A) for both years, contending, inter alia, that:
- There was no receipt of cash from the developer.
- The seized papers were third-party documents found in the possession of the developer, not the assessee.
- No corroborative evidence existed to establish a real cash transaction.
- Even on a without-prejudice basis, any receipt relatable to the JDA could not be taxed under
Section 56.
The CIT(A) upheld the AO’s action and sustained the additions under Section 56 for both assessment years, leading to the present appeals before the ITAT.