ITAT Hyderabad Dismisses Revenue's Appeal: Section 69 Addition Deleted as Seized Document Held a "Dumb Document"
Case Overview: ACIT Vs Rutuja Projects (ITAT Hyderabad)
The Income Tax Appellate Tribunal (ITAT), Hyderabad, pronounced a significant ruling in the case of ACIT Vs Rutuja Projects, dismissing the Revenue's appeal and affirming the order of the Commissioner of Income Tax (Appeals) [CIT(A)] that had deleted an addition of ₹1,05,96,934 made under Section 69 of the Income Tax Act, 1961, on the ground of alleged unexplained investment. The Tribunal simultaneously allowed the cross-objection filed by the assessee firm in support of the CIT(A)'s order.
This decision carries considerable weight for assessees facing additions arising from search proceedings where the evidentiary foundation rests exclusively on a seized loose sheet — commonly characterised in tax jurisprudence as a "dumb document" — without any independent corroborative material to substantiate the alleged transaction.
Background and Facts of the Case
The Assessee and Its Filed Return
The assessee in this matter is a partnership firm engaged in the construction and development of residential flats. For Assessment Year (AY) 2019-20, the firm filed its return of income declaring a total income of ₹1,000.
Genesis of the Search Proceedings
Search and seizure operations were initially conducted on the "Yashoda Group" under Section 153A of the Income Tax Act, 1961, on 22/12/2020. As an extension of those proceedings, search operations were subsequently carried out in the case of Dr. Amidyala Lingaiah. During the course of these search proceedings, the authorities seized a loose sheet identified as Page-24 of Annexure A/LA/RES/01.
The Assessing Officer (AO) of the searched person, upon reviewing the contents of this seized document, formed a view that the material therein pertained to the assessee firm — M/s. Rutuja Projects — and bore a bearing on its income determination for AY 2018-19 to AY 2021-22. Accordingly, the material was forwarded to the AO of the assessee firm, who then recorded a satisfaction note under Section 153C of the Income Tax Act, 1961, dated 29/06/2022, and issued a notice initiating assessment proceedings.
Assessment Order: How the Addition Was Computed
Property No. 1 — Purchased from Dr. Amidyala Lingaiah
On the basis of the contents of Page-24 of Annexure A/LA/RES/01, the AO noted that the assessee firm, jointly with M/s. Shiva Balaji Associates, had purchased Plot No. 6, Survey No. 313 & 316, Block No. 1, Kanteshwar, Nizamabad, admeasuring 244.16 sq. yds out of a total area of 698.66 sq. yds.
The AO determined the total consideration from the seized document at ₹1,26,96,320/-. The assessee's share at 67% worked out to ₹85,06,534/-, within which a purported cash payment of ₹71,22,984/- was identified. He further observed that the aggregate of cheque payments made by all purchasers to the seller — amounting to ₹47,92,000/- — appeared to correspond with figures mentioned in the seized document, which he treated as corroboration of its authenticity.
Property No. 2 — Purchased from Shri S. Madhukar Reddy and Shri S. Prakash Reddy
The assessee firm had also separately purchased land admeasuring 60 sq. yds at Survey No. 312, Kanteshwar Shivar, Mandal Nizamabad District, vide sale deed No. 3928/2019, dated 08/03/2019, from Shri S. Madhukar Reddy and Shri S. Prakash Reddy.
The AO, without placing any material on record specific to this second property, assumed that since the land was located in the vicinity of the first property, the same rate of ₹52,000/- per sq. yd. would apply. On this basis, he determined the assessee's investment in the second property at ₹20,90,400/-.
Total Addition Under Section 69
Aggregating the alleged undisclosed investment across both properties, the AO arrived at a total unexplained investment of ₹1,05,96,934/- and brought the same to tax under Section 69 of the Income Tax Act, 1961, passing the assessment order dated 19/03/2024 under Section 153C, with the total income determined at ₹1,05,97,934/-.