Mumbai ITAT Rules Cash from Property Sales as Legitimate Income
The Income Tax Appellate Tribunal (ITAT) in Mumbai has issued a significant ruling that clarifies the treatment of cash received from property sales. According to the ITAT, cash received from such transactions, when properly recorded in a registered sale deed and supported by bank statements, cannot be deemed as unexplained income under Section 69A of the Income-tax Act, 1961. This decision reinforces the legal recognition of primary documents in property transactions and is likely to influence future assessments in the real estate sector.
The case involved a taxpayer who sold an immovable property for Rs 94.06 lakh during the relevant assessment year. The taxpayer received Rs 38.15 lakh in cash from the sale, with Rs 13,00,500 of this amount subsequently deposited in her ICICI Bank account. The Assessing Officer, using data generated through the Department’s internal AIMS module, reopened the assessment under Section 148, alleging that the cash deposits were unexplained, despite the taxpayer filing her return and submitting supporting documents. The Commissioner of Income Tax (Appeals) partially upheld the assessment, applying Section 69A to the cash component.
The taxpayer appealed the decision, providing the registered sale deed, bank statements, and income computations as evidence. Upon review, the ITAT observed that the sale deed explicitly documented the receipt of Rs 38.15 lakh in cash, and the bank deposits directly corresponded to this amount. The Tribunal noted that the authenticity of both the sale deed and bank statements was not contested by the Revenue. It highlighted that Section 69A additions are justified only when explanations are unsatisfactory or unsupported. In this case, the explanation was substantiated by primary contemporaneous documents.
“The Tribunal recognized that system-generated or procedural anomalies, such as invalid return filings, cannot override verifiable evidence of transactions,” an industry expert commented. “This decision underscores the importance of properly documented property transactions in supporting taxpayers’ claims.” The Tribunal concluded that there was no evidence suggesting any additional source of income beyond the disclosed property sale. Accordingly, it ordered the deletion of Rs 13,00,500 from the taxable income, effectively allowing the appeal.
Legal analysts suggest that this ruling provides clarity for property sellers who receive cash payments, emphasizing the significance of maintaining accurate records in registered sale deeds and bank statements. Experts also indicate that it could guide future ITAT and high court decisions, offering taxpayers stronger safeguards when cash transactions are properly documented. The ruling aligns with a broader trend of recognizing digital and primary documentation in urban real estate markets, supporting transparency and reducing disputes between taxpayers and authorities.
It also indirectly encourages urban property owners to maintain thorough records, contributing to a more accountable and traceable property market. This decision is particularly relevant in cities like Mumbai, where property transactions are frequent and often involve significant cash components. Property sellers can now have greater confidence in the legitimacy of their transactions, provided they adhere to proper documentation practices.
