Photograph Of Handwritten Note Cannot Independently Prove Cash Transaction: ITAT Chennai

The Chennai Bench of the Income Tax Appellate Tribunal (ITAT) has held that a photograph of a handwritten document cannot independently establish an alleged cash payment when it is merely an electronic reproduction of the same document.

The Bench of Judicial Member Manu Kumar Giri and Accountant Member S.R. Raghunatha made the observation while upholding the deletion of a ₹18.87 crore addition against Ivar Estates Private Limited. The Revenue had alleged that the company paid the amount in cash, over and above the recorded consideration, for purchasing land at Vadapalani.

The tribunal observed, “We find that the photograph is merely an electronic reproduction of the very same handwritten page. It undoubtedly corroborates the existence of the page and may reinforce the conclusion that the vendor considered the notation sufficiently relevant to preserve an image thereof. However, the photograph does not constitute an independent evidentiary source establishing the actual movement of cash. A physical document and its photographic reproduction do not become two independent pieces of evidence concerning the underlying transaction merely because they exist in two different forms. Repetition or duplication of the same primary material cannot substitute for independent corroboration of the transaction sought to be inferred therefrom. Thus, while the photograph may corroborate the authenticity of the notebook, it does not corroborate the Revenue's interpretation that Rs.18.87 crore was actually paid in cash.”

The dispute concerned a handwritten notebook recovered from the residence of land vendor A. Gunasekaran. An entry against “Cash” showed ₹18.87 crore, which the Revenue treated as an additional cash payment by Ivar Estates over and above the recorded consideration.

A photograph of the same page was also found on Gunasekaran's mobile phone. The Revenue argued that it supported the authenticity of the notebook and strengthened its case that the cash entry represented an actual payment.

The tribunal drew a distinction between establishing that a document is genuine and establishing that the transaction recorded in it actually took place. It observed that a genuine commercial record may contain proposed consideration, tentative calculations, negotiations, or anticipated receipts or amounts expected to be received.

Gunasekaran had acknowledged making the entries and explained on oath that the ₹18.87 crore shown against “Cash” represented an amount he expected to receive, rather than money actually received. The tribunal found no independent evidence to falsify this explanation.

The Revenue also relied on the fact that the cheque entries in the notebook corresponded with banking transactions. The tribunal held that this did not establish the cash entry. The cheque component had an independent banking trail, but there was no corresponding material corroborating the alleged cash payment.

The tribunal found no evidence establishing the source, movement, delivery, receipt or utilisation of the alleged ₹18.87 crore. It also noted that no cash book, parallel ledger, voucher, receipt, diary or electronic communication belonging to Ivar Estates was found showing the alleged payment.

The tribunal considered the Revenue's reliance on Sections 132(4A) and 292C of the Income Tax Act. Since the notebook was found from Gunasekaran and not Ivar Estates, it held that the statutory presumptions could not automatically establish against the company that every transaction recorded in the document had actually taken place.

The tribunal also noted that the record referred to both Section 69 and Section 69A in relation to the addition. Section 69 deals with unexplained investments, while Section 69A applies to unaccounted money or other specified valuables found to be owned by an assessee. The tribunal held that, under either provision, the Revenue first had to establish that the alleged ₹18.87 crore payment had actually been made.

It further held that a proposed or expected component of consideration could not be treated as an actual investment merely because it appeared in a third-party document. The foundational fact that ₹18.87 crore had actually passed from Ivar Estates to the vendor remained unproved.

The tribunal accordingly upheld the deletion of the ₹18.87 crore addition. It also upheld the deletion of a separate ₹1.76 crore addition relating to alleged unaccounted cash receipts from flat sales and dismissed the Revenue's appeal

For Revenue: CIT Shivanand K. Kalakeri;

For Ivar Estates Private Limited: CA R. Venkataraman.