The Income Tax Appellate Tribunal (ITAT), Visakhapatnam Bench, in its decision dated 3 September 2025, examined whether an addition under Section 69 of the Income-tax Act, 1961 could be sustained in respect of a land transaction where the registered sale deed was subsequently cancelled, the purchaser rejected the plot, and no consideration was ever paid. The Assessing Officer had invoked Section 69 alleging unexplained investment, but the Tribunal clarified that in the absence of any actual investment or flow of funds, such an addition could not stand.
Facts
- A sale transaction was recorded by the assessee, but subsequently the registered sale-deed was cancelled.
- The prospective purchaser rejected the plot and did not pay any consideration (i.e., no money was received by the assessee).
Issue before Tribunal
- Whether the Assessing Officer could make an addition under Section 69 (unexplained investments) treating the alleged purchase as unexplained investment despite cancellation and no payment.
Tribunal’s findings / reasoning
- The Tribunal held that Section 69 additions are not sustainable where there is no actual investment or payment — i.e., where the sale deed has been cancelled and the purchaser paid nothing. The transaction had not resulted in any investment by the assessee to be treated as unexplained.
- The ITAT emphasized that the AO must demonstrate an actual unexplained investment/credit — mere recording of a deed (later cancelled) without any payment cannot be the basis for a Section 69 addition.
Result / Order
- Addition under Section 69 was deleted by the Visakhapatnam Tribunal.
Practical takeaways
- Where a property sale is cancelled and no consideration has actually passed, revenue cannot characterise the non-existent payment as an unexplained investment under Sec. 69 — AO needs evidence of real funds/ investment to sustain such additions.