2014 (8) TMI 1141 - AT - Wealth-tax

Addition of Wealth on account of the cash found during the course of search - Held that - A similar issue came up in Shri Nagurao Malku Gadge Versus The Wealth Tax Officer Ward 21 (3) (4) Mumbai 2011 (11) TMI 806 - ITAT MUMBAI there was a cash seizure from the assessee by the Crime branch of Mumbai Police. The Tribunal found that the said cash seized was directed to be kept in fixed deposit account with State Bank of India and therefore it cannot be considered as cash in hand for the purpose of the computation of net wealth. We find that part of the cash seized has been adjusted against the tax dues of Shri Ravi Kiran Aggarwal and M/s. Orbit Corporation Ltd. The balance cash is kept in the PD account of the Commissioner of Income Tax, therefore the same cannot be considered as cash in hand in the hands of the assessee for the purpose of the computation of net wealth of the assessee. We, accordingly direct the AO to delete the addition of wealth confirmed by the CWT(A). - Decided in favour of assessee.

Summary

Issues:
1. Addition of wealth on account of cash found during a search operation.

Analysis:
The appeal was filed against the order of the Ld. CWT(A) confirming the addition of wealth amounting to &8377; 2,06,31,230 on the grounds of cash found during a search operation. The cash in question, totaling &8377; 12,69,85,000, was seized during the search and offered for taxation. The WTO believed that any cash exceeding &8377; 50,000 should be added to the net wealth of the assessee. The assessee contended that the cash seized was deposited in a PD account after filing an application to the Director of Income Tax for adjusting it against tax liability. This led to a dispute regarding whether the cash should be considered as cash in hand for calculating the net wealth.

The Ld. CWT(A) upheld the addition of wealth, leading the matter to the Tribunal. The Ld. Counsel for the assessee argued that since the cash was deposited in the PD account, it should not be treated as cash in hand for determining the net wealth. On the other hand, the Ld. Departmental Representative supported the CWT(A)'s decision. The Tribunal referred to a previous case where cash seized was directed to be kept in a fixed deposit account, leading to a similar conclusion that such cash should not be considered as cash in hand for net wealth computation.

Based on the precedent and the specific circumstances of the case, the Tribunal directed the AO to delete the addition of wealth amounting to &8377; 2,06,31,230. The Tribunal found that since part of the seized cash was adjusted against tax dues and the remaining amount was held in the PD account of the Commissioner of Income Tax, it could not be categorized as cash in hand for the purpose of calculating the net wealth. Consequently, the appeal by the assessee was allowed, and the decision was pronounced in open court on 25th August 2014.