2015 (12) TMI 1284 - AT - Income Tax

Post Search assessment - double additions - Benefit of the surrender made by the assessee - Held that - In this case assessee has prepared a cash flow statement from the books of accounts of the assessee and shown that sources of the amount of ₹ 25,00,000/- taken to Bhuveneshwar on 5.8.2008 and ₹ 45,00,000/- cash seized on 22.8.208 are out of the amount available with the assessee on account of surrender made. As per the detailed breakup of the entries passed by the assessee on account of surrender shows that an amount of ₹ 45,00,000/- Seized by Income tax department and ₹ 25,00,000/- being cash sent to Bhuvenshwar shown as cash to BBS as per page no 6 of the paper book.. As per page 2 of the paper book, Cash flow statement shows that as on 6.8.2008 assessee was having the cash balance of ₹ 1,50,85,236/- and out of which on 31.7.2008 an amount of ₹ 6,14,597/- was spent on Infoage, on 5.8.2008 ₹ 25,00,000/- utilized for sending for cash to Bhuvneshwar and on 22.8.2008 cash was seized by Income tax department of ₹ 45,00,000/-. As per that statement assessee still has the balance of ₹ 74,70,639/- as at 22.8.2008 which is taken in to the books of accounts. This cash flow statement is not controverted by the AO as well as CIT(A) when it was specifically submitted that same is made based on the entries made in the cash book immediately after the surrender of ₹ 2,47,85,236/-. It is surprising that AO wants to tax the surrender amount as well as its application which definitely amounts to double addition in the hands of the assessee specially when the amounts are recorded in the books of accounts and there is no evidence that same is not available with the assessee Merely on the basis of time period in absence of any contrary material assets/ cash available with the assessee in its books cannot be disbelieved. We reject the contention of the revenue that because of elapse of such a long time, credit of surrender made by assessee cannot be granted for the amount used by assessee out of that disclosure/surrender. Therefore we reveres the order of CIT (A) and delete the addition - Decided in favour of assessee.

Summary

Issues:
Appeal against addition of undisclosed income based on cash seized during a search operation.

Analysis:
The appeal was filed against the order of the CIT(A) confirming the addition of Rs. 70,00,000 as undisclosed income for the assessment year 2009-10. The appellant, engaged in trading of computer hardware/software, declared a total income of Rs. 37,95,500. During a search operation, cash amounting to Rs. 45,00,000 was seized, and the appellant was asked to explain why Rs. 78,00,000 should not be treated as unexplained cash. The appellant claimed the cash was from the surrendered amount of Rs. 247.19 lakhs and hence not taxable twice. The Assessing Officer disallowed set off for Rs. 70,00,000 as no immediate sources of funds were available. The CIT(A) upheld the addition, stating the appellant failed to explain cash utilization during the surrender period. The appellant argued the cash flow statement justified the availability of cash and cited judicial precedents supporting their view.

The appellant submitted a cash flow statement showing sufficient cash available from 1-4-2008 to 29.8.2008. They contended it would be double taxation if the disclosed income was added separately again. The appellant detailed the cash flow statement, emphasizing the entries in the books of accounts were accepted by the AO. The appellant referred to judicial precedents to support their argument.

The Tribunal considered the contentions and orders of lower authorities. The appellant's failure to explain cash utilization during the intervening period led to the denial of benefit from the surrender. The Tribunal noted the appellant's cash flow statement prepared from the books of accounts showed the sources of cash taken to Bhubaneshwar and seized by the income tax department were from the surrendered amount. The Tribunal found the AO's desire to tax both the surrender amount and its application amounted to double addition. The Tribunal rejected the revenue's argument that the appellant, engaged in trading IT items, could not have kept the cash idle for sixteen months. Citing judicial precedents, the Tribunal held that without evidence of cash usage for other purposes, the cash available with the appellant should not be doubted. Following precedent, the Tribunal allowed the appeal, deleting the addition of Rs. 70,00,000 as undisclosed income.

In conclusion, the appellant's appeal was allowed, and the addition of Rs. 70,00,000 as undisclosed income was deleted.