2019 (9) TMI 1396 - AT - Income Tax

Undisclosed income on a/c of alleged unexplained cash found during the course of search - search and seizure u/s 132 and 133A - HELD THAT - The assessee explained the source of cash as belongs to M/s. Adventure Global Tour LLP and also produced the cash book of the said concern to show the availability of cash with the said LLP. Once there is no incriminating material to show that the cash of ₹ 2,59,140/- found at 203 Ratna Sagar, MSB Ka Rasta, Johari Bazar belongs to the assessee and the said premises was not the business premises of the assessee and the assessee has explained the source of cash belongs to M/s. Adventure Global Tour LLP whose business premises is situated at 203 Ratna Sagar, MSB Ka Rasta, Johari Bazar, then in the absence of any contrary fact or material, the said explanation of the assessee cannot be brushed aside. Assessee has discharged its onus in explaining the source of cash and the AO even failed to discharge his preliminary onus to establish that the cash found at a different premises not belonging to the assessee, belongs to the assessee. Thus the addition made by the AO is deleted. - Decided in favour of assessee.

Summary

Issues:
1. Addition of undisclosed income based on unexplained cash found during search and survey proceedings.

Analysis:
The appeal before the Appellate Tribunal ITAT Jaipur involved the addition of undisclosed income amounting to ?2,59,140 made by the Assessing Officer (AO) based on alleged unexplained cash found during search and survey proceedings for the assessment year 2016-17. The assessee, a partnership firm deriving income from financial brokerage, was part of a group subjected to search and seizure under section 132 and survey under section 133A of the IT Act. During these actions, cash amounting to ?15,59,085 was discovered at the assessee's premises. The AO proposed the addition of ?2,59,140 as unexplained cash found during survey proceedings at a different location, which the assessee contended belonged to a sister concern, M/s. Adventure Global Tour LLP. The AO rejected this explanation, leading to the appeal.

The assessee argued that the cash found at the different premises during the survey was adequately explained during the search and seizure action, and the AO did not propose any addition regarding the cash found at the assessee's business premises. The assessee maintained that the cash in question belonged to M/s. Adventure Global Tour LLP and produced relevant documentation to support this claim. The department, however, contended that the explanation provided was an afterthought and questioned the existence of the LLP based on ROC fees payment dates.

The Tribunal noted that while the cash found at the assessee's premises was explained and not subject to any addition by the AO, the addition was proposed solely based on cash found at a different location during the survey. It was observed that the department did not confront the assessee with the cash found at the different premises during the statement recording under section 132(4) and did not raise any queries regarding its ownership. As the premises where the cash was found did not belong to the assessee and the source was explained to belong to M/s. Adventure Global Tour LLP, the Tribunal held that the assessee had discharged its onus in explaining the source of cash. Consequently, the addition made by the AO was deemed unjustified and was deleted, thereby allowing the appeal of the assessee.

In conclusion, the Appellate Tribunal ITAT Jaipur ruled in favor of the assessee, emphasizing the importance of establishing ownership and providing a credible explanation for unexplained cash found during search and survey proceedings to avoid additions to undisclosed income.