2016 (5) TMI 346 - AT - Income Tax

Addition of cash found at the time of search - Held that - The Assessing Officer of Smt. Lalita Devi has scrutinized the cash availability U/s 143(3) of the Act and same cash has been accepted by the Assessing Officer. Further it is also undisputed fact that the husband of Smt. Lalita Devi Late Vallav Das Parwal was running a shop of wholesale of Ghee and oil etc. in the name of Maheshwari Store, Chandpole Bazar, Jaipur, who had expired on 19/08/2007. There was a cash balance as per cash book. Finally, the proprietory concern has closed on 15/9/2007, therefore, there is reasonable explanation with the assessee that he has received two lacs from his mother on different dates. Therefore, the addition confirmed by the ld CIT(A) is deleted. The finding on levy of interest U/s 234(c) of the Act is consequential to the above finding. - Decided in favour of assessee

Summary

Issues:
1. Addition of undisclosed cash to the income of the appellant.
2. Charging of interest under Section 234C of the Income Tax Act, 1961 on surrendered income.

Issue 1 - Addition of Undisclosed Cash:
The appeal was against upholding the addition of ?2,00,000 to the appellant's income due to cash found during a search operation. The Assessing Officer found cash during the search and the appellant surrendered a total amount of ?6,50,000. However, in the return of income, only ?5,30,000 was disclosed. The Assessing Officer made the addition as the appellant failed to provide evidence or explain the source of cash received from his mother. The CIT(A) dismissed the appeal, noting discrepancies in the appellant's explanations and lack of supporting evidence. The appellant argued that the cash was received from his mother, supported by entries in her books and balance sheet. The Tribunal found merit in the appellant's submissions, considering the cash transactions recorded in the mother's accounts and the closure of the business after the father's death. The addition was deleted based on the reasonable explanation provided by the appellant.

Issue 2 - Charging of Interest under Section 234C:
The Assessing Officer charged interest under Section 234C of the Act on the surrendered income. The CIT(A) upheld the interest charge, deeming it consequential. However, after deleting the addition of undisclosed cash, the Tribunal found the interest levy to be connected to the now-deleted addition. Consequently, the interest charge under Section 234C was also set aside. The appellant's appeal was allowed, and the order was pronounced in their favor.

In conclusion, the Tribunal allowed the appeal, deleting the addition of undisclosed cash and the consequent interest charge under Section 234C of the Income Tax Act, 1961. The decision was based on the appellant's reasonable explanation supported by evidence regarding the source of the cash received from the mother and the closure of the business after the father's demise.