2016 (7) TMI 391 - AT - Income Tax

Undisclosed/unexplained cash u/s 69A - assessee has chosen a particular manner to declare such income in its books of account by incorporating it as net proceeds of the activity of sale of agricultural produce - Held that - There is no material found in search or otherwise to show that assessee has carried out any agricultural activity. Ostensibly, the assessee claims that the said net amount of ₹ 83,00,000/- represents unexplained cash seized during the course of search. The notes of account, which we reproduced above, if considered in totality, supports the stand of the assessee that apart from the amount of ₹ 83,00,000/-, there is no further requirement of the assessee to declare income corresponding to the unexplained cash found during the search. If the stand of the Revenue was to be approved, then, it would be imperative to establish that assessee had earned ₹ 83,00,000/- over and above the unexplained cash found during the course of search. For that matter, there is no material or evidence on record which could show that other than the cash seized of ₹ 83,00,000/-, there was any other unexplained income to that extent. Though the manner in which assessee-company has offered the unexplained cash of ₹ 83,00,000/- to tax in the return of income is not in the best of the terms, yet it cannot be negated by merely cherry-picking the facts. In fact, the notes of account has to be understood in toto and, accordingly there cannot be any doubt that the sum of ₹ 83,00,000/- declared in the return of income corresponded to the amount of cash seized during the search operation. Therefore, in our view, the lower authorities fell in error in making a further addition of ₹ 83,00,000/- by invoking Sec. 69A of the Act on account of unexplained/undisclosed cash found during the search. - Decided in favour of assessee

Issues:
1. Addition of undisclosed cash under section 69A of the Income Tax Act.
2. Dispute regarding the declaration of unexplained cash found during a search.
3. Interpretation of entries in the books of account related to agricultural income.

Issue 1: Addition of undisclosed cash under section 69A of the Income Tax Act
The appeal was against the order of CIT(A) regarding an addition of ?83,00,000 sustained by the assessee as undisclosed cash under section 69A of the Income Tax Act. The Assessing Officer had added this amount as undisclosed/unexplained cash found during a search and seizure operation under section 132(1) of the Act. The assessee claimed to have declared this amount in the return of income as income from the sale of agricultural produce. However, the authorities did not accept this explanation, leading to the dispute.

Issue 2: Dispute regarding the declaration of unexplained cash found during a search
The primary dispute revolved around whether the assessee had indeed offered the unexplained cash of ?83,00,000 for taxation. The assessee contended that the entries in the books of account, related to the sale of agricultural produce, represented the seized cash. The Revenue argued that these entries were made only after the search and did not reflect the actual unexplained cash found. The Tribunal analyzed the notes to the account and the statements made during the search to determine the authenticity of the declaration of income by the assessee.

Issue 3: Interpretation of entries in the books of account related to agricultural income
The Tribunal examined the entries in the books of account provided by the assessee, which indicated the sale of agricultural produce as the source of the declared income. The Revenue challenged this explanation, highlighting the lack of evidence supporting agricultural activities by the assessee. Despite the unconventional methodology of declaring the income, the Tribunal concluded that the sum of ?83,00,000 declared in the return of income corresponded to the cash seized during the search operation. The Tribunal held that the lower authorities erred in making an additional addition under section 69A of the Act, directing the Assessing Officer to delete the impugned addition.

This detailed analysis of the legal judgment highlights the key issues, arguments, and conclusions reached by the Appellate Tribunal in the case.

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