2017 (1) TMI 1250 - AT - Income Tax

Unaccounted cash found during the course of search - addition on the amount of peak credit - Held that - Undisclosed income of ₹ 50 lacs warrants telescoping, which explains the source of cash and jewellery found as a result of search. The Hon ble Supreme Court in the case of Anantharam Veerasinghaiah & Co. Versus CIT 1980 (4) TMI 2 - SUPREME Court has approved the concept of telescoping. The Revenue has not been able to prove that undisclosed has been invested in investment other than cash and jewellery. Therefore, having regard to the settled proposition of law and in absence of any material placed on record by the Learned CIT(DR) to rebut the factual findings recorded by the learned Commissioner of Income Tax (Appeals), we reject the grounds of appeal of revenue

Summary

Issues Involved:
1. Deletion of addition on account of unaccounted cash found during search.
2. Deletion of addition on account of unaccounted jewellery found during search.
3. Deletion of addition on account of unaccounted receipt from chit fund business.

Issue-wise Detailed Analysis:

1. Deletion of addition on account of unaccounted cash found during search:
The Revenue challenged the deletion of ?12,16,500/- added by the Assessing Officer (AO) for unaccounted cash found during a search operation. The assessee argued that this cash was part of the undisclosed income from the chit fund business, which had already been declared. The Commissioner of Income-tax (Appeals) [CIT(A)] found merit in this argument, stating that even if the cash was considered in addition to the chit fund income of ?22,87,790/-, it was still part of the ?50,00,000/- undisclosed income already declared by the assessee. Thus, no separate addition was warranted. The Tribunal upheld this view, citing the Supreme Court's approval of telescoping in Anantharam Veerasinghaiah & Co. Versus CIT 123 ITR 457, and dismissed the Revenue's appeal on this ground.

2. Deletion of addition on account of unaccounted jewellery found during search:
The AO added ?8,55,955/- for unaccounted jewellery found during the search. The assessee claimed this jewellery belonged to family members and was traditional or stridhan. The CIT(A) noted that the jewellery's quantity was within the limits expected in a well-to-do Hindu family and below the permissible limits set by the CBDT. Additionally, the jewellery was not seized during the search, indicating it was not considered undisclosed. The CIT(A) also reasoned that the remaining amount of ?14,95,710/- from the declared ?50,00,000/- undisclosed income covered the jewellery value. The Tribunal agreed with this reasoning and upheld the deletion of the addition.

3. Deletion of addition on account of unaccounted receipt from chit fund business:
The AO initially added ?4,03,72,823/- based on seized documents from the assessee's premises, which suggested undisclosed income from a chit fund business. However, in a remand report, the AO admitted to arithmetical errors and revised the addition to ?6,91,419/-. The CIT(A) further examined the transactions and computed the peak balance from the chit fund business at ?20,46,784/-. Adding 2% commission on total payments, the CIT(A) determined the undisclosed income at ?45,75,580/-, splitting it between the two directors, resulting in ?22,87,790/- for the assessee. As this was less than the declared ?50,00,000/-, the CIT(A) deleted the addition. The Tribunal found the CIT(A)'s approach reasonable and upheld the deletion, noting that the Revenue could not provide contrary evidence.

Conclusion:
The Tribunal dismissed the Revenue's appeal, agreeing with the CIT(A)'s findings that the additions for unaccounted cash, jewellery, and chit fund income were unwarranted given the declared undisclosed income of ?50,00,000/-. The decision was pronounced in the open court on 20th January, 2017.