2017 (3) TMI 112 - HC - Income Tax

Unexplained cash - cash seized during the course of search - Held that - It is not in dispute that at the time of search, a sum of ₹ 2,89,000/- cash was in possession of the assessee, out of which ₹ 2,50,000/- was seized. Assessee is owning 4 acres of agricultural land in HUF capacity and in the said account, book cash of ₹ 4,16,092/- has been reflected and this was also with the assessee. It was also noticed by CIT (Appeals) that an agreement to sell had been entered into by assessee and had received back ₹ 1,80,000/- as refund since said deal did not materialise or sale did not take place. Hence, CIT (Appeals) concluded that as on 25.03.2008 assessee possessed cash balance as per book a sum of ₹ 2,96,092/- and in that background, addition of ₹ 2,89,000/- came to be deleted. Since it was notice d after verification of books of account maintained by assessee that assessee had sufficient cash on hand, deletion made by CIT (Appeals) came to be affirmed by ITAT. Addition towards afforestation charges - Held that - It came to be held by both the appellate authorities that though expenditure is financed by Sri Goutam Chand of M/s. Rajashree Minerals who had taken a mine on lease from assessee, they were recoverable from the assessee and their accounts also disclosed the same. In view of the fact that none of the parties other than the assessee has claimed said amount as expenditure and this aspect having not been questioned by the revenue, appeal of the revenue rightly came to be dismissed by the Tribunal. On appreciation of entire material on record, as noticed herein above, Tribunal has rejected the claim of the revenue and has affirmed the order passed by CIT (Appeals).

Summary

Issues:
1. Correctness and legality of the order passed by the Income Tax Appellate Tribunal.
2. Disallowance of claims made by the assessee by the Assessing Officer.
3. Appeal filed by the revenue challenging the decision of the Commissioner of Income Tax (Appeals).
4. Treatment of undisclosed investments, unexplained cash, and afforestation charges.

Analysis:
1. The High Court addressed the appeal by the revenue questioning the order of the Income Tax Appellate Tribunal, where the appeal filed by the revenue was dismissed, confirming the disallowance made by the Assessing Officer and upheld by the Commissioner of Income Tax (Appeals). The assessee, an individual, underwent a search operation under Section 132 of the Income Tax Act, 1961. The Assessing Officer disallowed certain claims made by the assessee, leading to the appeal process.

2. The Commissioner of Income Tax (Appeals) allowed the claims of the assessee, rejecting the grounds raised by the revenue. The revenue then appealed to the Income Tax Appellate Tribunal, challenging the disallowance of undisclosed income, unexplained cash, and afforestation charges. The Tribunal reviewed each disallowance, including the undisclosed investment in money lending, unexplained cash seized during the search, and the afforestation charges incurred by the assessee.

3. The Tribunal found that the assessee had sufficient cash available for lending, based on withdrawals from the bank and cash flow statements. Regarding the unexplained cash seized, it was established that the assessee had cash on hand and had received refunds from failed transactions, leading to the deletion of the added amount. The Tribunal also considered the nature of the afforestation charges, ruling that they were revenue expenditure and not capital expenditure, based on the terms of the agreement and the financial transactions between the parties involved.

4. The High Court dismissed the revenue's appeal, affirming the Tribunal's decision. It concluded that the orders of the Commissioner of Income Tax (Appeals) and the Tribunal were not erroneous and were based on factual aspects. The Court found no substantial questions of law to be considered and upheld the Tribunal's order, confirming the decision of the Commissioner of Income Tax (Appeals).

This detailed analysis highlights the key issues addressed in the legal judgment, focusing on the correctness and legality of the decisions made by the appellate authorities regarding the disallowed claims and treatment of undisclosed investments, unexplained cash, and afforestation charges.