2017 (12) TMI 1005 - AT - Income Tax

Unexplained cash u/s 69A - cash found in survey - proof of cash not belonging to assessee but to sister concern - Held that - We find that the assessee has not given any explanation before the A.O. why the retraction letter dated 19.04.2010 is placed before the A.O. during the course of the assessment proceedings not communicated to the department. Even before us, the assessee has not given any explanation why this letter is not communicated to the department immediately. Only that the partner Rajababu Khandenwala, he himself admitted that the cash found during the course of the survey out of unrecorded sales made by the assessee firm now before A.O. said that I simply signed the papers without going it cannot be accepted, we find that this argument raised by the counsel by the assessee is rejected. Sofaras another argument raised by the counsel that this cash is belonging to the sister concern of the assessee firm. The assessee is not able to establish names of the sister concern and type of business carried by the sister concern and books of accounts of the sister concern. Simply submitted before the A.O. that the cash found during the course of survey is belonging to sister concern is not sufficient. The assessee also failed to explain the sister concern companies also existed in the premises of the assessee firm. The assessee has failed to give details of the sister concern. Thus the assessee failed to recharge burden casted upon him to explain that the cash found during the course of survey not belonging to assessee and it is belonging to sister concern. Thus addition made by CIT(A) is confirmed and the appeal filed by the assessee is dismissed.

Summary

Issues:
1. Maintainability of appeal based on tax effect below 10 lakhs.
2. Addition of unexplained cash during assessment proceedings.

Issue 1 - Maintainability of appeal based on tax effect below 10 lakhs:
The ITAT Kolkata heard cross-appeals by the revenue and assessee against the CIT(A)'s order for A.Y. 2010-11. The revenue's appeal was dismissed as the tax effect was below 10 lakhs, not maintainable as per CBDT Circular No. 21 of 2015. The ITAT upheld the dismissal of the revenue's appeal based on the circular's guidelines.

Issue 2 - Addition of unexplained cash during assessment proceedings:
The case involved M/s. Nidhi Sulphonates, a chemical trading firm, where unexplained cash of 18,08,048/- was found during a survey, exceeding the recorded cash balance. The AO added this amount to the income as unexplained. The CIT(A) upheld this addition, stating the failure to prove the source of excess cash. The assessee contended that the retracted statement by a partner should not be the basis for addition. However, the ITAT found the retraction unconvincing, as the partner's explanation lacked credibility, and the claim that the cash belonged to a sister concern was unsubstantiated. The ITAT confirmed the CIT(A)'s decision, dismissing the assessee's appeal.

In conclusion, both appeals by the revenue and assessee were dismissed, upholding the addition of unexplained cash due to the failure to prove its source or relation to a sister concern.