2017 (12) TMI 1137 - AT - Income Tax

Addition on account of alleged excess cash declared by assessee at the time of search but not offered to tax in his return of income - Held that - It is an undisputed fact that during the course of search ₹ 5,79,410/- were recovered from residential premises of assessee. It is relevant to note here that search action at the premises of the firm took place on 11.04.2011 and search at the residential premises of the assessee was carried on 27.04.2011 i.e almost after two weeks. The statement of assessee u/s. 132(4) was recorded on 28.04.2011. The assessee sought time to reconcile the books to explain the source of cash. The recording of assessee s statement was resumed on 30.04.2011. On the said date, assessee admitted that ₹ 5,00,000/- is his unaccounted income for the assessment year 2012-13 on account of unexplained cash. Thus, assessee had ample time at least to make out whether this amount of ₹ 5,00,000/- belongs to the firm or on his personal account. CIT(Appeals) rightly pointed that the assessee never claimed while recording statement that cash belongs to the firm. We concur with the view of lower authorities that attributing ₹ 5,00,000/- as cash of the firm is an afterthought. - Decided against assessee.

Summary

Issues:
1. Addition of alleged excess cash declared by the assessee at the time of search but not offered to tax in the return of income.

Analysis:
The judgment revolves around the appeal by the assessee against the order of the Commissioner of Income Tax (Appeals) for the assessment year 2012-13. The primary issue is the addition of ?5,00,000 on account of alleged excess cash declared by the assessee at the time of search but not included in the return of income. The search action under section 132 of the Income Tax Act was conducted, leading to the discovery of ?5,79,410 in cash at the residential premises of the assessee. The assessee initially admitted that ?5,00,000 was his undisclosed income for the relevant assessment year but later claimed that the cash belonged to the firm M/s. Surekh Jewellers. Despite the firm's books being audited and presented during assessment, the Assessing Officer added the amount to the assessee's income.

The assessee contended that the cash found belonged to the firm and not to him personally. The argument was supported by the completion of the firm's books and reconciliation, which confirmed that the cash was part of the firm's funds. The assessee's representative cited relevant legal precedents to support this position. On the contrary, the Department argued that the assessee had admitted the cash as his undisclosed income during the search and only later claimed it belonged to the firm. The Department alleged that the assessee adjusted the amount in the firm's cash book post-search.

The Tribunal considered the submissions from both sides and reviewed the sequence of events surrounding the search and the assessee's statements. It was noted that the assessee had sufficient time to ascertain the ownership of the cash between the search and the recording of statements. The Tribunal agreed with the lower authorities that the claim that the cash belonged to the firm was an afterthought by the assessee. Consequently, the Tribunal upheld the Commissioner of Income Tax (Appeals) decision to add the amount to the assessee's income, dismissing the appeal for lack of merit.

In conclusion, the judgment highlights the importance of consistency in statements made during income tax proceedings and the need for evidence to support claims of ownership or source of funds, especially in cases involving undisclosed income discovered during search operations.