2018 (7) TMI 223 - AT - Income Tax

Addition of unexplained cash and cheque seized from the assessee - unexplained income - search proceedings - onus to prove - Held that - In terms of section 132(4A) it may be presumed that any books of accounts, documents, money, bullion, jewellery etc. found in the possession or control of any person in the course of search belongs to such person. This presumption is rebuttable presumption and onus is on the person from which possession said items of books of accounts or cash etc has been found. In the instant case, the onus was on the assessee and he has failed to discharge his onus in view of our observations above. Section 110 of the Evidence Act has also specified that when the question is whether any person is owner of anything of which he is shown to be in possession, the burden of proving that he is not the owner is on the person who affirms that he is not the owner. In the instant case, the assessee was in possession of the cash and thus the burden of proving that he is not the owner of the said cash is on the assessee. As the assessee has failed to discharge this onus, the assessee is held to be owner of the said cash and in absence of any explained source of said cash in the hand of the assessee, it is held to be unexplained. - Decided against assessee. Addition on cheque sized no name of the drawee was mentioned in the said cheque and the same has not been in encashed by the assessee, the cheque has remained merely a piece of paper without any monetary value . In view of the no monetary value of the said cheque, no addition can be made in the hands of the assessee. Accordingly, we direct the Assessing Officer to delete the said addition - Decided in favour of assessee.

Issues Involved:
1. Addition of ?53,90,000/- as unexplained income.
2. Addition of ?2,50,000/- undated cheque as unexplained income.

Issue-wise Detailed Analysis:

1. Addition of ?53,90,000/- as Unexplained Income:

The appeal concerns an assessee who is a partner in M/s Lakshit Jewellers. During a search by Railway Police at Jammu Railway Station, ?53,90,000/- in cash was found in the possession of the assessee. The cash was seized, and the case was handed over to the Income Tax Department. The assessee filed a return declaring ?2,66,180/- as total income for the year under scrutiny.

During scrutiny, the Assessing Officer (AO) noted several discrepancies:
- The assessee failed to provide valid proof of the cash source during initial inquiries.
- The explanation given by the assessee, that the cash was intended for purchasing property in Jammu & Kashmir, was deemed improbable as outsiders cannot purchase property in that state.
- The source of cash was later explained as being from the firm's cash-in-hand, but supporting documents were provided almost a month later, raising suspicions of manipulation.
- The firm’s books showed abnormal cash sales just before the cash seizure, suggesting an attempt to justify the cash found.
- The firm's turnover showed a significant increase in the year the cash was seized compared to previous years.
- The AO found it improbable that the partner would carry such a large amount of cash instead of using banking channels.

The Commissioner of Income Tax (Appeals) [CIT(A)] upheld the AO's findings, citing:
- The documents provided by the assessee were self-serving and submitted late.
- The assessee’s failure to produce statements recorded by the SSP, Jammu.
- Abnormal hike in sales and purchases just before the cash seizure.
- The improbability of carrying such a large amount of cash for business purposes.

The Tribunal noted:
- The assessee failed to convincingly explain the source of the cash.
- The firm’s books showed unusual transactions and discrepancies, indicating they were not maintained in the regular course of business.
- The assessee’s capital account did not justify the cash withdrawal.
- The Tribunal referenced the Supreme Court rulings in CIT Vs Durga Prasad More and Sumati Dayal Vs CIT, which support considering the apparent as real unless proven otherwise and looking at surrounding circumstances to find out the realities.

The Tribunal concluded that the cash found was unexplained and upheld the addition of ?53,90,000/- as unexplained income.

2. Addition of ?2,50,000/- Undated Cheque as Unexplained Income:

The cheque found with the assessee was undated and did not mention the drawee's name. The Tribunal observed that the cheque had not been encashed and thus held no monetary value. Consequently, no addition could be made based on the cheque. The Tribunal directed the AO to delete the addition of ?2,50,000/-.

Conclusion:

The Tribunal partly allowed the appeal, upholding the addition of ?53,90,000/- as unexplained income but deleting the addition of ?2,50,000/- for the undated cheque. The decision was pronounced on 3rd July 2018.

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