2019 (8) TMI 1275 - HC - Income Tax

Addition for the lesser cash in hand found as compared with the books of account - applicability of section 68 or 69A - difference of cash balance as reflected in the balance sheet and cash as per seized documents - HELD THAT - Addition made of 37, 30, 710/- which is lesser cash in hand as compared with the books of accounts in which the assess has shown more cash in hand the Tribunal held that it is neither a case under Section 68 nor Section 69-A. The Tribunal further went on to hold that it was not a case where money is not recorded in the books of account of assessee and in the present case cash in hand in the books of account was found to be more than the actual cash found during the course of search. At the most authorities could have presumed that assessee has spent the difference of amount in question somewhere as per cash in hand as per books of account and lesser cash as per seized documents but that would also not suffice to make addition under any of the above propositions. Addition in respect of alleged business of potato - assessee is ruining a cold storage - allegation for violation of the provisions of U.P. Regulation of Cold Storage Act - HELD THAT - Tribunal has also recorded a categorical finding that no evidence of purchase sales or unaccounted stock belonging to the assessee during the course of search or survey was found or established thus there was no justification for the authorities to make or confirm the addition of the said amount. There is no doubt that the business of running a cold storage is governed by the U.P. Act of 1976 and it is only after the grant of licence by the licencing authority that a cold storage can run according to the terms and conditions of the licence. Any violation of the terms of licence has penal consequences as provided under Section 37 and 38 of the Act for which the Magistrate of Ist Class is empowered to take cognizance of any offence so made by the licence holder. As in the case in hand during the search and survey in the business premises of the assessee no such violation was found or recorded nor any notice was given or action was taken against the asssessee as is evident from the perusal of the documents before us. Further the counsel for the Revenue also could not point out to any such violation made by the assessee of the U.P. Act of 1976. Once it is established that the assessee had not violated the terms of licence so granted by the licencing authority merely on the basis of presumption and assumption from any documents or papers seized during search and survey cannot be the basis for the addition of such an amount. Revenue has failed to establish that the order of the Tribunal is manifestly illegal and suffers from error apparent on face of the record. As the Tribunal being the last fact finding court has categorically recorded finding that the authorities below had wrongly made the additions without any material on record on the basis of mere presumption and assumption. - Decided in favour of the assessee.

Summary

Issues:
1. Addition of investment in potatoes
2. Difference in cash balance
3. Interpretation of word "either"
4. Direction to re-decide the issue by considering books of accounts
5. Reversal of concurrent findings by ITAT
6. Reversal of concurrent findings based on fresh material
7. Violation of U.P. Regulation of Cold Storage Act

Detailed Analysis:
1. The appeal challenged the ITAT's order regarding the addition of investment in potatoes and cash balance differences. The appellant disputed the deletion of the addition of ?23,31,28,321 for potato investment and ?37,30,710 for cash balance differences. The CIT(A) initially accepted the additions. The ITAT allowed the appeal partially, remanding one issue back to the Assessing Authority.

2. The appellant argued that the ITAT erred in deleting the additions without sufficient evidence. They contended that the actual cash with the assessee was less than shown in the balance sheet, resulting in the addition of ?37,30,710. The ITAT reversed the concurrent findings without proper material, according to the appellant.

3. The ITAT's decision was based on the interpretation of the word "either" used by the Assessing Officer and CIT(A) regarding a case reflecting either bogus liability or unexplained cash. The ITAT directed the Assessing Officer to re-decide the issue based on the books of accounts produced by the assessee, disregarding Section 142A provisions.

4. The respondent, a partnership firm engaged in cold storage business, argued that they were not involved in the potato business but operated a cold storage facility. They maintained proper records and contended that the additions were based on presumption without concrete evidence.

5. The Senior Counsel for the assessee emphasized that the cold storage operation was regulated by the U.P. Regulation of Cold Storage Act, 1976. They highlighted the Act's provisions regarding the licensing, operation, and penalties for violations, asserting that no violation was found during the search or survey.

6. The Tribunal found no evidence of purchase, sales, or unaccounted stock belonging to the assessee during the search or survey. They concluded that the authorities lacked justification for the additions made, as the business of running a cold storage is governed by the U.P. Act of 1976, and no violations were established.

7. The Court dismissed the appeal, stating that the Revenue failed to prove the Tribunal's order was manifestly illegal or contained an error apparent on the face of the record. The Tribunal's findings were upheld, emphasizing the lack of material evidence for the additions made by the authorities. The question of law was answered against the Revenue and in favor of the assessee.