2020 (2) TMI 1140 - AT - Income Tax

Undisclosed cash u/s 69 - survey operation u/s 133A - ₹ 1 crore found and seized was never disclosed in the books of account - HELD THAT - There is no dispute that the assessee is an authorised money changer. In our considered opinion, this line of business required availability of cash in huge amount as the persons give dollars to be exchanged in Indian currency. Considering the exchange rate, the assessee has to carry heavy cash. To this extent, we do not find any quarrel between the assessee and the revenue. The main reason which we find is that the cash bundles carry the tag of PNB, Hissar. Again, in our considered view, this should not be given weightage in as much as it is a very common practice amongst all banks to issue currency bundles as received by them. Moreover, once a bundle of currency carried tag of another bank, the issuing bank need not have to count again and again. Another reason given by the Assessing Officer is that the cash books were not available at the time of survey. It is common practice that though the cash books are written on day to day basis, but in practice, there is always a time gap between the book entries. Books were lying with the CA, which have also been verified by the Assessing Officer and when during the course of assessment proceedings books were produced, not even a single defect has been pointed out by the Assessing Officer in the books of account of the assessee. We are of the considered view that the entire addition has been made on the basis of suspicions and surmises and such additions cannot be sustained. We, accordingly, set aside the findings of the ld. CIT(A) and direct the Assessing Officer to delete the addition of ₹ 1 crore. The ground raised by the assessee is allowed. Addition u/s 68 - assessee was asked to produce all the creditors personally but could produce only one person, namely, Shri Neetu Nayyar - HELD THAT - There is no dispute that all the lenders are either directors or relatives of the directors. It is also true that the assessee has furnished PAN details, bank statements, confirmations and copies of Income tax returns of the lenders. It is equally true that none of the lenders is alleged to be an entry provider. A perusal of their bank statements reveals that they have given loan to the assessee out of their available balances and it is not the case of the Revenue that prior to issuing cheques, there is a deposit of cash in the lender s bank account. Therefore, it can be safely concluded that the assessee has not purchased cheque by paying cash. Considering the evidences which are before us in the form of paper book and considering the fact that the ld. CIT(A) has deleted the addition after carefully perusing the documents, we find no reason to interfere with the findings of the ld. CIT(A). Accordingly, the ground raised by the revenue is dismissed.

Summary

Issues:
1. Addition of undisclosed cash under section 69 of the Income-tax Act, 1961.
2. Addition of unsecured loans under section 68 of the Income-tax Act, 1961.

Issue 1: Addition of undisclosed cash under section 69 of the Income-tax Act, 1961
The case involved an appeal against the addition of ?1 crore as undisclosed cash under section 69 of the Income-tax Act. The cash was found with two individuals who were employees of a company, and it was claimed to belong to the assessee. The Assessing Officer observed discrepancies in the explanation provided by the assessee regarding the source of the cash, including issues with cash withdrawal from a bank and the presence of bank tags on the cash bundles. The assessee contended that the cash was part of their business operations as an authorized money changer, requiring a substantial cash balance. The tribunal noted that the Assessing Officer's conclusions were based on suspicions and surmises, lacking concrete evidence. The tribunal set aside the addition of ?1 crore, ruling in favor of the assessee.

Issue 2: Addition of unsecured loans under section 68 of the Income-tax Act, 1961
The second appeal concerned the addition of ?2.56 crores as unsecured loans under section 68 of the Income-tax Act. The Assessing Officer questioned the genuineness of the loans, as they were taken from directors and their relatives. The assessee provided various documents, including PAN details, bank statements, and confirmations, to prove the legitimacy of the loans. The tribunal noted that all lenders were related to the company and had established identities with no evidence of unscrupulous activities. The tribunal agreed with the CIT(A) that the loans were genuine, as the lenders were taxpayers, and the funds were transferred through bank accounts without any suspicious cash deposits. Consequently, the tribunal dismissed the revenue's appeal, upholding the deletion of the addition of ?2.56 crores.

In conclusion, the tribunal allowed the assessee's appeal regarding the undisclosed cash addition and dismissed the revenue's appeal concerning the unsecured loans addition. The judgments were pronounced on 20.02.2020 by the Appellate Tribunal ITAT DELHI, with detailed analysis and considerations for each issue presented in the case.