2021 (2) TMI 218 - AT - Income Tax

Addition u/s 69A - Seizure of cash in search - whether source of cash found and seized from the possession of the two persons which belongs to the assessee? - HELD THAT - We find force in the contentions so advanced by the ld. AR. The cash so seized admittedly belongs to the assessee and through return of income, the statement of affairs, cash flow statement for the previous year and cash book for the year under consideration, the source of cash so seized has been duly explained in form of sales and opening cash balance duly recorded in the books of accounts. We therefore, find that there is no basis for making the impugned addition in the hands of the assessee and the same is hereby directed to be deleted. - Decided in favour of assessee.

Summary

Issues Involved:
1. Legality of assessment proceedings under Section 153A versus 153C.
2. Rejection of books of accounts by the Assessing Officer.
3. Addition of cash amounting to ?5,34,000 as undisclosed income under Section 68.
4. Sufficient cash balance and supporting documents for the seized cash.
5. Charging of interest under Section 234A and 234B.

Detailed Analysis:

1. Legality of Assessment Proceedings under Section 153A versus 153C:
The assessee contended that the assessment for AY 2017-18 should have been conducted under Section 153C, similar to the assessments for AYs 2011-12 to 2016-17, making the proceedings under Section 153A illegal and void ab initio. The Tribunal, however, did not find it necessary to examine this contention further, as the primary issue regarding the addition of cash was resolved in favor of the assessee.

2. Rejection of Books of Accounts by the Assessing Officer:
The Assessing Officer (AO) rejected the books of accounts, stating that the assessee failed to produce supporting evidence for the opening cash balance and cash sales. The AO noted that the books were not audited and were based on presumptive income under Section 44AD. The Tribunal found that the books of accounts, regularly kept in the course of business, should be treated as evidence under Section 34 of the Evidence Act and that the AO’s rejection was unjustified.

3. Addition of Cash Amounting to ?5,34,000 as Undisclosed Income under Section 68:
The AO added ?5,34,000 as undisclosed income, questioning the source of cash found and seized. The Tribunal observed that the assessee had provided sufficient documentation, including a cash book, bank statements, and affidavits, to substantiate the source of the cash. The Tribunal noted that the opening cash balance of ?5,95,790 was supported by the return of income for AY 2016-17 and accepted by the same AO without adverse findings. Therefore, the addition of ?5,34,000 was deemed without basis and directed to be deleted.

4. Sufficient Cash Balance and Supporting Documents for the Seized Cash:
The assessee argued that the seized cash was part of regular business transactions, supported by the cash book showing a balance of ?5,69,878 before the seizure date. The Tribunal found that the cash book and other documents provided by the assessee sufficiently explained the source of the cash. The Tribunal emphasized that the AO did not dispute the sales and purchase bills, which supported the cash sales during the year.

5. Charging of Interest under Section 234A and 234B:
The Tribunal did not specifically address the issue of charging interest under Sections 234A and 234B, as the primary contention regarding the addition of cash was resolved in favor of the assessee, rendering the interest charges moot.

Conclusion:
The Tribunal ruled in favor of the assessee, directing the deletion of the ?5,34,000 addition and finding no basis for the AO’s rejection of the books of accounts and the addition of cash as undisclosed income. The appeal of the assessee was allowed, and the Tribunal did not find it necessary to examine the legality of the proceedings under Section 153A versus 153C further.