2021 (3) TMI 1112 - AT - Income Tax

Undisclosed income - as during the course of search cash sum was found and assessee failed to explain its source and accepted to offer it as additional income - HELD THAT - As we find that the assessee had made retraction before the completion of assessment proceedings with documentary evidence and relevant explanation and therefore the onus to prove the burden shifted on to the revenue. The assessee during the assessment proceedings also submitted the details of cash in hand as on 31.3.2016 in the hands of the firm M/s Daya Properties Finance, its partners and wife of the partner. Income Tax Returns of the firm M/s Daya Properties Finance and other individuals for Assessment Year 2016-17 were very much before the Ld. A.O. They have been scrutinized during the assessment proceedings and the assessment was completed u/s 143(3) of the Act and no addition have been made. If the Ld. A.O was not satisfied with the cash in hand shown by the assessee and individuals as on 31.3.2016 he should have taken necessary action during Assessment Year 2016-17 but in absence there of it has to be presumed that the Ld. A.O has accepted the position of cash in hand as on 31.3.2016 shown by the assessee firm and its partners and wife of the partner which stood. So as on 1.4.2016 assessee had cash in hand in its business concern and other individuals referred above at ₹ 16,50,360/- which is sufficient enough to cover up the shortfall in surrender of income of ₹ 15,02,020/- found during the course of search as on 30.8.2016. Since the assessee had explained the source of cash to the extent of ₹ 15,02,020/- as on the date of search, it had rightly reduced the surrender of income from ₹ 37,02,020/- to ₹ 22,00,000/-. We therefore are of the view that the Ld. A.O was not justified in making the addition of ₹ 15,02,020/-. We accordingly set aside the finding of Ld. CIT(A) and allow Ground No. 1 to 4 raised by the assessee.

Summary

Issues Involved:
Assessment Year 2017-18 - Addition of undisclosed income - Retraction of income surrender - Acceptance of cash position in previous returns - Burden of proof on revenue - Judicial precedence on retraction.

Analysis:

1. The appeal pertains to the Assessment Year 2017-18 and challenges the addition of undisclosed income amounting to ?15,02,020 made by the Assessing Officer (AO) based on a search and seizure operation conducted under section 132 of the Income Tax Act 1961. The appellant, a firm engaged in money lending and loan brokerage, had surrendered ?37,02,020 as additional income during the search, which was later partially included in the return of income filed. The AO completed the assessment under section 143(3) by adding ?15,02,020 to the total income.

2. The appellant contended that the cash available in the books of the firm and related individuals as of March 31, 2016, totaling ?16,50,360, was sufficient to cover the surrendered amount. However, the AO and the Commissioner of Income Tax (Appeals) upheld the addition, emphasizing the delayed retraction of the surrender and the lack of communication to the authorities.

3. The appellant, before the Tribunal, argued that the cash position as per previous returns for the firm and individuals had been accepted by the department in earlier assessments. Citing judicial precedents, the appellant asserted that the retraction made with documentary evidence and explanations should shift the burden of proof to the revenue authorities.

4. The Tribunal analyzed the facts and noted that the cash position as on March 31, 2016, had been accepted in earlier assessments without additions. Considering the evidence presented by the appellant and the explanation for the reduced surrender amount, the Tribunal held that the AO was unjustified in adding ?15,02,020 to the income. Consequently, the Tribunal allowed the appeal, setting aside the CIT(A)'s decision and granting relief to the appellant.

5. The Tribunal's decision underscores the importance of substantiating retraction with evidence and the significance of prior acceptance of cash positions in related assessments. By shifting the burden of proof to the revenue authorities and aligning with judicial precedents, the Tribunal provided relief to the appellant by overturning the addition of undisclosed income.