2022 (2) TMI 526 - AT - Income Tax

Addition u/s 69A - Cash found in possession of two persons by the Sundernagar police and subsequently requisitioned and seized by the Income tax Department u/s 132A - HELD THAT - There is no dispute that the cash had been found in possession of two persons namely Shri Avdesh Kumar and Shri Jagmohan however basis their statements and statement of Shri Amitabh Sharma the Director of the assessee company it has been found by the department and which has not been disputed by the assessee company that cash so found seized belongs to the assessee company. Therefore as far as the first condition for invoking provisions of section 69 A is concerned that during the financial year the assessee is found to be owner of the cash so seized the said condition is satisfied in the instant case. Cash so found is not recorded in the books of accounts if any so maintained by the assessee for any source of income and the assessee offers no explanation about the nature and source of acquisition of the money or the explanation offered by it is not satisfactory - Findings recorded by the AO that documents so produced in support of sale receipts from tickets sales are not reliable cannot be accepted in absence of any findings recorded either by the Investigation wing or any independent findings recorded by the Assessing officer himself. In light of the same we are of the considered view that the onus which has been cast on the Assessing officer to record a categorical finding that the cash so found has not be recorded in the assessee s books of accounts has not been satisfied in the instant case and therefore the second condition for invoking the provisions of section 69 A cannot be held to be fulfilled in the instant case. AO considering the fact that the bank was closed on 09. 11. 2016 had given benefit of average receipt of ropeway from 1st November 2016 to 15 th November 2016 amounting to Rs. 2, 85 562/- to the assessee company without appreciating the fact that Sundernagar police intercepted the vehicle carrying the cash on 09. 11. 2016 and the said cash was requisitioned and seized u/s 132 A of the Act by the Income tax Department subsequently on 17.11. 2016. The position of average receipt of ropeway prior to 8.11.2016 has to be seen and not subsequent to 8.11.2016. In any case there is no reasonable and justifiable basis for restricting the credit for just one day merely on the basis of finding that there are regular cash deposits in the bank account from 1.11.2016 to 8.11.2016 more so in light of the fact that the assessee has shown cash in hand of Rs. 81. 64 lacs as on 8.11.2016 in its books of accounts and which are represented by corresponding revenues which have been accepted and brought to tax and even deduction u/s 80 IC has been allowed by the Assessing officer. Addition invoking provisions of section 69 A and confirmed by the ld CIT(A) is hereby set- aside and directed to be deleted.- Decided in favour of assessee.

Summary

Issues Involved:
1. Sustenance of addition of Rs. 15,89,438/- under Section 69A of the Income Tax Act, 1961.

Detailed Analysis:

Issue 1: Sustenance of Addition of Rs. 15,89,438/- under Section 69A of the Income Tax Act, 1961

Background:
The assessee company, engaged in running a Passenger Ropeway Project, filed its return of income declaring Rs. 1,72,35,780/- after claiming a deduction under Section 80IC of the Income Tax Act, 1961. During scrutiny, an addition of Rs. 15,89,438/- was made under Section 69A, leading to an assessed income of Rs. 1,88,25,218/-.

Facts:
- On 09.11.2016, Sundernagar police intercepted a vehicle carrying Rs. 76 lacs, which was later requisitioned and seized by the Income Tax Department under Section 132A.
- The cash was claimed to belong to the assessee company, M/s SKI Himalayas Ropeways Pvt. Ltd.
- The assessee explained that the cash included Rs. 13,50,000/- from the sale of disposable material, Rs. 43,75,000/- from hotel references and activities in Solang Valley, and Rs. 18,75,000/- from ticket sales.
- The Investigation Wing rejected the submissions and documents provided by the assessee.
- The Assessing Officer (AO) made an addition of Rs. 15,89,438/- under Section 69A after giving credit for average ropeway receipts of Rs. 2,85,562/- from 1st November 2016 to 15th November 2016.

Arguments by Assessee:
- The AO did not conduct independent inquiries and relied solely on the Investigation Wing's findings.
- The assessee provided its cash book, bank books, and complete books of account, which were not rejected by the AO.
- The Investigation Wing's report lacked corroborative evidence to support the claim that the ticket register was manipulated.
- The assessee argued that the cash of Rs. 18,75,000/- was from operational receipts and should be accepted as part of its cash in hand.

Arguments by Revenue:
- The Revenue argued that the cash book showing Rs. 81.64 lacs as on 08.11.2016 was not reliable.
- The assessee regularly deposited cash in its bank account, making it unlikely to hold such a large amount of cash.
- The CIT(A) upheld the AO's findings, stating that no distinction could be made between the disclosed and undisclosed cash out of the seized amount.

Tribunal's Findings:
- The Tribunal noted that the cash belonged to the assessee company, satisfying the first condition under Section 69A.
- The second condition under Section 69A, which requires the cash to be unrecorded in the books of accounts, was not satisfied as the assessee had reported Rs. 81.64 lacs in its cash book.
- The AO accepted the assessee's explanation for Rs. 57,25,000/- as non-operational income but rejected the explanation for Rs. 18,75,000/- without sufficient evidence.
- The Tribunal found no basis for the AO's conclusion that documents regarding ticket sales were unreliable.
- The Tribunal held that the AO failed to record a categorical finding that the cash was unrecorded in the assessee's books of accounts.

Conclusion:
The Tribunal set aside the addition of Rs. 15,89,438/- made by the AO and confirmed by the CIT(A), directing its deletion. The appeal of the assessee was allowed.

Order Pronounced:
The order was pronounced on 10.02.2022.