2022 (10) TMI 1046 - AT - Income Tax

Unexplained money u/s 69A - assessee stated that the source of cash found in the search and seizure operation was out of repayment of principal as well as interest from the customers, and generated during the regular course of business activities - HELD THAT - Entire issue revolves around the cash that was introduced on 29/1/2019, namely, the date of survey. Except the statement of the assessee that the cash that was introduced on 29/1/2019 is business receipt, the authorities did not find any material to support that statement. Even before us also no material is produced. The cash seized by the Department is supported by the entries in the cash book by way of closing balance on 29/1/2019, but the source of the additional income introduced on 29/1/2019 is not established. Assessee says that except this business they do not have any other source of income. If that be so, its not known where from this additional income of Rs. 95,23,000/- in respect of the main branch and Rs. 78,17,790/- in respect of branch SR Nagar is generated to show in the cash book. Authorities found that this particular amount that was introduced by way of additional income is not business income since the business income is subsumed into the amount that was seized. We too have no material to take a different view. In these circumstances, we find it difficult to hold that the view taken by the authorities below is either illegal or improper. We accordingly do not find any reasons to interfere with the considered findings of the authorities below. With this view of the matter, we dismiss the grounds of appeal.

Summary

Issues:
1. Whether the cash seized during a search and seizure operation constitutes unexplained money under section 69A of the Income Tax Act, 1961?
2. Whether the additional income introduced in the cash book by the assessee after the seizure is liable for taxation under section 115 BBE of the Act?

Analysis:

Issue 1:
The case involved a partnership firm engaged in finance business, where a search and seizure operation resulted in cash amounting to Rs. 1,73,40,790/- being found at the premises. The Assessing Officer contended that the firm had introduced unexplained money into the cash books, leading to tax implications under section 69A of the Act. The firm argued that the cash was sourced from regular business activities, specifically from interest and principal repayments from customers. The Commissioner of Income Tax (Appeals) (CIT(A)) noted discrepancies in the cash balances before and after the seizure, indicating the introduction of an identical sum in the books post-seizure. The CIT(A) upheld the Assessing Officer's decision, applying section 115 BBE of the Act to tax the reintroduced cash as unexplained money. The firm's appeal against this decision was dismissed by the Appellate Tribunal.

Issue 2:
The second issue revolved around the treatment of the additional income introduced by the firm in the cash book post-seizure. The firm argued that this amount was declared to resolve the matter with the tax authorities and avoid penalties, hence should not be subject to higher tax rates under section 115 BBE of the Act. However, both the Assessing Officer and the CIT(A) maintained that the reintroduced cash lacked a clear nexus with the business income and was liable for taxation under section 115 BBE. The Tribunal concurred with the lower authorities, emphasizing the absence of evidence supporting the firm's claim that the additional income was derived from business activities. Consequently, the Tribunal upheld the taxability of the reintroduced cash under section 115 BBE, dismissing the firm's appeal.

In conclusion, the Appellate Tribunal affirmed the decisions of the lower authorities, ruling against the firm on both issues related to the treatment of cash seized during the search and the taxation of additional income introduced post-seizure.