2022 (11) TMI 886 - AT - Income Tax

Addition u/s.69A - unexplained cash being found during the course search - AO treated the amount of cash found during the search and seizure operation - HELD THAT - Admittedly, the cash was found during the search proceedings conducted u/s 132 at the premises of the assessee. The onus lies upon the assessee to explain the source of cash. We note that the assessee before the investigation wing post search in response to the notice issued u/s 131. None of the authorities below has pointed out any iota of defects in the details furnished by the assessee before them. As such, it seems to us that the assessee has duly discharged the onus about the cash found during the course of search and seizure operation and the onus now shifted upon the revenue to disprove the contention of the assessee based on the tangible materials. The revenue has not disproved the contention of the assessee except making a statement by the CIT-A that all the documents were prepared to mislead the AO and likewise these documents were prepared afterthought. In our considered view the revenue has not brought any cogent basis for rejecting the contention of the assessee. Accordingly we hold that there cannot be any addition to the total income of the assessee with respect to the cash found during the search proceedings. Hence, the ground of appeal of the assessee is hereby allowed. Addition mad on the basis of admission made by the assessee in the statement furnished u/s 132(4) - HELD THAT - There were various land transactions carried out as evident from the seized documents but we note that such land transaction had been considered by the revenue in the hands of Smt. Parvatiben in the assessment which can be verified from the assessment order of and the order of the learned CIT-A placed - In view of the above and after considering the facts in totality, we are of the view that no addition based on admission is warranted in the given facts and circumstances. Hence, we set aside the finding of the learned CIT-A and direct the AO to delete the addition made by him. Hence, ground of appeal of the assessee is hereby allowed.

Summary

Issues Involved:
1. Addition of Rs. 16.97 Lacs under Section 69A of the Income Tax Act for unexplained cash found during search proceedings.
2. Addition of Rs. 83.03 Lacs based on the assessee's admission during search proceedings under Section 132(4) of the Income Tax Act.

Detailed Analysis:

Issue 1: Addition of Rs. 16.97 Lacs under Section 69A for Unexplained Cash

The assessee, an individual, was subject to a search and seizure operation under Section 132 of the Income Tax Act on 30 May 2012, during which cash amounting to Rs. 16.97 Lacs was found. The assessee claimed that this cash represented withdrawals by various family members for household expenses. However, the Assessing Officer (AO) was not satisfied due to the following reasons:
- No supporting documents were provided to show that the cash was accounted for in the books of accounts.
- None of the family members maintained any books of accounts.
- Seized documents indicated land transactions in cash that were not disclosed in the income tax returns.

The AO treated the cash as unexplained and added it to the total income of the assessee. The assessee appealed to the Commissioner of Income Tax (Appeals) [CIT-A], arguing that the cash was accounted for in the books of Smt. Chandrikaben Ramchandani and disclosed in her income tax returns filed before the search. The CIT-A dismissed the appeal, stating that the documents seemed to be prepared as an afterthought and lacked independent supporting evidence.

Upon further appeal, the Appellate Tribunal noted that the assessee had provided necessary details about the returns of income, balance sheets, and other financial statements of Smt. Chandrikaben Ramchandani, which disclosed the cash in hand. The Tribunal found that the assessee had discharged the onus of explaining the cash and that the revenue had not disproved the assessee's contention with tangible evidence. Therefore, the Tribunal held that no addition to the total income was warranted and allowed the appeal.

Issue 2: Addition of Rs. 83.03 Lacs Based on Admission During Search Proceedings

During the search proceedings, the assessee admitted to disclosing an undisclosed income of Rs. 1 crore but did not honor this admission in the return filed. The AO added Rs. 83.03 Lacs (after adjusting the Rs. 16.97 Lacs cash found) to the total income, as the assessee did not explain the reasons for retracting the disclosure.

The assessee argued before the CIT-A that the disclosure was made on an ad hoc basis and that no discrepancy or unaccounted income was found upon analyzing the seized documents. The CIT-A dismissed the appeal, noting that the assessee had made a candid statement during the search and had not proved that the statement was made under coercion or threat.

In the appeal before the Tribunal, the assessee contended that the disclosure was made before proper verification of the documents and that the land transactions were disclosed in the books of respective family members. The Tribunal observed that the assessee had retracted the statement by a sworn affidavit and that the disclosure was not corroborated by tangible materials. The Tribunal referred to CBDT instructions and judicial precedents, emphasizing that additions should not be made solely based on statements without corroborative evidence. The Tribunal found that the revenue had not provided any cogent basis for rejecting the assessee's contention and directed the AO to delete the addition.

Conclusion:

The Tribunal allowed the appeal filed by the assessee, deleting the additions of Rs. 16.97 Lacs and Rs. 83.03 Lacs, as the revenue failed to provide sufficient evidence to support the additions. The judgment emphasized the importance of corroborative evidence in making additions based on statements during search proceedings.