2023 (4) TMI 682 - AT - Income Tax

Unexplained/unaccounted cash - Cash receipt found from the premises of loan party - Assessee contention that the impugned cash receipt is a dumb document as the same was not signed or written by its director or employee, not found from its premises. Shri Hitesh Bagdai from whose premises such receipt was found categorically denied to have received such cash - CIT-A deleted the addition - HELD THAT - The assessee on credit of interest also deducted tax at source under the provision of section 194A of the Act. Furthermore, in the immediate subsequent year i.e. in the month of April 2009, the entire loan amount along with interest was repaid to the party through banking channel which is much before the date of search. The revenue has not raised any iota of doubt on the genuineness of the interest claimed by the assessee which evidences that the amount of interest on the loan by the assessee was genuine. We also find the Hon ble Gujarat High Court in the case of the CIT Vs. Rohini Builders 2001 (3) TMI 9 - GUJARAT HIGH COURT wherein the facts and circumstances were identical to the facts narrated above that loan was received through banking channel and same was repaid along with interest through banking channel. The transaction of loan shown by the assessee is genuine. Thus, in our considered opinion addition cannot be made based on impugned cash receipt found from the premises of Shri Hitesh Bagdai which has been denied by the both assessee and Shri Hitesh Bagdai. Hence, the ground of appeal of the Revenue is hereby dismissed.

Summary

Issues Involved:
1. Whether the CIT(A) erred in deleting the addition of Rs. 2 crores based on a cash receipt found during the search proceedings.
2. The validity of the initiation of proceedings under section 147 of the Income Tax Act.

Summary:

Issue 1: Deletion of Addition Based on Cash Receipt
The Revenue contended that the CIT(A) erred in deleting the addition of Rs. 2 crores based on a cash receipt found from the premises of Shri Hitesh Bagdai. The receipt indicated a cash transaction between the assessee and Shri Hitesh Bagdai, which was not recorded in the books of accounts. The AO argued that the cash receipt, corroborated by cheque details, was not a "dumb document" and should be considered valid evidence of unaccounted cash transactions.

The assessee denied any cash transaction and argued that the receipt was neither found on its premises nor signed by any of its representatives. Shri Hitesh Bagdai also denied receiving any cash in his statement under section 132(4) of the Act. The CIT(A) concluded that the document was a "dumb document" as it was not found from the assessee's premises, nor signed by its representatives, and lacked corroborative evidence. The CIT(A) relied on various judicial precedents, including the Hon'ble Gujarat High Court's decision in Krishan Textiles v/s CIT and CIT v/s Vivek Agrawal, to support his conclusion.

The Tribunal upheld the CIT(A)'s decision, stating that the information in the seized document, although self-explanatory, was a unilateral act by Shri Hitesh Bagdai and could not be used solely to penalize the assessee. The Tribunal noted that the loan transaction was genuine, as it was conducted through banking channels and interest was paid and accounted for. The Tribunal referenced the Hon'ble Gujarat High Court's decision in CIT Vs. Rohini Builders, which supported the genuineness of transactions conducted through banking channels.

Issue 2: Validity of Proceedings Under Section 147
The assessee also challenged the initiation of proceedings under section 147 of the Act. However, since the assessee succeeded on the merits of the case, the Tribunal found no reason to adjudicate this issue and dismissed it as infructuous.

Conclusion:
The Tribunal dismissed the Revenue's appeal and the assessee's cross-objection, upholding the CIT(A)'s decision to delete the addition of Rs. 2 crores. The Tribunal concluded that the cash receipt found from Shri Hitesh Bagdai's premises could not be used as the sole basis for making an addition in the hands of the assessee.