2008 (10) TMI 281 - AT - Income Tax

Summary

Issues Involved:
1. Addition of Rs. 1,60,000 for unexplained excess cash found during the survey.
2. Addition of Rs. 2,000 in the husk account on the ground of alleged unrecorded sales.

Detailed Analysis:

1. Addition of Rs. 1,60,000 for Unexplained Excess Cash Found During the Survey:
Background:
- The assessee, a partnership firm running a rice mill, was subject to a survey under s. 133A on 20th Jan., 2003. During the survey, excess cash of Rs. 2,51,250 was found.
- The partner of the firm could not explain the excess cash during the survey and agreed to surrender it as income. However, in the return filed later, only Rs. 91,250 was offered as income, explaining that Rs. 1,60,000 was withdrawn from its bank account on the survey date.

AO's Decision:
- The AO rejected the explanation, noting the physical impossibility of withdrawing Rs. 1,60,000 from Raipur (140 kms away) and bringing it to the premises before the survey started. The AO added Rs. 1,60,000 to the total income.

CIT(A)'s Decision:
- The CIT(A) upheld the AO's addition, reasoning that the distance made it impossible to withdraw and transport the cash in time for the survey. The retraction was also not immediate but made at the time of filing the return, which was not credible.

ITAT Members' Opinions:
- Judicial Member (JM):
- The JM found the addition unjustified, noting that the withdrawal was recorded in the books and supported by documentary evidence (cheque and bank statement). The retraction was based on corroborative evidence, and the addition was made on mere presumption without rejecting the books of account.
- Accountant Member (AM):
- The AM agreed with the CIT(A), emphasizing the physical impossibility and the lack of immediate retraction. The explanation was seen as an afterthought, and the addition was upheld.
- Third Member (Vice President):
- The Vice President sided with the AM, highlighting the impossibility of transporting the cash 140 kms in time for the survey. The statement of the partner during the survey and the delayed retraction undermined the credibility of the explanation.

Final Decision:
- The majority decision upheld the addition of Rs. 1,60,000, finding the explanation of the assessee implausible and the retraction not credible.

2. Addition of Rs. 2,000 in the Husk Account:
Background:
- The AO added Rs. 2,000 for alleged unrecorded sales in the husk account.

CIT(A)'s Decision:
- The CIT(A) confirmed the addition.

ITAT Decision:
- The assessee did not press this ground during the hearing. Consequently, the ground was dismissed for non-prosecution.

Conclusion:
- The appeal of the assessee was partly allowed. The addition of Rs. 1,60,000 was upheld based on the majority decision of the ITAT members. The addition of Rs. 2,000 was dismissed due to non-prosecution by the assessee.