2025 (1) TMI 1399 - AT - Income Tax

Unexplained cash found at the residential premises during the course of search - assessee had declared Rs. 10 lacs in M/s Avinash Agro Pvt. Ltd. - HELD THAT - We are of the view that if explanation is taken into consideration based on cumulative circumstances namely; (1) Rs. 10 lacs was declared to cover up such type of issues in the case of M/s Avinash Agro Pvt. Ltd.; (b) Past savings of the family members and (c) Gift received from the brothers then it would be established that source of cash is available with the assessee. It is difficult to establish a cash available in the family with a mathematic precision. It is to be appreciated on the normal human behaviour available in the family and if all the family members are assessable to tax then possibility of their savings and availability of Rs. 10 lacs could never be denied. Therefore learned Revenue Officers have erred in not appreciating the facts and circumstances in right perspective and confirming the addition of Rs. 6 lacs. We allow this appeal and delete the addition of Rs. 6 lacs. Appeal allowed.

Summary

ISSUES PRESENTED and CONSIDERED

The core legal issue considered in this judgment was whether the addition of Rs. 6 lacs by the Assessing Officer (AO), confirmed by the Commissioner of Income Tax (Appeals) [CIT(A)], as unexplained cash found at the assessee's residential premises during a search operation, was justified.

ISSUE-WISE DETAILED ANALYSIS

Relevant Legal Framework and Precedents

The case revolves around the provisions of the Income Tax Act, particularly Section 132(1) concerning search and seizure operations, Section 139(4) regarding the filing of returns, and Section 143(2) related to scrutiny assessments. The Tribunal also considered the legal principles surrounding the explanation of unexplained cash and the burden of proof on the assessee to substantiate the source of such cash.

Court's Interpretation and Reasoning

The Tribunal examined the circumstances under which the cash was found and the explanations provided by the assessee. It noted that the assessee had declared Rs. 10 lacs in M/s Avinash Agro Pvt. Ltd. to address any potential irregularities related to unexplained items, which was assessed under Section 143(3). The Tribunal emphasized the need to consider the cumulative circumstances, including past family savings and a gift received from the assessee's brother, when evaluating the source of the cash.

Key Evidence and Findings

The Tribunal reviewed the evidence presented, including the statement recorded under Section 132(4) and the documentary evidence submitted by the assessee, which included details of the Rs. 4 lacs brought home by the assessee's son and the additional income declared by M/s Avinash Agro Pvt. Ltd. The Tribunal found these explanations credible and consistent with normal human behavior regarding family savings.

Application of Law to Facts

The Tribunal applied the legal principles to the facts by considering the declaration of Rs. 10 lacs in M/s Avinash Agro Pvt. Ltd. as a mitigating factor for any unexplained cash. It acknowledged the difficulty in precisely accounting for cash available within a family and concluded that the explanations provided by the assessee were plausible and sufficient to establish the source of the cash.

Treatment of Competing Arguments

The Tribunal considered the arguments presented by the Revenue, which had rejected the assessee's explanation for the Rs. 6 lacs. However, it found that the Revenue had failed to appreciate the facts and circumstances in the right perspective. The Tribunal gave weight to the cumulative evidence and explanations provided by the assessee, which were not adequately countered by the Revenue.

Conclusions

The Tribunal concluded that the addition of Rs. 6 lacs as unexplained cash was unjustified. It held that the explanations provided by the assessee, when viewed in light of the cumulative circumstances and the declaration made in M/s Avinash Agro Pvt. Ltd., were sufficient to establish the source of the cash.

SIGNIFICANT HOLDINGS

The Tribunal's significant holding was the deletion of the Rs. 6 lacs addition, emphasizing the importance of considering cumulative circumstances and the behavior of family members in tax assessments. The Tribunal stated, "It is difficult to establish a cash available in the family with a mathematic precision. It is to be appreciated on the normal human behavior available in the family and if all the family members are assessable to tax, then possibility of their savings and availability of Rs. 10 lacs could never be denied."

The core principle established by the Tribunal is that the explanation for unexplained cash should be considered in the context of the overall circumstances, including family savings and declarations made by associated business entities. The Tribunal's final determination was to allow the appeal and delete the addition of Rs. 6 lacs, thereby providing relief to the assessee.