2025 (2) TMI 815 - AT - Income Tax

Addition on account of cash found during the course of search as unexplained cash - whether the CIT(A) is justified in not allowing set off of cash considered unexplained by him against the cash withdrawal ? - HELD THAT - We note that no document is found in search to come to a conclusion that the amount withdrawn by the assessee from M/s Vijay Industries has been utilized elsewhere. There is no law which prohibits an assessee to keep cash in hand and therefore only because assessee has not given explanation as to why the cash was withdrawn when he has withdrawn the cash earlier also cannot be a ground to reject the explanation of assessee. In various cases referred above it has been held that where no evidence is brought on record that cash withdrawal has been utilized elsewhere such cash should be considered as available with the assessee. Considering all these facts we direct the AO to delete the addition made by him. Unexplained gold and silver jewellery - Once the jewellery and silver articles are considered as belonging to the family as a whole there does not remain any unexplained gold jewellery. When the jewellery was found from the bedroom and locker of Nidhi Data the addition made by Ld. CIT(A) in the hands of assessee is otherwise unjustified. We also found that in respect of the jewellery found from the room locker of Nidhi Data assessee has furnished the evidences as to the source of same but without controverting the evidences and the affidavits filed it was not correct to consider any part of gold jewellery found from the bedroom and locker of Nidhi Data as unexplained. Hence the addition of Rs. 27, 15, 544/- (9, 81, 744 17, 33, 800) confirmed by the Ld. CIT(A) is deleted. Silver utensils/ ornaments - We note that from the bedroom and the common room 12, 322.80 gms (3188.800 9134) of silver article was found from Nidhi Data. It comprises of 8000 gms owned by Nidhi Data 1170 gms owned by assessee and 3152.80 gms belonging to the children. Out of it 8000 gms is considered as explained by AO leaving the remaining silver items at 4322.800 gms but addition has been made for 29, 960.05 gms. Thus the addition made is prima facie incorrect. Otherwise also when the silver article was found in the possession of Nidhi Data addition made in the hands of assessee is unjustified. We also note that in search no evidence of purchase of silver item was found in search. Therefore considering the status of family and other material evidences we direct deletion on account of unexplained silver articles in the hands of assessee. Aappeal of the assessee is allowed.

ISSUES PRESENTED and CONSIDERED

The primary issues considered in this judgment were:

Whether the addition of Rs. 4,28,830 as unexplained cash by the CIT(A) was justified.
Whether the addition of Rs. 21,02,279 as undisclosed jewellery under Section 69A of the Income Tax Act, 1961, was proper.
Whether the enhancement of income by Rs. 17,33,800 by the CIT(A) was appropriate.

ISSUE-WISE DETAILED ANALYSIS

1. Unexplained Cash Addition

Relevant Legal Framework and Precedents: Section 69A of the Income Tax Act, 1961, deals with unexplained money, including cash. The assessee must provide a satisfactory explanation for the cash found during searches.
Court's Interpretation and Reasoning: The Tribunal considered whether the cash withdrawals from M/s Vijay Industries could be set off against the unexplained cash found. The Tribunal noted that there was no evidence to suggest that the withdrawn cash was used elsewhere.
Key Evidence and Findings: The assessee withdrew Rs. 4,72,000 between 05.04.2014 and 20.04.2015. The Tribunal found no evidence indicating the cash was spent elsewhere.
Application of Law to Facts: The Tribunal applied the principle that if no evidence shows cash was used elsewhere, it should be considered available with the assessee.
Treatment of Competing Arguments: The Tribunal rejected the CIT(A)'s reliance on the preponderance of probabilities, emphasizing the absence of evidence of alternative utilization.
Conclusions: The Tribunal directed the deletion of the Rs. 4,28,830 addition, accepting the assessee's explanation.

2. Undisclosed Jewellery Addition

Relevant Legal Framework and Precedents: Section 69A also applies to unexplained jewellery. The burden is on the assessee to prove the source of such jewellery.
Court's Interpretation and Reasoning: The Tribunal considered whether the jewellery found at different locations should be assessed collectively as belonging to a joint family.
Key Evidence and Findings: The jewellery was found at both Alwar and Jaipur residences. The Tribunal noted previous ITAT decisions recognizing joint family ownership.
Application of Law to Facts: The Tribunal applied the principle of considering the jewellery collectively for a joint family, thereby negating the unexplained status.
Treatment of Competing Arguments: The Tribunal found the CIT(A)'s approach of assessing jewellery individually was unjustified, especially given the affidavits and valuation reports submitted.
Conclusions: The Tribunal deleted the Rs. 21,02,279 addition, accepting the joint family ownership explanation.

3. Enhancement of Income by CIT(A)

Relevant Legal Framework and Precedents: The CIT(A) has the authority to enhance assessments, but must base such decisions on sound evidence and reasoning.
Court's Interpretation and Reasoning: The Tribunal evaluated whether the CIT(A)'s enhancement was based on a misinterpretation of the total jewellery found.
Key Evidence and Findings: The CIT(A) erroneously calculated the unexplained jewellery, considering only parts of the evidence provided.
Application of Law to Facts: The Tribunal emphasized the need for consistency in considering evidence and the proper allocation of jewellery among family members.
Treatment of Competing Arguments: The Tribunal found the CIT(A)'s findings contradictory and unsupported by the evidence, particularly regarding the ownership of jewellery by Smt. Nidhi Data.
Conclusions: The Tribunal deleted the Rs. 17,33,800 enhancement, finding the CIT(A)'s approach flawed.

SIGNIFICANT HOLDINGS

Verbatim Quotes of Crucial Legal Reasoning: "There is no law which prohibits an assessee to keep cash in hand and therefore only because assessee has not given explanation as to why the cash was withdrawn, when he has withdrawn the cash earlier also cannot be a ground to reject the explanation of assessee."
Core Principles Established: The Tribunal reinforced the principle that unexplained cash and jewellery should be assessed with consideration for joint family ownership and the absence of evidence for alternative utilization.
Final Determinations on Each Issue: The Tribunal allowed the appeal, directing deletions of the additions for unexplained cash, jewellery, and the CIT(A)'s enhancement.

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