2016 (10) TMI 410 - AT - Income Tax

Undisclosed income - Held that - The assessee has duly explained the said cash of ₹ 20 lakhs which was found in his possession while travelling from Delhi to Mumbai via Jet airways flight on 28-11-2006. The assessee has duly rebutted the presumption u/s 132(4A) of the Act . The assessee has duly brought on record the audited books of accounts of Le Shark Exports Private Limited and other cogent material to prove that infact cash belonged to Le Shark Exports Private Limited who also owned up the cash . The revenue has also framed assessment in respect of Le Shark Exports Pvt. Ltd. and passed an assessment orders u/s 143(3) of the Act dated 3rd September, 2009 for the assessment year 2007-08 and no addition of ₹ 20 lacs w.r.t. cash found and seized of ₹ 20 lacs from the possession of the assessee has been made in the hands of the Le Shark Exports Private Limited. The Revenue while framing assessment in the hands of the Le Shark Exports Pvt. Ltd. has mentioned in the assessment order u/s 143(3) of the Act dated 03-09-2009 that the cash seized has been taxed in the hands of Mr. Ajay B. Sabharwal whereby the contention of M/s Le Shark Exports Pvt. Ltd to adjust the said cash of ₹ 20 lacs against advance tax was rejected by the Revenue. In our opinion, addition is not sustainable in the hands of the assessee as the assessee has duly discharged his burden and has duly rebutted the presumption which arose u/s 132(4A) of the Act with cogent evidences brought on record as set out above that the cash of ₹ 20 lacs which the assessee was carrying while flying from Delhi to Mumbai on 28-11-2006 in-fact belonged to Le Shark Exports Pvt. Ltd who also owned up the said cash of ₹ 20 lacs for which cogent material is brought on record. Addition of ₹ 20 lacs made by the Revenue in the hands of the assessee as undisclosed income is therefore ordered to be deleted. We order accordingly.

Summary

Issues Involved:
1. Legality of proceedings initiated under Section 132 of the Income Tax Act.
2. Treatment of seized cash as unexplained income.

Issue-wise Analysis:

1. Legality of proceedings initiated under Section 132 of the Income Tax Act:
The assessee challenged the initiation of proceedings under Section 132 of the Income Tax Act, arguing that the seizure of ?20 lakhs was not justified as the cash belonged to Le Shark Exports Pvt. Ltd. The assessee contended that there was no bonafide belief that the cash was undisclosed income, as he had provided an authority letter from Le Shark Exports Pvt. Ltd. at the time of interception. The Commissioner of Income Tax (Appeals) [CIT(A)] rejected this contention, stating that the assessee failed to properly explain the source of the cash, thereby justifying the initiation of proceedings under Section 132. The Tribunal, however, found that the assessee had provided sufficient documentary evidence within five hours of interception, including a letter from Le Shark Exports Pvt. Ltd., bank statements, and cash book entries, proving that the cash was accounted for by Le Shark Exports Pvt. Ltd.

2. Treatment of seized cash as unexplained income:
The Assessing Officer (AO) treated the seized cash of ?20 lakhs as unexplained income of the assessee, citing discrepancies and lack of proper entries in the books of the Mumbai office of Le Shark Exports Pvt. Ltd. The CIT(A) upheld this view, noting inconsistencies in the assessee's explanations and the improbability of the cash being kept unrecorded for over a month. However, the Tribunal observed that the assessee had consistently maintained that the cash belonged to Le Shark Exports Pvt. Ltd. and was meant for purchasing machinery. The Tribunal noted that the cash was duly reflected in the books of Le Shark Exports Pvt. Ltd. and that the company had requested the adjustment of the seized cash towards its advance tax liability. The Tribunal concluded that the assessee had successfully rebutted the presumption under Section 132(4A) of the Act, providing cogent evidence that the cash belonged to Le Shark Exports Pvt. Ltd. Consequently, the Tribunal ordered the deletion of the addition of ?20 lakhs made by the Revenue as undisclosed income in the hands of the assessee.

Conclusion:
The Tribunal allowed the appeal filed by the assessee, concluding that the cash of ?20 lakhs seized from the assessee was duly accounted for by Le Shark Exports Pvt. Ltd. and should not be treated as unexplained income of the assessee. The Tribunal's decision was based on the documentary evidence provided by the assessee, which successfully rebutted the presumption of undisclosed income under Section 132(4A) of the Income Tax Act.