2016 (12) TMI 552 - AT - Income Tax

Addition made u/s. 69A - unexplained income - Held that - From the books of account furnished before the authorities below and which is place on record, it is clear that the assessee had sufficient funds to prove the cash seizure on 29/03/2007 and the same is clearly recorded in the books of account maintained by the assessee. It is for the said reason that the addition made in the hands of Shri Abdul Rasheed and Shri K.A. Sojumon was deleted by the CIT(A). As mentioned earlier, in the original assessment, no addition was made by the Assessing Officer. The original assessment was completed after examining the books of account, the ledge copies etc. From the books of account maintained by the assessee, it is clear that the assessee has sufficient cash availability as on 27/03/2007. - Decided in favour of assessee

Issues Involved:
1. Whether the sum of ?15,51,400/- should be treated as the assessee’s unexplained income.
2. Credibility of the ledger accounts produced by the assessee.
3. Whether the cash balance as per the books of the assessee was sufficient to explain the cash seized.

Issue-wise Detailed Analysis:

1. Whether the sum of ?15,51,400/- should be treated as the assessee’s unexplained income:
The primary issue revolves around the sum of ?15,51,400/- seized by the Mahe Police from Shri Abdul Rasheed and Shri K.A. Sojumon, which was claimed to be handed over by the assessee for the purchase of rubber sheets. The Assistant Director of Income Tax (Investigation) requisitioned the cash under section 132A of the Income Tax Act. Initially, the cash was assessed in the hands of Shri Abdul Rasheed and Shri K.A. Sojumon, but the CIT(A) deleted the addition in their hands. Subsequently, the CIT(Central), Kochi passed an order under section 263 of the Act, setting aside the order of the Assessing Officer and directing the reassessment of the amount as unexplained income in the hands of the assessee. The Tribunal upheld the revisionary order under section 263, emphasizing that the Assessing Officer had not verified the source of the amount in the hands of the assessee. The reassessment resulted in the addition of ?15,51,400/- under section 69A of the Act, which the assessee contested, arguing that the amount was accounted for in the regular books of accounts.

2. Credibility of the ledger accounts produced by the assessee:
The Assessing Officer questioned the credibility of the ledger accounts produced by the assessee, noting discrepancies in the dates and amounts recorded. The Assessing Officer highlighted that the cash balance as per the books was recorded on 28-03-2007, whereas the cash was handed over on 27-03-2007. Additionally, the assessee initially denied giving any money to Shri Abdul Rasheed or Shri K.A. Sojumon, later changing the stance. The Assessing Officer also noted inconsistencies in the business transactions and statements of the assessee and other involved parties, suggesting that the ledger entries were accommodative and not genuine.

3. Whether the cash balance as per the books of the assessee was sufficient to explain the cash seized:
The Tribunal focused on verifying whether the assessee had sufficient cash balance in the regular books of accounts to explain the cash handed over. The assessee's books showed a cash balance of ?18,43,143/- as on 27-03-2007, with significant withdrawals from bank accounts contributing to this balance. The Tribunal noted that the original assessment did not result in any addition regarding the seized cash, and the CIT(A) had deleted the addition in the hands of Shri Abdul Rasheed and Shri K.A. Sojumon based on the assessee’s books. The Tribunal concluded that the assessee had sufficient funds as recorded in the books of accounts, and the addition of ?15,51,400/- was not warranted. The Tribunal emphasized that the only issue to be examined was the availability of funds, and the assessee had adequately demonstrated the cash balance as on 27-03-2007.

Conclusion:
The appeal filed by the assessee was allowed, with the Tribunal holding that the addition of ?15,51,400/- as unexplained income was not justified based on the sufficient cash balance recorded in the assessee’s books of accounts. The Tribunal ordered accordingly, providing a resolution in favor of the assessee.

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