2017 (3) TMI 381 - AT - Income Tax

Addition for the cash found in search - unexplained cash - Held that - We find that the assessee submitted a statement of availability of agricultural income at ₹ 1,28,191/- ( 4,40,016- 3,11,825) prepared after date of search i.e. 13.11.2007, by recording certain entries remained to be recorded after September 2007. However, this cannot be relied as no evidence of un-recorded entries was found during search. In view of this matter, were are of the considered view that cash of ₹ 1,25,000/- can be treated as explained out of seized cash of ₹ 2 lacs. Accordingly, the addition to that extent of ₹ 1,25,000/- is deleted and balance addition of ₹ 75,000/- is confirmed. Thus, the ground No. 1 and 2 of appeal is partly allowed in favour of the assessee.

Summary

Issues:
1. Sustaining addition of ?2 Lacs made by the AO for cash found in search.
2. Applicability of section 69A in sustaining the addition.
3. Levy of interest under sections 234A, 234B, 234C, and 234D.

Analysis:

Issue 1: Sustaining addition of ?2 Lacs made by the AO for cash found in search:
1.1. The assessee, a partner in a jewelry trading business, had cash of ?2 Lacs seized during a search operation. The explanation provided, attributing the cash to the agricultural income of the assessee's wife, was deemed unacceptable due to lack of documentary evidence.
1.2. The CIT (A) upheld the addition, stating the explanation seemed an afterthought as no initial mention of the source of cash was made during the search. The absence of documentary evidence linking the cash to the claimed agricultural income led to the confirmation of the addition.
1.3. The assessee contended that a seized diary detailed agricultural income, supporting the claim that the cash was sourced from the wife's agricultural earnings. The AO's failure to consider this evidence in the right context was highlighted.
1.4. The CIT (DR) argued against the reliability of the claimed agricultural income, pointing out discrepancies in the presented figures. The inability to explain the source of the cash further supported the lower authorities' decisions.
1.5. The Tribunal found the seized diary entries credible, indicating a net agricultural income of ?1,24,963. The wife's declared agricultural income also supported the claim. Consequently, ?1,25,000 of the seized cash was linked to the agricultural income, leading to the deletion of this portion of the addition.

Issue 2: Applicability of section 69A in sustaining the addition:
No specific discussion or ruling related to the applicability of section 69A was mentioned in the judgment.

Issue 3: Levy of interest under sections 234A, 234B, 234C, and 234D:
The Tribunal upheld the charging of interest under sections 234A, 234B, 234C, and 234D, citing the mandatory nature of interest as established in relevant case law. Any consequential relief due to this order was acknowledged for the assessee.

In conclusion, the appeal was partly allowed in favor of the assessee, with the addition reduced by ?1,25,000. The interest levied under sections 234A, 234B, 234C, and 234D was upheld, with the possibility of consequential relief for the assessee.