2018 (4) TMI 407 - HC - Income Tax

Undisclosed cash receipt - addition based upon documents seized during the course of search - Held that - During and after the search, assessee states that these receipts are of extra or additional work done by him to certain purchaser of flats. These receipts have to be taxed in the hands of assessee by Revenue then total receipts cannot be added to the total income. Only profit margin has to be taxed. Therefore, we are of the view that entire amount cannot be added to the income of the assessee considering the statement of the assessee u/s 132(4) of the Act. It is also pertinent to note that the assessee has declared income of ₹ 10 lacs in A.Y. 2009-10 and ₹ 20 lacs in A.Y.2010-11 in respect of such receipt which is also assessed by the AO, therefore, the addition made by the AO and partly confirmed by the ld. CIT(A) is deleted. - Decided in favour of assessee

Summary

Issues:
1. Addition of undisclosed cash receipt based on seized documents.
2. Deletion of penalty imposed under section 271AAA of the Act.

Analysis:

Issue 1: Addition of undisclosed cash receipt based on seized documents
In DBITA No. 44/2018, the appellant challenged the Tribunal's decision to delete the additions of ?24,825,300 made by the Assessing Officer on account of undisclosed cash receipt based on seized documents. The Tribunal observed that the seized documents contained specific details such as date of sale, cash consideration, and cheque consideration, indicating composite transactions involving on money. The appellant argued that the cash receipts represented income from finishing job work, and only net profit should be taxed. The Tribunal noted the appellant's declarations of income in previous assessment years related to such receipts and concluded that the entire amount cannot be added to the income considering the appellant's statements under section 132(4) of the Act. The Tribunal allowed the appellant's appeal, dismissing the department's appeals.

Issue 2: Deletion of penalty under section 271AAA of the Act
In DBITA No. 45/2018, the Tribunal canceled the penalty of ?2,382,530 imposed by the Assessing Officer under section 271AAA of the Act. The Tribunal considered the seized materials and the appellant's statements under section 132(4), where the appellant explained that the cash receipts were for extra work done in furnishing flats and not linked to the business of the firm. The Tribunal noted the appellant's offer to pay tax based on profit ratio and previous declarations of income related to such receipts. As a result, the Tribunal found that the penalty imposed was not justified. Consequently, the Tribunal dismissed the penalty appeal.

In conclusion, the High Court upheld the Tribunal's decisions, dismissing both appeals. The judgment emphasized the importance of considering the specific circumstances and statements of the appellant in determining the tax implications of the undisclosed cash receipts and the validity of the penalty under section 271AAA of the Act.