2019 (10) TMI 139 - AT - Income Tax

Rectification u/s 254 - finding of the Tribunal that the assessee could not establish the live link between the withdrawals from bank and cash found at the time of search is erroneous finding of fact - HELD THAT - Since the assessee had drawn our attention to the findings of the revenue officers that the cash balances withdrawn from the bank were sufficient to explain the cash found in the hands of Shri KRV Uday Charan Rao and Shri Premsagar Rao, but was disallowed only for the reason that the assessee failed to establish the cash found with the source, we deem it fit and proper to modify the last 5 lines of para 12 of ITAT order. The following sentences shall be substituted Since both the AO and the CIT(A) have verified the cash and bank statements and have come to the conclusion that the assessee could not explain the sources for the cash found at the time of search, and even before us, the assessee could not establish the live link, we see no reason to interfere with the order of the CIT(A). Thus, ground no.4 raised by the assessee company is accordingly rejected. by the following lines Since both the AO and CIT(A) have made the addition on the ground that the assessee could not establish the live link, we are of the opinion that if the assessee is able to satisfy that there were sufficient bank withdrawals to explain the funds in their hands, no addition can be made. Therefore, we deem it fit and proper to remand this issue to the file of the AO for reverification of the issue.

Summary

Issues involved:
Rectification of alleged mistake in the order of Tribunal dated 11.01.2019 in ITA no.1256/Hyd./2012 regarding cash found and seized from the assessee.

Analysis:

1. The assessee filed a Miscellaneous Application seeking rectification of a mistake in the Tribunal's order regarding the cash found and seized. The cash amount in question was ?4,00,62,250, with ?3 crores found with individuals at the airport and the remaining amount at the appellant company's premises. The authorities had issues with the link between the cash withdrawn from the bank and the cash found during the search. The appellant argued that most of the amount was withdrawn from the bank, supported by bank statements and cash book entries. The Tribunal was urged to reconsider the evidence and remit the issue back to the AO for fresh examination.

2. The Tribunal acknowledged the appellant's argument that the cash found belonged to the company and was sourced from bank withdrawals and business operations. The Tribunal noted that if the withdrawn bank amount and business cash were sufficient to explain the cash found during the search, no addition under section 69 of the Income Tax Act could be made. The Tribunal agreed that the failure to establish a live link between the cash withdrawals and the cash found was a mistake that could be rectified under section 254(2) of the Act.

3. Consequently, the Tribunal modified the order by remanding the issue back to the AO for re-verification. The Tribunal substituted certain lines in the original order to reflect that if the assessee could demonstrate sufficient bank withdrawals to account for the funds found, no addition should be made. The Miscellaneous Application filed by the assessee seeking rectification was allowed, emphasizing the importance of establishing a clear link between the source of funds and the cash found during a search.

This detailed analysis highlights the key arguments, findings, and the Tribunal's decision regarding the rectification of a mistake in the order related to cash found and seized from the assessee.