2021 (7) TMI 1251 - HC - Income Tax

Addition on account of peak cash deficit worked out by the revenue authorities - Search proceedings - actual cash balance as per the books of account on the date of search when the same books of account was part of the seized material and the same was also not rejected and in fact relied upon the income tax authorities and consequently gave a perverse finding on the facts and circumstances of the case - HELD THAT - Admittedly, during the course of the search at the residential premises of the assessee on 09.10.2009, cash was found and was seized. The assessee was unable to explain the source of cash and cash book was updated only upto 30.09.2009. The cash balance as per the cash book on the date of search i.e., 09.1.2009 reflects the cash balance of ₹ 1,51,66,209/-. The assessee was asked to explain the cash difference. The assessee was unable to offer any explanation and in his statement admitted that cash balance of ₹ 45,40,000/- was seized from his residence and was available at his residence. The assessee was unable to explain the cash difference to the extent of ₹ 1,06,26,309/- and could not explain where the balance case of ₹ 1,06,26,309/- was kept. The Assessing Officer therefore, assessed the peak cash deficit in the cash book at ₹ 55,54,521/- and assessed the aforesaid amount to tax for 2010-11. The said order was affirmed in appeal by the Commissioner of Income Tax (Appeals) and it was held that the cash shown by the assessee in his books is not the real figure. The tribunal has held that despite opportunity being afforded to the assessee, the assessee did not explain the difference between the cash found and seized at the premises and the cash mentioned in the cash book. Thus, it was held that the CIT (Appeals) has rightly held that the addition has been made in respect of peak cash deficit subsequent to search and the cash balance after seizure of ₹ 45,40,000/- is NIL . As further held that the addition has rightly been made for cash payments received in excess of cash receipts after the date of search and the amount was rightly brought to tax in the hands of the assessee. The aforesaid findings are findings of fact recorded by the authorities under the Act and the same cannot be said to be perverse as the findings of fact are based on meticulous appreciation of evidence on record. In the result, the substantial question of law Nos.1, 2 and 4 are answered against the assessee and in favour of the revenue.

Summary

Issues:
1. Justification of addition of peak cash deficit by tribunal
2. Validity of assessment proceedings under Section 153A
3. Validity of search in the case of the appellant
4. Presumption of cash existence based on search

Analysis:

Issue 1:
The appellant challenged the addition of ?56,32,161 as peak cash deficit by the tribunal, arguing that the actual cash balance from the books of account was not considered. The appellant contended that the cash balance was accepted for all other purposes by the Assessing Officer, and the alleged difference in cash balance did not fall under specific sections of the Income Tax Act. However, the tribunal upheld the addition, stating that the appellant failed to explain the difference between the seized cash and the cash mentioned in the books, leading to the conclusion that the addition was justified based on post-search cash transactions.

Issue 2:
Regarding the validity of assessment proceedings under Section 153A, the appellant questioned the legality of the proceedings as no incriminating material was found during the search. The tribunal affirmed the assessment, emphasizing that the peak cash deficit was properly assessed post-search, and the addition was valid despite the absence of specific incriminating material.

Issue 3:
The appellant argued that the search was not valid as per Section 132 of the Act, contending that conditions were not met, and no additions were made based on seized materials. However, the tribunal found the search valid, as the cash balance discrepancy post-search was adequately addressed through assessment, leading to the dismissal of this contention.

Issue 4:
The appellant raised concerns about the presumption of cash existence based on the search, asserting that the absence of cash during the search did not imply non-existence. The tribunal rejected this argument, emphasizing that the meticulous evaluation of evidence post-search justified the addition of peak cash deficit, concluding that the cash balance post-seizure was nil.

In conclusion, the High Court dismissed the appeal, upholding the tribunal's decision on the substantial questions of law against the appellant and in favor of the revenue. The findings of fact were deemed non-perverse, as they were based on a thorough examination of the evidence. The appeal lacked merit and was consequently dismissed.