2022 (11) TMI 78 - AT - Income Tax

Unexpalined cash - Search and seizure operation - difference in cash found in the books of account and actual cash found during the search - HELD THAT - As initially the assessee in the instant case has not given access to the books of accounts, cash book etc., which are maintained in the computer. However, from the perusal of the record, it is clear that the said electronic computer, etc., were sealed by the Department and thereafter, it was accessed only on 09.12.2013. Revenue had failed to point out the efforts undertaken by it either to retrieve or find out user id / password of computer immediately after the search. In this age of technology, the user ID and password can always be retrieved with the help of various software and technical help. Department in the present case has not resorted to taking any such help as is clearly discernible from the record of the assessee. Further, the Department has also not taken any other effort to call or summon the Accountant of the assessee with whom allegedly the user ID and password of the computer were available. The appellant / revenue is not helpless and it can use all its powers under the Act to compel / force the assessee to share the user id, and password of the computer and the revenue can use its power under the Act to take coercive measures against the assessee and also impose a penalty for non-cooperation but nothing has been done in the present case except to sit idle and wait for the assessee to provide the information to the Department. As mentioned herein above, the Department retrieved the data on 9/12/2013 after having access to the system, the same is clear from the Mahazarnama at page 2, of the paper book. No question was asked by the search team as to whether the assessee had any other premises or factory other than the premises, which was the subject matter of the search. Incidentally, in the present case, cash was found from the business premises and residence of the assessee however, no question was asked about whether the assessee had any other factory or not. Admittedly, the assessee had the availability of cash as per books of accounts and it is not mandatory for the assessee to keep the cash only in the business premises of the assessee. Nonetheless, once the cash has been deposited, as per the cash balance available on the date of search in the books of accounts, it cannot be said that the said cash which was subsequently deposited was unexplained. In light of the above, the order of the ld.CIT(A) calls for no interference. Appeal filed by the Revenue is dismissed.

Summary

Issues Involved:
1. Whether the CIT(A) erred in both facts and law.
2. Non-disclosure of cash balance by the Directors during the search and seizure operation.
3. Non-production of books of accounts and disclosure of accounting package password during the search.
4. Specific questions regarding cash balance not put to the assessee during the search.
5. Treatment of cash found as unexplained cash credit under Section 69A of the Income Tax Act.
6. Applicability of the Apex Court judgment in Sumati Dayal v. CIT.
7. Authenticity of the rental agreement for the factory premises where cash was allegedly kept.

Detailed Analysis:

1. Whether the CIT(A) erred in both facts and law:
The Revenue contended that the CIT(A) erred in both facts and law. The Tribunal reviewed the CIT(A)'s decision and found that the CIT(A) had considered the facts and circumstances of the case appropriately, leading to the deletion of the addition made by the Assessing Officer (AO).

2. Non-disclosure of cash balance by the Directors during the search and seizure operation:
The Revenue argued that during the search and seizure operation conducted on 19.11.2013, the Directors and their family members did not disclose the availability of the balance cash of Rs. 1,71,59,105/-. The Tribunal noted that the cash balance as per the books of account maintained in electronic form was Rs. 1,88,16,905/- as on 14.11.2013, and the assessee had deposited cash in the bank on four occasions after the search.

3. Non-production of books of accounts and disclosure of accounting package password during the search:
The Revenue claimed that the assessee neither produced the books of accounts nor disclosed the password of the accounting package during the search. The Tribunal observed that the electronic form of books of account was verified post-search, and the entries were updated till 14.11.2013. The Tribunal also noted that the Department did not take adequate steps to retrieve the user ID and password of the computer immediately after the search.

4. Specific questions regarding cash balance not put to the assessee during the search:
The CIT(A) held that no specific questions were put to the assessee regarding the cash balance vis-à-vis availability during the search. The Tribunal agreed with this observation, noting that the books of account were not verified on the day of the search, and the AO could not make an addition without bringing on record any evidence to the contrary.

5. Treatment of cash found as unexplained cash credit under Section 69A of the Income Tax Act:
The AO had treated the cash of Rs. 1,70,50,000/- as unexplained cash credit under Section 69A of the Income Tax Act. The CIT(A) deleted this addition, and the Tribunal upheld the CIT(A)'s decision. The Tribunal emphasized that the AO's addition was based on mere suspicion without any evidence against the assessee's explanation.

6. Applicability of the Apex Court judgment in Sumati Dayal v. CIT:
The Revenue argued that the AO had rightly applied the test of human probabilities as laid down by the Apex Court in Sumati Dayal v. CIT. The Tribunal, however, found that the AO's conclusions were not supported by evidence and that the CIT(A) had rightly deleted the addition.

7. Authenticity of the rental agreement for the factory premises where cash was allegedly kept:
The Revenue questioned the authenticity of the rental agreement for the factory premises, claiming it was a forged document. The Tribunal noted that the assessee had provided details of the factory premises and regular payment of rent before and after the search. The Tribunal found the assessee's explanation plausible and upheld the CIT(A)'s decision.

Conclusion:
The Tribunal dismissed the appeal filed by the Revenue, finding no merit in the grounds raised. The Tribunal upheld the CIT(A)'s order, which deleted the addition made by the AO, and concluded that the cash deposits were explained by the cash balance available as per the books of account. The Tribunal emphasized the lack of evidence against the assessee's explanation and the Department's failure to take adequate steps to retrieve the necessary information during the search.