2023 (1) TMI 529 - AT - Income Tax

Rectification of mistake u/s 154 - Addition u/s 69A - cash found from the assessee s premises during the search proceedings - CIT-A deleted the addition - HELD THAT - In the case on hand, the AO in the rectification proceedings u/s 154 of the Act, has made independent addition which was not consciously made while framing assessment u/s 143 of the Act. Thus, can such mistake be said as a mistake apparent from the record? Admittedly, a long drawn process is required to be adopted to reach to the conclusion where the cash found from the premises of the assessee representing the unexplained money u/s 69A of the Act, in the given facts and circumstances. Even on merit, we note that the assessee in the statement furnished u/s 132(4) of the Act, has categorically stated about the documents found during the search proceedings that the same represent the undisclosed transaction of the firm namely M/s. M.K. Ceramics based on that undisclosed income of the firm was determined. Therefore, the AO has taken one of the possible view for holding that such undisclosed cash represent the application of undisclosed income determined in the hands of the firm. No reason to interfere in the order of the Ld. CIT(A). Hence, the ground of appeal of the Revenue is hereby dismissed.

Summary

Issues:
1. Addition of cash found from the assessee's premises during search proceedings.

Analysis:
The Revenue appealed against the order of the Learned Commissioner of Income Tax (Appeals) regarding the addition of cash found during a search operation. The Revenue contended that the cash was unexplained and should be taxed in the hands of the assessee under section 69A of the Income-tax Act, 1961. The dispute revolved around the ownership of the cash amounting to Rs. 15,50,000, with the assessee claiming it belonged to a partnership firm, M/s MK Ceramics. Initially, the Assessing Officer (AO) did not make any addition to the assessee's income based on this cash. However, a later finding revealed that M/s MK Ceramics did not acknowledge this cash, leading the AO to make an addition under section 154 of the Act. The assessee contended that the cash belonged to the firm, which was considered during the assessment of M/s MK Ceramics under section 153C. The Learned Commissioner of Income Tax (Appeals) accepted the assessee's submission and deleted the addition made by the AO. The Ld. CIT(A) emphasized that the cash found represented the application of undisclosed income of M/s MK Ceramics, which had been assessed and offered by the firm. The Ld. CIT(A) concluded that no separate addition to the assessee's income was warranted.

The Revenue challenged the Ld. CIT(A)'s order before the Appellate Tribunal. The Tribunal considered the arguments of both parties and examined the legal aspects. Referring to a relevant High Court judgment, the Tribunal emphasized that section 154 of the Act could only rectify apparent mistakes, not those requiring a lengthy reasoning process. The Tribunal noted that the AO, in the rectification proceedings, made an independent addition not consciously considered during the original assessment. The Tribunal found that the AO's decision to treat the undisclosed cash as representing the firm's undisclosed income was a valid interpretation based on the facts provided by the assessee. Consequently, the Tribunal upheld the Ld. CIT(A)'s order, dismissing the Revenue's appeal.

In conclusion, the Tribunal upheld the Ld. CIT(A)'s decision, emphasizing that the cash found during the search operation represented the undisclosed income of the partnership firm, M/s MK Ceramics. The Tribunal found no reason to interfere with the Ld. CIT(A)'s order, dismissing the Revenue's appeal.