2023 (2) TMI 517 - AT - Income Tax

Rectification of mistake u/s 154 - Addition u/s 69A - cash found during the course of search and seizure operation as unexplained money by ad-hoc estimation of expenses incurred - HELD THAT - Section 154 enables the AO to rectify a mistake apparent on record. A reading of the assessment order and the order u/s 154 nowhere speaks of any mistake which has occurred in the assessment order. The order passed by the AO is as if he is sitting into the shoes of ld. CIT and passing an order u/s 263 of the Act, which is not actually correct. How these additions of cash have been done u/s 154 claiming that there was a mistake apparent from record in the original order, is not borne out anywhere in the records. We note that assessee has filed return under presumptive taxation regime of section 44ADA in which books of accounts were not required. Assessee s submissions in explanation of cash-in-hand are sufficiently cogent. The estimate of cash by the ld. CIT (A) was also not done on correct basis. CIT (A) himself stated that claim of the assessee in respect of non-cash expenses cannot be ruled out. However, the assessee has not provided details of such expenses. This is a strange observation and ld. CIT (A) has on ad hoc basis held that on some non-cash expenses, 1/3rd of the expenses calculated by AO in this regard i.e. Rs.5,21,650/- (1/3rd of Rs.15,64,650/-) is allowed. This is solely on the basis of surmises and conjectures. The estimate of cash under the presumptive regime by the AO as well as CIT (A) is flawed. The same is based on surmises and conjectures and the same is not sustainable on merits also. So, to conclude, this estimate of cash in order passed u/s 154 is jurisdictionally not permissible and secondly, on merits also, we note that the addition is based on surmises and conjectures which cannot be sustained.Appeal filed by the assessee stands allowed.

Summary

Issues:
Addition of unexplained cash found during search and seizure operation under section 69A of the Income Tax Act.

Analysis:
The appeal was against the order of the ld. CIT (Appeals) sustaining additions under section 69A of the Act. The original return was filed declaring income of Rs. 46,21,330, and a search and seizure operation was conducted. The AO passed a rectification order adding unaccounted cash found during the search. The assessee justified the cash found as belonging to a company, professional receipts, and savings. The AO disallowed claimed expenses and added the excess cash to the income under section 69A. The CIT (A) noted the AO's errors in determining cash-in-hand and allowed some expenses. The availability of cash was recalculated, and the addition was restricted. The assessee appealed, arguing against the addition of Rs. 10,00,626 under section 69A. The Tribunal noted that the AO had not made the addition in the original assessment order but in the rectification order. The Tribunal found no mistake apparent on record justifying the addition. The estimate of cash by the authorities was deemed flawed, based on surmises and conjectures. The Tribunal concluded that the addition was not sustainable jurisdictionally or on merits, directing the deletion of the addition.

This detailed analysis covers the issues involved in the legal judgment, providing a comprehensive understanding of the case and the Tribunal's decision.