2023 (10) TMI 200 - AT - Income Tax

Cash found in search action - Managing Partner admitted total cash seized by the police as income of the assessee, and agreed to pay tax on it - retraction of disclosure of unaccounted cash seized , as was done by the assessee after 21 months - HELD THAT - It is clear beyond doubt that the cash surrendered by the assessee is an unexplained money found in the possession of the assessee and the assessee has not offered any satisfactory source and nature of acquisition of the said money, thus, the AO has rightly invoked provisions of Section 69A. Further, the assessee surrendered an amount on 09.04.2005 , while the Police search took place on 26.03.2005, and there was a sufficient gap of 14 days, and it cannot be said that the assessee has given statement offering to tax an amount out of cash seized , being under mental tension or scared, as there was sufficient 14 days time available with the assessee to bring down mental tension as well to seek necessary legal assistance. Further, by surrendering the aforesaid amount and offering to pay tax, the assessee has prevented further enquiries by the department , obviously because it could have led to further revelations / unraveling of truth as to the persons who are also implicit with assessee in transporting of cash as well other transactions undertaken by the assessee in the past. The assessee retracted its own statement firstly by filing income tax return on 31.08.2015 wherein Rs. 49,00,000/- was not included as income and was not offered for tax, while Rs. 21,10,000/- being the remaining amount out of surrendered amount of Rs. 70,10,000/- was offered for tax while filing return of income. The assessee during the course of assessment before the AO, on 15.12.2017, also retracted from the aforesaid surrendered amount of Rs. 49,00,000/-. Thus, the retraction by the assessee of the aforesaid surrendered amount of Rs. 49,00,000/- does not inspire confidence, and was rightly confirmed by ld. CIT(A). So far as deletion of income of Rs. 21,10,000/- by ld. CIT(A) is concerned, it was rightly done by ld. CIT(A) as the same was duly added by the assessee voluntarily in its return of income filed with department, which was erroneously added by the AO again leading to double addition. Decided against assessee.

Summary

Issues Involved:
1. Jurisdiction of CIT(A)
2. Confirmation of addition of Rs. 49,00,000/- as unexplained money u/s 69A
3. Retraction of earlier statement by the assessee

Summary:

1. Jurisdiction of CIT(A):
The assessee initially raised the issue that the CIT(A)-11, Pune, adjudicated the appeal without jurisdiction as it fell within the jurisdiction of CIT(A), Ahmedabad. However, during the proceedings before the Tribunal, the assessee chose not to press this ground, and it was dismissed as not pressed.

2. Confirmation of Addition of Rs. 49,00,000/- as Unexplained Money u/s 69A:
The core issue was the confirmation of the addition of Rs. 49,00,000/- as unexplained money under Section 69A of the Income-tax Act, 1961. The Police Department conducted a search at the assessee's branch office and seized cash amounting to Rs. 70,15,390/-. The Managing Partner of the assessee firm initially admitted that the firm would pay tax on Rs. 70,10,000/- as income. However, during the assessment proceedings, the assessee retracted this statement, claiming that the Managing Partner was under mental pressure when he made the admission.

The Tribunal observed that the Managing Partner had sufficient time (14 days) between the police search and the recording of his statement by the Income-tax Department to seek legal assistance and was not under undue pressure. The Tribunal also noted that the assessee could not provide satisfactory explanations or evidence regarding the source of the cash. The Tribunal upheld the addition of Rs. 49,00,000/- as unexplained money, rejecting the retraction made by the assessee.

3. Retraction of Earlier Statement by the Assessee:
The Tribunal found that the retraction of the statement made by the Managing Partner was not credible. The retraction was made 21 months after the initial admission and during the assessment proceedings. The Tribunal noted that the assessee's claim of transporting cash from Ahmedabad to Kalaburgi for purchasing a shop was not substantiated with any evidence. The Tribunal concluded that the retraction was an attempt to avoid tax liability and upheld the addition made by the AO.

Conclusion:
The Tribunal dismissed the appeal filed by the assessee, confirming the addition of Rs. 49,00,000/- as unexplained money under Section 69A and rejecting the retraction of the earlier statement made by the Managing Partner. The Tribunal also dismissed the jurisdictional issue as not pressed by the assessee.