2024 (6) TMI 1024 - AT - Income Tax

Penalty u/s 271AAA - unexplained cash during the search found - AO discarded the submissions of the assessee on the ground that assessee failed to file any documentary evidence to prove his averments - HELD THAT - On perusal of the bank statement filed by the assessee we find that approximately Rs 4, 85, 000/- have been withdrawals by the assessee starting from December 2009 to May 2010 which means when the last financial year i.e. 2009-10 relevant to AY 2010-11 was about to expire there was sufficient cash with the assessee till the date of search i.e 25.10.2010. The amount found during the course of search is Rs 4, 06, 700/- which is below the amount of withdrawals. Therefore we are of the view that the impugned cash cannot be treated as unexplained cash. So far as argument of the Revenue that no prudent person will keep a cash for such a long period. We do not find any force because admittedly it is the case of search and even after search department has not been able to prove that the cash withdrawals by the assessee has been utilized somewhere else and the impugned cash is generated from some other source. As in the case of Smt. P Padmavathi 2010 (10) TMI 1154 - KARNATAKA HIGH COURT has observed that time gap between the withdrawal and the deposit of the same in the bank account would not be a ground for treating the amount as unexplained cash. We are of the firm view that cash found was duly explained cash and hence no addition is permissible in the eyes of law. We allow the appeal of the assessee.

Summary

Issues Involved:
The judgment involves issues related to the proceedings under section 143(3) and section 271AAA of the Income Tax Act.

Proceedings u/s 143(3):
The case involved a salaried employee whose premises were searched by the Income-tax department. The Assessing Officer (AO) found cash during the search and questioned the source. The AO added the cash amount to the returned income of the assessee due to lack of documentary evidence. The assessee appealed to the CIT(A) who dismissed the appeal citing minimal bank withdrawals as the source of cash.

Appeal before ITAT:
The assessee appealed to the ITAT arguing that sufficient cash withdrawals from the bank could explain the cash found during the search. The ITAT analyzed the bank statements and noted that the withdrawals exceeded the amount found during the search. Citing precedents, the ITAT held that the impugned cash was duly explained and no addition was permissible.

Judicial Precedents Considered:
The ITAT referred to judgments by the Karnataka High Court and previous ITAT decisions to support their conclusion that the source of the cash was adequately explained. They emphasized that the time gap between cash withdrawals and deposits, as well as the utilization of cash in the interim, did not invalidate the explanation provided by the assessee.

Decision and Outcome:
The ITAT allowed the appeal of the assessee in the proceedings under section 143(3) of the Income Tax Act. As a result, the appeal against the penalty imposed under section 271AAA was also treated as allowed. Both appeals filed by the assessee were allowed by the ITAT, and the judgment was pronounced on June 20, 2024.

Separate Judgment by Judicial Member:
The judgment was delivered by Shri Prakash Chand Yadav, Judicial Member of the Appellate Tribunal ITAT Bangalore.