Search cash linked to property sale may be taxed as capital gains, not undisclosed income, when surrounding facts support the explanation.

Cash found during a search was treated as part of the sale consideration of the assessee's house property, not as income from undisclosed sources. The tribunal accepted the assessee's explanation because the search was close in time to the property transfer, she had no other known source of income, surrounding probabilities supported the explanation, and the Revenue's material was insufficient to displace it. The amount was therefore assessable under the head of capital gains arising from transfer of a capital asset, and the addition had to be recomputed on that basis.

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Issues: Whether the cash of Rs. 4,10,000 found during search was liable to be taxed as income from undisclosed sources or as capital gains arising from sale of the assessee's house property.

Analysis: The assessee claimed that the money represented part of the sale consideration of her immovable property and that the search was proximate to the transfer. The Revenue relied on the sale deed showing a lower consideration and the purchaser's denial of any on-money payment. The deciding factors were the assessee's lack of any other known source of income, the proximity of the search to the sale transaction, the surrounding probabilities, the practice of understatement in property dealings, and the inadequacy of the Revenue's material to dislodge the explanation that the money arose from the sale of the property.

Conclusion: The cash was held to be assessable as capital gains and not as income from undisclosed sources.

Final Conclusion: The assessee's explanation was accepted and the addition was to be recomputed on the basis that the amount represented consideration from transfer of capital asset.

Ratio Decidendi: Where unexplained money is found and the surrounding facts credibly connect it with a disclosed capital transaction, the amount may be assessed under the appropriate head of income as capital gains rather than being mechanically treated as income from undisclosed sources.

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