2012 (11) TMI 316 - AT - Income Tax

Appeal dismissed as AO lacked evidence, unexplained cash not linked to assessee, belonged to separate entity

The ITAT dismissed the Revenue's appeal, upholding CIT (A)'s decision to delete the addition of unexplained cash to the assessee's income. The ITAT found ... Unaccounted and unexplained cash - search - CIT(A) deleted the addition - Held that:- A.O. has only relied on the statement of Shri Damodarbhai Patel to make the addition in the hands of the assessee. The A.O. has not brought any material on record to prove that cash seized belonged to assessee. Shri Damodarbhai has in the statement stated that the cash belonged to Vanita Park project & on the basis of assessment records produced it is seen that Vanita Park project is developed by Mahavir Developers whose proprietor is Shri Mohanbhai Patel. Further the income from Vanita Park project is assessed in the hands of Shri Mohanbhai Patel. The D.R. could not controvert these facts or could controvert the findings of CIT (A) by bringing any material to the contrary on record - in favour of assessee. Issues:1. Addition of unaccounted cash during search proceedings.Analysis:The appeal filed by the Revenue was against the order of Ld. CIT (A) for the block period from A.Y. 1990-91 to 1999-2000 and period up to 2-12-1999. The main ground raised by the Revenue was the deletion of the addition of Rs.6,82,400/- made by the A.O. on account of unaccounted and unexplained cash found during the search proceedings. A search operation on 2-12-1999 led to the discovery of cash amounting to Rs. 6,82,000/-, out of which Rs. 6,65,000/- was seized as the assessee failed to explain the source of the cash. The A.O. added Rs. 6,82,400/- to the income of the assessee, which was confirmed by CIT (A) initially.During the block assessment proceedings, the assessee claimed that the cash belonged to the 'Vanita Park Project' owned by his brother, but failed to substantiate this claim. However, ITAT observed that proper opportunities for hearing and cross-examination were not provided by the A.O. and CIT (A), leading to the matter being sent back to the A.O. for a fresh decision. Subsequently, the A.O. did not accept the submissions of the assessee, concluding that the unexplained cash seized represented the assessee's income.The assessee then approached CIT (A) again, providing evidence that the cash belonged to the Vanita Park Project assessed in the hands of another entity, Shri Mohanbhai Patel. CIT (A) agreed with the assessee's contentions and deleted the addition made by the A.O. The Revenue, aggrieved by this decision, appealed before the ITAT.During the ITAT proceedings, the Revenue argued that the source of the cash remained unexplained by the assessee. On the other hand, the assessee presented evidence from the statement of Shri Damodarbhai Patel and assessment orders of Mahavir Developers to establish that the cash belonged to a different project not assessed in the hands of the assessee. The ITAT found that the A.O. solely relied on Shri Damodarbhai Patel's statement without further evidence linking the cash to the assessee. As the Vanita Park Project was developed by Mahavir Developers, owned by Shri Mohanbhai Patel, and assessed in his hands, the addition made by the A.O. was deemed unjustified by the ITAT. Consequently, the ITAT upheld CIT (A)'s decision to delete the addition and dismissed the Revenue's appeal.In conclusion, the ITAT dismissed the appeal of the Revenue, emphasizing the lack of evidence linking the unaccounted cash to the assessee and the established ownership of the cash by another entity assessed separately.