2008 (2) TMI 15 - HC - Income Tax

Tribunal Upholds Cash Source Decision Despite Search Validity and Assessee Explanations

The case involved the interpretation of statements, validity of a search at Delhi Airport, adequacy of explanations provided by the Assessee, reliability ... Assessee was intercepted by the Intelligence Wing and was found to be carrying Rs.18 lakhs in cash – he has given statement but retracted later on - employee of assessee stated that sales bills was prepared without actual sale – AO is justified to add the amount as income from undisclosed source Issues:1. Interpretation of statements made by the Assessee and employees during Income Tax Department's investigation.2. Validity of the search conducted by the Income Tax Department at the Delhi Airport.3. Adequacy of explanations provided by the Assessee regarding the cash found in possession.4. Reliability of the letter produced by the Assessee from M/s Hira Jewellers.5. Acceptance of cash availability with M/s Hira Jewellers on the evening of 1st February, 2001.Interpretation of Statements:The Assessee, a proprietor of M/s Sona Jewellers and a director in M/s Hira Jewellers, was intercepted at Delhi Airport carrying Rs.18 lakhs in cash. Initially, he claimed Rs.4 lakhs belonged to M/s Sona Jewellers. Subsequently, he stated Rs.17 lakhs was related to M/s Hira Jewellers. Employees initially confirmed preparing bills for cash sales but later retracted their statements, alleging coercion. The Assessing Officer concluded the cash was from undisclosed sources. Both the CIT (A) and the Tribunal upheld this view, considering the inconsistencies in the Assessee's explanations and employee statements.Validity of Search at Delhi Airport:The Assessee argued the cash recovery was not a result of a legal search. However, the Tribunal found the search commenced after the Assessee's admission at the Airport, and the cash was seized during the search. The Tribunal rejected the challenge to the search's validity, as it began after the Assessee's admission and the recovery was made during the search.Adequacy of Explanations Provided:The Assessee claimed to carry a letter from M/s Hira Jewellers stating the cash belonged to them, but the letter was prepared after the interception. The Tribunal found no independent evidence of cash availability with the Assessee or M/s Hira Jewellers. The Assessee failed to adequately explain the source of the cash found in his possession.Reliability of Letter from M/s Hira Jewellers:The Tribunal noted the letter produced by the Assessee was prepared after the interception, raising doubts about its authenticity. This, coupled with the lack of evidence supporting the cash source, led to the rejection of the Assessee's explanations.Acceptance of Cash Availability with M/s Hira Jewellers:The Assessee argued that cash was available with M/s Hira Jewellers on the evening of 1st February, 2001, as accepted by the Assessing Officer of M/s Hira Jewellers. However, this argument was not raised earlier before any authorities, and the Assessee failed to prove he was carrying that cash during the interception at Delhi Airport.In conclusion, no substantial question of law arose due to the concurrent findings based on material evidence. The appeal was dismissed, affirming the decisions of the lower authorities.