2016 (7) TMI 1184 - AT - Income Tax

Tribunal rules in favor of assessee, deeming revenue authority's cash additions unjustified.

Santosh Ahluwalia and MJS Ahluwalia Versus A.C.I.T., Circle-2, Jaipur

The Tribunal found that the additions made under Section 69 for unexplained cash were unjustified. The evidence, including a cash book seized during the ... Addition in the hands of assessee’s husband on protective basis - cash available on the date of search - Held that:- The authorities below have failed to apply their mind and appreciate the evidence available with it. Paragraph No. 2 of 4.3 of CIT(A)’s order clearly points out that there is a hard disk and hard disk was found during the course of search and on the basis of hard disk, the brought forward cash of ₹ 50,88,408/- was available on 11/11/2009. If the cash of ₹ 50,88,408/- was available on the date of search, than the wisdom of the assessee to keep the cash either at residence or in the locker cannot be doubted . The revenue authority cannot challenge the wisdom of keeping the cash either at residence or at the locker and therefore, the explanation given by the assessee during the course of search and further supported by the hard disk on the basis of which the cash book was prepared, which is an admitted piece of evidence, completely negate the case of the revenue. We have no doubt that the addition made by the authorities below were without any jurisdiction and were not in accordance with law and the facts and circumstances of the case. Accordingly, the addition in the hands of the assessee is deleted. Also the addition made in the hands of assessee Smt. Santosh Ahluwalia being cash found in the locker, in our opinion is also required to be deleted - Decided in favour of assessee. Issues Involved:1. Addition of Rs. 5,74,100/- made under Section 69 on account of unexplained cash.2. Addition of Rs. 14,13,100/- made under Section 69 on account of unexplained cash.3. Misinterpretation of statements recorded during the course of search.4. Ownership and explanation of cash found during the search.5. Treatment of cash found in the hands of the assessee and the company.Detailed Analysis:1. Addition of Rs. 5,74,100/- and Rs. 14,13,100/- under Section 69:The primary issue revolves around the addition of Rs. 5,74,100/- and Rs. 14,13,100/- made under Section 69 of the Income Tax Act, 1961, treating the amounts as unexplained cash. The assessee argued that the cash belonged to M/s Rajasthan Mining & Engineering Pvt. Ltd., where the assessee was a director. The Assessing Officer (AO) and the Commissioner of Income Tax (Appeals) [CIT(A)] did not accept this explanation, leading to the additions.2. Misinterpretation of Statements:The assessee contended that the CIT(A) misinterpreted the statements recorded during the search. The AO relied on the statement where the assessee allegedly denied maintaining the books of the company, which led to treating the cash as unexplained. However, the assessee argued that the statements were taken out of context and that the books of accounts, including the cash book, were completed post-search and submitted to the AO.3. Ownership and Explanation of Cash Found:The assessee provided evidence, including the audited cash book of M/s Rajasthan Mining & Engineering Pvt. Ltd., showing a cash balance of Rs. 50,88,408/- on the date of the search. The assessee argued that this cash balance justified the cash found during the search. The CIT(A) and AO, however, questioned the credibility of this explanation, citing inconsistencies and the improbability of company cash being kept in a private locker.4. Treatment of Cash Found:The AO made additions on a substantive basis in the hands of the assessee and on a protective basis in the hands of the assessee’s husband. The CIT(A) confirmed these additions, but the assessee argued that the cash belonged to the company and should not be treated as personal unexplained income.Tribunal's Findings:The Tribunal found that the authorities below failed to properly consider the evidence. The Tribunal noted that the hard disk seized during the search contained the cash book showing the cash balance of Rs. 50,88,408/-. This evidence supported the assessee's claim that the cash found belonged to the company. The Tribunal held that the wisdom of keeping cash at the residence or in a locker should not be questioned by the revenue authorities.Conclusion:The Tribunal concluded that the additions made by the AO and confirmed by the CIT(A) were without jurisdiction and not in accordance with the law. Consequently, the Tribunal deleted the addition of Rs. 14,13,100/- in the hands of the assessee and similarly deleted the addition of Rs. 5,74,100/- in the hands of the assessee’s wife. Both appeals were allowed.Order Pronounced:The appeals of the assessees were allowed, and the order was pronounced in the open court on 13/06/2016.