2016 (10) TMI 410 - AT - Income Tax

Tribunal rules in favor of assessee, cash explained by documents, not unexplained income.

Shri Ajay B. Sabharwal Versus ACIT, Circle 6 (1), Mumbai

Shri Ajay B. Sabharwal Versus ACIT, Circle 6 (1), Mumbai - TM Issues Involved:1. Legality of proceedings initiated under Section 132 of the Income Tax Act.2. Treatment of seized cash as unexplained income.Issue-wise Analysis:1. Legality of proceedings initiated under Section 132 of the Income Tax Act:The assessee challenged the initiation of proceedings under Section 132 of the Income Tax Act, arguing that the seizure of Rs. 20 lakhs was not justified as the cash belonged to Le Shark Exports Pvt. Ltd. The assessee contended that there was no bonafide belief that the cash was undisclosed income, as he had provided an authority letter from Le Shark Exports Pvt. Ltd. at the time of interception. The Commissioner of Income Tax (Appeals) [CIT(A)] rejected this contention, stating that the assessee failed to properly explain the source of the cash, thereby justifying the initiation of proceedings under Section 132. The Tribunal, however, found that the assessee had provided sufficient documentary evidence within five hours of interception, including a letter from Le Shark Exports Pvt. Ltd., bank statements, and cash book entries, proving that the cash was accounted for by Le Shark Exports Pvt. Ltd.2. Treatment of seized cash as unexplained income:The Assessing Officer (AO) treated the seized cash of Rs. 20 lakhs as unexplained income of the assessee, citing discrepancies and lack of proper entries in the books of the Mumbai office of Le Shark Exports Pvt. Ltd. The CIT(A) upheld this view, noting inconsistencies in the assessee's explanations and the improbability of the cash being kept unrecorded for over a month. However, the Tribunal observed that the assessee had consistently maintained that the cash belonged to Le Shark Exports Pvt. Ltd. and was meant for purchasing machinery. The Tribunal noted that the cash was duly reflected in the books of Le Shark Exports Pvt. Ltd. and that the company had requested the adjustment of the seized cash towards its advance tax liability. The Tribunal concluded that the assessee had successfully rebutted the presumption under Section 132(4A) of the Act, providing cogent evidence that the cash belonged to Le Shark Exports Pvt. Ltd. Consequently, the Tribunal ordered the deletion of the addition of Rs. 20 lakhs made by the Revenue as undisclosed income in the hands of the assessee.Conclusion:The Tribunal allowed the appeal filed by the assessee, concluding that the cash of Rs. 20 lakhs seized from the assessee was duly accounted for by Le Shark Exports Pvt. Ltd. and should not be treated as unexplained income of the assessee. The Tribunal's decision was based on the documentary evidence provided by the assessee, which successfully rebutted the presumption of undisclosed income under Section 132(4A) of the Income Tax Act.