Unexplained cash found in search may be added where the taxpayer's story fails the test of human probabilities.

Cash found during search may be treated as unexplained income where the assessee's explanation is unsupported by reliable documentary evidence and is contradicted by surrounding circumstances. The text notes material inconsistencies in the claimed land-sale advance, absence of the original agreement and receipt, unreliable photocopies, and an unconvincing recovery story. Applying the test of human probabilities and preponderance of probabilities, the explanation was rejected and the cash additions were sustained.

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Issues: Whether the addition of Rs. 2 crores as unexplained money and the allied additions relating to cash found in possession of the assessee were liable to be deleted.

Analysis: The assessee claimed that the cash found during search represented an advance received against an alleged agreement for sale of agricultural land. The authorities found material inconsistencies in the statements of the assessee, the alleged purchaser and the broker regarding the extent of land, agreed consideration, place of payment, existence of an agreement, and the source and timing of the cash. The original memorandum of understanding and receipt were not produced, the photocopies were unsupported by reliable verification, and the alleged suit for recovery appeared belated. The surrounding circumstances, including the search material and the CBI investigation, were assessed on the test of human probabilities and preponderance of probabilities, and the explanation for the cash was found unconvincing. The assessee also failed to satisfactorily explain the source of the balance cash found in possession.

Conclusion: The addition of Rs. 2 crores as unexplained money was sustained and the further cash additions were also upheld.

Final Conclusion: The appeal failed in substance, and the tax additions made on account of unexplained cash were confirmed.

Ratio Decidendi: Where the assessee's explanation for cash found in search is unsupported by reliable documentary evidence and is contradicted by surrounding circumstances and material inconsistencies, the authorities may reject it on the test of human probabilities and treat the amount as unexplained income.

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