Tribunal overturns Income Tax assessment, finds seized cash not undisclosed income

The Tribunal set aside the addition of Rs. 15,89,438/- made by the Assessing Officer under Section 69A of the Income Tax Act, confirming the deletion directed by the CIT(A). The Tribunal found that the cash seized belonged to the assessee company and was recorded in its books, thus not meeting the criteria for undisclosed income. Consequently, the appeal of the assessee was allowed, and the addition was removed.

---

---

Issues Involved:
1. Sustenance of addition of Rs. 15,89,438/- under Section 69A of the Income Tax Act, 1961.

Detailed Analysis:

Issue 1: Sustenance of Addition of Rs. 15,89,438/- under Section 69A of the Income Tax Act, 1961

Background:
The assessee company, engaged in running a Passenger Ropeway Project, filed its return of income declaring Rs. 1,72,35,780/- after claiming a deduction under Section 80IC of the Income Tax Act, 1961. During scrutiny, an addition of Rs. 15,89,438/- was made under Section 69A, leading to an assessed income of Rs. 1,88,25,218/-.

Facts:
- On 09.11.2016, Sundernagar police intercepted a vehicle carrying Rs. 76 lacs, which was later requisitioned and seized by the Income Tax Department under Section 132A.
- The cash was claimed to belong to the assessee company, M/s SKI Himalayas Ropeways Pvt. Ltd.
- The assessee explained that the cash included Rs. 13,50,000/- from the sale of disposable material, Rs. 43,75,000/- from hotel references and activities in Solang Valley, and Rs. 18,75,000/- from ticket sales.
- The Investigation Wing rejected the submissions and documents provided by the assessee.
- The Assessing Officer (AO) made an addition of Rs. 15,89,438/- under Section 69A after giving credit for average ropeway receipts of Rs. 2,85,562/- from 1st November 2016 to 15th November 2016.

Arguments by Assessee:
- The AO did not conduct independent inquiries and relied solely on the Investigation Wing's findings.
- The assessee provided its cash book, bank books, and complete books of account, which were not rejected by the AO.
- The Investigation Wing's report lacked corroborative evidence to support the claim that the ticket register was manipulated.
- The assessee argued that the cash of Rs. 18,75,000/- was from operational receipts and should be accepted as part of its cash in hand.

Arguments by Revenue:
- The Revenue argued that the cash book showing Rs. 81.64 lacs as on 08.11.2016 was not reliable.
- The assessee regularly deposited cash in its bank account, making it unlikely to hold such a large amount of cash.
- The CIT(A) upheld the AO's findings, stating that no distinction could be made between the disclosed and undisclosed cash out of the seized amount.

Tribunal's Findings:
- The Tribunal noted that the cash belonged to the assessee company, satisfying the first condition under Section 69A.
- The second condition under Section 69A, which requires the cash to be unrecorded in the books of accounts, was not satisfied as the assessee had reported Rs. 81.64 lacs in its cash book.
- The AO accepted the assessee's explanation for Rs. 57,25,000/- as non-operational income but rejected the explanation for Rs. 18,75,000/- without sufficient evidence.
- The Tribunal found no basis for the AO's conclusion that documents regarding ticket sales were unreliable.
- The Tribunal held that the AO failed to record a categorical finding that the cash was unrecorded in the assessee's books of accounts.

Conclusion:
The Tribunal set aside the addition of Rs. 15,89,438/- made by the AO and confirmed by the CIT(A), directing its deletion. The appeal of the assessee was allowed.

Order Pronounced:
The order was pronounced on 10.02.2022.

---