2023 (4) TMI 1405 - AT - Income Tax

Two assessees fail to prove source of Rs. 85 lakhs cash found during search, confirmed as unexplained income under section 69A and 115BBE

Gautham Chand Jain, Sumermal Kantilal Jain Versus Assistant Commissioner of Income Tax, Central Circle 1 (1), Chennai

Gautham Chand Jain, Sumermal Kantilal Jain Versus Assistant Commissioner of Income Tax, Central Circle 1 (1), Chennai - TMI ISSUES PRESENTED and CONSIDERED1. Whether the Assessing Officer (AO) and the Commissioner of Income Tax (Appeals) [CIT(A)] erred in treating the income as unexplained under Section 69A of the Income Tax Act, 1961, despite the assessee's claim that the income was from commission receipts.2. Whether the AO/CIT(A) failed to provide an opportunity to the assessees to explain the commission receipts before making additions.3. Whether the addition under Section 69A was justified when the cash was allegedly recorded in the books of accounts.4. Whether the cash seized during the search belonged to the joint family and not exclusively to the individual assessees.ISSUE-WISE DETAILED ANALYSIS1. Treatment of Income as Unexplained under Section 69A- Legal Framework and Precedents: Section 69A of the Income Tax Act deals with unexplained money, bullion, jewellery, or other valuable articles found in possession of the assessee but not recorded in the books of accounts. The burden is on the assessee to satisfactorily explain the nature and source of such assets.- Court's Interpretation and Reasoning: The Tribunal noted that the assessees admitted the cash as undisclosed income during the search proceedings, describing it as commission income. However, they failed to provide any substantial evidence or explanation regarding the source of this income.- Key Evidence and Findings: The assessees declared Rs. 85 lakhs as income from other sources but did not provide documentation to support the claim that it was commission income. The Tribunal found no evidence of contracts or agreements that could substantiate the commission income claim.- Application of Law to Facts: Given the lack of evidence to support the claim of commission income, the Tribunal upheld the AO's decision to treat the income as unexplained under Section 69A, leading to taxation under Section 115BBE.- Treatment of Competing Arguments: The assessees argued that the cash was commission income and should not be treated under Section 69A. However, the Tribunal found the explanation unsatisfactory due to the absence of supporting evidence.- Conclusions: The Tribunal concluded that the AO and CIT(A) correctly invoked Section 69A as the assessees failed to provide a satisfactory explanation for the source of the income.2. Alleged Lack of Opportunity to Explain Commission Receipts- Relevant Legal Framework: Principles of natural justice require that the assessee be given a fair opportunity to present their case.- Court's Interpretation and Reasoning: The Tribunal found that both lower authorities provided adequate opportunities for the assessees to explain the commission receipts. The assessees' failure to provide evidence was not due to lack of opportunity.- Conclusions: The Tribunal dismissed the claim of procedural unfairness, affirming that sufficient opportunity was granted.3. Recording of Cash in Books of Accounts- Legal Framework and Precedents: Section 69A applies when cash or assets are not recorded in the books of accounts. The assessees claimed the cash was recorded, thus challenging the applicability of Section 69A.- Court's Interpretation and Reasoning: The Tribunal noted that the assessees admitted the cash was not recorded in the books at the time of the search, contradicting their claim.- Conclusions: The Tribunal upheld the applicability of Section 69A, as the initial admission of unrecorded cash took precedence over later claims.4. Claim of Joint Family Ownership of Cash- Relevant Legal Framework: The burden of proof lies with the assessee to demonstrate that the cash belongs to multiple family members.- Court's Interpretation and Reasoning: The Tribunal found no merit in the argument that the cash belonged to the joint family, as the assessees had already declared it as their own income during search proceedings.- Conclusions: The Tribunal rejected the claim of joint family ownership, emphasizing the need for consistency in the assessees' statements and filings.SIGNIFICANT HOLDINGS- The Tribunal held that the income of Rs. 85 lakhs, declared as income from other sources by the assessees, was rightly treated as unexplained under Section 69A due to the lack of satisfactory evidence regarding its source.- The Tribunal affirmed that the provisions of Section 115BBE were applicable, resulting in the income being taxed at a higher rate.- The Tribunal dismissed the appeals, concluding that the assessees failed to substantiate their claims regarding the nature and source of the income and the ownership of the cash.The appeals filed by the assessees were dismissed, and the order of the CIT(A) was upheld, confirming the treatment of the income as unexplained under Section 69A and the application of Section 115BBE for taxation purposes.