2024 (5) TMI 1628 - AT - Income Tax

Assessment Upheld Treating Cash Found in Survey as Deemed Income Under s.69A Read with s.115BBE; Taxpayer's Explanation Rejected

ITAT (Chandigarh) upheld assessment treating cash found during survey as deemed income under s.69A read with s.115BBE, holding that the taxpayer failed to ... Cash as offered during survey - deemed income u/s 69A r.w.s. 115BBE - onus to prove - HELD THAT:- It is noted that during the course of survey, cash was found from the premises of the assessee which was unaccounted and not recorded in the books of the accounts of the assessee. The statement of the husband of the assessee, who was present at the time of survey, was recorded wherein he was asked to specify the nature and source of cash so found from the assessee’s premises and in response, he submitted that he was not in a position to explain the discrepancy noticed in cash and cash so found was surrendered as additional income for the financial year 2018-19 relevant to the impugned assessment year. The surrender so made was reiterated in the surrender letter and thereafter, in the return of income, the assessee has offered the amount so surrendered to tax. During the assessment and appellate proceedings as well, the assessee has tried to explain the source of cash as arising out of her business income however, no satisfaction explanation has been forthcoming. Where the cash so found during the course of survey was not accounted for in the books of accounts and the assessee has failed to explain the nature and source thereof, the provisions of section 69A r/w 115BBE have been rightly invoked by the AO and sustained by the ld. CIT(A). We are unable to accept various contentions so raised by the ld. AR and the same are hereby rejected. Various authorities have been quoted at the Bar which no doubt hold the field in the facts and circumstances of the respective cases, however, as far as the present case is concerned, we find that the assessee has clearly failed to explain the nature and source of cash so found and there is a clear admittance to this effect during the course of survey and in view of the same, the ratio laid down in the respective decisions doesn’t support the case of the assessee. Invocation of section 69A r/w 115BBE in respect of cash so surrendered during the course of survey is upheld - Appeal of the assessee is dismissed. ISSUES PRESENTED AND CONSIDERED 1. Whether additional evidence submitted before the first appellate authority ought to have been admitted for deciding the applicability of section 69A read with section 115BBE to cash found during survey. 2. Whether cash of Rs. 4,07,000 found during survey and not recorded in books can be treated as deemed income under section 69A read with section 115BBE, or whether it is taxable as business income (or other known head) where the assessee subsequently offered it in the return. ISSUE-WISE DETAILED ANALYSIS - Admissibility of Additional Evidence Legal framework: Admission of additional evidence before the appellate authority is governed by the principles that such evidence must be relevant, material to the determination of issues, and satisfy criteria for admission (nexus with the issues in controversy and reason for not producing earlier). Precedent treatment: The Tribunal notes that various authorities were cited by parties on admissibility but records that grounds concerning additional evidence (grounds 1 & 2) were not pressed at hearing. Interpretation and reasoning: Because the assessee did not press grounds relating to admission of additional evidence during hearing, the Tribunal treated those grounds as not pressed and dismissed them on that procedural basis. The Tribunal did not undertake detailed consideration of the merits of admissibility since the parties abandoned those grounds at the hearing. Ratio vs. Obiter: The finding that grounds not pressed are dismissed is a procedural ratio applicable to this appeal; the Tribunal's dismissal on that basis is part of the operative decision and not obiter. Conclusion: Grounds relating to admission of additional evidence are dismissed as not pressed; no substantive admission ruling made on the evidence's sufficiency or relevance to section 69A. ISSUE-WISE DETAILED ANALYSIS - Classification and Taxation of Cash Found in Survey (Section 69A r.w. 115BBE) Legal framework: Section 69A applies to unexplained money, bullion, jewellery or other valuable article or thing found during search or survey if the assessee fails to account for it or explain its nature and source; section 115BBE prescribes special tax rates/applicable treatment for incomes assessed as unexplained. Burden and evidentiary principles: When unexplained cash is found and the assessee offers it as income, the onus remains on the assessee to explain the nature and source to enable classification under a known head (e.g., business); mere declaration in ITR does not automatically establish that the source is a known, bonafide business source. The person asserting a claim must prove it. Precedent treatment: The Tribunal considered authorities cited by both sides (including High Court and coordinate bench decisions) which establish that where the source is known and identifiable as business, surrendered sums may be treated as business income; conversely, where source remains unexplained, provisions like section 69/69A apply. The Tribunal distinguished the authorities favourable to the assessee on facts: in this case the source/nexus was not satisfactorily established. Interpretation and reasoning: Facts accepted by the Tribunal: cash of Rs. 4,07,000 was physically found during survey and was not recorded in books; the husband's statement recorded inability to explain the discrepancy; the assessee later surrendered the amount and offered it in the return under 'income from other sources' and paid tax. The Tribunal found that (i) mere offer in ITR does not negate the unexplained character of cash, (ii) the assessee did not provide satisfactory contemporaneous documentary link (e.g., patient register entries) to establish nexus to business receipts, and (iii) mandatory record-keeping obligations applicable to the profession (patient register/Form C) were not complied with, weakening the claim that the cash was regular business receipts. Therefore the cash remained unexplained and amenable to section 69A treatment; consequent application of section 115BBE followed for taxation consequences. Ratio vs. Obiter: The holding that unexplained cash found in survey, not accounted in books and unsupported by satisfactory explanation/documentary nexus to business, may be taxed under section 69A r.w. 115BBE is the ratio of the decision. Observations about the insufficiency of particular documents (payment receipts without register entries) are factual applications of that ratio to the case facts; references to other decisions are treated as distinguishing commentary rather than altering precedent. Conclusion: The Tribunal upheld the invocation of section 69A read with section 115BBE in respect of the surrendered cash. Classification of the amount as business income or under 'income from other sources' was not accepted because the assessee failed to prove the nature and source; the deemed income treatment and associated rate treatment were sustained. CROSS-REFERENCES BETWEEN ISSUES The procedural dismissal of additional-evidence grounds (Issue 1) meant the Tribunal did not re-open consideration of documentary proofs beyond the material on record when deciding Issue 2; the finding on lack of satisfactory explanation directly informs the conclusion that section 69A r.w. 115BBE applies. FINAL CONCLUSION On the evidence and admissions recorded during survey and the assessee's failure to establish contemporaneous, satisfactory nexus between the found cash and known business receipts (as required to displace deemed-income treatment), the Tribunal sustained the assessment of the amount under section 69A and the consequential application of section 115BBE. Procedural grounds about additional evidence were dismissed as not pressed.